FEDERAL COURT OF AUSTRALIA

Anderson v Stonnington City Council [2024] FCA 1288

ORDERS

THE COURT ORDERS THAT:

1.    The Applicants’ application for review of Registrar Ellis’s decision made on 22 March 2024 be dismissed.

2.    The Applicants’ application to set aside Bankruptcy Notice 261232 issued on 14 August 2023 be dismissed.

3.    The Applicants pay the Respondent’s costs of the application, to be taxed if not agreed.

4.    The costs order in paragraph 3 above be stayed until 4:00pm on 15 November 2024.

5.    Any submissions on costs should be filed and served by 4:00pm on 12 November 2024 (limited to two pages), with any responsive submissions by 4:00pm on 14 November 2024 (limited to two pages).

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

BUTTON J:

INTRODUCTION

1    Mr and Ms Anderson (the Andersons), seek to set aside a bankruptcy notice issued on 14 August 2023 by the Respondent (the Council). The bankruptcy notice requires payment of costs orders totalling $344,068.75. Underpinning the notice are costs orders made by the Supreme Court of Victoria and the High Court of Australia. There was no dispute as to the amount or existence of the debt. Instead, the Andersons said that the bankruptcy notice should be set aside on the basis that they have a counterclaim, set-off or cross demand within the meaning of s 40(1)(g) of the Bankruptcy Act 1966 (Cth) (the Act), that equals or exceeds the sum payable under the bankruptcy notice.

2    The proceeding came before me on an application for a review of a decision of a Registrar dismissing the Andersons’ application. The application for review was made pursuant to s 35A(5) of the Federal Court of Australia Act 1976 (Cth). It was therefore a hearing de novo, with the matter being considered afresh on the evidence and law at the time of the review: Mazukov v University of Tasmania [2004] FCAFC 159 at [22]–[24] (Kiefel, Weinberg and Stone JJ); Bechara v Bates (2021) 286 FCR 166; [2021] FCAFC 34 at [17] (Allsop CJ, Markovic and Colvin JJ).

3    The Andersons also sought, to the extent necessary, an order under s 41(6A) of the Act, extending time for compliance with the bankruptcy notice to a date to be fixed. That relief was granted by Snaden J on 5 April 2024, when his Honour ordered that:

To the extent that it is not already extended by operation of s 41(7) of the Bankruptcy Act 1966 (Cth), the time for compliance with Bankruptcy Notice 261232 be extended under s 41(6A) until 4pm on the day seven days after the court determines the applicants’ application for review of the orders made herein by Registrar Ellis on 22 March 2024.

4    The application was heard on 30 October 2024, following two applications made by the Andersons to have the hearing adjourned, namely:

(a)    an application dated 15 October 2024, which was dismissed on 18 October 2024, for reasons given on the transcript; and

(b)    an oral application made by counsel for the Andersons at the commencement of the hearing on 30 October 2024, which was also refused for reasons given on the transcript.

5    The Andersons relied on affidavits of Ms Anderson dated 2 July 2024, and dated 14 October 2024. The Andersons also tendered a copy of a generally endorsed writ filed in the Supreme Court of Victoria on 20 January 2024. That writ names the Council as the sole defendant, but has not been served on the Council.

6    The Council relied on an affidavit of Annaliese Battista, a Director of Planning & Place at the Council, dated 2 August 2024.

7    Both parties filed and relied on written submissions. No witnesses were required for cross-examination.

BACKGROUND

8    The Andersons are the registered proprietors of the land at 21 William St, South Yarra, Victoria (the Property), which they purchased on 26 April 2012. The Property, and the laneway next to it, has been the source of a great deal of litigation between the parties. It is necessary to explain that litigation and the events surrounding it in order to understand the Andersons’ claim under s 40(1)(g) of the Act.

The laneway

9    There is a laneway abutting the South side of the Property, which leads to a public path running alongside a railway line. The path alongside the railway line is known as Lovers Walk.

10    On 9 April 2012, prior to settlement on the Property taking place, the Andersons wrote to the Council raising certain concerns they had with the laneway, namely: graffiti, security risks, and unauthorised cars parking across, and inhibiting access to, the Property’s driveway. In view of those concerns, the Andersons offered to purchase a portion of the laneway. As it happened, that offer was misdirected. The laneway was owned by Victorian Rail Track (VicTrack), not the Council.

11    In the years that followed, the Andersons extensively lobbied the Council and VicTrack to restrict public access to the laneway. It is not necessary for the purposes of this application to delve into those efforts. It suffices to note that, having had no luck in their efforts with the Council and VicTrack (including by making a further offer to purchase the laneway, this time to VicTrack), the Andersons took matters into their own hands:

(a)    in November 2013, by installing a fence to close off public access to the laneway, which was later removed by the Council in December 2013; and

(b)    in August 2014, by re-installing a fence to close off public access to the laneway.

12    On 18 September 2014, the Andersons commenced proceedings in the Supreme Court of Victoria and applied by summons for an interlocutory injunction seeking to restrain the removal of the fence they had erected. On 29 September 2014, the Supreme Court of Victoria dismissed the summons and ordered that the originating motion stand as a writ and that a statement of claim be filed and served. The fence was removed by the Andersons on 1 October 2014.

13    The “laneway litigation” (as it was dubbed by the Andersons) continued for some years. The Andersons were ultimately unsuccessful at first instance (Anderson v City of Stonnington [2016] VSC 374) and on appeal (Anderson v City of Stonnington [2017] VSCA 229).

14    Interactions between the Andersons and the Council became increasingly hostile over this period, and some correspondence from the Andersons to the Council levelled serious allegations against the Council, and one Councillor in particular. The details of these interactions were set out in the evidence tendered by the Applicants. The present relevance of those interactions is that it constitutes the background against which the Council’s later introduction of a heritage overlay over the Property took place, and which caused the Andersons to consider the Council’s actions in respect of the heritage overlay to have been undertaken as “pay back” for the Andersons’ agitation of issues concerning the laneway.

Building works

15    While continuing, unsuccessfully, to lobby the Council and VicTrack in relation to the laneway, the Andersons engaged a builder to design and renovate the house on the Property.

16    During November and December 2014, the Andersons obtained three building permits in relation to works to be performed on the Property. At this time, there was no requirement for a planning permit (as distinct from a building permit) for the works.

17    However, on 21 May 2015, a site specific heritage overlay control (HO462) was introduced by Amendment C204 to the Stonnington Planning Scheme. That heritage overlay control introduced a requirement for a planning permit to be obtained for demolition, building and other works on the Property. The heritage overlay was preceded by a “Panel Report” issued on 23 April 2015 by Planning Panels Victoria, pursuant to s 25 of the Planning and Environment Act 1987 (Vic) (the Planning Act). The recommendation of the Panel, as contained in the report, was for Stonnington Planning Scheme Amendment C204 to be adopted. That recommendation was made following a hearing of the Panel on 25 and 26 March 2015, at which both the Council and the Andersons were legally represented, and at which the parties adduced expert evidence as follows:

(a)    the Council called Mr Bryce Raworth, a heritage consultant; and

(b)    the Andersons called Mr David Bick, an architectural historian and conservation architect.

18    The Panel Report also records that, at the hearing, the Council also informed the Panel that it had obtained three separate heritage assessments: from its internal heritage advisor, from Bryce Raworth Pty Ltd, and from Anthemion Consultancies, prepared by Robyn Ridett.

19    The Andersons continued to progress building works on the Property after 21 May 2015, without having obtained a planning permit.

20    On 14 August 2017, the Andersons were issued with a further building permit authorising alterations and additions to the Property. The Andersons continued works to the house on the Property under that permit. Again, no planning permit was sought.

21    The crux of the Andersons’ case is that their efforts to restrict public access to the laneway, and the related litigation, led the Council to “victimise” them by introducing the heritage overlay control. They assert claims of misfeasance in public office, unlawful and lawful means conspiracy, and the tort of contractual interference. As noted above, the Andersons have issued, but not served, a generally endorsed writ (filed in the Supreme Court of Victoria) advancing those claims. A copy of the writ was in evidence, and I return to it below. Ms Anderson deposed that the Andersons have not yet served the writ as they intend to prepare, file and serve a statement of claim after first considering the outcome of the application in this proceeding.

Proceedings underlying costs orders

22    In or about December 2016, the Andersons commenced proceedings in the Victorian Civil and Administrative Tribunal (VCAT) seeking declarations under ss 149A and/or 149B of the Planning Act that works authorised under the building permits issued prior to the heritage overlay could lawfully continue without a planning permit being obtained under that overlay. Those sections provide for applications to be made to VCAT.

23    On 23 January 2018, VCAT made orders refusing the Andersons’ application and reserving costs: Anderson v Stonnington CC [2018] VCAT 102.

24    The Andersons sought leave to appeal to the Supreme Court of Victoria from VCAT’s decision. Appeals from VCAT to the Supreme Court of Victoria were limited to appeals on a question of law: s 148(1), Victorian Civil and Administrative Tribunal Act 1998 (Vic). Leave to appeal was granted, but the proceeding was dismissed: Anderson v Stonnington City Council [2019] VSC 453 (Garde J). Costs were subsequently ordered and taxed.

25    The Andersons sought leave to appeal from Garde J’s decision, which leave was granted. However, the Victorian Court of Appeal (Maxwell P, Tate and McLeish JJA) dismissed the appeal (Anderson v Stonnington City Council (2020) 62 VR 147; [2020] VSCA 229 (Anderson (CA)) and subsequently ordered that the Andersons pay the Council’s costs of and incidental to the appeal: Anderson v Stonnington City Council [2020] VSCA 238. It was of some significance to the Council’s arguments on the present application that the Andersons were permitted by the Court of Appeal to raise new arguments on the appeal.

26    On 12 April 2021, the High Court refused to grant the Andersons special leave to appeal from the Court of Appeal’s principal decision, with costs: Anderson v Stonnington City Council [2021] HCA Trans 065 (Kiefel CJ and Gordon J). The Andersons also unsuccessfully applied to reopen the High Court’s decision for the purpose of setting aside the High Court’s order as to costs, and to substitute in its place orders that the Council pay the Andersons’ costs of their special leave application and of the proceedings in the Tribunal and courts below. That application was dismissed: Anderson v Stonnington City Council [2021] HCASL 254 (Gageler and Keane JJ). Costs were subsequently taxed.

LEGISLATIVE FRAMEWORK AND RELEVANT PRINCIPLES

27    The relevant provisions of the Act are as follows:

40    Acts of bankruptcy

(1)    A debtor commits an act of bankruptcy in each of the following cases:

…

(g)    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 … a bankruptcy notice under this Act and the debtor does not:

(i)    where the notice was served in Australia—within the time fixed for compliance with the notice; or

    …

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;

41    Bankruptcy notices

    …

(6A)    Where, before the expiration of the time fixed for compliance with a bankruptcy notice:

(a)     proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or

(b)     an application has been made to the Court to set aside the bankruptcy notice;

the Court may, subject to subsection (6C), extend the time for compliance with the bankruptcy notice.

    …

(7)    Where, before the expiration of the time fixed for compliance with 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 counter‑claim, 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.

28    In order to avoid committing the act of bankruptcy identified in s 40(1)(g) of the Act, the Andersons must satisfy the Court that they have a counter-claim, set-off or cross demand against the Council of the kind described in that paragraph. That task involves the Andersons satisfying the Court of three interrelated and sometimes overlapping matters, as summarised by Lindgren J in Re Glew; Glew v Harrowell of Hunt & Hunt Lawyers (2003) 198 ALR 331; [2003] FCA 373 (Re Glew) at [9] (citations omitted):

(a)    that they have a “prima facie case”, even if they do not adduce evidence which would be admissible on a final hearing making out that case;

(b)    that they have “a fair chance of success” or are “fairly entitled to litigate” the claim; and

(c)    that they are advancing a “genuine” or “bona fide” claim.

29    In Guss v Johnstone (2000) 171 ALR 598; [2000] HCA 26 (Guss) at [40], the High Court explained that the state of satisfaction referred to in s 40(1)(g) and s 41(7) “involves weighing up considerations as to the legal and factual merit of the claim relied upon by the debtor, and the justice of allowing the bankruptcy proceedings to go ahead or requiring them to await the determination of the claim”. The Andersons also relied on a passage of the judgment of Latham CJ in Vogwell v Vogwell (1939) 11 ABC 83 at 85 (referred to in Guss at [39] and, in turn, by Griffiths J in Williamson v Bendigo and Adelaide Bank Ltd [2021] FCA 451 at [31]), in which Latham CJ referred to the overarching question of “whether it is just that the claim should be determined before the bankruptcy proceedings are allowed to continue”.

30    As Stewart J observed in Royal v Nazloomian, in the matter of Royal [2019] FCA 555 at [82]:

The terms “counter-claim”, “set-off” and “cross demand” in s 40(1)(g) are said to be not subject to limits. The word “counter-claim” is likely to refer to claims in equity and the word “set-off” is likely to refer to those claims the subject of a set-off at common law while “cross demand” refers to claims other than those encompassed in the expressions “counterclaim” or “set-off” and can include a claim for unliquidated damages for a tort or damages for breach of contract: Blair v The Owners - Strata Plan No 71656 [2016] FCA 1522 at [20] per Markovic J citing Re Brink; Ex parte Commercial Banking Co of Sydney Ltd [1980] FCA 93; AustLII citation [1980] FCA 78; 30 ALR 433 at 436 per Lockhart J.

31    In Massih v Esber (2008) 250 ALR 648; [2008] FCA 1452, Flick J observed (at [18]) in relation to the test:

A debtor cannot “satisfy” the Court, for example, by showing no more than the fact that a claim is made and how the claim may be made out: Re Duncan, Ex parte Modlin (1917) 17 SR (NSW) 152 per Street J. It is not sufficient that a debtor believes he has a genuine claim; what is required is that the Court must be satisfied that it is just that the claim should be determined before the bankruptcy proceedings are allowed to continue: Dekkan v Evans [2008] FCA 1004 at [54] per Jacobson J. See also: Dekkan v Macquarie Leasing Pty Ltd (No 2) [2008] FCA 1431 per Buchanan J; Cirillo v Consolidated Press Property Pty Ltd [2007] FCA 139. Mere production of a statement of claim, without more, is not sufficient: Re Cox (1934) 7 ABC 98. Nor is a “shadowy” claim that could not fairly be litigated: Re Rivett; Ex parte Edward Fay Ltd (1932) 5 ABC 182 at 188.

PARTIES’ SUBMISSIONS

Andersons’ submissions

32    As mentioned above, the Andersons identified their offsetting claims, for the purpose of s 40(1)(g) of the Act, as being claims of misfeasance in public office, conspiracy by lawful and unlawful means, and the tort of contractual interference. The Andersons submitted that none of these claims could have been made in the VCAT proceedings, having regard to its jurisdiction and the nature of the application brought, nor could they have been made in any of the appeals therefrom.

33    The Andersons’ misfeasance and conspiracy claims were said by the Andersons to rely on the following propositions:

(1)    The heritage overlay applies only to the Property.

(2)    The Council, through its councillors, agents and employees who were responsible for the implementation of the heritage overlay, pursued its introduction primarily in response to the dispute between the Andersons and the Council in relation to the laneway.

(3)    The heritage overlay was implemented with the intent to cause harm to the Andersons (or with reckless indifference as to the likelihood of such a consequence).

34    In relation to the second proposition, the Andersons pointed to the following factors, which they said told against a more innocent explanation for the introduction of the heritage overlay:

(a)    the late stage at which the overlay was introduced (in relation to the works that had been completed at the Property);

(b)    the retrospective nature of the overlay; and

(c)    the failure of the Council to introduce a heritage overlay to other buildings in like circumstances and to buildings “more deserving” of protection.

35    As to their contractual interference claim, the Andersons said that the Council was aware of their contractual relationship with their builder from 10 November 2014 and that it was aware of their appointment of the building surveyor. The Andersons said that the Council, through its representatives, was not entitled to ask the builders to stop working or to have stopped the building surveyor from issuing a permit.

36    The Andersons accepted that the Panel Report was in favour of the imposition of the heritage overlay, but suggested it was flawed because the heritage value of any particular property needs to be considered in the context of other properties, in order to assess the comparative heritage value of the particular property. The Andersons also said that the heritage value of the Property needed to be considered by reference to its then-current state, which included some demolition works already having been undertaken.

Council’s submissions

37    The Council submitted, in summary, that:

(1)    Each of the claims raised by the Andersons is statute barred, given that each of the claims has a six-year limitation period, and the causes of action accrued when the heritage overlay came into effect (on 21 May 2015) or shortly thereafter when the Andersons were instructed to cease work on the Property.

(2)    The Andersons’ writ against the Council does not identify the individuals for whose conduct the Council is said to be vicariously liable. This was said to prevent the Court from meaningfully assessing the claims, the vicarious liability of the Council (the creditor in the bankruptcy notice and prospective defendant in the Supreme Court of Victoria), and, relatedly, whether the claims are mutual and due in the same right.

(3)    The claims have no prospect of success and are not supported by a Statement of Claim or adequate admissible evidence and, in relation to each of the specific claims:

(a)    Misfeasance in public office — the Andersons’ allegations are opaque and lacking in foundation, and the Andersons cannot meet the essential elements of the claim, being an intention to cause harm, misuse of position, potential advantage, deliberate attempt to cause damage, or that any such conduct was in bad faith or beyond power. The Council further submitted that, contrary to the Andersons’ claims of victimisation, the decision to introduce the heritage overlay was based on the detailed Panel Report, delivered after the receipt of competing expert evidence and submissions from legal representatives.

(b)    Conspiracy — the Council submitted that the Andersons had not identified the alleged conspirators, let alone what is said to be the agreement and mutual intent to harm, nor how or why an act conducted by such persons was unlawful, or for the purpose of harming the Andersons.

(c)    Tortious interference/inducing breach of contract — in respect of this claim the Council submitted that even if a claim were to be made out (which is denied by the Council) a justification defence is nevertheless apparent and that “[s]elf evidently, builders being instructed to cease building when such works were unlawful cannot be a legitimate cause of action”. The Council also submitted that, in the absence of any specified individuals as prospective defendants, the Court cannot be satisfied of what, if any, knowledge any specific individual might have regarding any specific contract, and that the Court was not in a position to assess whether the Council could be held vicariously liable for the unspecified wrongdoers.

(4)    As to each of the claims, the Council submitted that no damages can be seen to flow from the impugned conduct and that any costs and losses incurred by the Andersons after the introduction of the heritage overlay were “deliberately and continually incurred by the Andersons with full knowledge that they did not have, and had not applied for, the requisite planning permit”. The Council submitted that the Andersons had failed to mitigate their loss, by way of a claim of frustration of contract, or by simply ceasing works on the Property.

(5)    In relation to the Andersons’ submission that their off-setting claims could not have been raised before VCAT, given its jurisdiction, the Council submitted that the Andersons have not established that they were legally unable to raise the issues, and referred to the Court of Appeal’s decision to allow the Andersons to raise new issues on appeal: Anderson (CA) at [52]–[56]. The Council also submitted that the Andersons are prevented, by the doctrine of res judicata, from relying on arguments which rely on the proposition that the heritage overlay is unlawful and are estopped from seeking to litigate matters where it was unreasonable not to have raised them in the prior proceedings (referring to Mandeville v Better Lending Pty Ltd (2021) 139 SASR 1; [2021] SASCA 28 at [94] (Doyle, Livesey and Bleby JJA)). In oral submissions, the Council submitted that the Andersons could have brought a cross-claim in the Supreme Court of Victoria when their appeal from VCAT went to that Court, or could have applied directly in the High Court in relation to the points they took to VCAT, then asked the High Court to remit the matter to the Federal Court. The Council cited the decision of Raphael FM in Batshon v Migliorino & Associates [2003] FMCA 32 in support of the proposition that the legislative expression “that he or she could not have set up in the action or proceeding” has been interpreted widely and does not restrict the applicant to the particular court in which the proceedings were heard (for example if the proceeding could have been transferred to another court) .

