Sarina v O'Shannassy - [2020] FCCA 1625

FEDERAL CIRCUIT COURT OF AUSTRALIA

SARINA v O'SHANNASSY

[2020] FCCA 1625

Catchwords:
BANKRUPTCY – Determination of question whether the time for complying with the requirements of a bankruptcy notice should be extended to the time there is determined the counter-claim, set-off, or cross demand the debtor claims he has against the creditor and on which he relies as a ground for applying to set aside a bankruptcy notice – whether debtor has complied with the requirements for making an application to set aside a bankruptcy notice on the ground that the debtor has a counter-claim, set-off, or cross demand that exceeds the judgment debt so as to have engaged s.41(7) of the Bankruptcy Act 1966 (Cth) (Act) – debtor has not complied –– extension of time to be granted in aid of other grounds on which debtor relies for setting aside bankruptcy notice.

Legislation:

Bankruptcy Act 1966 (Cth), ss.27(1), 30(1)(b), 40(1)(g), 41(6A), 41(7)

Federal Circuit Court (Bankruptcy) Rules 2016 (Cth), r.3.02(3)
Federal Circuit Court Rules 2001 (Cth), r.1.06
Federal Court Rules 2011 (Cth), r.27.11
Legal Profession Uniform Law Application Act 2014 (NSW), ss.68, 70, 74, 78

Cases cited:

Burrell v Reavill Farm Pty Ltd & Ors [2014] FCCA 1449

Ex p Ruffle; In re Dummelow (1873) LR 8 Ch App 997

Glew v Harrowell, in the matter of Glew [2003] FCA 373

Guss v Johnstone [2000] HCA 26

Olivieri v Stafford (1989) 24 FCR 413

Re Brink; Ex parte The Commercial Banking Company of Sydney Ltd [1980] FCA 78; (1980) 44 FLR 135

Re Sterling, Ex parte Esanda Ltd [1980] FCA 61; 44 FLR 125

Jagatramka v Coeclerici Asia (PTE) Limited (No.2) [2015] FCCA 2743

Sarina & Anor v O'Shannassy (No.2) [2019] FCCA 2802

Stec v Orfanos [1999] FCA 457

Webb v Hunter (1995) 59 FCR 24

Applicant:

CLINTON SARINA

Respondent:

JOHN O'SHANNASSY

File Number:

SYG 1345 of 2020

Judgment of:

Judge Manousaridis

Hearing date:

12 June 2020

Date of Last Submission:

12 June 2020

Delivered at:

Sydney

Delivered on:

19 June 2020

REPRESENTATION

Counsel for the Applicant:

Mr C Bolger, by video

Solicitors for the Applicant:

Kalantzis Lawyers

Respondent in person, by video

ORDERS

The question whether the time for compliance with the requirements of bankruptcy notice BN249223 served on the applicant either on 9 or 11 March 2020 be extended up to and including the day Judge Manousaridis gives judgment in matter number SYG1339/2018 is answered in the negative.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 1345 of 2020

CLINTON SARINA

Applicant

And

JOHN O'SHANNASSY

Respondent

REASONS FOR JUDGMENT

Introduction

In these reasons for judgment I consider whether the time for compliance with the requirements of bankruptcy notice BN249223 the respondent, Mr O’Shannassy, served on the applicant, Mr Sarina, should be extended up to and including the day on which I give judgment in a proceeding (Proceeding) that is pending before me in which Mr Sarina claims Mr O’Shannassy defamed him (Defamation Claim).

Background

The bankruptcy notice, which was…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2020] FCCA 1625
Decision Date: 19 June 2020

CaseChat Overview and Summary

In this matter before Judge Manousaridis, Mr Sarina sought to set aside a bankruptcy notice issued by Mr O’Shannassy. The bankruptcy notice, served in March 2020, required Mr Sarina to pay $26,071.47 within 21 days, representing a judgment debt arising from a certificate of determination of costs. Mr Sarina applied to the Federal Court on 27 March 2020 to set aside the notice, relying on grounds under s.40(1)(g) of the *Bankruptcy Act 1966* (Cth) and alternatively seeking an extension of time under s.41(6A) of the Act. The proceeding was subsequently transferred to the Federal Court.

