232] ay CATCHWORDS Bankruptcy - Application to set aside bankruptcy notice based on default judgment in Petty Sessions- Application adjourned until Petty Sessions deals with application to set aside judgment. Re Hazzib Sleiman; Ex parte Hazzib Sleiman, applicant and Dojif Pty. Limited, respondent No. B3480 of 1984 Beaumont, J. 18 October 1984. Sydney. IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE ) AUSTRALIAN CAPITAL TERRITORY No. B3480 of 1984 RE: HAZZIB SLEIMAN Debtor EX PARTE: HAZZIB SLEIMAN Applicant DOJIF PLY. LIMITED Respondent ORDER Judge making order: Beaumont, J. Date order made: 18 October 1984. Where made: Sydney. THE COURT ORDERS THAT: l. I dismiss the application to set aside the bankruptcy notice served herein. 2. I suspend the operation of order 1 until 4 p.m. on 12 November 1984. 3. I reserve liberty to the debtor to apply, on or before 4 p-m. on 8 November 1984, on giving 48 hours' notice to the judgment creditor in that behalf, to discharge or vary order 1. 4. I extend time for compliance with the bankruptcy notice up to and including 12 November 1984. 5. I order that the debtor pay one-half of the costs of the judgment creditor of this application, including reserved costs. IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE ee eee' AUSTRALIAN CAPITAL TERRITORY No. B3480 of 1984 RE: HAZZIB SLEIMAN Debtor EX PARTE: HAZZIB SLEIMAN Applicant DOJIF PLY. LIMITED Respondent CORAM: Beaumont, Jd. DATE: 18 October 1984. REASONS FOR JUDGMENT This is an application by a debtor to set aside a bankruptcy notice, coupled with an application to extend time for compliance with the notice pending the determination of the application to set 1t aside. The bankruptcy notice, which was served on the debtor in August last, was based upon a default judgment obtained on 27 July 1982 in the Court of Petty Sessions, 302 Castlereagh Street, Sydney. The cause of the action was stated in the plaint and default summons in these terms: "On the lst day of July, 1982, the plaintiff gave to the defendant a cheque in the amount of Four thousand three hundred and fifty one dotlars and seventy five cents ($4,351.75) drawn on the plaintiff's account with the Commonwealth Trading Bank. This cheque was paid by the plaintiff's bank on the 5th day of July, 1982. The plaintiff has established that the cheque was for the wrong amount because when the plaintiff was calculating the amount payable by it to the defendant, the plaintiff neglected to deduct a payment which it had made on behalf of the defendant for steel on the 18th day of June, 1982 in the amount of $1,737.64. The plaintiff has requested the defendant to repay the amount of $1,737.64 and the defendant has refused to do so." The amount claimed in the plaint and default summons was $1,820.14 being the said sum of $1,757.64 together with costs and fees of $82.50. The summons was said to have been served on 10 July 1982. In support of his application, the debtor swore an affidavit on 31 August 1984 in which he not only denied any debt to the judgment debtor but also, whilst conceding a "small" overpayment, claimed that the judgment creditor was, Vl in the final analysis, indebted to him in the sum of $328.00 for a "cross claim" (not then stated) and "hiring fees on formwork". The judgment debtor also denied service of the plaint and default summons, saying that he "presumed" that he was in Lebanon at the time. (It later emerged that he was in Lebanon in October 1982.) By an affidavit sworn on 18 September 1984, Mr. W.J. Kavanagh, a director of the judgment creditor, gave evidence of his service of the plaint and default summons upon the debtor personally on 10 July 1982. MThis evidence was corroborated by an affidavit sworn on 18 September 1984 by Mr. R. Kavanagh, the son of Mr. W.J. Kavanagh. In response, the debtor swore a further affidavit on 19 September 1984 in which, inter alia, he said: "2, I refer to the Affidavit sworn by me on the 31st August 1984 and in particular to paragraphs 2 and 8 and say that after examining my books of accounts I do not have a Cross Claim against the Judgment Creditor for the sum of $328.00. My records show that this sum was includei in the payments made to me by the Judgment Creditor. (The debtor later resiled from this concession claiming once more that he is owed $328.00.) 3. I say that the total amount owing by the Judgment Creditor for the work performed by me in 1982 together with some materials supplied was $7,228.00. 