You are here:
AustLII >>
Databases >>
Federal Magistrates Court of Australia >>
2011 >>
[2011] FMCA 45
[Database Search]
[Name Search]
[Recent Decisions]
[Noteup]
[Download]
[Help]
Acheson v National Australia Bank Ltd [2011] FMCA 45 (4 February 2011)
![[AustLII]](45.1.gif)
Federal Magistrates Court of Australia
[Index]
[Search]
[Download]
[Help]
Acheson v National Australia Bank Ltd [2011] FMCA 45 (4 February 2011)
Last Updated: 9 February 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
ACHESON v NATIONAL
AUSTRALIA BANK LTD
|
|
BANKRUPTCY – Application to set aside
bankruptcy notice – whether counter-claim, set-off or cross demand equal
to or exceeding
the amount of the judgment debt. |
|
Respondent:
|
NATIONAL AUSTRALIA BANK LIMITED (ABN 12 004 044
937) |
|
Hearing date:
|
27 October 2010
|
|
Date of Last Submission:
|
23 November 2010
|
|
Delivered on:
|
4 February 2011
|
REPRESENTATION
Counsel for the
Applicant: |
Mr R Brender
|
Solicitors for the Applicant: |
Campbell Paton & Taylor
|
Counsel for the Respondent: |
Mr D Sulan
|
Solicitors for the Respondent: |
Dibbs Barker
|
ORDERS
(1) The application be dismissed.
(2) The applicant pay the costs of the respondent as agreed and in the absence
of agreement taxed in accordance with the Federal Court
Rules.
|
FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT
SYDNEY
|
SYG 1004 of
2010
Applicant
And
NATIONAL AUSTRALIA BANK LIMITED (ABN 12
004 044 937)
|
Respondent
REASONS FOR JUDGMENT
These Proceedings
- By
Bankruptcy Notice NN16/10 issued on 5 January 2010 National Australia Bank
Limited (NAB) claimed that Mr Acheson owed it the sum
of $149,204.57 based
on a judgment entered in favour of NAB in the District Court of New South Wales
in the amount of $164,204.57.
The Bankruptcy Notice recorded that a payment of
$15,000 had been made by Mr Acheson.
- On
7 May 2010 Mr Acheson filed an application to set aside the Bankruptcy
Notice on the basis that he had a counter-claim, set-off
or cross demand of the
kind referred to in s.40(1)(g) of the Bankruptcy Act 1966 (Cth).
Extension of Time for Compliance
- Mr
Acheson also sought both interim and final orders that the time for compliance
with the Bankruptcy Notice be extended.
- However
the Bankruptcy Notice was deemed to have been served on Mr Acheson on 19
April 2010. This application was made before the
expiration of the time fixed
for compliance with the requirements of the Bankruptcy Notice. Hence under
s.41(7) of the Bankruptcy Act the time for compliance with the Bankruptcy Notice
would be extended until and including the day on which the Court determined
whether
it was satisfied that the debtor had a counter-claim, set-off or cross
demand within s.40(1)(g) of the Bankruptcy Act. Insofar as Mr Acheson
seeks a further extension of the time for compliance, there is no basis for any
such order on the material
before the court.
Re-opening proceedings
- There
is one other preliminary matter. During the hearing Mr Acheson sought to
rely upon part of an exhibit to his affidavit sworn
on 6 May 2010 and filed
on 7 May 2010 in support of his application to set aside the Bankruptcy
Notice, which consisted of a copy
of an affidavit filed in Supreme Court
proceedings between NAB and Mr Acheson, sworn by Adrian Paxton Acheson (the
applicant’s
son) on 1 April 2010. Mr Acheson sought to rely on
his son’s Supreme Court affidavit, not only in support of his claim that
he had a prima facie cross-claim in relation to which such an affidavit
would be evidence, but also to establish a factual proposition that his son
would
have paid up to $700,000 for a property at 171 Anson Street, Orange
which was formerly owned by Mr Acheson and which was sold at
auction by NAB
for $580,000. The circumstances of the sale are discussed further below. Issue
was taken by NAB with the admissibility
of the son’s Supreme Court
affidavit.
- The
parties were given the opportunity to file and serve written submissions in
relation to the admissibility of such evidence in
these proceedings. In
post-hearing submissions in reply filed on 23 November 2010 counsel for
Mr Acheson submitted that Mr Acheson
should have the opportunity to
correct any irregularity caused by exhibiting his son’s affidavit to his
own affidavit, by the
Court either treating the son’s affidavit as an
affidavit read in the proceedings in this Court or allowing Mr Acheson the
opportunity to re-open his case and tender an affidavit re-sworn by his son in
the same terms as the Supreme Court affidavit. It
was submitted that NAB should
then have the opportunity to cross-examine Mr Acheson’s son if it
wished to do so and if the
Court believed that this was appropriate.
Accompanying these submissions was a filed copy of an affidavit sworn by
Mr Acheson’s
son.
- However,
as my chambers advised the solicitor for Mr Acheson by letter of
24 November 2010, this affidavit was mistakenly accepted
by the Registry in
the absence of any accompanying interlocutory application or leave to file
evidence after the hearing. It was
returned to the applicant’s solicitor,
who was advised that any application to re-open the applicant’s case would
have
to be made in accordance with the Rules of the Court. No such application
has been made.
- As
submitted for NAB, it is not necessary to address the post-hearing submissions
in detail. As discussed below, I am satisfied on
the evidence before the Court
that even accepting the applicant’s claim in this respect at its highest
(and having regard to
the exhibits to Mr Acheson’s affidavit,
including the affidavit of his son filed in the Supreme Court proceedings as an
indication
of the evidence Mr Acheson intends to rely upon in the Supreme
Court proceedings which are the basis for his assertion that he has
an arguable
cross-claim), the value of his purported cross-claim is not sufficient to equal
or exceed the amount of the judgment
debt which forms the basis for the
Bankruptcy Notice within s.40(1)(g) of the Bankruptcy Act.
The basis for the Bankruptcy Notice: the Lease Proceedings
- On
4 March 2008 NAB commenced proceedings in the District Court of New South
Wales against Bentech Australia Pty Ltd (Bentech) and
Mr Acheson seeking
delivery of goods and the sum of $153,856.48 under a goods lease facility
between NAB and Bentech and a guarantee
of that facility from Mr Acheson
(the Lease Proceedings). NAB obtained default judgment against Bentech (which
did not defend the
proceedings) on 27 October 2008, and orders were made
for delivery of possession of the goods and for payment of the amount sought.
- Mr Acheson
filed a defence on 29 May 2008 denying liability pursuant to the alleged
guarantee and indemnity. However on the hearing
date of 7 May 2009 the
District Court made orders by consent that NAB have judgment against
Mr Acheson for $144,204.57 plus costs
of $20,000. These orders were stayed
provided Mr Acheson paid NAB $15,000 that day and $115,000 by 7 August
2009. Mr Acheson paid
NAB $15,000.
- On
12 June 2009 NAB filed a form of judgment/order setting out the consent
orders for sealing by the District Court. On 18 June 2009
the District
Court rejected this document on the basis that it should be re-engrossed to
accord with the orders made and re-submitted.
- NAB
submitted a fresh form of judgment/order which was sealed by the District Court
on 6 July 2009. The sealed copy of the orders
states that the orders were
entered on 7 May 2009. It was served on Mr Acheson’s solicitors
by letter of 14 July 2009.
- Mr Acheson
did not pay $115,000 to NAB on 7 August 2009 as provided for in the orders
of 7 May 2009. His solicitors advised the solicitors
for NAB that this
amount was not paid because the sealed orders did not accurately reflect the
terms of settlement, in particular
because the orders should not have contained
the word “not” in a notation (in order 6) that payment
in accordance with the orders “shall not result in the Second
Defendant or the First Defendant obtaining any interest in the mortgaged goods
the subject of the proceedings” (emphasis added).
- After
some correspondence, Mr Acheson filed a notice of motion in the District
Court on 25 September 2009 seeking orders either amending
the orders of
7 May 2009 to remove the word “not” from order 6
and an extension of time to pay NAB $115,000, or orders setting aside those
orders and relisting the proceedings
for hearing.
- On
6 November 2009 orders were made by the District Court by consent varying the
orders of 7 May 2009 by deleting the word “not” from
order 6 and extending the date for payment of the sum of $115,000 until
4 December 2009. Mr Acheson contends that these
orders were made and
entered on 6 November 2009. NAB contends that the orders were made on
6 November 2009, but were entered on
16 December 2009, apparently on
the basis that the sealed copy of these orders issued by the District Court (a
copy of which is annexed
to the Bankruptcy Notice) is dated 16 December
2009.
- Mr Acheson
did not pay NAB $115,000 on or before 4 December 2009 (or thereafter). On
8 December 2009 he filed a notice of motion
in the District Court to pay
the judgment debt by instalments. This application was refused. On
23 December 2009 Mr Acheson filed
a further such notice of motion in
Orange (officially filed in the Sydney Registry of the District Court on
4 January 2010) which
was refused on 8 January 2010.
- The
Bankruptcy Notice based on the District Court judgment against Mr Acheson
in the Lease Proceedings was issued on 5 January 2010
and served in
accordance with orders for substituted service. Service was deemed to have
occurred on 19 April 2010.
The Possession Proceedings
- On
30 October 2008 NAB commenced proceedings against Mr Acheson in the
Supreme Court of New South Wales. Initially it sought possession
of properties
owned by Mr Acheson at 171 Anson Street, Orange and 82 Kite Street,
Orange, on the basis that Mr Acheson was in default
under finance
facilities secured by mortgages to NAB over these properties.
- On
16 April 2009 Mr Acheson filed a defence in the Possession Proceedings in which
he contended that NAB owed a duty to him “to take reasonable care in
and about the exercise of its securities taken from him and his associated
companies so as to obtain the
market value from its securities”. It
was asserted that NAB had breached that duty in its conduct of the sale of other
properties, situated at Parkes Road,
Forbes, Lords Place, Orange and Cliff Road,
Forster. Mr Acheson owned the Cliff Road property. The Parkes Road and
Lords Place
properties were owned by companies associated with Mr Acheson.
- The
nature of the Possession Proceedings and the basis for what is now the asserted
s.40(1)(g) cross-claim have changed over time.
- NAB
had taken possession of the Cliff Road property in September 2008 and sold the
property for $740,000 on 22 November 2008. Settlement
took place on
2 January 2009. On 23 March 2009 NAB entered into possession of the
Anson Street property, also pursuant to the terms
of its mortgage. On 23 May
2009 the Anson Street property was sold by NAB for the sum of $580,000 (with
settlement on 3 July 2009).
- On
30 June 2009 NAB filed an amended statement of claim in the Possession
Proceedings deleting the claim for possession of the Anson
Street property. In
addition, the indebtedness of Mr Acheson was recalculated to take into
account the fact that on 2 January 2009
the sum of $674,136.53 received by NAB
from the proceeds of sale of the Cliff Road property had been applied in
reduction of the
amount owing by Mr Acheson under one of the facilities.
- On
15 September 2009 Mr Acheson filed a defence to the amended statement of claim
in which he claimed that the pleadings failed to
give credit for the proceeds of
sale of the Anson Street property, that the agreement between the parties was
unjust within the meaning
of the Contracts Review Act 1980 (NSW), that
NAB had engaged in unconscionable conduct and that NAB had interfered with
actions of receivers appointed in relation
to companies associated with
Mr Acheson. The alleged breach of a duty of care in relation to the sale
of the Parkes Road, Lords
Place and Cliff Road properties was said to have been
a breach of the duty to take reasonable care in and about the exercise of
NAB’s
rights under the facilities, mortgages and securities taken from
Mr Acheson and his associated companies by NAB by itself and through
its
alleged agents (the receivers appointed to the corporate owner of Parkes Road
and Lords Place).
- On
16 November 2009 NAB filed a further amended statement of claim in the
Possession Proceedings. The claim for possession of Kite
Street was maintained.
NAB also sought judgment against Mr Acheson in the sum of $1,330,162.73
(and interest), on the basis that,
after allowance for receipt of the proceeds
of sale from both the Cliff Road and Anson Street properties, Mr Acheson
was indebted
to NAB in that amount.
- On
25 November 2009 Mr Acheson filed a defence to the further amended
statement of claim contending that NAB had breached a duty of
care in the sale
of the properties at Parkes Road, Lords Place and also Calarie Road, Forbes
(owned by associated companies) as well
as in relation to the Cliff Road and
Anson Street properties Mr Acheson had owned.
- NAB
filed a reply to Mr Acheson’s defence on 9 December 2009 in which it
admitted that it had a duty to Mr Acheson to act in
good faith in respect
of its sale as mortgagee in possession of the properties at Cliff Road and Anson
Street (the properties Mr
Acheson had owned) but otherwise denied the
claims pleaded.
- On
23 March 2010 Mr Acheson filed a cross-claim in which he sought damages on
the basis that NAB had breached its duty to take care
to sell the Anson Street
and Cliff Road properties for the best price reasonably obtainable and to
co-operate to permit Mr Acheson
to sell the Anson Street property for a
reasonable price. He also alleged that he lost goods and chattels
in these properties by reason of a breach by the NAB of a duty to take care to
avoid
the risk of foreseeable loss to him.
- On
12 May 2010 NAB filed a second further amended statement of claim in which
it sought possession of the Kite Street property and
that Mr Acheson pay it
a sum over $3 million. Mr Acheson was said to be liable personally and
also as guarantor in relation to loans
provided by way of financial
accommodation to Bentech and to a company called Baiame Investments Pty Ltd
(Baiame).
- On
12 July 2010 Mr Acheson filed a defence to the bank’s second further
amended statement of claim contending, among other things,
that NAB had failed
to bring to account money received, to be received or that ought to have been
received from securities consisting
of the Lords Place, Parkes Road and Calarie
Road properties. In addition, Mr Acheson alleged that there
had been a failure by NAB to account for the proceeds of sale of the commercial
portion of the Kite
Street property which had occurred in March 2010.
- Counsel
for Mr Acheson tendered a proposed “Amended First Cross-Claim,
Statement of Cross-Claim” signed on 24 October 2010 which, it was
said, was to be filed in the Possession Proceedings in which the basis for the
alleged
liability of NAB was to be reformulated as a breach of a duty to act
conscionably with respect to the taking of possession and sale
of the Anson
Street and Cliff Road properties. Such duty was said to extend to
Mr Acheson as mortgagor or as guarantor.
- The
Possession Proceedings have not yet been determined.
Counter-claim, set-off or cross demand
- Mr Acheson’s
contention in these proceedings is that he has a counter-claim, set-off or cross
demand of the kind referred to
in s.40(1)(g) of the Bankruptcy Act exceeding the
outstanding part of the District Court judgment which forms the basis for the
Bankruptcy Notice (the cross-claim).
When this matter was first listed for
hearing, counsel for Mr Acheson contended that Mr Acheson’s
potential cross-claim against
NAB included an alleged breach of duty of care in
relation to the properties owned by Baiame and the sale of those properties by
receivers of that company. Mr Acheson’s application for an
indefinite adjournment of the hearing was refused (see Acheson v National
Australia Bank Ltd [2010] FMCA 771). He was granted a limited adjournment
to clarify the basis for the asserted cross-claim.
- The
cross-claim within s.40(1)(g) is now said to arise by reason of
“shortfall[s]” in the amount received on the sale by NAB of
the properties at Cliff Road and Anson Street which were owned by
Mr Acheson,
as well as claims against NAB relating to personal property
items that were said to have been in those properties at the time that
NAB took
possession and sold the properties. No reliance is placed on claims about other
properties.
- Section
40(1)(g) of the Bankruptcy Act relevantly provides that a debtor commits an act
of bankruptcy:
- ... if a
creditor who has obtained against the debtor a final judgment or final order,
being a judgment or order the execution of
which has not been stayed, has served
on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy
notice under
this Act and the debtor does not:
- (i) where
the notice was served in Australia--within the time specified in the notice; or
- (ii) where
the notice was served elsewhere--within the time fixed for the purpose by the
order giving leave to effect the service;
- comply with
the requirements of the notice or satisfy the Court that he or she has a
counter-claim, set-off or cross demand equal
to or exceeding the amount of the
judgment debt or sum payable under the final order, as the case may be, being a
counter-claim,
set-off or cross demand that he or she could not have set up in
the action or proceeding in which the judgment or order was obtained.
- While
Mr Acheson’s asserted s.40(1)(g) cross-claims relate to the sale of
the Cliff Road and Anson Street properties and the alleged loss of goods and
chattels from those
properties, counsel for Mr Acheson indicated that the
only matter he intended to address in oral submissions was the alleged breach
of
NAB’s duty to act conscionably in relation to the Anson Street property.
He conceded that the applicant faced difficulties
in relation to the other
issues raised in written submissions, but stated that he was not instructed to
abandon anything relied on
in the written submissions.
- Mr Acheson
bears the onus to satisfy the Court that he has a counter-claim, set-off or
cross demand in the sense considered by Lindgren
J in Re Glew; Glew v
Harrowell of Hunt & Hunt Lawyers; Re Tresidder; Tresidder v Harrowell of
Hunt & Hunt Lawyers (2003) 198 ALR 331; [2003] FCA 373 at [10] –
[12]. The debtor’s obligation has been variously formulated as an
obligation to satisfy the Court that he has a genuine
demand that is more than
bona fide; that the Court must be satisfied that it has a reasonable
probability of success; that the debtor has a prima facie case (even if
in these proceedings he does not adduce the admissible evidence which would make
out a prima facie case before the court trying the issues that are
involved); and whether it is just that the claim should be determined before
bankruptcy
proceedings are allowed to continue, that is whether it is a claim
which is proper and reasonable to litigate.
- As
Lindgren J pointed out in Glew v Harrowell, the application of such
criteria requires the Court to engage in “some kind of preliminary
assessment” (at [10]), although not to determine the counter-claim
set-off or cross demand finally. His Honour stated at [11] –
[12]:
- Plainly, in
order to “satisfy” the Court for the purposes of par 40(1)(g),
the debtor is not required to prove, as on
a final hearing, the asserted
entitlement to recover from the creditor. Accordingly, evidence tendered on an
application to set
aside is to be tested for admissibility, not as if the
proceeding were one in which the debtor’s claim was being finally
determined,
but by reference to the question whether the Court should be
satisfied that the debtor has a claim deserving to be finally determined.
- ...a debtor
must satisfy the Court that there is sufficient substance to the counter-claim,
set-off or cross-demand asserted to make
it one which the debtor should, in
justice, be permitted to have heard and determined in the usual way, rather than
be forced to
comply with the bankruptcy notice by payment or to commit an act of
bankruptcy.
- In
Dekkan v Evans (2008) 6 ABC(NS) 334; [2008] FCA 1004 at [52] Jacobson J
pointed out that the applicant must satisfy the Court of three inter-related and
sometimes overlapping matters: that he
or she has a prima facie case, (even if
the evidence is not adduced which would be admissible on a final hearing), that
he or she
has a fair chance of success and that the claim is genuine or bona
fide (and see Guss v Johnstone (2000) 74 ALJR 884; [2000] HCA 26).
- The
state of satisfaction required involves weighing up considerations as to the
legal and factual merit of the claims relied on by
the debtor and the justice of
allowing the bankruptcy proceedings to go ahead or requiring them to await the
determination of the
claims.
- In
addition, Mr Acheson must satisfy the Court that the amount of the
counter-claim, set-off or cross demand is an amount equal to
or exceeding the
amount claimed in the Bankruptcy Notice and that the claim is one that he could
not have set up in the District
Court Lease Proceedings in which the judgment or
order that formed the basis for the Bankruptcy Notice was obtained. This
question
is to be “answered by reference to legal
considerations” not practicalities (see Re Ling; Ex Parte Ling v
Commonwealth of Australia (1995) 58 FCR 129; [1995] FCA 1410 at [10]).
The Anson Street Property
- The
first part of the asserted cross-claim within s.40(1)(g) of the Bankruptcy Act
against NAB relates to what is said to be a “shortfall” in
respect of the price achieved by the NAB on the sale of the Anson Street
property. Mr Acheson claims that the bank had
a duty to act conscionably
with respect to the taking possession of and sale of the property and that it
breached such duty.
- He
claimed first that he had an agreement with his son (Adrian Acheson) dated 15
February 2008 to sell the property to him for $700,000
with no agent’s
commission, that the property had been valued by a valuer at $700,000 as at 15
October 2007, but that NAB had
refused to allow the sale to
Mr Acheson’s son and proceeded to auction. This aspect of
Mr Acheson’s claim was not addressed
in oral submissions.
- It
was also alleged that NAB had represented to Mr Acheson’s solicitors on
21 May 2009 that it had agreed to postpone the scheduled
auction of the
Anson Street property but that, without further notice to Mr Acheson, it
proceeded to sell the property at auction
on 23 May 2009. There is evidence
that on 21 May 2009 the NAB wrote to Mr Acheson’s solicitors by
facsimile letter advising
that it “does agree to postpone any auction
of the [Anson Street] Property pending the return of Mr Adrian
Paxton Acheson from overseas”. Such conduct was said to be misleading
or deceptive within s.52 of the Trade Practices Act 1974 (Cth). Reliance
was also placed on s.51A of the Trade Practices Act. It was submitted that
there was an arguable case that by way of the letter to Mr Acheson’s
solicitors of 21 May 2009, NAB
had made a misleading statement which caused
Mr Acheson to lose the purchaser (who happened to be his son) who would
have bought
the property for more than the amount for which it was sold. NAB
contended that there was a slip in the letter in the failure to
include the word
“not”.
- The
Anson Street property sold for $580,000. Mr Acheson’s claim, as
explained in oral submissions, is that by reason of the
said conduct, he
suffered loss and damage in an amount of up to $120,000, in that he lost the
opportunity to sell the Anson Street
property to his son for up to $700,000.
- NAB
took possession of the Anson Street property on 23 March 2009. Mortgagee
Services Pty Ltd was appointed as agent to arrange
the sale. It obtained a
valuation from a professional valuer, indicating a valuation of between $480,000
to $570,000 and appointed
a professional real estate agent familiar with the
local area to market and sell the property. An auction was held on 23 May 2009.
The property was sold for $580,000 in negotiations after the property was passed
in at the auction. This result was $10,000 higher
than the top range of the
valuation.
- It
was contended that there was a basis for the applicant to assert that the lost
chance was in the order of $120,000 in circumstances
where there were 12
registered bidders, a lot of people in attendance at the auction and an
additional person (Mr Acheson’s
son) who would have been prepared to
pay up to $700,000. It was submitted that the court could be satisfied that
this would definitely
have increased the sale price to somewhere between
$580,000 and $700,000. In oral submissions counsel for Mr Acheson
explained that
the asserted loss was a loss of a chance to get up to $700,000
for the Anson Street property, on the basis that Mr Acheson’s
son
would have bid at the auction had it been postponed as agreed by NAB. It was
acknowledged that there could be more evidence
and that at this stage damages
were a matter of informed estimation. It was also acknowledged that such a
claim for up to $120,000
(plus interest) was less than the amount in the
Bankruptcy Notice, but suggested that the Court should determine the
“shortfall” and that Mr Acheson would pay the
difference to NAB and that the Bankruptcy Notice should be set aside on that
basis.
- It
was also submitted that the Court could be satisfied that such a counter-claim
could not have been raised in the District Court
Lease Proceedings, as the
orders were made on 7 May 2009, which was prior to the letter of
21 May 2009 and the sale of 23 May 2009.
- Counsel
for NAB acknowledged that the bank had a duty to act in good faith in respect to
its sale as mortgagee in possession (see
Pendlebury v Colonial Mutual Life
Assurance Society (1912) 13 CLR 676; [1912] HCA 9), but submitted that the
court should not be satisfied that this asserted duty gave rise to a prima
facie case of a claim equal to or exceeding the amount claimed in the
Bankruptcy Notice that had a fair chance of success (see Glew v
Harrowell). It was also submitted that such a claim could in any event have
been set up in the proceedings which gave rise to the judgment
that formed the
basis for the Bankruptcy Notice.
- While
there is limited evidence to support a claim of breach of a duty to act in good
faith, Mr Acheson’s counsel stated that
the claim that was pressed
was that NAB had engaged in misleading conduct within s.52 of the Trade
Practices Act (and see s.51A of that Act) in writing to Mr Acheson’s
solicitors on 21 May 2009 stating that they would agree to postpone
any
auction. He asserted that the cross-claim was for an amount “up
to” $120,000 (the difference between the sale price of $580,000 and
the amount that Mr Acheson’s son was said to be prepared
to pay).
- Accepting
for present purposes that Mr Acheson has an arguable case, in particular
based on a claimed breach of the Trade Practices Act, taking the evidence at its
highest it is not such as to establish that Mr Acheson’s son would in
fact have paid as much as
$700,000 to secure the property at auction in
circumstances where it was sold for $580,000 after bidding which went from
$450,000
to $565,000 at which time the property was passed in. In any event,
even if Mr Acheson’s son was prepared to bid up to $700,000
and this
provided an appropriate basis on which to assess the value of the asserted
cross-claim for the purposes of determining whether
the cross-claim was equal to
or exceeded the amount of the judgment debt, that would only give rise to a
claim of $120,000. Such
an amount does not equal or exceed the amount of the
judgment debt relied on in the Bankruptcy Notice. This was conceded by counsel
for the applicant who submitted that it was not necessary for the applicant to
have a cross-claim for the full amount of the debt
relied on in the Bankruptcy
Notice and that it was open to the Court to make an order on terms that the
Bankruptcy Notice be set
aside provided that the shortfall between the
Court’s assessment of the amount of the cross-claim and the amount in the
Bankruptcy
Notice was paid within 28 days.
- I
am not persuaded that such an approach is appropriate. Section 40(1)(g) of
the Bankruptcy Act is only met if the Court is satisfied that the counter-claim,
set-off or cross demand relied upon equals or exceeds the amount of
the judgment
debt. In Patane v Asteron Life Ltd (formerly Royal & Sun Alliance
Financial Services Ltd) (ACN 001 698 228) (2004) 2 ABC(NS) 85; [2004] FCA
232 at [100] – [101] it was suggested that if the Court found that a
counter-claim, set-off or cross demand existed but that it was not
of a value or
amount that equalled or exceeded the amount of the judgment debt, the proper
course was to refuse to set aside the
Bankruptcy Notice, not to allow the debtor
to pay the creditor the difference. This is because the debtor would have the
opportunity
to raise arguments as to solvency on the presentation of any
creditor’s petition. I am of the same view. I have also borne
in mind
that it is not for this court to finally determine any asserted counter-claim.
It is not appropriate to make the order suggested
for Mr Acheson.
- Strictly
speaking, this makes it unnecessary to determine whether the Anson Street claim
could have been set up in the District Court
proceedings. However this issue is
also of relevance to the Cliff Road claim.
- First,
if the conduct relied on as the basis for any asserted cross-claims occurred
prior to the date on which the District Court
orders were made by consent
(7 May 2010), the requirement of s.40(1)(g) that the debtor could not have
set up the claim in the action or proceedings in which the judgment or order was
obtained will not
be met. This is a question “to be answered by
reference to legal considerations” not practicalities (Re Ling; Ex
parte Ling v Commonwealth at 132 and see Westbrook v National Australia
Bank Ltd [1999] FCA 892). There is no suggestion that the asserted claims
could not have been set up in the District Court proceedings due to their nature
or as a matter of law (see Re Brink; Ex parte Commercial Banking Co of Sydney
Ltd (1980) 30 ALR 433; [1980] FCA 78). The only issue is the relative
timing of the various elements of the asserted claim and the District Court
action.
- NAB
submitted that the Anson Street claim could have been raised in the District
Court proceedings because the ultimate District Court
orders were not entered
until 16 December 2009, after Mr Acheson agreed to such orders by
consent on 6 November 2009. Indeed, it
was submitted that there was no
reason Mr Acheson’s claims concerning Anson Street could not have
been set up in the District
Court proceedings prior to the consent orders being
agreed on 6 November 2009.
- However
the orders that formed the basis for the Bankruptcy Notice were made on
7 May 2009. The fact that thereafter a party could,
as Mr Acheson
did, file a notice of motion seeking that the orders be set aside or varied to
correct an alleged error in the sealed
orders, does not mean that a cross-claim
could have been set up after 7 May 2009. It is always open to a party to
seek to have orders
set aside or varied, provided certain prerequisites are met
(in this case see the Uniform Civil Procedure Rules (UCPR), rr.36.15,
36.16 and
36.17). However I am not satisfied that such a possibility, or the fact of such
an application, means that the time for
determination of whether a counter-claim
could have been set up is other than the date on which judgment was obtained and
entered,
at least where the subsequent variation of orders did not affect the
part of the orders that were the basis for the Bankruptcy Notice.
(See Re
Deen; Ex parte Deen v Muller [1995] FCA 1450; (1995) 58 FCR 441 at 442; [1995] FCA 1450).
- Contrary
to the respondent’s submissions, in my view the relevant time is the time
at which judgment was obtained by the creditor
in the original proceedings (see
ICM Agriculture Pty Ltd v Young (2009) 6 ABC(NS) 765; [2009] FCA 109 at
[2] – [4] and Westbrook v National Australia Bank Ltd) that is,
7 May 2009. Even if the relevant time was the time at which judgment was
entered, according to the sealed certificate
of order that also occurred on
7 May 2009. It was not addressed in any detail on the procedure for the
entry of orders made by the
District Court of New South Wales (see for example
Deputy Commissioner of Taxation v Meredith (No 2) (2008) 75 NSWLR 462;
[2008] NSWCA 133 in relation to r.36.11 of the UCPR). It has not been
established that entry of the orders occurred after 7 May 2009 or that the
subsequent variation to paragraph 6 of the orders made and entered on
7 May 2009 meant that the date of the order that formed the
basis for the
Bankruptcy Notice should be regarded as a later date.
- Insofar
as Mr Acheson asserted a breach of duty by NAB in not
“allowing” him to sell the property to his son, as was said
to have been agreed in February 2008 (a matter not addressed in oral
submissions),
those alleged events occurred in 2008. This was before 7 May
2009 and any such claims could have been raised in the District Court
proceedings. Hence such a claim is not of the kind referred to in s.40(1)(g) of
the Bankruptcy Act.
- In
contrast, the part of the Anson Street claim based on events after 7 May
2009 could not have been set up in the District Court
proceedings. However, as
indicated, taken at its highest the Anson Street claim is not for an amount
equal to or exceeding the amount
in the Bankruptcy Notice. Thus it is necessary
to consider the other asserted cross-claims to determine whether the Court is
satisfied
that there is a total counter-claim within s.40(1)(g) of the
Bankruptcy Act of a sufficient amount to equal or exceed the amount of the
judgment debt relied on in the Bankruptcy Notice.
Cliff Road Sale
- In
his affidavit sworn on 6 May 2010, Mr Acheson claimed a
“shortfall” in the sale of 28 Cliff Road, Forster in the
amount of $225,863.47. Cliff Road was a property in Forster owned by
Mr Acheson
which NAB took possession of on 17 September 2008. NAB
appointed Mortgagee Services Pty Ltd as agent to arrange the sale of this
property. It is not in dispute that, as attested to by Peter Mair who was
employed as a consultant by Mortgagee Services and was
responsible for securing
and marketing the property at Cliff Road and also the Anson Street property on
behalf of NAB, Mortgagee
Services obtained a valuation report on the property
dated 29 September 2008 prepared by a certified practising valuer which
assessed
the then current market value at the date of inspection
(29 September 2008) at $755,000 and suggested that the most appropriate
method
of selling the property would be at a public auction.
- Mortgagee
Services provided a property report for NAB dated 1 October 2008 in respect
of the proposed sale of Cliff Road. It appointed
a professional real estate
agent familiar with the local area to market and sell the property. The agent
expressed an opinion as
to a current estimated selling price or price range of
between $800,000 and $900,000 in the sales inspection report and auction agency
agreement dated 7 October 2008. The evidence relied on by NAB is that a
pre-auction bid of $700,000 was received. That offer was
not accepted by
NAB.
- On
22 November 2008 Cliff Road was put to public auction. According to an auction
report prepared by Mortgagee Services for NAB,
there were approximately 45
people in attendance with six registered bidders. The reserve was set at
$825,000 with a fall-back of
$725,000 having regard to the valuation of the
property at $755,000, with a range of $725,000 to $780,000.
- NAB’s
evidence is that bidding opened at $600,000 and proceeded to $700,000 and with
no further bids. Mortgagee Services instructed
the agent to place a
vendor’s bid at $750,000. There was no response to this bid and the
property was passed in. The auction
report stated that after lengthy
negotiations with the highest bidder a final offer of $740,000 was secured. The
property was sold
at this amount under auction conditions. This was $15,000
above the “[f]all-back” figure of $725,000. It was below the
valuation, but was $40,000 above the pre-auction offer made by the party who
ultimately
purchased the property. It was suggested in the auction report that
this result was acceptable in light of recent low auction clearance
rates and
the general downturn in prices for coastal property.
- Mr Acheson
initially alleged in the Possession Proceedings that NAB had a duty to take care
to sell the property at 28 Cliff Road
for the best price reasonably
attainable and that it breached this duty. He proposes to amend the formulation
of the duty having
regard to NAB submission’s that its duty was to act in
good faith in respect to its sale as mortgagee in possession (see Pendlebury
v The Colonial Mutual Life Assurance Society Limited). Counsel for the
applicant foreshadowed that Mr Acheson would seek to amend his cross-claim in
the Possession Proceedings to assert
a breach of the equitable duty to act
conscionably towards the mortgagor (Ultimate Property Group Pty Ltd v
Lord (2004) 60 NSWLR 646; [2004] NSWSC 114).
- It
was submitted that there was an arguable claim that the sale of Cliff Road
amounted to a breach of NAB’s duty to act conscionably
because the sale
was made in the face of an offer for a significantly higher figure than that
received at auction. According to
Mr Acheson, he obtained four valuations
of Cliff Road in April 2008 in the range of $900,000 to $1.05 million and
his agent obtained
an offer for $900,000. However NAB proceeded to auction.
The property was sold for $740,000. It was asserted that by reason of
such
conduct Mr Acheson suffered loss and damage as he lost the opportunity to
sell the property for $900,000 or more.
- Annexed
to Mr Acheson’s affidavit of 6 May 2010 is a copy of an affidavit sworn by
him and filed in the Supreme Court on 29
March 2010 detailing this claim. In
particular, he claimed that on 3 October 2008, his real estate agent (who
was said to have had
the property listed for sale at the time for $995,000)
received a telephone call from a named person who had advised that he had
seen
their “For Sale” sign on the Cliff Road property and
submitted an oral offer of $900,000. According to Mr Acheson, the offer
was unsuccessfully
submitted to Mortgagee Services.
- In
contrast, the evidence from NAB in relation to the sale of the Cliff Road
property is that a pre-auction bid of $700,000 (which
was said to be
unconditional) was received by email of 12 November 2008, but was not accepted
by NAB. There is no reference to any
offer of $900,000.
- In
oral submissions, counsel for the applicant indicated that he wished to say no
more in relation to the Cliff Road property and
conceded that there was an issue
about the timing of the events in question.
- Even
if I were to be satisfied on the conflicting evidence before the Court that
Mr Acheson had a genuine counter-claim, set-off or
cross demand in relation
to the sale of the Cliff Road property in the sense considered in Glew v
Harrowell (and I was not addressed in any detail on why that would be so),
the insurmountable difficulty that faces the applicant is that the
Cliff Road
settlement occurred before the date on which orders were made in the District
Court Lease Proceedings. Even if Mr Acheson
had to seek leave to raise the
matter in the District Court proceedings, it has not been established that he
could not have set up
the Cliff Road claim in those proceedings. There is no
suggestion that the nature of the asserted claim was such that it could not
be
raised in the District Court proceedings. The applicant cannot be said to have
been unable to set up a cross-claim in proceedings
because he needed the leave
of the Court or the exercise of the discretion by the Court to do so, especially
(as here) in circumstances
where he did not apply for such leave (see Re
Willats and Another; Ex parte Nissan Finance Corporation Limited (1991) 31
FCR 206; [1991] FCA 407).
- Hence,
insofar as Mr Acheson relies on any alleged “shortfall” in
the sale of the Cliff Road property, he has not satisfied me that this aspect of
his claims is a counter-claim, set-off
or cross demand of the kind described in
s.40(1)(g) of the Bankruptcy Act that could not have been raised in the District
Court Lease Proceedings in which the judgment that formed the basis for the
Bankruptcy
Notice was obtained. This aspect of Mr Acheson’s claim is
not made out.
Personal Property at Cliff Road
- Mr
Acheson also asserted a cross-claim in relation to what was said to be the value
of lost goods and chattels unable to be retrieved
from the Cliff Road property.
It was alleged that NAB breached its duty in failing to advise him of the time
of settlement so that
he could pick up such personal property items.
- Settlement
of the Cliff Road sale occurred on 2 January 2009. In written submissions
the applicant submitted that proposed evidence
of the former tenant of the Cliff
Road property would demonstrate that he was permitted to believe that the
deadline to collect contents
was three days after settlement, but that he and
Mr Acheson were unable to retrieve their possessions when a removalist
attended
on 5 January 2009. Mr Acheson’s claim is that he lost
all of the furniture and other effects that he had left in the Cliff
Road house.
- It
is relevant in relation to the prospects of success of such a claim that
cl.20.1(e) of the mortgage over the property to NAB provided:
- If
you are in default... [NAB] may enforce this mortgage by doing any
one or more of the following in addition to anything else the law allows [NAB]
to do as mortgagee:
...
- (e) take
possession of the property; ([NAB] may remove personal possessions and
either abandon them or store them without being liable to you. If
[NAB] stores them and you do not reclaim them within a reasonable
time, [NAB] may dispose of them and use the proceeds towards paying the
amount owing.)
- The
applicant did not address the issue of whether this clause would exclude any
liability of NAB in relation to the personal property
items. On its face it
would appear to be applicable. Nor did he address the evidence before the Court
of multiple unsuccessful
attempts by the solicitors for NAB and Mortgagee
Services between October 2008 and January 2009 to have Mr Acheson or the
tenant
remove personal property from the Cliff Road property.
- In
any event, there are no proper particulars or evidence of ownership or valuation
of the goods in question before the court. It
is also unclear as to what items
were Mr Acheson’s possession, as distinct from those of the tenant.
As suggested in Melbourne v Relativity Pty Ltd [1999] FCA 160 at [29], a
mere assertion as to ownership and value by a party interested in the outcome is
insufficient, even for an application to set
aside a Bankruptcy Notice.
- The
evidence before the Court is not such as to establish that Mr Acheson has
an arguable cross-claim in this respect based on breach
of a duty owed to him by
NAB. Even if that is wrong, the value of any asserted cross-claim cannot be
calculated on the material
before the Court.
- Moreover,
and critically, just as the claim in relation to the Cliff Road property could
have been raised in the District Court Lease
Proceedings, so could the claim in
relation to the contents, notwithstanding that by early 2009 the pleadings had
closed in those
proceedings. Mr Acheson could have sought leave to raise
such a cross-claim prior to the hearing date. The matter was fixed for
hearing
in the District Court at a status conference on 4 March 2009. The hearing
date and the date of judgment in the Lease Proceedings
was 7 May 2009. The
applicant’s contention that an unrelated cross-claim would not have been
permitted is not such as to establish
that the asserted claim could not have
been raised in the District Court proceedings. This aspect of
Mr Acheson’s claim is
not made out.
The Anson Street Goods
- Finally,
Mr Acheson contended that he was not afforded the opportunity to retrieve
his goods from the Anson Street property. However,
as submitted for NAB and
conceded in oral submissions for Mr Acheson, Mr Acheson has not
particularised or quantified the goods or
value of the goods he claimed were
left in the Anson Street property. The operation of cl.20.1(e) of the mortgage
was not addressed.
The applicant did not elaborate on the legal basis for an
alleged counter-claim in this respect. Moreover, Mr Mair’s
unchallenged
evidence is that the goods in Anson Street were collected.
- On
the evidence before the court it has not been established that there is a
prima facie case of such a counter claim. Even if there was, in the
absence of quantification (beyond an assertion that the goods were of the
value
of $30,000 approximately), the evidence is not such as to enable a value to be
attributed to such a claim for the purposes
of determining whether the asserted
cross-claims in total exceed the amount of the judgment debt. This element of
Mr Acheson’s
claim is not made out.
Conclusion
- Hence,
taken at its highest, the only relevant element of the asserted cross-claims is
in relation to the Anson Street property, but
that is not in an amount equal to
or exceeding the amount in the Bankruptcy Notice.
- I
am not satisfied that the requirements of s.40(1)(g) are met. Nor, as
indicated, am I satisfied that the Bankruptcy Notice should be set aside on the
basis of payment of the difference
between the “value” of the
asserted cross-claim assessed by the Court and the debt. This is not a proper
basis on which to set aside a bankruptcy
notice. The application should be
dismissed with costs.
I certify that the preceding eighty (80)
paragraphs are a true copy of the reasons for judgment of Barnes FM
Date: 4 February 2010
AustLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.austlii.edu.au/au/cases/cth/FMCA/2011/45.html
