Yang v Mead
[2009] FMCA 636
•15 July 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| YANG v MEAD | [2009] FMCA 636 |
| BANKRUPTCY – Application to set aside bankruptcy notice – whether counter-claim, set-off or cross demand. |
| Bankruptcy Act 1966, s.40 Civil Procedure Act 2005 (NSW), s.101 Evidence Act 1995 (Cth), s.91 Uniform Civil Procedure Rules 2005 (NSW) |
| Guss v Johnstone (2000) 74 ALJR 884 ReGlew; Glew v Harrowell (2003) 198 ALR 331 |
| Applicant: | LEE CHIN LIEN YANG |
| Respondent: | COLIN ANTHONY MEAD |
| File Number: | SYG687 of 2008 |
| Judgment of: | Barnes FM |
| Hearing date: | 29 May 2009 |
| Delivered at: | Sydney |
| Delivered on: | 15 July 2009 |
REPRESENTATION
| Applicant: | In person |
| Counsel for the Respondent: | Mr V Bedrossian |
ORDERS
The application be dismissed.
The applicant pay the costs of the respondent, including reserved costs, as agreed and in the absence of agreement taxed in accordance with the Federal Court Rules.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG687 of 2008
| LEE CHIN LIEN YANG |
Applicant
And
| COLIN ANTHONY MEAD |
Respondent
REASONS FOR JUDGMENT
By application filed on 20 March 2008 Mrs Yang sought that bankruptcy notice number NN0820 of 2008 be set aside on the basis that she has a “cross claim” against Mr Mead for $100,000 plus interest of $184,728. She also sought that the time for compliance with the bankruptcy notice be extended and referred to the fact that there were Family Court property proceedings on foot which were expected to be completed by the end of April 2008.
The matter has been before a Registrar of this Court on a number of occasions and has been adjourned while Family Court proceedings between Mr Mead and his former wife Mrs Mead (the daughter of Ms Yang) to which Mrs Yang is also a respondent were on foot. Final orders were made by O’Ryan J of the Family Court on 3 April 2009 in those proceedings. On 18 May 2009 O’Ryan J made further orders staying some but not all of the orders made on 3 April 2009 in light of a notice of appeal to the Full Court of the Family Court filed by Mrs Mead and a cross-appeal by Mrs Yang.
The bankruptcy notice in question was issued on 11 March 2008. It claimed that Mrs Yang owed the creditor, Mr Mead, a debt of $13,221.09. The bankruptcy notice was based on a certificate as to determination of costs issued on 27 July 2004 in the Local Court of New South Wales at North Sydney said to be under ss.208F and 208J of the Legal Profession Act 1987 (NSW), being an assessment of party/party costs in the sum of $9,918.40. The certificate was filed in the registry of the Local Court at North Sydney on 18 August 2004. There were three respondents to the cost application. Mrs Yang was the second respondent. In addition, the bankruptcy notice claimed interest from 18 August 2004 until 11 March 2008 in the sum of $3,302.69 pursuant to s.101 of the Civil Procedure Act 2005 (NSW) and the Uniform Civil Procedure Rules 2005 (NSW).
The bankruptcy notice required Mrs Yang to pay the amount of the debt within twenty-one (21) days after service on her of the bankruptcy notice. She admitted in her application that she was served with the bankruptcy notice on 11 March 2008. She commenced these proceedings on 20 March 2008. The time for compliance with the bankruptcy notice has been extended on each occasion the matter was before the Court.
As indicated the application to set aside the bankruptcy notice asserted that Mrs Yang had a “cross claim” against Mr Mead. Under s.40(1)(g) of the Bankruptcy Act 1966 (Cth) a debtor commits an act of bankruptcy 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 … a bankruptcy notice under this Act and the debtor does not:
(i) where the notice was served in Australia – within the time specified in the notice;
…
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 appears that Mrs Yang asserts that she has such a counter-claim, set-off or cross demand against Mr Mead equal to or exceeding the amount claimed in the bankruptcy notice that could not have been set up in the Local Court proceedings.
Mrs Yang filed and relies on affidavits sworn on 20 March 2008, 9 April 2008 and 11 April 2008. She gave evidence that she was content for her daughter Lucy Mead to make submissions on her behalf.
The first of Mrs Yang’s affidavits simply contains the bankruptcy notice as an annexure and other “supporting documents”, consisting of a copy of a certificate of title for a property in the names of Mr Mead and Lucy Yang (who is apparently Mrs Yang’s, daughter now known as Mrs Mead) and a copy of a mortgage of that property to Mrs Yang and Mei Chen Yang dated 28 June 1996. It appears from what is described as an “interest table” that Mrs Yang claimed $100,000 from 28 June 1996 and “interest” of $184,728. The basis of the claimed entitlement to interest was not explained further.
