Scanlan v Douglas
[2007] FMCA 1265
•7 September 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| SCANLAN v DOUGLAS | [2007] FMCA 1265 |
| BANKRUPTCY – Application to set aside – cross-demand or set-off. |
| Bankruptcy Act 1966, ss.40(1)(g) and 41(7) Civil Judgments Enforcement Act 2004 (WA), ss.12, 13(1), 13(2)(a) Property Law Act 1969 (WA), s.20 Rules of the Supreme Court 1971, O.47 r.3(2)(b) Supreme Court Act 1935 (WA), s.141(2)(a) |
| Australian Mutual Provident Society v Specialist Funding Consultants Pty Ltd (1991) 24 NSWLR 326 Commonwealth of Australia v Albany Port Authority [2006] WASCA 185 Dennehy v Reasonable Endeavours Pty Ltd [2001] VSC 447 Ebert v Union Trustee Co of Australia (1960) 104 CLR 346 Guss v Johnstone (2000) 171 ALR 598 Lockett v A & M Charles Ltd [1938] 4 All ER 170 Nominal Defendant v Manning (2000) 50 NSWLR 139 Orwell Steel (Erection and Fabrication) Ltd v Asphalt and Tarmac (UK) Ltd [1985] 3 All ER 747 Pinnel’s Case (1602) 77 ER 237 Re Glew; Glew v Harrowell (2003) 198 ALR 331; [2003] FCA 373 Richards v Heather (1817) 1 B & Ald 29, 106 ER 11 Solic v Bertossa [1969] VR 594 Thomas A Edison Limited v Bullock (1912) 15 CLR 679 Todd v Novotny [2000] WASC 308 Van Lynn Developments Ltd v Pelias Construction Co Ltd [1969] QB 607 Walker v Secretary, Department of Social Security (1995) 129 ALR 198 |
| Applicant: | SHIRLEY LYNETTE SCANLAN |
| Respondent: | OLIVER DOUGLAS |
| File Number: | PEG 249 of 2006 |
| Judgment of: | Lucev FM |
| Hearing date: | 18 May 2007 |
| Date of Last Submission: | 18 May 2007 |
| Delivered at: | Perth |
| Delivered on: | 7 September 2007 |
REPRESENTATION
| Counsel for the Applicant: | Mr G.D. Cobby |
| Solicitors for the Applicant: | Christensen Vaughan |
| Counsel for the Respondent: | Mr M. Levitan |
| Solicitors for the Respondent: | Melvyn Levitan |
ORDERS
Bankruptcy Notice No. 367 of 2006 be set aside.
The costs of this application, including reserved costs, to be paid by the Respondent to be taxed if not agreed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 249 of 2006
| SHIRLEY LYNETTE SCANLAN |
Applicant
And
| OLIVER DOUGLAS |
Respondent
REASONS FOR JUDGMENT
Application
This application under s.40(1)(g) of the Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”) seeks to set aside Bankruptcy Notice No. 367 of 2006 (“the Application”). Mrs Shirley Lynette Scanlan (“the Applicant”) has brought this Application on the basis that she has a cross-demand or set-off exceeding the amount of the debt claimed in the notice. When the Application came on before the Court for the sixth time on 18 May 2007, and the Respondent sought, not for the first time, to have the matter adjourned to facilitate further investigations, the Court proceeded to hear and determine the matter and to make orders. At that time the Court indicated that formal reasons for judgment would follow. These are those reasons.
History of the matter
The history of the matter is fully set out in the Applicant’s Submissions and the following paragraphs are (but for one or two minor amendments) taken from those Submissions.
On 7 October 1997, judgment (“the Judgment”) was entered for Cianiup Pty Ltd (“Judgment Creditor”) against Barry Daniel O’Rourke (“Mr O’Rourke”), Laurence John Scanlan (“Mr Scanlan”) and Oliver Douglas (“the Respondent”) (together “the Judgment Debtors”) in the amount of $73,312.47.
By a deed made between the Judgment Creditor, the judgment debtors and the Applicant on 27 July 1998 the Judgment Creditor assigned the Judgment to the Applicant.
On 24 September 2004, Deputy Registrar Harman of the District Court of Western Australia granted the Applicant’s ex parte application for leave to execute on the Judgment pursuant to the now repealed s.141(2)(a) of the Supreme Court Act 1935 (WA) (“Supreme Court Act”) (“the ex parte order”).