CONSIDERATION

38    As the relevant authorities make clear, it is not the task of the Court on an application such as the present to undertake a preliminary trial of the offsetting claim. Nor does an applicant have to adduce evidence that would be admissible on a final hearing of the foreshadowed claim. However, it is also clear that the Court does need to be satisfied that the applicants in question have a prima facie case which has a sufficient chance of success that they are entitled to litigate the claim, and that the claim identified is a genuine and bona fide claim.

The nature of the Andersons’ claim against the Council

39    The fundamental premise of the claim identified by the Andersons is that they were victimised by the Council due to the steps that they took to close the laneway adjacent to the Property. They consider that the action taken by the Council to impose the heritage overlay on, and only on, the Property was undertaken essentially as retaliation for their conduct in relation to the laneway dispute.

40    Those claims are cast in the following terms in the writ the Andersons filed in the Supreme Court of Victoria:

14     The introduction of HO462 was improper because:

(1)     the defendant, through its councillors, agents and employees who were responsible for HO462 and Stonnington Planning Scheme Amendment C204 pursued its introduction primarily in response to the dispute between the plaintiffs and defendant, as set out in paragraph 13(2), above [ie the laneway dispute];

(2)     it only affected the Land; and

(3)     it was designed to cause detriment to the plaintiffs.

15     Further and alternatively, by introducing HO462, those councillors or members of a delegated committee responsible for its introduction intentionally misused their position to cause, or attempt to cause, detriment to the plaintiffs, within the meaning of section 123 of the Local Government Act 2000 (Vic).

41    While it is clear that there was significant disputation between the Council and the Andersons concerning the laneway, the suggestion that the Andersons were victimised by the Council because of their actions in relation to the laneway is entirely speculative.

42    Likewise, the suggestion that the introduction of the heritage overlay (by which a planning permit requirement applied to the works the Andersons were undertaking on the Property) was designed to cause detriment to the plaintiffs, and that those involved on the Council side intentionally misused their position, are serious allegations that are not supported by anything other than the Andersons’ suspicions.

43    Nor have the Andersons identified who the “councillors, agents and employees”, or members of the “delegated committee” are, so that the likelihood of the Council being liable for their actions can be assessed, even at a prima facie level.

44    The Andersons feel victimised and point to the fact that the specific overlay in question applied only to the Property. However, assessed at a prima facie level, the fact that the overlay applied only to the Property does not lend credence to their suspicions of victimisation where the heritage overlay was applied following a report being prepared by Planning Panels Victoria, and where:

(1)    The Andersons had, and took, the opportunity to participate in the Panel’s processes.

(2)    The Panel considered the reports of three heritage advisors and engaged in a detailed assessment of the heritage value of the Property, taking into account the submissions made, and heritage report submitted, by the Andersons, which contended there should be no heritage protection.

(3)    The Panel Report discloses an explanation for why the Property was the subject of a heritage overlay that only applied to it. The Panel accepted that the Property was of at least equivalent significance as four other identified properties that were already the subject of heritage overlays. The Panel regarded the examples of other properties raised by the Andersons’ heritage expert as not in fact being comparable.

(4)    The Panel Report explained the history of the approach to heritage protection in the relevant area. The Panel explained that the Council was pursuing an ongoing strategy of seeking heritage controls for “all A1 graded buildings” and “those A2 graded buildings meeting or exceeding the threshold of local significance”, which it was approaching thematically. The Panel Report observed that the Property, which had been graded A2, fell within the “Victorian” building thematic group, which group had not yet been the subject of full analysis when the Council received a request for report and consent to a proposed demolition on the site. The application for consent to the demolition at the Property prompted the Council to bring forward consideration of heritage in respect of the Property specifically.

