Re Racheha, Selah Said Ex parte Antonios, Anthony

[1980] FCA 172

Re: SELAH SAID RACHEHA
Ex parte: ANTHONY ANTONIOS (1980) 49 FLR 423
No. B3652 of 1980
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Lockhart J.(1)

CATCHWORDS

Bankruptcy - application to set aside bankruptcy notice - whether affidavit is of the kind mentioned in s. 41 (7) - whether the requisite counter-claim, set-off or cross demand could not have been set up in the action in which the judgment was obtained - meaning of "action" in s. 40 (1) (g) - judgment obtained in Court of Petty Sessions - application of s. 12 of Courts of Petty Sessions (Civil Claims) Act, 1970 to meaning of "action".

Bankruptcy Act, 1966 (Cth.) - ss. 40 (1) (g), 41 (7)

Bankruptcy - Bankruptcy notice - Application to set aside - Affidavit deposing to counterclaim, set-off or cross demand - Inability to set up cross demand in action in which judgment obtained - "Action" - Judgment of Court of Petty Sessions (N.S.W.) - Bankruptcy Act 1966 (Cth), ss. 40 (1) (g), 41 (7) - Courts of Petty Sessions (Civil Claims) Act, 1970 (N.S.W.), s. 12.

HEADNOTE

In 1977 the creditor commenced proceedings in the Court of Petty Sessions against the debtor to recover the cost of certain building work. The debtor sent to the Registrar of the court a notice of set-off and counterclaim on 12th September, 1977. This alleged a set-off or counterclaim in excess of the jurisdiction. The Registrar returned the notice inviting the debtor to abandon any amount claimed in excess of the jurisdiction, commence a separate action in the District Court or to object to the jurisdiction of the Court of Petty Sessions and have the action transferred to the District Court. On 7th October, 1977, the creditor signed judgment against the debtor in the sum of $1,535.50 in the Court of Petty Sessions. On 8th November, 1977, the debtor notified the Registrar of the court of his objection to the jurisdiction; but such objection was too late. On 21st July, 1980, the Deputy Registrar issued a bankruptcy notice on the application of the creditor. Before the expiry of the time limit the debtor filed an affidavit purporting to be an affidavit deposing to the fact that he had a counterclaim, set-off or cross demand within s. 41 (7) of the Bankruptcy Act 1966 (the Act). The debtor alleged that the counterclaim of $3,250 was one which he could not have set up in the action in the Court of Petty Sessions as it exceeded the jurisdiction.

In a hearing to determine whether the affidavit was of the kind mentioned in s. 41 (7) and, if it were such an affidavit whether the court was satisfied that the counterclaim set-off or cross demand could not have been set up in the action in which the judgment was obtained,

Held: (1) The affidavit filed by the debtor contained sufficient particulars of the alleged counterclaim, set-off or cross demand to come within the provisions of s. 41 (7).

Re Brink; Ex parte Commercial Banking Company of Sydney Ltd. (1980), 44 FLR 135, applied.

(2) As it was established that the debtor could have applied to have "the action" in the Court of Petty Sessions transferred to the District Court pursuant to s. 12 (2), (3) and (4) of the Court of Petty Sessions (Civil Claims) Act, 1970, and he could then have contested his counterclaim, set-off or cross demand in "the action", his affidavit failed to satisfy the requirements of s. 40 (1) (g) of the Act.

HEARING

Sydney, 1980, November 10-11. #DATE 11:11:1980

APPLICATION.

Application to set aside bankruptcy notice.

D. B. P. Khoury (solicitor), for the creditor.

J. F. Boultbee, for the debtor.

Cur. adv. vult.

Solicitors for the creditor: Benjamin & Khoury.

Solicitor for the debtor: D. J. McCabe.

D. LEVIN

ORDER

1. The Court is not satisfied that the debtor has the requisite counter-claim, set-off or cross demand within the meaning of s. 40 (1) (g) of the Bankruptcy Act 1966, as any counter-claim, set-off or cross demand the debtor may have is one that could have been set up in the action in which the judgment was obtained.

2. The judgment debtor pay the costs of the judgment creditor of this matter including reserved costs.

Order accordingly.

