Re Sweet, Allan Clifford & Ors Ex Parte Sweet, Allan Clifford

':/30

IN THE FEDERAL COURT

OF AUSTRALIA )

BANKRUPTCY DISTRICT OF THE STATE

No. 2076 of 1980

OF	NEW	SOUTH	WALES	AND	THE	>
1

AUSTRALIAN

CAPITAL

TERRITORY

RE: ALLAN CLIFFORD SWEET, JANET ANN

SWEET, ADRIAN

L A W N C E SHEPHERD

HEATHER MARY SHEPHERD

EX PARTE: ALLAN CLIFFORD SWEET, JANET

ANN

SWEET, ADRIAN LAWRENCE SHEPHERD

HEATHER MARY SHEPHERD

ApplicAs

REASONS FOR JUDGMENT

LOCKHART J.

16 July 1980

At Sydney

On 17 August 1979 the respondent Kevin Davison ("the

respondentv1)

signed judgment against the applicants, Allan

Clifford Sweet, Janet

Ann Sweet, Adrian Lawrence Shepherd and

Heather Mary Shepherd ("the applicants11)

in the District Court

of New South Wales at Wollongong

in the sum of $11,600.16. On

2 May 1980 the Deputy Registrar issued

a bankruptcy notice

directed to the applicants.

It is common ground that before the expiration

of the

time fixed for compliance with the requirements

of the bankruptcy

notice the applicants filed with the Registrar two affidavits. It

was intended by the applicants that the affidavits were affidavits

of the kind referred to in sub-s.

(7) and paragraph 40 (1 ) ( g )

of the Bankruptcy Act

1966 ("the Act").

The Registrar duly gave notice to the applicants and

the respondent

in accordance with the Bankruptcy Rules that

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the matter had been set down

for hearing by the Court. The

matter came on for hearing before me yesterday. Counsel

for

the parties submitted that the case fell conveniently into

two parts:

first, the question whether the affidavits were

of the kind mentioned in sub-section 41

( 7 ) and para. 40 (1 ) (g)

and, second, if they were such affidavits, whether the Court

satisfied that the applicants have the requisite counter-claim,

set-off o r cross-demand.

Counsel informed me that they wished to deal

with

the first question

as a preliminary point,

so that, if I answered

it against the applicants, that would be

an nd of the matter;

but, if I answered it against the respondent, then probably

there should be an adjournment of the case to abide the outcome

of an application to be made by the applicants

in he District

Court at Wollongong to set aside the judgment.

In Re Brink;

Ex parte Commercial Banking Company of Sydney Limited judgment

delivered 27 June 1980, I considered the construction and

operation of sub-S. 41

( 7 ) and para. 40~(1)

(g) of the Act, and

said what, in my view, the requisite affidavit must contain.

There are two affidavits relied

on by the applicants

as falling within sub-s. 41

( 7 ) and para. 40 (1 ) (g).

It was

not disputed that the use of the singular Itan affidavit!!

sub-s. 41

(7) includes the plural. However, whether this be

o r not is not a question that

has significance in the present

case because the relevant matter relied

on by the applicants

is contained in one affidavit, namely, the affidavit

of Adrian

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Lawrence Shepherd (Wr. Shepherd") sworn on 11 June 1980.

The other affidavit merely adopts

what Mr. Shepherd said.

Mr. Shepherd asserts

in his affidavit that

he has a

counter-claim against the respondent exceeding the judgment

debt which could

not have been set up in the action

o r proceeding

in which the judgment

or order was obtained (paragraph 2).

paragraph 3 he sets out what

he describes as particulars of

that counter-claim as follows:-

The particulars of such claim are

as follows:-

The Judgment

Debt is in relation to money

pay-

able by the Defendants to the Plaintiffs

under a Bill of Sale.

The Statement

of Liquidated Claim

was issued

on 1st May, 1979 and served

on me on Thursday

17th May,

1979, and though I did have a defence

as to the amount claimed due to the exigencies of my work Iwas unable to obtain legal advice.