4. I further say that the total payments made by the Judgment Creditor amounted to $7,611.75, the payments being made as follows: Cheque drawn in favour of Aquila Steel $1700.00 (in fact it was for $1,737.64) Cheque drawn in my favour on the 1.6.82 $1500.00 ($200.00 was also paid in cash) Cheque drawn in my favour on the 1.7.82 $4,411.75 (in fact it was for $4,351.75) I say that I received no other payments from the Judgment Creditor and accordingly there 1s a sum owing to him of $383.75. 5. I crave leave to refer to the Affidavit of William James Kavanagh sworn 18th day of September 1980. 6. I refer to paragraph 5 of that Affidavit and deny that the Judgment Creditor had a Plaint and Default Summons in his hands when I arrived on the building site on the 10th July 1982. 7. .As to paragraph 6, I say that no such conversation as alleged took place. I say that when JI arrived on the building site I found that some materials had been chained up. The Judgment Creditor said to me 'I've given you too much money'. I replied 'Tell me, Let's work it out'. I say that there was no mention by anyone about a Summons. The only conversation which arose concerning a demand was when the Judgment Creditor handed me a small piece of paper saying 'Take this paper, it's from the Police'. This related to the argument we were having about some Form Work." By a further affidavit sworn on 26 September 1984, Mr. W.Jd. Kavanagh detailed his version of the history of the dispute between the parties. According to this version, which 18 now largely accepted by the debtor, the judgment creditor, by a mistake of fact, overpaid the debtor the sum of $1,757.64. This mistake occurred when the judgment creditor paid the debtor the sum of $4,351.75 in July 1982 without taking into account the fact that in June 1982, it had paid Aquila Steel Co. Limited the sum of $1,737.64 on behalf of the debtor. Assuming such a mistake of fact, the judgment creditor was entitled to recover that amount from the debtor (see South Australian Cold Stores Lamited v. Electricity Trust of South Australia (1957) 98 C.L.R. 65 at p-75). In the course of the hearing of the application in which each deponent was cross-examined at some length, the question of whether the payment of $1,737.64 was made under a mistake of fact was assumei in favour of the judgment creditor. Instead, the debtor challenged the claim made against him by questioning the entitlement of the judgment creditor to credit in respect of a reduction of $250.00 in the original quotation for the job and, secondly, a further credit in respect of a cash payment of $200.00 on 1 June 1982. These questions raise issues of fact which, in my view, must be resolved adversely to the debtor. Mr. W.d. Kavanagh was not shaken in cross-examination on either point, particularly as he was able to corroborate his version of what happened by reference to contemporary diary notes, the authenticity of which is not seriously 6. challenged. Those notes referred, 1n explicit terms, to the items of $250.00 and $200.00 respectively. This left outstanding two items. First, despite his earlier concession, the debtor now asserts a cross-claim in the sum of $528.00 for monies said to be owed by the judgment creditor to the debtor on account of rubbish removed from the building site. To say the least of it, as the debtor's own affidavit evidence reveals, the claim is a confused one. No serious attempt was made to establish an evidentiary foundation for the clain. It was allowed to rest in no more than a general assertion. For that reason, it must be rejected, at this stage at least. It also emerged, during the course of the hearing, that even on the debtor's own case, there had been an overpayment to him of $361.39. This amount was paid by the debtor on the day after the conclusion of argument in the application. There still remains the question of service of the plaint and default summons. Here also, the evidence of M>. W.J. Kavanagh was not shaken in cross-examination. On the other hand, the affidavit of the debtor, cited above, is, at best, equivocal on the point. In my opinion, the recollection of Mr. Kavanagh of the events now in question, including that of service, is to be preferred to that of the debtor. I find that the debtor was served with the plaint and default summons on 10 July 1982. In the result, even if the Court were to go behind the judgment, no