JUDGE1

On 7 October 1977 Anthony Antonios ("the judgment creditor") signed judgment against Selah Said Racheha ("the judgment debtor") in the Bankstown Court of Petty Sessions in the sum of $1,535.50. On 21 July 1980 a Deputy Registrar issued a bankruptcy notice directed to the judgment debtor. Before the expiration of the time fixed for compliance with the requirements of the bankruptcy notice, the judgment debtor filed with the Registrar an affidavit. It was intended by the judgment debtor that the affidavit answer the description of

" . . . an affidavit to the effect that he has such a counter-claim, set-off or cross demand as is referred to in paragraph (g) of subs. (1) of the last preceding section, . . ."

within the meaning of s. 41 (7) of the Bankruptcy Act 1966 ("the Act").

The Registrar gave notice to the judgment creditor and the judgment debtor that the matter had been set down for hearing by this Court. The matter came on for hearing before me yesterday and today. It is common ground that two questions should be determined: first, whether the affidavit is of the kind mentioned in s. 41 (7) and, second if it is such an affidavit, whether the Court is satisfied that the counter-claim, set-off or cross demand which the judgment debtor alleges he has could not have been set up in the action in which the judgment was obtained.

In Re Brink; Ex parte: The Commercial Banking Company of Sydney Limited 30 A.L.R. 433 I set out some relevant principles relating to questions arising under s. 41 (7) and s. 40 (1) (g) of the Act, and see no purpose in recapitulating what I said. I adhere to the views expressed by me in that case.

Although various affidavits have been relied on by both parties, it is common ground that the affidavit of the judgment debtor of 11 August 1980 is the only affidavit which could answer the description of the affidavit referred to in s. 41 (7).

Counsel for the judgment creditor submitted that the affidavit of 11 August does not answer that description because it contains little more than a bare assertion that the judgment debtor has a counter-claim, set-off or cross demand which he could not have set up in the action in which the judgment was obtained.

I do not accept that submission. The judgment debtor said in his affidavit, so far as is material to this question:

"3. That I have a counter-claim against Anthony Antonios the judgement Creditor for $3,250.00 which is a sum exceeding the claim of the judgement creditor and the grounds of which are as contained in ordinary statement of claim filed in the District Court of New South Wales hereto annexed and marked 'B:.

4. That I could not have set up the counter-claim in the action in which the judgement was obtained for the following reasons: -

A. The action in which the judgement was obtained was an action commenced by Anthony Antonios in the Court of Petty Sessions at Bankstown for work done and materials provided.

B. The work performed and materials provided by Anthony Antonios were defective.

C. It was not possible for me to file in that action grounds of defence by way of set off as the amount that I sought to claim viz. $3,250.00 exceeded the jurisdiction of the court.

C. (sic) The only course of action open to me was to commence a seperate (sic) action by way of ordinary statement of claim in the District Court."

Annexure "B" is a printed form of the "ordinary statement of claim" in the District Court of New South Wales at Sydney, and, so far as material, reads as follows: -

"The plaintiff pleads his cause of action as follows:

1. In about January 1977 the defendant carried out certain work for the plaintiff in particular renovations to the defendant's premises at No. 31 Frampton Street, Lidcombe, and such renovations were not carried out completely and properly whereby the said roof was not structurally sound nor properly supported and in danger of collapse whereby the defendant will be forced to rectify the said renovations to place the roof in order so that the same will not collapse or allow the weather access to the interior of the premises.

2. The costs of rectification aforesaid will be Two Thousand Dollars ($2,000.00) and the defendant claims as damages from the defendant the sum of Two Thousand Dollars ($2,000.00).

3. Further as a result of the defendant's negligence as aforesaid stormwater entered the interior of the plaintiff's premises through the roof whereby damage was caused to the fittings, fixtures and internal structure of the plaintiff's premises and as a result the plaintiff has suffered damage and loss for repairs renovations and replacement of such damaged items and claims from the plaintiff in respect of such loss the costs and expenses thereof in the sum of One Thousand Dollars ($1,000.00) which sum is in addition to and not in the alternative to the damages claimed by the plaintiff in paragraph 2 hereof.

4. Further, the defendant took certain materials in the nature of timber, being the plaintiff's property from the site of the said work to the value of Two Hundred & Fifty Dollars ($250.00) in addition to and not in the alternative to the damages claimed in paragraphs 2 and 3 hereof.