Bankruptcy Notice No. 153 of 2005 dated 18 May 2005 was served on the Respondent on 15 November 2005, but subsequently set aside by consent with costs on 23 January 2006. This is the first of the two cost orders on which the present bankruptcy notice is founded.
On 5 December 2005 the Respondent made an application to set aside the ex parte order (“Respondent’s Application”).
On or about 7 February 2006, the Applicant filed an application for leave to execute on the Judgment under s.13(1) of the Civil Judgments Enforcement Act 2004 (WA) (“Civil Judgments Enforcement Act”) (“the Second Application”), with the intention that the Second Application be heard together with the Respondent’s Application.
Deputy Registrar Harman dismissed the Second Application on 17 February 2006, on the ground that the orders sought in the Second Application had already been made.
On 27 February 2006, Deputy Registrar Harman set aside the ex parte orders, having found that there had been a material non-disclosure on the Applicant’s part, and ordered the Applicant to pay the Respondent’s costs of the application to be taxed. This order is the second costs order on which the present bankruptcy notice is founded.
On or about 31 March 2006, the Applicant filed a further application for leave to execute under s.13(1) of the Civil Judgments Enforcement Act (“the Third Application”).
The Third Application was heard by Deputy Registrar Harman on 29 May 2006 and dismissed on or about 25 August 2006.
That decision was appealed to a Judge of the District Court. The appeal was heard by Commissioner Archer on 7 December 2006. It came to the parties’ attention during the course of the appeal that the Deputy Registrar lacked jurisdiction to determine either the Second or Third Applications. At the time the Orders were made by this Court the Commissioner was still to deliver her reserved judgment.
Set-off or cross-demand
To demonstrate a counter-claim, set-off or cross-demand, the debtor must show a prima facie case and admissible evidence need not be adduced to make out that case.[1]
[1] Ebert v Union Trustee Co of Australia (1960) 104 CLR 346.
If the District Court grants the Applicant leave to execute the Judgment Debt, she will be entitled to set aside the Bankruptcy Notice.
Even if the District Court were to refuse leave, the Applicant will still be entitled to have the Bankruptcy Notice set aside, because she will be entitled to set-off the Judgment Debt against the amounts claimed in equity. The debts are sufficiently related so as to make it inequitable to enforce the cost orders without taking into consideration the Judgment Debt.[2]
[2] Section 12, Civil Judgments Enforcement Act; Walker v Secretary, Department of Social Security (1995) 129 ALR 198; Australian Mutual Provident Society v Specialist Funding Consultants Pty Ltd (1991) 24 NSWLR 326 at 331-2.
The discretion to grant leave
If the Applicant is not presently entitled to set-off the Judgment Debt against the debts claimed in the Bankruptcy Notice, she is still arguably entitled to have the Notice set aside, as she may still obtain leave to enforce the Judgment.
In exercising discretion as whether to grant leave,[3] the District Court will consider any explanation for the delay in enforcing the judgment, in addition to the matters of which the District Court must be satisfied in order for the jurisdiction to grant leave to arise.
[3] Civil Judgments Enforcement Act, s.13(2)(a).
The delay
Following assignment of Judgment, the Applicant issued invoices to the Respondent for 8 months from July 1998 to February 1999.[4] No payment was made.
[4] “OD5”, Douglas 1 December 2005. (Reference to Douglas’ affidavit sworn 1 December 2005 are references his affidavit of that date filed in the Federal Court of Australia, a copy of which comprises annexure OD-A1 to his affidavit sworn 5 December 2005 which itself comprises annexure D1 to his affidavit sworn 30 November 2006 and filed in these proceedings).
On or around 15 February 2002, the Applicant wrote to the Respondent requesting payment.[5] The Respondent claimed inability to pay, but said he would defend bankruptcy proceedings.[6]
[5] OD6, Douglas 1 December 2005, at 65.
[6] OD6, Douglas 1 December 2005, at 64.
On 21 October 2002 the Applicant again wrote to the Respondent requesting payment.[7] The Respondent said he could not pay. He again intimated that he would have to be bankrupted.[8]
[7] OD6, Douglas 1 December 2005, at 62.
[8] OD6, Douglas 1 December 2005, at 61.
Against that background it was reasonable for the Applicant to delay execution on the Judgment.
