Ronald Abrahams v Fay June James

[1980] FCA 155

I N THE	FEDERAL	COURT	OF AUSTRALIA	1
\

BANKRUPTCY DISTRICT OF THE STATE

I No. B2448 o f l980

OF NEW SOUTH WALES AND THE AUSTRALIAN)

CAPITAL TERRITORY 5

RE ABRAHAMS RONALD

EX PARTE:	FAY JUNE JAPES
(now known as Fay June Warner)

O R D E R

JUDGE MAKING ORDER McGREGOR J.

WHERE MADE AT SYDNEY

DATE OF ORDER 1 OCTOBER 1980

RONALD A B W E (appl icant ) wab t ie defendant in an act ion

brought i n the Distr ic t Court of New South Wales i n respec t

of which judgment was recovered i n the sum o f $6,887.06

against 'him on t h e 20 December 1978 by FAY	JlJm	JAM3S
(OR WARNER) (respondent).

The said respondent sought and there was issued

a t h e r r e q u e s t by the Regis t ra r a Bankruptcy Notlce addressed

t o the appl icant	and dated the	21 May 1990 which was served
upon him.

The Bankruptcy Notice allowed 14 days f o r

compliance with it. Af ter se rv ice on the app l i cv l t and

before the said t ime had expired, the applicant caused

t o be f i l e d such an affidavit as he contends answers t h e

descr ip t ion in the aankruptcy Act 196&41(7), i .e . -

l'. . . . . . . .an a f f i d a v i t t o t h e

e f f e c t t h a t he has such a

counter claim set off o r c ross

demand as 1 s r e fe r r ed t o i n

paragraph ( g ) o f sub-section	(1)
of the l as t p receding sec t ion" .

( l a e o s.4O(l)(g) of the Act,)

The e f f e c t o f f i l i n g t h e a f f i d a v i t , assuming it answers the

descr ip t ion In s.41(7), i s t h a t time f o r conplying with

the s a id Bankruptcy Notice i s autoxatically extended o r

deemed t o have been extended immedla7;ely before I ts expi ra t ion

L.

u n t i l and mcluding the day on which the court determines

whether it i s s z t i s f i e d as requlred by that sub-sect ion.

The appl icat ion, therefore , proceeds upon t h e

bas i s tha t the appl icant w i l l s eek t o e s t ab l i sh t ha t he:-

1. has such a counter claim set o f f o r c ross

demand against the respondent equal to o r

exceeding the amount of the Judgment debt

o r sum payable under the f inal order ~

2. that he could n o t have s e t up i n t h e a c t i o n

o r proceeding In	which the Judgment was
obtained.

In support o f t h i s app l i ca t ion t he app l i can t

has a l leged i n an a f f idav i t da t ed t he 13 June 1980 and

f i l e d h e r e i n t h a t i n 1969 the respondent was the reg is te red

proprietor of a p rope r ty i n Balmain which she w a s desirous

or' r e s t o r m g ; t h a t he agreed t o car ry o u t the necessary

works in cons idera t ion tha t she would s e l l i t when t h i s

was completed,dividing the proceeds between then, Thereafter

he carried o u t a t a cost , excluslve o f h i s time and labour,

o f about $10,000, r e s to ra t lon work t o the sa ld p roper ty

which he had l i s t e d i n h i s affidavit and t o which I need

m&e no fur ther reference. However, according to appllcant

a fu r the r agreement was made, in e f fec t , pos tponing d i v i s l o n

of proceeds.

3.

The said property was sold and,

according to the applicant, the net proceeds thereof were

applied: towards the purchase of land a t Cromer i n reqpect o f

wilicn, so he says , the par t ies agre'ed to bu l ld on it f o r

r e s a l e a t	a	p r o f i t .	He	fu r the r	s	ays	t ha t	between	1972
has

and 1974 he/caused or caused t o be car r ied ou t o r car r ied

out himself construction work necessary t o complete a

res ident la l dwel lmg on tha t l and , t he cos t o f which,

excluslve o f h i s own time and labour, was $22,000.

