Carver v Westpac Banking Corporation [2000] FCA 1517

FEDERAL COURT OF AUSTRALIA

Carver v Westpac Banking Corporation [2000] FCA 1517

BANKRUPTCY – application to set aside bankruptcy notice – whether judgment debtor has a cross-claim which he "could not have set up in the action or proceedings in which the judgment or order was obtained"

Bankruptcy Act 1966 (Cth) s 40(1)(g)

Amos v Lillyman (unreported, Federal Court of Australia, Whitlam J, 1 July 1998) followed Bank of Western Australia Ltd v Commissioner of Taxation (1994) 55 FCR 233 referred to DEAN STARR JOSEPH CARVER v WESTPAC BANKING CORPORATION (IN THE MATTER OF DEAN STARR JOSEPH CARVER) N 7824 OF 2000 MOORE J 30 OCTOBER 2000 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 7824 OF 2000

IN THE MATTER OF DEAN STARR JOSEPH CARVER

BETWEEN: DEAN STARR JOSEPH CARVER

APPLICANT

AND: WESTPAC BANKING CORPORATION

RESPONDENT

JUDGE: MOORE J

DATE OF ORDER: 30 OCTOBER 2000

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. The application is dismissed. 2. The applicant pay the respondent's costs of the application. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 7824 OF 2000

IN THE MATTER OF DEAN STARR JOSEPH CARVER

BETWEEN: DEAN STARR JOSEPH CARVER

APPLICANT

AND: WESTPAC BANKING CORPORATION

RESPONDENT

JUDGE: MOORE J

DATE: 30 OCTOBER 2000

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 This is an application filed on 14 September 2000 by Mr Dean Carver ("the judgment debtor") to set aside a bankruptcy notice served on him (pursuant to an order for substituted service). The ground upon which the application is made is that the judgment debtor has a counter-claim, set-off, or cross-demand of the kind referred to in s 40(1)(g) of the Bankruptcy Act 1966 (Cth). 2 The application raises a narrow legal issue, namely whether the claim is one the judgment debtor "could not have set up in the action or proceeding in which the judgment or order was obtained" for the purposes of par (g). On 22 June 1999 Westpac Banking Corporation ("Westpac") obtained judgment in the sum of $92,379.53 against the judgment debtor in proceedings in the Supreme Court of New South Wales. Those proceedings concerned a mortgage over land which had been owned by the judgment debtor (and another) and which had been sold by Westpac as a mortgagee in possession. To understand what was before the Supreme Court, is necessary to refer briefly to the history of the proceedings. It is not in issue, at least in these proceedings, that the sale of the land did not realise sufficient funds to satisfy the indebtedness of the judgment debtor to Westpac under the mortgage. 3 On 30 September 1996 Westpac commenced proceedings in the District Court of New South Wales against the judgment debtor and another. From this point I will treat (contrary to the fact) all relevant proceedings as between the judgment debtor and Westpac only. Those proceedings became matter no. 5762 of 1996 in that Court. Westpac sought to recover moneys it alleged remained due under the mortgage. On 17 December 1996 the judgment debtor commenced proceedings in the Supreme Court which became matter no. 4448 of 1996. In those proceedings the judgment debtor alleged that in dealing with the property the subject of the mortgage and selling it, Westpac did not act in good faith towards the mortgagor and failed take reasonable care in exercising the power of sale pursuant to the mortgage. 4 On 17 February 1997, the Supreme Court ordered the proceedings in the District Court be transferred to the Supreme Court. In due course the matters were listed for hearing before a judge of the Supreme Court on 21 and 22 June 1999. On 21 June 1999 an application was made by the judgment debtor to vacate the hearing dates. The application was dismissed and the trial judge published fairly lengthy reasons explaining why the dates should not be vacated. Once judgment on that application had been given, an application was then made by the judgment debtor for leave to discontinue the proceedings, I infer, being the proceedings commenced by him on 17 December 1996. Leave to discontinue was given on 21 June 1999 and an order made that the judgment debtor pay the costs of Westpac. It is not clear from the material before me whether, if it was necessary to file a notice of discontinuance (as I assume to be the case), such a notice was filed and if so when. 5 On 22 June 1999 several orders were made by the Supreme Court concerning the proceedings between Westpac and the judgment debtor. First an order was made consolidating the former District Court proceedings (no. 5762 of 1996) with the proceedings in the Supreme Court (no. 4448 of 1996) and requiring the District Court proceedings to be treated as a cross-claim. Secondly judgment was given for the cross-claimant, Westpac, in the cross-claim and thirdly an order made requiring the judgment debtor to pay Westpac $92,379.53. It was also ordered that the judgment debtor pay Westpac's costs of that part of the proceedings to which the judgment related. 6 Two further matters should be mentioned. On 9 October 2000 the judgment debtor commenced further proceedings against Westpac in the Supreme Court repeating, in substance, the case sought to be made out in the application filed on 17 December 1996 in the proceedings for which leave to discontinue was granted on 21 June 1999. On the day listed for the hearing of this application, 24 October 2000, a notice of motion was filed in the newly commenced Supreme Court proceedings seeking an order for expedition and an order staying the execution of the orders made on 22 June 1999. 7 Against this background, I turn to consider the legal question of whether the judgment debtor has a claim of the type referred to in s 40(1)(g) that "could not have (been) set up" in the proceedings that gave rise to the judgment debt of approximately $93,000 upon which the bankruptcy notice is based. A very similar issue was considered by Whitlam J in Amos v Lillyman (unreported, Federal Court of Australia, Whitlam J, 1 July 1998). In that matter the judgment debtor commenced proceedings in the Supreme Court and was unsuccessful in seeking interlocutory relief against the judgment creditor. The judgment creditor's costs were ordered to be paid by the judgment debtor. In due course, the costs were assessed and a certificate issued. The amount assessed as costs founded the bankruptcy notice which the judgment debtor sought to set aside. At some point, the proceedings that had earlier been commenced by the judgment debtor were discontinued. Fresh proceedings were later commenced by the judgment debtor against the judgment creditor. In issue before Whitlam J was whether the judgment debtor had a claim that "she could not have set up" in the action or proceeding in which the judgment or order was obtained. That is, whether the judgment debtor had a claim that could not have been set up in the proceedings in which the costs order was made. His Honour concluded that the claim could have been set up. Indeed, his Honour pointed to the fact that it had been set up in the proceedings but that the proceedings had been discontinued by the judgment debtor. 8 While the facts in Amos differ from the facts in the present case, the differences are not material. That is, in the proceedings in which the order was made which founds the bankruptcy notice, the judgment debtor had had the opportunity to set up the claim and indeed had done so. The prosecution of the claim was effectively abandoned (at least for the time being) by the discontinuance of the proceedings in which the claim was made. Whitlam J concluded that in those circumstances the requirement in s 40(1)(g) that the claim could not have (been) set up could not be satisfied. By parity of reasoning the same is so in this matter. That is, the judgment debtor in this matter could have, and did, set up the claim in the proceedings in which the judgment was obtained. No submission was made that Amos was wrongly decided and if it had been, I should only depart from the conclusion of law decided by Whitlam J if I thought his Honour was plainly wrong: see Bank of Western Australia Ltd v Commissioner of Taxation (1994) 55 FCR 233 at 255. I do not hold that view. 9 Accordingly I dismiss the application to set aside the bankruptcy notice and order that the judgment debtor pay Westpac's costs of the application. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore.