Merchantile Mutual Custodian v O'Brien [2000] FCA 1627

FEDERAL COURT OF AUSTRALIA

Mercantile Mutual Custodians v O'Brien [2000] FCA 1627

BANKRUPTCY – creditor's petition – where bankruptcy notice founded on two separate judgments – whether bankruptcy notice void Bankruptcy Act 1966 (Cth) Trade Practices Act 1974 (Cth) s 82

In Re Low; Ex parte Argentine Gold Fields [1891] 1 QB 147 - followed Re Bond; Ex parte HongKongBank of Australia Limited (1991) 33 FCR 426 - cited GPW Aussie Exports v Latin (1998) 85 FCR 324 - cited Catalano v Commonwealth Bank of Australia (unreported, Federal Court, 3 July 1997) - distinguished Re Wheeler [1982] 1 WLR 175 - distinguished Cummings v Raeffaele FCA [2000] 675 - distinguished MERCANTILE MUTUAL CUSTODIANS PTY LTD (ACN 008 508 496) v RYLE MATTHEW O'BRIEN Q 7122 of 2000 SPENDER J BRISBANE 8 NOVEMBER 2000

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY Q 7122 OF 2000

BETWEEN: MERCANTILE MUTUAL CUSTODIANS PTY LTD

(ACN 008 508 496)

APPLICANT

AND: RYLE MATTHEW O'BRIEN

RESPONDENT

JUDGE: SPENDER J

DATE OF ORDER: 8 NOVEMBER 2000

WHERE MADE: BRISBANE

THE COURT ORDERS THAT: 1. The creditor's petition be dismissed. 2. There be no order as to costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY Q 7122 OF 2000

BETWEEN: MERCANTILE MUTUAL CUSTODIANS PTY LTD

(ACN 008 508 496)

