Re O'Callaghan, D. Ex parte O'Callaghan D. v Hall, K.
[1993] FCA 353
•01 JUNE 1993
Ex parte: DENNIS O'CALLAGHAN
And: KEVIN and SUSAN HALL
No. BN267 of 1993
FED No. 353
Number of pages - 9
Bankruptcy
COURT
IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND
GENERAL DIVISION
Cooper J(1)
CATCHWORDS
Bankruptcy - application to set aside a bankruptcy notice - application for an extension of time to comply with the bankruptcy notice - whether debtor had a counterclaim, set-off or cross-demand of a kind referred to in section 40(1)(g).
Bankruptcy - judgment obtained after trial in District Court - bankruptcy notice - application to set aside - debtor asks the Court to go behind the District Court judgment - discretion - whether substantial reasons for questioning whether there is a debt in truth and reality owing to the creditor - no suggestion of fraud or collusion on the part of the judgment creditors at the trial of the action - trial on the merits - debtor taken no steps to seek to set aside the judgment or appeal it - applications dismissed.
Bankruptcy Act 1966 - Section 40(1)(g)
Corney v. Brien (1951) 84 CLR 343
Wren v. Mahoney (1972) 126 CLR 212
Petrie v. Redmond (1942) 13 ABC 44
Re Vojnovski (1970) ALR 355
Olivieri v. Stafford (1989) 24 FCR 413
Re V. and J. Removals Ex parte Earl (BN963 of 1985; Pincus J., Unreported, 21 June, 1985 at 7)
Simon v. O'Gorman Pty. Ltd. (1979) 27 ALR 619
Re Conte; Ex parte Conte v. Commissioner of Taxation (1990) 27 FCR 120
HEARING
BRISBANE, 21 May 1993
#DATE 1:6:1993
Counsel for the Applicant: Mr T. Ryan
Solicitors for the Applicant: Messrs. McInally Astill, Solicitors
Counsel for the Respondent: Mr G. Robinson
Solicitors for the Respondent: Cranston McEachern and Co.,
ORDER
THE COURT ORDERS THAT:
1. The application to set aside the bankruptcy notice be dismissed.
2. The application for an extension of time to comply with the bankruptcy notice be dismissed.
3. The application for a declaration that the debtor has a counterclaim, set-off or cross-demand of a kind referred to in section 40(1)(g) of the Bankruptcy Act 1966 is dismissed.
4. The debtor pay the respondents to the application costs of and incidental to 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.
JUDGE1
COOPER J This is an application by the debtor to set aside a bankruptcy notice served upon him and for a declaration that he has a counterclaim, set-off or cross-demand of a kind referred to in paragraph 40(1)(g) of the Bankruptcy Act 1966.
The judgment creditors on 13 December, 1991 obtained judgment against the debtor in the sum of $28,960.00 after a two day trial in the District Court at Brisbane before McMurdo DCJ. On 1 March, 1993 a bankruptcy notice issued based upon the said judgment. The notice required payment of the sum of $28,960.00 within 28 days. The bankruptcy notice was served on 6 March, 1993.
On 2 April, 1993 the debtor filed the within application. Annexed to the application was the following :-
"1. DETAILS OF THE COUNTERCLAIM AND SETOFF OR CROSS DEMAND ARE:
1. There is no true debt;
2. The judgment was obtained as a result of DENNIS O'CALLAGHAN'S former Solicitors negligence;
3. The debtor was self represented at the time of trial and possessed no legal skill; and
4. That the judgment was unfairly obtained.
2. THE REASONS WHY THE COUNTERCLAIM SETOFF OR CROSSDEMAND COULD NOT HAVE BEEN SET UP IN THE ACTION OR PROCEEDING IN WHICH THE JUDGMENT OR ORDER WAS OBTAINED ARE: The set-off arose in the proceedings and damage was suffered at the conclusion of the action. SIGNED:"
No affidavit was filed in support of the application until 21 May, 1993.
The matter giving rise to the trial was a dispute as to the quality of brick work done by the debtor for the judgment creditors. In her reasons for judgment, McMurdo DCJ found :-
"I find that the plaintiff entered into a contract with the defendant for the defendant to carry out the bricklaying work on the house built at 88 Celandine Street, Shailer Park, Queensland. I find that the defendant represented to the plaintiffs that he was a qualified bricklayer and would carry out the work in a good and tradesman-like manner. I find that it was an implied term of that verbal contract that the defendant would so carry out the bricklaying work. I find it was a further implied term of that agreement that the mortar used in that work would be of a finished strength and adhesion of acceptable standard. I find it was a further term of that verbal contract that the defendant would comply with the engineer's plans.
The evidence is overwhelming that the bricklaying work carried out by the defendant was unsatisfactory. The mortar strength makes the brick work not only visually displeasing but structurally unsound. I accept the recommendations of the engineers, Mr Martin and Mr Moore that demolition and reconstruction is the only remedy that will both aesthetically and structurally correct the work. I found the plaintiff to be an entirely credible witness and where there are discrepancies between the evidence given by the plaintiff and the defendant I certainly prefer the plaintiff's evidence.
I gave leave at the commencement of proceedings for the defendant to amend his Entry of Appearance and Defence filed on the 14th November 1990 by adding to Paragraph 6 the following sub-paragraphs:
'(e) That the defendant has never been given any opportunity to rectify any work; and
(f) The defendant has not been allowed to have the work inspected or tested.'
I find that the defendant has never made any offer to rectify his defective work in terms that could in any way be regarded as satisfactory to the plaintiff. I find the plaintiff has given the defendant reasonable access in all of the circumstances to the site for inspection and for tests to be carried out. I find the plaintiff has suffered a loss by reason of the defendant's breach of the contract. The plaintiff is entitled to be placed in the position he would have been in, had the contract not been breached. That loss can only properly be remedied by demolition of the defective brickwork and proper reconstruction. This is the only remedy which will give the plaintiff aesthetic and structural satisfaction. The plaintiff is entitled to damages for the cost of actual rectification of the work. See Bellgrove v. Eldridge (1954) 90 CLR 613 especially at 617-618. The lower of the two quotations for carrying out this work is that from Mills Homes in the sum of $28,960. On the evidence before me this is a fair and reasonable price. Counsel for the plaintiff has conceded that there is no proper claim for interest in the circumstances, and has abandoned that claim.
I therefore give judgment for the plaintiff against the defendant in the sum of $28,960. I order the defendant pay the plaintiff's costs of and incidental to this action to be taxed".
The recommendation of Mr Martin, the engineer to which her Honour refers, is set forth earlier in her reasons where she says :-
"Geoffrey Charles Martin is a consulting structural and civil engineer in private practice and did the engineering design work on the plaintiffs' house. The plan prepared by him was tendered as Exhibit 15. He said, in his opinion, after inspecting the building of this house in relation to the north wall, it does not comply with the plan as the brick wall is not bonded in with the chimney. He described this as a structural defect resulting in the wall not being stable under a full wind load. He said he did not think the slab under the fireplace was on a separate footing to the slab for the house. He tested brick pieces using mortar with a cement : loam rate of 1 : 4 and compared this to bricks bonded with a mortar of a 1 : 16 cement to loam ration. The 1 : 16 mortar had a very low bond strength so there was very little bond between the ties and the brickwork. This meant that in high winds there would be a possibility of bond failure between the ties and the brickwork. His reports were tendered as Exhibit
16. He recommended demolition and re-building of all external brickwork".
Importantly her Honour found two areas of deficiency in the work which required demolition and rebuilding. The first was the inadequate mortar strength. The second was the failure to build the fireplace in accordance with the plans by not bonding it to the brick wall as was required.
The debtor, in his affidavit in support of the application, states :-
"4. During the initial part of the action brought by MR AND MRS HALL, I had instructed my solicitors at that time MESSRS CANN(O)N and PETERSON to obtain various tests. Specifically I asked them to arrange to have a MR JIM EATON from Q.U.T. take samples from the property for the purpose of among other things a compaction test.
5. I was told by my solicitors, MESSRS CANN(O)N and PETERSON that the Hall(')s had refused to allow me to obtain tests. I then instructed my solicitors to bring an application to allow me to obtain the tests. This application was never brought. I subsequently terminated the service of MESSRS CANN(O)N and PETERSON. At no time prior to the trial was I aware that the Halls had consented to the testing.
6. During evidence at the trial a letter from the Halls solicitors was handed up which stated the Halls consented to the testing. I never received this letter. On inspection of the letter the address indicated on the letter was incorrect. I am advised by my current solicitors, MESSRS ASTILLS, that it appears a Certificate of Readiness for Trial was signed by my former solicitors, MESSRS CANN(O)N and PETERSON. At that time, I was unaware that they had signed the Certificate. If I had of been aware I would not have consented to the signing of the Certificate of Readiness for Trial until we had been able to obtain the property compaction test.
7. The matter was subsequently set down for trial and I appeared for myself at that trial without legal representation.
8. I was unaware that at the time of the trial that I could have made an application for an adjournment so as to proper(ly) conduct my action. If I had of been aware I would have applied for that adjournment and would have attempted to obtain a report.
9. At the time of the trial I did not really have any idea of the court procedures.
10. I did not know that I was required to call witnesses with expertise in a particular area I believed that I could give all the evidence on my behalf.
11. Particularly at the trial I did not raise all the evidence that I could have.
12. Prior to the time of the trial I visited the defendant's property to further inspect the mortar. On an inspection I formed a view that the exterior of the brick work and mortar had been treated with a concentrated acid wash. To determine whether acid has been used on a surface you normally lick the mortar. If it has been treated with acid wash it has a distinctive taste. In that case that distinctive taste was present when I checked the mortar. The taste is an acidy taste.
13. When a wall is treated with concentrated acid wash it will have the effect of breaking down the mortar and making the mortar crumbly. This is particularly so in the event that acid was applied without first wetting the wall.
14. At no time did I apply acid wash to the walls of the Hall's residence. Acid wash will not normally be used in the case of a brick structure where colonial bricks are used with dark mortar. In this type of construction acid wash is almost never used. As far as I am aware the only testing that took place is external testing. The sample from the external testing I believe would have been effected by the acid wash.
15. I am informed by MRS JAN HEAD and verily believe that the Halls neighbours and friends the THOMMASONS had purchased acid wash with the intention of acid washing the wall of their house themselves. At the time (of) the THOMMASONS and the HALLS were good friends. I do not know whether the THOMMASONS gave the Halls acid so they could wash their walls. I have since the judgment requested a compaction test from the Halls.
16. I have made numerous enquiries about compaction testing. I believe that the compaction testing is the only way that the integrity of the mortar could be determined throughout from the front of the walls to the rear of the walls. I believe from my discussions with MR JIM EATON of Q.U.T. that compaction testing would determine the overall integrity of the mortar and not just the exterior parts of the mortar which I believe have been effected by acid wash.
17. I understand that the compaction testing requires the removal of a number of bricks. However, I am willing to pay for the compaction testing together with providing monies in advance for the rectification work that may be required as a result of the removal of the bricks for the compaction test".
The debtor did not appeal the judgment and has made no application to set it aside.
The debtor asks that the court go behind the District Court judgment and that the question of whether the court will do so be determined as a preliminary issue.
The discretion of the court to go behind a judgment requires that there be substantial reasons for questioning whether there is a debt in truth and reality owing to the creditor (Corney v. Brien (1951) 84 CLR 343 at 358; Wren v. Mahoney (1972) 126 CLR 212 at 224-225). That requirement may be more easily satisfied in the case of a default judgment (Petrie v. Redmond (1942) 13 ABC 44 at 49; Corney v. Brien at 347, 357-358; Re Vojnovski (1970) ALR 355 at 359; Oliveri v. Stafford (1989) 24 FCR 413 at 422; Re V. and J. Removals Exparte Earl (BN 963 of 1985; Pincus J, Unreported, 21 June, 1985, at 7).
Where the judgment is one entered after trial, as Lockhart J (with whose reasons Fisher J generally agreed) stated in Simon v. O'Gorman Pty. Ltd. (1979) 27 ALR 619 at 633 :-
"The courts are reluctant to exercise this jurisdiction where the judgment was entered after a full investigation of the issues at a trial where both parties appeared and had ample opportunity to put their case to the court: see Corney v. Brien, supra; Re Vojnovski; Ex parte Malcolm (1970) ALR 355; Wren v. Mahoney, supra."
Similarly, in Corney v. Brien Fullagar J said at 356 - 357 :-
"If the judgment in question followed a full investigation at a trial on which both parties appeared, the court will not reopen the matter unless a prima-facie case of fraud or collusion or miscarriage of justice is made out. In re Flatau; Ex parte Scotch Whisky Distillers Ltd.
(1888) 22 QBD 83, at p 86, Fry LJ said: 'This power has never, so far as I am aware, been extended to cases in which a judgment has been obtained after issues have been tried out before a court'".
