Commonwealth Bank of Australia v Luciano, Orlando [1998] FCA 133

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VG 7649 of 1997

BETWEEN: COMMONWEALTH BANK OF AUSTRALIA

(ACN 123 123 124)

Applicant

AND: ORLANDO LUCIANO

Respondent

JUDGE: MERKEL J

DATE: 16 february 1998

PLACE: MELBOURNE

REASONS FOR JUDGMENT In the present matter the applicant issued a bankruptcy notice against the respondent claiming the sum of $6,047,578.96. The amount was claimed by the applicant to be payable pursuant to a consent judgment dated 27 July 1995 in the sum of $7,219,322.63. The respondent has claimed that there is an overstatement of the amount due under the bankruptcy notice and, accordingly, it is invalid. The claim of overstatement was originally put on two bases. The first was that the applicant had overstated the amount due by a sum of $2,000 in respect of legal costs. Evidence has been given that that sum was not part of the amount the subject of the bankruptcy notice and the uncertainty concerning its treatment has been clarified in the course of the hearing before me today. Accordingly, counsel for the respondent quite properly conceded that on the evidence there is no overstatement in that amount. The second basis of challenge relates to a claim that the applicant failed to obtain the best available price for certain properties which were sold by it as a mortgagee. In general, the evidence is that an offer had been made late in 1995 for the properties which would have yielded a purchase price of $900,000. At the time, the applicant did not accept the offer. It is said, by the applicant, in reliance on the evidence before me which I have no reason to reject, that at the time the Bank was not in a position to deliver vacant possession and it also had doubts as to the genuineness of the offer. More importantly, the evidence is that the properties were advertised for sale and a public auction was held during 1996 when the Bank was in a position to sell the properties and deliver vacant possession. The properties were passed in at auction but sold some weeks later for the sum of $650,000. Apparently, no further offer was made by the original offeror. It seems to me that there are two reasons why the claim for overstatement on this basis must fail. The first is that I am not satisfied, as a matter of fact, that the applicant breached any duty in relation to the sale of the relevant property. It failed to achieve its reserve price at public auction and, on the material before me, appeared to act responsibly in later obtaining the best available market price available at the time. There is no evidence before me that the offeror who made the offer for the properties late in 1995 was ready, willing and able to purchase the property. The evidence is somewhat sparse but in reality, if that purchaser was ready, willing and able to purchase the property, there was no reason why he could not have done so when the Bank was in a position at the auction to sell the property with vacant possession. The second reason why the claim of overstatement on this account fails is that in reality it is a claim by way of a cross-claim or set-off, and it seems to be fairly well established that such a claim is not a claim of an overstatement of the amount due but is subject to quite different principles. The principle of particular relevance in the present matter is that the set-off must be at least of an amount that is equal to the amount claimed on the bankruptcy notice - see Re Sgambellone: ex parte Jacques and Ors (1994) 53 FCR 275. That principle is not satisfied in the present case. Accordingly, both of the grounds relied upon for overstatement fail. I am satisfied that the respondent debtor has committed the act of bankruptcy alleged in the petition. I am also satisfied with the proof of the other matters of which s 52(1) of the Bankruptcy Act 1966 requires proof. I order that the estate of Orlando Luciano be sequestrated. I also order that the petitioning creditor's costs, including reserved costs, be taxed and paid in accordance with the Act.