APPLICANT

AND: RYLE MATTHEW O'BRIEN

RESPONDENT

JUDGE: SPENDER J

DATE: 8 NOVEMBER 2000

PLACE: BRISBANE

REASONS FOR JUDGMENT 1 This is a contested creditor's petition. The notice of opposition by the judgment debtor, Ryle Matthew O'Brien (Mr O'Brien) is that he has a valid counterclaim which he "could not set up in the Judgment of 18 October 1999 because of a legal obstacle". It is unnecessary, in light of what has occurred, to deal with that ground of opposition. It seems, however, to involve a misunderstanding on Mr O'Brien's part as to what constitutes an inability to set up a counterclaim. 2 The fact is that in the District Court action in which various orders and judgments were made against Mr O'Brien, there was pleaded on his behalf the counterclaim on which he now wishes to rely. On 24 November 1999, Mr O'Brien (who then, as now, was acting on his own behalf) indicated to Noud DCJ that he did not then wish to proceed any further with his counterclaim, and his Honour then made orders including that the counterclaim be dismissed. The reason that it is unnecessary to now deal with the stated ground of opposition arises from a defect in the bankruptcy notice relied on to found the act of bankruptcy, which aspect of the notice was very properly brought to the Court's attention by counsel for the petitioning creditor. 3 Notwithstanding counsel's submissions to the contrary, in my judgment the bankruptcy notice is a nullity, because it is founded on two separate judgments. 4 What happened was this: Mr O'Brien leased a shop from Mercantile Mutual Custodians Pty Ltd. On 17 November 1997 Mercantile Mutual Custodians issued a District Court plaint against Mr O'Brien claiming $78,330.02 for rental and outgoings payable by him to it, together with interest. The plaint referred to rent owing for various periods during which it was unpaid, as well as unpaid amounts for fit-out of the premises. In respect of that plaint, Mr O'Brien filed an entry of appearance and defence and counterclaim on 17 December 1997. 5 The defence and the counterclaim both set up that, in addition to the terms of the agreement, there was a further representation that all businesses in the premises in which Mr O'Brien's shop was located were to operate in compliance with core trading hours, and that contrary to that representation and to a clause in the agreement, the businesses did not operate during those core hours and as a result Mr O'Brien suffered damage, being loss of custom and loss of profits. The counterclaim claimed $250,000 damages for breach of contract, and further and in the alternative $250,000 damages pursuant to s 82 of the Trade Practices Act 1976 (Cth). 6 On 3 December 1998, Boulton DCJ ordered that: "1. the Plaintiff be given leave to sign Judgment against the Defendant in the sum of seventy-eight thousand three hundred and thirty dollars and two cents ($78,330.02) with interest of 9% per annum from 1 July 1997 to today's date. 2. the Defendant have liberty to pursue his counter claim. 3. the execution of the Plaintiff's Judgment to be stayed pending determination of the counter claim or earlier Order of the Court, conditional upon the Defendant pursuing this counter claim expeditiously. 4. liberty to be granted to both parties to apply within two (2) days in writing to each other. 5. the Defendant pay the Plaintiff's costs of and incidental to this application and costs of and incidental of the principal action, excluding the counterclaim, to be taxed." 7 On 9 February 1999 there was an amended entry of appearance and defence and counterclaim, filed on Mr O'Brien's behalf by a firm of solicitors. That counterclaim was in substance the same as the earlier one, based on representations concerning adherence to core hours by businesses in the complex in which Mr O'Brien's shop was located. The only significant difference in the amended counterclaim was the addition of a claim under s 87 of the Trade Practices Act seeking an order "varying the contract or agreement in such manner as and from such date as this Honourable Court deems fit." 8 On 20 October 1999 the plaintiffs made an amended claim, seeking a total of $221,347.53 as monies due for rental and outgoings by Mr O'Brien to Mercantile Mutual Custodians. That sum of $221,347.53 included a claim for rental of $146,854.43. While it is not transparently clear from the document, the amended claim is directed at unpaid rental for periods other than those in respect of which Boulton DCJ gave judgment on 3 December 1998, and the total amount claimed comprehends the sum of $78,330.02 in respect of which Boulton DCJ gave judgment on 3 December 1998 and a further sum of $146,854.43. 9 On 18 October 1999, Noud DCJ gave judgment. It is the terms of that judgment which are central to the difficulty that attaches to the petition. It was in these terms: "THE JUDGMENT OF THE COURT IS THAT the Defendant pay to the Plaintiff the amount of $143,017.51. THE COURT ALSO ORDERS THAT: 1. The Judgment is in addition to the judgment pronounced by His Honour Judge Boulton at an earlier stage namely on 3 December, 1998. These 2 judgments total $221,347.53. 2. There will be a stay of execution in respect of those 2 amounts which is mentioned. There is a stay because the stay that His Honour ordered applies until the counterclaim is disposed of. 3. In relation to the judgment, a similar stay apply. 4. The case be adjourned to a date to be fixed. 5. The costs thrown away as a result of the adjournment be paid by the Defendant to the Plaintiff. 6. The costs thrown away as a result of further pleading be paid by the Defendant to the Plaintiff. 7. These orders in relation to costs be stayed pending the completion of the litigation or earlier order. 8. The Defendant deliver an amended counterclaim to the Plaintiff by 3 November 1999, that delivery, however, can be effected by the amended pleading being sent by facsimile. …" 10 There were other orders made, and the matter was stood over for further directions on 9 November 1999. On 24 November 1999, Noud DCJ made orders that: "1. The Defendant's counter-claim be dismissed. 2. The Defendant pay the Plaintiff's costs of and incidental to the counter- claim, including reserved costs if any, to be assessed. 3. Stay of execution of orders per Boulton DCJ, of 3 December, 1998 and Noud DCJ, 18 October, 1999 lifted and Plaintiff be at liberty to enforce these orders." 11 It is against the history of the making of those orders that a bankruptcy notice issued against Mr O'Brien. The bankruptcy notice called on him to pay within 21 days of service the amount claimed to be owing, $243,382.59, as shown in the schedule. The schedule is as follows: "COLUMN 1 COLUMN 2