On receipt of advice that an Order for Judgment

had been made against me

I approached my Solicitors

Messrs. Kearns & Garside and they forwarded a

letter dated 12th May,

1980 to the Solicitors

acting for the Judgment Creditor. A copy of this

letter is annexed and marked

with the letter

rrA1l.

My Solicitors received a letter from the Solicitors

acting for the Judgment Creditor

n 16th May

1980.

A copy of this letter dated 15th May,

I980 is

annexed hereto and marked

with the letter rlBrt.

Subsequently on 17th May, I980 I was served with

a Bankruptcy Notice and instructed my Solicitors

Messrs. Kearns & Garside to pursue this matter.

With regard our cross claim the following are particulars of same:-

In August, 1977 the Judgment Creditor approached

my son-in-law Allan Clifford Sweet and myself at

the Brighton Hotel and informed

us that he had

several oyster leases

for sale on the Minnamurra

River, Kiama, and enquired as to whether

we were

interested in purchasing same.

. .

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On inspection of the subject oyster leases the Defendant substantially misrepresented to the said Allan Clifford Sweet and myself

the area of the leases and farmable areas,

by stating that the depth of the farmable

areas was from midstream to high tide mark

on the river

and, were substantially longer

than in fact.

On inspection by the said Allan Clifford Sweet

and myself

of the lease documents

at the Judgment

Creditors home, lease maps which should have been attached to the lease documents were not

produced, but were shown to

us on a general

map of the river and

an indication was given

on that map as to the extention of the leases. The Judgment Creditor once again mis-represented

the area farmable by

us.

In discussions with the Manager of the

C.B.C.

Bank, Kiama Mr. Barry Bamford,

when arranging

finance for the purchase of the oyster leases,

the Judgment Creditor once again misrepresented

the area which could be farmed commercially	on
the river.

Subsequently on 9th

December, 1977 agreement

was reached as to the purchase of the subject

leases by the said Allan Clifford

Sweet, Janet

Ann Sweet, Heather Mary Shepherd and myself, and a Deed of Sale was executed which indicated

that the sale included "all oysters

on trays

and mangroves"; the Assignment of the leases;

and other chattels. A copy of that agreement

is annexed hereto and marhd with the letter IrC1I.

The sale was completed and the oyster leases assigned to us.

The partnership commenced farming the area represented to be part of the sale.

In late 1979 an Inspector of the Department of

Fisheries inspected and surveyed the leases, and

informed me that the only area farmable by

was not as represented by the Judgment Creditor,

but from

11' in from mid-stream to half way between

low and high water marks and

as per the lease

maps within the lease documents, which

we only

saw on settlement. The area outside the leases was public oyster reserve and ot farmable by us.

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(i) On two of the lease maps, the area between

the boundaries

of our lease and high water

mark are not marked as public oyster reserves.

(j)

The area we are no longer able to farm provided some 50 percent of the oysters which were

farmable and the

loss of these oysters,

estimate, will cause

us a loss of profits

at least ($6,000.00)

Six Thousand Dollars per

ysrr if we continue to farm the area

on a small

scale o r ($30,000.00)

Thirty Thousand Dollars

per year if we farmed the area

on large scale.

(k)

We claim that as a result of the mis-representation made by the Judgment Creditor, which must be read

in conjunction with the Deed

of Sale, we were

induced to purchase the subject leases, and

now find

as a result of the discovery by

us of

the actual areas farmable,

we will loose

amount in rofits of between($6,000.00 -

$3O,OOO.OO P Six Thousand Dollars to Thirty

Thousand Dollars per year.

(1) We have instructed our Solicitors Messrs. Kearns

& Garside of Kiama to file and have issued

Statement of Claim against the Judgment Creditor.

