Shephard v Chiquita Brands South Pacific Ltd - [2002] FMCA 115

FEDERAL MAGISTRATES COURT OF AUSTRALIA

SHEPHARD v CHIQUITA BRANDS SOUTH PACIFIC LTD

[2002] FMCA 115

BANKRUPTCY – Bankruptcy Notice – set aside – cross claims – assessment of alleged cross claims.

Bankruptcy Act 1966 (Cth) ss.40(1)(g), 41(7)

Derek George Shephard v Blueberry Farms of Australia (Curindi) Limited [2001] FMC 2
Ebert v Union Trustee Co (Aust) Limited (1960) 104 CLR 346
ReA Debtor; ex-parte Bolan (1909) 9 SR (NSW) 580
Re Ling; ex-parte Ling v Commonwealth of Australia (1995) 58 FCR 129
Nath v Klipway Pty Limited [1999] FCA 149
Re Franks; ex-parte GIO Holdings Limited (1990) 24 FCR 398
Re Brink; ex-parte Commercial Banking Co of Sydney Limited (1980) 44 FLR 135
Excel Petroleum (NSW) Pty Limited v Caltex Oil (Aust) Pty Limited (1985) 155 CLR 448
Re E J Brown (1923) 40 WN 73

Re Wedd (1962) WAR 42
Re Camilleri; ex-parte Maquire (unreported) Federal Court, Olney J, 8 May 1996

Applicant:

DEREK GEORGE SHEPHARD

Respondent:

CHIQUITA BRANDS SOUTH PACIFIC LIMITED
ACN 002 687 961

File No:

SZ 233 of 2001

Delivered on:

24 June 2002

Delivered at:

Sydney

Hearing Date:

17 June 2002

Judgment of:

Raphael FM

REPRESENTATION

For the Applicant:

Mr Derek Shephard in person

Counsel for the Respondent:

Mr C Newlinds and Mr H Stowe

Solicitors for the Respondent:

Fishburn Watson O’Brien

ORDERS

Application dismissed.
Applicant to pay the respondent’s costs pursuant to the Federal Court Rules.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SZ 233 of 2001