(5)    Contrary to the Andersons’ suggestion, the Panel did have regard to the context in which the heritage value of the Property was being assessed, and did pay attention to the fact that there had already been some demolition work on the Property by the time the matter was before it, detailing the nature of the demolition, alteration and replacement works that had been completed.

45    Having regard to these matters, I am not satisfied that the Andersons’ claim is one that meets the threshold set out in the authorities. I do not consider that they have a sufficient prima facie claim with sufficient prospects such that it is just that they be entitled to litigate the claim before the bankruptcy proceedings proceed.

46    As to the arguments on limitation of actions, while the Council suggested that the claims set out in the writ are statute-barred on the basis that the causes of action crystallised when the heritage overlay was imposed, I do not regard the position to be sufficiently clear cut to weigh in the balance in assessing the prospects of the Supreme Court proceeding initiated by the writ.

47    Given that finding, what follows is not strictly necessary to decide, but I will address the issues concerning forum and quantum as the parties devoted significant submissions to those points.

Forum

48    Section 40(1)(g) requires that the Court be satisfied that the recipient of the bankruptcy notice “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” (emphasis added).

49    In my view, this criterion has been satisfied in respect of the various tortious claims the Andersons identified in the present proceeding, and which are the subject of the writ filed in the Supreme Court of Victoria.

50    The costs orders which underpin the bankruptcy notice were obtained in proceedings that advanced from VCAT and, on appeal on a question of law, to the Supreme Court of Victoria’s trial division, then the Court of Appeal, and finally to the High Court. While, as the Council pointed out, the Andersons have been well aware of the grievances pursued by the writ filed in January 2024 for many years, that does not mean they could have advanced the tortious claims in those proceedings.

51    As noted above, the proceeding was properly initiated under provisions of the Planning Act that provided for applications to be made to VCAT. Even if, as the Council noted, the Andersons were allowed to rely on new arguments in the Court of Appeal, that is in no way tantamount to the Court of Appeal somehow having opened the door for the Andersons to pursue the tortious claims in that forum. As the Court of Appeal noted, the point made by the new grounds sought to be advanced on appeal was “essentially a legal one, concerned with the meaning of s 6(3)(d)” of the Planning Act: Anderson (CA) at [55] (Maxwell P, Tate and McLeish JJA).

52    It was also suggested by the Council that the Andersons could have brought a counterclaim in the Supreme Court of Victoria when the appeal on the question of law was initiated. Counsel was unable to identify any procedural mechanism in the Supreme Court (General Civil Procedure) Rules 2015 (Vic) by which that might occur. I note, in passing, that it does not appear that O 10 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) would lend itself to that use. The suggestion that the matter could also have been brought in the High Court was not adequately explained, and it is not apparent how it is said that the Andersons could have brought proceedings in the High Court of the kind they initiated in VCAT.

53    Accordingly, I consider that this integer of s 40(1)(g) has been made out by the Andersons.

Quantum

54    In her first affidavit, Ms Anderson deposes that the introduction of the heritage overlay “has caused loss” to her and Mr Anderson. That loss is said to have been suffered on the basis that:

(a)    the Andersons are “at risk” that the building works they completed after the introduction of the overlay will need to be demolished as they were conducted without a planning permit, and those works cost $941,372; and

(b)    the Property has been “devalued” by the introduction of the heritage overlay.

55    In the absence of any suggestion that the Andersons are being, or are likely to be, required to demolish the works they undertook, the mere existence of a “risk” of that occurring — how and when is not clear — does not satisfy me that the Andersons have a credible prima facie claim with a quantum that meets or exceeds the amount due to the Council in respect of the costs orders.

56    To be clear, however, I do not accept the Council’s submission that the evidence put forward by Ms Anderson did not make good on the quantum point as the costs were not “proven”. A person applying to set aside a bankruptcy notice does not need to tender evidence that would be satisfactory at an ultimate trial (Re Glew at [11] (Lindgren J)). The Council did not seek to cross-examine Ms Anderson on her evidence regarding the costs incurred.

