Tyndall v Westpac Banking Corp

[1999] FCA 210

FEDERAL COURT OF AUSTRALIA

Tyndall v Westpac Banking Corp [1999] FCA 210

JONATHAN DE VERE TYNDALL v WESTPAC BANKING CORPORATION

NG 8342 OF 1998

HELY J
12 MARCH 1999
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 8342 OF 1998

BETWEEN:	JONATHAN DE VERE TYNDALL Applicant
AND:	WESTPAC BANKING CORPORATION Respondent
JUDGE:	HELY J
DATE OF ORDER:	12 MARCH 1999
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.The application is dismissed with costs.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 8342 OF 1998

BETWEEN:	JONATHAN DE VERE TYNDALL Applicant
AND:	WESTPAC BANKING CORPORATION Respondent

JUDGE:	HELY J
DATE:	12 MARCH 1999
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. This is an application to set aside a bankruptcy notice.  The notice was served on the applicant by the respondent, Westpac Banking Corporation, on 8 November 1998.  In the event that he is unsuccessful in having the bankruptcy notice at issue set aside, the applicant seeks an extension of time for compliance with the bankruptcy notice.  The applicant made no submissions concerning this alternative order at the hearing.  However, he sought such an order in his application and the parties have now provided the Court with written submissions on this issue.

   The facts

2. On 27 March 1996 judgment was ordered against the applicant in favour of the respondent in the sum of $17,515.70 in Local Court proceedings.  Relying upon that judgment, a bankruptcy notice (“the First Bankruptcy Notice”) was issued against the applicant on 11 November 1997.  The applicant was served with that notice on 17 December 1997.  On 19 February 1998 a registrar of this Court set aside the First Bankruptcy Notice and awarded the applicant costs.  Those costs were assessed at $2,881.20 on 18 December 1998 and a certificate of taxation for that amount was issued on 24 February 1999.

3. Apparently the Local Court judgment, on which the first bankruptcy notice was based, was set aside.  The proceedings in the Local Court continued.  There were negotiations for settlement.  In a letter dated 26 February 1998 Westpac’s solicitor offered to accept $10,000 in settlement of the claim on the basis that “this offer will also take into account the costs that were ordered to be paid, by our client on the application to set aside the bankruptcy notice on 19 February 1998”.

4. After considerable negotiations, on 20 July 1998, the parties executed Terms of Settlement.  They read as follows:

   “By consent:

   Judgment $7,500.00 inclusive of interest and costs.

   The judgment in paragraph 1 stayed pending payments as follows:

   (a)      $2,000.00 in 7 days;

   (b)      $5,500 in 30 days”.

   The respondent in these proceedings signed as the plaintiff and the applicant as the defendant.  The Terms of Settlement were filed in the Local Court on 24 July 1998.

5. The applicant defaulted in respect of the obligations he undertook in the Terms of Settlement.  Consequently, on 31 July 1998 the respondent entered judgment against the applicant in the Local Court in the sum of $7,500.  The applicant sought to have this judgment set aside or stayed but failed.

6. On 2 October 1998 another bankruptcy notice (“the Second Bankruptcy Notice”) was issued against the applicant in favour of the respondent.  That notice states that the applicant owes the respondent a debt of $7,606.15 (being the judgment debt of $7,500 plus interest).  It was served on the applicant on 8 November 1998.  On 25 November 1998 the applicant notified the respondent, by way of facsimile, that he disputed the validity of the Second Bankruptcy Notice on the ground that it overstated the amount owed by the applicant to the respondent.  The Second Bankruptcy Notice required payment of the stated amount on or before 29 November 1998.  However, on 27 November 1998 the date for compliance was extended to 11 December 1998.  Time for compliance with the notice was subsequently extended to 2 March 1999.

