FEDERAL COURT OF AUSTRALIA

Finikiotis v Sandhurst Trustees Ltd [2000] FCA 1783

BANKRUPTCY – application to set aside bankruptcy notice – whether counterclaim, set-off or cross-demand

Bankruptcy Act 1966 (Cth) s 41(7)

EFSTATHIOS FINIKIOTIS & ANOR v SANDHURST TRUSTEES LTD

NO. S 84 OF 2000

BEAUMONT, HEEREY AND LEHANE JJ

1 DECEMBER 2000

ADELAIDE

THE COURT ORDERS THAT:

1.         The appeal be dismissed.

2.         The appellant pay the respondent’s costs to be taxed, including reserved costs.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

THE COURT:

1                     The appellants Efstathios Finikiotis and Chrissafina Zervos appeal against an order of von Doussa J made on 14 July 2000 which dismissed their application to set aside a bankruptcy notice.  The ground raised before his Honour which Dr Finikiotis, who was not legally represented, repeated before us concerned his claim that there was an alleged counterclaim set‑off or cross‑demand alleged for the purpose of s 41(7) of the Bankruptcy Act 1966 (Cth). 

2                     The background to this matter is an advance which was made by the respondent Sandhurst Trustees Ltd to companies of which the appellants were guarantors for the purchase of a shopping centre.  A valuation was made by Knight Frank and Co in May 1997.  The respondent advanced $3.398 million.  Default was made on the loan and the respondent entered into possession.  Notices of demand were served and an action commenced in the Supreme Court of South Australia against the appellants and others.

3                     In September 1999 the appellants filed a defence and counterclaim in that action, in the course of which they alleged that the valuation was negligent and defective because the sum for rentals was inflated.  However, it is important to note that the defence and counterclaim were against Heine Management Ltd and Knight Frank, the valuers.  The respondent Sandhurst Trustees Ltd was not a defendant to the counterclaim.

4                     On 6 December 1999 the respondent filed an application for summary judgment.  On 13 January 2000 the counterclaims were struck out, and on 14 February 2000 a Master entered summary judgment against the appellants.  That is the judgment on which the bankruptcy notice is founded.  An appeal from the summary judgment was dismissed by Williams J.  On 31 March 2000 the bankruptcy notice was issued.  Subsequent proceedings seeking to appeal against the Master’s judgment have not been successful, although there is, we are told, an appeal fixed for hearing next Friday, 8 December. 

5                     The other relevant matter is that on 13 July 2000, that is the day before von Doussa J gave judgment on the present application, the appellants commenced action number S 71 of 2000 in the Federal Court against Heine Management Ltd and Knight Frank and this time also against the respondent, alleging breaches of the Trade Practices Act 1974 (Cth)in relation to the valuation.

6                     The essential grounds on which von Doussa J dismissed the application were that the counterclaim in relation to the alleged valuation was one which could have been commenced in the Supreme Court of South Australia and, secondly, the counterclaim that was lodged did not make a claim against the respondent.  We see no error in the conclusions that his Honour reached on both those issues. 

7                     We note, as did von Doussa J, that Williams J who had much more information than has been available to either von Doussa J or ourselves, observed that the allegations that were made in the Supreme Court proceedings against Knight Frank and Heine made no criticism of Sandhurst so far as the circumstances of the valuation were concerned.  His Honour was unable to see that there was any relevant connection between the valuation transaction and the loan transaction.  Williams J observed that Dr Finikiotis had asserted that the Knight Frank valuation was wrong and said:

“I have fully investigated the consequences that might flow from such an assertion if it were correct.  I am satisfied that relevantly the plaintiff Sandhurst has not been shown to be involved in anything arising out of Knight Frank’s action.”

8                     The appeal should be dismissed.

Associate:

Dated:              14 December 2000