The primary legal issues before the Court were whether Mr Sarina had complied with the requirements for making an application to set aside a bankruptcy notice on the ground that he possessed a counter-claim, set-off, or cross demand exceeding the judgment debt, as contemplated by s.41(7) of the *Bankruptcy Act*. Additionally, the Court was required to determine whether to grant an extension of time for compliance with the bankruptcy notice, in aid of other grounds relied upon by Mr Sarina for setting aside the notice.

The Court found that Mr Sarina had not complied with the specific requirements for establishing a counter-claim, set-off, or cross demand under s.41(7) of the *Bankruptcy Act*. However, the Court acknowledged its jurisdiction in bankruptcy, derived from s.27(1) and s.30(1)(b) of the Act, to make necessary orders, including setting aside a bankruptcy notice. Furthermore, the Court possessed the power under s.41(6A) of the Act to extend the time for compliance with a bankruptcy notice, provided an application to set aside had been made within the prescribed period. This power to extend time was considered to carry with it the power to set aside the notice itself.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

The bankruptcy notice, which was issued on 6 March 2020, required Mr Sarina, within 21 days of service, to pay to Mr O’Shannassy $26,071.47. That is the amount of a judgment Mr O’Shannassy on 31 January 2020 arranged to be entered against Mr Sarina in the Local Court of New South Wales (Judgment Debt). The Judgment Debt, in turn, represents the amount recorded in a certificate of determination of costs (Costs Certificate). The Costs Certificate was issued under s.70 and s.78 of the Legal Profession Uniform Law Application Act 2014 (NSW) (LP Application Act) in response to an application Mr O’Shannassy made under s.68 and s.74 of the LP Application Act for the assessment of costs the District Court ordered Mr Sarina to pay. The Certificate of Costs was registered with the Local Court pursuant to s.71(3) of the LP Application Act. The bankruptcy notice was served on Mr Sarina either on 9 or 11 March 2020. On 27 March 2020 Mr Sarina applied to the Federal Court for an order that the bankruptcy notice be set aside “on the grounds of s.40(1)(g)” of the Bankruptcy Act 1966 (Cth) (Act), and, in the alternative, for an order under s.41(6A) of the Act that the time for complying with the requirements of the bankruptcy notice be extended until the Defamation Claim is finally determined. One of the grounds on which Mr Sarina relied is that the Defamation Claim, and an order for costs I made in the Proceeding (Costs Order), each constitutes a counter-claim, set-off, or cross demand. On 2 June 2020 an order was made under r.27.11 of the Federal Court Rules 2011 (Cth) that the proceeding in the Federal Court be transferred to this Court. The matter came before me for directions on 5 June 2020; and on that day I set down for hearing on 12 June 2020 the determination of the question I consider in these reasons. The proceeding before me is an application to set aside a bankruptcy notice. The Act does not confer an express power on this Court to set aside a bankruptcy notice, but there is no question that this Court, in the exercise of the “jurisdiction in bankruptcy” conferred on it by s.27(1) of the Act, has the power to do so. The principal source of power is s.30(1)(b) of Act which provides that the Court may make “such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter”.[1] Another source of power is s.41(6A) of the Act which empowers the Court to extend the time for compliance with the requirements of a bankruptcy notice if, before the time for complying with those requirements, the debtor has, among other things, applied to set aside the bankruptcy notice. It has been said that the power of the Court to extend the time for compliance with the requirements of a bankruptcy notice carries with it the power to set aside the bankruptcy notice itself.[2][1] Olivieri v Stafford (1989) 24 FCR 413, at page 430 (Gummow J)[2] Re Sterling; Ex parte Esanda Ltd (1980) 44 FLR 125, at page 130 (Lockhart J)

Ratio Decidendi

Legal Principle Established

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