Byrnes v Royal & Sun Alliance Insurance Australia Ltd

[1999] FCA 930

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(Judgment by: EMMETT J)

BETWEEN: JAMES WARREN BYRNES, Applicant
AND: ROYAL & SUN ALLIANCE INSURANCE AUSTRALIA LIMITED, Respondent

Court:

Judge:
EMMETT J

Hearing date: 29 June 1999
Judgment date: 29 JUNE 1999

SYDNEY

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Judgment by:
EMMETT J

EX TEMPORE REASONS FOR DECISION

1 I have before me a notice of motion which, in its terms, seeks an order that proceedings be stayed until such time as the applicant's appeal from a decision of Hely J of 17 June 1999 be determined. Counsel for the applicant ("the Debtor") indicated that he wishes to vary the terms of the prayer for relief, in effect, to ensure that there would be a stay of the effect of Hely J's decision such that, until the determination of an appeal, the time for compliance with a bankruptcy notice would not have expired.

2 Hely J dismissed summarily an application by the Debtor to set aside a bankruptcy notice. The judgment debt, in respect of which the bankruptcy notice was issued, was based on a bond issued by the respondent ("the Creditor") in connection with certain development works. The judgment was entered in favour of the Creditor on 18 January 1999 in the sum of $49,841.72. That represents the balance of monies owing by the Debtor in respect of a guarantee given in respect to the bond issued by the Creditor.

3 Concept Properties Pty Limited ("Concept") was the owner of land situated at Quakers Hill. Concept entered into a contract with Bluecrest Constructions Pty Limited ("Bluecrest") to construct home units on that property. The Creditor issued a policy of insurance covering the contract works at Quakers Hill and on several other properties. The insured under that policy was Bluecrest. The policy also noted the interest of Arkway Pty Limited ("Arkway") as mortgagee.

4 In late 1997, after construction of the units had commenced, the Quakers Hill property was vandalised and, in February 1998, Bluecrest went into liquidation. It was not clear, on the evidence before his Honour, whether a claim under the policy had been made. However, on 23 March 1998, Concept wrote to the Creditor indicating that it wanted the claim processed as a claim by the mortgagee, Arkway.

5 Arrangements were entered into between the Debtor and the Creditor concerning the payment of the liability of the Debtor in respect of his guarantee, although the terms of those arrangements were not before his Honour. Apparently, orders were made by consent which would have entitled the Creditor to have judgment entered against the Debtor in the District Court.

6 The Debtor claims that he has taken an assignment of any claim which Arkway has to be indemnified under the policy of insurance issued by the Creditor. That assignment was said to have been entered into after the compromise arrangements between the Debtor and the Creditor.

7 There were two bases upon which his Honour dismissed summarily the Debtor's application to set aside the bankruptcy notice. The first is that his Honour was not satisfied that any cross-claim or set off which might arise as a consequence of any assignment of the insurance claim could not have been set up in the proceedings in the District Court. His Honour was prepared to draw an inference that, on 15 September 1997, the Creditor agreed to withhold any further enforcement action against the Debtor provided that, amongst other things, it received a bank cheque in an amount of $10,000 each month.

8 His Honour inferred that, pursuant to that arrangement, consent orders were executed which entitled the Creditor to immediate entry of judgment in the event that payment was not made in accordance with the arrangements. On 4 January 1999, the solicitors for the Creditor notified the Debtor that, unless the balance due to the Creditor at that stage was paid by Wednesday, 13 January, the Creditor would apply to the District Court for default judgment without further notice.

9 The judgment entered on 18 January 1999 is described as a default judgment and his Honour considered that there was no basis for an inference that it was entered pursuant to any consent orders which might have been signed in association with the 15 September 1997 arrangements.

10 His Honour concluded that there was no acceptable explanation as to why any cross demand, assuming that one existed, could not be set up in the District Court proceeding. The explanation as offered by the Debtor was that the consent orders might have precluded that course. The consent orders, of course, were not before his Honour and are not before me. His Honour considered that, even if the cross-claim was based upon a cause of action which arose after the institution of the District Court proceedings, that would not be a barrier to its being set up in those proceedings. I do not see any basis for concluding that there is any arguable error in the conclusion reached by his Honour in that regard.

11 In any event, his Honour also concluded that, on the material before him, there was no basis for concluding that there was, in fact, a cross-claim equal to or greater than the amount of the judgment debt. His Honour considered that there was no material from which it could be deduced that Arkway, as mortgagee, suffered loss in consequence of the vandalism. There is nothing to suggest that Arkway had made any claim on the Creditor with respect to such a loss other than the assertion by Concept that it wanted the claim processed as a claim by the mortgagee. His Honour had some doubts as to whether the correspondence before him could operate as a legal assignment of whatever interest Arkway might have had. Having regard to the nature of the proceeding before him, his Honour did not think that it was appropriate to determine that question.

12 However, even making an assumption in favour of the Debtor, his Honour considered that there was no basis at all for concluding that any claim which anybody has in relation to the Quakers Hill property exceeded the amount referred to in the bankruptcy notice. There is some reference in the evidence to a claim in respect of a job at Lemon Grove for $35,000, and another claim for $8,000 and a third claim yet to be quantified. The only possible reference to the claim in relation to Quakers Hill is the claim for $8,000 or the one which is yet to be quantified. In those circumstances, I consider that there is no arguable error in his Honour's conclusion that there was nothing in the material to indicate that there was a set off in excess of the amount of the bankruptcy notice.

13 I do not consider that there is any basis for doubting the correctness of his Honour's conclusion. In those circumstances, I would not be prepared to grant any stay which would have the effect of interfering with the effect of his Honour's orders. Accordingly, I propose to dismiss the application and order the Debtor to pay the Creditor's costs of the application for a stay.