Re Lear, R.l. v Ex parte Walker, R.W

[1992] FCA 1058

/OS% ,92

JUDGMENT NO. ..~.-t

CATCHWORDS

BANKRUPTCY - application to have bankruptcy notice set aside -

s 40(l)(g) Bankru~tcv Act - allegation by debtor that he has a
cross demand against the creditor equal to or exceeding

judgment debt founding the bankruptcy notice - what standard

of chance of success of cross demand Court must be satisfied	.
with.

.C

Bankru~tcv Act 1966 (Cth) - S 40(l)(g)

Defamation Act 1974 (NSW)

Re Brink: Ex Darte Commercial Bankinq CO of Svdnev Ltd (1980)

30 ALR 433

Re Gould: Ex ~arte Skinner (1983) 72 FLR 393

RE ROBERT LIONEL LEAR: EX PARTE ROBERT WILLIAM WALKER

No. BN 4269 of 1991

FOSTER J
2 JUNE 1992

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA )

NEW SOUTH WALES DISTRICT REGISTRY ) No. BN 4269 of 1991

1

BANKRUPTCY DIVISION 1

RE :  ROBERT LIONEL LEAR

Debtor

EX PARTE:  ROBERT WILLIAM WALKER

Petitioning Creditor

JUDGE MAKING ORDERS:	FOSTER J
DATE :	2 JUNE 1992
PLACE :	SYDNEY

MINUTE OF ORDERS

THE COURT ORDERS THAT:

1.   the application be dismissed;

2.   the applicant debtor pay the respondent petitioning creditor's costs.

Note:  Settlement and entry of orders is dealt with in
Rule 124 of the Bankruptcy Rules.

IN THE FEDERU COURT OF AUSTRALIA	)
1
NEW SOUTH WALES DISTRICT REGISTRY )	No. BN 4269 of 1991

1

BANKRUPTCY DIVISION 1

RE :  ROBERT LIONEL LEAR

Debtor

EX PARTE:  ROBERT WILLIAM WALKER

Petitioning Creditor

CORAEI:	FOSTER J
DATE :	2 JUNE 1992
PLACE :	SYDNEY

REASONS FOR JUDGMENT

(Extempore)

HIS HONOUR: This is an application on behalf of the debtor to have set aside the bankruptcy notice which has been served on him by the creditor. Both the debtor and creditor have appeared in person in this matter. Consequently, to a fairly

ordinary requirements of procedure which would be unknown to	substantial extent it has been necessary to depart from
them. A lot of matters have been put to me from the bar table. In the ultimate I advised each of the gentlemen that the matter must be determined upon the material placed before me, either in the affidavits which each side have filed, or in the documents which have been placed before me during the course of argument.
I have been addressed at some length by each party at various times during these proceedings and have endeavoured to ensure that each side has placed before me everything that it wishes me to take into account. As a significant portion of this case relates to proceedings which the debtor has commenced against the creditor in the District Court at Penrith I have had regard to the file in those proceedings which has been produced to this court and which the debtor has placed before me. I shall make further reference to that file later in these reasons.
The bankruptcy notice which was served on the debtor relates to a judgment recorded in the Local Court at Penrith in the amount of $1950. Including amounts accruing by way of interest, the notice at time of service related to a total debt of $2169.56. It is clear from the evidence that the debt in fact is founded upon an order for costs made by the Magistrate who heard certain proceedings brought by the debtor against the creditor. Those proceedings were proceedings in
which a penalty was claimed for alleged breaches relating to broadcasting. The proceedings were dismissed by the learned
Magistrate and the costs order was made consequent upon that dismissal. It is plain that that order was converted according to ordinary procedures into a judgment of the Local Court; it is in respect of those costs so converted into that judgment that the bankruptcy notice was brought.
Although there was some discussion early in the case as to matters which might perhaps be said to amount to attempts to go behind that judgment, that was ultimately abandoned by the debtor. The situation then is that a bankruptcy notice was issued upon that judgment debt and served upon the debtor in the ordinary way.
The application to set aside the notice is supported by an affidavit of the debtor, sworn on 23 April 1992. Insofar as the grounds for setting aside set out in that affidavit relate to matters going to the composition of the original costs order, those grounds have not been made out and indeed, as I have already said, I regard them as having been abandoned. The judgment upon which the bankruptcy notice is founded is clearly shown to be a judgment in favour of the creditor, M r Walker, and is adequate to found the notice. I am satisfied that the bankruptcy notice demonstrates no formal defect.