However in her affidavit of 9 April 2008 Mrs Yang claimed that in fact she lent Mr Mead more than $177,000. She attached copies of a bank statement for an account in the name of Hypec Technology Group Pty Ltd (Hypec), copies of bank cheques made out to Hypec and 1996 extracts from a Commonwealth Bank passbook in the name of Miss Shiow-Ging Yang. There was no explanation as to how these documents established such a claim against Mr Mead.
In addition Mrs Yang claimed that Mr Mead owed her $175,000 from 20 September 1995 together with interest of $367,616 on the basis that she deposited $143,524.53 into a personal bank account of Mr and Mrs Mead and paid $31,476 to cover the wages of Hypec employees. There is evidence of a deposit into an account in the name of Mr Mead and Miss L Yang. There is no explanation for the claimed entitlement to interest.
Mrs Yang also claimed to have a cross-claim against Mr Mead for an additional amount of $377,451.50 plus interest of $744,790 (a total of $1,122,242) on the basis that she had deposited $377,451.50 into a Hypec bank account on 15 February 1996. She did not explain how this constituted a claim against Mr Mead within s.40(1)(g) of the Bankruptcy Act.
In her affidavit of 11 April 2008 Ms Yang complained that Mr Mead did not file or serve any evidence by 4 April 2008 according to an order made by a Registrar on 1 April 2008 and stated “Further to my previous affidavit of 20 March 2008, I enclosed (sic) further cross claim $3,257,909 in total (refer to annexure D) against Mr Colin Mead”. Annexure D, which is in fact the only annexure to the affidavit, again contains a bundle of documents which assert that Mr Mead owed Mrs Yang $641,225.97 from 1 November 1989 as a 49% interest in a property at West Ryde (together with interest of $2,616,683). Also annexed is an incomplete copy of part of what is apparently an affidavit sworn by both Mrs Yang and her husband and filed in Family Court proceedings between Mr and Mrs Mead which asserted that payments were made to a Hypec cheque account in 1989 and in relation to the purchase of a West Ryde property which Mrs Yang and M L Yang were said to have purchased with Mr and Mrs Mead.
In total Mrs Yang claimed (on a Corporations Act proof of debt Form) that Mr Mead owed her $5,207,495. Mrs Yang sought orders that Mr Mead and his solicitors pay her the amount owed and that Mr Mead’s solicitors be reported “to the law society & bar association to refrain their wrongful and unethical actions”. There is no evidence before the Court to warrant any such suggested action.
In submissions on behalf of her mother, Mrs Mead claimed that because Mrs Yang was a mortgagee in relation to the property owned by Mr and Mrs Mead in Ermington, Mrs Yang could “take action and sell that” and then pay Mr Mead the amount she owed him. Mrs Mead suggested that Mrs Yang preferred not to do this, as if she did her daughter and grandchildren would have nowhere to live. She also claimed that Mrs Yang had appealed from the decision of the Family Court to which she was a respondent and, on the assumption that she would succeed, they could restore their position and then they would be in a position to pay the money owed to Mr Mead. Mrs Yang relied on the notice of cross-appeal filed by her in the Family Court on 30 April 2009 which claimed among other things that the trial judge failed to give weight to contributions made by Mrs Yang and Mei Chen Yang (the father of Mrs Mead and husband of Mrs Yang) to the marriage of the Meads and in relation to their interest in Hypec and to a company called Lamron Pty Limited which was one of the respondents to the costs order on which the bankruptcy notice was based.
In addition Mrs Mead claimed that there was an abuse of process because the bankruptcy notice was said to have been issued and served at a time when she (Mrs Mead) was in prison and her mother and sister would not have been able to handle the legal documents and understand what was going on.
However, as the solicitor for the respondent pointed out, on 3 April 2009 O’Ryan J made a declaration that the mortgage in favour of Mrs Yang and Mei Chen Yang against the title of the Mead’s former matrimonial home secured no indebtedness and was liable to be discharged. O’Ryan J also ordered that Mrs Yang and Mei Chen Yang do all acts and things necessary to cause to be delivered to Mr Mead’s solicitors a discharge of mortgage in relation to the mortgage registered over the property at Ermington.
