Re Muirhead, George Arthur Robert & Anor Ex Parte Commonwealth Bank of Australia

[1996] FCA 936

IN THE FEDERAL COURT OF AUSTRALIA     )
GENERAL DIVISION  )
   No.  QN 829 of 1995
BANKRUPTCY DISTRICT OF THE             )
STATE OF QUEENSLAND  )

RE:GEORGE ARTHUR ROBERT MUIRHEAD and STEPHANIE SUSAN MUIRHEAD

EX PARTE:COMMONWEALTH BANK OF AUSTRALIA

MINUTES OF ORDER

JUDGE MAKING ORDER:     Spender J

DATE OF ORDER:          14 October 1996

WHERE MADE:              Brisbane

THE COURT ORDERS THAT:

1. The application filed 19 September 1995 is dismissed; and

1. The applicants on the application filed 19 September 1995 are to pay the respondent's costs on the application, including reserved costs, to be taxed if not agreed.

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

IN THE FEDERAL COURT OF AUSTRALIA     )
GENERAL DIVISION  )
   No. QN 829 of 1995
BANKRUPTCY DISTRICT OF THE             )
STATE OF QUEENSLAND  )

RE:GEORGE ARTHUR ROBERT MUIRHEAD and STEPHANIE SUSAN MUIRHEAD

EX PARTE:COMMONWEALTH BANK OF AUSTRALIA

CORAM:    Spender J
DATE:     14 October 1996
PLACE:    Brisbane

REASONS FOR JUDGMENT

This application raises orthodox questions concerning the provisions of s 41(7) of the Bankruptcy Act 1966 ("the Act") but which questions fall for determination in what seems to me to be against a quite unorthodox background. On 19 September 1995, George Arthur Robert Muirhead and Stephanie Susan Muirhead ("the Muirheads") made application for orders:

"1.   That the Bankruptcy Notice herein be set aside;

2.A declaration that the Court is satisfied that the Applicants have a counter-claim, set-off or cross demand within the meaning of section 40(1)(g) of the Bankruptcy Act. "

The order sought in paragraph 1 of that application appears, from what is said by Mr Myers of counsel for the applicants, to be based on, effectively, what is sought to be relied upon under the second order sought.  It is therefore
sufficient, for present purposes, to consider whether the Court is satisfied that the applicants have a counter-claim, set-off or cross demand within the meaning of s 40(1)(g) of the Act. Section 41(7) of the Act provides:

"Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has filed with the Registrar an affidavit to the effect that he has such a counter-claim, set-off or cross demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter-claim, set-off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied. "

The reference to "a counter-claim, set-off or cross demand" as is referred to in s 40(1)(g) of the Act is a reference to "a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, 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 or order was obtained."

The questions on the present application include questions of whether, firstly, the Muirheads have a counter-claim, set-off or cross demand against the Commonwealth Bank of Australia ("the CBA").  Secondly, whether the decision of the Court of Appeal dismissing an appeal from a judgment of Thomas J in the Supreme Court of Queensland giving summary
judgment for the bank against the Muirheads in the sum of $1,722,984.49 is a final judgment. Thirdly, whether the counter-claim, set-off or cross demand propounded by the Muirheads could have been set up in the action in which Thomas J gave the judgment the subject of the bankruptcy notice. Finally, and as it turns out, most importantly, whether before the expiration of the time fixed for compliance with the requirements of the bankruptcy notice, the debtor had filed with the Registrar an affidavit to the effect that they had such a counter-claim, set-off or cross demand as is referred to in paragraph 40(1)(g) of the Act.

On 5 June 1995, Thomas J ordered, in response to an application by the CBA for summary judgment against the Muirheads:

"The Plaintiff do recover against the Defendants in the sum of ONE MILLION, SEVEN HUNDRED AND TWENTY-TWO THOUSAND, NINE HUNDRED AND EIGHTY-FOUR DOLLARS AND FORTY-NINE CENTS ($1,722,984.49) with costs of the action to be taxed. "

This judgment, as I say, was in response to the application by the CBA for summary judgment in the sum I have mentioned for money lent.  That claim was for the balance due under crediting proceeds of a receiver's sale for the Muirheads' properties.  I use the words "receiver's sale" because that is how it was characterised by Thomas J in his reasons given on 5 June 1995.  In those reasons, his Honour said:

"The defendants have filed affidavits with a view to showing that there are questions in dispute which ought to be tried.  Their counsel, Mr Parker QC, relied on three points which he submitted demonstrate this.  Two of them are directed to the alleged inadequacy of proof of liability for that part of the loan which is said to have been advanced by means of a bill discount facility.  The other point is that the sale by the receiver of property securing the defendant's loan was at undervalue and it is asserted that rights are thereby raised in the defendants to resist the present claim. "

At page 8 of his Honour's reasons, his Honour commenced by saying:

"I turn to the third point concerning the adequacy of the realisation effected by the receivers.  A defence was delivered which alleges that the receiver acted in breach of his duty and sold the properties at prices substantially below their real value, and that this was done with the knowledge and acquiescence of the plaintiff.  There is however no verification by affidavit of the allegation of knowledge or acquiescence on the part of the plaintiff.  Assuming without deciding that mere knowledge and acquiescence on the part of a secured creditor would make it liable for the defaults of a receiver, there is no evidence by which knowledge or acquiescence can be inferred.  The bank is entitled to take advantage of the somewhat artificial, but well-known legal consequences that a receiver pursuant to instruments such as those signed in this case, must be treated as the agents of the defendants (Visbord v FCT (1943) 68 C.L.R. 354, 376). "

He later said:

"Finally it should be remembered that the defendants instituted proceedings in the Federal Court, and these were recently removed into this Court.  Those proceedings raised the same bills of exchange points as those raised before me, and they also raised other issues.  However it was not submitted that any of those issues are such as to raise triable issues with respect to the present claim for summary judgment.  They include points under The Currency Act 1965, The Reserve Bank Act 1959 and The Commonwealth Bank Act 1959, but they were not pressed before me. "

His Honour then proceeded to give judgment for the plaintiff CBA for the amount I have earlier referred to, with costs.

On 19 July 1996, the Court of Appeal gave judgment on the appeal by the Muirheads from the decision of Thomas J ordering summary judgment against them.  It is necessary to have some close consideration to aspects of their Honours' judgments.  Macrossan CJ gave his agreement to the reasons for judgment of McPherson JA.  At page 2 of the Chief Justice's reasons he proceeded on the basis:

"...for present purposes, it can be assumed that there has been a failure to take reasonable care to ensure that the property has been sold at its market value. "

After referring to Commercial and General Acceptance Limited v Nixon (1981) 152 CLR 491, which gives an interpretation of s 85(1) of the Property Law Act 1974 (Qld) ("the PLA") of the mortgagee's obligation exercising a power of sale by him directly or acting through an agent, his Honour said:

"Subsection 1 [of s 85 of the Property Law Act] is concerned with "the duty of a mortgagee, in the exercise ... of a power of sale." This wording should, in my view, lead to the conclusion that the statute is intended to apply to the case where the mortgagee himself sells or does so through his agent but does not deal with the different case where the sale is effected by an agent of the mortgagor. "

At page 3 the Chief Justice said:

"...if the result of the contractual arrangement between the parties is that any sale made by the receiver is a sale by the mortgagor's agent, then this is not to be regarded as a stipulation having the effect within the meaning of subs.(5) of relieving the mortgagee from the duty imposed by the statute under the section.  The only duty imposed by the section is one which applies in the case where the power of sale is exercised by the mortgagee or the mortgagee's agent. "

Davies JA also agreed generally with the reasons of McPherson JA.  He said at page 3, however:

"The relevant questions here are whether the sale by the receiver was nevertheless a sale by the mortgagee; and whether the provision making the receiver solely the mortgagor's agent was one purporting to relieve or which might have the effect of relieving the mortgagee from the duty imposed by subs. (1).  The second of these questions does not, in my view, require a separate answer because it presupposes a duty imposed by subs. (1) which, as I have said, arises only upon a sale by the mortgagee. "

He continued:

"If cl. E of each of the mortgages had the effect, as it purported to, of making the receiver, in selling the property, solely the agent of the mortgagor then the sale could not have been one by the mortgagee, that it should be given its intended effect has been accepted in Australia. "

citing Visbord v The Federal Commissioner of Taxation (1943) 68 CLR 354, applying the judgment of Rigby LJ in Gaskill v Gosling [1896] 1 QB 669 at 691-3.