basis for setting it aside has been demonstrated in this application. It also appears, therefore, that the debtor has little, if any, prospect of setting aside the judgment in the Court of Petty Sessions since that court applies similar principles to those applied here in an application to set aside a judgment (see Jackson and Byron, Courts of Petty Sessions (Civil Claims) Practice at pp.7l et seq.). Nonetheless, an order dismissing an application to set aside a default judgment does not constitute a bar to a subsequent application of the same character (see Attwood v. Chichester [1878] 3 Q.B.D. 722; Hall v. The Nominal Defendant (1966) 117 C.L.R. 423 at p.440). Thus, it is possible that the debtor could adduce further evidence, not presented to this Court, upon which the Court of Petty Sessions could rely to set aside the default judgment. In fact, on 20 September 1984, after the filing of this application, but before it was heard, the debtor filed an application in the Court of Petty Sessions seeking to set aside the default judgment. That application 1s returnable on 2 November 1984. Although present indications are that this application will fail, the question arises whether the debtor should have an opportunity to pursue it. 8. In Re Sterling; Ex parte Esanda Limited (1980) 30 A.L.R. 77, Lockhart, J., in dealing with an application of the present kind, said (at p.84) that, although each case must depend upon its own facts, there may be cases where the application to set asidje a bankruptcy notice should be adjourned pending the outcome of an application by the debtor to a court of competent jurisdiction to set aside the judgment on which the bankruptcy notice is founded. In ny Opinion, where the judgment has been obtained by default or where, for other reasons, there has been no real hearing on the merits (see Wren v. Mahoney (1972) 126 C.L.R. 212 at p.225), then, prima facie, the application to set aside the bankruptcy notice should stand over until the application to set asije the judgment has been disposed of. The reason for this approach is that this 1s a court of ansolvency which is not an appropriate forum for the resolution of civil disputes, and in particular, the recovery of debts, except where the insolvency of the debtor is apprehended. In the latter event, this Court will readily intervene for the protection of the general body of creditors. But where, as here, the debtor's solvency is not questioned, the primary forum for the resolution of the dispute between the parties should be the Court of Petty Sessions. In the result, whilst, on the evidence presently a available, the debtor's application to set aside the bankruptcy notice cannot succeed, I think that the debtor should be given the opportunity to pursue his application in the Court of Petty Sessions on 2 November 1984. It 1s unlikely that he will wish to do this in the light of the findings I have made, so that, in an effort to achieve some finality in the litigation, I make the following orders: 1. I dismiss the application to set aside the bankruptcy notice served herein. 2. I suspend the operation of order 1 until 4 p-m. on 12 November 1984. 3. I reserve liberty to the debtor to apply, on or before 4 p.m. on 8 November 1984, on giving 48 hours' notace to the judgment creditor in that behalf, to discharge or vary order 1. 4. I extend time for compliance with the bankruptcy notice up to and including 12 November 1984. 5. I order that the debtor pay one-half of the costs of the judgment creditor of this application, including reserved costs. I have made orders 1, 2 and 3 to cater for the remote possibility that the Court of Petty Sessions sets asiije its judgment on or shortly after 2 November 1984. I 10. have deprived the judgment creditor of one-half of its costs because of its unreasonable opposition to "the debtor's application made at the commencement of the hearing before me on 3 October 1984 that the matter stand over until shortly after 2 November 1984 when the appropriate forum, the Court of Petty Sessions, could deal with the matter. Viewing the dispute as I do, as one of debt collection rather than apprehendei insolvency, 1% is appropriate that the judgment creditor, notwithstanding some success in the application, should not receive all its costs. 