A RECEIVED 10 JUN 1999 FEDERAL COURT OF AUSTRALIA seeveue weeveccevoel secscsesseee JUDameni ive. IN THE FEDERAL COURT OF AUSTRALIA BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE ) ; No. 2076 of 1980 ) ) AUSTRALIAN CAPITAL TERRITORY RE: ALLAN CLIFFORD SWEET, JANET ANN SWEET, ADRIAN LAWRENCE SHEPHERD HEATHER MARY SHEPHERD EX PARTE: ALLAN CLIFFORD SWEET, JANET ANN SWEET, ADRIAN LAWRENCE SHEPHERD HEATHER MARY SHEPHERD Applicats REASONS FOR JUDGMENT LOCKHART J. 16 July 1980 At Sydney On 17 August 1979 the respondent Kevin Davison ("the respondent") signed judgment against the applicants, Allan Clifford Sweet, Janet Ann Sweet, Adrian Lawrence Shepherd and Heather Mary Shepherd ("the applicants") in the District Court of New South Wales at Wollongong in the sum of $11,600.16. On 2 May 1980 the Deputy Registrar issued a bankruptcy notice directed to the applicants. . It is common ground that before the expiration of the time fixed for compliance with the requirements of the bankruptcy notice the applicants filed with the Registrar two affidavits. It was intended by the applicants that the affidavits were affidavits of the kind referred to in sub-s. 41 (7) and paragraph 40 (1) (g) of the Bankruptcy Act 1966 ("the Act"). The Registrar duly gave notice to the applicants and the respondent in accordance with the Bankruptcy Rules that the matter had been set down for hearing by the Court. The matter came on for hearing before me yesterday. Counsel for the parties submitted that the case fell conveniently into two parts: first, the question whether the affidavits were of the kind mentioned in sub-section 41 (7) and para. 40 (1) (g) and, second, if they were such affidavits, whether the Court is satisfied that the applicants have the requisite counter-clain, set-off or cross—demand. Counsel informed me that they wished to deal with the first question as a preliminary point, so that, if I answered it against the applicants, that would be an end of the matter; but, if I answered it against the respondent, then probably there should be an adjournment of the case to abide the outcome of an application to be made by the applicants in the District Court at Wollongong to set aside the judgment. In Re Brink; Ex_parte Commercial Banking Company of Sydney Limited judgment delivered 27 June 1980, I considered the construction and operation of sub-s. 41 (7) and para. 40e(1) (g) of the Act, and said what, in my view, the requisite affidavit must contain. There are two affidavits relied on by the applicants as falling within sub-s. 41 (7) and para. 40 (1) (g). It was not disputed that the use of the singular "an affidavit" in sub-s. 41 (7) includes the plural. However, whether this be so or not is not a question that has significance in the present case because the relevant matter relied on by the applicants is contained in one affidavit, namely, the affidavit of Adrian ...f3 -3- Lawrence Shepherd ("Mr. Shepherd") sworn on 11 June 1980. The other affidavit merely adopts what Mr. Shepherd said. Mr. Shepherd asserts in his affidavit that he has a counter-claim against the respondent exceeding the judgment debt which could not have been set up in the action or proceeding in which the judgment or order was obtained (paragraph 2). In paragraph 3 he sets out what he describes as particulars of that counter-claim as follows:- "3, (a) (b) (c) (4) (e) (f) (a) The particulars of such claim are as follows:- The Judgment Debt is in relation to money pay- able by the Defendants to the Plaintiffs under a Bill of Sale. The Statement of Liquidated Claim was issued on 1st May, 1979 and served on me on Thursday 17th May, 1979, and though I did have a defence as to the amount claimed due to the exigencies of my work Iwas unable to obtain legal advice. On receipt of advice that an Order for Judgment had been made against me I approached my Solicitors Messrs. Kearns & Garside and they forwarded a letter dated 12th May, 1980 to the Solicitors acting for the Judgment Creditor. A copy of this letter is annexed and marked with the letter "A", * My Solicitors received a letter from the Solicitors acting for the Judgment Creditor on 16th May 1980. A copy of this letter dated 15th May, 1980 is annexed hereto and marked with the letter "B", Subsequently on 17th May, 1980 I was served with a Bankruptcy Notice and instructed my Solicitors Messrs. Kearns & Garside to pursue this matter. With regard our cross claim the following are particulars of same:-— In August, 1977 the Judgment Creditor approached my son-in-law Allan Clifford Sweet and myself at the Brighton Hotel and informed us that he had several oyster leases for sale on the Minnamurra River, Kiama, and enquired as to whether we were interested in purchasing same. .. 