In the reasons for the leading judgment of McPherson JA, his Honour dealt with a number of matters which were argued before him, touching bills of exchange and so on; but for present purposes, at page 15 of his reasons for judgment under the rubric "Sale under value," his Honour said:

"It is necessary now to examine the relevance of these matters to the Bank's claim against the Muirheads. "

And after dealing with some general propositions concerning such a claim, his Honour said:

"Apart from the bare allegation in para. 10 of the defence that the receiver Harris "acted in breach of his statutory duty to the defendants ... and sold the property at a price substantially below its real value...there is nothing in that defence giving rise to an issue about the inadequacy of the sale.  The Bank is, however, also alleged in para. 10 to have known of and acquiesced in the receiver's action; but the pleading does claim any amount of damages led to or resulted from that breach, nor is it asserted that there is a right to set off any such amount against the bank's claim for money lent. "

His Honour at page 17 said:

"...from the estimate of value given by Mr Turner (which is uncontradicted), a question is raised whether or not the mortgaged properties were sold by the receiver at such an undervalue in 1994 as to give rise to a claim on the part of the Muirheads against the Bank for damages under section 85(3) of the Property Law Act. If a breach of section 85(3) is capable of being established at the trial, the amount of those damages might prove to be enough to extinguish, or at least substantially reduce, the deficiency in repayment of the loan as it then stood. "

Then under the rubric "The receiver as agent," his Honour deals with the question about the sale.  His Honour said:

"The sale about which complaint is made was effected not by the mortgagee Bank itself, but by the receiver Mr E.G. Harris. "

Having referred to the provisions in clause 4 of the bills of mortgage, there is a proviso that any receiver:

"...shall be the agent of the mortgagor and the mortgagor alone shall be responsible for his acts and defaults..."

His Honour said at page 18 of his reasons:

"Considered apart from the particular statutory provisions to be mentioned, the result seems plainly to be that the Bank as mortgagee could not be made liable to the Muirheads as mortgagors for the defaults alleged against their agent Mr Harris in selling the mortgaged property in the exercise of his powers as receiver appointed by the Bank. "                  

His Honour then considered s 92(2) of the PLA, which provides that a receiver appointed under power conferred by the PLA is "deemed to be the agent of the mortgagor, and the mortgagor shall be solely responsible for the receiver's acts or defaults unless the instrument of mortgage otherwise provides."

His Honour's conclusion is contained at page 20 of his reasons where his Honour said:

"Having regard to the explicit terms of s 92(2), the apparent conflict or inconsistency between it and s 85(1) and 85(5) of the Act is capable of being resolved only by treating s 92(2) as a specific provision detracting from the more general provisions of the earlier subsections of s 85. Consistency can be achieved by regarding the general duty to take care imposed by s 85(1) as subject to the special exception recognised by s 92(2) in the case of an act or default of a receiver, who by the terms of that subsection is deemed to be the agent of the mortgagor, and as such outside the ratio of Gibbs CJ and Mason J in Nixon's Case. "

His Honour at page 22 said:

"For these reasons I have come to the conclusion that the prospective claim of the appellants Muirheads as mortgagors against the respondent Bank as mortgagee for damages for alleged breach by Harris of the duty imposed by s 85(1) of the Property Act (sic) (if that is what is intended to be pleaded) is not one that is capable of prevailing over the express provisions of cl. 4
of the bills of mortgage that the receiver 'shall be the agent of the mortgagor, and the mortgagor alone shall be responsible for his acts and defaults.' "

He agreed then that the primary judge was correct in holding that no triable defence or issue was disclosed on the application for summary judgment.  Had the matter stopped there, much of my problems would have been avoided.  However, his Honour said that not only should the appeal be dismissed with costs but:

"The appellants should have leave to amend their defence as they may be advised but are ordered to pay the costs of and incidental to any such amendment. "

The difficulty I have is that if there is anything that might be available to the Muirheads by way of defence justifying permission to amend their defence, that conclusion seems to me, with respect, to be inconsistent with the conclusion by the Court of Appeal that the appeal should be dismissed.   It is clear that the matters pleaded by the Muirheads to the claim by the CBA were treated as being in the nature of an equitable set-off or at least sufficient as justifying, if they were made good or at least were triable, the refusal of summary judgment on the CBA's claim.

The dismissal of the appeal against the summary judgment seems to me to be inconsistent with agreement of leave to amend the defence to the CBA's claim.  I confess,
frankly, that I cannot see that the explanation for the Court of Appeal's judgment is (as was suggested by Mr Couper QC, counsel for CBA, in respect of the orders by the Court of Appeal) that this was done so as to permit the Muirheads to put their best case before the High Court should there be an application for special leave. 