Other evidence suggests that some o f t h i s work was car r ied

out by a company i n respec t o f whlch he and hls wife and,

a t some l a t e r stage the respondent ( i n her casefrom 1 Ju ly 1969)

were Directors. This was Ronald Abrahams Loaders Pty. Lmited.

The s a i d company went i n to l l qu ida t lon on the

3 December 1976. Portion of the applicant 's evldence i s

that the cost of the bui lding work on the Cromer property

was provided as follows:-

$8, ooo	-	borrowed by Respondent
86,000	-	by the Company
$5,000	-	by the appl icant

The applicant a l l e g e s i n h i s a f f i d m i t d a t e d t h e

8 September 1960 t h a t when the cornpany wect i n to l l qu i2a t lon

on the 3December 1976 he sought to have the noney expended

by the company on the property recovered; but the l iquidator

decl ined to take act ion unless he guaranteed the cos^.

4.

The appl icant fur ther said t h z t m 1976 he and

the respondent were desirous o f s e l l i ng t he Cromer property

and of purchasing land near Murwillumbah ( i n f a c t a’i

Kmgsc l i f f ) , i n respec t o f which he ac tua l ly pa id a deposl t

of $800. Thereafter the respondent declined to join i n

the sa le o f the Cromer property o r t o purchase from him t h e

va lue o f h i s i n t e re s t	i n	it,	to vaca te	It	o r to permit	him
t o be on it.

The applicant clalms that because of the

conduct of the respondent he has lost the value o f work

and labour employed on the Balmain property and money

spent on the improvements car r led ou t there , the va lue

of the land purchased a t Cromer and h i s work and labour

there employed and the value of money spent on the

improvements car r ied ou t on the s a id l and a t Cromer

toge the r w i th p ro f i t on resa le o f it.

The app l i can tFs Counsel submitted that a fa i r

construct ion of the facts whlch I have but shor t ly re fe r red

t o 1s tha t the expec ta t lon c rea ted by the respondent was t h a t

i f t he app l i can t l a ld ou t ce r t a in money and spent cer ta in

tlme and applled sk l l l s i n res tormg the Balnain pmperty

t o a habitable condltlon, then the property would be sold

and he would expect t o share ln the proceeds equal ly with

the respondent.

5 .

However, those proceeds were then by agreement l a i d

out in the purchase o f land a t Cromer, The appl icant

agreed $0 use and apply labour and ski l ls in cons t ruc t ing

upon it a residence. The expectatlon was t ha t t h a t

property would be sold and the net proceeds again shared

equal ly by the appl icant and the respondent. He s t a t e s

t h a t it mlght be s a i d t h a t a t h i rd pa r ty , namely, t h e

company Ronald Abrahams Loaders Pty. Llmited may also be

e n t i t l e d t o some portion of these proceeds. I have quo-ced

his assessment o f the cos t incur red by the parties individually

In suppor t of t h i s con ten t ion he r e l i e s upon the c2se

Crabb v. Arun Sis t r ic t Council (1975) 3 W.L.R. 847

and, i n pa r t i cu la r , t he pas sage which i s quoted a t p.859

from Lord	Kingsdods speech in	Ramsden v.	Dyson L.R.1	H.L.
129 et 170.

In e f f ec t , he says, that the appl icant under

a verbal agreement with the respondent and upcn t h e f a i t h

of her promise or having an expectation and w i t h the

knowledge of the respondent, l a id ou t ce r t a in moneys upon

the l and a t Balmam and Cromer and tha t therefore equi ty

wouid compel the respondent t o give effect to such promlse

or expectat lon. He descr ibes t h i s as "proprietary es toppel"

(uslng the phrase of Lord Denning i n t h e sane case a t p. 853)

and re ly ing on his Lordship's statement t ha t such estoppel

g l v e s r l s e t o a caclse of actlon, As an a l te rna t lve he

says there could be sa id t o a r l s e he re , upon the evidence,

a '!r-esultmg"trust i n the sense tha t the cour t w i l l glve

e f f e c t t o an o r a l agreement a s t o the manner i n whlch the

6 .

b e n e f l c i a l i n t e r e s t i n t h e l a n d s a t Balmain and Cromer

should be regarded as being held, by reason o f the

contrlbutions both of money and o f work and labour made by

the appl icant to the p roper t ies in each ins tance . He C l a i m s

there was a common in t en t ion t ha t t he p roceeds f i na l ly o f t he

Cromer property would be shared upon sa le . In th l s regard he

r e l i e s upon Allen v. Snyder (1977) 2 N.S.W.L.R. a t 685.