(m)

I request that the time fixed

for compliance

with the Bankruptcy Notice be deemed to be

extended until and including the day

on which

the Court determines whether our claim	is
satisfied.l'

There are certain annexures to the affidavit which

need not set

out.

Although Mr. Shepherd refers to

his claim as a counter-

claim, I think nothing turns

on that fact. Whether it is a

counter-claim o r a cross-demand is perhaps a matter of argument.

In Re Brink (supra)

I discussed the meaning

of the words llcounter

claim, set-off or cross-demandll.

Probably what

is relied on by the applicants is,

truth, a cross-demand and not a counter-claim. Clearly

it is

not a set-off.

The mere fact that Mr. Shepherd refers to

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as a counter-claim is not to the point; the real question

what is the true description that attaches to the facts and

circumstances set out

in his affidavit, and in my opinion they

are more accurately described as a cross-demand.

District Court proceedings were commenced by filing a

statement of liquidated demand

on 1 May 1979 which was served,

on at least Mr. Shepherd, on 17 May 1979.

Judgment was signed,

by default, on 17' August 1979.

The respondent asserts that the

affidavit is deficient for the purposes

of sub-s. 41 (7) in a

number of respects.

Counsel for the respondent submitted that the counter-

claim o r cross-demand, whichever it be, is not one which equals

o r exceeds the amount of the judgment debt.

He relied on the

fact that Mr. Shepherd says in his affidavit that the applicant:

will sustain a

loss of profits of a least $6000 per year if they

continue to farm the relevant area

on a small scale

o r $3O,OOO.OC

per year if they farm the area

on a large scale.

The applicants? case

is based on a misrepresentation

which is alleged to have been made by the respondent to the

applicants.

Cases claiming damages measured by loss of profits

are, of course, notoriously difficult to formulate .with

precision.

In Re Brink (supra) I expressed the view that

courts should adopt a benevolent construction of the original

affidavit for the purposes of sub-s. 41 (7) and I adhere to

that view. In my opinion, on a fair reading of the affidavit

of Mr. Shepherd as a whole,

it answers the description of

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affidavit which asswtsa cross-demand that equals

of exceeds

the amount

of the judgment debt.

Counsel for the respondent submitted that the affidavit

was deficient in that, although

Mr. Shepherd asserts that

his

counter-claim could

not have been set

up ill the initial action

in the District Court, when the contents

of his affidavit are

read as a

whole, it does not readily, o r at all, appear that the

applicants could

not have set

up the counter-claim or cross-

demand in the original action. He relied on a number of matters

some of which I will refer to.

It is said that the affidavit,

whilst alleging misrepresentation

by the respondent as to the

relevant areas

of the oyster leases, merely asserts that

it was

not untilfllate

19791f that an Inspector of the Department

Fisheries informed Mr.

Shepherd that the only area farmable by

the applicants

was not as was represented by the respondent, but

was substantially different. Counsel for the respondent points

judgment was signed

on 17 August 1979, *that date could

included in the description Illate 19791f. Hence it is said that

the alleged misrepresentation may have come to the knowledge

Mr. Shepherd before judgment

was signed; so that it cannot be

said that the cross-demand could not have been set up in the original action. I see no substance in this contention. It

is true that "late

I97gt1 is a somewhat uncertain expression;

but I think that, in all the circumstances,

it means the period

-a-

from September to December

1979. As I say, one must take a

sensible and

not overly technical view of affidavits

for the

purposes of sub-S. 41

( 7 ) .

Counsel for the respondent submitted there

is nothing

in the affidavit to suggest that

Mr. Shepherd did

not know of

the alleged misrepresentation before

his conversation with the

inspector of the Department of Fisheries in late 1979.

In other

words, Mr. Shepherd has not specifically deposed to the

fact

that, when he spoke to the inspector

in late 1979, he did not

already know that there had

been a misrepresentation. Again,

I do not think this point

has substance. Reading the affidavit

as a	whole, I have the distinct impression that the deponent

is saying that

it was not until

his conversation with the

inspector that

he knew

of the alleged misrepresentation.