The case now sought to be argued by the Muirheads is one which attempts to avoid the dangers and the difficulties that are thrown up by, first of all, clause 4 of the mortgage documents; secondly, the provisions of s 92(2) of the PLA ; and, thirdly, the unanimous decision of the Court of Appeal that the Muirheads cannot establish any vicarious liability in the CBA on the basis of the conduct of the receiver.

What is asserted by Mr Myers on behalf of the Muirheads is that, without too much precision being achieved, the CBA authorised the sale at an under-value; that the CBA is primarily responsible for the sale at an under-value; they are not vicariously liable; and that at trial the Muirheads would hope to establish that there was a direction by the CBA to sell at an under-value, and the Muirheads can claim that the question is not one in any way at all of vicarious liability pursuant to s 85 or relevant to s 92(2) of the PLA but one of direct responsibility.

This case, it is said, is different from what was asserted before the primary judge and before the Court of
Appeal.  The contention by the CBA is that that claim is simply a mere variant of what was rejected by the Court of Appeal and also what was put up before the primary judge, Thomas J, on the summary judgment application.  I, for my own part, would be very happy to accept this but for the order of the Court of Appeal permitting leave to amend the defence.  If the claims as pleaded were regarded as being a claim for an equitable set-off impeaching the right of the applicant CBA to summary judgment, I cannot see how the dismissal of the successful application for summary judgment can be reconciled with the grant of leave to amend the defence to the claim by the CBA.

The Court of Appeal ordered:

"1.   The appeal is dismissed with costs.

2.The appellants have leave to amend their defence as they may be advised but are ordered to pay the costs of and incidental to any such amendment. "

Pursuant to the leave granted by the Court of Appeal, the Muirheads filed an amended defence on 27 September 1996.  On 9 October Ambrose J dealt with a summons by the Muirheads seeking a stay of the execution of the judgment of Thomas J in the sum of $1,722,984.49 with costs.  On that day, his Honour dismissed the judgment debtors summons and made an order for costs in favour of the CBA. 

It is accepted that the affidavit of Susan Forrest filed 14 October 1996 accurately records what occurred before his Honour, his Honour's reasons not having yet been published.  In respect of the contention on behalf of the Muirheads:

"that the summary judgment in the Bank's favour could not be treated as a final judgment where in the Supreme Court there was still outstanding a cross action (that action being the Federal action commenced by the defendants and cross-vested to the Supreme Court on 28 November 1994).  His Honour noted that on the defendants' own admissions the former Federal Court statement of claim would need to be amended to amount to a properly constituted cross-action. "

The affidavit further recites:

"His Honour further found that the prospects of the defendants succeeding on either matters were negligible having regard to the clear pronouncement of the Court of Appeal in dismissing the Muirhead's (sic) appeal, and that he was unpersuaded that there was any significant prospect of circumventing the effect of the Court of Appeal judgment by the defendants (Judgment Debtors) alleging against the Bank (Judgment Creditor) a cause of action in negligence or for breach of an implied term in the contract between the Judgment Creditor and the Judgment Debtors. "

It is submitted on behalf of the Muirheads that Ambrose J had no basis for so concluding, particularly having regard to the observations of McPherson J at page 16 of his judgment, to which reference has earlier been made.  It seems to me that perhaps the difficulty concerning Ambrose J's determination is to be found in the tension between the orders of the Court of Appeal, on the one hand dismissing summary

judgment, and on the other, permitting leave to amend the defence to the CBA's claim. 

Notwithstanding these obvious difficulties, I am prepared to proceed on the basis that first of all, the Muirheads may have a cause of action not answered by the difficulties of clause 4 of the mortgage documents, ss 85 and 92(2) of the PLA, and that the cause of action is a cause of action at common law such as is alleged by Mr Myers on their behalf. There are difficulties with that assumption, but it seems to me that that is the only way I can fairly resolve the tension between the various orders that the Court of Appeal made.