On 18 May 2009 O’Ryan J dismissed an application by Mei Chen Yang for a stay of the judgment of 3 April 2009 pending an appeal. In relation to the orders affecting Mrs Yang, the respondent relied on a copy of the judgment of O’Ryan J of 18 May 2009 which was tendered. I have had regard to s.91 of the Evidence Act 1995 (Cth). This evidence establishes the terms of the judgment of that date and its effect. Notwithstanding a finding that the balance of convenience favoured dismissal of the applications for a stay, being mindful that both Mrs Mead and Mrs Yang were unrepresented and that they still had the opportunity to file, without leave, an amended notice of appeal, O’Ryan J granted a stay on the operation or enforcement of the declaration that the mortgage in favour of Mrs Yang and Mei Chen Yang against the title to the former matrimonial home secured no indebtedness and was liable to be discharged and on the order requiring Mrs Yang to do all things necessary to deliver a discharge of mortgage to the husband. In addition, a broadly expressed order restraining Mrs Yang and Mrs Mead from engaging in or permitting Hypec to engage in any transactions was stayed but replaced by an order restraining Mrs Yang (and others) from engaging in, permitting or authorising Hypec to engage in any transactions, except in the ordinary course of business. At the same time Mrs Mead was restrained from assigning, transferring, encumbering by mortgage or charge or otherwise in any way dealing with the former matrimonial home or from doing any act to cause any caveat lodged on the title on behalf of Mr Mead to be removed or lapsed.
It was submitted for Mr Mead that the Family Court had dealt with the “claims” raised by Mrs Yang and that the mere filing of the notice of cross-appeal did not establish any prospects of success or that there was any basis for the assertion that success by Mrs Yang on such a cross-appeal would result in a considerable amount of money flowing to her. Beyond this it was contended that it had not been established that there was a claim within s.40(1)(g) such that the bankruptcy notice should be set aside.
Insofar as the application is based on the ground that Mrs Yang has a counter-claim, set-off or cross demand within s.40(1)(g) of the Bankruptcy Act, neither in her affidavits nor elsewhere in the material before the Court did she set out the details required by Rule 3.02(2) of the Federal Magistrates Court (Bankruptcy) Rules. I gave Mrs Mead the opportunity in oral submissions to clarify the basis for Mrs Yang’s application. However the submissions did not satisfy me that Mrs Yang had a counter-claim, set-off or cross demand that came within s.40(1)(g) of the Act that should be determined.
In order to avoid committing the act of bankruptcy in s.40(1)(g), consisting of failure to comply with the requirements of a bankruptcy notice, Mrs Yang must satisfy the Court that she has a counter-claim, set-off or cross demand against Mr Mead of the kind described in s.40(1)(g). As Gleeson CJ, Gaudron, McHugh, Kirby and Callinan JJ stated in Guss v Johnstone (2000) 74 ALJR 884 at [40]:
The state of satisfaction referred to in s 40(1)(g) and s 40(1)(vii) involves weighing up considerations as to the legal and factual merit of the claim relied upon by the debtor, and the justice of allowing the bankruptcy proceedings to go ahead or requiring them to await the determination of the claim.
After describing various formulations of what an applicant must do to “satisfy the court” within s.40(1)(g) of the Act Lindgren J stated in ReGlew; Glew v Harrowell (2003) 198 ALR 331 at [12] that in proceedings such as these:
Perhaps little more can usefully be said than that a debtor must satisfy the court that there is sufficient substance to the counter-claim, set-off or cross-demand asserted to make it one which the debtor should, in justice, be permitted to have heard and determined in the usual way, rather than be forced to comply with the bankruptcy notice by payment or to commit an act of bankruptcy.
The evidence before the Court and the submissions for Mrs Yang do not sufficiently identify any cause of action against Mr Mead such as to satisfy the Court, in the manner considered in Glew v Harrowell, that she has any claim against Mr Mead that should be permitted to be heard and determined in the usual way.
The Family Court orders in relation to the mortgage over the former matrimonial home of Mr and Mrs Mead are discussed above. The evidence before this Court does not satisfy me that Mrs Yang has a claim that constitutes a counter-claim, set-off or cross demand within s.40(1)(g) arising merely from the existence of such a mortgage. There is no evidence before the Court to establish that there is some claim that she wishes to bring in relation to her interest as mortgagee. In the absence of evidence as to what has occurred in relation to the mortgage and given the orders made in the Family Court, it has not been established that there is a counter-claim or cross demand in the sense of an effective claim existing at this time that is capable of being enforced by action (see Guss v Johnstone) that has not been determined by the Family Court.
In relation to Mrs Yang’s other asserted claims, as stated in Guss v Johnstone a counter-claim or cross demand must be not merely an inchoate one. While Mrs Yang claimed that Mr Mead owed her money, the evidence before the Court is insufficient to establish that she has a counter-claim or cross demand as she asserts. Insofar as her claims appear to involve Hypec, there is no evidence before the Court to establish that, even if such claims existed, they were claims against Mr Mead that would come within s.40(1)(g) of the Act.
Moreover, even if there are claims of the nature specified in s.40(1)(g) of the Act, they are said to have arisen in 1989, 1995, and 1996 and hence would appear to be statute barred, there being no evidence of any proceedings commenced to recover such amounts apart from Mrs Yang’s claims in the Family Court proceedings.
Insofar as Mrs Yang’s claims are matters that are the subject of the Family Court proceedings (and it seems that this may be the case) such claims have been considered and determined by the Family Court. Indeed her application to set aside the bankruptcy notice was adjourned until determination of those proceedings. Final orders have now been made. Hence, if there was such a claim that was not statute barred that was a material claim, it has been dealt with by the Family Court.
Mrs Mead referred to the fact that Mrs Yang had filed a notice of cross-appeal in the Family Court proceedings and that some of the orders made by O’Ryan J had been stayed. As indicated, the orders made by O’Ryan J on 3 April 2009 dealt specifically with the issue of the mortgage over the former matrimonial home and also with certain companies (such as Hypec) in relation to which Mrs Yang appears to assert some interest. One of the orders made required not only Mrs Mead but also members of her family (including Mrs Yang) to indemnify Mr Mead against all claims arising in relation to his interest in the former matrimonial home and in various companies or as a result of any guarantees given by him or alleged indebtedness on his part in relation to those companies. The operation of that order was not stayed. Nor was there any stay on the operation of orders in relation to Lamron Pty Ltd. While there was no evidence before the Court as to the precise relationship between Lamron and Mrs Yang and Mr Mead, Lamron was one of the respondents to the certificate as to the determination of costs that formed the basis for the bankruptcy notice in relation to Mrs Yang. It is notable that one of the orders made by O’Ryan J (the operation of which was not stayed) was a declaration that the fixed and floating charge created in 1997 over Lamron Pty Ltd in favour of Mrs Yang and Mai Chen Yang secured no indebtedness and was liable to be discharged. Mrs Yang was also ordered to do all things necessary for the purpose of causing that to occur.
The fact that Mrs Yang has lodged a notice of cross-appeal and that the operation of certain orders has been stayed is not such as to persuade me that there should be a further adjournment pending determination of this matter by the Full Court of the Family Court. I am not persuaded that any such adjournment would be in the interests of justice or of the parties on the evidence before me or that the existence of the notice of cross-appeal provides a basis on which the bankruptcy notice should be set aside. No submissions were made for Mrs Yang in relation to the grounds of appeal and on the evidence before this Court she has not established that she has any prospects of success.
More particularly, the evidence before the Court described above is not sufficient to satisfy me or to establish that Mrs Yang has a “prima facie case” or a “fair chance of success” or a “genuine or bona fide claim” in relation to the asserted cross-claims as discussed in Glew v Harrowell.
Insofar as Mrs Yang seemed to submit through her daughter that she would be able to pay the debt to Mr Mead were she able to exercise a power of sale in relation to the former matrimonial home it has not been established that she is in a position to do so. I note the orders of O’Ryan J in that respect. In any event, in these proceedings issues of solvency do not arise as they would in the context of a hearing of a creditor’s petition.
The general contention that these proceedings are in some way an abuse of process is not made out. While the bankruptcy notices in relation to Mrs Mead and Mrs Yang were apparently issued at a time when Mrs Mead was serving a sentence of six months imprisonment and while Family Court proceedings were on foot, Mrs Yang has had a considerable amount of time to address the issues raised by the bankruptcy notice and an opportunity to file further affidavit evidence. Indeed she has filed three affidavits. There is no evidence to support any claim that she has not had the opportunity to raise or to address the issues she wished to raise in the proceedings to set aside the bankruptcy notice, particularly given the adjournments there have been since the matter first came before the Court on 1 April 2008. It has not been established that there was an abuse of process.
I am not satisfied on the evidence before me that Mrs Yang has a counter-claim, set-off or a cross demand within s.40(1)(g) of the Bankruptcy Act or that there is any other basis on which the bankruptcy notice should be set aside.
The application to set aside the bankruptcy notice should be dismissed with costs.
I certify that the preceding thirty-three (33) paragraphs are a true copy of the reasons for judgment of Barnes FM
Associate:
Date: 15 July 2009
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