   The application in these proceedings

7. The applicant objects to the Second Bankruptcy Notice on two grounds.  First, the applicant relies upon s 41(5) of the Act.  Section 41(5) states:

   “A bankruptcy notice is not invalidated by reason only that the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due, unless the debtor, within the time allowed for payment, gives notice to the creditor that he or she disputes the validity of the notice on the ground of the mis-statement.”

   The applicant contends that the sum specified in the Second Bankruptcy Notice, namely $7,606.15, exceeds the amount in fact due to the respondent because it fails to take into account the costs order in favour of the applicant against the respondent referred to at paragraph 2 above.  That costs order was made before the Second Bankruptcy Notice was issued and served.  However, the costs were not assessed until after the Second Bankruptcy Notice was issued and served.  The applicant submits that the costs were capable of estimation and the debt nominated in the Second Bankruptcy Notice should have been reduced by an amount representing the estimated costs.  It follows, according to the applicant, that the Second Bankruptcy Notice is invalid.

8. Second, the applicant contends that the entry of the judgment referred to at paragraph 5 above was irregular.  The applicant submitted that on the proper construction of the Terms of Settlement, judgment should not have been entered on 31 July 1998.  The applicant claimed that the effect of this purported irregularity was that the Second Bankruptcy Notice is invalid.

   The applicant’s first submission

9. The respondent submitted that it was implicit in the settlement of the Local Court proceedings , that, in fixing the agreed sum, credit was given for the costs ordered to be paid by the Registrar on 19 February 1998.  So much was made clear in the letter of 26 February 1998.  Although the proceedings were ultimately settled on different terms, it was submitted that the negotiations proceeded upon the basis that figures nominated by either party from time to time incorporated an allowance for the costs in question.

10. I am not satisfied on the materials before me that the respondent has made out a case to this effect.  There was no mention of the costs issue after the letter of 26 February 1998.  If the settlement was on the basis that the costs order made by the Registrar was to be vacated, then one would have expected the Terms of Settlement to contain express provision to that effect.  They do not.  Whilst order 1 in the terms of settlement states that the judgment is inclusive of interest and “costs”, that is at least equally consistent with the “costs” being those of the Local Court proceedings.

11. That leaves for consideration the applicant’s submission that the amount of the bankruptcy notice was overstated, by reason of the failure on the part of the creditor to estimate the amount of those costs, and to reduce the debt nominated in the Second Bankruptcy Notice by that amount.

12. The applicant did not point to any provision of the Act or other principle of law which indicated that a creditor is required to proceed in this way.  There is, however, authority to the contrary.  In Re Sgambellone; Ex parte Jacques (1994) 53 FCR 275 at 281, Drummond J said:

    “It is not necessary if there is to be a valid notice, for the judgment creditor to identify the existence of a set-off available to the debtor that partly answers his claim, to assess its validity and quantum, and then bring that into account in determining the amount to be claimed in the notice.  It would, as a practical matter, be inappropriate to make the validity of a bankruptcy notice depend upon the judgment creditor doing all that when, moreover, he may be unaware that the judgment debtor has such a set-off.  There is nothing in the wording of the relevant provision of the Bankruptcy Act to require a different conclusion to be reached.

    I accept the submissions for the Jacques that, assuming there is a set-off available to the judgment debtor of a lesser amount than the judgment debt, a notice demanding payment of the full debt without any allowance for the set-off is valid.”

    The first submission is accordingly rejected.

    The applicant’s second submission

13. It was submitted that the act of filing the terms of settlement in the Local Court on 24 July 1998, resulting in the entry of judgment on 31 July 1998 was contrary to the arrangement implicit in the terms; with the result that the judgment was irregular, and the bankruptcy notice issued on the basis of it should be set aside.

14. I reject this submission.  The terms provided for the entry of immediate judgment, the operation of which was to be stayed if the stipulated payments were made.  The payments were not made.  Even if the view be taken that judgment was not to be entered until after the expiry of the date fixed for payment of the first instalment, and then only if that instalment was not paid, the fact is that the time for payment of the first instalment had expired, before judgment was entered.