DEREK GEORGE SHEPHARD

Applicant

And

CHIQUITA BRANDS SOUTH PACIFIC LIMITED
ACN 002 687 961

Respondent

REASONS FOR JUDGMENT

The dispute between these parties has a long history. It commenced on or about 29 June 1984 when the applicant and his wife entered into a series of agreements by which they acquired certain land and rights as part of a proposed co-operative scheme for the planting, maintenance and harvesting of blueberry plants in a proposed sub-division in the Coffs Harbour area. The details of what occurred thereafter is set out in a judgment of Driver FM in Derek George Shephard v Blueberry Farms of Australia (Curindi) Limited [2001] FMC 2 at [5] to [17]. Part of the dispute between the parties was referred to arbitration in the Local Court and the arbitrator delivered an award on 21 June 1994. A request for rehearing was made and on 20 November 1995 consent orders requiring Mr Shephard to pay to the respondent the sum of $8,574.00 were entered. On or about 19 April 2000 a bankruptcy notice was issued and numbered NW663/2000 by the current respondent then known as Blueberry Farms of Australia (Curindi) Pty Limited based upon that judgment. Mr Shephard brought proceedings, originally in the Federal Court but later transferred to this court, to set aside that bankruptcy notice. That application was heard by Driver FM and was successful. Judgment was given on 1 February 2001. In his judgment the Federal Magistrate dealt not only with the procedural deficiencies in the bankruptcy notice but also with certain counter claims, set offs or cross demands raised by Mr Shephard against the creditor. His views on those matters are set out in [46] to [65] of the judgment. The Federal Magistrate did not believe that the debtor had made out a counter claim, set off or cross demand of equal or greater value than the amount claimed in the bankruptcy notice. S.40(1)(g) and 41(7) of the Bankruptcy Act 1966. The bankruptcy notice was, however, set aside for other reasons.
On 14 February 2001 a bankruptcy notice numbered NN317/01 was issued by the respondent claiming a debt of $11,793.32 based upon the Local Court debt dated 20 November 1995 and interest together with some costs.
The applicant took proceedings in the Federal Magistrates Court to set aside that bankruptcy notice. Those proceedings were dismissed by Driver FM in a judgment dated 12 September 2001. The applicant then appealed against the decision of Driver FM, and in proceedings N1335 of 2001 Gyles J upheld the appeal in a judgment dated 15 April 2002. He ordered that the matter be remitted to this court to be determined in accordance to law. The only ground for challenge left to the applicant following the decision of Gyles J was whether the applicant had a counter claim, set off or cross demand which could be raised to defeat the notice under s.40(1)(g) Bankruptcy Act.
On 14 May 2002 I made orders concerning the conduct of these proceedings. These orders included the following:
“1The applicant to prepare and serve upon the respondent on or before 4 June 2002 a list of all cross claims or set offs he wishes to established and in respect of each item identify:
(a) the proceedings;
(b) the evidence relied on to establish the claim;
(c)why the evidence relied on to establish the claim could not have been raised in the action or proceeding to which the judgment or order was obtained.
Any evidence may be identified by reference to evidence relied on in previous proceedings before this court or new evidence, which must be served upon the respondent.”
The purpose of this order was to provide the court and the respondent with a document which indicated in a readily comprehensible manner how the applicant intended to establish the requirements of s.40(1)(g).
The applicant went part of the way to satisfying the orders. On 4 June 2002 he filed a document entitled “Schedule of Cross Claims” and an affidavit of the same day. The affidavit goes through the items referred to in the schedule in a formal manner of which the extracts set out below are typical:
“1(a)Subsequent to the date of judgment upon which the respondent relies, the respondent blocked the right of way, benefiting my land, crossing lot 45/731384. I claim damages in the sum of $5,063.00.
1(h)Subsequent to the date of judgment upon which the respondent relies, the respondent has continued to block my right to use an irrigation pipe and fittings which were situated on the north western corner of the plantation area on Lot 36/731384. I claim damages in the sum of $5,063.00. I further claim damages for consequential loss of $504,000.00 due to loss of production of fruit.
1(i)Subsequent to the date of judgment upon which the respondent relies, the respondent has continued to block my right to use an irrigation pipe situated on the north eastern corner of the plantation area on Lot 36/731384. I claim damages in the sum of $5,063.00.
It became clear that this affidavit was not all the evidence upon which Mr Shephard wished to rely and there was admitted into evidence a series of affidavits which had been filed in previous proceedings. The paragraphs on which Mr Shephard intended to rely were noted on the transcript. The respondent made some objections to the affidavits which were, for the most part, admitted subject to relevance.
It was possible by combining the schedule of cross claims and the affidavits to ascertain the nature of each of the cross claims, whether or not they were the subject of proceedings in another court, (the District Court of New South Wales), the general date upon which the alleged incidents constituting the cross claims occurred and the facts which Mr Shephard asserted was evidence of the existence of those claims.
In his judgment in matter no. [2001] FMC 2 at [47] to [50] Driver FM set out by reference to the decided cases (Ebert v Union Trustee Co (Aust) Limited (1960) 104 CLR 346; reA Debtor; ex-parte Bolan (1909) 9 SR (NSW) 580; re Ling; ex-parte Ling v Commonwealth of Australia (1995) 58 FCR 129; Nath v Klipway Pty Limited [1999] FCA 149; re Franks; ex-parte GIO Holdings Limited (1990) 24 FCR 398; re Brink; ex-parte Commercial Banking Co of Sydney Limited (1980) 44 FLR 135) what was required to establish a set off, cross demand or cross claim for the purposes of s.40(1)(g). I respectfully adopt the Federal Magistrate’s reasoning.
There are approximately eighty-three alleged cross claims. The amounts claimed by way of damages in the schedule sometimes vary from the amounts claimed in the affidavit. Mr Shephard comes to his figure of $5,063.00 found frequently in the schedule and the affidavit by reference to an English case in which he said an award of £2,000 for trespass had been made and in respect of the $360,000.00 he cited the decision of the High Court in Excel Petroleum (NSW) Pty Limited v Caltex Oil (Aust) Pty Limited (1985) 155 CLR 448.
The first eight items in the schedule of cross claims are all dated November 1995. The first three relate to an alleged blocking of a right of carriageway, the next three relate to an alleged blocking of a right to use an irrigation pipe and the next two relate to the blocking of a right to use an irrigation pump. The respondent argues that all these matters relate to the rights which the applicant maintains he has over the land which he purchased at Curindi including the alleged rights to utilise irrigation equipment and water flowing through that equipment. Success or failure in these claims depends upon a finding as to the ownership of the irrigation equipment and the contractual right to take water. Those matters were already disputed by the parties prior to judgment and could have been the subject of a claim transferred from the Local Court to either the Supreme Court or the District Court of New South Wales in which declarations were sought. A similar view could be taken of the allegations concerning the blocking of the right of carriageway. The respondent submits that there is no evidence of any of these claims merely assertions. The respondent submits that there is no evidence of loss in the amounts claimed and finally notes that no claim has been filed in respect of these allegations.
