Re Judith Margaret Mullally Ex Parte: National Westminster Finance Australia Limited [1991] FCA 259 (17 June 1991)

FEDERAL COURT OF AUSTRALIA

Re: JUDITH MARGARET MULLALLY
Ex Parte: NATIONAL WESTMINSTER FINANCE AUSTRALIA LIMITED
No. B60 of 1991
FED No. 326
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA
GENERAL DIVISION
Lee J.(1)

CATCHWORDS

Bankruptcy - application to set aside bankruptcy notice - counter-claim, set-off or cross-demand - whether prima facie case established - nature of claim for compensatory damages by reason of discriminatory conduct under Sex Discrimination Act 1984.

Bankruptcy Act 1966 s.41; sub-s.41(7); para.40(1)(g)

Sex Discrimination Act 1984 Pts.II (ss.14-47), III (ss.48-84), IV; ss.5, 6, 22; sub-ss.4(1), 5(1), 6(1), 81(1), 81(2); sub-para.81(1)(iv)

Bankruptcy Rules r.10

Re Brink; Ex parte The Commercial Banking Company of Sydney Ltd. [1980] FCA 78; (1980) 44 FLR 135

Ebert v The Union Trustee Company of Australia Limited [1960] HCA 50; (1960) 104 CLR 346

Re Gould; Ex parte Skinner [1983] FCA 68; (1983) 72 FLR 393

In re E.E. Judd; Ex parte Sidney Pike (1924) 24 SR (N.S.W.) 537

O'Toole v Charles David Pty. Ltd. (1989) 90 ALR 112

HEARING

PERTH
17:6:1991

No appearance for the Judgment Debtor.

Counsel for the Judgment Creditor: Mr C.D. Steytler

Solicitors for the Judgment Creditor: Corser and Corser

ORDER

The judgment debtor has not satisfied the Court that the judgment debtor has a counter-claim, set-off or cross-demand equal to or exceeding the amount of the judgment debt referred to in the bankruptcy notice served upon the judgment debtor on 8 March 1991.

The judgment debtor pay the judgment creditor's costs of the hearing on 29 May 1991 and the costs of attendances on 13 and 28 May 1991.

NOTE: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

DECISION

National Westminster Finance Australia Limited ("NatWest") obtained a final judgment against Judith Margaret Mullally ("Mrs Mullally") in the Supreme Court of Western Australia on 20 December 1990 for a sum of $248,699.42 and costs.

2. On the application of NatWest the Registrar in Bankruptcy issued a bankruptcy notice under s.41 of the Bankruptcy Act 1966 ("the Act") directing Mrs Mullally to pay the sum of $248,699.42 within fourteen days of service of the notice. The notice was served on Mrs Mullally on 8 March 1991.

3. Mrs Mullally is a legal practitioner.

4. On 22 March 1991 Mrs Mullally filed with the Registrar pursuant to sub-s.41(7) of the Act an affidavit to the effect that she had a counter-claim, set-off or cross-demand equal to, or exceeding, the amount of the judgment debt being a cross-claim, set-off or cross-demand that Mrs Mullally could not have set up in the action in which the judgment was obtained.

5. On 23 April 1991 the Deputy Registrar informed NatWest and Mrs Mullally that pursuant to r.10 of the Bankruptcy Rules the Deputy Registrar had fixed 13 May 1991 at 9.30 a.m. as the date and time at which Mrs Mullally may appear before the Court for the purpose of satisfying the Court that she had the counter-claim, set-off or cross-demand referred to in her affidavit. Pursuant to sub-s.41(7) of the Act the time for compliance with the bankruptcy notice was extended thereupon until the day on which the Court determined whether it was satisfied that Mrs Mullally had such a counter-claim, set-off or cross-demand.

6. On 9 May 1991 Mrs Mullally (now Wickham) advised the Deputy Registrar by letter forwarded by facsimile transmission that "Due to unforeseeable professional committments (sic) it will be impossible for me to attend on the date set for the hearing" and requested that the matter be adjourned to a date after 20 May 1991.

7. On Monday 13 May 1991 Mrs Mullally did not attend the Court at the appointed time and the matter was adjourned until 21 May 1991. Mrs Mullally was directed to file an outline of her submissions in support of her case by 16 May 1991. Mrs Mullally was given notice on 13 May 1991 of the Court's orders made on that day. Mrs Mullally did not file an outline of submissions as directed.

8. On Tuesday 21 May 1991 Mrs Mullally attended the Court at the appointed time and sought a further adjournment of the matter due to illness. The Court was satisfied that Mrs Mullally was disadvantaged by illness on that day and should be given a further opportunity to present any submissions. The matter was further adjourned until 28 May 1991. Mrs Mullally was directed to file an outline of her submissions by 24 May 1991.

9. NatWest objected to each of the adjournments described above.

10. On 28 May 1991 Mrs Mullally appeared by counsel who advised that he had instructions to seek a further adjournment of the matter due to Mrs Mullally's ill health. He had no instructions to present submissions on Mrs Mullally's behalf in repect of the issues raised in her affidavit. Mrs Mullally had not filed an outline of submissions as directed.

11. The matter was further adjourned until 29 May 1991 to enable counsel to read the papers and obtain any necessary instructions to allow him to make submissions in support of the claim described in Mrs Mullally's affidavit.

12. On 29 May 1991 counsel for Mrs Mullally advised that he had not been instructed to present any argument on behalf of Mrs Mullally but had been instructed to seek a further adjournment of the matter for one week to allow Mrs Mullally to present submissions on her own behalf after her release from the hospital to which she had been admitted on the previous day.

13. The request for adjournment was denied after regard was given to the need for a prompt determination of the issue raised by Mrs Mullally's affidavit and to the fact that the nature of the issue raised did not require any more time than had been allowed for counsel to master the brief. It would have been unfair to the creditor and a reward for earlier inactivity on Mrs Mullally's part to provide Mrs Mullally with another date on which to present any further submissions in support of the counter-claim, set-off or cross-demand contended for in her affidavit.

14. According to that affidavit in March 1985 Mrs Mullally and her husband were carrying on business in partnership as legal practitioners under the firm name "Patrick Mullally and Co". The partners executed a deed of loan in March 1985 pursuant to which NatWest advanced funds to the partnership to be repaid on 31 March 1988. Mrs and Mrs Mullally separated in December 1986. The partnership continued until 7 July 1987 when Mr Mullally served a notice dissolving the partnership. After dissolution the partnership business was conducted by Mr Mullally, no doubt holding the partnership interest in trust for the former partners. On 6 November 1987 Mr and Mrs Mullally executed a deed of settlement pursuant to which Mrs Mullally transferred her interest in the partnership business to Mr Mullally.

15. Mrs Mullally stated that from the time of dissolution of the partnership, but more particularly after the loan to the former partners fell due in March 1988, NatWest excluded her from discussions concerning arrangements for the repayment of the loan facility provided under the deed of loan and denied her an opportunity to negotiate satisfactory terms to settle NatWest's claim for repayment of that sum.

16. In September 1990 an action by NatWest against Mr and Mrs Mullally to recover the sum owing by the former partners under the deed of loan came on for hearing. At that time Mr Mullally was an undischarged bankrupt and NatWest obtained leave to discontinue its action against him and his trustee. The trial continued against Mrs Mullally. Mrs Mullally defended the action by contending that there had been a novation of the loan agreement which discharged her liability under the covenants of the deed.

17. On 18 October 1990 the trial judge held that there had not been a novation and that Mrs Mullally was liable to pay the sum claimed by NatWest. After submissions on the amount of interest due and the form of the judgment, judgment was entered on 20 December 1990.

18. Mrs Mullally now contends that the conduct of NatWest after dissolution of the partnership, in particular in 1988 and 1989, was "an 'offence' under sub-ss.5(1) and 6(1) of the Sex Discrimination Act 1984" and that pursuant to that Act NatWest should be ordered to pay a sum of damages equal to or greater than the amount of the judgment debt. Mrs Mullally attached to her affidavit a copy of an "Application to the Equal Opportunity Commission" ("the Application") of even date.

19. Mrs Mullally did not identify the nature of her claim under the Sex Discrimination Act 1984 but the relevant provisions appear to be ss.22, 50, sub-para.81(1)(iv) and s.82 of that Act. Section 22 provides as follows:
"22.(1) It is unlawful for a person who, whether for payment or

not, provides goods or services, or makes facilities available,
to discriminate against another person on the ground of the other
person's sex, marital status or pregnancy -
(a) by refusing to provide the other person with those goods or
services or to make those facilities available to the other
person;
(b) in the terms or conditions on which the first-mentioned
person provides the other person with those goods or
services or makes those facilities available to the other
person; or
(c) in the manner in which the first-mentioned person provides
the other person with those goods or services or makes those
facilities available to the other person.
(2) This section binds the Crown in right of a State."

The term "services" used in s.22 is defined, inter alia, in sub-s.4(1) as follows:

"'services' includes -
(a) services relating to banking, insurance and the
provision of grants, loans, credit or finance".

20. The term "discrimination" as used in s.22 is defined in sub-ss.5(1) and 6(1) of that Act.

"5.(1) For the purposes of this Act, a person (in this
sub-section referred to as the 'discriminator') discriminates
against another person (in this sub-section referred to as the
'aggrieved person') on the ground of the sex of the aggrieved
person if, by reason of -
(a) the sex of the aggrieved person;
(b) a characteristic that appertains generally to persons
of the sex of the aggrieved person; or
(c) a characteristic that is generally imputed to persons
of the sex of the aggrieved person,
the discriminator treats the aggrieved person less favourably
than, in circumstances that are the same or are not materially
different, the discriminator treats or would treat a person of
the opposite sex."
"6.(1) For the purposes of this Act, a person (in this
sub-section referred to as the 'discriminator') discriminates
against another person (in this sub-section referred to as the
'aggrieved person') on the ground of the marital status of the
aggrieved person if, by reason of -
(a) the marital status of the aggrieved person;
(b) a characteristic that appertains generally to persons
of the marital status of the aggrieved person; or
(c) a characteristic that is generally imputed to persons
of the marital status of the aggrieved person,
the discriminator treats the aggrieved person less favourably
than, in circumstances that are the same or are not materially
different, the discriminator treats or would treat a person of a
different marital status."

21. Section 85 of the Sex Discrimination Act 1984 stipulates that unless expressly provided otherwise in Pt.IV of that Act, an act made unlawful by reason of Pt.II (ss.14-47) is not an offence. Furthermore, the right to seek compensation provided by the Sex Discrimination Act 1984 is not dependent upon the demonstration of the occurrence of an offence but of the engagement in unlawful conduct or commission of an unlawful act. The distinction between unlawful conduct and an unlawful act is not elaborated upon in that Act. Under s.50 of the Sex Discrimination Act 1984 a person aggrieved by an unlawful act may lodge a complaint with the Human Rights Commission ("the Commission") alleging that a person has done an act made unlawful by Pt.II of that Act.

22. Pursuant to sub-para.81(1)(iv) of the Sex Discrimination Act 1984 the Commission, after holding the inquiry it is required to conduct by s.59 of that Act, may find a complaint to be substantiated and may make a determination which includes a declaration that the respondent to the complaint should pay to the complainant damages by way of compensation for any loss or damage suffered by reason of the conduct of the respondent.

23. The relationship between that conduct and the unlawful act complained of is not spelt out and nor is it made clear whether the conduct must be unlawful conduct. Apparently, to remove any suggestion that the Commission may be exercising judicial power in such a determination, sub-s.81(2) provides that a determination of the Commission under sub-s.81(1) is not binding or conclusive between any of the parties to the determination.

24. The right to seek an enforceable order for the payment of compensation is to be found in s.82 of the Sex Discrimination Act 1984. Section 82 reads as follows:

"82.(1) The Commission or complainant may institute a proceeding
in the Federal Court for an order to enforce a determination made
pursuant to sub-section 80(1) or 81(1).
(2) Where the Federal Court is satisfied that the respondent
has engaged in conduct or committed an act that is unlawful under
this Act, the Federal Court may make such orders (including a
declaration of right) as the Federal Court thinks fit.
(3) Orders made by the Federal Court under sub-section (2)
may give effect to a determination of the Commission."

25. Under s.115 of the Sex Discrimination Act 1984 jurisdiction is conferred on the Federal Court with respect to matters arising under Pt.III of that Act (ss.48-84) which would include controversies made justiciable in the manner provided by s.82 of that Act.

26. It is apparent from the text of s.82 that the Court is given power to make orders if it is satisfied that the respondent to the proceedings has engaged in conduct or committed an act that is unlawful under the Sex Discrimination Act 1984. Therefore, any order giving effect to a determination of the Commission is also dependent upon a finding being made by the Court that it is so satisfied. No conclusions of fact made by the Commission bind the Court in the exercise of the judicial power involved in the use of the jurisdiction conferred upon it.

27. The jurisdiction given to the Court is in respect of matters which require judicial resolution at the suit of a person who has instituted a complaint to the Commission under s.50, leading to the holding of an inquiry by the Commission under s.59 and the making of a determination by the Commission under s.81 of the Sex Discrimination Act 1984. (See O'Toole v Charles David Pty. Ltd. (1989) 90 ALR 112 at p 158.)

28. It may be accepted that the matters set out in the Application may be relied upon by Mrs Mullally to provide an outline of the facts that would be sought to be proved against NatWest in an inquiry conducted by the Commission and upon the hearing of an application filed in this Court.

29. It was not in issue that the Application was a complaint to the Commission under s.50 of the Sex Discrimination Act 1984.

30. The essence of the facts alleged is that NatWest maintained close and sympathetic contact with Mr Mullally and treated him as the only party able to negotiate or discuss arrangments to be made in respect of the loan which fell due in March 1988 and remained unpaid.

31. Mrs Mullally apparently suggests that had she been given the appropriate opportunities to participate in such negotiations and had not been discriminated against by NatWest she would have urged that the practice of Patrick Mullally and Co. be sold more promptly than it was for a price closer to its valuation said by her to range between $280,000 and $760,000. I was informed by counsel that NatWest held a security over the practice by way of a bill of sale under which it eventually took possession of the practice and sold it for a price of $60,000.

32. It is unnecessary to explore the distinction between a counter-claim and set-off on the one hand and cross-demand on the other as referred to in para.40(1)(g) of the Act, but for the purposes of this hearing it may be accepted that a statutory right to seek orders in this Court in respect of conduct or acts made unlawful by the Sex Discrimination Act 1984 is in the nature of a cross-demand if such order may include an order for damages by way of compensation for any loss or damage suffered by reason of that conduct. A claim for such an order would be equivalent to a claim for unliquidated damages for tort. (See In re EE Judd; Ex parte Sidney Pike (1924) 24 SR (N.S.W.) 537.

33. The material submitted by Mrs Mullally to identify the nature of her cross-demand is bare in content, but if it is accepted for the purposes of this determination that the material is sufficient to indicate that an inquiry may be conducted by the Commission into allegations of discrimination under s.22 as defined in ss.5 and 6 of the Sex Discrimination Act 1984 in respect of the provision of banking services and that the nature of Mrs Mullally's claim is in the same right as the judgment obtained against her, being a claim that could not have been set up in that action, it would not follow that the requirements of para.40(1)(g) and sub-s.41(7) of the Act have been met.

34. It would be necessary for Mrs Mullally to show that she has a prima facie case that her complaint will lead to a determination that damages should be paid and that she would succeed in an application to this Court for an order that NatWest pay damages equal to or greater than the amount of the judgment debt. (See Ebert v The Union Trustee Company of Australia Limited [1960] HCA 50; (1960) 104 CLR 346.)

35. If Mrs Mullally had continued to retain the interest of a former partner in the assets of a dissolved partnership at the relevant times and had been excluded from the opportunity and right to be heard as to the best method of disposal of the partnership property, it may be arguable that a nexus could be demonstrated between any alleged loss suffered on the sale of the property and the alleged discriminatory conduct which nexus could ground an order for the payment of compensation in respect of the loss suffered by reason of that conduct. However, even that submission would require some outline of the nature of the evidence to be adduced as to relevant values, markets and prospects of sale at material times in addition to some particularisation of the alleged discriminatory conduct.

36. But where, as in this case, the alleged aggrieved person had no direct interest in the secured property or asset, having conveyed it to her former partner in November 1987, any loss suffered must be said to lie in Mr Mullally's impaired ability to repay the sum advanced by NatWest to the partnership and to meet his obligation to indemnify Mrs Mullally in that regard, presumably an obligation undertaken pursuant to a covenant to that effect in the deed of settlement. The terms of the deed of settlement were not put before the Court, nor was any other evidence submitted which would allow the Court to assess the strength of Mrs Mullally's claim in that regard.

37. On the present material the Court could do no more than speculate as to whether an order of this Court directing NatWest to pay damages may be obtained and no meaningful assessment could be made of the amount of compensation for the loss or damage suffered which NatWest may be ordered to pay by reason of any discriminatory conduct it may be found to have engaged in.

38. As stated in Re Brink; Ex parte The Commercial Banking Company of Sydney Ltd. [1980] FCA 78; (1980) 44 FLR 135 and in Re Gould; Ex parte Skinner [1983] FCA 68; (1983) 72 FLR 393 at p 405, a debtor is not obliged to mount a preliminary trial of the issue raised in the debtor's affidavit but at least the debtor must be able to satisfy the Court that he or she has a fair chance of success in respect of the claim set out in that affidavit. That test has not been met in this case and indeed the debtor has fallen well short of satisfying the required standard. The words of the High Court in Ebert at p 350 are equally apt in this case:

"The appellant cannot satisfy the Court that a cross-demand
exists by showing no more than that she propounds one and states
how she suggests that she can make it out."

39. There will be a determination that the Court is not satisfied that Mrs Mullally has a counter claim, set-off or cross-demand equal to or exceeding the amount of the judgment debt. NatWest should have costs of the application including costs of the attendances on the adjourned hearings on 13 and 28 May 1991 but each party should bear their own costs in respect of the adjournment on 21 May 1991.