Toyne v Stokes
[2021] FedCFamC2G 148
•15 October 2021
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
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.
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 amount of the judgments in the Supreme Court proceeding.
LEGISLATION
Subsection 41(1) of the Act provides that:
An Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained against a debtor:
(a)a final judgment or final order that:
(i) is of the kind described in paragraph 40(1)(g); and
(ii) is for an amount of at least the statutory minimum; or
(b)2 or more final judgments or final orders that:
(i) are of the kind described in paragraph 40(1)(g); and
(ii) taken together are for an amount of at least the statutory minimum.
There was no dispute that each of the judgments upon which the bankruptcy notice is based was above the statutory minimum.
Subsection 40(1)(g) of the Act provides that:
A debtor commits an act of bankruptcy in each of the following cases:
…
(g)if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:
(i)where the notice was served in Australia—within the time fixed for compliance with the notice; or
(ii)where the notice was served elsewhere—within the time specified by the order giving leave to effect the service;
comply with the requirements of the notice or satisfy the Court that he or she has a counter‑claim, set‑off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter‑claim, set‑off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained;
…
Subsection 30(1) of the Act provides that:
The Court:
(a)has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part IX, X or XI coming within the cognizance of the Court; and
(b)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.
REQUIREMENTS FOR A COUNTER-CLAIM, SET-OFF OR CROSS DEMAND
In Singh v Fobupu Pty Ltd [2021] FCAFC 14, the Full Court of the Federal Court explained the requirements for a counter-claim, set-off or cross demand, for the purposes of s.40(1)(g) of the Act, as follows:
35.… s 40(1)(g) of the Bankruptcy Act provides that, once served with a bankruptcy notice, the debtor has the onus of satisfying the court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under a final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained.
36There are two components to that obligation. The first component is that the debtor has to establish the existence of what he or she claims can amount to a cause of action or right to found the counter-claim, set‑off or cross demand. That is, the debtor has to satisfy the Court that he or she has a prima facie case of a counter-claim, set-off or cross demand even if the debtor does not adduce admissible evidence to support its existence. But, it is not enough for the debtor to make a mere assertion that such a case exists, as Dixon CJ, McTiernan and Windeyer JJ held in Ebert v The Union Trustee Company of Australia Limited [1960] HCA 50, (1960) 104 CLR 346 at 350. The debtor must show sufficiently that he or she has a claim that has reasonable probability of success to enliven the Court’s power to allow that claim to be litigated in separate proceedings, so that the Court will not require compliance with the bankruptcy notice. That does not involve, necessarily, proving as at a trial that the creditor has the claimed liability. But, it does mean that the Court must be satisfied that the debtor has some form of legal claim of sufficient substance to warrant the Court not requiring the bankruptcy notice to be enforced, until that contestable issue is resolved in another proceeding on a final basis. …
37.The second component of s 40(1)(g) is that the debtor must satisfy the Court that the relevant counter-claim, set‑off or cross demand could not have been set up in the proceeding in which the judgment or order was obtained. …
That is, for the purposes of setting aside the bankruptcy notice on the ground relied on by Ms Toyne:
(a)the onus is on Ms Toyne;
(b)Ms Toyne must satisfy the court that she has a prima facie case of the counter-claim, set-off or cross demand;
(c)the counter-claim, set-off or cross demand must exceed the amount of the judgments in the Supreme Court proceeding;
(d)the counter-claim, set-off or cross demand must have a reasonable probability of success; and
(e)the counter-claim, set-off or cross demand could not have been set up in the Supreme Court proceeding.
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.1
6.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.3
8.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 2018.7
12.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).8
13.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.
Basically, after signing the contract to purchase the land, and before settlement, Ms Toyne granted Mr Stokes access to the land to do various tasks for the purposes of developing the land, including demolishing an asbestos shed. In doing so, Mr Stokes caused asbestos contamination on at least one part of the land. He was then unable to complete the purchase.
While Ms Toyne has said that, when the costs assessment was registered, it was given a new proceeding number, it was undoubtedly a costs judgment in the Supreme Court proceeding, being the proceeding in which the primary judgment was entered.
MATERIAL RELIED UPON
At the hearing on 27 August 2021, Ms Toyne relied on:
(a)the affidavit sworn by Molly Harriss Toyne on 1 April 2021;
(b)the affidavit sworn by Molly Harriss Toyne on 19 August 2021;
(c)the affidavit sworn by James Edward Penman on 1 July 2021;
(d)the affidavit sworn by Phillip Langworthy on 19 August 2021; and
(e)the applicant’s written submissions filed on 25 August 2021.