He submlts that there was a re levant common

in t en t ion between the par t ies as evidenced f rom the agreement

t o which the applicant 's evldence goes and tha t there has

been a f a i l u r e t o c a r r y o u t t h i s agreement.

For these reasons, he submits, h is c l i e n t i s

e n t i t l e d t o e q u i t a b l e r e l i e f and t h a t he has, i n f a c t , sought

t h i s r e l l e f by the commencement o f a s u i t f o r t ha t purpose.

The Statement of Claim f i l e d i s annexed t o h l s c l l e n t ' s a f f i d a v i t .

He ind ica t e s t ha t it may be necessary to amend that Statement

of Claim t o make p r o v i s i o n f o r a n i n t e r e s t i n t h e company t o

whlch I have e a r l l e r r e f e r r e d .

For the appl lcant he argues that by reason o f the

provls ions of the Distr lc t Court Act as amended s , 1 3 4 ( l ) ( e )

any equitable defence whlch rnlght have been r a l sed In t he

Dlstr lc t Court proceedlngs would have been r e s t r i c t e d t o

gS5,OOO;and t h a t I f tha t mat te r had been ralsed by way o f

7 .

defence t o the respondentvs claim, he would have been obliged

t o waive the excess; and thus by walver would hzve d i s e n t i t l e d

himself to, i n e f f e c t , meet fully the claim of the responeent.

He submits that therefore and f o r these reasons th i s was a

claim whlch was, i n terms o f s .4O(l)(g) "a counter c la im set off

o r c ross demand t h a t he could n o t s e t up i n the ac t lon . . . . . 11

A s to the wld th of t h e words "counter claim"

" s e t o f f " and l lcross demand", he r e f e r s t o t h e judgment of

Maugha A.J. i n t he ca se o f i n Re Judd; ex parte Pike (1924)

24 S.R. (N.S.W.) 537 a t p.539-540. This authori ty was

mos t recent ly re fe r red t o i n t he ca se of Re B r i n k ; ex par te

The Commercial Banking Company of Sydney Limited reported 30

A.L.R. 433, a Judgment o f Lockhart J.

The respondent t o t h i s a p p l i c a t l o n h a s f i l e d

a Statement of Defence in those proceedings. Generally

speaking, it could be said she denies the appl icant ' s case;

but she admits tha t app l i can t d id ca r ry ou t ce r t a in

construct ion work on the l and a t Crorner though she denies

t h a t l t was t o the ex ten t a l leged by the appl lcant .

A s I understand her Statement o f Defence she

does not accept that the cost of the work al leged was $22,000

b u t c l a m s t h a t it was $3,000. Furt3er, she has s t a t ed t ha t

l f any benef l t was l o s t a s h a s been elleged by the appl icant ,

it was l o s t by the company.

8.

Spec i f l ca l ly i n her Pleadings she refers to a memorandum

i n wri t ing dated the 30 November 1977 s a i d t o heve been

signed by t h e p l a i n t i f f i n which he declared tha t he had no

c l am o f - any desc r ip t ion on the Cromer property. In respect

o f t h e l a s t claim, the applicant has given an explm-ation of

the s igning of such a document, namely, t h a t it was t o

protect the respondent f rom having t o submit t o an ac t ion

on behalf	o f appl icant ' s wife	" f o r any p a r t of	the house	a t
Cromer" .

Respondent has also argued tha t it would have

been poss ib l e fo r app l i can t t o have applied t o have D l s t r i c t

Court claim removed to the Equi ty Court , ra ther than now t o

complain t h a t lt was n o t p o s s i b l e t o l i t i g a t e t h e E q u i t y

case i n t he D i s t r i c t Cour t . Whilst the comment may be

correct, the applicant 's enti t lement under Bankruptcy Act 1966

s.41(7) i s not thereby removed; a t l e e s t a s I read sub s.7.