Although the circumstances in which the court will inquire into the validity of a judgment are not closed, to justify the exercise of the discretion to go behind a judgment after a trial on the merits requires evidence in the nature of fraud, collusion, miscarriage of justice or the like (Petrie v. Redmond at 48-49; Corney v. Brien at 347-348, 356-357; Wren v. Mahoney at 223; Simon v. O'Gorman Pty. Ltd. at 633).
In the instant case the debtor's complaints fall into three categories:-
(a) His then solicitors did not act in accordance with his instructions and were not authorised to sign a certificate of readiness;
(b) That in conducting his own trial he was unaware that he could seek an adjournment, did not known he was required to call expert witnesses or give all his evidence;
(c) He has been denied the opportunity to have testing of the brickwork carried out by a Mr Eaton of the Queensland University of Technology.
The debtor filed an affidavit exhibiting the transcript of the second day of proceedings before McMurdo DCJ. For some unexplained reason the transcript of the first day was not exhibited. Her Honour led the debtor through his evidence in chief. In part he said :-
"HER HONOUR: Well, you can't give evidence of what someone else gave you. You've had the opportunity to call experts, if you wanted to?-- I realise that, but with nobody being allowed to do testing, I didn't think there was much point in having any experts called because if they couldn't get the results that they needed for their tests, what was the point - I did engage QUT. I've had several conversations with them. I've been and spent hours in their laboratory and as recently as a fortnight ago I spent a day in there and they were explaining to me what tests were taken.
You can't give evidence of what they explained to you. If you want to call them, call them?-- There was no point calling them, they said, until they were allowed to do tests and I also tried to engage the engineer chap who looks at it all, Mr David Beal, but we couldn't get consent, so we couldn't do the test. They said they gave me a time limit on how long it would take. They said they were very extensive and very thorough, but other than that, I can't make any explanation. I, myself, cannot make any explanation for the mortar tests. I, personally, mixed the mortar. Unless I did something wrong or there's been a strange reaction - someone else said 'pump sand' or something and I said, 'I don't known.' - unless there was something wrong - well then I go to gaol or whatever, but I have never deliberately tried to rip anybody off or anything like that. I mean, Kevin only lives sort of three doors down the road from where I live and I've built a tremendous amount of work, all in the same street. In the same area there's probably in the vicinity of 100,000 bricks that I've laid. The problem of the mixture is something I don't fully understand. There is no point in me saying that I had someone working for me or something like that. I did it at different times, but I would have to feel fully responsible. It was blended cement used, being a darker colour, and whether there was a chemical reaction between that and the black, I don't know, but I don't blame anyone else for the problem. It is 100 per cent mine. I have offered to rectify it. I've offered to pay for the demolition. It is still a - something I can't understand where Mr Hall doesn't want holes put in the wall for testing, but he wants the same wall demolished. I find difficulty as someone uneducated to relate to that point. ......
Are you saying you never told Mr Hall apart from the first occasion when he spoke to you that you would rectify it?-- I have not had any conversation with Mr Hall with reference to the job. It's been all, sort of, letters from lawyers and things like that. There's been no direct conversation.
So you haven't?-- No.
And your next dealings with him was the letter in September of this year where you asked to do further testing; is that right?-- No. I'm sorry, Your Honour, the only time I saw him since was when an inspection was done on the job from T A Taylor. I requested that they look at the work and that was in March, I believe, some time, and Kevin was there - a legal representatives from Cranston and McEachern was there. A representative from Cannan and Peterson was there and Mrs Helen Thompson was there and Kevin and I were there, and a Mr Arthur Grouch basically walked around the job looked at this and that and everything else, and he made a report which was tendered to me. I then - my solicitors, Cannan and Peterson, sent a report to Mr Deed. I said that I would abide by that report. The report was somewhere in the vicinity of $1,200 - $1,500 worth of work. I said, 'Right, I will pay for that'. - or, 'do it'. I didn't have a reply. Cannan and Peterson then - whether they did or not, I can only say I instructed them to offer out of court settlement of some $3,000. I believe whether Mr Deed received that or not, I don't know and then from that day I - from that day on I kept asking and asking the solicitors to get the QUT test report done, and I said if they are not happy with Arthur's report - Arthur, himself, I haven't asked to come or subpoenaed him for the simple reason that Mr Hall's solicitors said I used to work for him and there could be something like that; but Arthur, when he came to do the job said, 'Dennis, there will be no favours. I will be harder on you than anybody'. I said, 'Fine.' He said, 'I don't do favours. I play it as I see it'. They were his exact words. He's a JP, very proud of the fact, and he's an extremely straight down the line person and somebody I have respect for. His report wasn't accepted by Mr Hall, so - although I accepted it, he didn't. I then wanted a QUT report done which I though would be more higher up the scale. We have tried on many occasions ---- You understand Mr Taylor's report is not in evidence?-- I understand that. I could present it if I want -----
Well, you couldn't, unless you presented him for cross-examination?-- That is what I was told, and I just didn't want to - I was told early on in the piece that seeing I worked for the company the report is known void. I've also worked for Doug Geofs, but I accept the Master bricklayers association report. I've spoken to Tom Lawson or Larson from the Master Bricklayers Association and one of the report - one of the suggestions that Doug made - he said that nothing had to be demolished. I said, 'Hang on, Doug, that's what they're going for'. HER HONOUR: Are you objecting, Mr King? MR KING: Yes, Your Honour. I'm reluctant to interfere, but I think it has to stop somewhere.