3, 3 2 CATCHWORDS Bankruptcy — Application to set aside bankruptcy notice based on default judgment in Petty Sessions- Application adjourned until Petty Sessions deals with application to set aside judgment. Re Hazzib Sleiman; Ex parte Hazzib Sleiman, applicant and Dojif Pty. Limited, respondent No. B3480 of 1984 Beaumont, Jd. 18 October 1984. Sydney. IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION OF NEW SOUTH WALES AND THE BANKRUPTCY DISTRICT OF THE STATE } ) AUSTRALIAN CAPITAL TERRITORY RE: EX PARTE: Judge making order: Date order made: Where made: THE COURT ORDERS THAT: 1. I dismiss HAZZIB SLEIMAN Debtor HAZZIB SLEIMAN Applicant DOJIF PRY. LIMITED Respondent ORDER Beaumont, J. 18 October 1984. Sydney. the application to bankruptcy notice served herein. No. B3480 of 1984 set aside the 2. I suspend the operation of order 1 until 4 p.m. on 12 November 1984. 3. I reserve liberty to the debtor to apply, on or ' pefore 4 p.m. on 8 November 1984, on giving 48 hours' notice to the judgment creditor in that behalf, to discharge or vary order l. 4. I extend time for compliance with the bankruptcy notice up to and including 12 November 1984. 5. I order that the debtor pay one-half of the costs of the judgment creditor of this application, including reserved costs. IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION ) BANKRUPICY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE ) AUSTRALIAN CAPITAL TERRITORY No. B3480 of 1984 RE: HAZZIB SLEIMNAN Debtor EX PARTE: HAZZIB SLEIMAN Applicant DOJIF PLY. LIMITED Respondent CORAM: Beaumont, J. DATE: 18 October 1984. REASONS FOR JUDGMENT This is an application by a debtor to set aside a bankruptcy notice, coupled with an application to extend time for compliance with the notice pending the determination of the application to set it aside. The bankruptcy notice, which was served on the debtor in August last, was based upon a default judgment obtained on 27 July 1982 in the Court of Petty Sessions, 302 Castlereagh Street, Sydney. The cause of the action was stated in the plaint and default summons in these terms: "On the 1st day of July, 1982, the plaintiff gave to the defendant a cheque in the amount of Four thousand three hundred and fifty one dollars and seventy five cents ($4,551.75) "drawn on the plaintiff's account with the Commonwealth Trading Bank. This cheque was paid by the plaintiff's bank on the 5th day of July, 1982. The plaintiff has established that the cheque was for the wrong amount because when the plaintiff was calculating the amount payable by it to the defendant, the plaintiff neglected to deduct a payment which it had made on behalf of the defendant for steel on the 18th day of June, 1982 in the amount of $1,737.64. The plaintiff has requested the defendant to repay the amount of $1,737.64 and the defendant has refused to do so." The amount claimed in the plaint and default summons was $1,820.14 being the said sum of $1,737.64 together with costs and fees of $82.50. The summons was said to have been served on 10 duly 1982. In support of his application, the debtor swore an affidavit on 31 August 1984 in which he not only denied any debt to the judgment debtor but also, whilst conceding a "small" overpayment, claimed that the judgment creditor was, 3. in the final analysis, indebted to him in the sum of $328.00 for a "cross claim" (not then stated) and "hiring fees on formwork". The judgment debtor also denied service of the plaint and default summons, saying that he "presumed" that he was in Lebanon at the time. (It later emerged that he was in Lebanon in October 1982.) By an affidavit sworn on 18 September 1984, Mr. Wed. Kavanagh, a director of the judgment creditor, gave evidence of his service of the plaint and default summons upon the debtor personally on 10 July 1982. This evidence was corroborated by an affidavit sworn on 18 September 1984 by Mr. R. Kavanagh, the son of Mr. W.J. Kavanagh. In response, the debtor swore a further affidavit on 19 September 1984 in which, inter alia, he said: "2. I refer to the Affidavit sworn by me on the 31st August 1984 andi in particular to paragraphs 2 and 8 and say that after examining my books of accounts I do not have a Cross Claim against the Judgment Creditor for the sum of $328.00. My records show that this sum was included in the payments made to me by the Judgment Creditor. (fhe debtor later resiled from this concession claiming once more that he is owed $328.00.) 3. I say that the total amount owing by the Judgment Creditor for the work performed by me in 1982 together with some materials supplied was 87, 228-00. 