4 (b) On inspection of the subject oyster leases the Defendant substantially misrepresented to the said Allan Clifford Sweet and myself the area of the leases and farmable areas, by stating that the depth of the farmable areas was from midstream to high tide mark on the river and, were substantially longer than in fact. (c) On inspection by the said Allan Clifford Sweet and myself of the lease documents at the Judgment Creditors home, lease maps which should have been attached to the lease documents were not produced, but were shown to us on a general map of the river and an indication was given on that map as to the extention of the leases. The Judgment Creditor once again mis-represented the area farmable by us. (d) In discussions with the Manager of the C.B.C. Bank, Kiama Mr. Barry Bamford, when arranging finance for the purchase of the oyster leases, the Judgment Creditor once again misrepresented the area which could be farmed commercially on the river. (e) Subsequently on 9th December, 1977 agreement was reached as to the purchase of the subject leases by the said Allan Clifford Sweet, Janet Ann Sweet, Heather Mary Shepherd and myself, and a Deed of Sale was executed which indicated that the sale included "all oysters on trays and mangroves"; the Assignment of the leases; and other chattels. A copy of that agreement is annexed hereto and marked with the letter "C". (f) The sale was completed and the oyster leases assigned to us. (g) The partnership commenced farming the area represented to be part of the sale. (h) In late 1979 an Inspector of the Department of Fisheries inspected and surveyed the leases, and informed me that the only area farmable by us was not as represented by the Judgment Creditor, but from 11' in from mid-stream to half way between low and high water marks and as per the lease maps within the lease documents, which we only saw on settlement. The area outside the leases was public oyster reserve and not farmable by us. .-/f5 (i) On two of the lease maps, the area between the boundaries of our lease and high water mark are not marked as public oyster reserves. (3) The area we are no longer able to farm provided some 50 percent of the oysters which were farmable and the loss of these oysters, we estimate, will cause us a loss of profits of at least ($6,000.00) Six Thousand Dollars per yer if we continue to farm the area on a small scale or ($30,000.00) Thirty Thousand Dollars per year if we farmed the area on large scale. (k) We claim that as a result of the mis-representation made by the Judgment Creditor, which must be read in conjunction with the Deed of Sale, we were 'induced to purchase the subject leases, and we now find as a result of the discovery by us of the actual areas farmable, we will loose an amount in profits of between(#$6,000.00 - $30,000.00) Six Thousand Dollars to Thirty Thousand Dollars per year. (1) We have instructed our Solicitors Messrs. Kearns & Garside of Kiama to file and have issued a Statement of Claim against the Judgment Creditor. (m) I request that the time fixed for compliance with the Bankruptcy Notice be deemed to be extended until and including the day on which the Court determines whether our claim is satisfied." There are certain annexures to the affidavit which I « need not set out. Although Mr. Shepherd refers to his claim as a counter- claim, I think nothing turns on that fact. Whether it is a counter-—claim or a cross-demand is perhaps a matter of argument. In Re Brink (supra) I discussed the meaning of the words "counter claim, set-off or cross—demand". Probably what is relied on by the applicants is, in truth, a cross-demand and not a counter-claim. Clearly it is not a set-off. The mere fact that Mr. Shepherd refers to it ..-/6 as a counter-claim is not to the point; the real question is what is the true description that attaches. to the facts and circumstances set out in his affidavit, and in my opinion they are more accurately described as a cross—demand. District Court proceedings were commenced by filing a statement of liquidated demand on 1 May 1979 which was served, on at least Mr. Shepherd, on 17 May 1979. Judgment was signed, by default, on 17 August 1979. The respondent asserts that the affidavit is deficient for the purposes of sub-s. 41 (7) ina number of respects. Counsel for the respondent submitted that the counter- claim or cross-demand, whichever it be, is not one which equals or exceeds the amount of the judgment debt. He relied on the fact that Mr. Shepherd says in his affidavit that the applicants will sustain a loss of profits of a least $6000 per year if they continue to farm the relevant area on a small scale or $30,000.0C per year if they farm the area on a large scale. The applicants' case is based ona misrepresentation which is alleged to have been made by the respondent to the applicants. Cases claiming damages measured by loss of profits are, of course, notoriously difficult to formulate with precision. In Re Brink (supra) I expressed the view that courts should adopt a benevolent construction of the original affidavit for the purposes of sub-s. 41 (7) and I adhere to that view. In my opinion, on a fair reading of the affidavit of Mr. Shepherd as a whole, it answers the description of an 1/7 -7- affidavit which asserts a cross-demand that equals of exceeds the amount of the judgment debt. Counsel for the respondent submitted that the affidavit was deficient in that, although Mr. Shepherd asserts that his counter-—claim could not have been set up in the initial action in the District Court, when the contents of his affidavit are read as a whole, it does not readily, or at all, appear that the applicants could not have set up the counter-claim or cross- demand in the original action. He relied on a number of matters, some of which I will refer to. It is said that the affidavit, whilst alleging misrepresentation by the respondent as to the relevant areas of the oyster leases, merely asserts that it was not until"late 1979" that an Inspector of the Department of Fisheries informed Mr. Shepherd that the only area farmable by the applicants was not as was represented by the respondent, but was substantially different. Counsel for the respondent points out that "late 1979" is an indefinite phrase and that, as judgment was signed on 17 August 1979, that date could be included in the description "late 1979". Hence it is said that the alleged misrepresentation may have come to the knowledge of Mr. Shepherd before judgment was signed; so that it cannot be said that the cross-demand could not have been set up in the original action. I see no substance in this contention. It is true that "late 1979" is a somewhat uncertain expression; put I think that, in all the circumstances, it means the period ../8 from September to December 1979. As I say, one must take a sensible and not overly technical view of affidavits for the purposes of sub-s. 41 (7). Counsel for the respondent submitted there is nothing in the affidavit to suggest that Mr. Shepherd did not know of the alleged misrepresentation before his conversation with the inspector of the Department of Fisheries in late 1979. In other words, Mr. Shepherd has not specifically deposed to the fact that, when he spoke to the inspector in late 1979, he did not already know that there had been a misrepresentation. Again, I do not think this point has substance. Reading the affidavit as a whole, I have the distinct impression that the deponent is saying that it was not until his conversation with the inspector that he knew of the alleged misrepresentation. Counsel for the respondent submitted that there is no clear statement or definition of the alleged misrepresentation to be found in Mr. Shepherd's affidavit. It is true that the misrepresegtation is perhaps not defined with fine precision in the affidavit, but its meaning is clear enough. The facts that I have already set out establish this to my satisfaction. Counsel for the respondent submitted that it is not enough for the applicants to assert that they learned in "late 1979" from the inspector of the Department of Fisheries that there had been a misrepresentation. What the inspector told Mr. Shepherd does not prove that there was a misrepresentation. If there was a misrepresentation as to the area covered by the relevant oyster leases, that is a matter that can be ascertained objectively. .../9 -9- Assuming for the purposes of the present application that it would have been possible for the applicants to find out earlier than "late 1979" the true facts as to the area of the oyster leases, it does not follow at all that the alleged cross—demand is one which could have been set up in the original action. Many, if not most, cases of misrepresentation are ones in which the plaintiff could have ascertained, if he had wanted to, earlier than he did in fact ascertain, that there was a mis- statement on some material question of fact. For the purposes of this application, I think it matters not whether Mr. Shepherd or the other applicants could have found out earlier than they did about the true extent of the areas of the oyster leases. The fact is that a fair reading of the affidavit establishes that it was not until late 1979 that they knew of the misrepresentation. I should say, of course, that in saying what I have about the facts I am relying merely upon the statements in Mr. Shepherd!: affidavit and the assumption of their accuracy for the purposes of the application. Whether they are acourate or not is a matter which will be determined by the appropriate court in due course, whether this Court or the District Court, and I say nothing whatever as to that. I have not dealt with all the submissions of counsel for the respondent, but I have covered the major submissions. Others were discussed and disposed of in the course of argument. Every point that could have been argued on this aspect of the case was, I think, argued by counsel for the respondent; but I am nevertheless satisfied that the affidavit of Mr. Shepherd is sufficient affidavit for the purposes of s. 41 (7). .--/10 -10- I should add that there was evidence led on behalf of the applicants, including viva voce evidence from Mr. Shepherd, on the basis that if the Court should find that the affidavit was itself deficient, nevertheless the applicants were entitled to supplement those deficiencies by viva voce evidence. Mr. Shepherd gave evidence as to a number of matters, but in particular of the fact that "late 1979" in paragraph 3 (h) of his affidavit meant late November 1979, and that the defence which he refers to in paragraph 3 (b) of his affidavit is a defence which has no bearing upon the misrepresentation, but a defence relating in some way to arrears of rates in relation to the oyster leases. I do not find it necessary to decide whether the Court is entitled to look beyond the mere affidavit itself to determine its sufficiency for the purposes of s. 41 (7). Hence I pay no regard to the viva voce evidence. That evidence may, of course, be relevant if this Court were to embark upon the next step and determine whether or not it is satisfied that the applicants have the requisite cross-—demand. On condition that the applicants file and serve within 21 days of today the necessary documents seeking to set aside the District Court judgment on which the bankruptcy notice in this case is based and prosecute the same with all reasonable expedition, this matter is stood out of the list generally with liberty to either party to restore to the list after 25 August next on seven (7) days'notice. Costs of both parties are -11- reserved. The exhibits may be handed out. | certify that this and the tan (ie) preceding pages are a true copy of the Reasons for Judgment herein of his Honour Mr. Justice Lockhart. LOG AK etn Associate Dated: 24 Jaky (1¢0