Ms Toyne and Mr Langworthy were cross-examined, but Mr Penman was not required for cross-examination.
At the hearing on 27 August 2021, Mr Stokes relied on:
(a)the affidavit sworn by Lorraine Susan White on 30 April 2021;
(b)the affidavit sworn by Lorraine Susan White on 1 July 2021;
(c)the affidavit sworn by Lorraine Susan White on 23 August 2021;
(d)the affidavit of service sworn by Elsie Kingston on 28 October 2019;
(e)the affidavit of service sworn by Dennis John Domaille on 25 August 2021;
(f)the affidavit of service sworn by Dennis John Domaille on 19 September 2020;
(g)Mr Stokes’ written submissions filed on 12 July 2021; and
(h)his written submissions filed on 26 August 2021.
None of Mr Stokes’ witnesses was required for cross-examination.
THE CLAIM IN THE SUPREME COURT
The action or proceeding in which the judgments relied on in the bankruptcy notice were obtained was Supreme Court of New South Wales proceeding number 2017/205679.
The primary judgment was an order that Ms Toyne refund to Mr Stokes $110,000, which he had paid to her as the deposit for a land purchase that Mr Stokes was unable to complete. The costs judgment was in the same proceeding, and required Ms Toyne to pay Mr Stokes costs of $123,046.34.
The primary judgment was entered after a two day trial in which Ms Toyne and Mr Stokes were legally represented.
The action was under s.55(2A) of the Conveyancing Act 1919 (NSW). It concerned a contract for the sale of land which was terminated by the prospective vendor, Ms Toyne, for non-completion by the prospective purchaser, Ms Stokes. In determining whether, in its discretion, the court should order the refund of the deposit, the Supreme Court considered, among other things, work done by Mr Stokes on the land between the exchange of contracts and the termination of the contract. The Supreme Court considered that the work done by Mr Stokes on Ms Toyne’s land was of substantial value to her, even though he had also caused some asbestos contamination.
The substantive judgment was dated 18 March 2019. The costs judgment was dated 25 January 2021.
THE COUNTERCLAIM AS FILED IN THE DISTRICT COURT
The bankruptcy notice was issued on 3 March 2021. Following that, Ms Toyne filed a claim in the District Court of New South Wales on 5 July 2021 (“the District Court proceeding”). The District Court proceeding is yet to be determined, and is, in fact, in its very preliminary stages.
In the District Court proceeding, Ms Toyne pleaded that:
3.In or about June 2016, the parties entered into an agreement to subdivide, develop and sell part of the Plaintiff’s Land (Agreement).
4.The Agreement contained the following terms:
a.the defendant would pay the plaintiff the purchase price of $1.1 million and plaintiff a deposit of $110,000.00; and
b.the Agreement was subject to the defendant obtaining financial approval by a date agreed to between the parties.
5.In or about July 2016, at the defendant’s request and in furtherance of the Agreement, the plaintiff permitted the defendant limited access to part of the Plaintiff’s Land for the purpose of making it ready for subdivision.
6.In or about July 2016, the defendant caused damage to the Plaintiff’s Land.
PARTICULARS
The defendant improperly demolished sheds on the Plaintiff’s Land which contained asbestos, causing the Plaintiff’s Land to be affected by asbestos.
The defendant improperly demolished fences on the Plaintiff’s Land.
7.By reason of paragraph 6 above, the plaintiff has suffered loss and damages.
PARTICULARS
The cost for the plaintiff to remedy and remove the asbestos from the Plaintiff’s Land is $235,080.00. A copy of Aztech Services Australia’s Project Tender dated 30 April 2021 is in the possession of the plaintiff’s solicitor and may be inspected upon request.
The cost for the plaintiff to reinstate the fences on the Plaintiff’s Land is approximately $2,500.00.
The plaintiff has suffered loss of income of $8,400.00 due to being unable to lease the Plaintiff’s Land for agistment purposes, due to the defendant demolishing the fences.
Further particulars to be provided prior to trial, including the devaluation of the Land.
The cover sheet to the statement of claim in the District Court proceeding describes the claim as:
Torts – Trespass – Trespass to land
Breach of Contract
In the District Court proceeding, Ms Toyne relies on the same contract for the sale of land that was considered by the Supreme Court in the reasons for judgment dated 18 March 2019.
In her affidavit sworn on 1 April 2021, Ms Toyne did not say why she could not have brought her counterclaim in the Supreme Court proceeding, although she did allude to some personal matters. While they may cause anyone to feel sympathy for her, they are not sufficient for present purposes, as explained in Palaniappan.