4. I further say that the total payments made by the Judgment Creditor amounted +o $7,611.75, the payments being made as follows: Cheque drawn in favour of Aquila Steel $1700.00 (in fact it was for $1,737.64) Cheque drawn in my favour on the 1.6.82 $1500.00 ($200.00 was also paid in cash) Cheque drawn in my favour on the 1.7.82 $4,411.75 (in fact it was for $4,351.75) I say that I received no other payments from the Judgment Creditor and accordingly there is a sum owing to him of $383.75. 5. I crave leave to refer to the Affidavit of William James Kavanagh sworn 18th day of September 1980. 6. I refer to paragraph 5 of that Affidavit and deny that the Judgment Creditor had a Plaint and Default Summons in his hands when I arrived on the building site on the 10th July 1982. ' 7. j.As to paragraph 6, I say that no : such conversation as alleged took place. I say that when I arrived on the building site I found that some materials had been chained up. The Judgment Creditor said to me 'I've given you too much money'. I replied 'Tell me, let's work it out'. I say that there was no mention by anyone about a Summons. The only conversation which arose concerning a demand was when the Judgment Creditor handed me a small piece of paper saying-'Take this paper, it's from the Police't. This related to the argument we were having about some Form Work." By a further affidavit sworn on 26 September 1984, Mr. W.J. Kavanagh detailed his version of the history of the dispute between the parties. According to this version, 5. which is now largely accepted by the debtor, the judgment creditor, by a mistake of fact, overpaid the debtor the sum of $1,737.64. This mistake occurred when the judgment creditor paid the debtor the sum of $4,351.75 in July 1982 without taking into account the fact that in June 1982, it had paid Aquila Steel Co. Limited the sum of $1,737.64 on behalf of the debtor. Assuming such a mistake of fact, the judgment creditor was entitled to recover that amount from the debtor (see South Australian Cold Stores Limited v. Electricity Trust of South Australia (1957) 98 C.L.R. 65 at p-75). In the course of the hearing of the application in which each deponent was cross-examined at some length, the question of whether the payment of $1,737.64 was made under a mistake of fact was assumed in favour of the judgment creditor. Instead, the debtor challenged the claim made against him by questioning the entitlement of the judgment creditor to credit in respect of a reduction of $250.00 in the original quotation for the job and, secondly, a further credit in respect of a cash payment of $200.00 on 1 June 1982. These questions raise issues of fact which, in ny view, must be resolved adversely to the debtor. Mr. W.d. Kavanagh was not shaken in cross~examination on either point, particularly as he was able to corroborate his version of what happened by reference to contemporary diary notes, the authenticity of which is not seriously 6. challenged. Those notes referred, in explicit terms, to the items of $250.00 and $200.00 respectively. This left outstanding two items. First, despite his earlier concession, the debtor now asserts a cross-claim in the sum of $328.00 for monies said to be owed by the judgment creditor to the debtor on account of rubbish removed from the building site. To say the least of it, as the debtor's own affidavit evidence reveals, the claim is a- confused one. No serious attempt was made to establish an evidentiary foundation for the claim. It was allowed to rest in no more than a general assertion. For that reason, it must be rejected, at this stage at least. It also emerged, during the course of the hearing, that even on the debtor's own case, there had been an overpayment to him of $361.39. This amount was paid by the debtor on the day after the conclusion of argument in the application. There still remains the question of service of the plaint and default summons. Here also, the evidence of Mr. W.J. Kavanagh was not shaken in cross-examination. On the other hand, the affidavit of the debtor, cited above, is, at best, equivocal on the point. In my opinion, the recollection of Mr. Kavanagh of the events now in question, including that of service, is to be preferred to that of the 7. debtor.. I find that the debtor was served with the plaint and default summons on 10 July 1982. In the result, even if the Court were to go behind the judgment, no basis