5. The plaintiff claims total damages of $3,250.00 plus costs."

In my opinion, the judgment debtor has said sufficient about his alleged counter-claim, set-off or cross demand in his affidavit of 11 August to bring it within s. 41 (7). I said in Re Brink (supra) at p. 440: -

"It is as well to remember that the initial affidavit has to be filed within a limited time namely, the number of days after service of the bankruptcy notice upon the debtor fixed by the Registrar. These times are fixed by him without any knowledge on his part of the possibility of a counter-claim, set-off or cross demand being propounded by the debtor. In many cases it is difficult, if not impossible, for the debtor to present more than a mere outline of his case in the time available.

I do not think any good purpose would be served by my attempting to express a definitive formula as to what the original affidavit must contain. That must depend in every case on the particular facts and circumstances: see Re a Debtor 1963 1 W.L.R. 51, per Upjohn L.J. at 56."

I turn to the next question namely, whether the Court is satisfied that the counter-claim, set-off or cross demand which the judgment debtor alleges he has, is one which could not have been set up in the action in which the judgment was obtained. This question and the previous question are perhaps, on one view of the matter, but two facets of the same question in that, if the assertion by the judgment debtor in his affidavit that:

"C. The only course of action open to me was to commence a seperate" (sic) "action by way of ordinary statement of claim in the District Court."

is erroneous, that error may operate to prevent the affidavit answering the description of the requisite affidavit for the purposes of s. 41 (7). Whatever the position be as to that matter, it is common ground that if the counter-claim, set-off or cross demand relied upon by the judgment debtor is one which could have been set up in the original action, the only course this Court should take is to hold that it is not satisfied that the judgment debtor has the requisite counter-claim, set-off or cross demand.

However, whether there are two questions or but two limbs of the same question is significant, because it bears on the date of commission of the act of bankruptcy.

If the affidavit of the judgment debtor does not fall within the description of s. 41 (7), there never has been the deemed statutory extension of time to comply with the requirements of the bankruptcy notice. On the other hand, if the affidavit answers that description, but the Court determines that it is satisfied that any counter-claim, set-off or cross-demand which the judgment debtor may have, could have been set up in the earlier action, the act of bankruptcy will not be committed until the day following the day on which the Court so determines.

The correct view, on the facts of the present case, is that the affidavit of 11 August 1980, answers the description of the affidavit mentioned in s. 41 (7), and any relevant act of bankruptcy will not be committed until the day after the Court determines that it is satisfied that the judgment debtor's alleged counter-claim, set-off or cross-demand could have been set up in the earlier action.

The judgment creditor sued the judgment debtor in the Bankstown Court of Petty Sessions to recover the cost of certain extensions or alterations to the judgment debtor's home at Lidcombe. The judgment debtor sent to the Registrar of the Bankstown Court a form of "Notice of Grounds of Defence by way of Set Off and Counter Claim" on or about 12 September 1977 which, in all material respects, is the same as the document annexed to the judgment debtor's affidavit of 11 August 1980 and which he relies on as outlining his counter-claim, set off or cross-demand.

The Registrar of the Bankstown Court returned the document, under cover of a letter of 20 September 1977 and said:

"I return herewith your notice of grounds of defence by way of set off in the above matter as the amount claimed by you exceeds the jurisdiction of this court. If you wish to proceed with your defence by way of set off you may abandon the sum of $1250 which is the amount by which your counter claim exceeds the jurisdiction of this court or alternatively, you may start a separate action for the full amount claimed by you in the District Court. You may also object to this matter being heard in this jurisdiction and have it transferred to the District Court."

On 8 November 1977 the judgment debtor's then solicitors sent to the Bankstown Court a document titled, "Notice of Objection to Jurisdiction" which so far as relevant reads:

"The Defendant intends to defend this action and objects to the action being heard and determined in this Court on the ground that the amount claimed exceeds the sum of One thousand two hundred and fifty dollars ($1250.00).

The Registrar replied that this course could not be followed as judgment had been signed against the judgment debtor on 7 October 1977.

Counsel for the judgment creditor submitted that the counter-claim, set-off or cross-demand which the judgment debtor alleges he has against the judgment creditor, is one that he could have set up in the original action.