I have perused the affidavits which have been filed and relied on and I do not believe that they establish a prima facie case sufficient to satisfy the standard required by Ebert but even if it did I would be reluctant to come to a view that the claims are likely to be successful when they rely on conduct which commenced seven years ago and in respect of which no proceedings have been commenced. The respondent would surely be able to mount a very strong case of laches, acquiescence or delay on the part of Mr Shephard in so far as the alleged torts are continuing.
Claim 9 relates to the alleged withholding of consent for the erection of fences. It is dated November 1995. There is no evidence that consent was sought. I am not satisfied that this is a claim which has any prospects of success.
Claim 10 relates to allowing timber poles to remain upon the applicant’s land. It seems that the respondents removed an erection of which the poles formed part but did not remove the poles themselves. They are on the applicant’s land, they were put there by the applicant. I cannot see how the respondent can be responsible for their continued existence.
Claim 11 relates to the detention of irrigation fittings and includes a claim for loss of blueberry crops. It is dated November 1995. This is another matter which was part of the general dispute between the parties prior to the date of the judgment. The claim must be treated with considerable scepticism given that no proceedings have been filed in relation to it notwithstanding that a claim of over one half of one million dollars is being made. The evidence is scant, if it exists at all, and I would not conclude that there is a viable cross claim within s.40(1)(g).
Items 12 and 13 relate to activities which occurred in December 1995, are not continuing and which are now statute barred.
Item 14 to 39 relate to a series of alleged incidents of what can best be described as minor trespass. Although the applicant claims $360,000.00 in respect of each (including the allegations of harassment and abusive language) I do not believe that even if the allegations could be proved that they would result in a finding in damages of much more than a few hundred dollars. I note also that there is no indication that proceedings have been commenced in respect of any of these alleged incidents which took place in 1998.
Items 42 and 43 allege blocking a right of way. They are dated in 1998, no claim has been filed in respect of them and no particulars of any evidential value are provided.
Items 43 to 45 relate to the alleged removal of a wallaby proof fence in 1998. The claim is said to be $5,063.00 in respect of each of the parcels of land upon which this fence was alleged to have been erected. There is most certainly a dispute between the parties as to the applicant’s right to erect a fence in the first place and in cross-examination he accepted that he had plucked the figure for damages “out of the air”. Given the knowledge which I have of the proceedings between the parties and the allegations each make against the other it would be difficult to form an opinion that there were reasonable prospects of success in these claims. I would also note that the incidents are alleged to have taken place in “about 1998” and yet no claim has been filed in regard to them.
Item 46 relates to the blocking of an irrigation pipe. Again there is no evidence other than the assertion. The incident is alleged to have taken place “about 1998”. The ownership of the irrigation pipe is in any event disputed and could have been raised by the applicant in the original proceedings. Item 47 relates to driving a tractor across the applicant’s land. There is no evidence that I can see identifying the tractor. I do not think the claimed damages of $360,000.00 are likely to be achieved even if the allegation was proved. I note that no claim has been filed even though the alleged trespass occurred on 16 February 1999.
Item No 48 relates to a slasher being operated on the applicant’s land on 16 March 1999. The remarks I have made above apply equally to this.
Items 49, 50 and 51 relate to blocking a right of way. Once again no claim has been filed, there is no evidence other than the assertion and no indication of how the alleged damages of $5,063.00 in respect of each parcel of land is likely to be achieved.
Items 52 to 55 relate to the wallaby proof fence upon which I have already commented and it seems to be a repeating of the earlier allegations.
There were then a series of allegations numbered 56 to 61 and 63 to 67 also 70 to 74 and 76 which relate to alleged assaults upon the applicant in respect of which a claim was filed in July 2001. These claims are made against the respondent and a series of other persons some of whom are its employees. When the matter was before Driver FM he held that these claims could not constitute a cross claim because there was no mutuality between the parties. His Honour followed the decisions such as re E J Brown (1923) 40 WN 73, re Wedd (1962) WAR 42 and re Camilleri; ex-parte Maguire (unreported) Federal Court, Olney J, 8 May 1996. This issue was dealt with by Gyles J on the appeal where at [34] he said:
“In my opinion, there is much to be said for the submissions for the appellant (which I have not fully reproduced) particularly (but not only) in relation to the several claims in tort. However, as the decisions in question are not plainly wrong, it is appropriate that they be applied until reviewed in a full court. This should be borne in mind on the retrial when making findings on this issue.”
Gyles J was sitting in the appeal as a Full Bench of the Federal Court. I am bound by his views in that capacity. The allegations of assault cannot be maintained as cross claims, cross demands or set offs in these proceedings.
The remaining items are small allegations of trespass for which no evidence is provided and in respect of which, if they were capable of proof, the damages would be very low. I refer to such items as placing a surveyor’s peg on the eastern boundary of the lot, slashing the south western corner of the land. Other similar items relate to alleged acts of vandalism against the applicant’s property. There is no proof that these were caused by the respondent. Item 77 is an allegation relating to the spread of fire on Christmas Day 2001. There is no suggestion in the documentation that the fire was caused by the respondents. It appears to have been part of the Christmas Day fires that damaged a considerable amount of property in that area. The prospects for the applicant succeeding in such a claim are small.
Taking these allegations as a whole it is my view that even if the applicant did succeed in some of his claims of trespass, in respect of none of which have claims been commenced, the applicant would be hard pushed to obtain damages likely to exceed even the small amount that is claimed under the bankruptcy notice.
I would dismiss this application to set aside the bankruptcy notice.

I order that the applicant pay the respondent’s costs of the proceedings pursuant to the Federal Court Rules to be taxed if not agreed.

I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Raphael FM

Associate:

Date: