Re Hazzib Sleiman Ex Parte: Hazzib Sleiman; Dojif Pty Limited [1984] FCA 299 (18 October 1984)

FEDERAL COURT OF AUSTRALIA

Re: HAZZIB SLEIMAN
Ex Parte: HAZZIB SLEIMAN; DOJIF PTY. LIMITED
No. B3480 of 1984
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Beaumont J.

CATCHWORDS

Bankruptcy - Application to set aside bankruptcy notice based on default judgment in Petty Sessions - Application adjourned until Petty Sessions deals with application to set aside judgment.

Re Hazzib Sleiman; Ex parte Hazzib Sleiman, applicant and Dojif Pty. Limited, respondent

HEARING

SYDNEY
18:10:1984

ORDER

I dismiss the application to set aside the bankruptcy notice served herein.

I suspend the operation of order 1 until 4 p.m. on 12 November 1984.

I reserve liberty to the debtor to apply, on or before 4 p.m. on 8 November 1984, on giving 48 hours' notice to the judgment creditor in that behalf, to discharge or vary order 1.

I extend time for compliance with the bankruptcy notice up to and including 12 November 1984.

I order that the debtor pay one-half of the costs of the judgment creditor of this application, including reserved costs.

DECISION

This is an application by a debtor to set aside a bankruptcy notice, coupled with an application to extend time for compliance with the notice pending the determination of the application to set it aside. The bankruptcy notice, which was served on the debtor in August last, was based upon a default judgment obtained on 27 July 1982 in the Court of Petty Sessions, 302 Castlereagh Street, Sydney. The cause of the action was stated in the plaint and default summons in these terms:

"On the 1st day of July, 1982, the

plaintiff gave to the defendant a cheque
in the amount of Four thousand three
hundred and fifty one dollars and
seventy five cents ($4,351.75) drawn on
the plaintiff's account with the
Commonwealth Trading Bank. This cheque
was paid by the plaintiff's bank on the
5th day of July, 1982. The plaintiff
has established that the cheque was for
the wrong amount because when the
plaintiff was calculating the amount
payable by it to the defendant, the
plaintiff neglected to deduct a payment
which it had made on behalf of the
defendant for steel on the 18th day of
June, 1982 in the amount of $1,737.64.
The plaintiff has requested the
defendant to repay the amount of
$1,737.64 and the defendant has refused
to do so."

2. The amount claimed in the plaint and default summons was $1,820.14 being the said sum of $1,737.64 together with costs and fees of $82.50. The summons was said to have been served on 10 July 1982.

3. In support of his application, the debtor swore an affidavit on 31 August 1984 in which he not only denied any debt to the judgment debtor but also, whilst conceding a "small" overpayment, claimed that the judgment creditor was, in the final analysis, indebted to him in the sum of $328.00 for a "cross claim" (not then stated) and "hiring fees on formwork". The judgment debtor also denied service of the plaint and default summons, saying that he "presumed" that he was in Lebanon at the time. (It later emerged that he was in Lebanon in October 1982.)

4. By an affidavit sworn on 18 September 1984, Mr. W.J. Kavanagh, a director of the judgment creditor, gave evidence of his service of the plaint and default summons upon the debtor personally on 10 July 1982. This evidence was corroborated by an affidavit sworn on 18 September 1984 by Mr. R. Kavanagh, the son of Mr. W.J. Kavanagh.

5. In response, the debtor swore a further affidavit on 19 September 1984 in which, inter alia, he said:

"2. I refer to the Affidavit sworn by me
on the 31st August 1984 and in
particular to paragraphs 2 and 8 and say
that after examining my books of
accounts I do not have a Cross Claim
against the Judgment Creditor for the
sum of $328.00. My records show that
this sum was included in the payments
made to me by the Judgment Creditor.
(The debtor later resiled from this
concession claiming once more that he is
owed $328.00.)

3. I say that the total amount owing by
the Judgment Creditor for the work
performed by me in 1982 together with
some materials supplied was $7,228.00.

4. I further say that the total
payments made by the Judgment Creditor
amounted to $7,611.75, the payments
being made as follows:

Cheque drawn in favour of Aquila Steel
$1700.00 (in fact it was for $1,737.64)

Cheque drawn in my favour on the 1.6.82
$1500.00 ($200.00 was also paid in cash)

Cheque drawn in my favour on the 1.7.82
$4,411.75 (in fact it was for $4,351.75)

I say that I received no other payments
from the Judgment Creditor and
accordingly there is a sum owing to him
of $383.75.

5. I crave leave to refer to the
Affidavit of William James Kavanagh
sworn 18th day of September 1980.

6. I refer to paragraph 5 of that
Affidavit and deny that the Judgment
Creditor had a Plaint and Default
Summons in his hands when I arrived on
the building site on the 10th July 1982.

7. As to paragraph 6, I say that no
such conversation as alleged took place.
I say that when I arrived on the
building site I found that some
materials had been chained up. The
Judgment Creditor said to me 'I've given
you too much money'. I replied 'Tell
me, let's work it out'. I say that
there was no mention by anyone about a
Summons. The only conversation which
arose concerning a demand was when the
Judgment Creditor handed me a small
piece of paper saying 'Take this paper,
it's from the Police'. This related to
the argument we were having about some
Form Work."

6. By a further affidavit sworn on 26 September 1984, Mr. W.J. Kavanagh detailed his version of the history of the dispute between the parties. According to this version, which is now largely accepted by the debtor, the judgment creditor, by a mistake of fact, overpaid the debtor the sum of $1,737.64. This mistake occurred when the judgment creditor paid the debtor the sum of $4,351.75 in July 1982 without taking into account the fact that in June 1982, it had paid Aquila Steel Co. Limited the sum of $1,737.64 on behalf of the debtor. Assuming such a mistake of fact, the judgment creditor was entitled to recover that amount from the debtor (see South Australian Cold Stores Limited v. Electricity Trust of South Australia [1957] HCA 69; (1957) 98 CLR 65 at p 75).

7. In the course of the hearing of the application in which each deponent was cross-examined at some length, the question of whether the payment of $1,737.64 was made under a mistake of fact was assumed in favour of the judgment creditor. Instead, the debtor challenged the claim made against him by questioning the entitlement of the judgment creditor to credit in respect of a reduction of $250.00 in the original quotation for the job and, secondly, a further credit in respect of a cash payment of $200.00 on 1 June 1982. These questions raise issues of fact which, in my view, must be resolved adversely to the debtor. Mr. W.J. Kavanagh was not shaken in cross-examination on either point, particularly as he was able to corroborate his version of what happened by reference to contemporary diary notes, the authenticity of which is not seriously challenged. Those notes referred, in explicit terms, to the items of $250.00 and $200.00 respectively.

8. This left outstanding two items. First, despite his earlier concession, the debtor now asserts a cross-claim in the sum of $328.00 for monies said to be owed by the judgment creditor to the debtor on account of rubbish removed from the building site. To say the least of it, as the debtor's own affidavit evidence reveals, the claim is a confused one. No serious attempt was made to establish an evidentiary foundation for the claim. It was allowed to rest in no more than a general assertion. For that reason, it must be rejected, at this stage at least.

9. It also emerged, during the course of the hearing, that even on the debtor's own case, there had been an overpayment to him of $361.39. This amount was paid by the debtor on the day after the conclusion of argument in the application.

10. There still remains the question of service of the plaint and default summons. Here also, the evidence of Mr. W.J. Kavanagh was not shaken in cross-examination. On the other hand, the affidavit of the debtor, cited above, is, at best, equivocal on the point. In my opinion, the recollection of Mr. Kavanagh of the events now in question, including that of service, is to be preferred to that of the debtor. I find that the debtor was served with the plaint and default summons on 10 July 1982.

11. In the result, even if the Court were to go behind the judgment, no basis for setting it aside has been demonstrated in this application. It also appears, therefore, that the debtor has little, if any, prospect of setting aside the judgment in the Court of Petty Sessions since that court applies similar principles to those applied here in an application to set aside a judgment (see Jackson and Byron, Courts of Petty Sessions (Civil Claims) Practice at pp.71 et seq.). Nonetheless, an order dismissing an application to set aside a default judgment does not constitute a bar to a subsequent application of the same character (see Attwood v. Chichester (1878) 3 QBD 722; Hall v. The Nominal Defendant [1966] HCA 36; (1966) 117 CLR 423 at p 440). Thus, it is possible that the debtor could adduce further evidence, not presented to this Court, upon which the Court of Petty Sessions could rely to set aside the default judgment. In fact, on 20 September 1984, after the filing of this application, but before it was heard, the debtor filed an application in the Court of Petty Sessions seeking to set aside the default judgment. That application is returnable on 2 November 1984. Although present indications are that this application will fail, the question arises whether the debtor should have an opportunity to pursue it.

12. In Re Sterling; Ex parte Esanda Limited [1980] FCA 61; (1980) 30 ALR 77, Lockhart, J., in dealing with an application of the present kind, said (at p 84) that, although each case must depend upon its own facts, there may be cases where the application to set aside a bankruptcy notice should be adjourned pending the outcome of an application by the debtor to a court of competent jurisdiction to set aside the judgment on which the bankruptcy notice is founded. In my opinion, where the judgment has been obtained by default or where, for other reasons, there has been no real hearing on the merits (see Wren v. Mahoney [1972] HCA 5; (1972) 126 CLR 212 at p 225), then, prima facie, the application to set aside the bankruptcy notice should stand over until the application to set aside the judgment has been disposed of. The reason for this approach is that this is a court of insolvency which is not an appropriate forum for the resolution of civil disputes, and in particular, the recovery of debts, except where the insolvency of the debtor is apprehended. In the latter event, this Court will readily intervene for the protection of the general body of creditors. But where, as here, the debtor's solvency is not questioned, the primary forum for the resolution of the dispute between the parties should be the Court of Petty Sessions.

13. In the result, whilst, on the evidence presently available, the debtor's application to set aside the bankruptcy notice cannot succeed, I think that the debtor should be given the opportunity to pursue his application in the Court of Petty Sessions on 2 November 1984. It is unlikely that he will wish to do this in the light of the findings I have made, so that, in an effort to achieve some finality in the litigation, I make the following orders:

1. I dismiss the application to set aside the bankruptcy notice served herein.

2. I suspend the operation of order 1 until 4 p.m. on 12 November 1984.

3. I reserve liberty to the debtor to apply, on or before 4 p.m. on 8 November 1984, on giving 48 hours' notice to the judgment creditor in that behalf, to discharge or vary order 1.

4. I extend time for compliance with the bankruptcy notice up to and including 12 November 1984.

5. I order that the debtor pay one-half of the costs

of the judgment creditor of this application, including
reserved costs.

14. I have made orders 1, 2 and 3 to cater for the remote possibility that the Court of Petty Sessions sets aside its judgment on or shortly after 2 November 1984. I have deprived the judgment creditor of one-half of its costs because of its unreasonable opposition to the debtor's application made at the commencement of the hearing before me on 3 October 1984 that the matter stand over until shortly after 2 November 1984 when the appropriate forum, the Court of Petty Sessions, could deal with the matter. Viewing the dispute as I do, as one of debt collection rather than apprehended insolvency, it is appropriate that the judgment creditor, notwithstanding some success in the application, should not receive all its costs.