HER HONOUR: You can't give evidence of what other people whom you are not calling said?-- There's nothing more I can say. Think carefully. Is there anything else you wanted to say?-- No, not really".
At the conclusion of his cross-examination the debtor gave the following evidence :-
"HER HONOUR: Is there anything you wanted to add arising out of cross-examination?-- No, not really, Your Honour. I still - I realise now that there's no way I can get the tests done. I did try, and I tried on many occasions, to get QUT done. I've spoken to different people, there's even letters there on March and in February from Cannan and Peterson saying that they had written to and received phone calls from - so whether or not they wrote to Mr Deed is beyond my control, and I don't have any information on that. They said they'd give me the information but they wanted an arm and a leg for it, which I haven't got, and that's all there is to it.
Anything further?-- No, Your Honour. You can return to the Bar table. Do you have any further witnesses?
DEFENDANT: No, Your Honour. HER HONOUR: That is your case, is it? DEFENDANT: That's it, finished."
The evidence given by the debtor in the context of the observations made by the trial judge demonstrate that the debtor was aware that he could call expert evidence. However, he held the view that "...with nobody being allowed to do testing, I didn't think there was much point in having any experts called because if they couldn't get the results that they need for their tests, what was the point...". The debtor chose not to call expert evidence because he had not been able to have tests which he wished undertaken on the brickwork. Her Honour expressly found that the debtor had been given reasonable access in all the circumstances to the site for inspection and tests to be carried out.
The allegation now made as to acid washing the bricks is completely inconsistent with the evidence the debtor gave on trial. I do not accept that if he believed prior to the trial, as he now says that he did, that acid washing had occurred and thus rendered the mortar defective, he would not have said so on trial. He swore on trial that he did not known why there was inadequate strength in the mortar; he speculated in his evidence that there may have been "a strange reaction - someone else said pump sand" and "whether there was a chemical reaction..." caused by the blending and colouring of the cement. If the debtor had honestly believed at that time that the surface of the mortar had been rendered defective and thus produced misleading results when tested, I have no doubt that he would have said so.
There was before the learned District Court judge a substantial body of expert evidence that the work undertaken by the debtor was unsatisfactory and one of the areas in which it was unsatisfactory was that the ratio of cement to loam was well outside any acceptable ratio. But that was not the only respect in which the work was unsatisfactory. The evidence of the engineers Mr Moore and Mr Martin which her Honour accepted detailed numerous defects in the brickwork, including not being built to plan, which could only be remedied by demolition and reconstruction of the brickwork. It cannot be said that her Honour's conclusion was based solely on her finding as to the use of an unacceptable mortar mix. Even assuming that acid washing occurred, and it was only the surface of the mortar which was defective, it does not follow that the brickwork was not required to be demolished. The failure to bond the fireplace to the north wall meant that the wall did not have its design strength and was structurally unsound. Her Honour summarised the evidence of Mr Moore, which she accepted :-
"He inspected the plaintiffs' home and examined the outer brickwork and the chimney. He said the chimney should have been monolithically bonded to the exterior wall, and this was not done. He said the crack that had occurred in the mortar joints between the chimney and the north wall indicated this lack of bonding. He said that, in his opinion, he would recommend that all brickwork be demolished and rebuilt. He added that the brick ties which join the brickwork to the frame of the house have cement droppings on them which will permit the passage of moisture from the brickwork into the framing. This is because of failure of the bricklayer to carry out proper cleaning methods during the brickwork. The result of this is that water can enter rapidly through the brickwork."
