CATCHWORDS BANKRUPTCY - Application to set aside bankruptcy notice - whether court should go behind a judgment entered by compromise in the Queensland Building Tribunal and registered in the District Court of Queensland - must be substantial reasons for questioning whether there is in truth and reality a debt owing - substance of complaint that judgment creditor would have received lesser amount if claim had not been compromised - no unilateral mistake by judgment debtor. BANKRUPTCY - Whether judgment debtor had counterclaim, set off or cross demand within s.40(1)(g) Bankruptcy Act 1966 (Cth) - claim deposed to inconsistent with statement of claim filed by judgment debtor in proceedings in Supreme Court of Queensland - claim could have been set up in Queensland Building Tribunal or by transfer to District Court of Queensland - no separate claim for a debt but a joint and several claim against judgment creditor in a partnership capacity. Bankruptcy Act 1966 (Cth) ss.40(1)(g), 41(7) Queensland Building Services Authority Act 1991 (Qld) ss.4, 91, 95(1), 95(4), 97(2) Wren v. Mahony (1972) 126 CLR 212 - Appl. Corney v. Brien (1951) 84 CLR 343 - Appl. Oliveri v. Stafford (1989) 24 FCR 413 - Appl. Re: Brink Ex parte Commercial Bank Co. of Sydney Ltd. (1980) 44 FLR 135 - Appl. Re Wedd; Ex parte Wedd (Applicant); Parker (Respondent) (1961) 19 ABC 36 - Appl. Woorabinda Aboriginal Council v. Ealesrose Pty. Ltd. (ACN 010 378300) Trading as NK Builders (Unreported, 22 November, 1993, No. 109 of 1993) - Appl. Ex parte Banner; In re Blythe (1881) 17 Ch.D. 480 - Dist. Re Frazer Ex parte Central Bank of London [1892] 2 QB 633 Simon v. O'Gormon Pty. Ltd. (1979) 27 ALR 619 Re David Ex parte Lahood (1979) 26 ALR 306 Petrie v. Redmond (1942) 13 ABC 44 Re Vojnovski [1970] ALR 355 In re A Debtor [1929] 1 Ch. 125 Wilkinson v. Osborne (1915) 21 CLR 89 Re Riviere; Ex parte Original Mont de Piete Ltd (1919) 20 SR (NSW) 77 Deputy Commissioner of Taxation v. Chamberlain (1990) 26 FCR 221 Re: Rochela Ex parte Antonios (1980) 49 FLR 423 Re Franks Ex parte GIO Holdings Ltd. (1990) 24 FCR 398 Re Cosimo Longo; Ex parte Cosimo Longo No. QN104 of 1995 Cooper J., Brisbane, 23 June 1995 IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND No. QN104 of 1995 RE: COSIMO LONGO EX PARTE: COSIMO LONGO JUDGE MAKING ORDER:Cooper J. WHERE MADE: Brisbane DATE OF ORDER: 23 June 1995 MINUTES OF ORDER THE COURT ORDERS THAT: 1. The application filed 2 March 1995 is dismissed. 2. The applicant pay the respondent's costs of and incidental to the application, including reserved costs if any, to be taxed if not agreed. Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules. IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND No. QN104 of 1995 RE: COSIMO LONGO EX PARTE: COSIMO LONGO CORAM: Cooper J. PLACE: Brisbane DATE: 23 June 1995 REASONS FOR JUDGMENT The applicant, Mr. Cosimo Longo, brings an application seeking the following orders :- "1. An Order that the Bankruptcy Notice filed 2 February 1995 be set aside; or in the alternative, 2. A Determination by the Court that Cosimo Longo 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 could not have set up in the action or proceeding in which the order was obtained." The alternative orders sought can be conveniently dealt with in turn. The Bankruptcy Notice The bankruptcy notice in question, issued on 2 February 1995, was founded on a consent judgment in the sum of $40,000.00 obtained against the applicant in the Queensland Building Tribunal ("the Tribunal") in favour of a Mr. Paul Cavaliere on 3 October 1984. A certified copy of the Tribunal's order was registered in the District Court at Southport on 27 January 1995 :- "UPON HEARING MR McGHEE ON BEHALF OF THE APPLICANT AND MR WALSH ON BEHALF OF THE RESPONDENT OF THE ABOVE APPLICATION THE QUEENSLAND BUILDING TRIBUNAL MAKES THE FOLLOWING ORDERS BY CONSENT. THIS ACTION IS SETTLED ON THE FOLLOWING BASIS: 1. THAT THE RESPONDENT SHALL PAY TO THE APPLICANT THE SUM OF $40,000 PLUS THE APPLICANT'S COSTS OF THIS APPLICATION, INCLUDING RESERVED COSTS TO BE AGREED, OR FAILING SUCH AGREEMENT, TO BE DETERMINED BY THE TRIBUNAL AT A HEARING AFTER WRITTEN SUBMISSIONS ARE FILED IN THE REGISTRY AND EXCHANGED BY THE PARTIES (HEREINAFTER REFERRED TO AS `THE SETTLEMENT SUM'). 2. THAT THE RESPONDENT, COSIMO LONGO WARRANTS THAT HE IS A PARTY TO A JOINT VENTURE AGREEMENT WITH KIRRALEE PTY LTD IN RESPECT OF LOT 67, KURANDA DRIVE, ROBINA ISLAND IN THE STATE OF QUEENSLAND. 3. THAT THE SETTLEMENT SUM BE PAID TO THE APPLICANT ON 31 DECEMBER 1994 OR ON THE SETTLEMENT OF THE SALE OF LOT 67, KURANDA DRIVE, ROBINA ISLAND, WHICHEVER IS THE EARLIER. 4. THAT THE RESPONDENT AND GEORGIA SYLVIA LONGO AGREE NOT TO DELIVER A CERTIFICATE OF READINESS IN RESPECT OF THE PROCEEDINGS COMMENCED BY SUPREME COURT WRIT NO. 528 OF 1994 UNTIL PAYMENT OF THE SETTLEMENT SUM OR 31 DECEMBER 1994, WHICHEVER IS THE EARLIER. 5. THAT THE SAID SUPREME COURT PROCEEDINGS BE STAYED PENDING PAYMENT OF THE SETTLEMENT SUM IF THE SETTLEMENT SUM IS NOT PAID BY 31 DECEMBER 1994. 6. THAT ALL MONIES PAYABLE TO THE RESPONDENT UPON THE SALE OF LOT 67, KURANDA DRIVE, ROBINA BE PAID INTO THE TRUST ACCOUNT OF THE SOLICITORS FOR KIRRALEE PTY LTD. 7. THAT THE RESPONDENT WITHIN SEVEN DAYS GIVE AN IRREVOCABLE AUTHORITY TO THE SOLICITORS FOR KIRRALEE PTY LTD TO PAY TO THE TRUST ACCOUNT OF MESSRS PRICE & ROOBOTTOM THE SETTLEMENT SUM FORTHWITH UPON SALE OF LOT 67, KURANDA DRIVE, ROBINA ISLAND, A COPY OF SUCH AUTHORITY TO BE PROVIDED TO MESSRS PRICE & ROOBOTTOM UPON ITS BEING GIVEN. 