for setting it aside has been demonstrated in this application. It also appears, therefore, that the debtor has little, if any, prospect of setting aside the judgment in the Court of Petty Sessions Since that court applies similar principles to those applied here in an application to set aside a judgment (see Jackson and Byron, Courts of Petty Sessions (Civil Claims) Practice at pp.71 et seq.). Nonetheless, an order dismissing an application to set aside a default judgment does not constitute a bar to a subsequent application of the same character (see Attwood v. Chichester [1878] 3 Q.B.D. 722; Hall v. The Nominal Defendant (1966) 117 C.L.R. 423 at p-440). Thus, it is possible that the debtor could adduce further evidence, not presented to this Court, upon which the Court of Petty Sessions could rely to set aside the default judgment. In fact, on 20 September 1984, after the filing of this application, but before 1t was heard, the debtor filed an application in the Court of Petty Sessions seeking to set aside the default judgment. That application is returnable on 2 November 1984. Although present indications are that this application will fail, the question arises whether the debtor should have an opportunity to pursue it. In Re Sterling; Ex parte Fsanda Limited (1980) 30 A.L.R. 77, Lockhart, J., in dealing with an application of the present kind, said (at p.84) that, although -each case must depend upon its own facts, there may be cases where the application to set aside a bankruptcy notice should be adjourned pending the outcome of an application by the debtor to a court of competent jurisdiction to set aside the judgment on which the bankruptcy notice is founded. In my opinion, where the judgment has been obtained by default or where, for other reasons, there has been no real hearing on the merits (see Wren v. Mahoney (1972) 126 C.L.R. 212 at p.225), then, prima facie, the application to set aside the bankruptcy notice should stand over until the application to set aside the judgment has been disposed of. The reason for this approach is that this 1s a court of insolvency which is not an appropriate forum for the resolution of civil disputes, and in particular, the recovery of debts, except where the insolvency of the debtor 1s apprehended. In the latter event, this Court will readily intervene for the protection of the general body of creditors. But where, as here, the debtor's solvency is not questioned, the primary forum for the resolution of the dispute between the parties should be the Court of Petty Sessions. In the result, whilst, on the evidence presently available, the debtor's application to set aside the bankruptcy notice cannot succeed, I think that the debtor 9. should be given the opportunity to pursue his application in the Court of Petty Sessions on 2 November 1984. It is unlikely that he will wish to do this in the light of the findings I have made, so that, in an effort to achieve some finality in the litigation, I make the following orders: 1. I dismiss the application to set aside the bankruptcy notice served herein. 2. I suspend the operation of order 1 until 4 p.m. on 12 November 1984. 3. I reserve liberty to the debtor to apply, on or before 4 p.m. on 8 November 1984, on giving 48 hours' notice to the judgment creditor in that behalf, to discharge or vary order 1. 4. I extend time for compliance with the bankruptcy notice up to and including 12 November 1984. 5. I order that the debtor pay one-half of the costs of the judgment creditor of this application, including reserved costs. I have made orders 1, 2 and 3 to cater for the remote possibility that the Court of Petty Sessions sets aside its judgment on or shortly after 2 November 1984. I 10. have deprived the judgment creditor of one-half of its costs because of its unreasonable opposition to the debtor's application made at the commencement of the hearing before me on 3 October 1984 that the matter stand over until shortly after 2 November 1984 when the appropriate forum, the Court of Petty Sessions, could deal with the matter. Viewing the dispute as I do, as one of debt collection rather than apprehended insolvency, it is appropriate that the judgment creditor, notwithstanding some success in the application, should not receive all its costs. } apola - . chat ce ithe G preceding - ' en een c "I03743 ier 5 mre borg ~ ga-S 6 cif OO rou or rere cna My ul Supa [lant wae Pout LOOT ' Bae prtncd can