The second general area then concerns the complaint is that if there is such a cause of action it was not, in the terms of section 40(1)(g) of the Act, a cause of action that could not have been set up in the action or proceeding in which the judgment order was obtained. This in turn concerns the question of what is "a final judgment". It was argued that whatever the cause of action on which the Muirheads presently rely, that is a cause of action that could have been set up before Thomas J, and later before the Court of Appeal.
As to the terms of section 41(7) of the Act, it is important to have regard to the observations of Dixon CJ, McTiernan and Windeyer JJ in Ebert v The Union Trustee Company of Australia Limited (1960) 104 CLR 346 at 350, where their
Honours said in reference to the statutory provision, the predecessor of section 41(7) of the Act:

"The debtor clearly must satisfy the Court that there exists in him a counter-claim, set-off or cross-demand.  'Cross demand' is the word 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 Re Duncan; Ex parte Modlin (1917) 17 S.R. (N.S.W.) 152; 34 W.N. 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 [1958] 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' [1958] 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 he 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.  What the appellant put before the Bankruptcy Court does not reach this standard. "

That is the conclusion that I reach on the application of the applicable legal principles to the facts of this case.  In Re Scott; Ex parte Scott v Beneficial Finance Corporation Limited (1994) 53 FCR 324, Einfeld J at 327 referred to the well known test of Lukin J in re Stokvis (1934) 7 ABC 53 at 57 where Lukin J said:

"I take a counter claim, set off, or cross demand which could not be set up as one which, from point of time, or from its nature, or from the
absence of empowering provisions, or from positive inhibition so to do, could not be set up in the particular case in which judgment was obtained...Mere failure to take advantage of the opportunity can hardly be said to be inability. "

That approach has been adopted in many cases since, including Re Brink; Ex parte Commercial Banking Company of Sydney Ltd (1980) 44 FLR 135 by Lockhart J; O'Loughlin J in Re Willats; Ex parte Nissan Finance Corporation Ltd (1991) 31 FCR 206, and Hill J in Re James; Ex parte Carter Harvey Roofing (Australia) Pty Ltd (1993) 46 FCR 183 at 189.

The difficulty in the present case in the application of those principles is this; theoretically and practically it was possible for the applicants to set up the claim which, as explained by Mr Myers, they now wish to propound in the proceedings before Thomas J.  On the application for summary judgment the question is whether the claim now propounded could have been set up.  I suspect that it could have been.  Against that, however, is the fact that on the summary judgment application McPherson JA, with whom the other judges agreed, at page 16 of his judgment seemed to express the view that independently of the question of summary judgment it was open to the Muirheads to plead something, notwithstanding that the application by the CBA for summary judgment against them was to be upheld. 

Consistent with what I said in Re Ryan; Ex parte Ryan v Jupiter's Management Limited (1992) 38 FCR 127 and with
the other cases concerning the characterisation of what might be set up in the cause of action in which judgment was obtained, I am not, at present, in the light of the judgment of the Court of Appeal, prepared to say that the judgment of Thomas J, affirmed by the Court of Appeal, is a final judgment in the relevant sense.

It is clearly not an interlocutory judgment.  It is final in that sense.  Notwithstanding that the application the appeal to the Court of Appeal was concerned with posed the question of whether a judgment for summary judgment should be confirmed, it was still open for some other ground to be argued by the Muirheads as a defence to that claim, or even as a cross-claim to that claim.  Having regard to what I see as the paramount consideration of the bankruptcy law in this area, namely, that a person should not be exposed to bankruptcy proceedings if in truth, at the end of the day, there might be a balance of account in his favour, it would seem to me to be wrong to permit bankruptcy proceedings to be based on a summary judgment application in circumstances where the Court of Appeal has decreed that there may be circumstances of defence or a cross claim in relation to the claim by the CBA on which the summary judgment was obtained.

However, the third and most unhappy aspect for the Muirheads concerns the terms of section 41(7) of the Act. It is necessary before the provisions of that section can come into account that the debtor file with the Registrar an
affidavit to the effect that the debtor has such a counter- claim, set-off or cross demand as is referred to in paragraph 40(1)(g) of the Act and the court has not, before the expiration of the time fixed for compliance with the bankruptcy notice, determined whether it is satisfied that the debtor has such a counter-claim, set-off or cross demand. The effect of the section is to extend, until the court has so determined whether it is so satisfied, the time for compliance with a bankruptcy notice.

In this particular case there has been no suggestion argued that the affidavit is not an affidavit "to the effect" as required by subsection 41(7) of the Act. In that regard it seems to me that it is necessary to consider whether the affidavit satisfies the court that there is a counter-claim, set-off or cross demand of which that section speaks.

