FEDERAL COURT OF AUSTRALIA Tu v Chang (No 2) [2016] FCA 1568 File number: NSD 927 of 2016 Judge: BROMWICH J Date of judgment: 22 December 2016 Catchwords: BANKRUPTCY AND INSOLVENCY – application to set aside bankruptcy notice – "counter-claim, set-off or cross demand" pursuant to ss 40(1)(g) and 41(7) of the Bankruptcy Act 1966 (Cth) – supplementary ground raised that the judgment upon which the bankruptcy notice was issued was invalid due to inclusion of filing fee so as to render bankruptcy notice invalid – held: bankruptcy notice was valid pursuant to s 306(1) of the Bankruptcy Act 1966 (Cth) – held: "counter-claim, set-off or cross demand" established – held: application to set aside bankruptcy notice allowed with costs Legislation: Bankruptcy Act 1966 (Cth), ss 40(1)(g), 41(5), 41(6), 41(6A), 41(7), 306, 306(1) Bankruptcy Regulations 1996 (Cth), reg 4.02, Sch 1 Civil Procedure Act 2005 (NSW), s 133 Civil Procedure Regulations 2012 (NSW), cl 7(1), Sch 1 Legal Profession Act 1987 (NSW), ss 208J(3), 208JA(4) Legal Profession Act 2004 (NSW), ss 368, 368(5), 369, 369(7) Uniform Civil Procedure Rules 2005 (NSW), rr 36.10, 36.11 Cases cited: Adams v Lambert [2006] HCA 10; (2006) 228 CLR 409 Coshott v Barry [2015] NSWCA 257; (2015) 91 NSWLR 1 Croker v Commissioner of Taxation [2005] FCA 127; (2005) 145 FCR 150 Cumins v Deputy Commissioner of Taxation [2008] FCAFC 185; (2008) 172 FCR 425 Dennis v Miller [2012] FMCA 25; (2012) 257 FLR 64 Ebert v The Union Trustee Company of Australia Limited [1960] HCA 50; (1960) 104 CLR 346 Gomez v State Bank of New South Wales Limited [2002] FCAFC 101 sub nom Gomez v State Bank of New South Wales Limited [2002] FCA 442 Harman v Secretary of State for the Home Department [1983] 1 AC 280 Hearne v Street [2008] HCA 36; (2008) 235 CLR 125 Hussain v King Investment Solutions Pty Ltd [2006] FCA 905; (2006) 153 FCR 428 Lord & Anor v Rankine & Ors [2010] FMCA 668 Nugawela v Deputy Commissioner of Taxation [2016] FCAFC 164 Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 Rankine v Lord [2011] FCA 478; (2011) 121 ALD 258 Re Brink; Ex parte The Commercial Banking Company of Sydney Ltd [1980] FCA 78; (1980) 30 ALR 433 Re Judd; Ex parte Pike (1924) 24 SR (NSW) 537 Re Walsh (1982) 65 FLR 87 Seovic Civil Engineering Pty Ltd v Groeneveld [1999] FCA 255; (1999) 87 FCR 120 Stec v Orfanos [1999] FCA 457 The Australian Steel Company (Operations) Pty Ltd v Lewis [2000] FCA 1915; (2000) 109 FCR 33 Wende v Howarth (No 2) [2015] NSWCA 416; (2015) 91 NSWLR 588 Murray M and Harris J, Keay's Insolvency: Personal and Corporate Law and Practice (9th ed, Lawbook Co., 2016) Date of hearing: 20 October 2016 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Category: Catchwords Number of paragraphs: 91 Counsel for the Applicant: Mr M Klooster Solicitor for the Applicant: Shaw McDonald Lawyers Counsel for the Respondent: Mr G McDonald Solicitor for the Respondent: CCSG Legal Pty Ltd ORDERS NSD 927 of 2016 BETWEEN: DAT QUYEN TU BY HIS LITIGATION REPRESENTATIVE THE NSW TRUSTEE & GUARDIAN Applicant AND: LAI WAH CHANG Respondent JUDGE: BROMWICH J DATE OF ORDER: 22 December 2016 THE COURT ORDERS THAT: 1. The application be allowed. 2. Bankruptcy notice number BN 190586 issued 3 May 2016 addressed to Mr Dat Quyen Tu be set aside. 3. The respondent pay the applicant's costs of and incidental to the application, without any apportionment or reduction as to costs of the unsuccessful ground in the application. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT BROMWICH J: 1 This is an application to set aside a bankruptcy notice which the respondent, Ms Lai Wah Chang, caused to be issued on 3 May 2016 and served on the applicant, Mr Dat Quyen Tu. Mr Tu claims that the bankruptcy notice should be set aside upon two independent grounds, namely: (1) the bankruptcy notice fails to comply with ss 40(1)(g), 41(1)(a) and 41(3)(a) of the Bankruptcy Act 1966 (Cth) because the certificate of costs upon which it relies entered in Campbelltown Local Court incorrectly reflects the operation of s 368 [certificate as to determination of costs, and s 369, costs of costs assessment] of the Legal Profession Act 2004 (NSW) (LPA 2004) by including a non-recoverable filing fee of $88 so as to be invalid for bankruptcy purposes; and (2) he has a "counter-claim, set-off or cross demand" (offsetting claim) which exceeds the amount specified in the bankruptcy notice: ss 40(1)(g) and 41(7) of the Bankruptcy Act. 2 Because a part of the application raises an offsetting claim, and that application was made prior to the expiry of the time for compliance with the bankruptcy notice, the time for compliance is automatically extended to the date of judgment by the operation of s 41(7) of the Bankruptcy Act. Accordingly, no act of bankruptcy has occurred. 3 For the reasons that follow: (1) the first ground must fail because the defect relied upon by Mr Tu does not invalidate the bankruptcy notice; (2) the second ground must succeed because Mr Tu has established that he has an offsetting claim with sufficient prospects of success which exceeds the amount specified in the bankruptcy notice; (3) the application must be allowed by reason of Mr Tu's success on the second ground, and therefore the bankruptcy notice must be set aside; and (4) Ms Chang must pay Mr Tu's costs of and incidental to the application, without any reduction or apportionment in respect of the unsuccessful ground in that application. Ground 1: alleged invalid statement of the judgment debt 4 The debt upon which the bankruptcy notice issued was based on costs orders made on 15 August 2012 in Ms Chang's favour in failed District Court proceedings brought against her by Mr Tu in 2010. The costs incurred were subject to a process of assessment and the issuing, on 18 January 2016, of two certificates for Ms Chang's costs of the proceedings and for the costs of assessment, following an assessor's costs determination (with written reasons). The two certificates were formally entered as orders on 4 February 2016. There is no outstanding dispute as to the making of that costs order or of the assessment and certification of their quantum. 5 This ground turns on the resolution of a dispute about the validity of the "judgment/order" that was entered (and issued and annexed to the bankruptcy notice) consequent upon the filing of those costs certificates, both in terms of its legal effectiveness in its own right, and in terms of its impact on the validity of the bankruptcy notice that relies upon it. Legislative framework and administrative process 6 Costs certificates, upon filing in a court having jurisdiction to order payment of that amount of money, are taken to be a judgment of that court for the amount of the unpaid costs of the claim and the unpaid costs of the costs assessment: ss 368(5) and 369(7) of the LPA 2004, reproduced below. Judgment can then be entered administratively without any further step being taken. 7 The LPA 2004 was repealed with the commencement of the Legal Profession Uniform Law (NSW), but the operation of ss 368 and 369 was preserved in transitional provisions in relation to costs orders made before repeal, as in this case. The terms of ss 368(5) and 369(7) are relevantly the same as the terms of ss 208J(3) and 208JA(4) respectively of the Legal Profession Act 1987 (NSW) (LPA 1987). Section 208J(3) is the provision considered in a number of the authorities referred to below. The reasoning of those cases in relation to s 208J(3) (and thus s 208JA(4)) of the LPA 1987) therefore applies equally to ss 368(5) and s 369(7) of the LPA 2004. 8 Section 368(5) of the LPA 2004 dealing with costs assessment certificates (as continues to apply to these proceedings) was as follows: In the case of an amount of costs that has not been paid, the certificate is, on the filing of the certificate in the office or registry of a court having jurisdiction to order the payment of that amount of money, and with no further action, taken to be a judgment of that court for the amount of unpaid costs, and the rate of any interest payable in respect of that amount of costs is the rate of interest in the court in which the certificate is filed. 9 Section 369(7) of the LPA 2004 dealing with certificates for the costs of a costs assessment (as also continues to apply to these proceedings) was as follows: The certificate is, on the filing of the certificate in the office or registry of a court having jurisdiction to order the payment of that amount of money, and with no further action, taken to be a judgment of that court for the amount of unpaid costs. 10 Civil procedure legislation in New South Wales creates a regime for filing costs assessor's certificates and entering judgments based on such certificates in s 133 of the Civil Procedure Act 2005 (NSW) (CPA) and rr 36.10 and 36.11 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) as follows: (1) Section 133 of the CPA provides as follows 133 Judgments and orders unenforceable until entered (1) A judgment or order of the court may not be enforced until it has been entered in accordance with the uniform rules. (2) This section extends to: (a) any judgment, order, determination or decree of a court, and (b) any adjudication or award of a person having authority to make an adjudication or award, that may be filed or registered in the court, or of which a certificate may be filed or registered in the court, under any other Act or law. (3) In subsection (2), law includes: (a) a law of the Commonwealth, and (b) a law of another State or Territory, and (c) in relation to the Supreme Court, a law of a foreign country. (2) Rules 36.10 and 36.11 of the UCPR relevantly provided as follows: 36.10 Filing of cost assessors' certificates (1) A cost assessor's certificate: (a) may be filed in the proceedings to which it relates, or (b) may be filed in fresh proceedings, whether in the same court or another court. (2) A number of certificates may be filed together under subrule (1) if each of the certificates: (a) relates to the same costs assessment, and (b) requires the same person or persons to pay costs. … 36.11 Entry of judgments and orders (1) Any judgment or order of the court is to be entered. (2) Unless the court orders otherwise, a judgment or order is taken to be entered when it is recorded in the court's computerised court record system. (2A) If the court directs that a judgment or order be entered forthwith, the judgment or order is taken to be entered: (a) when a document embodying the judgment or order is signed and sealed by a registrar, or (b) when the judgment or order is recorded as referred to in subrule (2), whichever first occurs. (3) In this rule, a reference to a judgment or order of the court includes a reference to any judgment, order, determination, decree, adjudication or award that has been filed or registered in the court, or of which a certificate has been filed or registered in the court, as referred to in section 133(2) of the Civil Procedure Act 2005. (4) This rule does not limit the operation of rule 36.10. 11 It is important to note that on the face of ss 368(5) and 369(7) of the LPA 2004 (as preserved by the transitional provisions), deemed judgment takes effect upon the filing of the certificate of costs, not upon any subsequent entry or issue of any document reflecting that procedure having been adopted. However for the purposes of enforcement, including for bankruptcy purposes, the additional step of entry and issue of the document reflecting the deemed judgment is needed. For bankruptcy proceedings, ordinarily a supporting document needs to be annexed to the bankruptcy notice in order to satisfy the requirement of demonstrating the existence of an enforceable judgment. Entry of judgment on a filed certificate is a "ministerial act", with s 133 of the CPA and the parallel provisions of the UCPR reproduced above giving effect to the deeming of such a certificate to be a judgment: Wende v Howarth (No 2) [2015] NSWCA 416; (2015) 91 NSWLR 588 at 597-8 [39] (citing Handley AJA in Frumar v The Owners of Strata Plan 36957 [2010] NSWCA 172 at [42]); see also Coshott v Barry [2015] NSWCA 257; (2015) 91 NSWLR 1 at 10 [33]. 12 A deemed judgment of a court entered (and thereupon issued) in reliance on ss 368(5) and 369(7) of the LPA 2004, together with s 133 of the CPA and rr 36.10 and 36.11 of the UCPR, is not the product of adjudication by any judicial officer, or even by a registrar or anyone else at a court, but rather a statutory and administrative process, also described as noted above as a "ministerial act". However so described, it is not a judicial act. As such, the entry is a "mere clerical entry in the records of that court", not an order pronounced or a judgment given, even though taken to be a judgment of that court: see Croker v Federal Commissioner of Taxation [2003] FCAFC 23; (2003) 52 ATR 226 (Croker Full Court) at 230 [10], extracts from which are reproduced below. As Croker Full Court was concerned with different legislation and facts, it is a case relevant to principles, rather than outcome. Costs certificates, judgment/order and bankruptcy notice in these proceedings 13 The administrative process described in the legislative framework above is precisely what happened here. However in addition simply to recording the amount of the unpaid costs in the two costs certificates (as to which no issue is taken), an amount of a filing fee of $88 for the costs certificates was added to the judgment debt in the judgment/order document issued by Campbelltown Local Court on 17 March 2016, as the following demonstrates. 14 The judgment/order issued by the registrar of Campbelltown Local Court contained the following in the text of Form 43 (a form that does not prescribe or otherwise require, authorise or prohibit any particular information to be entered under the "terms of judgment/order" section reproduced below): TERMS OF JUDGMENT/ORDER Judgment: Dat Quyen TU, First Defendant [sic] is to pay Lai Wah CHANG, First Plaintiff [sic] the sum of Claim amount: $59638.07 Interest claimed: $0.00 Filing fees: $88.00 Service fees: $0.00 Solicitors fees: $0.00 Other costs: $0.00 TOTAL: $59726.07 15 The bankruptcy notice was issued in accordance with Form 1 to the Bankruptcy Regulations 1996 (Cth). The table in Form 1 provides for the listing of what is claimed beneath the fields for the creditor's name and address. That list, with a field for each list item where the amount is to be entered, was completed as follows: 1. Amount as per the attached final judgment/s or final order/s (note A) $59,638.07 2. Add legal costs (note B) $0.00 3. Add interest accrued since date of judgment/s or order/s (note C) $0.00 4. Subtotal (1 + 2 + 3) $59,638.07 5. Less payments made and/or credit allowed since judgment/s or order/s $0.00 6. TOTAL DEBT AMOUNT (4 - 5) $59,638.07 Notes A. [foreign currency calculations not relevant to these proceedings] B. Where legal costs are being claimed (and a specific amount was not included in the judgment/s or order/s), a certificate of taxed or assessed costs in support of the amount claimed is attached. C. Where interest is being claimed, the provisions under which it is claimed and the basis of its calculation are shown in the attached interest schedule. If no interest is claimed the creditor need not attach the schedule to this notice. 16 It may immediately be observed by a comparison between the judgment/order document entered and issued by the Campbelltown Local Court and the bankruptcy notice itself issued in reliance upon that document that the bankruptcy notice sought payment of the costs claim amount only of $59,638.07, and not for the filing fee of $88 added to the total in the judgment/order document. Thus no one looking at the face of the bankruptcy notice could seriously have thought that payment of the filing fee was being sought, or that such payment would be required to satisfy the bankruptcy notice. 17 This way of completing the Form 1 bankruptcy notice is in keeping with its structure, which refers to an amount claimed as per the attached final judgment or order, rather than necessarily confining its operation to the total amount recorded in such a judgment or order. Indeed it specifically contemplates that there may be a judgment which either distinguishes the amount for the claim and a separate amount for legal costs, or conversely, awards legal costs without quantifying them. The Form 1 bankruptcy notice identifies those separate items sought to be relied upon and for which payment is required to satisfy the bankruptcy notice. 18 The focus contemplated by the Form 1 bankruptcy notice is in identifying precisely what part of a judgment or order the creditor wishes to pursue. It might, for example, be thought that a costs order was too small, or too contentious, to be worth pursuing. Interest is often, as in this case, not pursued, perhaps because of the difficulties in calculation and the consequent risk of error. 19 The Form 1 bankruptcy notice also contemplates that the amount within a judgment or order may be adjusted by reason of payments or credits, in which case payment of the full amount stated in the judgment or order is not sought by the bankruptcy notice. If a judgment or order does not specify an amount for legal costs, a certificate of taxed or assessed costs must be attached. This means that the existence of a judgment or order for costs is not essential for bankruptcy purposes as a certificate of taxed or assessed costs may suffice, albeit conditioned upon the absence of a separate itemisation of costs in the judgment or order that is available. Inclusion of the filing fee in the judgment/order and issues arising 20 For reasons discussed below, it was common ground that the filing fee paid by Ms Chang could not be claimed by her against Mr Tu because there was no provision which allowed for it to be recovered from a debtor. Schedule 1, Part 5, item 3 of the Civil Procedure Regulations 2012 (NSW) provides the amount of the fee payable for registration of costs certificates; and cl 7(1) of those regulations provides that the fee is payable by the person at whose request such documents are filed, but no provision takes the additional step of making that fee recoverable from a debtor. 21 However, importantly, as the above also makes clear, the bankruptcy notice itself only carried forward the judgment/order amounts for the costs awarded, and did not include the filing fee arising from the two certificates being filed in Campbelltown Local Court. The inclusion of the $88 filing fee was apparently, and accepted by Ms Chang to be, beyond the power of the entering and issuing registrar of Campbelltown Local Court. 22 This ground therefore raises whether the inclusion of the filing fee beyond power rendered invalid ab initio the entire judgment/order administratively issued by Campbelltown Local Court consequent upon the filing of the two cost certificates, or whether it was merely a formal defect or an irregularity not occasioning any injustice at all, let alone substantial injustice, so as to be protected from invalidity by s 306 of the Bankruptcy Act. The live issues thereby arising for consideration in resolving this ground are: (1) whether inclusion of the filing fee made the judgment entered (and issued) in reliance on the valid costs certificates invalid; (2) if so, whether such invalidity made the bankruptcy notice prima facie defective; and (3) if so, whether such a defective bankruptcy notice was able to be rescued from invalidity by the operation of s 306(1) of the Bankruptcy Act. Claimed invalidity of judgment entered and resulting claimed defective bankruptcy notice 23 It is convenient to deal with the first two issues together because they are inter-related. 24 The abovementioned common ground between the parties of the filing fee not being payable by Mr Tu was based on decisions of two magistrates of the former Federal Magistrates Court of Australia (now the Federal Circuit Court of Australia) in relation to s 368(5) of the LPA 2004: Lord & Anor v Rankine & Ors [2010] FMCA 668 at [10]-[15] (Lord v Rankine) and Dennis v Miller [2012] FMCA 25; (2012) 257 FLR 64 at 68 [9], 71-2 [16]-[20]. Those two cases in turn were based upon a decision of this Court dealing with the prior equivalent provision in s 208J(3) of the LPA 1987, being a subsequent case involving Mr Croker: Croker v Commissioner of Taxation [2005] FCA 127; (2005) 145 FCR 150 (Croker per Hely J) at 153 [14]-[15]. Lord v Rankine was upheld on appeal by Marshall J in Rankine v Lord [2011] FCA 478; (2011) 121 ALD 258 at 264 [38]-[40]. 25 Mr Tu alleges that the judgment is invalid because the Local Court registrar had no power to add the amount of $88 to the judgment debt amount. While the bankruptcy notice correctly excluded the filing fee in the amount demanded, it still claimed an amount exceeding the "true indebtedness" of Mr Tu under the costs order as quantified by the cost assessment certificates. 26 Ms Chang advances s 41(5) of the Bankruptcy Act as a preliminary barrier to Mr Tu advancing this ground at all. That provisions is as follows: (5) A bankruptcy notice is not invalidated by reason only that the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due, unless the debtor, within the time allowed for payment, gives notice to the creditor that he or she disputes the validity of the notice on the ground of the misstatement. 27 In Seovic Civil Engineering Pty Ltd v Groeneveld [1999] FCA 255; (1999) 87 FCR 120 it was stated at 130: 40 … a debtor's notice which wrongly identifies a misstatement in the bankruptcy notice, and does not provide sufficient information to enable the true misstatement (if any) to be identified by the creditor, does not comply with s 41(5) of the Bankruptcy Act. 28 If, contrary to Mr Tu's primary position outlined below, notice under s 41(5) was required, Mr Tu relies upon notice having been given to Ms Chang that he disputed the validity of the bankruptcy notice on the ground of the misstatement relied upon. In Hussain v King Investment Solutions Pty Ltd [2006] FCA 905; (2006) 153 FCR 428, Gyles J at 433-4 [20] observed that s 41(5) is silent as to the method of giving notice and his Honour could see no reason why it could not be done by service of an application to set aside the bankruptcy notice. I see no reason to doubt the correctness of that conclusion, and propose to treat the application as constituting such notice if required, supplemented if necessary by the written submissions for Mr Tu filed well before the hearing date, and within the period for compliance with the bankruptcy notice by reason of the automatic extension of time created by the operation of s 41(7). 29 The words in s 41(5) are capable of being given too much weight or too little. They neither protect all misstatements, nor operate on the presumption that all misstatements are fatal. As was pointed out in Re Walsh (1982) 65 FLR 87 at 92, in a passage recently endorsed by the Full Court in Nugawela v Deputy Commissioner of Taxation [2016] FCAFC 164 at [24], those provisions (ss 41(5) and 41(6)) operate to: … save some bankruptcy notices from what otherwise would be invalidity, but the subsections are not based on an assumption that overstatement necessarily leads in every case to invalidity of the bankruptcy notice. It does where, but only where, the debtor could be reasonably misled by the overstatement. 30 Even if sufficient notice has been given for the purposes of s 41(5), Mr Tu has a more fundamental problem in this respect because the bankruptcy notice itself does not meet the s 41(5) description of "the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due" because on its face it is confined to the amount that is in fact agreed to be due. The error contained in the attached judgment/order issued by a registrar at Campbelltown Local Court is not such as to suggest that the greater sum in that document including the filing fee was being sought to be paid by the bankruptcy notice. 31 Mr Tu's principal contention is that s 41(5) of the Bankruptcy Act has no application because this is not a defect that can be saved by that provision because it concerns an objection to the amount stated in a bankruptcy notice based on an assertion that the bankruptcy notice overstates the true amount outstanding under the judgment relied upon, whereas his argument asserts invalidity independently of the amounts involved. Reliance is placed on Croker Hely J, and also Lord v Rankine and Dennis v Miller cited above which followed Croker Hely J. In Croker Hely J it was stated at 153: 14 When a certificate is filed with the Local Court, the Local Court does not adjudicate upon anything. The records of the Local Court either correctly reflect the operation of s 208J(3) of the LPA in the circumstances of the case or they do not. If they do not, then the issue of a "certificate of judgment" which incorrectly reflects the operation of s 208J(3) is devoid of any legal effect. 32 The reference in the above quote to "s 208J(3) of the LPA" is a reference to s 208J(3) of the LPA 1987. As noted above, that provision was re-enacted in relevantly identical terms in the provision relied upon for the issue of the present judgment/order, being s 368(5) of the LPA 2004. 33 Croker Hely J further stated at 153: 15 Mr Melrose conceded that Mr Croker had given notice to the Commissioner in accordance with the provisions of s 41(5) of the Bankruptcy Act 1966 (Cth), but submitted that the bankruptcy notice should not be set aside because it was not likely to mislead, as Mr Croker was aware of the error. However, in Walsh v Deputy Commissioner of Taxation (Cth) (1984) 156 CLR 337 Gibbs CJ (with whom the other members of the Court agreed) said (at 339): There is no doubt that a bankruptcy notice will be invalid if the sum specified in the notice as the amount due to the creditor exceeds the amount for which the creditor is entitled to issue execution, provided that the debtor gives timely notice under s 41(5) of the Bankruptcy Act 1966 (Cth), as amended, that he disputes the validity of the notice on that ground. 16 Mr Melrose relied upon the decision of the Full Court in Seovic Civil Engineering Pty Ltd v Groeneveld (1999) 87 FCR 120 as establishing that an overstatement of the amount due by the debtor will only lead to the avoidance of the bankruptcy notice if the overstatement could reasonably mislead the debtor. Whilst the authors of McDonald, Henry and Meek's Australian Bankruptcy Law and Practice (5th ed, 1996), assert (at [41.5.05]) that "suggestions" to that effect are to be found in the Full Court's decision in Seovic, a reading of the judgment does not support that proposition. Seovic does suggest that in order to comply with s 41(5), the debtor must provide sufficient information in the s 41(5) notice to enable the creditor to identify what is said to be the alleged misstatement (at 129). In the light of that requirement, a conclusion that Mr Croker cannot set aside the bankruptcy notice because he knew of the error which it contains would be decidedly odd. 34 Ms Chang initially asserted, in written submissions, that this Court did not have power to declare a judgment of a State court void and inoperative, and referred to s 41(6A) of the Bankruptcy Act by which an extension of time can be obtained pending the hearing of an application to set aside an adverse judgment. The first part of this submission was a "straw man" argument not advanced on behalf of Mr Tu: he was not seeking such a declaration of invalidity of a State court judgment and did not suggest that this Court had power to do any such thing. The second part of this submission is an irrelevancy given that there was no dispute about the entitlement of Ms Chang to move upon the certificates of costs in order to have a valid judgment or order issued upon which to ground the issue of a bankruptcy notice. 35 Mr Tu was in fact contending that a bankruptcy notice could not be issued upon the basis of the sum stated in that notice (taken as a whole to include attachments) in excess of the amount for which Ms Chang was entitled to and to that extent the judgment obtained may be devoid of any legal effect for bankruptcy purposes. As far as it goes, that is a correct statement of principle in light of the passages from Croker Hely J reproduced above, including the passage quoted from Walsh v Deputy Commissioner of Taxation, but it is conditioned upon consideration below of subsequent authority of the High Court in Adams v Lambert [2006] HCA 10; (2006) 228 CLR 409 and the terms of s 306 of the Bankruptcy Act. 36 It is clear that this Court can, and sometimes must, go behind a judgment upon which a bankruptcy notice is issued, including a judgment of a State court: see Cumins v Deputy Commissioner of Taxation [2008] FCAFC 185; (2008) 172 FCR 425 at 427-8 [7]-[10]. At the hearing it was made clear that Ms Chang was not arguing there was no power to examine whether the judgment/order was invalid for bankruptcy proceeding purposes, but rather that the power (or alternatively discretion) to do so could not, would not, or should not be triggered by a minor error. That was so whether relying on s 306(1) of the Bankruptcy Act, or upon discretionary factors in the authorities cited going to the willingness of this Court to intervene when there was "in truth and reality a debt due". It was asserted that there was "no principle that if a judgment is irregular, because it was entered for an excessive amount, the irregularity should necessarily invalidate subsequent bankruptcy proceedings". A court exercising bankruptcy jurisdiction, while able to go behind a judgment would not do so "if the grounds upon which the judgment is challenged are such that, if accepted, they would only support a finding that the amount of the debt would be reduced and would not support a finding that there was no debt at all". See Cumins at 427-8 [7]-[10]. 37 The arguments advanced on behalf of Mr Tu and Ms Chang give rise to this conundrum. Had the judgment/order issued by Campbelltown Local Court made no reference to any filing fee, but instead erroneously overstated the amount as against the costs certificates upon which it was based by an arithmetic error of $88, it is doubtful that this would have been a proper basis to set aside the bankruptcy notice in the absence of notice under s 41(5) of the Bankruptcy Act. It might not have been enough even if notice under s 41(5) had been given. However in this situation, express reference was made to the $88 filing fee, giving rise to the judgment/order total amount being overstated by that sum and for that reason. The bankruptcy notice itself only referred to the legitimate debt based on the costs certificates and did not include the $88 filing fee. Mr Tu's case is that the issue is not the amount, but the statutory power to issue the judgment/order at all with the filing fee included, whatever its amount. Mr Tu asserts that this is not a mere "formal defect or an irregularity" of the kind able to be disregarded in the proper application of s 306(1) of the Bankruptcy Act. Nor is it a mere matter of overstating the amount leaving a genuine debt to be paid. Rather it goes to the validity of issuing the judgment/order at all. Those arguments rely on Croker Hely J at [14], reproduced at [31] above. 38 Ms Chang relied upon an earlier case involving Mr Croker, being Croker v Federal Commissioner of Taxation [2002] FCA 1157; (2002) 50 ATR 617 at 622-3 [15]-[17]. However, that decision was overturned on appeal in Croker Full Court, specifically quoting one of the paragraphs relied upon by Ms Chang before deciding at 230: 10 The respondent's submissions rest on the false premise that the certificate of taxation issued by the High Court's taxing officer was registered in the Local Court. The respondent's lodgment of a certified copy of that certificate with the registrar of the Local Court was not authorised by s 105(1) of the Service and Execution of Process Act 1992 (Cth). The High Court is not a court of rendition for the purposes of s 105. The purported "registration" of such a certificate as a judgment by the registrar of the Local Court is a mere clerical entry in the records of that court. It is not an order pronounced or a judgment given by a superior court of record. Such an entry is invalid and of no effect. In other words, the registration is a nullity. Moore J erred in regarding such registration as effective until such time as it was set aside "as a judgment" of the Local Court. 11 In Re Bayliss (1971) 19 FLR 14 the Federal Court of Bankruptcy set aside a bankruptcy notice based upon a judgment said to have been registered under the predecessor of s 105 when it was not in fact so registered. In that case the clerical entry had not been made in the registry. In this case the clerical entry is completely ineffective in law. The consequence is that the bankruptcy notice relies upon a non-existent judgment of the Local Court with the result, as Sweeney J said in Bayliss at 16, that the bankruptcy notice "fails because a fact essential to its validity which it alleges to have existed did not in fact exist." The question whether to go behind any judgment simply does not arise in the present case. Re Ferguson; Ex parte E N Thorne & Co Pty Ltd (In Liq) (1969) 14 FLR 311 does not stand for a contrary proposition. In that case Gibbs J said, at 320: I say nothing as to the case in which, although the existence of a real debt is established, it is shown that the court which gave the judgment had no jurisdiction to pronounce it. 12 In any event, if we are wrong and there is a validly registered judgment in the Local Court, the bankruptcy notice must still be set aside. In The Australian Steel Company (Operations) Pty Ltd v Lewis (2000) 109 FCR 33 a majority of the full court held that it is an essential requirement of a bankruptcy notice, in which interest is being claimed, that it state the provision under which such interest could be validly claimed. Interest on the amount of a judgment registered under s 105(1) of the Service and Execution of Process Act 1992 (Cth) (which was not the case here) is payable pursuant to s 108 of that Act. Yet in this case, as appears from the terms of the attachment to the bankruptcy notice reproduced in [4] above, the respondent has wrongly claimed that interest is payable pursuant to s 39 of the Local Courts (Civil Claims) Act 1970 (NSW). 39 It should be noted that Croker Full Court at 230 [12] above, relying on The Australian Steel Company (Operations) Pty Ltd v Lewis [2000] FCA 1915; (2000) 109 FCR 33, is no longer good law following the High Court decision in Adams v Lambert, which at 412 [4]-[5] overruled Lewis on that specific point. This is considered in further detail below. 40 All bankruptcy notice cases which rely upon defects by way of misstatements need to be considered through the prism of Adams v Lambert. There is no point in citing or relying on pre-2006 authority if it is not checked to ensure it is compatible with the High Court's focus on substance rather than form. What emerges from Adams v Lambert includes the following. 41 When an error in a bankruptcy notice is proven, the issue is not merely whether a debtor could be misled, but whether a debtor could be misled as to what they had to do to satisfy the bankruptcy notice. In Adams v Lambert there was no doubt the debtor had to pay a sum which included post-judgment interest. The fact that a mistake had been made in referring to the wrong provision of the District Court Act was held to be covered by s 306(1) of the Bankruptcy Act 1966. The bankruptcy notice was misleading in form but not in substance, nor in what the debtor had to do, namely pay the judgment debt which included pre-judgment interest plus post-judgment interest. 42 It is not in doubt that the inclusion of the filing fee for the costs certificates reflected in the costs judgment/order administratively issued by Campbelltown Local Court was not authorised by s 368(5), or s 369(7), or any other provision of the LPA 2004, or any other provision able to be located by their Honours in Lord v Rankine or in Dennis v Miller. 43 There are therefore two cases decided by single judges of this Court essentially supporting Mr Tu's contention that inclusion of the filing fee in the judgment/order is beyond power so as render it invalid. Those cases also decide that this renders the bankruptcy notice upon which it is based invalid. I note however that Marshall J in Rankine v Lord followed Croker Hely J without any significant analysis, and his Honour did not apparently consider the impact of Adams v Lambert [2006] HCA 10; (2006) 228 CLR 409 and the terms of s 306 of the Bankruptcy Act in the context of the misstatement issue. While I am not bound by other single judge decisions, convention and comity dictates that I should follow them unless there is a good reason not to do so, such as considering that they are wrongly decided (not just that I might have decided them differently), or being able to distinguish them sufficiently upon a proper basis, or some combination of the two. 44 I consider that I should not follow the conclusion reached by Hely J for two reasons, one a marginal point of factual distinction, and the other more substantive one of principle based on developments in the law since his Honour's decision. First, in Croker Hely J, the error going to validity of including the filing fee was carried through to the bankruptcy notice itself, so that the amount required to be paid was incorrect. The demand to pay constituted by the bankruptcy notice was therefore misleading, albeit to a very minor degree, and moreover overstated the amount due, so as to trigger the application of s 41(5) of the Bankruptcy Act, a feature absent from this case. That on its own would not be enough to depart from his Honour's conclusion as to invalidity ab initio which undermined the judgment upon which the bankruptcy notice was based, but it is a relevant distinction when taken with the second and more substantial reason. 45 The second and more substantial reason lies in the High Court's decision in Adams v Lambert. Unfortunately, it means that I am forced to conclude that the decision of Hely J, upon whom Marshall J relied, can no longer be considered good law. That is not a conclusion to be reached lightly, especially in light of the respect Hely J continues to command. 46 Adams v Lambert on one view represents a significant and ahistorical shift in the approach to be taken when considering the validity of a bankruptcy notice. It involves a different focus on what kinds of otherwise invalidating defects can and cannot be cured by s 306(1). As the judgment of all seven judges in the High Court observed in Adams v Lambert at 421-2 [32]-[34], the critical issue in determining whether compliance with a particular requirement is made essential by the Bankruptcy Act, and thus whether non-compliance is more than a formal defect or an irregularity beyond the reach of s 306, is whether the debtor could have been misled as to what they had to do in order to comply with the bankruptcy notice. This approach accords with the very purpose of a bankruptcy notice of demanding a particular payment be made in a particular way if the step towards bankruptcy of an act of bankruptcy is to be avoided: see Adams v Lambert at 413 [11], see also 414 [14]-[15]. Section 306(1) of the Bankruptcy Act 47 Section 306(1) of the Bankruptcy Act provides as follows: 306 Formal defect not to invalidate proceedings (1) Proceedings under this Act are not invalidated by a formal defect or an irregularity, unless the court before which the objection on that ground is made is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court. 48 Section 306(1) excludes from consideration a defect or irregularity of such a nature that it cannot properly be characterised as merely formal: Adams v Lambert at 414-5 [18] and 418 [24]. But even if it is merely formal, if it results in substantial injustice protection from invalidity is not available. In this case there is no suggestion of any injustice from the inclusion of the filing fee, especially as it was not included in the bankruptcy notice itself. 49 Adams v Lambert made it clear at 421-2 [34] that the views expressed in Lewis attributed to the legislature an overwhelming preference for form over substance that should not be maintained. Section 306 "relieves against the invalidating consequences of some mistakes in the preparation of bankruptcy notices" in the absence of substantial injustice being caused: Adams v Lambert at 411 [1], 421-2 [34]. That is, s 306 was interpreted by the High Court in Adams v Lambert to operate in particular circumstances to relieve from the consequences of certain types and degrees of invalidity, rather than to say that such a basis for invalidity does not otherwise exist, provided there is no substantial injustice involved. Section 306 "assumes the possibility of some failure to comply with a statutory requirement; that is, some defect or irregularity" that is capable of invalidating a bankruptcy notice: Adams v Lambert at 415-6 [18], 420 [29]. That form of legislative device of forgiving certain otherwise fatal defects has a well-established jurisprudence in other areas of the law, including in particular criminal law in relation to defects in charges and indictments. 50 The determination of whether a defect or irregularity is merely formal may be easy, or may involve a difficult question of judgment: Adams v Lambert at 418 [25]. That paragraph acknowledges that there may be a defect which renders a bankruptcy notice a nullity that cannot be saved by s 306, the very point Mr Tu asserts in this case. The key concepts in bankruptcy are whether the requirement was made essential by the Bankruptcy Act; and whether it could reasonably mislead a debtor: Adams v Lambert at 418 [25], citing and quoting from Kleinwort Benson Australia Limited v Crowl (1988) 165 CLR 71 at 79. 51 As in Adams v Lambert, the second limb of misleading Mr Tu does not arise. The question of whether the requirement for a judgment annexed to a bankruptcy notice not to include a filing fee was made essential by the Bankruptcy Act involves the application of a version of Project Blue Sky reasoning: Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at 390-1 [93]. The litmus test derived from that reasoning is that the kind of misleading that takes a defect or irregularity outside the concept of being formal, and therefore beyond the reach of s 306, is not just that it is misleading – "any error is capable of misleading somebody about something" – but that it "mislead[s] a debtor about what is necessary to comply with the notice": Adams v Lambert at 419 [27]. However that reasoning only addresses the first limb from Kleinwort Benson. If the requirement was essential, s 306 cannot apply: Adams v Lambert at 419-420 [28]. 52 In Adams v Lambert, a process of statutory construction led to the conclusion that it was not essential that there be no misdescription of the provision under which interest was claimed contrary to an express requirement which could not be overlooked such as by substantial compliance (Adams v Lambert 417-8 [22]), especially as it was clear from the other parts of the notice (including attachments) that the claim was for post-judgment interest. That conclusion was reached by considering: (1) the terms of s 41(2) of the Bankruptcy Act, which simply state "The notice must be in accordance with the form prescribed by the regulations"; (2) the terms of reg 4.02 of the Bankruptcy Regulations 1996 (Cth), which provide as follows: (1) For the purposes of subsection 41(2) of the Act, the form of bankruptcy notice set out in Form 1 is prescribed. (2) A bankruptcy notice must follow Form 1 in respect of its format (for example, bold or italic typeface, underlining and notes). (3) Subregulation (2) is not to be taken as expressing an intention contrary to section 25C of the Acts Interpretation Act 1901. Note: Under section 25C of the Acts Interpretation Act 1901, where an Act prescribes a form, then, unless the contrary intention appears, strict compliance with the form is not required and substantial compliance is sufficient; see also paragraph 46(1)(a) of that Act for the application of that Act to legislative instruments other than Acts. (3) the contents of the form of the bankruptcy notice then in Form 1 in Schedule 1 to the Bankruptcy Regulations, a copy of which was reproduced in the majority reasons in Lewis at 37-40. 53 Adams v Lambert endorsed the dissenting views of Gyles J and Lee J in separate judgments in Lewis. Their Honours referred to the question by Gyles J as to "whether correct completion of the form prescribed in the regulations in every respect is a requirement made essential by the [Bankruptcy] Act", and said that it was not essential: Adams v Lambert at 421 [32]. Thus correctly stating the relevant interest provision, although a defect, was not essential and s 306(1) applied to avoid the notice being invalidated by failure to observe that requirement. 54 The same analysis here means that the starting proposition is that correct completion of the bankruptcy notice form in every respect is not essential, even if it falls short of substantial compliance. Whether a particular error was in breach of an essential requirement requires consideration of the basis for that requirement. The terms of s 41(2) of the Bankruptcy Act and reg 4.02 of the Bankruptcy Regulations have not changed since Adams v Lambert, but the form of the bankruptcy notice has changed. 55 In Cumins, the Full Court observed at 427 [7]: … A judgment is never conclusive in bankruptcy but the Court may accept the judgment as satisfactory proof of the petitioning creditor's debt. In that sense that Court has a discretion; it may or may not so accept the judgment. The question is whether there was in truth and reality a debt due to the petitioning creditor as claimed in the creditor's petition. Where substantial reasons are given for questioning whether behind the judgment there was in truth and reality a debt due to the petitioner, then the Court must go behind the judgment: s 52(1)(c) of the Bankruptcy Act 1966 (Cth) (the Act); Wren v Mahony (1972) 126 CLR 212 at 224-225. 56 Thus it may be seen that the issue is not whether there exists an order which has legal effect outside of bankruptcy, although that will be the usual and most dependable course, but whether there is in truth a debt due to the creditor. The fact of the existence of a debt owed by Mr Tu to Ms Chang was not in dispute. Indeed each certificate was itself, per ss 368(5) and 369(7) of the LPA 2004 "taken to be a judgment of [the Local] court for the amount of unpaid costs". The judgment or order obtained amounted to evidence that such a certificate existed, irrespective of the filing fee also referred to. 57 Applying the reasoning in Adams v Lambert, and starting from the binding conclusion in that case that the correct completion in every respect of the bankruptcy notice form prescribed was not essential, the particular respect relied upon by Mr Tu that the non-claimable filing fee item be excluded (or perhaps more precisely, not be included) was not essential, even though including it was not authorised. At least when such an error as claiming a filing fee is not carried through to a bankruptcy notice, its otherwise invalidating effect is neutralised by the operation of s 306(1). Arguably the same result would apply even if the error in the judgment was carried through to the bankruptcy notice, but it is not necessary to decide that. To the extent that inclusion of the non-claimable filing fee in the certificate but not in the bankruptcy notice itself was otherwise a source of invalidity, s 306(1) operated so that the bankruptcy notice taken as a whole with all of its annexures was not thereby invalidated. This basis for setting aside the bankruptcy notice therefore fails. 58 For completeness, I should observe that Hely J did not have regard to s 306(1) on this issue, probably because a long line of authority to that time, culminating in Lewis in 2000 only five years earlier, denied its application to such a situation. His Honour at 230 [12], immediately after the paragraph replied upon by Mr Tu expressly followed the then binding authority of Lewis on the very point reversed in Adams v Lambert, albeit in relation to another issue concerning interest, so was plainly cognisant of its meaning and impact. It is highly likely that Hely J would have come to different view had Adams v Lambert been decided at that time. 59 The dispute between the parties boils down to the question of whether the inclusion of the $88 filing fee denied Ms Chang the right to rely on the judgment debt for the issue of the bankruptcy notice. It is important to note again that the bankruptcy notice only referred to the judgment amount claimed of $59,638.07, excluding the $88. The critical question is whether Mr Tu has been misled as to what he has to do in relation to a real debt not in dispute. In my view, that question must be answered adversely to Mr Tu. This ground must fail. Ground 2: counter-claim, set-off or cross demand 60 It is worth briefly making some observations at the outset as to what the phrase "counter-claim, set-off or cross demand" in ss 40(1)(g) and 41(7) of the Bankruptcy Act means and also certain fundamental requirements of such an offsetting claim, including mutuality. 61 The clearest exposition of the meaning of the phrase "counter-claim, set-off or cross demand" that I have come across is from a textbook, and not from a case. In Keay's Insolvency: Personal and Corporate Law and Practice (Ninth edition) by Michael Murray and Jason Harris at page 97 [3.315] it is clearly and helpfully stated: In relation to the meaning of the three terms, "cross-demand" has a wider meaning than set-off and counter-claim. A set-off provides a defence to a claim, in that it diminishes or wipes out the amount claimed. A counter-claim is not a defence but because it directly answers the claim, it can result in relief being ordered in favour of the counter-claimant against the claimant. A cross-demand is neither a set-off nor a counter-claim, but a more general term describing a claim which can be specified and which equals or exceeds the amount of the judgment debt. 62 That clear exposition is in accordance with the long-standing and much cited statement in Re Judd; Ex parte Pike (1924) 24 SR (NSW) 537 at 539-540: There is no authority of which I am aware deciding what limits (if any) ought to be placed on the words "counter-claim, set-off or cross demand". I think that the Legislature by the word "counter-claim" probably referred to those claims which might be the subject of a counter-claim in equity and by the word "set-off" to those claims which might be the subject of a set-off at common law. The other term "cross-demand", however, is not a technical term and must in my opinion refer to claims other than those which would be comprised in the two expressions "counter-claim" and "set-off". Taking the ordinary meaning of the word itself, I can see no reason why "cross-demand" should not be held to include a claim for unliquidated damages for a tort. The case of Re Griffin; Ex parte Soutar (1 B.C. 29) shows that "cross-demand" includes a claim for unliquidated damages for breach of contract. In the case of Re Smyth; Ex parte North (3 B.C. 17) a common law action of Smyth v. North is referred to as constituting a cross-demand. I have sent for and perused the papers in this case and here again it appears that the cause of action was a claim for unliquidated damages for breach of contract. Two recent cases in England—In re G.E.B. ([1903] 2 K.B. 340) and In re A Debtor ([1914] 3 K.B. 726)—show that the cross-demand need not have any connection with the cause of action out of which the judgment debt arose—so much so, that a judgment debtor may even buy up a claim against the judgment creditor in order to have a "cross-demand". These cases are all in favour of an unrestricted meaning being given to the word. 63 It follows that the particular offsetting claim relied upon by Mr Tu may best be characterised as a "cross demand", or perhaps even a set-off, although nothing turns on this. These reasons will therefore continue to use the generic term offsetting claim as the relevant principles do not change according to the particular type relied upon. 64 A key aspect of the requirement of an offsetting claim is that it and the bankruptcy debt must be "mutual and due in the same right". As was stated by the Full Court in Stec v Orfanos [1999] FCA 457 at [24]: … Where a debtor seeks to set aside a bankruptcy notice on the ground that the debtor has a cross demand which equals or exceeds the amount of the judgment or order on which the bankruptcy notice is founded, the judgment on the one hand and the cross demand on the other must be mutual and due in the same right: Re Anderson; Ex parte Alexander (1927) 27 SR (NSW) 296; James v Abrahams (1981) 51 FLR 16 at 27. The requirement that the two claims be "in the same right" is directed to the capacities in which the claimants claim. Thus a claim by a judgment creditor personally cannot be answered by a claim against the creditor as a member of a partnership or as an executor or trustee. See Re Wedd; Ex parte Wedd (1961) 19 ABC 36; Re Molesworth (1907) 51 Sol J 653; Vogwell v Vogwell (1939) 11 ABC 83 at 89. But the requirement relevant to the present case is that the claims be mutual; that is that they be of the same kind or nature. Thus joint debts cannot be set off against several debts: Middleton v Pollock (1875) LR 20 Eq 515 at 518. … 65 Mr Tu contends that his offsetting claim substantially exceeds the costs debt by reason of Ms Chang's failure to honour a contractual obligation to repay to him the balance of a loan. The difference between what she claims by the bankruptcy notice and what he claims by way of repayment of the balance of the loan exceeds $200,000. On its face, that offsetting claim satisfies the requirement of mutuality. 66 In addition to that contractual claim, Mr Tu brings alternative actions in monies had and received and unjust enrichment, but that claim cannot be advanced by him alone and would have to include his ex-wife, which would then create problems with mutuality. It was common ground that I should confine this part of the application to the contract claim. 67 The problem for Mr Tu is that his contract claim has been dismissed in the District Court of New South Wales, a decision which he has appealed to the New South Wales Court of Appeal. I was told at the hearing that this appeal is listed for hearing on 3 February 2017. 68 Mr Tu filed and served a notice of intention to appeal to the Court of Appeal on 16 March 2016, six weeks before the bankruptcy notice was issued on 3 May 2016. A notice of appeal to the Court of Appeal was filed on 19 May 2016, two days before the bankruptcy notice was apparently served on Mr Tu. Ms Chang was not dissuaded by that pending appeal from pressing ahead with the bankruptcy notice. That was her right, but it was a course that always had the potential to carry consequences in relation to the bankruptcy notice being allowed to stand pending that appeal and any retrial. It also has a bearing on the question of costs as discussed below. 69 The contract claim sought to be re-litigated by Mr Tu against Ms Chang in the District Court of New South Wales plainly sounds in money and exceeds by a very considerable margin the judgment debt referred to above upon which the bankruptcy notice is founded. Indeed it exceeds as well the only other debt in evidence before me that would be provable in the event of bankruptcy, being a further sum of around $20,000 owed to Mr Tu's former solicitors. While it is not disputed that the contract claim itself sounds in money, one of the points made by Ms Chang is that this is too far removed to meet the description in ss 40(1)(g) and 41(7) of the Bankruptcy Act of being a "counter-claim, set-off or cross demand" equal to or in excess of the amount claimed by the bankruptcy notice because of the need: for Mr Tu to succeed in the Court of Appeal so as to secure a retrial in the District Court; and then for Mr Tu to succeed in the retrial. 70 Mr Tu's claim is that he could not have set up his offsetting claim in the action or proceeding in which the judgment or order was obtained because it was obtained ex parte by the administrative process described above. That contention was not disputed, such that this issue does not need to be considered further. 71 Ms Chang accepted that Mr Tu was correct in stating in his written submissions, supported by references to well-established authority, that he must satisfy this Court that he had a prima facie case for the offsetting claim relied upon even if he does not adduce evidence which would be admissible in a final hearing making out that case, that he has a fair chance of success or is fairly entitled to litigate his claim and that his claim is genuine or bona fide. The authorities cited by counsel for Mr Tu and accepted by counsel for Ms Chang include Ebert v The Union Trustee Company of Australia Limited (1960) 104 CLR 346 at 350 and Re Brink; Ex parte The Commercial Banking Company of Sydney Ltd (1980) 30 ALR 433 at 438, along with numerous cases that have followed that authority, including Gomez v State Bank of New South Wales Limited [2002] FCAFC 101 sub nom Gomez v State Bank of New South Wales Limited [2002] FCA 442 at [17]-[18]. 72 Re Brink at 438 is also accepted and much-cited authority to the effect that while this Court does not need to conduct a preliminary trial, there must be some kind of preliminary assessment falling short of a final determination. Mr Tu must satisfy the Court that there is sufficient substance to make it a case which he should, in justice, be permitted to have heard and determined in the usual way, rather than be forced to comply with the bankruptcy notice or commit an act of bankruptcy. 73 Mr Tu, having failed in an earlier District Court action commenced in February 2010 to recover the debt he claimed from Ms Chang (due, it seems, to not prosecuting his claim), which gave rise to the adverse costs order relied upon much later for the issue of the bankruptcy notice, commenced fresh proceedings in June 2014, also in the District Court (second proceedings). By the time the second proceedings came to trial, they were advanced by way of an amended statement of claim filed on 8 February 2016 in accordance with an order of a judicial registrar made on 5 February 2016. 74 The matter was listed for trial in the Sydney District Court on 18 February 2016. On that day the trial was listed before her Honour, Judge Gibb, the trial judge. The transcript reveals that her Honour appeared to take an immediately adverse view of Mr Tu's case and was highly critical of what seemed to be largely procedural matters and deficiencies, such as the processes involved in appointing a litigation guardian for Mr Tu (which I note was a procedure that took place at the commencement of the hearing in this case, albeit in response to an application filed at the outset: see the ex tempore judgment in Tu v Chang [2016] FCA 1567). Her Honour was critical of her fellow judges who had dealt with the matter in the past in terms of procedure, expressed in quite strong language. Her Honour refused what appeared to be quite reasonable applications and submissions made on behalf of Mr Tu in relation to those procedural issues. 75 One of the concerning aspects of the conduct of the hearing of the second proceedings in the District Court was that the trial judge insisted upon the statement of claim being re-filed at the hearing on 18 February 2016 due to formal steps to appoint a litigation guardian not having been taken earlier. While that appointment was an important procedural step and should have been attended to sooner, the approach taken by the trial judge seemed harsh and out of proportion to the real issues in dispute, especially as no point was taken about this not having happened sooner by Ms Chang (noting she was self-represented). There was no indication of any prejudice and no reason why such an appointment could not have been dealt with on the spot and made nunc pro tunc. 76 In significant part, the trial judge appeared to take the running of the case on behalf of Ms Chang, raising and determining legal and evidentiary issues on her own initiative. It seems that in part that was due to Ms Chang not being legally represented, but if so, that approach is out of step with authority in this area which makes it clear that an unrepresented litigant is not to be put at an advantage (or disadvantage) by the Court by reason of not having a lawyer. 77 Beyond those general observations, it is not appropriate for me to make any detailed comment about what transpired procedurally before the trial judge, save to observe that the summary dismissal of Mr Tu's case was at least unconventional. The above observations set the scene for her Honour's assessment of the evidence and assist in assessing Mr Tu's prospects of success on appeal, especially as numerous grounds of denial of procedural fairness and legal error are advanced. As there was no oral evidence before the trial judge I am at no disadvantage to her Honour in assessing the case presented and thereby the prospects of Mr Tu succeeding in the Court of Appeal and succeeding also in a retrial before a different judge in the District Court. 78 A critical aspect of the approach taken by the trial judge was a view that her Honour formed that the asserted loan from Mr Tu to Ms Chang was in fact a loan by both Mr Tu and his ex-wife, who was not a party to the proceedings. It seems that this was fatal to Mr Tu's case, although it is hard to be sure because her Honour's judgment is not before me and I am relying upon only the hearing transcript. That transcript does, however, reveal her Honour's thought processes. 79 Ms Chang's primary argument in this Court to challenge the application to set aside the bankruptcy notice is that the offsetting claim lacks mutuality because the debt upon which the bankruptcy notice is based is as between only Ms Chang and Mr Tu, whereas the offsetting claim is between both Mr Tu and his ex-wife as creditors and Ms Chang as debtor. 80 The principles in relation to mutuality, as set out above, are not in doubt, and Ms Chang's arguments would have real cogency if that was the case that Mr Tu sought to bring. However, that is not so. That was the argument which the trial judge sought to impose upon Mr Tu. It is not the case pleaded by Mr Tu in the amended statement of claim before her Honour. It is not the case that is being asserted in the Court of Appeal on behalf of Mr Tu. It is not to the point that counsel for Mr Tu, in what appears to have been an act of desperation in difficult circumstances, sought an adjournment towards the end of the second and final day of the hearing to obtain instructions as to whether to join Mr Tu's wife as a co-plaintiff. That adjournment request was refused. 81 This view of the case sought to be brought by Mr Tu in the District Court is supported by the evidence that was before the trial judge. In that regard it should be noted that at the hearing of this application, Ms Chang opposed the tender of her affidavits filed in the first and second District Court proceedings. That objection was based upon those affidavits not having been read or tendered in the District Court, so as to be bound by the usual implied undertaking precluding their use in other proceedings: Hearne v Street [2008] HCA 36; (2008) 235 CLR 125 at 154 [96], 157 [103], and 158 [106]; see also Harman v Secretary of State for the Home Department [1983] 1 AC 280 (Harman v Home Office). There was no way around that conclusion for the first affidavit (styled as a 'statement'). 82 The second of those affidavits by Ms Chang was sought to be tendered before the trial judge. While the refusal of that tender is challenged in the Court of Appeal, the contents of that affidavit do not advance an appreciation of that ground, turning on issues to do with due process and procedural fairness, some of which at least seem to me to have some substance. Thus the second affidavit of Ms Chang really only goes to the assessment of the case Mr Tu seeks to bring at a retrial. That affidavit is therefore really relied upon as to its substance, for which again the implied undertaking must prevail. For that reason Ms Chang's objection to the tender of that second affidavit was upheld, even though parts of it may also have helped her case in this application as it would have put forward her version of events. She was represented by solicitor and counsel in these proceedings and is bound by their tactical decisions on her behalf. 83 Mr Tu's affidavit evidence and documents which were before the trial judge establish at least a prima facie case for the claim that he previously brought and seeks to renew in the District Court. That is so even though there is, upon the basis of Ms Chang's filed defence in the second proceedings, which is the only material I have before me as to what her case is, an alternative case to be mounted. Mr Tu's evidence before her Honour establishes, prima facie and therefore to a sufficient degree for present purposes, the following: (1) On 3 April 2006, Mr Tu executed a loan agreement between himself and Ms Chang. Mr Tu witnessed Ms Chang sign that document. He produced his signed counterpart of that loan agreement. That two-page document entitled "loan agreement" bears the date 3 April 2006 and bears both his and Ms Chang's names on both pages. Ms Chang is described as "the borrower" on the second page. (2) The term of the loan was expressed to be until 5 April 2009. It required repayment in full on the day of the expiry of the loan term and for interest to be paid. The loan agreement was signed by Mr Tu. While it did not record the amount of the loan, that was remedied by the actual moneys ($359,324.67) advanced a short time later, by direct deposit to Ms Chang's personal bank account. There was no evidence before me to show or even indicate that Ms Chang's company, rather than Ms Chang herself, was the other party to the loan agreement, as pleaded in her defence. (3) Mr Tu said he was not provided with a copy of the loan agreement to keep for his records and did not obtain a copy until after Ms Chang had begun defaulting on interest payments to him. (4) At the time Mr Tu signed the loan agreement, he did not notice that Ms Chang had not indicated the amount of the loan, but he knew he would be lending her 70% of the equity of his house. He did not look at or read the documents prior to signing them, placing complete trust in Ms Chang to prepare the documents and explain the contents to him. He understood it was a term of the loan agreement that he would be repaid the funds he advanced to Ms Chang by 5 April 2009 and that interest would accrue on the loan monies at a rate of 10% per year. (5) On 11 April 2006, Mr Tu signed another document prepared by Ms Chang which he now knows was a funds transfer document in the sum of $359,324.67 from the mortgage company from whom he had obtained finance to the account held by Ms Chang. He produced a document which he executed with his ex-wife authorising the transfer. On 18 April 2006, that amount was transferred into Ms Chang's personal account. The loan transaction was therefore given effect to just over two weeks after the loan agreement was signed. (6) On 10 July 2006 Mr Tu received a payment of $85,000 to reduce the loan. Over the next year, he was repaid some of the interest that he was owed on the loan. However, the payment of interest was not consistent. When interest was paid, the payment was sometimes made in cash and at other times by direct transfer into his ex-wife's bank account. That had taken place because Mr Tu's ex-wife's bank account details were provided at the time when the loan agreement was signed. Mr Tu had no issue with Ms Chang repaying interest in this manner. (7) On or about 13 April 2009, Mr Tu met with Ms Chang to discuss the loan. Ms Chang sought to extend the term of the loan by a further 12 months and provided Mr Tu with a document to that effect. Mr Tu did not agree to this extension and did not sign the document provided. (8) This meant that the loan was, on Mr Tu's account, still due to be repaid by April 2009. It follows there was no limitation problem in commencing the proceedings in the District Court, even the second time. (9) Ms Chang, in a letter dated 14 April 2009, albeit on the letterhead of her company, acknowledged the existence of the debt, but asserted an extra year in which to repay it had been agreed to. Mr Tu disputes that extension of time was agreed to. 84 None of the above account was contradicted by any evidence for or from Ms Chang. On its face it established an apparently credible and relatively straightforward suit for repayment of a loan. 85 On the basis of the documents that are before me in evidence, and that were before the trial judge in evidence, I have some difficulty in seeing how her Honour was able to conclude that Mr Tu's ex-wife was a party to the loan agreement. On a perusal of the transcript it appears that her Honour took that view on the somewhat fragile basis that the source of the moneys advanced was a mortgage over Mr Tu's house, which it seems he jointly owned at the time with his now ex-wife. 86 Although there are situations where the way in which money advanced for a loan was obtained may be a telling indication of who was really making that loan, in this case the loan agreement before her Honour seems to me to contradict that conclusion. The primary basis for deciding who has made a loan will ordinarily be the loan documentation. As Ms Chang did not to go into evidence before her Honour at all, and did not cross-examine Mr Tu (observing in fairness again that she was self-represented), his account, none of it inherently improbable and supported by contemporaneous documents, has been made out to the extent necessary for these proceedings. 87 It is difficult to see how Mr Tu's description of what took place in his affidavit, coupled with the loan agreement document, was able to result in anything other than a verdict in his favour. That does not mean it was the inevitable outcome; I do not need to go that far. It suffices for present purposes for me to form a view that the advice of senior counsel provided to Mr Tu, which was also before me, stating that Mr Tu had a better than even chance of success on his appeal, is well founded, and perhaps even somewhat conservative. 88 Nor is it necessary to go so far as to conclude that the appeal will necessarily succeed; nor go so far as to conclude that a retrial in the District Court will necessarily succeed. What matters is that Mr Tu has a case with sufficient merit and sufficient prospects of a successful outcome, both as to the appeal and as to the retrial, which if realised would result in a judgment in his favour equal to or in excess of the judgment debt upon which the bankruptcy notice is based. I am comfortably satisfied to that degree. 89 Mr Tu has demonstrated that he should be able to run his appeal and any retrial without the burden of meeting or defaulting on a premature bankruptcy notice. It follows that the second ground advanced by Mr Tu succeeds and the bankruptcy notice must be set aside. Costs 90 While Mr Tu did not succeed on the first ground, Ms Chang's success in that regard bears a limited relationship to the case advanced on her behalf, with the above reasons going well beyond what her counsel argued. It would be hard in any event to separate out the different parts of Mr Tu's case. Perhaps most importantly, Ms Chang chose to persist with obtaining and serving a bankruptcy notice despite being on ample notice of the likely appeal. In all the circumstances it is appropriate that Ms Chang be ordered to pay Mr Tu's costs of this application without any attempted apportionment or reduction by reason of the failure of Mr Tu's first ground. Conclusion 91 The application is allowed based upon a sufficient offsetting claim being established. The bankruptcy notice addressed to Mr Tu must be set aside. Ms Chang must pay Mr Tu's costs. I certify that the preceding ninety-one (91) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bromwich. Associate: Dated: 22 December 2016