Toyne v Stokes

Case [2021] FedCFamC2G 148

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)

Toyne v Stokes [2021] FedCFamC2G 148

File number(s): MLG 597 of 2021
Judgment of: JUDGE RILEY
Date of judgment: 15 October 2021
Catchwords: BANKRUPTCY– application to set aside a set aside a bankruptcy notice – whether the debtor has a cross-claim, set-off or cross demand, exceeding the amount of the judgments relied upon in the bankruptcy notice, that she could not have set up in the proceedings in which the judgments relied upon in the bankruptcy notice were obtained – whether “judgment debt” in s.40(1)(g) of the Bankruptcy Act 1966 includes the plural.
Legislation:

Acts Interpretation Act 1901 s 23

Bankruptcy Act 1966 ss 30(1), 40(1)(g) and 41(1)

Conveyancing Act 1919 (NSW) s 55(2A)

Cases cited:

Elston v Dore (1982) 149 CLR 480; (1982) 43 ALR 577; (1982) 57 ALJR 83; [1982] HCA 71

GPW Aussie Exports v Latin (1998) 85 FCR 325

Palaniappan v Westpac Banking Corporation [2017] FCAFC 121

Singh v Fobupu Pty Ltd [2021] FCAFC 14
Number of paragraphs: 59
Division Division 2 General Federal Law
Date of hearing: 27 August 2021 
Place: Melbourne
Counsel for the applicant: Ben Fry
Solicitor for the applicant: Logie-Smith Lanyon Lawyers
Counsel for the respondent: Nigel Oram
Solicitor for the respondent: Baker Deane & Nutt Lawyers

ORDERS

MLG597 of 2021

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)

BETWEEN:

MOLLY HARRISS TOYNE
AND:

NICHOLAS ARTHUR STOKES

ORDER MADE BY:

JUDGE RILEY

DATE OF ORDER:

15 OCTOBER 2021

THE COURT ORDERS THAT:

1.The application filed on 1 April 2021 be dismissed.

2.The applicant pay the respondent’s costs of the application to be taxed if not agreed.

Note:   The form of the order is subject to the entry in the court’s records.

Note:This copy of the court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).

REASONS FOR JUDGMENT

JUDGE RILEY:

INTRODUCTION

  1. This is an application for orders that bankruptcy notice BN 251979, which was issued on 3 March 2021, be set aside. The applicant is the debtor, Ms Toyne. The respondent is the creditor, Mr Stokes. The bankruptcy notice is based on two judgments of the Supreme Court of New South Wales in the same proceeding (“the Supreme Court proceeding”), being:

    (a)the primary judgment, which required Ms Toyne to pay Mr Stokes $110,000 with costs; and

    (b)the costs judgment, which fixed costs in the sum of $123,046.34.

  2. The present application was brought by Ms Toyne under s.40(1)(g) of the Bankruptcy Act 1966 (“the Act”). The ground of the application is that Ms Toyne has, against Mr Stokes, a counter-claim, set-off or cross demand, which she could not have brought in the Supreme Court proceeding, and which exceeds the…

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Toyne v Stokes [2021] FedCFamC2G 148
Case
[2021] FedCFamC2G 148
Decision Date

CaseChat Overview and Summary

In Toyne v Stokes, the applicant, Ms Toyne, sought to set aside a bankruptcy notice issued by the respondent, Mr Stokes, claiming that she had a counterclaim, set-off, or cross demand that exceeded the amount of the judgments relied upon in the notice and which she could not have set up in the original proceedings. The court was required to determine whether the statutory definition of "judgment debt" in section 40(1)(g) of the Bankruptcy Act 1966 includes the plural, and whether the applicant's claims in the second proceeding constituted a cross-claim, set-off, or cross demand that could not have been set up in the original proceedings.

The court found that the statutory definition of "judgment debt" did not include the plural, and that the applicant's claims in the second proceeding did not constitute a cross-claim, set-off, or cross demand that could not have been set up in the original proceedings. The court held that the applicant's claims in the second proceeding were not legally incapable of being set up in the original proceedings, and that the applicant's failure to do so was not due to any legal inhibition. The court also noted that the applicant had not demonstrated any proper reason to set aside the bankruptcy notice.

The court dismissed the application to set aside the bankruptcy notice, with costs to be taxed if not agreed. The court held that the applicant had not satisfied the onus of proving that she had a cross-claim, set-off, or cross demand that exceeded the amount of the judgments relied upon in the notice and which she could not have set up in the original proceedings. The court found that the applicant's claims in the second proceeding were not legally incapable of being set up in the original proceedings, and that the applicant's failure to do so was not due to any legal inhibition. The court held that the mere fact that the applicant was unable to bring a cross-action for practical reasons did not entitle her to argue that she had a cross-action that could not have been brought in the original proceedings.