8. THAT PAUL CAVALIERE ON THE FIRST PART AND COSIMO LONGO AND GEORGIA SYLVIA LONGO ON THE SECOND PART EXECUTE A DEED OF SETTLEMENT IN THE ABOVE TERMS. 9. THAT BOTH PARTIES ARE GRANTED LIBERTY TO APPLY TO THE TRIBUNAL UPON THE GIVING OF FOUR DAYS NOTICE TO EACH OTHER." By virtue of section 91 of the Queensland Building Services Authority Act 1991 (Qld) ("the Building Services Act") a determination by the Tribunal, once registered in the District Court, has the same force and effect as if the determination had been originally given as a judgment of the District Court and entered on the day of registration. In order to understand the circumstances giving rise to the consent judgment and the basis that the applicant contends the bankruptcy notice ought to be set aside, it is necessary to set out something of the dealings between the parties. On 8 February 1993 the applicant purchased from the developer of Robina Island, Lot 67 Kuranda Drive, Robina, Queensland ("Lot 67") on what the applicant calls "builders terms". I take that to mean that the purchase price of the land was to be paid out of the proceeds of the sale of the land and a dwelling to be constructed on it. The applicant deposes to an oral agreement between he and Mr. Cavaliere (a licensed builder) that the applicant would pay $6,000.00 cash to Mr. Cavaliere for the use of his Builders Licence and for supervision of construction of a dwelling on Lot 67. The applicant deposes that the agreement was conditional on Mr. Cavaliere's regular sub-contractors being used on the project. On 30 September 1993 an Housing Industry Association ("HIA") building agreement between the applicant as owner and Mr. Cavaliere as builder was registered with HIA. The "Price of Works" was to be $39,500.00, which was to be paid in one sum at "lock-up stage". On the same day, the Albert Shire Council granted approval for the project. The applicant deposes that Mr. Cavaliere approached him just before Christmas 1993 with a document, which is annexed to an affidavit of the applicant, headed "Housing Industry Association Specification". The document sets out, item by item, the elements of a building project, a brief description and the amount allowed for each item. Owners and builders simply "fill in the blanks". In this case the specification has been completed in handwriting and appears to have been done with some haste. Further, the "amount allowed" column is not filled in. Rather, for each item, the blank space left on the standard form specification has been filled by :- "owner to supplies [sic]" "builder no responsible, owner to pay all bill [sic]" "owner to supplies [sic] labour" "owner to employed [sic] plumber" "builder to supplies [sic] at owners choice, owner to pay for tiles" In some cases the handwriting is barely legible. On the tenth and final page of the document in the space between the last standardised item and the signatures of the client and builder, the following has been inserted in typewritten form :- "The builder will receive the sum of $39500.00 for supervision, this payment will be devided [sic] into installments [sic], $20000 on sign [sic] the contract and specification, $19500 on completion, lock up stage. The owner will be responsible to pay for all material and labour, the owner can use the account facilty [sic] of the builder, the account must be paid in full after 30 days and 20% administration fees will be paid to the builder on termination of this contract. The owner will be responsible for payment to the taxation department for P.P.S. forms for payments collected by the owner. The builder will supply tiles to the owner at the cost plus 20% for administration and over heads [sic], this payment will be due 7 days after the tiles has [sic] been laid. The builder will supply the owner with bathroom fittings (FRATELLI FRATTINI) at the cost plus 20% administration and overheads, this item will be paid 7 days after installation." On 3 March 1994 Mr. Cavaliere filed an "Application to Commence Proceedings" in the Queensland Building Tribunal claiming to be owed $48,508.35 in respect of the building agreement between he and the applicant. In a letter to the chairperson of the Tribunal, Mr. Cavaliere states that the $48,508.35 comprises a $19,500.00 final payment, an overhead of 20% on $84,909.74 ($16,981.95) plus ceramic tiles to the value of $42,026.40. A preliminary conference was held on 25 May 1994 and a "preliminary conference summary sheet" prepared. The application, listed for hearing on 9, 10 and 11 August 1994, was adjourned on 9 August, until 3, 4 and 5 October 1994. On 3 October 1994 both parties appeared at the Tribunal and were represented by counsel. After lengthy discussion between the respective legal representatives, an agreement was reached. Mr. Cavaliere's solicitor, Mr. Brendan Peace, deposes that he hand-wrote the agreement (a copy of which is annexed to his affidavit) and with the consent of both parties, the handwritten agreement was read into the record of the Tribunal. Consequently the Tribunal made an order in terms of that registered in the District Court at Southport on 27 January 1995. On 31 January 1995 an application for the issue of a bankruptcy notice was filed on behalf of Mr. Cavaliere. A bankruptcy notice to the applicant was issued by a Deputy Registrar of this court on 2 February 1995. The applicant submitted that the court should go behind the District Court judgment and inquire as to whether there is in truth and reality a debt owed by the judgment debtor to the judgment creditor. Alternative grounds were advanced in support of this submission :- 1. The applicant was pressured by his legal advisers to compromise the claim in order that he avoid any adverse finding as to his credit which may damage him in other pending proceedings. 