Re Prasad, P. v Ex parte Evans, L.
[1994] FCA 567
•18 AUGUST 1994
RE: PREMILA PRASAD
EX PARTE: LEN EVANS and BRETT SMITH t/as E and S HOMES
No. NP186 of 1994
FED No. 567/94
Number of pages - 4
Bankruptcy
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
BANKRUPTCY DISTRICT OF NEW SOUTH WALES
GENERAL DIVISION
LINDGREN J
CATCHWORDS
Bankruptcy - Proceedings in connection with sequestration - alleged counter-claim, set-off or cross demand against the creditor - whether these claims already determined in District Court proceedings - res judicata.
Bankruptcy Act 1966
Blair v Curran (1939) 62 CLR 464
Jackson v Goldsmith (1950) 81 CLR 446
Port of Melbourne Authority v Anshun (1981) 147 CLR 589
Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502
Onerati v Phillips Construction Pty Ltd (1989) 16 NSWLR 730
HEARING
SYDNEY, 16 August 1994
#DATE 18:8:1994
Ms E. Olsson of counsel instructed by Barros O'Brien Snelgrove appeared for the Debtor
Mr G. J. Grogin of counsel instructed by A. H. Kington and Co appeared for the Creditors
ORDER
THE COURT:
1. MAKES A SEQUESTRATION ORDER against the estate of the Debtor.
2. ORDERS that the petitioning Creditors' costs (including reserved costs) be taxed and paid in accordance with the Act.
3. DIRECTS that a draft of this order be delivered to the Registrar within seven days in accordance with sub-rule 124(2).
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
LINDGREN J In these proceedings, Len Evans and Brett Smith trading as "E and S Homes" ("the Creditors") seek the making of a sequestration order against the estate of Premila Prasad ("the Debtor"). The act of bankruptcy on which the Petition is founded is non-compliance by the Debtor with a bankruptcy notice dated 14 May 1993 which was served on her on 8 September 1993 and which allowed for compliance a period of 21 days expiring on 29 September 1993, which was extended by order to 26 October 1993.
The bankruptcy notice was founded upon a judgment debt in favour of the Creditors against the Debtor in proceedings No.17878 of 1990 in the District Court of New South Wales ("the District Court proceedings"). The Creditors obtained that judgment two years ago to-day on 18 August 1992. The amount of the judgment was $16,764.80 and costs to be taxed. The bankruptcy notice referred to the full amount of the judgment and interest of $883.71 making a total of $17,648.51 down to 3 February 1993. No payment has been made off this amount.
The Debtor applied to the Court to set aside the bankruptcy notice, and on 26 October 1993 that application was refused.
The Petition was issued on 21 January 1994.
Before me at the hearing on 16 July 1994, Miss E.M. Olsson of counsel appeared for the Creditors and Mr G.J. Grogin of counsel appeared for the Debtor.
The only basis on which the making of the sequestration order was opposed was that, according to the Debtor, she had a counter-claim, set-off or cross demand against the Creditors equal to or exceeding the amount of the judgment debt, being a counter-claim, set-off or cross demand which she could not have set up in the District Court proceedings.
Once it is understood that the District Court proceedings arose out of building work performed by the Creditors for the Debtor, the nature of the case sought to be made by the Debtor is revealed by paragraph 2 of her affidavit sworn 25 July 1994 in these proceedings, which is as follows:
"(2) I have since 18th August 1992 become aware that the defects in the house constructed by the Petitioner were much more numerous and some were more serious than those referred to by me in the abovementioned matter before the District Court."
It is necessary to state the background facts, and it is convenient to do so in the chronological form
15-4-1989 By a contract of this date, the Creditors undertook to carry out construction of work on the Debtor's property at 440 Belltrees Close, Glen Alpine for a sum of $115,300.00, and during the course of construction it was agreed that they would carry out additional work for a further sum of $15,006.30.
10-12-1990 By the Statement of Liquidated Claim filed on this date commencing the District Court proceedings, the Creditors sought to recover a balance outstanding of $27,306.30. 06-02-1991 By her Defence of this date in the District Court proceedings, the Debtor raised issues of defective workmanship.
01-07-1991 By a Cross-Claim filed on this date in the District Court proceedings the Debtor claimed to be entitled to recover damages for breach of contract by the Creditors giving rise to defective workmanship particularised in a Scott Schedule filed concurrently with the Cross-Claim, the amounts being specified in the Scott Schedule.
June 1992 The District Court proceedings were heard before Judge O'Reilly QC, when both parties were legally represented. 18-08-1992 Judgment was delivered for $16,764.80 plus costs. The judgment records that the Creditors as plaintiffs had agreed to various adjustments in the Debtor's favour with the result that only three items in the Scott Schedule were litigated. These were items 1 relating to brickwork, item 8 relating to site drainage, and item 14 relating to delay in completion. The learned judge rejected all three claims and found a verdict for the Creditors less items in the Scott Schedule which had been agreed to.
September
1992 The Debtor applied for an order that she be permitted to pay the amount of the judgment debt by instalments of $200 per month, the first instalment to fall due on 25 September 1992. 25-09-1992 The Debtor failed to pay the first monthly instalment and has, in fact, paid no instalments.
Evidence was tendered for the Debtor directed to supporting her claim to be entitled to damages for breach by the Creditors of express or implied terms of the building contract. The forms of loss which it was suggested the evidence established were as follows:
Cost of rectification work $10,134.00
Diminution in value 7,000.00
Loss of rental $18,200.00
$35,334.00
In my opinion, these alleged losses arise out of the cause of action for breach of contract which the Debtor pleaded in her Cross-Claim in the District Court proceedings, which has merged in and does not survive the judgment in those proceedings, and which is res judicata: see Blair v Curran (1939) 62 CLR 464 at 531-532 per Dixon J; Jackson v Goldsmith (1950) 81 CLR 446 at 466 per Fullagar J; Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 597 per Gibbs CJ, Mason and Aickin JJ; and Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502 at 507-508 per Deane, Toohey and Gaudron JJ. It is not to the point that the Debtor has discovered since the hearing of the District Court proceedings that the defects are more serious and more numerous than she thought: cf Onerati v Phillips Constructions Pty Ltd (1989) 16 NSWLR 730 (Giles J). Nor is it to the point that particular categories of loss now relied upon may not have been relied upon in the District Court proceedings, although it is not amiss to observe that the Cross-Claim, by reference to the Scott Schedule which accompanied it, claimed amounts for cost of rectification work and loss of rental, and as the judgment of the learned District Court judge reveals, that the Debtor had also asserted a diminution in the value of her house (he remarked that no valuer or other expert witness was called to support that claim).
The Debtor submitted, at the heel of the hunt, that the learned District Court judge had not disposed of the Cross-Claim in his judgment. It is true that he did not deal with it in terms, but he dealt with the claims made in the Scott Schedule, and those claims were forensically enlivened only by reason of the reference made to them in the Cross-Claim. Further, the amount of the judgment was clearly intended by his Honour to represent the amount to which the creditors were entitled after a set-off of the amount to which the Debtor was entitled on the Cross-Claim.
It follows that the Debtor fails on the only ground of opposition to the Creditors' Petition which was argued before me. It remains for me to deal with formal matters.
Pursuant to rules 138 and 195 the affidavit of service of the bankruptcy notice need not comply with rule 121.
I am satisfied that the Debtor committed the act of bankruptcy alleged in the Petition. I am satisfied with the proof of the other matters of which sub-section 52(1) of the Act requires proof.
I MAKE A SEQUESTRATION ORDER against the estate of the Debtor.
I ORDER that the petitioning Creditors' costs (including reserved costs) be taxed and paid in accordance with the Act.
I DIRECT that a draft of this order be delivered to the Registrar within seven days in accordance with sub-rule 124(2).
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