The question then becomes one of whether S 40(l)(g)

of the debtor with the result that the notice should be set of the Bankru~tcv Act 1966 (Cth) (the "g") applies in favour aside. That section so far is relevant and reads as follows:

"A debtor commits an act of bankruptcy . . . if a creditor who has obtained against the debtor a final judgment ... being a judgment the execution of which has not been stayed, has served on the debtor . . . a bankruptcy notice under this Act and the debtor does not -

comply with the requirements of the notice or satisfy the Court that he has a counter-claim, set- off or cross demand equal to or exceeding the amount

of the judgment debt . . . being a counter-claim set-
off or cross demand that he could not have set up in

the action or proceeding in which the judgment . . .

was obtained."

There is no doubt in these proceedings that the creditor obtained the relevant final judgment, that execution upon it has not been stayed and that he has served the necessary bankruptcy notice. There is equally no doubt that the notice has not been complied with by the debtor. The debtor's claim, however, is that he does in fact have a cross- demand, or perhaps cross-demands, equal to or exceeding the amount of the judgment debt.

Insofar as these cross-demands are put in this case, it is fair to remark at the outset that clearly they are not demands that could have been set up in the action or proceeding in respect of which the judgment has been obtained. The demands upon which the debtor relies all relate to the proceedings to which I have already made reference. These are

proceedings brought by the debtor against the creditor in the

District Court at Penrith for defamation. Those proceedings

were commenced in March 1991. It is fairly clear that they are some distance away from a final hearing. However, there have been some interlocutory proceedings in the action and these are referred to in the debtor's affidavit. He has been successful. in relation to matters relating to the creditor's defence and he has been granted costs.

Attached to his affidavit is a bill of costs in

relation to an application to strike out the defendant's
defence. This bill of costs has not been taxed. A claim is
made for $2858.79. It includes an item fox the drawing of a
statement of claim and for photocopying, those two items
amounting to approximately $1600. The actual amount that
would be payable by the creditor to the debtor under that bill
of costs will, of course, ultimately have to be determined by
a taxing officer. Until that is done, there is no final
amount payable by the creditor to the debtor. This does not
prevent the claim being a demand as at present or it may not
so prevent it. In any event, the onus is, of course, upon the
debtor. I am not satisfied in relation to those aspects of
the matter that a demand has been demonstrated equal to or
exceeding the amount of the judgment debt. Indeed I would be
extremely surprised if the ultimate order for costs in any way
approached that amount.

The debtor, however, relies not only upon these successes that he has achieved at the interlocutory level in

these proceedings but also upon the proceedings themselves as

constituting a relevant cross-demand equal to or exceeding the amount of the judgment debt. The claim is in defamation. It is based upon alleged statements made by the creditor in radio broadcasts on amateur band radio. It is clear that both the debtor and the creditor operate radio broadcasts in this way and it would seem that other persons who are mentioned in the proceedings are similar operators in that field. It is necessary to have regard to decided cases dealing with the section relied upon by the debtor.

Although there are many such cases they have been conveniently collected and referred to in the comprehensive judgment of Lockhart J in Re Brink: Ex Darte Commercial Bankincr CO of Svdnev Ltd (1980) 30 ALR 433. His Honour, in reviewing the decisions relating to the section which I have set out above said at 438:

"In E b e r t v Union Trustee CO of Austral ia Ltd (1960) 104 CLR 346, Dixon CJ, McTiernan and Windeyer JJ said, at 350: 'Section 52(j) makes it necessary that a debtor served with a bankruptcy notice, if he does not comply with its requirements, should satisfy the Court of Bankruptcy that he has a counter-claim, set-off or cross demand which equals or exceeds the amount of the judgment debt. The debtor clearly must satisfy the court that there exists in him a counter-claim, set-off or cross demand. "Cross demand" are the words relied upon here. The appellant cannot satisfy the court that a cross demand exists by showing no more than that she propounds one and states how she suggests that she can make it out. In R e Duncan; Ex parte Modlin (1917) SR (NSW) 152; 34 WN (NSW) 49, Street J said that the debtor need not satisfy the court that there are reasonable grounds for believing that he will establish his cross-action, but only that he