It is common ground that Courts of Petty Sessions in New South Wales had no jurisdiction at the relevant time in 1977 to hear and determine actions for the recovery of any"debt, demand or damages, whether liquidated or unliquidated," in which the amount claimed was more than $2,000.00: s. 12 (1) of the Courts of Petty Sessions (Civil Claims) Act 1970; and that, if the judgment debtor had sought to propound his counter-claim, set-off or cross-demand before the Bankstown Court of Petty Sessions, he could not have done so unless he abandoned the excess over $2,000.00 namely, $1,250.00. The judgment debtor claimed $3,250.00 from the judgment creditor.

It was submitted on behalf of the judgment creditor that it was open to the judgment debtor, before judgment was signed against him, to comply with s. 12 (2) of the Courts of Petty Sessions (Civil Claims) Act 1970 and give notice that he intended to defend the action and that he objected to the action being heard and determined by the Bankstown Court of Petty Sessions. Section 12 (2), (3) and (4) are relevant, and they provide as follows: -

"(2) Where the amount claimed in any action exceeds $1,250, the defendant, or any one of two or more defendants, may, within such time and in such manner as may be prescribed, give to the registrar notice that he intends to defend the action and that he objects to the action being heard and determined by a court, and where that notice is given, the registrar of the court in which the action was commenced shall order that the action be transferred to the District Court sitting at the nearest proclaimed place, as defined in section 4 (1) of the District Court Act, 1973, to the place - -

(a) where the defendant, or any one of two or more defendants, has his place of abode, business or employment; or

(b) where the cause of action arose.

(3) Where an order is made under subsection (2) the registrar of the court in which the action was commenced shall forthwith deliver or send by post the whole record thereof, including the order for transfer, to the registrar of the District Court for the proclaimed place mentioned in the order.

(4) After an action has been transferred to the District Court under this section all proceedings therein shall, subject to the District Court Act, 1973, and to any rules of court made thereunder, be taken in the District Court as if the action had been commenced therein on the date on which the plaint commencing the action was filed."

It was submitted on behalf of the judgment debtor that, if he invoked the procedure afforded by s. 12 (2), the action in the District Court would have been a different action from the action in the Court of Petty Sessions and that, in the result, his counter-claim, set-off or cross-demand propounded in the District Court, would have been one that he could not have set up in the action in which the judgment was obtained, namely the action in the Court of Petty Sessions.

Upon a defendant invoking the procedures afforded by s. 12 (2), the Registrar of the Court of Petty Sessions is required to order that "the action" be transferred to the District Court; and when that order is made the Registrar of the Court of Petty Sessions is required to transmit the whole record of "the action" to the Registrar of the District Court: s. 12 (3).

After "the action" has been transferred to the District Court, all proceedings "therein" shall be taken in the District Court "as if the action had been commenced therein on the date on which the plaint commencing the action was filed": s. 12 (4).

It is plain that it is the same action that is transferred from the Court of Petty Sessions to the District Court, pursuant to s. 12, and continued in the District Court. The very notion of "transfer" suggests this, as does the language of s. 12 itself. Indeed, any other construction would lead to curious and anomalous results. One example suffices. A plaintiff may file a plaint in a Court of Petty Sessions one month before the expiration of the time limited by the relevant Limitation of Actions legislation; yet, because he sues for more than $1,250.00 he may find himself, say, three months later, necessarily in the District Court if the defendant calls in aid s. 12. If his action in the District Court is a fresh action, the defendant may plead the Statute of Limitations and defeat the plaintiff's claim. That would be a conclusion which I would be loath to draw in the absence of the plainest language.

Section 12 is couched in language that clearly assumes the continuance in the District Court of the same action that was commenced in the Court of Petty Sessions. All that has happened is that the action is to be continued in the District Court because of the amount of money involved.

If s. 40 (1) (g) had used the words:

"being a counter-claim, set-off or cross-demand that he could not have set up in the Court in which the judgment or order was obtained"

probably the result would be different; but this is not the language of paragraph (g).

The judgment debtor could have invoked the machinery of s. 12 (2) and prosecuted the counter-claim, set-off or cross-demand for $3,250.00 in the District Court; but in the same action.

I am satisfied that any counter-claim, set-off or cross-demand of the judgment debtor is one that he could have set up in the action in which the judgment was obtained. I say nothing as to the merits of the alleged counter-claim, set-off or cross-demand, as they have not been litigated before me.

I order the judgment debtor to pay the costs of the judgment creditor of this matter including reserved costs.