Counsel for the respondent submitted that there

is no clear

statement or definition of the alleged misrepresentation to be

found in Mr. Shepherd's affidavit.

It is true that the misrepreseptation

is perhaps not

defined with fine precision in the affidavit, but

its meaning

is clear enough. The facts that	I have already set out establish
this to my satisfaction.

Counsel for the respondent submitted that

it is not

enough for the applicants to assert that they learned

in "late

1979'' from the inspector

of the Department

of Fisheries that

there had been a misrepresentation. What the inspector told

Mr. Shepherd does

not prove that there was a misrepresentation.

If there was a misrepresentation as to the area covered by the

relevant oyster leases, that	is a matter that	can be ascertained
objectively.

. .

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Assuming for the purposes of the present application

that it would have

been possible for the applicants to find out

earlier than "late

I97gf1

the true facts

as to the area

of the

oyster leases, it does not follow at all that the alleged

cross-demand is one which could have been set

up in the original

action.

Many, if not most, cases of misrepresentation are ones

in which the plaintiff could have ascertained,

if he had wanted

to, earlier than he did in fact ascertain, that there was a mis- statement on some material question of fact. For the purposes

of this application,

I think it matters not whether Mr. Shepherd

or the other applicants could have found out earlier than they

did about the true extent of the areas of the oyster leases. The

fact is that a fair reading

of the affidavit establishes that

was not until late 1979 that they knew of the misrepresentation.

I should say,

of course, that

in saying what I have about

the facts I am relying merely

upon the statements

in Mr. Shepherd'

affidavit and the assumption

f their accuracy for the purposes

of the application. Whether they are

acmrate o r not is a matter

which will be determined by the appropriate court

in due course,

whether this Court

or the District Court, and

I say nothing

whatever as to that.

I have not dealt with all the submissions

f counsel

for the respondent, but

I have covered the major submissions.

Others were discussed

and disposed of in the course

of argument.

Every point that could have been argued

on this aspect of the

case was, I think, argued by counsel for the respondent; but

I am nevertheless satisfied that the affidavit of

Mr. Shepherd is

sufficient affidavit

for the purposes of

S. 41 (7).

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I should add that there

was evidence led on behalf

of the applicants, including viva voce evidence from

M .

Shepherd, on the basis that if the Court should find that

the affidavit was itself deficient, nevertheless the applicants

were entitled to supplement those deficiencies by viva voce

evidence.

Mr. Shepherd gave evidence as to

a number of matters,

but in particular of the

fact that "late 197g1' in paragraph

3 (h) of his affidavit meant late November

1979, and that the

defence which

he refers to

in paragraph 3 (b) of his affidavit

is a defence which has no bearing upon the misrepresentation,

but a defence relating

in some way to arrears of rates

relation to the oyster leases.

I do not find it necessary to decide whether the

Court is entitled to

look beyond the mere affidavit itself

to determine its sufficiency

for the purposes of

S. 41 (7).

Hence I pay no regard to the viva voce evidence. That evidence

may, of course, be relevant

if this Court were to embark

upon

the next step and determine whether or not it is satisfied that the applicants have the requisite cross-demand.

On condition that the applicants

file and serve within

21 days o f today the necessary documents seeking to set aside

the District Court judgment

on which the bankruptcy notice

this case

is based and prosecute the same with all reasonable

expedition, this matter

is stood out of the list generally

with

liberty to either party

to restore to the list after

25 August

next on seven (7) dayslnotice. Costs of both parties are

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reserved. The exhibits may be handed out.

I certify that this and the )A,\

(19)

preceding pages are a true copy of the

Reascns for Judgment herein of his Honour

Mr. Justice Lockhart.

&4%.d44

Associate

Dated: lq &*

/ ‘l <‘Q

[1980] FCA 212

16 Jul 1980