Having regard to the terms of the affidavits filed during the currency of the time referred to in the bankruptcy notice, I am not so satisfied.  It might be thought that this is a hard decision, but the fact of the matter is that it is necessary, as Ebert suggests "...the debtor must show that he has a prima facie case, even if then and there he does not adduce the admissible evidence which would make out a prime facie case..."

Even if in terms of formulation such as those in Brink's Case, what is necessary is that the debtors show a
bona fide case asserting or claiming with particulars the basis on which they assert the cross demand, and that has not been done in this case. My approach in the matter, conscious that the time frame is very short within which the debtors have to satisfy the demands of the Act, and I approach it further on the basis that there has to be a generous and benevolent view given of the affidavit which is said to call into operation 41(7) of the Act: Re Brink; Ex parte Commercial Banking Company of Sydney Ltd (1980) 44 FLR 135 at 142 per Lockhart J; Eastick v Australian & New Zealand Banking Group Ltd (1981) 53 FLR 91 (FC); Re Hodby; Ex parte Kenny (1986) 12 FCR 134 at 136 per Fisher J; Re Willats; Ex parte Nissan Finance Corporation Ltd (1991) 31 FCR 206 at 209 per O'Loughlin J.

In conformity with that approach, it seems to me that the material which in point of fact depends on the consequences of the affidavit of Stephanie Susan Muirhead filed on 19 September 1995, the requirements of the Act have not been met. It is accepted by Mr Myers that the claim in the Federal Court proceedings which were cross vested to the Supreme Court requires amendment.

What in fact has to be asked is whether what is claimed in the bankruptcy notice amounts to, first of all, the assertion of the counter-claim, set-off or cross demand which the Act requires; and secondly, whether it provides a basis for concluding that, in an appropriate way, the test of the
establishment of that claim has been made out.  All that can be said on behalf of the Muirheads in relation to this appears in par 21 of the affidavit of Susan Stephanie Muirhead filed 19 September 1995, as follows:

"I verily believe, having read the said Application and the Statement of Claim attached hereto as 'GS12' having received legal advice, that we have a prima facie case against the Bank and the Receiver.  I rely on the contents of the said Application and Statement of Claim. "

[which are those relevant to the Federal Court proceedings].

When reference is made to the application and statement of claim referred to in Mrs Muirhead's affidavit, all that can be gleaned from those documents as justifying or supporting the counter-claim, set-off and cross demand now asserted, appears at page 24 of the statement of claim under the heading "Receivership" and from pars 35 onwards.

Most of these are directed to complaints against the receiver and all that is presently able to be pointed to by Mr Myers is what appears in paragraph 46 which is in the following terms:

"...the First and Second Respondents were aware of the valuation of the Land carried out by Herron Todd White and Associates and dated 19 May 1989 which specified a value of $5,800,000.00 for the Land and a further $1,245,000.00 for capital works.  The valuation therefore totalled $7,045,000.00 without capital gain. "

The remaining paragraphs deal with complaints against the second respondent, and in paragraph 49 complains that the actions of the receiver were unlawful and an abuse of process and in breach of various duties owed by the receiver.

While I want to make it plain that I share the description by Thomas J at first instance that the position of a receiver pursuant to the mortgage documents such as those in the present case being the agent of the mortgagors is "artificial" and while, for myself, I would hesitate long before lending a court to be a party to fraud or imposition by treating as real that which is false, the facts are that nothing in the affidavit of Mrs Muirhead, on which reliance has to be placed for the Muirheads, comes within the statutory requirements of the Act.

In those circumstances, I decline to grant the relief sought by the application filed on behalf of the debtors on 19 September 1995. The court is not satisfied that the debtors have such a counter-claim, set-off, or cross demand as is referred to in paragraph 40(1)(g) of the Act. The consequence is that the time for compliance with the bankruptcy notice in respect of which the application was made, being Bankruptcy Notice 829 of 1995, is extended by virtue of the Act until today.

The application filed 19 September 1995 is refused and the applicants on that motion are to pay the respondent's

costs of that application, including reserved costs, to be taxed if not agreed.

I certify that this and the preceding twenty (20) pages are a true copy of the reasons for judgment herein of the Honourable Justice Spender.

Associate

Date: 14 October 1996

Counsel for the debtors        :         Mr R Myers
instructed by                  :         Nicol Robinson & Kidd

Counsel for the creditor       :         Mr S Couper QC
instructed by                  :         Gadens Ridgeway

Date of Hearing                :         14 October 1996