    Extension of time

15. In his application the applicant sought an extension of time for compliance with the Second Bankruptcy Notice under s 41(6C) of the Act.  However, as mentioned previously, no submissions were made in support of that application at the hearing.  Subsequent to the hearing the applicant sought the same extension by way of a facsimile to Chambers.  This putative application was made pursuant to s 41(6A)(b) of the Act.  The respondent opposes the granting of any extension and has made written submissions to that effect.

16. Subsection 41(6C) of the Act has no relevance to the applicant’s plight.  Its application is confined to circumstances in which proceedings to set aside the judgment or order, in respect of which the bankruptcy notice was issued, have been instituted but not determined.  That is not the situation here.  The applicant did apply to have the consent judgment set aside but that application was rejected on 22 December 1998.

17. Insofar as s 41(6A) is concerned, relevantly, the authorities establish:

    ·    In circumstances where an application to set aside a bankruptcy notice has been made, the Court has power to extend the time for compliance with that bankruptcy notice notwithstanding that the time for compliance has expired and an act of bankruptcy has been committed: Streimer v Tamas (1981) 54 FLR 253 at 258.

    ·    Whilst the discretion conferred on the Court by s 41(6A) is broad, orders for the extension of time will not be made as a matter of course.  Grounds must be shown:  Re Sterling; Ex parte Esanda Ltd (1980) 44 FLR 125 at 131.

    ·    The power to extend time for compliance with a bankruptcy notice is in aid of the power to set aside the notice.  Therefore, matters relevant to whether the bankruptcy notice should be set aside are also relevant when determining an application to extend time for compliance: Re Sterling at 130-132.

18. Time for compliance with the Second Bankruptcy Notice, as a result of previous extensions, was 2 March 1999.  That time has expired.  The applicant has failed to comply with the notice, therefore an act of bankruptcy has now been committed: s 40(1)(g).  In spite of this, Streimer v Tamas  dictates that it remains open to the Court to grant an extension of time; the effect of which would be that no act of bankruptcy has occurred and the applicant has additional time within which to comply with the Second Bankruptcy Notice.

19. However, the applicant has provided no grounds as to why such an extension should be granted.  Indeed, he has merely indicated that he seeks an extension.  He has unsuccessfully challenged the judgment upon which the Second Bankruptcy Notice is based; a judgment to which, it should be remembered, he in fact consented.  The grounds on which he sought to set aside the notice were insubstantial.  I reserved my decision in order to look at the authorities to which counsel referred.  In these circumstances, even accepting that the failure to seek an extension of time when the matter was before the Court on 2 March 1999 was due to inadvertence on the applicant's part, there is no justification shown for granting an extension of time.  I refuse to make that order.

20. The application is dismissed with costs.

    Postscript

21. On 8 March 1999 the applicant made a further submission by way of facsimile to Chambers.  He submitted that, whilst the time for compliance with the Second Bankruptcy Notice has expired, he has not committed an act of bankruptcy.  This contention relies upon s 40(1)(g) (and 41(7)) of the Act.  Relevantly, s 40(1)(g) provides that failure to comply with a bankruptcy notice does not give rise to an act of bankruptcy if the debtor satisfies the Court, amongst other things, that he has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt.  The judgment debt at issue is in the sum of $7,500.  The counter-claim, set-off or cross demand is the costs order in favour of the applicant referred to at paragraph 2 above.  The applicant points to bill of costs for $8,819.71 to quantify this entitlement.  However, his costs were assessed at $2,881.20.  In spite of the fact that this assessment had not been made at the time the Second Bankruptcy Notice was issued, at no stage could it be said that the applicant had a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt.  It follows that the applicant has committed an act of bankruptcy.

I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hely.

Associate:

Dated:             12 March 1999

Counsel for the Applicant:	J B de Vere Tyndall
Solicitor for the Respondent:	Sally Nash & Co
Date of Hearing:	2 March 1999
Date of Judgment:	12 March 1999