2. The $39,500.00 contract price to "lock-up stage" as appears in the HIA specification is a "sham" and the "special conditions" clause in the same document was fraudulently added by or on behalf of Mr. Cavaliere after execution of said document. 3. The applicant agreed to the consent judgment in a mistaken belief that the settlement sum was to be paid on 31 December 1994 or on the settlement of the sale of Lot 67, whichever was the later, not earlier as appears in clause 3 of the order. The existence of a judgment is prima facie evidence of a debt (Re Frazer Ex parte Central Bank of London [1892] 2 QB 633 at 636). However a judgment is never conclusive in bankruptcy and the court has a discretion to go behind a judgment to determine whether there is in truth and reality a debt due (Wren v. Mahony (1972) 126 CLR 212 at 224-225). Before the court will exercise the discretion there must be established substantial reasons for questioning whether there is in truth and reality a debt owing to the creditor; the court will not inquire into the validity of a judgment debt as a matter of course (Simon v. O'Gormon Pty. Ltd. (1979) 27 ALR 619 at 633; Re David Ex parte Lahood (1979) 26 ALR 306 at 307). The requirement may more readily be met where there has been no adjudication on the merits, for example a default judgment and there exists a bona fide allegation that no real debt lies behind the judgment (Corney v. Brien (1951) 84 CLR 343 at 357-358; Petrie v. Redmond (1942) 13 ABC 44 at 49; Re Vojnovski [1970] ALR 355 at 359; Oliveri v. Stafford (1989) 24 FCR 413 at 422). The applicant submitted that the judgment in the present case was not one based on an adjudication. Rather, it was a consent judgment based on a compromise. Such a judgment, it was submitted, may be gone behind even where counsel has advised on the compromise where there had been a yielding to an unjust claim in order to avoid giving evidence under oath. In support of this submission the applicant referred to the judgment of Fullagar J. in Corney v. Brien where his Honour said (at 357) :- "Where the party challenging a judgment entered on a compromise has acted on the advice of counsel, the judgment will not generally be reopened (see In re a Debtor (1929) 1 Ch. 125), but in Ex parte Banner; In re Blythe (1881) 17 Ch.D 480 a judgment entered in pursuance of a compromise was reopened although counsel had advised the compromise. It was held that there had been a yielding to an unjust claim through fear of disclosures which were likely to be made if the `debtor', by resisting the claim, necessarily submitted himself to cross-examination as to credit." The statement of his Honour merely acknowledges that there may in some circumstances be an exception to the general rule. However the reference to Ex parte Banner; In re Blythe (1881) 17 Ch.D. 480 demonstrates that the circumstances giving rise to the exception must themselves be special or exceptional. The judgment in Ex parte Banner; In re Blythe was obtained by a former employee of Blythe Brothers who commenced an action against the firm for a money sum. The claim arose out of fraudulent commission arrangements to which the firm and the former employee had been parties. The action was compromised and judgment entered so that the partners of Blythe Brothers would not be exposed in the witness box. The employee sought to prove the judgment in the bankruptcy of the members of the firm. In the Court of Appeal Brett LJ. said (at 490-491) :- "... In my view the judgment in the present case was a dishonest judgment, obtained by dishonest pressure, not because there was any doubt about the cause of action, not even because either party believed that there was any doubt about the cause of action, but, both parties knowing that there was no real cause of action, the one endeavoured to oppress the other by reason of that other's infamy known to him, and the other yielded, not because he believed there was, or doubted whether there was, a cause of action, but because he did not dare to face the consequences of his own infamy. Under these circumstances it seems to me that to allow the other creditors to be ousted of their rights by such a judgment would be a monstrous conclusion, and one not warranted by the law. And, if we do go behind the judgment, it seems to me that there is not and never was any colour or pretence for saying that there was any debt due from Blythe Brothers to Sheil. In the beginning this arrangement for returned commissions was made by Sheil on behalf of Blythe Brothers, and not on his own behalf at all. But I go further, and say that, even if it had been made by Sheil on his own behalf, he could not have retained the money, but it would nevertheless have belonged to Blythe Brothers. Therefore, from beginning to end, there never was any pretence for saying that any part of this money was due from Blythe Brothers to Sheil." Cotton LJ. said (at 492- 493) :- "In my opinion there is enough to shew that this was not the money of Sheil, that he knew it was not his money, and that the entries in the books of Blythe Brothers were made, not as admitting that he had a just right to the money, but for another purpose. Then came his action against Blythe Brothers. They had sworn in the underwriters' action that this was his money, and there was his opportunity. They could not resist the claim in his action without admitting that they had sworn falsely in the former action, and without swearing exactly in contradiction to what they had formerly sworn. So that he might well have believed, having that hold upon them, that he would succeed in his action, though he knew, as the fact was, that he had no possible right to the money which he was claiming. In my opinion, therefore, it is not the case of a plaintiff bona fide believing he had a right to the money he claimed, it is not a compromise in which the Plaintiff was acting bona fide; but both parties knew that Sheil had no right to the money, and there was a probability of success in the action, simply in consequence of the Plaintiff and the Defendants having been parties to a fraud on third persons. In my opinion it would be positively wrong to allow an order obtained under such circumstances to stand as against the creditors of the bankrupts. In my opinion we ought to go behind the order so obtained and to investigate the claim, and upon an investigation of the claim I have no hesitation in saying that Sheil has no right to the money, and cannot be allowed to prove." The applicant deposes that during the negotiation of the compromise he felt he was under a great deal of pressure by his own legal advisers to settle the matter by agreeing to pay the sum of $40,000.00. He says that he was told by his counsel that if he lost before the Tribunal it would seriously prejudice his claim in the District Court and it was only on that basis that he agreed to the compromise. The circumstances he deposes to do not come within the exception to the general rule noted by Fullagar J. in Corney v. Brien. The judgment obtained in Ex parte Banner; In re Blythe was one obtained dishonestly in what amounted to blackmail and as the observations of the Lord Justices show, the circumstances of that case stand in stark contrast to the ones in the instant case. Before a court will look behind a judgment based on a compromise there must be shown in the circumstances of the compromise "such suspicion of unfairness or impropriety as to justify [the] Court in looking behind the judgment to inquire into the consideration for the debt or the propriety of the compromise" (per Astbury J. with whom Clauson J. concurred in In re A Debtor [1929] 1 Ch. 125 at 127). The issues of fraud and sham were issues in the proceedings before the Tribunal and they were compromised in the settlement on the advice of counsel. It is reasonably apparent how the matter was compromised. The claim of the judgment creditor was for $48,508.00 calculated as :- Contract price $39,500.00 Less paid on account $20,000.00 $19,500.00 Supply of ceramic tiles $12,026.40 Supervision $16,981.95 $48,508.35 The payment of the $20,000.00 by the applicant to Mr. Cavaliere is totally inconsistent with the written agreement being a sham and the true agreement being that the applicant would pay only $6,000.00 for the use of the builders' licence. In the settlement negotiations the $19,500.00 has been treated as part of the original price owing by the applicant under the written contract registered 30 September 1993 with the HIA. The tiles were the subject of invoices directed to and signed by the applicant. The contentious matter was the claim for $16,981.95 for supervision under what the applicant alleged was a forged clause to the specification. It is apparent that the parties have compromised the supervision claim by "splitting the difference" 50/50 so that the monies due were :- Balance contract price $19,500.00 Tiles $12,026.40 Supervision $ 8,490.97 $40,017.37 rounded to $40,000.00. The substance of the applicant's complaint is that if he had not compromised the claim the judgment creditor would have received a lesser amount, namely $31,526.40. That however is not the basis upon which the court exercises the jurisdiction to set aside a bankruptcy notice. In Oliveri v. Stafford, Gummow J. said (at 429-430) :- "What is crucial to the present appeal is an understanding of the basis of the jurisdiction of this Court to set aside bankruptcy notices. In my view, the Court permits the debtor to go behind the judgment so as to have the bankruptcy notice set aside, on the footing that the Act is not given effect to or not carried out if a bankruptcy notice has been issued for a debt which is liable to be set aside or varied such that the creditor does not have a debt upon which bankruptcy proceedings can be founded. I refer later in these reasons to authority for that proposition. I should point out immediately that the appellant in the present case complains of a trifling amount which would still leave outstanding a substantial indebtedness." After giving some consideration to the judgment of the High Court in Wilkinson v. Osborne (1915) 21 CLR 89, Gummow J. cites with approval a passage in the judgment of Owen AJ. in Re Riviere; Ex parte Original Mont de Piete Ltd (1919) 20 SR (NSW) 77 at 83-84, where Owen AJ. said :- "Is, then, the fact that a judgment is obtained against a debtor for a larger sum than is actually due to a creditor a ground for setting aside a bankruptcy notice issued in respect of such a judgment, where the debt due to the creditor as so reduced exceeds L50? In other words, does the mere fact that a judgment is obtained for too large an amount vitiate the bankruptcy notice issued in respect of that judgment? I think it is clear that where the application is made bona fide, the Court, on the hearing of an application to set aside a bankruptcy notice, can, in a sense, go behind, or go round, a judgment which has been obtained against the debtor. ... At the same time, I think it is equally clear that the Court will only reconsider the judgment in order to ascertain whether the petitioning creditor's debt, on which the bankruptcy proceedings have been founded, should be struck out altogether. ... The Court does not reconsider the judgment merely with a view to seeing whether the judgment debt should be reduced, but in order to ascertain whether the creditor has a debt upon which bankruptcy proceedings can be founded." Gummow J. continued (at 432) :- "On the other hand, Wilkinson v. Osborne (supra) was a case where no debt at all would remain behind the judgment. In my view, the force of Owen AJ's reasoning is by no means diminished if it is applied to the present legislation and to the situation with which this appeal is concerned. As Sweeney ACJ pointed out in argument, although there will be no act of bankruptcy for the purposes of s 40(1)(g) where the debtor satisfies the Court that he has a counterclaim, set off or cross-demand, this will avail the debtor only if it is equal to or greater than the amount of the judgment debt: see also s 41(7). That result of application of the present legislation is consistent with the approach taken by Owen AJ in the above passage." The applicant in these proceedings did not contend that if one went behind the compromise there was no debt in reality due or only a debt which was below the statutory minimum and therefore insufficient to sustain a bankruptcy notice. The applicant has not sought to argue before me that there was fresh evidence which was not available to him at the time of the Tribunal hearing. That argument was put to Shanahan DCJ. and rejected on the applicant's application to extend the time to appeal against the consent judgment of the Tribunal. The applicant finally sought to have the court go behind the compromise because it was the product of a unilateral mistake on his behalf in that he alleged that "earlier" in paragraph 3 of the consent judgment should read "later". In support of this submission the applicant relied upon an observation of Wilcox J. in Deputy Commissioner of Taxation v. Chamberlain (1990) 26 FCR 221 where his Honour said (at 233) :- "... Where a clerical or arithmetical error is apparent to the other party at the time of the agreement, or even where it is made known to that party after the agreement promptly and before that party has altered its position, equity will relieve against the terms of the agreement." The mistake in Chamberlain was a clerical mistake in transcription and it was obviously so. The decimal point had been misplaced so that $255,579.20 became $25,557.92. To attempt to take advantage of such a mistake was described by Wilcox J. as "a shabby trick and indubitably unconscionable." The instant case is not one of obvious clerical error. The word "earlier" is recorded in the handwritten note of Mr. Peace the solicitor for Cavaliere. It was read into the Tribunal record and was reproduced in the consent judgment on 3 October, 1994. The applicant submitted that when the error was found it was immediately communicated to the solicitors for Mr. Cavaliere. However the facts are that the deed of settlement for execution was forwarded to the applicant's solicitors under cover of a letter dated 6 October 1994. The deed of settlement was not executed by the applicant and his wife until 4 December 1994 when it was returned under cover of his solicitor's letter dated 6 December 1994, which said :- "We enclose the Deed of Settlement and the Irrevocable Authority in accordance with paragraphs 7 and 8 of the Deed of Settlement. You will note that our client has amended clause 3 of the Deed." There is in this letter no suggestion that there has been a clerical error. The reason for the amendment is unexplained. On 12 December 1994 Mr. Cavaliere's solicitors replied by letter which said in part :- "The Deed of Settlement executed by your clients clearly does not comply with paragraph 8 of the Tribunals Order, in that paragraph 3 of the operative part of the Deed, as amended by your clients, is at odds with paragraph 3 of the Tribunals Order." On 22 December 1994 the applicant's new solicitors wrote to the solicitors for Mr. Cavaliere as follows :- "Dear Sirs, RE: LONGO ats CAVALIERE QUEENSLAND BUILDING TRIBUNAL APPLICATION No. C125-94 We refer to our letter dated 17 November 1994 and confirm we now act for Mr. Longo in relation to Queensland Building Tribunal Application Number C125-94. We are instructed [sic] apply to the District Court to seek an Order that the matter be referred to the Tribunal for re-hearing on the basis of fresh evidence. Enclosed is a copy of a statement, dated 19 December 1994, from Stephen John Bell. It is anticipated that Raymond Graham Clark will be providing fresh evidence by way of affidavit. We are further instructed, in the alternative, to seek an extension of two months, with respect to the date on which the settlement sum is to be paid, on such terms as the Court may decide and anticipate that any such terms will incorporate an interest component." Importantly, there is no suggestion that it will be sought to set aside the consent judgment or compromise on the ground of a unilateral mistake of the nature now claimed. Nor was it sought to have the agreement rectified because of a mistake in transcription. The only ground taken in the application to extend time for an appeal filed on 22 December 1994 was fresh evidence. In the affidavit prepared by his new solicitors and sworn by a clerk in their employ in support of the application before Shanahan DCJ., the order of the Tribunal is exhibited as Exhibit "RLJM-2" without any suggestion that it contained an error in paragraph 3 of it. Again in the correspondence passing between the solicitors in January 1995 leading up to the registration of the order in the District Court there is no suggestion that the order is other than a correct recording of the compromise reached. I am not persuaded that the applicant made any unilateral mistake. I am satisfied that the applicant attempted to vary the terms of the agreement by amending the deed and that he failed in his attempt. The applicant has failed to make out any basis for setting aside the bankruptcy notice. Counterclaim, Set Off or Cross Demand In the affidavit in support of his claim to have a counterclaim, set off or cross demand the applicant deposes that he paid at the request of Mr. Cavaliere the following payments for container loads of ceramic tiles :- 28 July 1993 $25,030.39 27 September 1993 $15,589.92 29 October 1993 $18,278.14 $58,898.45 This sum, he deposes, Mr. Cavaliere had promised to pay or reimburse to the applicant upon completion of the house at 66 Kuranda Drive, Robina. He alleges that the judgment creditor failed to pay him as promised or at all. As deposed to in his affidavit, the counterclaim, set off or cross demand of the applicant is a simple money count enforceable by plaint proceedings in the District Court between the applicant and Mr. Cavaliere. The claim as deposed to is totally inconsistent with proceedings instituted by the applicant and his wife as plaintiffs in the Supreme Court of Queensland by writ number 528 of 1994 against Mr. Cavaliere, his wife and their daughter, which action has been remitted to the District Court In a statement of claim delivered 25 May 1994 in those proceedings it is alleged :- "1. In or about March 1993 the Plaintiffs on the one part entered into a partnership agreement with the Defendants on the other part. PARTICULARS (a) The partnership agreement was oral; (b) The Plaintiffs on the one part and the Defendants on the other part were to share equally in the profits of the partnership. 2. Between in or about March 1993 and February 1994 the Plaintiffs made monetary contributions to the partnership particulars of which will be provided after discovery and inspection. 3. Between in or about March 1993 and February 1994 the First Defendant, in breach of the partnership agreement, sold partnership property and applied the proceeds thereof to his own use further particulars of which will be provided after discovery. 4. Further or in the alternative on or about 29th July 1993 the Plaintiffs lent the sum of $25,100.00 to the First Defendant (the loan agreement). 5. It was an implied term of the loan agreement that the sum of $25,100.00 was repayable on demand. 6. Despite demand the First Defendant had refused or neglected to pay the sum of $25,100.00 to the Plaintiffs. 7. There is now due and owing from the First Defendant to the Plaintiffs in [sic] the sum of $25,100.00. 8. On or about 2nd March 1994 the partnership was dissolved by mutual agreement. 9. An accounting of what is due and owing to the parties pursuant to the partnership has not been undertaken. 10. The Plaintiffs do not require a jury. AND THE PLAINTIFFS CLAIM:- (i) against the Defendants an injunction restraining them from selling, converting, encumbering or otherwise dealing with certain ceramic tiles constituting partnership property until trial or earlier order; (ii) further or alternatively money owing from the First Defendant in the sum of $25,100.00; (iii) an account of what is due and owing to the Plaintiffs from the Defendants; (iv) such further or other orders as the Court deems appropriate; (v) interest." When confronted with the inconsistency between the counterclaim, set off or cross demand sworn to and the cause of action pleaded and the relief sought in the statement of claim the applicant's counsel submitted :- "HIS HONOUR: The statement of claim is totally inconsistent with the affidavit. MR HAWES: It is, your Honour; I accept that. Your Honour will understand, of course, that the statement of claim is in ambit terms - at least I submit that; my instructions are that it is in ambit terms. The statement of claim can be amended at cost further down the track. Your Honour, the facts that - the facts behind both these disputes: the one before the tribunal and the one subject to the writ are extremely convoluted, and that is not made much more easy by some difficulty with language of perhaps - certainly my client has a difficulty in presenting the facts, and - but certainly the affidavit that he has deposed to and that is before the court today is the clearest explanation of the facts that has come before me." Such a response, although candid, does nothing to instil any confidence in the case mounted by the applicant. The only logical way to test the matter is to consider the claim firstly as a personal claim for a debt and then consider the partnership claim for the joint recovery of a debt of $25,100.00 due to the applicant and his wife and for a winding up and the taking of partnership accounts. In either case the applicant must show that the claim is in the nature of a counterclaim, set off or cross demand contemplated by s.40(1)(g) of the Act and that he could not have set it up in the action or proceeding in which the judgment or order was obtained. It was submitted that the Tribunal did not have jurisdiction to hear and determine the claim for debt alleged by the applicant in the proceedings before it. The jurisdiction of the Tribunal is, so far as is relevant, contained in s.95(1) of the Building Services Act which provides :- "95(1) The Tribunal may, on application by a party to a domestic building dispute, make such orders and directions as may be just to resolve the dispute and any other matters at issue between the parties." A "Domestic building dispute" is defined in s.4 to mean :- "`domestic building dispute' means - (a) a claim or dispute arising between a consumer and a building contractor in relation to the performance of domestic building work or a contract for the performance of domestic building work; or (b) a claim or dispute arising between 2 or more building contractors in relation to the performance of domestic building work or a contract for the performance of domestic building work; or (c) a claim or dispute in negligence, nuisance or trespass related to the performance of domestic building work." The powers of the Tribunal in the exercise of its jurisdiction are contained in s.95(4) which provides :- "(4) In the exercise of its jurisdiction under this section, the Tribunal may exercise any 1 or more of the following powers - (a) order the payment of a monetary sum found to be owing by one party to another; (b) award damages, including exemplary damages and damages in the nature of interest; (c) order restitution; (d) avoid any unjust contractual term, or otherwise vary a contract to avoid injustice; (e) avoid a policy of insurance under the statutory insurance scheme; (f) order rectification of defective or incomplete building work; (g) award costs." Additionally, the Tribunal has power to transfer a proceeding to a court. Section 97(2) of the Building Services Act provides :- "(2) If the Tribunal is of the opinion that a proceeding brought in the Tribunal would be more appropriately brought, wholly or partly, in a court, the Tribunal may order - (a) that matters not directly related to a building dispute be removed to a court; or (b) that the proceeding be removed in its entirety to a court." The only consideration of the jurisdiction of the Tribunal which I have been able to find is the judgment of Demack J. of the Supreme Court of Queensland in Woorabinda Aboriginal Council v. Ealesrose Pty. Ltd. (ACN 010 378300) Trading as NK Builders (Unreported, 22 November, 1993, No. 109 of 1993). His Honour said (at 6-7 of his reasons) :- "The principal argument advanced by Mr Britton is that here the plaintiff has sought a number of declarations and that declaratory orders are ones that are not specifically said to be within the power of the Tribunal. Section 95(1) of the Act says, `The Tribunal may on application by a party to a domestic building dispute make such orders and directions as may be just to resolve the dispute and any other matters at issue between the parties.' That section gives the widest of powers to the Tribunal. Subsection 4 of s 95 enumerates some of the powers that the Tribunal has. Mr Britton submitted that that list is exhaustive. I am not satisfied that that is so. It seems to me it could be read as illustrative of the powers given by s 95(1) just as easily as it can be said to be exhaustive. There does not seem to me to be any reason to assume that legislature in subs 4 has cut down the wide powers given in subs 1. In any case, the declarations that are sought are ones that are simply part of the process of reasoning that would allow this Court to reach the point where damages were assessed. Ultimately, the only issue between the parties is money. To determine who is the one who owes the other money, a large number of issues must be determined, all of which relate to the construction of this group of houses. It seems to me that the Tribunal is well placed to decide all of those issues and at the end of the day it will decide whether some rectification of defective work is to be done and if so whether this to be at the defendant's cost or by the defendant's hand. However, at the end of the day there will certainly be a sum of money to be paid by one side to the other. That seems to me to be an action that may properly be brought in the Tribunal and that pursuant to s 97(1) this action should be transferred to the Tribunal." I agree with his Honour that a broad construction of both the jurisdiction and the powers of the Tribunal ought to be taken. Where the claim in the Tribunal is for the price payable under a building contract, the issue before the Tribunal is whether or not a money sum is due and payable under the contract. It is always open to allege a set off by way of defence at law to a claim for a money sum due under a contract. Similarly in my view it is open to contend that a money sum is due on another account by the original claimant and to seek to offset the money sum against the original claim. That is, to seek to have the Tribunal deal with both claims in a way which would enable them to be finally and conveniently disposed of between the parties. This would involve the adoption of an approach similar, for example, to rule 96 of the District Court Rules (Qld) which provides :- "96.(1)A defendant may raise by way of set-off, or set up by way of counterclaim against the claim of the plaintiff, or any of the plaintiffs if more than one, any right or claim recoverable in the Court whether such set-off or counterclaim sound in damages or not or exceeds the amount of the claim or not and such set-off or counterclaim shall have the same effect as a cross-action so as to enable the Court to pronounce a final judgment in the same action both on the original claim and on the cross-claim. (2) But the Court or a Judge may strike out a defence by way of set-off or a counterclaim if, in the opinion of the Court or Judge, such set-off or counterclaim cannot be conveniently disposed of in the pending action or ought not to be allowed or may order that it shall be disposed of separately. (3) Any such defendant shall be entitled to recover in such action the amount (if any) by which the debt or demand so set-off or counterclaimed and proved exceeds the debt or demand claimed and proved by the plaintiff, and shall have judgment and execution for the same accordingly." I come to that view with the aid of the decision of Demack J., the statutory object in s.3(c) of the Building Services Act and having regard to the requirement in s.97(1) that a court must transfer to the Tribunal on the application of a party an action arising wholly or partly from a domestic building dispute. It was not, in my view, the intention of Parliament to fragment proceedings by having part only of the dispute transferred to the Tribunal. Rather the jurisdiction and powers are framed in broad and flexible terms to give the Tribunal the scope to resolve finally matters of this nature. In my opinion a counterclaim, set off or cross demand which a party to a domestic building dispute wishes to set up as either a defence or a claim giving rise to an amount to be offset in satisfaction of the price is a claim within the phrase "and any other matters at issue between the parties" and within the jurisdiction of the Tribunal. It was therefore open as a matter of law to the applicant to raise the claim for debt in the proceedings before the Tribunal. The applicant therefore fails to show that he had a claim "that he could not set up in the action or proceeding in which the judgment or order was obtained" (Re: Brink Ex parte Commercial Bank Co. of Sydney Ltd. (1980) 44 FLR 135 at 139). If I am wrong and the applicant's claim for money due on account of the alleged loans to the judgment creditor did not fall within s.95(1) of the Building Services Act, then it was open to the applicant to apply to have the proceedings transferred to the District Court to enable him to bring his counterclaim. His failure to do so prevents him from contending that he could not bring the cross claim (see Re: Rochela Ex parte Antonios (1980) 49 FLR 423; Re Franks Ex parte GIO Holdings Ltd. (1990) 24 FCR 398). The applicant, if he had a claim for $58,898.45, elected not to pursue it in the Tribunal or, if necessary, to transfer the proceedings to the District Court to pursue it. If in fact the applicant has no separate claim for debt but is a joint and several claimant with his wife against Mr. Cavaliere, his wife and their daughter in respect of the causes of action pleaded in the existing District Court proceedings, then the proceedings do not constitute a counterclaim, set off or cross demand within the meaning of s.40(1)(g) of the Act (Re Wedd; Ex parte Wedd (Applicant); Parker (Respondent) (1961) 19 ABC 36 at 38). Conclusion The applicant has failed to make out any ground for the relief claimed in the application filed 2 March 1995. The application must be dismissed with costs. THE COURT ORDERS THAT: 1. The application filed 2 March 1995 is dismissed. 2. The applicant pay the respondent's costs of and incidental to the application, including reserved costs if any, to be taxed if not agreed. I certify that this and the preceding twenty-three (23) pages are a true copy of the reasons for judgment herein of his Honour Justice Cooper. Date: 23 June 1995 Associate Counsel for the Applicant: Mr. D. Hawes Solicitors for the Applicant: Piper & Associates Counsel for the Respondent: Mr. K.J. McGhee Solicitors for the Respondent: Price & Roobottom Date of Hearing: 27 March 1995 Place of Hearing: Brisbane Date of Judgment: 23 June 1995