Ryan v Hill [2019] FCCA 2882 (17 September 2019)

Last Updated: 10 October 2019

FEDERAL CIRCUIT COURT OF AUSTRALIA

RYAN v HILL

[2019] FCCA 2882

Catchwords: BANKRUPTCY – Application to set aside bankruptcy notice – whether the debtor has a counter-claim, set-off or cross demand – whether cross demand made or “set up” in the relevant proceeding – whether proceedings to set aside a judgment or order have been instituted – whether amount in bankruptcy notice is overstated – whether the debtor owes the debt – application dismissed with costs.

Legislation: Bankruptcy Act 1966 (Cth), ss.40(1)(g), 41(6A), 41(6C), 41(7)

Cases cited: Smart v Esanda Finance Corp Ltd [2000] FCA 235 Chen v TMS Global Services Pty Ltd [2010] FMCA 524

Applicant:

TODD PATRICK RICHARD RYAN

Respondent:

DEBORAH SUSAN HILL

File Number:

ADG 178 of 2019

Judgment of:

Judge Young

Hearing date:

17 September 2019

Date of Last Submission:

17 September 2019

Delivered at:

Darwin

Delivered on:

17 September 2019

REPRESENTATION

The Applicant:

In person

Counsel for the Respondent:

Mr Gentry

Solicitors for the Respondent:

Andersons Solicitors

ORDERS

(1) The application filed 17 May 2019 be dismissed.
(2) The applicant pay the respondent’s costs as taxed or agreed.
(3) Certified for counsel.

FEDERAL CIRCUIT COURT OF AUSTRALIA AT DARWIN

ADG 178 of 2019

TODD PATRICK RICHARD RYAN

Applicant

And

DEBORAH SUSAN HILL

Respondent

REASONS FOR JUDGMENT

Ex-Tempore

1. These reasons for judgment were delivered orally. They have been corrected from the transcript. Grammatical errors have been corrected and an attempt has been made to render the orally delivered reasons amenable to being read.
2. This is an application for the rehearing of an application by Mr Ryan to set aside or extend time for compliance with a bankruptcy notice. Registrar Parkin dismissed Mr Ryan’s application on 5 August 2019.
3. The background to the matter is as follows. The applicant, Mr Ryan, commenced defamation proceedings in the District Court of South Australia against the respondent, his former mother-in-law. Broadly speaking it appears that the matter arose out of a family law dispute. On 26 November 2018 Master Blumberg of the District Court gave summary judgment for Ms Hill in relation to the majority of Mr Ryan’s claim. Master Blumberg made orders that Mr Ryan pay Ms Hill’s costs immediately. Those costs were subsequently taxed along with two other orders that had been previously made for smaller amounts and which were also immediately payable.
4. Master Blumberg left one aspect of Mr Ryan’s defamation action on foot, which was a claim that Ms Hill had defamed Mr Ryan in a witness statement or affidavit filed in criminal proceedings, Police v Ryan, which were conducted or may still be on foot, it is unclear, in the Adelaide Magistrates Court. In summary, the police charges were against Mr Ryan for harassing or stalking Ms Hill.
5. What I will call a compilation order was made on 15 April 2019 for $8,300 against Mr Ryan that was payable immediately. I will call it a compilation order because there are in fact, on that date, three orders, all payable immediately, made on different dates for $300, $500 and $7,500. Those orders founded the bankruptcy notice dated 18 April 2019 which included that total amount $8,300 plus an interest component of $38.42. The bankruptcy notice was served on Mr Ryan on 28 April 2019. On 16 May 2019 he applied to this court.
6. The grounds are set out in his application. Mr Ryan is not a lawyer and his grounds are not neatly divided into separate numbered grounds but, distilling them as best I can, I consider there are three grounds that he agitates in his application.
7. Ground 1 rests on section 41(7) of the Bankruptcy Act which provides as follows:
   • Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has applied to the Court for an order setting aside the bankruptcy notice on the ground that the debtor has such a counter-claim, set-off or cross demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counterclaim, set-off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the court determines whether it is so satisfied.
8. Mr Ryan asserts that he has applied to the court for an order setting aside the bankruptcy notice, that is, the application in this court, on the ground that he has a counter-claim, set-off or cross demand.
9. The reference to paragraph 40(1)(g) is a reference to subsection 40(1)(g) of the Bankruptcy Act which provides that:

... 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;
(ii) [not relevant] ;

comply with the requirements of the notice or satisfy the Court that he or she has a counterclaim, 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 counterclaim, 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; ...

10. Ground 2 relates to subsections 41(6A) and (6C). It is asserted by Mr Ryan that there are proceedings on foot to set aside the judgment or order on which the bankruptcy notice was based.
11. Ground 3 is in three parts and asserts (a) that there is a stay of proceedings of the relevant order in the District Court, (b) that the amount of the claim in the bankruptcy notice is overstated, and (c) the debtor, Mr Ryan, does not owe the debt.
12. Turning to ground 1, the nub of the matter, in my view, is whether or not, in terms of section 40(1)(g), Mr Ryan has a counterclaim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, that is, $8,300 odd, being a counterclaim, set-off or cross demand that he could not have set up in the action or proceeding in which the judgment or order was obtained. The claim for damages against Ms Hill is said to be such a counterclaim, set-up or cross demand.
13. Assuming that there is a prima facie case in Mr Ryan’s claim, and I am prepared to assume that on the basis that there is a remaining claim not struck out by Master Blumberg, which Mr Ryan says is worth $72,000, less, of course, any set-off, and assuming that his claim for damages in the District Court is such a claim, that is, a counterclaim, set-off or cross demand (perhaps it is a cross demand), it is a fact that that claim was made and is made in the same proceeding as the proceeding in which the order was made against Mr Ryan.
14. I am satisfied that in that sense it could have been and was, to use the words of the Act, “set up” in the same proceeding in the sense meant by subsection 40(1)(g). Mr Ryan was in reality able to seek a set-off of any costs order against him but because Master Blumberg decided, contrary to the usual practice in civil litigation, to make an order for costs that was payable immediately (reflecting, I assume, the Master’s view of Mr Ryan’s conduct in the proceeding and the merits of his claims) those costs were not set-off against his claim by reason of the order for immediate payment.
15. In my view, the policy or legislative intention of subsection 40(1)(g) is that persons ought not be made bankrupt on the basis of judgments or orders where they have some other claim that it has not been possible to agitate and have determined in the proceeding in which the costs order was made, that is, it was not possible to “set up” the claim in that proceeding.
16. The reason for that is obvious. It would work an injustice if a debtor had a genuine setting-off claim or cross demand or counterclaim that would expunge the value of the order made against him or her but was unable for some reason, and that reason must be a legal reason, to be able to have it set up in the relevant proceeding. The meaning of “set up” was referred to in a Full Court Federal Court decision in Smart v Esanda Finance Corp Limited [2000] FCA 235, where the Court said that “set up” in a proceeding meant could be set up as a matter of law.
17. In this case, I am satisfied that Mr Ryan could have set up and, indeed, did set up that claim in the same action or proceeding but was unsuccessful in establishing it because of Master Blumberg’s view of the merits of his case or his conduct, resulting in an immediately payable costs order. Master Blumberg also made some observations about the merit of the remaining case. Master Blumberg expressed the view in his decision that there was a very strong defence available to the defendant in those proceedings of qualified privilege having regard to the fact that the document or statement or affidavit that was said to be defamatory was provided to the police and indeed the affidavit was annexed to an affidavit in these proceedings. It appears that the affidavit was, in fact, prepared by the police or those advising them for use in a criminal proceeding.
18. In my view, that fact reinforces the observations made by Master Blumberg that there was probably a strong defence of qualified privilege available. Mr Ryan points out that the defence of qualified privilege will not withstand proof of malice and says that in his statement of claim he has alleged malice. I accept he has alleged malice but whether or not he succeeds in that, I cannot say. I really cannot go beyond Master Blumberg’s view that he considered the defence was clearly available to the defendant.
19. There has been, in my view, an opportunity for Mr Ryan to advance his claim in the same proceeding and, for the reasons I have given, it did not meet with favour from Master Blumberg. There has been a degree of judicial oversight and, in those circumstances, I find it difficult to accept that the policy intent behind the section has not been met.
20. I was also referred to Chen v TMS Global [2010] FMCA 524, a decision of the Federal Magistrates Court, as it then was, where interlocutory costs orders had founded a bankruptcy notice. I am not satisfied that that case is of particular assistance to me in this decision because the question there was whether or not a counterclaim that was in fact not made in the relevant proceeding could have been set up. Magistrate Driver, as he then was, found that it could have been set up. In my view, that case was somewhat factually different and does not particularly answer the question that I need to answer here.
21. In my view, the claim that Mr Ryan refers to, that is, his claim for damages against Ms Hill, not only could have been set up in the proceeding or action in which the judgment or order was obtained but was. For that reason the first ground must fail.
22. Ground 2 is based on a claim by Mr Ryan that there is a proceeding on foot to set aside the orders in which the bankruptcy notice was founded. He said to me in submissions that the first directions hearing or a directions hearing in relation to that application is to be held on 23 September 2019 in the District Court in Adelaide. I do not accept that submission. Mr Ryan tendered in evidence a record of outcome produced by the District Court dated 12 August 2019. That record, in my opinion, is to be construed as permitting Mr Ryan to seek orders in respect of inspection of documents and to seek to set aside certain orders, including an order made against him for costs in default of appearance on 8 July 2019.
23. I do not accept that the directions hearing on 23 September 2019 will deal with setting aside the orders made in what I have called the compilation order: essentially the orders of 14 September 2018 and 15 April 2019. There is no indication in the record of outcome that the directions hearing on 23 September 2019 deal with those matters at all. On the contrary, I am satisfied that the record of outcome suggests it will deal with other matters altogether including, as I say, Mr Ryan’s failure to appear in the court on 8 July 2019.
24. The other provision referred to in subsection 41(6A) of the Bankruptcy Act is in (b) which says that where an application made to the court to set aside the bankruptcy notice the court may in such case, subject to subsection (6C), extend the time for compliance with the bankruptcy notice. Subsection 41(6C) provides that where the debtor applies to the court for an extension of time to comply with a bankruptcy notice on the ground that proceedings to set aside a judgment or order have been instituted and the court is of the opinion that the proceedings to set aside the judgment or order have not been instituted bona fide or not been prosecuted with due diligence the court shall not extend the time for compliance.
25. I am satisfied in relation to subsection 41(6A)(a) that there are, in fact, no proceedings on foot to set aside the judgment in the District Court, as asserted by Mr Ryan. That of course does not dispose of a general application to this court to extend time. I am not satisfied that Mr Ryan’s application to this court is not bona fide or has not been prosecuted with due diligence. However, Mr Ryan has not put forward any other ground on which this court could exercise its discretion to extend time other than the matters that I have mentioned, and matters in what I have called ground 3 in its three parts, (a), (b) and (c).
26. As I have noted, part (a) contains an assertion that there is an application for stay of proceeding on foot in the District Court in respect of the orders founding the bankruptcy notice. I am satisfied that that is not the case.
27. The second part is the claim that the amount in the bankruptcy notice is overstated. There is no evidence of that. The amount claimed appears to be consistent with the orders appearing in the compilation order of 15 April 2019. That is a total amount of $8,300 plus a small amount for interest.
28. The third claim is that the debtor does not owe the debt. In my view, there is no evidence of that whatsoever and indeed the evidence is overwhelmingly to the contrary.
29. That being the case, there is no other ground on which a discretion to extend time for compliance with the bankruptcy notice could be based and, accordingly, the application is dismissed.

I certify that the preceding twenty-nine (29) paragraphs are a true copy of the reasons for judgment of Judge Young

Associate:

Date: 9 October 2019