FEDERAL COURT OF AUSTRALIA

Shephard v Chiquita Brands (South Pacific) Ltd

[2002] FCA 466

BANKRUPTCY – whether bankruptcy notice defective – where creditor’s address alleged not to be accurate

BANKRUPTCY – existence of counterclaim, set off or cross demand – whether mutuality of counter-claims

ISSUE ESTOPPEL – where Federal Magistrate held issue estoppel applied so as to preclude party arguing matters previously ventilated on application to set aside bankruptcy notice – whether issue estoppel can flow from obiter dicta – whether issue estoppel can flow from findings from which no automatic right of appeal because debtor successful on other grounds

ABUSE OF PROCESS – whether issues found against debtor on previous application to set aside a bankruptcy notice might be raised on another application where debtor could not appeal from initial findings as successful on another ground

COURTS – waiver of allegations of bias by unrepresented party

PRACTICE AND PROCEDURE – whether proceeding should be returned for rehearing

WORDS AND PHRASES – “mutuality”

Bankruptcy Act  1966 (Cth) ss 40(1)(g), 41(7)

Re Nugent; Ex parte Nugent (1985) 5 FCR 161 referred to

Blair v Curran (1939) 62 CLR 464 followed

Guss v Johnstone (2000) 74 ALJR 884 referred to

Ramsay v Pigram (1968) 118 CLR 271 distinguished

A Pak Plastics Pty Ltd v Menhone Pty Ltd (1995) 120 FCR 277 distinguished

Vakauta v Kelly (1989) 167 CLR 568 applied

Stead v State Government Insurance Commission (1986) 161 CLR 141 applied

Re EJ Brown (1923) 40 WN 73 referred to

Re Wedd [1962] WAR 42 referred to

Re Camilleri;  ex parte Maguire (unreported, Federal Court, Olney J, 8 May 1996) referred to

Van Reesema v Australian Growth Corporation Pty Ltd (Receivers & Managers appointed) (1987) 75 ALR 33 referred to

DEREK GEORGE SHEPHARD v CHIQUITA BRANDS (SOUTH PACIFIC) LIMITED

N 1335 OF 2001

GYLES J

SYDNEY

15 APRIL 2002

THE COURT ORDERS THAT:

1.                  The appeal be allowed and the orders below set aside.

2.                  The proceeding be remitted to the Federal Magistrate’s Service for hearing.

3.                  The respondent pay the appellant’s costs of the appeal.

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

REASONS FOR JUDGMENT

1                     This is an appeal against a decision of Driver FM in proceeding SZ233 of 2001, [2001] FMCA 78 whereby an application pursuant to s 41(7) of the Bankruptcy Act 1966 (Cth) (“the Act”) by Derek George Shephard (“the appellant”) to set aside a Bankruptcy Notice NN317 of 2001 served upon the appellant on behalf of Chiquita Brands (South Pacific) Limited (“the respondent”) was dismissed.

procedural history

2                     In 1984 the appellant and his wife entered into a series of agreements with Johnson Farm Management Pty Ltd and Vosington Pty Ltd whereby the appellant acquired certain land and rights within a proposed scheme for the farming of blueberry plants in the Coffs Harbour area of New South Wales.  There is dispute between the parties as to whether and to what extent property passed to the appellant and his wife.  The parties are also in dispute regarding the nature of the rights to the supply of water the appellant obtained from Vosington Pty Ltd and the creation of certain easements over the appellant’s land.

3                     After Johnson Farm Management Pty Ltd experienced financial difficulties around 1985, the respondent (then known as Blueberry Farms of Australia (Corindi) Ltd (“BFA”)) took over the control of certain management functions.  In 1987, as a result of changed terms of service by BFA a number of disputes appear to have arisen, the appellant being dissatisfied with the amended terms.  In July 1991 the appellant commenced proceedings against BFA claiming a refund of money that had been paid for farm services and a refund of money paid for shares in BFA.  BFA lodged a counter-claim for money alleged to be owing to it.

4                     After various court orders and arbitration, in November 1995 the Local Court of New South Wales at Coffs Harbour ordered the appellant to pay BFA a sum of $8574.  It is this judgment which established the judgment debt, pursuant to which the respondent issued Bankruptcy Notice NW663 of 2000.  The appellant applied to have that Notice set aside in proceedings SZ85 of 2000.  In that proceeding, the appellant relied upon various defects in the Bankruptcy Notice and submitted he had a counter-claims, set offs or cross demands within the meaning of s 40(1)(g) of the Act.  On 1 February 2001 Driver FM allowed the appellant’s application, setting aside the notice (Shephard v Blueberry Farms of Australia (Corindi) Ltd [2001] FMC 2).  The Magistrate based his decision on his finding that there was a fatal defect in the notice, however he went on to consider the merits of the counter-claim in some detail as he said:

“46.    As I have found the bankruptcy notice to be invalid, it is not strictly necessary for the Court to deal with the balance of the appellant’s case, concerning his alleged counter claims, set offs or cross demands.  I have elected to deal with those arguments, however, for three reasons.  First, because if a fresh bankruptcy notice is served by the respondent on the applicant, the parties will be assisted by the Court’s findings on these issues.  Secondly, judgment in this matter has been reserved for several months, which was longer than I had anticipated at trial.  In the circumstances, the parties are entitled to a considered and comprehensive judgment on their submissions.  Finally, and perhaps most importantly, this case could be the subject of an appeal.  It is desirable to avoid the necessity for retrial should the respondent succeed on appeal.”

Driver FM then proceeded to give his reasons why the applicant had failed to establish the existence of a counter-claim, set off or cross demand.

5                     No appeal was filed by the respondents against that decision of Driver FM.  Instead, a new bankruptcy notice (Bankruptcy Notice NN317 of 2001) was issued on 14 February 2001. 

6                     I should add that between 1998 and 2000 the appellant commenced a number of proceedings against the respondent in the Local Court, District Court and the Supreme Courts of New South Wales, variously alleging damages for detention of irrigation equipment, trespass, breach of fiduciary duties and breaches of the Trade Practices Act 1974 (Cth).

Judgment below

7                     The appellant applied for the setting aside of Bankruptcy Notice NN317 of 2001 before Driver FM in September 2001.  The two grounds now relevant were that the notice incorrectly stated the address of the respondent and that the appellant had counter-claims, set offs or cross demands within s 40(1)(g) of the Act.  On 12 September 2001 the Magistrate delivered judgment, dismissing the application and ordering the appellant to pay the costs of the respondent (Shephard v Chiquita Brands (South Pacific) Ltd [2001] FMCA 78).

8                     In relation to the defective notice, Driver FM said:

“10.    The bankruptcy notice in these proceedings specifies that the respondent creditor’s address is Range Road, Corindi Beach, NSW, 2456.  Section 41(2) of the Bankruptcy Act requires that a bankruptcy notice must be in accordance with the form prescribed by the regulations.  The relevant regulation is 4.02.  The relevant form incorporated by the regulation is bankruptcy form 1.  The form provides for the insertion of the name and address of the creditor.  The applicant bears the onus of adducing evidence which establishes that the address utilised by the creditor is not one at which, during the relevant period, it is reasonably practicable to make payment to offer to secure or compound:  Re Barnes;  ex parte Barnes v Makhoul (1994) 53 FCR 169 at 174;  Re Nugent;  ex parte Nugent (1985) 5 FCR 161 at 163 (approved on appeal).

11.              On the issue of the validity of the bankruptcy notice I accept the submissions by the respondent that the applicant’s challenge to validity based upon the incorporation of the address of the respondent creditor fails because the applicant has not adduced evidence to satisfy the Court in accordance with the relevant test noted above.  On the contrary, the respondent has provided evidence that the creditor has always conducted business at the address nominated in the bankruptcy notice.  The address nominated is clear enough to enable a debtor to locate the creditor, even though the lot number on the road is not specified.  There is no requirement that the bankruptcy notice must specify the registered office of a corporate creditor.

9                     With respect to the alleged counter-claims, Driver FM relied upon his judgment in the earlier proceedings between the parties where the applicant had raised many claims which he alleged constituted counter-claims.  The Magistrate stated that

“The allegations currently relied upon by the applicant are to a very large extent the same as those he relied upon in the earlier proceedings.”

Driver FM agreed with the respondent’s contention that the decision in the earlier proceedings created an issue estoppel, preventing the appellant from raising issues dealt with and decided at the earlier proceedings.  He relied upon his finding in the earlier proceedings that the claims were either without substance, were far smaller than the amount due under judgment, or could have been set up in the original proceedings supporting the notice, to reject the existence of cross claims within s 40(1)(g) of the Act.  He said:

“13.    The respondent submits that my judgment in the earlier Blueberry Farms proceedings creates an issue estoppel in that it binds the parties to that decision in respect of the issues of fact and law dealt with in that judgment:  Ramsay v Pigram (1967-8) 118 CLR 271 at 276.  I agree with and accept that submission.  That was the approach taken by the New South Wales Court of Appeal in A-Pak Plastics Pty Ltd v Merhone Pty Ltd (1995) 120 FLR 277.  That was a case concerning an application to set aside a statutory demand under the Corporations Law.  I do not think that there is any material difference in the case of an application to set aside a bankruptcy notice.  The decision in the Blueberry Farms case was final in that there was an appeal as of right from it.  I do not think that it matters that Mr Shephard was the successful applicant in those proceedings and hence had no interest in an appeal.  I find that the applicant is estopped from now raising again the same allegations of a counterclaim, set off or cross demand as were raised and dealt with in the Blueberry Farms proceedings.”

10                  The appellant sought to rely upon counter claims not dealt with by Driver FM in his previous judgment.  As to these, his Honour said:

“14.    The applicant relies in part on a statement of claim commenced in the District Court of New South Wales at Coffs Harbour on 12 February 2001.  A copy of that statement of claim is annexed to the applicant’s affidavit of 12 April 2001.  The respondent submits that none of those claims (considered in isolation or in combination with one another) satisfy the requirements of s 40(1)(g) of the Bankruptcy Act to the extent that they were not raised in the Blueberry Farms proceedings.  I think there is much force in that submission.  To the extent that the District Court statement of claim traverses matters not already dealt with in the earlier Blueberry Farms proceedings it deals with matters which could have been set up in the original proceedings between the parties which led to the bankruptcy notice and, in addition, the prospects of success in the claim in the District Court appear dubious, especially for the reasons set out in my judgment in the earlier Blueberry Farms proceedings, at paragraphs 56 to 61.

15.              In addition, in my view, the claim in the District Court relied upon by the applicant lacks mutuality with the amount due under the bankruptcy notice.  The bankruptcy notice is in respect of a judgment debt owed to a sole judgment creditor.  The District Court proceedings have been instituted by the applicant against a large number of defendants.  The principle of mutuality requires that the cross claim relied upon must be against the judgment creditor only:  Re EJ Brown (1923) 40 WN (NSW) 73;  Van Reesema (judgment debtor);  Australian Growth Corporation Pty Ltd (Receivers and Managers appointed) (1987) 75 ALR 311.  I note that the decision in Van Reesema was affirmed on appeal.

16.              In response to questions from me, the applicant conceded that the main claims that he currently relies on, which were not raised in the Blueberry Farms proceedings, are my own costs decision in his favour (which was an award for costs fixed at $500), a series of unlawful imprisonment claims based upon two incidents on 30 August 2000 and 6 September 2000, and a claim of $5,000 for loss of amenity due to an alleged blocking of a right of way.  The costs award speaks for itself and is uncontested.  The unlawful imprisonment claims are based upon facts which I dealt with in the Blueberry Farms proceedings and the attempt by the applicant to use the same facts to support a different cause of action is frankly spurious.  I am not satisfied that there is any substance to the claim of loss of a right of way.  A further claim of a loss of amenity is unquantified and is probably unquantifiable.  A claim for loss of blueberry production was abandoned and a claim for loss of fodder production is based upon facts which I dealt with in the Blueberry Farms proceedings.

17.              The applicant has asserted that he intends adding further claims for damages against the respondent for trespass.  However, the applicant has not put before me evidence which is reliable and which would satisfy me that:

(a)               these claims are bona fide and establish a prima facie case at least;

(b)               there is mutuality as between the debtor and creditor;

(c)                the claims could not have been set up in the original proceedings;  and

(d)               the claims exceed in value the amount due under the bankruptcy notice.

18.              To the extent that the applicant has any claims of substance against the respondent, those claims could not exceed in value $2000.  Accordingly, I conclude that the applicant has failed to establish that he has a counterclaim, set off or cross demand of equal or greater value than the amount due under the bankruptcy notice that he could not have set up in the original proceedings.”

APPELLANT’S SUBMISSIONS

11                  In his Notice of Appeal the appellant relied upon six grounds:

“i)       Driver FM erred by finding that the Respondent had provided evidence that it had always conducted business at the address nominated in the bankruptcy notice when the Respondent adduced no evidence of any matter in the proceedings;

ii)                  Driver FM erred by finding that his decision in earlier proceedings between the parties, Shephard v Blueberry Farms of Australia (Corindi) Limited [2001] FMCA 2 (“the earlier proceedings”), created an issue estoppel regarding matters under section 40(1)(g) of the Act raised by the Appellant in both proceedings, when Driver FM’s findings concerning section 40(1)(g) in the earlier proceedings were not necessary to the determination of the of the earlier proceedings and, accordingly, obiter dicta;

iii)                Driver FM erred by failing to properly consider the merits of the Appellant’s claim that he had a counter claim, set off or cross demand against the Respondent equal to or exceeding the amount in the judgment or order relied upon by the Respondent and which the Appellant could not have set up in the action in which the judgment or order was obtained.

iv)       Driver FM erred by finding that the fact that the Appellant’s counter-claim, set off or cross demand against the Respondent was being pursued in proceedings where there were other claims against other parties arising from the same or similar circumstances which gave rise to the claims against the Respondent, meant there was no mutuality between the Appellant’s claims against the Respondent and the judgment debt relied upon by the Respondent as the foundation of the bankruptcy notice.

v)                  Driver FM erred by holding that the Appellant’s claims of unlawful imprisonment were “frankly spurious” merely because in the earlier proceedings Driver FM had found that the facts put forward by the Appellant as the foundation of his claim for unlawful imprisonment did not satisfy Driver FM that the Appellant had a viable claim for assault against the Respondent.

vi)               A reasonable observer would apprehend that Driver FM might not bring an unprejudiced and impartial mind to the resolution of the issue before him because he was influenced by views he had formed in the earlier proceedings rather than an assessment based on the case at hand.”

12                  In his written submissions, the appellant clarified his Notice of Appeal with respect to the alleged defect in the bankruptcy notice, submitting that the finding of Driver FM that “…the respondent has provided evidence that the creditor has always conducted business at the address nominated in the bankruptcy notice…” was made without any evidentiary foundation.

13                  With respect to issue estoppel, it was the appellant’s argument that the findings which may have given rise to issue estoppel (ie the existence of a counter-claim, set off or cross demand sufficient to satisfy s 40(1)(g) of the Act) were obiter dicta and therefore not capable of founding issue estoppel.  Moreover, he contended that since he had been successful in his application in the earlier proceedings, although Driver FM ruled against him on his counter-claims, he had had no opportunity to appeal against the Magistrate’s findings as to the validity of his counter-claims.

14                  The appellant also contended that the mutuality of the counter-claim was not affected simply by reason of the fact that, in respect of the counter-claim, the judgment creditor was one of many debtors jointly and severally liable.  The appellant further argued that Driver FM’s description of his imprisonment claims as “frankly spurious” revealed that the Federal Magistrate did not independently analyse those matters but instead approached them as if they were no different to matters raised in the earlier proceedings.  The appellant also submitted that an independent observer would have an apprehension that Driver FM did not bring an impartial mind to the matter and so was biased.

RESPONDENT’S SUBMISSIONS

15                  With respect to the alleged defect in the bankruptcy notice, the respondent submitted that the relevant test to be applied when considering the effect of an incorrect address is that in Re Nugent; Ex parte Nugent (1985) 5 FCR 161, per Pincus J at 163:

“…the basic principle, in accordance with which most of the authorities are capable of being reconciled, is that the address given should be one at which, during the relevant period, it is reasonably practicable to make payment or offer to secure or compound.”

It was submitted that the appellant bears the onus of adducing evidence which establishes that the address did not satisfy the above test.  The appellant did not adduce such evidence.

16                  With respect to issue estoppel, the respondent contended firstly that the appellant conceded at the hearing before Driver FM on 19 December 2001 that issue estoppel applied so as to preclude the appellant from raising previous claims that had been ventilated.  Secondly it was submitted that issue estoppel could apply notwithstanding that the findings may be regarded as obiter dicta.  Thirdly it was submitted that the lack of an opportunity to appeal did not affect the existence of an issue estoppel.

17                  In the alternative, it was submitted for the respondent that if the doctrine of issue estoppel did not apply to preclude the appellant from now arguing matters ventilated and decided in the earlier proceedings, the appellant should have been precluded from arguing those matters by operation of the doctrine of abuse of process.  This argument was put to but was not considered by the learned Magistrate at first instance. 

18                  The respondent further submitted that, even if the appellant’s evidence as to the existence of counter-claims was taken at its highest, they would not amount to a sum equal to or greater than the judgment debt so as to satisfy s 40(1)(g).  On this point the respondent submitted that the Magistrate’s finding against the appellant’s counter-claims at [17] of his judgment was intended to cover the entirety of counter-claims, set offs and cross demands raised by the appellant and not just “further” claims to be raised.  The respondent also submitted that the appellant had not adduced any evidence to support his contention that the Federal Magistrate failed to consider the merits of his application.

19                  It was submitted finally for the respondent that the appellant had not only failed to raise the issue of bias when he had the chance to do so, but had joined in requesting that the proceeding be dealt with by Driver FM and so waived the right to now raise the issue of bias on appeal.

Defective Bankruptcy notice

20                  Section 41(2) of the Act requires a Bankruptcy Notice to be in the form prescribed by the regulations.  The relevant form provides for the insertion of the name and address of the creditor.  At first instance the appellant argued that Bankruptcy Notice NN317 of 2001 was defective on the ground that it incorrectly stated the address of the respondent on the narrow basis that the correct address was “1 Range Road, Corindi”, not “Range Road, Corindi Beach”.

21                  No direct evidence was led by either party as to the address of the respondent at the time of issue or service of the bankruptcy notice or the period thereafter.  The documents tendered in evidence show both Corindi Beach and Corindi used in the address of the respondent.  There is no evidence that they are different places.  Some documents also show the address of the respondent as 1 Range Road.  There is no evidence as to how long Range Road is, or what other occupiers there may be.  It was conceded by the appellant in argument below that he knew and had been to the premises of the respondent at Range Road.  The state of evidence does not provide any proper basis for finding that the address of the respondent on the bankruptcy notice was incorrect, and the finding below should not be disturbed.

22                  The reference by the learned Magistrate to the provision of evidence by the respondent is a little puzzling, unless it relates to the documents which were tendered.  On the narrow basis argued by the appellant, these documents are neutral.  However, I agree with the submission on behalf of the respondent that this finding was not critical to the decision.

Issue estoppel

23                  The respondent’s first point is that the appellant had conceded that issue estoppel applied so as to preclude him from ventilating matters decided in the previous proceedings.  I have read the relevant portions of the transcript below, and I do not agree that there was any formal and binding concession made by the appellant, although it is fair to say that he appeared to assume that the learned Magistrate would take the same view as he had in the previous proceeding.  The appellant is not precluded from raising this ground of appeal.

24                  In Blair v Curran (1939) 62 CLR 464 at 531-532, Dixon J defined the scope and operation of issue estoppel as:

“A judicial determination directly involving an issue of fact or of law disposes once and for all of the issue, so that it cannot afterwards be raised between the same parties or their privies.  The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion…Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded.”

25                  Because of the lucid way in which they are put, it is useful to set out in extenso the written submissions of counsel for the respondent on this issue:

“11.     If the Appellant were granted leave to raise the issue, the Respondent:

11.1          Concedes that under some traditional articulations of the doctrine of issue estoppel (exemplified by the decision of Dixon J in Blair v Curran (1939) 62 CLR 464), obiter findings do not give rise to issue estoppel;

11.2          Concedes that the Cross Claim Finding was obiter;

11.3          Submits that the developments in the principle of “abuse of process” which underpins the doctrine of issue estoppel support the extension of the doctrine of issue estoppel to obiter findings in some circumstances;

                        …

12.              As to the traditional articulation of the doctrine of issue estoppel:

12.1          The statements by Dixon J in Blair v Curran as to the scope of “issue estoppel” are sometimes limited by reference to determinations which comprise a prior “judgment, decree or order” (eg, page 531.9);

12.2          Although Dixon J does not expressly define the scope of the expression “judgment, decree or order”, the Respondent concedes that the expression has a well established meaning under section 73 of the Constitution and section 4 of the Federal Court Act.  That meaning limits the scope of the expression to the “formal orders” of a court which constitute the court’s “operative judicial acts”:  see the authorities collected in Ah Toy v Registrar of Companies for the Northern Territory (1985) 61 ALR 583, per the Full Court at page 588.  The limitation of issue estoppel to “judgments, decrees or orders” (so defined) would necessarily exclude obiter determinations from its scope.  The Respondent also concedes that there is appellate authority which expressly excludes obiter findings from the scope of issue estoppel:  eg Aavelaid v Dental Board of New South Wales & Anor (Unreported, NSWCA, 19 October 1998).

13.              As to the developments in nature and scope of the doctrine of abuse of process, the Respondent submits that the following considerations support the removal of any complete restriction on the application of issue estoppel to obiter determinations:

13.1          As outlined from paragraph 14 below, it is recognised in recent authorities that issue estoppel is underpinned by the public policy against abuse of process (constituted by the vexatious relitigation of issues).  Once that underpinning is recognised, there is no reason in principle why issue estoppel should not apply to issues which have been the subject of pleadings, evidence, submissions, and detailed obiter determination.

13.2          The stated limitation in Blair v Curran of issue estoppel to “judgments, decrees or orders” was itself obiter.  Further, there were other statements of principle in Dixon J’s judgment which were expressed more broadly, and in a manner which is consistent with the application of issue estoppel to obiter determinations.  Thus, for example, Dixon J states at 531.9 that “A judicial determination directly involving an issue of fact or of law disposes once and for all of the issue, so that it cannot afterwards be raised between the same parties or their privies.”  The expression “judicial determination” is apt to extend to obiter determinations;

13.3          There are other later statements of principle by the High Court in relation to the nature and scope of issue estoppel which are consistent with the application of the doctrine to obiter determinations.  By way of example, Fullager J held in Brewer v Brewer (1953) 88 CLR 1 that issue estoppel “precludes parties …from contending to the contrary of that point, or matter of fact, which having been once distinctly put in issue by them … has been on such issue joined, formally found against them”.

13.4          If it were accepted that issue estoppel could extend to obiter determinations, there is no significant difficulty in limiting its scope (in order to avoid issue estoppel arising in relation to all collateral and inconsequential findings of fact that might be made in the course of a judgment).  Merely by way of example, it would be possible to limit the doctrine to obiter findings of fact, in respect of which the issue of fact had been the subject of pleadings, evidence, submissions, and was necessarily determined in an obiter finding about the existence of a cause of action.

13.5          The mere fact that there is no right of appeal in relation to obiter findings should not of itself exclude the operation of issue estoppel, if other conditions are satisfied.  There is no automatic right of appeal in relation to the determinations in interlocutory applications (as to which the doctrine of abuse of process will prevent the vexatious relitigation of issues).”

26                  In my opinion, it is reasonably clear that there would need to be a significant extension of the principles of issue estoppel for that doctrine to apply in these circumstances.  In my view, the principles are too well entrenched to enable such an extension to be made by a single judge.  Even if that were not so, I would not make such an extension.  It would be contrary to principle to bind a party by issue estoppel as the result of a finding at first instance from which no appeal could be brought because the party succeeded on another point, whether or not the finding is classed as obiter dicta.  Any extension of the doctrine of abuse of process which has occurred does not derogate from this opinion.

27                  I need not examine the question as to whether the issue tendered by s 41(7) is such that issue estoppel will apply (cf Guss v Johnstone (2000) 74 ALJR 884 at [37]-[40] inclusive).  I should also mention that the authorities relied upon by the learned Magistrate are not directly in point.  Ramsay v Pigram (1968) 118 CLR 271 is a restatement of the relevant general principles of issue estoppel.  A Pak Plastics Pty Ltd v Merhone Pty Ltd (1995) 120 FCR 277 deals with another question – whether an order setting aside a statutory demand is final or interlocutory for the purposes of appeal.  Assuming that this decision is applicable to a proceeding to set aside a bankruptcy notice (which I need not decide), it would establish that estoppels might arise from such a decision.  It does not say anything as to the particular situation which arises here.

abuse of process

28                  Naturally, once issue estoppel was found, the judgment below did not deal with the abuse of process argument.  The appellant seeks to rely upon that issue on appeal.  In my opinion, this argument suffers the same deficiency as the argument for issue estoppel.  If applicable, the appellant would be prevented from raising any matter which was (or could have been) raised in the previous proceeding.  The result would be that the appellant is bound by the findings in that proceeding without having or having had any opportunity of challenging them on appeal.  In my opinion, that cannot be so.  There is no abuse of process.

bias

29                  It is agreed by the parties that the suggestion that the proceeding be heard by Driver FM was made by counsel for the respondent on the basis of saving time and costs, and acceded to by the appellant, leading to a joint request.  The appellant says that he did not have the benefit of legal advice in acceding to the suggestion.  I do not know whether the appellant had the benefit of legal advice as to that – there is no evidence either way, although his written submissions show a sophisticated knowledge of bankruptcy law.  All I can say is that he was unrepresented.  I do not think that the appellant misunderstood the position, or that it was misrepresented to him.  It is clear enough from the transcript of the proceedings that he accepted the reality that Driver FM would not make different findings from those made before.  It was obvious that the course proposed would be quicker and cheaper than having another magistrate hear the matter.  He understood that he had a choice in the matter.  Whilst there may be particular difficulties in applying waiver of bias to an unrepresented party, I do not regard the present case as presenting any such difficulty.  There is no reason not to apply the principle in Vakauta v Kelly (1989) 167 CLR 568.  The appellant cannot rely upon an independent ground of bias.

merits

30                  Counsel for the respondent submits that, in any event, Driver FM dealt with and rejected the merits of the counter-claims alleged, and submits that there is no proper basis for interfering with those findings.  In my opinion, the learned Magistrate did not deal with the merits of all the alleged counter-claims.  He only dealt with the merits of alleged counter-claims which had not been dealt with in the previous judgment.  Naturally enough, the manner in which he dealt with those allegations was influenced by his views of the merits of the other claims.

31                  Counsel for the respondent submitted that, even if I were to come to that view, it is not necessary to allow the appeal and send the proceeding back for further hearing.  He submitted that, even if the evidence for the appellant was taken at the highest, it was inevitable that the appellant would fail to establish the necessary counter-claims, set offs or cross demands.  Put another way, a properly conducted hearing below could not possibly have produced a different result (Stead v State Government Insurance Commission (1986) 161 CLR 141).  This involves a heavy onus, particularly with a history of dealings between the parties over a period of years and where one party was unrepresented at the hearings below.  I was effectively invited to review all of the material produced in and the reasons delivered in each proceeding, and come to a view as to the proper result.   I have reviewed the submissions of the parties and the material (and the supplementary material) sufficiently to be satisfied that this is not a case in which the appellant should be denied a properly conducted hearing.  In saying this, I do not mean to imply that I have formed any view as to merits.

32                  I should mention one aspect of the judgment below which the appellant has challenged, and which will be relevant on any further hearing, namely, the principle of mutuality applied by the learned Magistrate at [15].  The appellant submits that it is only necessary for a debtor to have a cause of action by way of counterclaim, set off or cross demand against the creditor.  It does not affect the mutuality between debtor and creditor, if the debtor has other causes of action against other parties arising out of the same or related circumstances.  Those other causes of action against other parties are not counterclaims, set off or cross demands.  The appellant submits that there is no reason in principle why a joint claim against a judgment creditor should not qualify pursuant to s 40(1)(g) and certainly no reason why a several claim against a judgment creditor should not so qualify.  To the extent that any authority is to the contrary, it is wrong and ought not be followed.  The respondent counters by pointing to a line of authority to the contrary, including Re EJ Brown (1923) 40 WN 73, Re Wedd [1962] WAR 42 and Re Camilleri;  ex parte Maguire (unreported, Federal Court, Olney J, 8 May 1996).

33                  The authorities referred to by the respondent do stand for the proposition applied below (although I agree with the submission for the appellant that Van Reesema v Australian Growth Corporation Pty Ltd (Receivers & Managers appointed) (1987) 75 ALR 33 is not in point as it dealt with the right in respect of which the claims are made).

34                  In my opinion, there is much to be said for the submissions for the appellant (which I have not fully reproduced) particularly (but not only) in relation to several claims in tort.  However, as the decisions in question are not plainly wrong, it is appropriate that they be applied until reviewed in a Full Court.  This should be borne in mind on the retrial when making findings on this issue.

conclusion

35                  Notwithstanding the well crafted and comprehensive submissions of Mr Stowe for the respondent, the appeal must be allowed, the orders below set aside and the proceeding remitted to the Magistrate’s Service for hearing according to law.  I have no satisfaction in taking this course, which will involve yet further expense and delay, and may well produce the same result.  However, the appeal to issue estoppel and abuse of process was misconceived.  In addition, problems of this kind might be expected where a bankruptcy notice is founded upon a judgment about six years old for a relatively small amount and where there has been continuing contact between the parties.  In view of the history of the matter, and the grounds of appeal, I can see no escape from having the matter heard by another magistrate, absent evidence of the informed consent of each party.

36                  The respondent should pay the costs of the appeal.  The order as to the costs of the proceedings at first instance should await the conclusion of the further hearing.

Associate:

Dated:              15 April 2002