Reference has been made by respondent's Counsel

t o I n r e a Bankruptcy Notice 1934 1 Ch. 431. This was a

declsion of the Court of Appeal (Lord Hanworth, Lord J u s t i c e s

ROmer and ?laugham.) I t i s sa ld it resembles the instant

case. Yet there the debtor was re ly lng on a claim f o r a

dec l a ra t ion t ha t he was e n t i t l e d t o a charge On the proceeds

of cer ta in property in the hands o f t ru s t ees , The s u i t he

conmsnced was aga ins t the c red l tor and two o f the persons who

were t rus tees .

9.

The dec lara t ion he sought was t h a t on s a l e o f the p roper t ies

the debtor and c red i to r were e n t i t l e d t o a share m any p r o f i t s

r e su l t i ng from the t ransact lon. I t d id no t appear in the

\

repor t what were the f ac to r s which would determine the

ascer ta inment of prof i ts , o r t o what those p r o f i t s might

amount. The debtorss appl ica t ion was t o have a Bankmptcy

Notice issued by the c r ed i to r set as ide , on t h e ground t h a t

he had by the ac t ion re fer red to above a l lcross demand"

against the credi tor exceeding the amount c lamed aga ins t

him. More particularly the debtor claimed, accordipg to

the Reg i s t r a r , t ha t -

" . . . . . . the credi tor re ta ined

under h i s con t ro l p rope r ty o f

the debtor i n the form of

denying a charge f o r a sum of money

and a half share of the prof i ts . l !

The R e g i s t r a r s e t t h e Bankruptcy Notice aside, The

t r ansac t ion , r e f e r r ed t o i n t h e Judgment of Lord Hanworth

a t

M.R./p. 434 i s r a t h e r more complex than my shor t p rec i s

descr ibes . The debtor% clam included e .g . a c la im tha t

he was en t i t l ed t o sub roga t ion rights. The Master o f the

Rolls af ter speaking somewhat scept ica l ly o f the debtor ' s

c l a m , s a i d (p.435) -

"It must be not lced tha t In

that Chmcery act ion there i s no

claim against the present

c r ed i to r i n respect of any

p e r s o n a l l i a b l l l t y charged

aga ins t him. I t

10.

“I do no t des i r e t o s ay what

l lcross demand” may Include, but

it is n o t d i f f i c u l t t o s a y it

does not include a c l a i a of

such uncertain nature as appears

m these Chancery proceedings.”

Romer L.J . sa id of l lcross demand“ (p.439) -

”I cannot accede t o the suggestion

t h a t t h e words a r e satisfied i f the judgment debtor i s claiming

t o have ul i n t e r e s t I n something

i n t h e hands o f and properly

re ta ined by a th i rd par ty ranking

i n p r i o r i t y t o t h e i n t e r e s t m

tha t t h ing	claimed by	the judgment
debtor. ‘l

See also per Maughan LJ, a t ~ “ 4 4 1 ,

S lgnl f icant ly , in my view, t h s Judgments emphasize the necessl ty

f o r t h e c l a m by the debtor to be aFa ins t t he c r ed i to r ( i . e .

mutual) rather than one which eventual ly may enure t o the

b e n e f i t o f t h e p l a i n t i f f ( l o e c d e b t o r ) ,

11.

Fur the r , i n my view, the claim o f t he deb to r i n tha-c

case i s considerably less wel l def ined than i s tha-c of

the ap'pllcant here. I do not regard that case as

de termining th i s mat te r bu t ra ther as an expos l t lon o r

example o f what may or mey not f a l l within the meaning

of l l c ross demand". The case i s analysed i n I n r e a Debtor 195:

1 Ch. 81.. i n whlch Jenkms LJ . dissented. There,

t he re a r e bu t two persons involved, debtor applicmt

and creditor respondent, one property o f which the

share clalmed clearly exceeds the judgment debt,

even allowing	for	the entltlemen-c In the	company	i n
l iqu lda t ion .

Respondent's Counsel also relied upon two

au tho r i t i e s from which he argued t h a t It was necesszry

f o r the applicant in the circumstances such as these

t o give some evi2ence of the exis tence of h i s counter

c l a m , s e t o f f o r cross demand.

