Anderson v Stonnington City Council - Bankruptcy Notice Appeal

Original Word Document (129.9 KB) Federal Court of Australia

Anderson v Stonnington City Council [2026] FCAFC 34

| Appeal from: | Anderson v Stonnington City Council [2024] FCA 1288 |
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| File number: | VID 1265 of 2024 |
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| Judgment of: | BANKS-SMITH, DOWLING AND MCDONALD JJ |
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| Date of judgment: | 27 March 2026 |
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| Catchwords: | BANKRUPTCY AND INSOLVENC Y – appeal from dismissal of application to set aside bankruptcy notice on the basis of a cross demand – where appellants alleged claims in tort against respondent Council relating to grant of heritage overlay over property – claims in tort enunciated on general and speculative level – where primary judge dismissed application on the basis that the appellants had failed to establish a prima facie cross demand and it was not just to allow the litigation to proceed before determination of the bankruptcy proceedings – no error in identification of principles – no error in application of principles – appeal dismissed |
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| Legislation: | Bankruptcy Act 1966 (Cth) s 40

Federal Court of Australia Act 1976 (Cth) s 35A

Federal Court (Bankruptcy) Rules 2016 (Cth) r 2.06 |
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| Cases cited: | Australian Wool Innovation Ltd v Newkirk [2005] FCA 290

Blair v The Owner – Strata Plan No 71656 [2016] FCA 1522

Cannon v Tahche (2002) 5 VR 317

CFB18 v Reader Lawyers & Mediators [2018] FCA 611

Guss v Johnstone [2000] HCA 26

Massih v Esber [2008] FCA 1452

Re Brink; Ex parte Commercial Banking Co of Sydney Ltd [1980] FCA 93; (1980) 30 ALR 433

Re Glew; Glew v Harrowell of Hunt & Hunt Lawyers [2003] FCA 373

Royal v Nazloomian, in the matter of Royal [2019] FCA 555

Tse v Evans as trustee in bankruptcy for Ngo (No 2) [2024] FCA 1020 |
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| Division: | General Division |
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| Registry: | Victoria |
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| National Practice Area: | Commercial and Corporations |
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| Sub-area: | General and Personal Insolvency |
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| Number of paragraphs: | 108 |
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| Date of hearing: | 19 August 2025 |
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| Counsel for the Appellants: | Mr L A Warren |
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| Solicitor for the Appellants: | L A Warren Lawyers |
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| Counsel for the Respondent: | Ms A V M Carruthers |
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| Solicitor for the Respondent: | Maddocks Lawyers |
ORDERS

| | | VID 1265 of 2024 |
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| BETWEEN: | JOHN ANDERSON

First Appellant

DEMITRA ANDERSON

Second Appellant | |
| AND: | STONNINGTON CITY COUNCIL

Respondent | |

| order made by: | BANKS-SMITH, DOWLING AND MCDONALD JJ |
| DATE OF ORDER: | 27 MarCH 2026 |
THE COURT ORDERS THAT:

1. The appeal be dismissed.

2. The appellants pay the respondent's costs of the appeal to be taxed if not agreed.

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

REASONS FOR JUDGMENT

THE COURT:

1 The appellants, Mr and Ms Anderson, are the registered proprietors of a P roperty in South Yarra, Victoria.

2 The Andersons were involved in litigation against the Stonnington City Council about public access to a laneway adjoining the Property, and also in relation to whether building works, undertaken pursuant to building permits, could proceed despite the absence of a planning permit.

3 Costs orders against the Andersons in favour of the Council were ultimately made by the Supreme Court of Victoria and the High Court in the planning permit proceedings in the sum of $344,068.75.

4 The Andersons did not pay the amounts due under the costs orders and the Council issued a bankruptcy notice.

5 The Andersons applied to set aside the bankruptcy notice 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 application was refused by a registrar of this Court, and the Andersons sought review of that decision under s 35A(5) of the Federal Court of Australia Act 1976 (Cth).

6 The primary judge dismissed the review application, thereby affirming the decision of the Registrar: Anderson v Stonnington City Council [2024] FCA 1288 (PJ).

7 The Andersons now appeal from the decision of the primary judge on numerous grounds.

Background to litigation

8 The background was accurately set out by the primary judge at PJ [8]-[26]. Accordingly, we will provide only a brief introduction.

9 As noted, a laneway abuts the Property. It leads to a public path. The laneway was owned by Victorian Rail Track (VicTrack). Following unsuccessful lobbying of both VicTrack and the Council by the Andersons to close the laneway, they erected a fence to close off public access.

10 On 18 September 2014 the Andersons issued proceedings in the Supreme Court of Victoria against the Council seeking an interlocutory injunction to stop removal of the fence. When the application was unsuccessful, the fence was removed, but the so-called 'laneway litigation' continued.

11 During the period of the litigation, interactions between the Andersons and the Council became hostile, and the Andersons made serious allegations about the conduct of the Council.

12 In November 2014 and December 2014, the Andersons obtained building permits to undertake renovations to the Property. At that time there was no requirement for a planning permit.

13 However, on 21 May 2015 a site-specific heritage overlay control (numbered HO462) was introduced by the Council which required a planning permit for demolition, building and other works on the Property.

14 The Andersons continued to undertake works under building permits after that date but without a planning permit.

15 In December 2016 the Andersons commenced proceedings in the Victorian Civil and Administrative Tribunal (VCAT) seeking declarations that they could lawfully proceed with the building works authorised before the heritage overlay was introduced without a planning permit. The primary judge summarised the various proceedings that ensued at PJ [24]-[26]. In short, the Andersons were unsuccessful before the VCAT, the Victorian Supreme Court, the Victorian Court of Appeal and on a special leave application to the High Court. Their costs liability to the Council arose from this litigation.

The purported offsetting claim

16 According to the Andersons, the heritage overlay was introduced to victimise them and in retaliation for their conduct and litigation relating to the laneway. They contended before the primary judge that they have claims against the Council for misfeasance in public office, conspiracy by unlawful and lawful means, and the tort of contractual interference (relating to the contract between the Andersons and their builder). We will refer to these as the misfeasance, conspiracy and contractual interference claims respectively.

17 A generally endorsed writ issued in the Supreme Court of Victoria, advancing those claims against the Council as sole defendant, was in evidence before the primary judge but had not been served at the time of the hearing before her Honour.

18 Relevantly, paras 14, 15 and 16 of the writ framed the Andersons' claims as follows:

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;

(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).

16 From around the time that HO462 was introduced, the defendant:

(1)    adopted a position that planning approval was required for all works at the Land, including those works which were the subject of the Stage 1 Works;

(2)    by its councillors, employees and agents, made repeated approaches to Period Extensions & Designs to ask it to stop work on the Land; and

(3)    by its councillors, employees and agents, requested that the registered building surveyor appointed in respect of the works not permit any further works on the Land.

19 The Andersons rely on these claims against the Council as offsetting claims within the meaning of s 40(1)(g) of the Bankruptcy Act, which relevantly provides:

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, 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 fixed for compliance with the notice; or

(ii)    where the notice was served elsewhere – within the time specified by the order giving leave to effect the service;

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; …

20 It was not in issue that a cross demand within the meaning of s 40(1)(g) may include a claim for unliquidated damages for a tort: Blair v The Owners – Strata Plan No 71656 [2016] FCA 1522 at 20; Royal v Nazloomian, in the matter of Royal [2019] FCA 555 at 82.

Summary of primary judge's findings

21 The primary judge referred to the 'fundamental premise' of the Andersons' claim being that they were victimised because of the steps they had taken in relation to the laneway (at PJ [39]). Her Honour noted that those claims were made in [14] and [15] of their writ, which were extracted in the reasons.

22 The primary judge found (at PJ [41]-[45]) that:

(a) the Andersons' contention that they were victimised by the Council because of the laneway litigation was speculative;

(b) the suggestion that the heritage overlay was introduced to cause detriment to the Andersons and involved an intentional misuse of position by persons from the Council was serious and not supported by anything but the Andersons' suspicion;

(c) the Andersons failed to identify persons for whose conduct the Council was said to be vicariously liable, so it was not possible to assess the potential liability of Council for their actions;

(d) assessed at a prima facie level, the Andersons' reliance on the fact that the overlay applied only to their Property as evidence of victimisation was undermined by the processes and preparation of a report by Planning Panels Victoria;

(e) the Planning Panels Victoria report disclosed an explanation for its recommendation, the history of its approach to heritage protection, its detailed assessment of the heritage value of the Property, the basis for bringing forward the application for consideration of heritage controls for the property, and the fact that it took into account submissions and a heritage report submitted on behalf of the Andersons; and

(f) in those circumstances the Andersons failed to disclose a sufficient prima facie claim with sufficient prospects of success to be entitled to litigate it before the bankruptcy proceedings proceed.

23 Although having made those findings it was unnecessary to decide the questions, the primary judge found that:

(a) the various tortious claims the subject of the writ were not claims that could have been set up in the proceedings in which the costs judgments were obtained (PJ [48]-[53]); and

(b) the Andersons had not satisfied the Court that they had a credible prima facie claim with a quantum referable to any diminution in value of the property that exceeded the amount due to the Council in respect of the costs orders (PJ [54]-[62]).

24 Having made those findings, her Honour also observed that the suggestion that the Andersons had a credible and genuine claim against the Council was further undermined by the fact that they had not applied to set aside the heritage overlay or sought a planning permit, nor sought to issue a writ until some nine years after the heritage overlay was imposed (PJ [63]-[64]).

25 Her Honour concluded at PJ [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. 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.

Grounds of appeal

26 There were 11 grounds of appeal (ground 3 of what were originally 12 grounds was abandoned).

27 The alleged errors the subject of each respective ground may be paraphrased as follows:

(1) failing to take into account evidence of communications between the Council and the Andersons that supported their argument that they were victimised;

(2) failing to find that the relevant councillors, agents and employees of the Council were adequately identified in evidence before the Court (affidavit of Ms Anderson filed 3 July 2024);

(3) [abandoned];

(4) failing to determine whether the Andersons had a prima facie contractual interference claim;

(5) failing to find in the circumstances that the Andersons had a prima facie case with sufficient prospects so that it was just to entitle them to litigate those claims;

(6) finding that the Andersons' evidence of loss was speculative when they were not required to establish a 'fully evidenced claim';

(7) finding that the 'risk' that the Andersons may be required to demolish the building works did not satisfy a prima facie case as to quantum relating to the misfeasance and conspiracy claims;

(8) failing to find that the imposition of the heritage overlay prevented the Andersons from reinstating a demolished bedroom and undertaking 'further' planned work and that those matters were relevant to the quantum of their misfeasance and conspiracy claims;

(9) as to the contractual interference claim, failing to find that the quantum of damages was the increased cost of completing the works, estimated by the Andersons as a 10% increase;

(10) finding implicitly that the Andersons were not advancing a genuine and bona fide claim;

(11) wrongly taking into account an irrelevant consideration when assessing the bona fides of the claim, being that the Andersons did not apply to set aside the heritage overlay or seek a planning permit, when such matters were only relevant to mitigation of damages; and

(12) wrongly taking into account an irrelevant consideration when assessing the bona fides of the claim, being the failure by the Andersons to take any step to advance their claim prior to issuing the writ in January 2024.

Principles

28 Counsel for the Andersons initially conveyed in submissions that the appeal did not rest on any dispute about the principles, but rather their application.