Orders

Orders of the court

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Background

Background to the litigation

In regard to the requirement that “the counter-claim, set-off or cross demand could not have been set up in the proceeding in which the judgment or order was obtained”, Gilmour J, with whom McKerracher J agreed, said in Palaniappan v Westpac Banking Corporation [2017] FCAFC 121: 32.The principles applicable to the proper construction of s 40(1)(g) of the Act, which the parties accept, correctly, are relatively well settled. They are relevantly:(1)The question of whether or not a counterclaim or cross-demand ‘could not have been set up’ is a question to be determined with reference to legal inability, not practical or personal considerations; Re Brink at 434, 437.(2)‘...[A] counterclaim-claim, set-off or cross demand which could not be set up [is] one which, from point of time, or from its nature, or from absence of empowering provisions, or from positive inhibition so to do, could not be set up in the particular case in which judgment was obtained. ... Mere failure to take advantage of the opportunity can hardly be said to be inability’: Re Stokvis at 57.(3)The debtor bears the onus of satisfying the Court that he/she was legally incapable of setting up his/her counterclaim in the proceedings in which the judgment was obtained: Re Ling; Ex parte Ling v Commonwealth [1995] FCA 1410; (1995) 58 FCR 129 at 130 and 137.33.Therefore, for present purposes, as Hill J noted in Re James; Ex parte Carter Holt Harvey Roofing (Aust) Pty Ltd (1993) 46 FCR 183 at 189:As the law presently stands it would seem that the mere fact that for practical reasons a debtor is unable to bring a cross-action etc will not entitle the debtor to argue that he or she had a cross-action etc which could not have been brought in the original proceedings.BACKGROUND Ms Toyne’s written submissions filed on 25 August 2021 provided the following background to this matter:5.In June of 2016, Mr Stokes entered into two contracts of sale with Ms Toyne (the Contracts) for the purchase of land and property in Gundaroo, NSW (the Land). The purchase price was $1,100,000. A 10% deposit of $110,000 was paid by Mr Stokes to Ms Toyne at the time the Contracts were exchanged.16.The Contracts contained a special condition permitting Mr Stokes access to the Land from the date of exchange to undertake various development works.2 Following exchange of contracts, Mr Stokes duly accessed the Land, and performed works associated with its development.7.During the period around June of 2016 to December of 2016, Mr Stokes was unable to raise the finance necessary to complete the conveyance, and on 8 December 2016, Ms Toyne terminated the Contracts, forfeiting Mr Stokes’ deposit.38.On 6 July 2017, Mr Stokes commenced proceeding No 2017/205679 against Ms Toyne in the Supreme Court of New South Wales. The relief Mr Stokes sought in that proceeding was an order pursuant to section 55(2A) of the Conveyancing Act 1919 (NSW) that Ms Toyne return Mr Stokes’ deposit to him.9.The First Proceeding was heard over two days on 15 and 16 October 2018.4 10.On 18 March 2019, Justice Rees, published reasons, and ordered Ms Toyne to pay Mr Stokes the sum of $110,000 plus costs (the Primary Judgment).5 The underlying facts, matters and circumstances of the litigation, are set out in detail in her Honour’s reasons.6 11.On 15 April 2019, Justice Rees made further orders that Ms Toyne pay Mr Stokes’ costs of the proceeding, on the ordinary basis up to and including 11 January 2018, and on the indemnity basis from 12 January 2018.712.On 25 January 2021, and following an assessment of the costs order referred to in the previous paragraph, the relevant certificates of assessment were formally registered - in proceeding No 2021/00019936 - as a judgment of the Supreme Court of New South Wales. Pursuant to the judgment, Ms Toyne was ordered to pay Mr Stokes’ costs in the amount of $123,046.34 (the Costs Judgment).813.On 3 March 2021, Mr Stokes issued the Bankruptcy Notice.9 The Bankruptcy Notice was served on Ms Toyne on 11 March 2021,10 and on 1 April 2021 she filed the present application.14.Finally, on 5 July 2021, Ms Toyne commenced a proceeding against Mr Stokes in the District Court of New South Wales (the Second Proceeding). Ms Toyne relies on her claims made in the second proceeding [to] constitute the relevant counterclaim, set-off or cross demand.FN 1:Second Toyne Affidavit, paragraphs [6]-[10].:Second Toyne Affidavit, contract of sale, p 8, special condition 8.:Second Toyne Affidavit, paragraph [14].:Second Toyne Affidavit, paragraph [16].:First Toyne Affidavit, ex MT-01, p 12.:First White Affidavit, ex MT-01, p 14-53.:First Toyne Affidavit, ex MT-01, p 14.:First Toyne Affidavit, ex Mt-01, p 16.:First Toyne Affidavit, Bankruptcy Notice, p 9.:First Toyne Affidavit, paragraph [3].:Orders of Riley J, dated 10 August 2021.:Section 41(1)(b) of the Bankruptcy Act.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

This point is without merit.CONCLUSION I am not persuaded that there is any proper reason to set aside the bankruptcy notice. The application will be dismissed with costs to be taxed if not agreed.

Ratio Decidendi

Legal Principle Established

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