FEDERAL COURT OF AUSTRALIA Sharples v O'Shea [2001] FCA 1863 TERRY PATRICK SHARPLES v DESMOND J. O'SHEA No Q 7022 of 2001 SPENDER J BRISBANE 13 DECEMBER 2001 IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY Q 7022 OF 2001 BETWEEN: TERRY PATRICK SHARPLES APPLICANT AND: DESMOND J. O'SHEA RESPONDENT JUDGE: SPENDER J DATE OF ORDER: 13 DECEMBER 2001 WHERE MADE: BRISBANE THE COURT DECLARES THAT: On 19 November 2001 any right to payment of the judgment debt claimed in the bankruptcy notice was converted into a right to claim in the estate of the bankrupt, with the consequence that the bankruptcy notice lapsed on that date. THE COURT ORDERS THAT: The applicant pay the respondent's costs of and incidental to the applicant's application up until 19 November 2001, and that thereafter in these proceedings there be no order as to costs. Those costs are to be taxed if not agreed. 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 7022 OF 2001 BETWEEN: TERRY PATRICK SHARPLES APPLICANT AND: DESMOND J. O'SHEA RESPONDENT JUDGE: SPENDER J DATE: 13 DECEMBER 2001 PLACE: BRISBANE REASONS FOR JUDGMENT 1 On 9 July 2001, Mr Ned Kelly, whose name then was Terry Patrick Sharples, filed a document in the Federal Court which was headed "Q7022/01 Re: Terry Patrick Sharples A Debtor Ex Parte: Terry Patrick Sharples Applicant Desmond J. O'Shea Respondent" and the document had the heading "Details of Claim" and said amongst other things: "On the grounds stated in the accompanying affidavit sworn by the applicant claims or seeks the following orders: That the applicant has a counterclaim, set-off or cross-demand equal to or greater than the debt claimed by the respondent." 2 The Court should construe that document benevolently in the circumstances later disclosed. The respondent, Desmond J. O'Shea, was the Australian Electoral Commissioner who had issued a bankruptcy notice dated 4 June 2001. The bankruptcy notice was a 21 day notice which claimed an amount of $3656.38 as the amount of the judgment order on which the bankruptcy notice was based. The date of the order was said to be 22 February 2000. Paragraph 7 provided: "In addition, within the time specified in paragraph 3 above you may file an application to the Court for an order to set aside this Bankruptcy Notice on the specific grounds that: (a) you have a counter-claim, set-off or cross demand equal to or exceeding the sum specified in this Bankruptcy Notice as owing to the creditor; and (b) in the action or proceeding in which the judgment or order mentioned in paragraph 2 of the Bankruptcy Notice was obtained, you could not have set up that counterclaim, set-off or cross demand." Paragraph 8(b) provided: "If you file, at the Court an application mentioned in paragraph 7(a) you need not comply with this Bankruptcy Notice until the Court decides whether you have grounds for a counter-claim set off or cross demand. Whether you will have to comply at that stage will depend on the Court's decision." (Original emphasis) 3 The $3656.38 was the consequence of an order made by the Court of Appeal of the Supreme Court of Queensland constituted by De Jersey CJ, Davies JA and Demack J who on 8 June 1999 dismissed an appeal by the present applicant with costs. That costs order was assessed by Senior Deputy Registrar Houghton on 22 February 2000 who made the order by the Court that the costs were assessed at $3656.38. The matter which Mr Kelly wished to rely on as constituting a cross-claim or a counter claim set off or cross demand equal to, or exceeding, the amount claimed in the bankruptcy notice is said to be an entitlement of an amount for election funding reimbursement from the Electoral Commission. 4 The Electoral Commission of Queensland had on 16 May 2001 written to the applicant. That letter says, in part: "I am satisfied that had you stood as an independent candidate for the Queensland General Election held on 13 June 1998 you would have been entitled to a maximum of $4998.68 for election funding reimbursement from the Electoral Commission..." The letter continued, however, later in the following terms: "As you are aware, you have been ordered on a number of occasions to pay the costs of the Electoral Commissioner in legal proceedings. The following costs orders have been assessed as follows: 1. Order made 22 February 2000 assessed in the sum of $4,440.85; 2. Order made 22 February 2000 assessed in the sum of $3,656.38; and 3. Order made 4 April 2001 in the sum of $2,772 (formalizing the agreement reached between the parties to settle the costs). Demands for payment in respect of these costs orders have been made upon you on my behalf by the Crown Solicitor. Despite demands, you have not paid any of the moneys owed pursuant to those costs orders..." The Electoral Commissioner then claimed: "You owe the Electoral Commission the sum of $10,869.23 pursuant to the three costs orders which have already been assessed" and later - "The amount you owe the Electoral Commission in respect of the three assessed costs orders clearly exceeds the maximum amount of $4998.68 which you have substantiated as your election campaign expenditure." The letter then concluded: "In consideration of these matters I am not prepared to make an ex gratia payment to you." 5 The contention by Mr Kelly would have been that his claim for the admitted amount of $4998.68 exceeds the amount claimed in the bankruptcy notice, and therefore, pursuant to the Bankruptcy Act, he would be entitled to have the bankruptcy notice set aside. One can anticipate, however, that the Commissioner would have argued that the bankruptcy notice ought not be set aside, because the effect of s 41(7) of the Bankruptcy Act is to prevent a debtor being exposed to the possibility of committing an act of bankruptcy where there is a positive balance in his favour when an account is taken between the creditor and the debtor. 6 The competing contentions raise the interesting, but in this case, academic matter of whether one has regard simply to the amount in the bankruptcy notice and to the amount which is said to be the amount of the cross claim or whether one has to look at the matter more broadly, both from the point of view of what the creditor claims is owed by the debtor to it, or to him, and what the debtor claims is owed by the creditor to the debtor. 7 The application commenced by the filing of the document on 9 July 2001 proceeded in the Federal Court and was the subject of directions hearings and the filing of affidavit material on both sides. The present status of that litigation, however, has become complicated by the fact that on 19 November 2001 a debtor's petition on behalf of the present applicant was accepted. 8 The effect of that acceptance was that the Commissioner no longer had the right to claim the sum claimed in the bankruptcy notice as a debt, but that his rights in that respect were converted to a right to prove in the bankruptcy. 9 Similarly, any right the debtor had to bring a claim in the sum of $4998.68 against the Commissioner, being the entitlement which the debtor says he had for electoral compensation (although his claim may in fact be for more than that sum) was converted then to a right exercisable at the option of the trustee of the bankrupt by the trustee, for the benefit of the creditors of the bankrupt. In the administration of the bankruptcy in the ordinary course, it will be necessary for the question of proof of the various costs order sums which the Commissioner claims against the bankrupt to be considered, as well as the possibility of set off of any sums owed by the Commissioner to the bankrupt; that is a matter in the administration of the estate. 10 It follows that the questions which the applicant had raised by his document filed 9 July 2001 are moot. In the circumstances which I have outlined above and for the reasons which I have attempted to indicate, it seems to me that the appropriate order to make is to declare that on 19 November 2001 any right to payment of the judgment debt claimed in the bankruptcy notice was converted into a right to claim in the estate of the bankrupt, with the consequence that the bankruptcy notice lapsed on that date. That declaration makes it plain that there has not been any act of bankruptcy committed by the present applicant in respect of the bankruptcy notice served on him on 18 June this year. 11 The outstanding matter in respect of the present proceedings is the question of costs. Notwithstanding that the question of the existence of a counter claim set off a cross demand within s 41(7) was sought to be raised by the applicant in his initiating document in the Federal Court proceedings, that matter has, for the reasons that I've indicated, been overtaken as a consequence of the presentation by the present applicant of his debtor's petition. Notwithstanding submissions by Mr Kelly to the contrary, it seems to me that a fair order as to costs in respect of these proceedings Q7022 of 2001 is to order that the applicant pay the respondent's costs of and incidental to the applicant's application up until 19 November 2001, and that thereafter in these proceedings there be no order as to costs. Those costs are to be taxed if not agreed. 12 The utility of any taxation of course is a matter for the respondent, but it seems unlikely that there will be any commercial utility in the taxation of the costs that I have ordered in these proceedings. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Spender. Associate: Dated: 21 December 2001 The Applicant appeared in person For the Official Receiver: Mr Robert Tom Solicitor for the Respondent: Ms Tracey Jackson, Crown Solicitor's Office Date of Hearing: 13 December 2001 Date of Judgment: 13 December 2001