In or around June 2004, the Applicant became aware that the Respondent’s financial position might not be so precarious. She sought legal advice. The application for leave to execute was filed in September 2004.
The Applicant was unaware that she was required to execute the Judgment within 6 years.
The Respondent has suffered no prejudice. It was manifest at all times that the Applicant had no intention of abandoning her rights with respect to the Judgment and that her sole reason for not proceeding was the Respondent’s alleged inability to pay. The Respondent’s claims have never been examined.
Entitlement to seek enforcement
The purpose of having the Applicant show she is still entitled to seek enforcement is to give the judgment debtor the opportunity of having the judge investigate whether she is still entitled to issue execution, but no more.[9]
[9] Solic v Bertossa [1969] VR 594, at 595.
The onus to do so has been discharged by proof of the judgment and affidavit evidence that some or all of the judgment debt remains unpaid.[10] The Respondent was a party to and executed the deed of assignment. The Applicant is prima facie entitled to enforce the Judgment.
[10] Dennehy v Reasonable Endeavours Pty Ltd [2001] VSC 447, at [16] (“Dennehy”).
In the District Court, the Respondent has raised a series of matters in opposition to the grant of leave, namely that:
a)notice of the Assignment was not provided to the Respondent;
b)the payment of $80,000.00 to the Judgment Creditor by the Applicant was to discharge the Judgment, not to obtain the Assignment;
c)an oral agreement between the Applicant and the three Judgment debtors prevents her from executing under the Judgment; and
d)once the ex parte orders were set aside, the Applicant was not entitled to bring renewed applications to seek leave to enforce the Judgment.
The Applicant says that none of the above matters have merit.
Notice of assignment
Section 20 of the Property Law Act 1969 (WA) requires express notice in writing to be given to the debtor when there is an assignment of a debt.
The Respondent executed the deed of assignment.[11] Clause 7.1 of the deed provides that the Respondent acknowledges receipt of a copy of the deed by signing. Provision of a copy of the deed provided all the information required in a written notice of the assignment.[12]
Alleged discharge
[11] Mrs Scanlan 29 September 2006.
[12] Van Lynn Developments Ltd v Pelias Construction Co Ltd [1969] QB 607, at 615.
The assertion that the payment to the Judgment Creditor by the Applicant was made in discharge of the Judgment Debt is inconsistent with the deed, signed by the Respondent.
Oral Agreement
An oral agreement was reached. The terms are disputed.
The dispute is irrelevant. For the purposes of this application, and those in the District Court, the Applicant has proceeded on the basis that the Respondent’s version of events is correct.
Agreement void for lack of consideration
If the oral agreement was as alleged by the Respondent, the agreement was void and of no effect. The Respondent essentially claims that it was agreed that each of the Judgment Debtors would pay a third of the Judgment Debt, and no more.
Each of the Judgment Debtors was however liable to pay all of the Judgment Debt, plus interest, the Judgment being joint and several.
Even if the Judgment was only joint, rather than joint and several, each joint promisor is still arguably liable for the performance of the whole promise.[13]
[13] Richards v Heather (1817) 1 B & Ald 29, 106 ER 11; Lockett v A & M Charles Ltd [1938] 4 All ER 170.
Each Judgment Debtor was therefore arguably liable to pay the entire Judgment Debt to the Applicant. There was no consideration moving to the Applicant if each Judgment Debtor agreed to pay only a third of the debt at a later date, and the agreement relied upon by the Respondent would fail for want of consideration.[14]
[14] Pinnel’s Case (1602) 77 ER 237.
Oral agreement a compromise of the Judgment
The alleged oral agreement did not compromise the judgment. A mere agreement could not have that effect. The agreement must be performed for the compromise to take effect.[15]
[15] Dennehy.
There was no performance in this case. No payment was ever received from the Respondent.
Estoppel
The Respondents estoppel argument (based on the alleged agreement) must, where no payment was made, fail, because:
a)there was no reliance by; and
b)there was no detriment to,
the Respondent.
Renewed application
The Respondent has sought to argue in the District Court that it is not open to the Applicant to renew the Application for leave to execute, on a number of grounds.
The order by Deputy Registrar Harman on 27 February 2006 setting aside the ex parte order was interlocutory in nature.
The Court can make orders of an interlocutory nature after final judgment in an action.[16]
[16] Orwell Steel (Erection and Fabrication) Ltd v Asphalt and Tarmac (UK) Ltd [1985] 3 All ER 747, at 748j to 749h.
The order dismissing the ex parte order was of an interlocutory nature. It is not a bar to another application.[17]
[17] Commonwealth of Australia v Albany Port Authority [2006] WASCA 185, at [71]-[72].
The Deputy Registrar based his decision on the ground of material non-disclosure. There was no exercise of discretion to proceed to consider whether a grant of leave should be maintained on the whole of the material.[18] There was no decision on the merits of whether the Applicant should be granted leave to execute on the Judgment.
[18] “FX2”, Xue 31 January 2007, at 10.
Where an order has been set aside for material non-disclosure, the applicant can apply de novo for an order based on the merits.[19]
[19] Thomas A Edison Limited v Bullock (1912) 15 CLR 679, at 683.
Even if it is assumed that the Deputy Registrar’s decision was made upon full consideration of the merits (which is not the case), the order dismissing the first application is no bar to a second application, because the first application was of an interlocutory nature.[20]
[20] Nominal Defendant v Manning (2000) 50 NSWLR 139, at 141 (“Manning”).
In determining whether to allow a second application, the question will be whether the second application is an abuse of process.[21] The failure to file fresh or new evidence is not, in and of itself, an abuse of process.[22]
[21] Manning, at 155.
[22] Todd v Novotny [2000] WASC 308 at [8], [15] and [19].
The Applicant’s ex parte application filed 7 September 2004 was defective, in that it did not comply with O.47 r.3(2)(b) of the Rules of the Supreme Court, 1971 (WA) in that there had been, as required by that sub-rule, no explanation as to delay in enforcing the Judgment. The Applicant says she was not responsible for the defect.[23]
[23] “SLS16”, Mrs Scanlan 29 September 2006, at 117.
The filing of a new application, rather than an appeal from the decision of the Deputy Registrar made 27 February 2006 to set aside the grant of leave, was the appropriate procedure, because:
a)the orders having been set aside was for material non-disclosure, it was always open to the Applicant to bring a fresh application to be determined having regard to the whole of the evidence; and
b)the difficulty with an appeal from the Deputy Registrar’s decision was that the application he determined was the Judgment Debtor’s motion to set aside the grant of leave filed 5 December 2005, not the Applicant’s application for that leave. An appeal would have involved the hearing de novo of the Judgment Debtor’s motion, but the Applicant would still have required the Judge to exercise discretion both to:
i)admit evidence as to delay filed on behalf of the Applicant since the original application was made, to be led (although admittedly that was unlikely to have given rise to any difficulty); and
ii)in the event that the Judge decided that there had been a material non-disclosure, exercise discretion to proceed to determine whether the grant of leave should nevertheless be maintained, having regard to the whole of the evidence.
Considerations which militate against a second application, such as the risk of conflicting decisions, the unnecessary vexing of respondents, judge-shopping and the diminution of certainty in the conduct of the Respondents of their affairs do not apply in this case. The Respondent received an order for costs in relation to the previous application.
The above reasoning is basically in line with the Submissions of the Applicant filed in this matter. The Court is satisfied (contrary to the Submission of the Respondent) that there is a sufficient basis for the Applicant to assert an arguable cross-demand or set-off and that such a cross-demand or set-off may exist, and that it is sufficiently arguable to warrant setting aside the Bankruptcy Notice.
Conclusion
It is necessary for this Court only to make a preliminary assessment of the alleged cross-demand or set-off, and not a final determination.[24]
[24] Re Glew; Glew v Harrowell (2003) 198 ALR 331 at 334 per Lindgren J; [2003] FCA 373 at paras 10-12 per Lindgren J.
Having weighed the competing legal and factual merits of the parties claims, and in particular the Applicant’s alleged cross-demand or set-off, this Court is satisfied[25] that the Bankruptcy Notice ought to be set aside for the reasons outlined above.
[25] Bankruptcy Act, ss.40(1)(g) and 41(7); Guss v Johnstone (2000) 171 ALR 598 at 606 per Gleeson CJ, Gaudron, McHugh, Kirby and Callinan JJ.
I certify that the preceding fifty-five (55) paragraphs are a true copy of the reasons for judgment of Lucev FM
Associate: J. Semler
Date: 7 September 2007
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