12.

He refer red t o Re Cox 7 A.B.C. 98 and Vogwell v. Vogwell

11 A.B.C. 83 . In both those cases the quest ion o f

ava i labdl ty o f ev idence was cons idered . In the f i r s t

instance it seems t h a t t h e o n l y a t t e m p t t o s a t i s f y t h i s

requirement was t o annex t h e copy of the Statement of Claim

to proceedings; and, i n t h e second, the Judge who heard

the mat te r a t first ins tance was not sat lsf ied,on the evldence

anyway, t ha t t he re was a claim. He had the ass is tance of

cross examination of the applicant. It seems t o me

these cases do not give great ass is tance to respondent 's

argument, i n a s l t u a t i o n as here, where the appl icant has

pos i t i ve ly deposed i n h i s a f f i d a v i t t o certain arrangements

sald t o have been arrived a t wi th the respondent ,

Though he annexed a copy of the S ta tement o f Clam to h i s

a f f i d a v i t he has not done tha t only. I n o t e t h a t no

challenge t o the ev idence in the a f f idavi t wes a t tenpted

by way o f cross examination.

13.

I n my view w h i l s t passing no opini3n on

the ul t lmate success or f a i l u r e of d e b t o r ' s s u l t ,

whlch inay well depend on c r e d i b l l i t y , t h e c l a m he

r a i s e s 1s suf f ic ien t ly suppor ted in h i s evldence t o

e n t l t l e him t o l l t l g a t e i t , and rneanwhlle t o have

extended the Bankruptcy Notice but upon terms o f

expedition being sought by him. This course 1 s preferab le

to se t t ing as ide the Not ice .

I consider that the end r e s u l t of the cur ren t

equity proceedmgs 1s tha t there could be recovered by

the p resent appl icant a sum o f money, a lbe i t poss ib ly

a f t e r enforcement of a charging order, fro3 and aga ins t

the respondent.

The da te t o whlch I adJourn the further

hearing i s t o be f o r mention only, and so that z ry

fur ther ex tens ion may be considered, if e.g. the applicant

can show that he has complied wi th the condi t ion imposed

and t o which I r e f e r l a t e r .

14.

I f ind tha t the appl icant has f l l ed wi th in

the re levant t ime an aff idavi t o r a f f i d e v i t s t o the

e f f e c t r e f e r r e d t o i n s.41(7) o f the Act.

This court has not , before the expirat ion of that time

o r t ha t t ime as extended, determmed whether it i s

sa t i s f ied tha t the appl icant has such a counter claim,

s e t o f f o r c ross demand. The outcome o f proceedings i n

mat ter No. 2003 of 1980 i n t h e Supreme Court of New

South Wales i n Equity w i l l , I expec t , s ign l f icant ly o r

subs t an t i a l ly assist t h i s court t o be so s a t i s f i e d o r

t o f a l l t o be s a t l s f i e d . It i s appropr i a t e t ha t t h i s

cour t await t h e outcome of t h i s s u i t r a t h e r t h a n i t s e l f

proceed	t	o	resolve the issues there ra ise&
I n view of my finding above, though the tine

f o r compliance with the bankruptcy notice may be extended

by the sub section, the applicant must himself meanwhile

proceed with a l l due d i l igence t o prosecute the Equl ty su i t

and, i f he can, t o discharge the onus he bears of satisfying

i n t e n d s of s.41(7) t h i s c o u r t I n due course.

Were there defau l t on h l s p a r t i n t h i s regard,

t h i s court might not be sa t l s f ied In t e rms of s , 4 1 ( 7 ) ; o r

be s a t l s f l e d t o the cont rwy,

15.

I order -

1. Time f o r compliance with t h e Bankruptcy Notice herein

i s extended t o 4.00 p.m. on 11 November 1930

o r further order,upon condition -

(a ) applicant proceeds wlth expedi t ion to

complete all interlocutory proceedings

i n s u i t No. B.2009 o f 1930.

(b) appl icant then for thwith appl ies to the

Court f o r an expedlted hearins	of the
s u i t

2. L iber ty t o apply on two days' notice.

3. Costs reserved.