Following the filing of that affidavit, Mr Stokes filed his written submissions dated 12 July 2021. In those written submissions, Mr Stokes noted that:
(a)in the Supreme Court proceeding, Ms Toyne put in issue, and the Supreme Court made findings about, the asbestos issue, and, to a lesser extent, the fencing issue;
(b)Ms Toyne was represented by experienced solicitors and counsel during the Supreme Court proceeding;
(c)Ms Toyne put a substantial amount of evidence before the Supreme Court about the asbestos claim, the fencing claim and a claim regarding mortgage payments (that is, her holding costs); and
(d)Ms Toyne, through her counsel, advised the Supreme Court on the second day of the two day hearing that she would not be reading and tendering the majority of that evidence.
Ms Toyne filed her second affidavit on 19 August 2021. In that affidavit, Ms Toyne gave further evidence about the personal matters which led her to not set up her present claims in the Supreme Court proceeding. Again, for the reasons set out in Palaniappan, those reasons are not sufficient for present purposes.
Also in her affidavit filed on 20 August 2021, at paragraph 17, Ms Toyne conceded that she had raised in the Supreme Court proceeding aspects of the claims that she now sought to raise in her District Court proceeding.
Ms Toyne also exhibited to her affidavit a proposed amended statement of claim in her District Court proceeding. The proposed amended statement of claim had not been filed in the District Court at the time of the hearing before this court. There was no argument before me about whether Ms Toyne would need leave to amend her statement of claim, or, if so, whether she was likely to be given such leave. For the reasons discussed below, it seems to me to be very unlikely that Ms Toyne would be granted leave to file the proposed amended statement of claim, due to its poor prospects of success. In any event, the proposed amended statement of claim raised a claim of nuisance.
In her written submissions filed on 25 August 2021, Ms Toyne said that her proposed amended statement of claim was primarily based on nuisance, but retained a claim for breach of contract. Ms Toyne’s case before this court was based on the proposed amended statement of claim, not the statement of claim she had filed in the District Court on 5 July 2021.
It is abundantly clear that Ms Toyne could have set up in the Supreme Court proceeding her claims in trespass and contract as set out in her statement of claim filed in the District Court on 5 July 2021. Indeed, Ms Toyne scarcely sought to argue otherwise. In effect, Ms Toyne did set up those claims in the Supreme Court proceeding, but then chose to withdraw them on the second day of the hearing. I turn now to the nuisance claim.
THE PROPOSED AMENDED STATEMENT OF CLAIM
As mentioned above, Ms Toyne’s claim in her proposed amended statement of claim is largely based in nuisance. To the extent that it retains some aspects of the trespass and contract claims as set out in the statement of claim filed on 5 July 2021, Ms Toyne could have set up those claims in the Supreme Court proceeding.
Mr Stokes argued that Ms Toyne has indicated that she wishes to amend her claim to be primarily a nuisance claim because she wished to argue that the wrong complained of was ongoing, and, therefore, she could not have brought the claim in the Supreme Court proceeding. However, the fact is that the claim as expressed by Ms Toyne is still ongoing. If that had been a reason for not bringing the claim in the Supreme Court proceeding, it would be a reason for not bringing the claim now.
In any event, the basic requirements of the tort of nuisance was explained by the High Court in Elston v Dore (1982) 149 CLR 480; (1982) 43 ALR 577; (1982) 57 ALJR 83; [1982] HCA 71, where Gibbs CJ, Wilson and Brennan JJ said at p.487 to p.488:
… In Sedleigh-Denfield v. O’Callaghan, Lord Atkin said (19):
“For the purpose of ascertaining whether as here the plaintiff can establish a private nuisance I think that nuisance is sufficiently defined as a wrongful interference with another’s enjoyment of his land or premises by the use of land or premises either occupied or in some cases owned by oneself. The occupier or owner is not an insurer; there must be something more than the mere harm done to the neighbour's property to make the party responsible. Deliberate act or negligence is not an essential ingredient but some degree of personal responsibility is required, which is connoted in my definition by the word ‘use’.”
Lord Atkin’s judgment suggests that an interference with the enjoyment of lands can be described as “wrongful” if it was deliberate or negligent. In the same case, Lord Wright said (20):
“A balance has to be maintained between the right of the occupier to do what he likes with his own, and the right of his neighbour not to be interfered with. It is impossible to give any precise or universal formula, but it may broadly be said that a useful test is perhaps what is reasonable according to the ordinary usages of mankind living in society, or more correctly in a particular society.”