57    In her second affidavit, Ms Anderson referred to the costs having increased due to delays in finishing the stage 2 building works. She identified a number of items of work and the costs thereof, as well as the overall cost of internal fit out works (kitchen, pantry, powder room, cabinetry etc). She deposed to a belief that the cost of those works had, conservatively, increased by 10% due to delays.

58    The loss and damage identified in the unserved writ differs from the loss or damage referred to by Ms Anderson in her first affidavit. While both refer to diminution in the value of the Property due to the imposition of the heritage overlay (of which there was no evidence before me), the loss otherwise identified in the writ as having been occasioned by the misfeasance in office and conspiracy claims is constituted by “costs associated with the delay in completion of construction works”. The loss and damage referred to in the writ in respect of the contractual interference claim is stated to be occasioned by “delay in completing building works”, at least some of which work “remains incomplete”. There is no suggestion in Ms Anderson’s affidavits that the Andersons actually intend to complete further work that has not yet been undertaken.

59    Ms Anderson’s second affidavit details costs of delay, which at least ties in with the nature of the loss referred to in the writ. While, as noted, a person applying to set aside a bankruptcy notice does not need to adduce evidence of the kind that would be necessary at trial, Ms Anderson’s unreasoned assertion that the costs went up 10% due to delay does not meet even the more limited standard required in applications such as the present. That is before one even gets to adding up whether the 10% increase in costs is equal to, or exceeds, the debts upon which the bankruptcy notice was founded.

60    While it might be accepted, as a matter of common sense, that the imposition of a heritage overlay may, depending on the circumstances, be seen by buyers as making a property less desirable in the market than it would be without any such overlay, the quantum of that impact is a matter of speculation.

61    For these reasons, the Andersons have not established, even at a prima facie level, that the quantum of the Andersons’ claim against the Council is of an amount “equal to or exceeding” the sum of the costs orders against them ($344,068.75).

62    I am not satisfied that the Andersons have a credible prima facie claim with a quantum that meets or exceeds the amount due to the Council in respect of the costs orders, that is referable to any diminution in value of the Property.

Other matters

63    The fact that the Andersons have not at any time applied to set aside or vary the heritage overlay, or even apply for a planning permit, further undermines the suggestion that they have a credible and genuine claim against the Council, which they should be permitted to advance without having to pay the sums due to the Council on pain of otherwise committing an act of bankruptcy. The failure to apply for a planning permit is of particular relevance given the loss and damage identified in the writ refers to the increased cost of undertaking works that remain incomplete.

64    I also take into account, in assessing whether I am satisfied that the Andersons are advancing a genuine and bona fide claim, the fact that, despite the heritage overlay being imposed in mid-2015, the Andersons have not taken any action to pursue the claims before filing, but not serving, a generally endorsed writ in January 2024, nearly nine years later. If the Andersons have a claim that they genuinely wish to press against the Council, I would have expected them to have taken steps well before January 2024, and also not to be holding back service of the writ to see what the outcome of the bankruptcy proceeding is.

CONCLUSION

65    Having regard to the foregoing matters, I am not satisfied that the Andersons have a counter-claim, set-off or cross demand meeting the criteria set out in s 40(1)(g) of the Act. The claim outlined in Ms Anderson’s evidence, and the endorsed writ, is not one of sufficient substance to make it one that the Andersons should be permitted to have heard and determined in the ordinary way, rather than being required to comply with the bankruptcy notice (or commit an act of bankruptcy): Re Glew at [12] (Lindgren J). Put another way, the claim raised by the Andersons is not one in respect of which the bankruptcy proceedings should be required to await the outcome: Guss at [40] (Gleeson CJ, Gaudron, McHugh, Kirby and Callinan JJ).

66    The application will be dismissed with costs. Pursuant to the orders made by Snaden J on 5 April 2024, the Andersons will have seven days to comply with the bankruptcy notice.

67    There is no obvious reason why costs ought not follow the event. However, I have stayed the costs order until 4.00pm on 15 November 2024, should the parties wish to make any submissions on costs. Any submissions should be filed and served by 4.00pm on 12 November 2024 (limited to two pages), with any responsive submissions by 4.00pm on 14 November 2024 (limited to two pages).

Associate:

Dated:    8 November2024