Ronald Abrahams v Fay June James

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

ABRAHAMS

RONALD

EX PARTE:

FAY JUNE JAPES

(now known

Fay June Warner)

O R D E R

JUDGE MAKING ORDER

McGREGOR J.

WHERE

MADE

SYDNEY

DATE OF ORDER

1 OCTOBER 1980

RONALD

A B W E (appl icant ) wab

t ie

defendant

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

the Regis t ra r

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

the app l i cv l t

and

before the said t

ime

had expired,

the

applicant

caused

t o

f i l e d

such an affidavit as

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

counter claim set off

o r

c ross

demand

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)

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

answers

the

descr ip t ion

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

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

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

that

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.

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

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

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

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

appllcant

fu r the r

agreement

was

made,

in e f fec t , pos tponing

d i v i s l o n

of proceeds.

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,

he says , the par t ies

agre'ed

to bu l ld

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

res ident la l dwel lmg

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

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

the

3 December 1976. Portion

the

applicant

evldence

i s

that

the cost of the bui lding

work

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

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

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^.

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

deposl t

of $800.

Thereafter

the

respondent

declined

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

work

and labour employed on the Balmain property and money

spent

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

the s a id l and a t

Cromer

toge the r w i th p ro f i t

resa le o f

it.

The

app l i can tFs Counsel submitted that

fa i r

construct ion of the facts

whlch

have

but shor t ly re fe r red

t o

tha t the expec ta t lon c rea ted

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

sold

and

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

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

sold

and

the net proceeds again shared

equal ly by

the

appl icant

and the

respondent.

s t a t e s

t h a t it mlght

s a i d t h a t

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.

have

quo-ced

his assessment

o f

the cos t incur red

the parties individually

In suppor t

t h i s con ten t ion

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 ,

says,

that

the

appl

icant

under

verbal agreement with the respondent

and

upcn

t h e f a i t h

her

promise

having

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

expectat lon.

descr ibes t h i s as

"proprietary

toppel"

(uslng the phrase

of Lord Denning

i n t h e

sane case

a t p.

853)

and

re ly ing

his Lordship's statement

t ha t

such estoppel

g l v e s

r l s e

t o

a caclse of

actlon,

a l te rna t lve

says there could

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

regarded as being held,

reason

o f

the

contrlbutions both of

money and o f work

and labour made by

the

appl icant

the

p roper t ies

each

ins tance .

C l a i m s

there

was

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 .

regard

r e l i e s upon Allen v.

Snyder (1977) 2 N.S.W.L.R.

a t 685.

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

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,

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

has,

i n f a c t ,

sought

t h i s r e l l e f

the

commencement

o f

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 .

ind ica t e s t ha t

it may

necessary to

amend

that Statement

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

have

e a r l l e r r e f e r r e d .

For

the appl lcant

he argues that

reason

o f

the

provls ions of the Distr lc t Court

Act

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

way

o f

7 .

defence

t o the respondentvs claim,

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.

submits that therefore

and

f o r these reasons th i s

was

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 . . . . .

A s to the wld th

t h e words

"counter claim"

" s e t o f f "

and

l lcross demand",

r e f e r s t o t h e

judgment

Maugha

A.J.

i n t he ca se o f

i n Re

Judd;

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

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

Defence

those

proceedings.

Generally

speaking,

could

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

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

the appl lcant .

A s

understand her Statement

o f

Defence she

does not accept that the cost

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

the appl icant ,

it was l o s t by the company.

Spec i f l ca l ly i n

her

Pleadings she refers to

memorandum

i n wri t ing dated the

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

c l am o f - any desc r ip t ion

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

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

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

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

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

respondent's Counsel

t o I n r e

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

was

e n t i t l e d t o

charge On

the proceeds

cer

property

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 .

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

the c r ed i to r

set as ide ,

on t h e ground

t h a t

he had

the ac t ion re fer red to

above

l lcross demand"

against the credi tor exceeding the

amount

c lamed aga ins t

him. More particularly

the

debtor

claimed,

accordipg

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

half share

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

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 .

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

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

no t des i r e t o s ay

what

l lcross demand” may Include,

but

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

does not include

c l a i a

such uncertain nature

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

i n t e r e s t I n

something

i n t h e

hands

o f

and properly

re ta ined

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

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 ,

my view, t h s Judgments

emphasize

the

necessl ty

f o r

t h e c l a m

the debtor

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

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

the

ap'pllcant

here.

I do not

regard

that

case

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

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

meaning

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

argued

t h a t It was

necesszry

the applicant in the circumstances such as these

t o give

some

evi2ence

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.

and Vogwell v. Vogwell

11 A.B.C.

both

those

cases

the

quest ion

o f

ava i labdl ty

ev idence

was

cons idered .

the

f i r s t

instance

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

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

tance

cross

examination

the

applicant.

It seems t o me

these cases

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

copy

of the S ta tement o f Clam to h i s

a f f i d a v i t

has

not

done

tha t only.

I n o t e t h a t

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

f a i l u r e

d e b t o r ' s s u l t ,

whlch inay well

depend

c r e d i b l l i t y , t h e c l a m

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 .

consider that the

end

r e s u l t

the cur ren t

equity proceedmgs

1s tha t there could

recovered

the p resent appl icant

sum

o f money,

a lbe i t poss ib ly

a f t e r enforcement

charging order, fro3

and

aga ins t

the	respondent.

The

da te t o

whlch

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

considered,

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

extended,

determmed whether

it i s

sa t i s f ied tha t the appl icant has such

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 ,

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

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

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

resolve the issues there ra ise&

I n

view of

finding above, though the tine

f o r compliance with the bankruptcy notice

may

be extended

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

satisfying

i n t e n d s

s.41(7)

t h i s c o u r t

I n due

course.

Were

there defau l t

h l s p a r t i n

t h i s regard,

t h i s court

might

not

sa t l s f ied In

t e rms of

s , 4 1 ( 7 ) ;

o r

s a t l s f l e d

t o

the cont rwy,

15.

I order -

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

complete all interlocutory proceedings

i n s u i t No.

B.2009

o f 1930.

(b)

appl

icant

then

for thwith

appl

ies

the

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

L iber ty t o apply on

two

days'

notice.

3. Costs

reserved.

[1980] FCA 155

1 Oct 1980