In our respectful opinion, that is the proper test to apply in most cases. Although, as was pointed out in Overseas Tankship (U.K.) Ltd. v. Miller Steamship Co. Pty. (“The Wagon Mound” (No. 2))[1966] UKPC 1; (1967) 1 AC 617, at p 639 , the wide and uncertain boundaries of the law of nuisance include cases in which negligence in the narrow sense is not essential, fault of some kind is almost always necessary. In the present case the action of the respondent was deliberate, but in our opinion it will only have been wrongful if it was not reasonable in the sense to which Lord Wright refers.
: [1940] A.C., at pp. 896-897.
: [1940] A.C., at p. 903.
In other words, to establish nuisance, it is necessary to show that the plaintiff’s land was interfered with by the defendant’s use of the defendant’s land. In the present case, the alleged interference with Ms Toyne’s land did not arise from Mr Stokes’ use of his land. It arose from Mr Stokes’ actions on Ms Toyne’s land.
It follows that Ms Toyne has not established a prima facie case of nuisance, and, to the extent that her proposed amended statement of claim raises that issue, it does not have a reasonable probability of success. That is, the nuisance claim does not amount to a counter-claim, set-off or cross demand for the purposes of s.40(1)(g) of the Act.
A POSSIBLE CLAIM IN NEGLIGENCE
Ms Toyne changed her position somewhat during the hearing before this court, and said her claim was actually in negligence. One difficulty with giving credence to that claim is that it was not made in either the existing statement of claim in the District Court proceeding, or in the proposed amended statement of claim in the District Court proceeding. Given that Ms Toyne has been legally represented throughout the bankruptcy proceeding, one would have expected a rather more clear and early statement of her position.
Another difficulty with the negligence claim is that Mr Langworthy, who was assisting Ms Toyne in the sale of the land to Mr Stokes, said in a letter dated 19 June 2019 that Ms Toyne had no objection to Mr Stokes demolishing the sheds on the land. Mr Stokes demolished the sheds on 11 July 2016. At paragraph 79 of the Supreme Court’s reasons for judgment, the Supreme Court found that this was done to keep the development approval on foot.
In the same paragraph, the Supreme Court found that Ms Toyne’s criticism of Mr Stokes for removing the sheds was not fair, in the light of Mr Langworthy’s letter dated 19 June 2019. The Supreme Court also noted in that paragraph that Mr Langworthy was present at the demolition, because he wanted the timber and corrugated sheets, which Mr Stokes assisted him in obtaining.
These circumstances lead me to wonder whether there may have been some contributory negligence on Ms Toyne’s part, in not warning Mr Stokes of the presence of the asbestos, and in not requiring him to deal with it in an appropriate way, as a condition of permitting him to remove the shed.
That is by the by. The important point is that the negligence claim obviously could have been set up in the Supreme Court proceedings.
There was much evidence in the proceeding before me about the quantification of the loss, particularly in terms of remediation costs due to asbestos contamination. Ms Toyne previously had a quote for the remediation, but recently obtained a new, and much higher, quote for the remediation. However, that does not mean that the negligence claim could not have been set up in the Supreme Court. It simply means that Ms Toyne would have needed to rely on the earlier quote that she had, or ask the Supreme Court for more time to obtain additional evidence.
CRYSTALLISATION OF LOSSES
Ultimately, in her oral submissions to this court, Ms Toyne did not formally concede that she could have set up a claim for breach of contract or tortious interference in the Supreme Court proceeding, but she did concede that there was a strong argument that she could have set up those claims in the Supreme Court proceeding.
On the other hand, Ms Toyne submitted that what she could not have set up in the Supreme Court proceeding was the loss that she has continued to suffer, being the approximately $118,000 in holding costs, or the increase in the costs of the remediation, which have only recently crystallised.
As discussed above, the issue about the remediation costs is just a point of evidence. It does not mean that Ms Toyne could not have brought the claim in the Supreme Court proceedings. She could have got a more accurate quote earlier than she has. There is nothing to suggest that there has been any material change in the land since Mr Stokes demolished the shed on 11 July 2016.
The issue about the holding costs is that Ms Toyne maintains that Mr Stokes is liable for mortgage interest costs of $118,000 because she has not been able to sell the land, due to its contamination. She says that she intended to sell the land to discharge or reduce certain mortgages.
However, contrary to Ms Toyne’s submissions, her losses in that regard have still not crystallised, because she has still not sold the land, and she is continuing to pay mortgage interest. In that sense, she is in no different position now to the position that she was in during the Supreme Court proceeding, except that she has paid a lot more interest. That goes to the question of whether her claim exceeds the judgment debts, but it does not go to the fundamental question of whether she could, as a matter of law, have brought her claim in the Supreme Court proceeding. Obviously, she could have, just as she can now bring her claim in the District Court proceeding.