The debtor in his affidavit in support of the application does not address the other major deficiencies found by the learned trial judge in the execution by the debtor of the work.
There is no material filed of the circumstances which led to the retainer between the debtor and his former solicitors coming to an end. His statement in re-examination on the trial suggests that he could not or would not pay his legal costs. I am not prepared to accept at face value allegations of negligence or a refusal to act in accordance with instructions without some more credible evidence than has been presented. In any event, even if I were to accept the allegations at face value, the failure of the solicitors leads only to a failure to obtain a report from the Queensland University of Technology to sustain an allegation that the walls had been acid washed and that the mortar strength was satisfactory despite all the expert evidence to the contrary. As I have said, even if the debtor obtained such a report that does not lead to a conclusion that the remedy given, namely the costs of demolition and rebuilding of the brickwork would or may have been different. There were on her Honour's findings sufficient other causes apart from the question of the bond strength of the mortar to justify damages being assessed on the basis of the cost of demolition and re-building.
It cannot be said, in my view, that there has been a miscarriage of justice in the sense that an inability to undertake the additional testing and the tendering of the results of that testing on trial has denied to the debtor the opportunity to obtain a judgment in his favour, such that in truth and reality there would be no debt due to the judgment creditors.
Nor can it be said that in conducting his case in person and in the manner of the trial there was a miscarriage of justice. The debtor has had his trial in open court on the merits. Although his case may have been better put by legally qualified persons, there is nothing in the transcript in evidence which suggests that the debtor did not understand the proceedings, or could not put his case. In relation to what he had been told by experts at the Queensland University of Technology as to the nature of the tests needed to be undertaken, her Honour said "If you want to call them, call them". Her Honour gave the debtor every opportunity to put his case and call such witnesses as he wished.
There is, on the material before me, no suggestion of fraud or collusion on the part of the judgment creditors or their witnesses on the trial of the action or in the obtaining of the judgment.
The debtor did not appeal the decision, did not seek to set the judgment aside, nor seek a new trial. The reality is that there was a trial on the merits and a determination that the judgment creditors had suffered a loss in the sum of $28,960.00. They received judgment in that amount and that is the judgment on which the bankruptcy notice issued. There are no substantial reasons for questioning whether there is a debt in truth and reality owing to the judgment creditors.
In the exercise of my discretion I refuse to go behind the judgment and hear a new trial on all of the issues which were determined adversely against the debtor in the proceedings before McMurdo DCJ. It follows that I accept the judgment as proof of the existence of a debt due by the debtor to the judgment creditors and refuse to set aside the bankruptcy notice.
The debtor, by his Counsel, asked that if I would not go behind the judgment that I extend the time for compliance with the bankruptcy notice to enable the debtor to seek to appeal or set aside the judgment and obtain an order for a new trial.
The judgment was given on 13 December, 1991. The debtor has taken no steps to seek to set aside the judgment or appeal it and obtain a new trial. The delay is not explained; indeed there has been no attempt to explain it. For the reasons I refused to go behind the judgment, I consider that the debtor has little, if any, prospect of succeeding in such an application to the State Courts. Should I be wrong and the judgment is set aside, a sequestration order would not properly be made because at that time in truth and reality there would be no debt due to the petitioning creditor (Re Conte; Ex parte Conte v. Commissioner of Taxation (1990) 27 FCR 120 at 131). I refuse to extend the time for compliance with the bankruptcy notice.
The debtor has failed to file an affidavit as required by section 41(7) of the Bankruptcy Act in support of the application that he has a counterclaim, set-off or cross-demand. The reason why he has not done so is patently clear from the grounds attached to the application. None of the circumstances alleged can possibly give rise to a counterclaim, set-off or cross-demand against the judgment creditors. The debtor was fully paid by the judgment creditors for the agreed cost of the building. To say that a set-off arose in the proceedings before McMurdo DCJ is a nonsense. The only damage suffered by the debtor at the conclusion of the District Court trial was that judgment was given against him. It was argued that by the giving of the notice attached to the application, or by the making of the application itself, the time for compliance with the notice was extended until the court determined whether or not it was satisfied that the debtor had a counterclaim, set-off or cross-demand. In my opinion section 41(7) as a matter of construction provides that the required affidavit be filed before time is, by operation of the section, extended. In this case that did not occur before the expiration of the period for compliance or at all. In any event, I am satisfied that the debtor has no counterclaim, set-off or cross-demand.
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