has a bona fide claim which he is fairly entitled to	litigate. This perhaps is expressed too favourably
to the debtor. In Re a Debtor [l9581 1 Ch 81,
Roxburgh J said: "But not every demand will suffice. A demand made in bad faith would not be good enough. The debtor must satisfy the court that he has a genuine demand . . . But in my opinion a demand must be more than bona fide: the court must be satisfied that it has a reasonable probability of success": [l9581 1 Ch at p 99. Perhaps the standard may be expressed by saying that the debtor must show that he has a prima facie case, even if then and there does not adduce the admissible evidence which would make out a prima facie case before a court trying the issues that are involved in his counter-claim, set-off or cross demand.'
In my opinion this court should follow the decision of the High Court in Ebert's case. Hence a debtor must show that he has a prima facie case. However,
I do not understand Ebert's case as deciding that
this court must undertake a preliminary trial of the counter-claim, set-of f or cross demand; rather this court must be satisfied that the debtor has a fair chance of success."

During the course of these proceedings I read this passage to the debtor and creditor so that they could understand the nature of the inquiry upon which I am embarking in considering this application. That statement of the law by Lockhart J has been followed in this Court in Re Gould: Ex parte Skinner (1983) 72 FLR 393 at 404-405. Accordingly, I adopt it as a statement of the principles upon which I must decide this application.

The affidavit of the debtor in relation to the proceedings in the District Court at Penrith says only this:

"I have a cross-demand on the creditor which is an

action in tort and was commenced in the District Court at Penrith on 5 March 1991 by the filing of a Statement of Claim for damages for Defamation against the creditor."

The number of the matter in Penrith District Court

is 115 of 1991 and was served on the creditor on 24 April

1991. The matter is still being litigated: see Re Brink at

437. There is no other affidavit material bearing upon these proceedings. The debtor, however, relies upon the material in the file which has been produced by the District Court at Penrith for the purpose of this hearing and which he has placed before me by way of evidence.

He submits that a perusal of the file will indicate that relevantly he has a fair chance of success and that, equally relevantly, he can reasonably look forward to an award of damages in those proceedings which will be equal to or more than the amount of the debt upon which the bankruptcy notice has been issued. I have been referred to particular parts of this material and I have taken time to read and consider it. The statement of claim refers to a number of radio transmissions allegedly made by the defendant in which statements were made alleged to be defamatory of the debtor.

Reference is also made to letters written by the creditor to relevant officers of the Department of Communications and Transport in which complaints are made as to certain broadcasting, allegedly by the debtor. There is no need for me to set out in these brief reasons what is set out in the statement of claim. The document speaks for itself. It was said of the debtor as a plaintiff in the proceedings that he was slightly psychotic, that he had suffered from

be regarded as derogatory of him.	paranoid schizophrenia and various other matters which could
The matter is, however, defended. The allegations are traversed or not admitted. They have apparently been to some extent the subject of court proceedings including the court proceedings which led to the costs order upon which the judgment was based, which was the foundation of the bankruptcy notice. Defences under the Defamation Act 1974 (NSW) are raised, being defences of comment in the public interest, and substantial truth and public interest. Quite clearly the proceedings are being defended and being defended upon a number of bases which could lead to their being defeated.
I have been taken to the only other material which be said to be of any particular significance in the matter, namely transcripts, which apparently were made by the debtor and which he alleges contain records of statements made on the air by the creditor. Allowing as much latitude as I think I reasonably can, having regard to the fact that the matter has been conducted without the benefit of legal representation and accepting submissions from the bar table which would at least go to pointing towards a connection between the transcript material which forms part of this file and the statement of claim, and accepting also that the statement of claim makes reference to the transcript, I have to consider whether the material placed before me indicates, the applicant debtor having the onus, that he has not only demonstrated the
material placed before me, that he has shown that he has a existence of these proceedings, but also on the basis of reasonable chance of success.
I have considered what he has submitted to me as well as reading with care the material. I find it quite impossible on this material to come to the conclusion that there has been relevantly established in his favour any more than that he has brought the proceedings, and that they are in progress. As to whether there is a reasonable chance of success in those proceedings, I am quite unable to say.
Consequently he has not made out, in my view, the necessary elements under the section to found a stay or dismissal of the bankruptcy notice.

I therefore dismiss this application with costs.

I certify that this and the preceding nine (9) pages are a true copy of the reasons for judgment herein of the Honourable Mr Justice M. L. Foster.

Associate:

Date:	2 JUNE 1992
A P P E A R A N C E S

COUNSEL FOR THE DEBTOR:	IN PERSON
COUNSEL FOR THE PETITIONING CREDITOR:	IN PERSON
DATE OF HEARING:	2 JUNE 1992
DATE OF JUDGMENT:	2 JUNE 1992