To actually crystallise her losses, and avoid any further holding costs, Ms Toyne would have to sell the land for whatever price is reasonably obtainable. She could do that now, for the purposes of the District Court proceeding, or she could have done it some years ago for the purposes of the Supreme Court proceeding. Whether Ms Toyne wishes to sell the land is obviously a matter for her.
SUBSECTION 41(1)
When I have indicated above that a claim by Ms Toyne could have been set up in the Supreme Court proceeding, I meant that it could have been set up in the principal proceeding. Obviously, claims of trespass, breach of contract, negligence, or nuisance cannot be set up in a costs proceeding following the determination of a substantive proceeding.
It will be recalled that s.40(1)(g) of the Act provides that:
(1) A debtor commits an act of bankruptcy in each of the following cases:
…
(g)if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:
(i)where the notice was served in Australia—within the time fixed for compliance with the notice; or
(ii)where the notice was served elsewhere—within the time specified by the order giving leave to effect the service;
comply with the requirements of the notice or satisfy the Court that he or she has a counter‑claim, set‑off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter‑claim, set‑off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained;
…
It will also be recalled that s.41(1) of the Act provides that:
An Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained against a debtor:
(a)a final judgment or final order that:
(i) is of the kind described in paragraph 40(1)(g); and
(ii) is for an amount of at least the statutory minimum; or
(b)2 or more final judgments or final orders that:
(i) are of the kind described in paragraph 40(1)(g); and
(ii) taken together are for an amount of at least the statutory minimum.
In that context, Ms Toyne said in her written submissions filed on 25 August 2021:
49.Further, the correct interpretation of the words ‘judgment debt’ in section 40(1)(g) of the Bankruptcy Act, is that they refer to a ‘judgment debt’ singular, and not ‘judgment debts’ plural.46 That finding is supported by, and is consistent with an analysis of the text of the surrounding sections of the Bankruptcy Act, in particular, section 41(1), which expressly delineates between a singular ‘final judgment or final order’ (s41(1)(a)), and the plural ‘2 or more final judgments or final orders’ (s41(1)(b)). That is, to read ‘judgment debt’ in section 40(1)(g) as meaning judgment debts plural, would be inconsistent with the singular use of ‘judgment debt’ in section 41(1)(a).
…
51.The result which, it is submitted, must follow the construction referred to above - that ‘judgment debt’ in section 40(1)(g) means ‘judgment debt’ singular - is that if an alleged debtor has a counter-claim, set-off or cross-demand in respect of a judgment of the singular kind referred to in section 40(1)(g), then the bankruptcy notice which has issued in respect of that judgment should be set aside.
52.That is so, irrespective of whether, as is the case here, the relevant bankruptcy notice has issued for more than one judgment.
:GPW Aussie Exports -v- Latin (1998) 85 FCR 324.
In support of those propositions, Ms Toyne relied on GPW Aussie Exports v Latin (1998) 85 FCR 325, where Goldberg J said at p.326 that:
The line of authority to which I have referred is too well established to enable me as a single judge to reconsider the matter. In any event, it would only be appropriate for me to do so if I was of the opinion that the decisions in those cases were clearly wrong. I am not of that opinion. Although it does not appear that s23(b) of the Acts Interpretation Act was considered in any of the Australian authorities to which I have referred I consider that the reasoning in those cases is inconsistent with the proposition that s40(1)(g) does not exhibit a contrary intention to the expressions “final judgment” and “final order” being read in the plural. In my opinion the structure of s40(1)(g) and in particular the reference to satisfying the court of a counterclaim, set-off or cross demand that could not have been set up in the action in which the judgment or order was obtained does exhibit a contrary intention.
However, as pointed out by Mr Stokes, s.41(1) of the Act was amended in 2002, after the decision in GPW. The explanatory memorandum said that the purpose of the amendments was to, among other things:
…allow the amounts of final judgments or final orders obtained by a creditor to be amalgamated for the purpose of meeting the $2,000 threshold for the issue of a bankruptcy notice…
It is clear that GPW has been overtaken by legislative amendment. Subsection 41(1) of the Act clearly allows two or more judgments to be relied upon for the purpose of a bankruptcy notice. Moreover, s.23 of the Acts Interpretation Act 1901 provides that, unless the contrary intention appears, the singular includes the plural in Acts of Parliament.
It is clear, reading the Act as a whole, that the intention was for the words “judgment debt” in s.40(1)(g) of the Act to include the plural. The fact that s.41(1) of the Act refers to both “judgment” and “judgments” does not detract from that conclusion.
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.
I certify that the preceding fifty-nine (59) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Riley. Associate:
Dated: 15 October 2021
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