29 There is no question that the primary judge properly identified the leading authorities as to what is required in order to avoid committing an act of bankruptcy when a judgment creditor otherwise has the benefit of an order of the Court.

30 Her Honour referred to each of Guss v Johnstone [2000] HCA 26; Re Glew; Glew v Harrowell of Hunt & Hunt Lawyers [2003] FCA 373; and Massih v Esber [2008] FCA 1452.

31 As explained by the High Court in Guss (at [40]), where an application is made to set aside a bankruptcy notice on the basis of an offsetting claim, the Court must weigh 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.

32 As summarised by Colvin J in CFB18 v Reader Lawyers & Mediators [2018] FCA 611 at [34], with reference to Guss, it is not simply a matter of evaluating whether there is a claim with the requisite strength:

Rather, the question is whether the claim is of a kind that, in all the circumstances (including the Court's view of the strength of the offsetting claim), it is just to allow the party to pursue rather than face bankruptcy. One aspect of the claim to consider is its strength. A weak claim will not suffice. Otherwise, an assessment of strength is to be considered in the context of other considerations that bear upon the justice of allowing the bankruptcy proceedings to continue without the claim first being determined.

33 The various formulations in the cases as to what must be established by the party seeking to set aside the bankruptcy notice were summarised by Lindgren J in Glew at [9]. His Honour referred to the cumulative 'interrelated and sometimes overlapping' matters to be satisfied, being the existence of a 'prima facie case'; 'a fair chance of success' or the party is 'fairly entitled to litigate' the claim; and that the party is advancing a 'genuine' or 'bona fide' claim.

34 Such an assessment does not require the Court to undertake a preliminary trial, but clearly it must make some assessment: Re Brink; Ex parte Commercial Banking Co of Sydney Ltd [1980] FCA 93; (1980) 30 ALR 433 at 436 (Lockhart J).

35 As oral submissions proceeded during the appeal, it became apparent that although the Andersons did not go so far as to say the Court cannot take account of any defences a respondent may seek to rely upon, the Andersons submitted that in assessing whether there was a prima facie claim (or a claim within the various formulations provided in Glew) the Court should have regard only to the evidence provided by the Andersons as applicants. We would not accept that as a definitive rule, but this appeal does not require resort to the Council's evidence in any event.

36 A creditor who wishes to oppose an application such as an application to set aside a bankruptcy notice must file a notice of appearance, a notice stating grounds of opposition and an affidavit in support of those grounds (r 2.06 of the Federal Court (Bankruptcy) Rules 2016 (Cth)). Accordingly, it is hardly surprising that a respondent might provide evidence relating to an alleged counterclaim, set-off or cross demand. Nor is it surprising that the Court would take into account such evidence, where appropriate, in assessing the nature of the applicant's claim and whether it is just that the bankruptcy proceeding continue. CFB18 is an example of such evidence being taken into account: at [47]-[53].

37 Regardless, there is no reason a respondent cannot make submissions as to inferences that it says arise (or cannot sensibly arise) from evidence before the Court that has been tendered by the applicant.

38 Further, the Andersons sought to rely on inferences they say should be drawn relating to the motives behind the Council's conduct. The principles as to competing inferences therefore arise. In this regard, the principles were summarised in the context of proof to a civil standard in Tse v Evans as trustee in bankruptcy for Ngo (No 2) [2024] FCA 1020 (Perry J) at [22]-[30]. We accept that for the purpose of the application before the primary judge the Andersons were not obliged to prove their cross demand. However, the principles in relation to competing inferences provide guidance as to the task of assessing the nature of the applicant's claim and whether it is just that the bankruptcy proceeding continue. The Court is not obliged to accept the applicants' case and is not obliged to ignore competing inferences.

Evidence before the primary judge

39 The Andersons relied on two affidavits sworn by Ms Anderson for the purpose of the hearing before the primary judge, together with a copy of the writ.

40 The Council filed a notice of intention to appear in the proceeding before the primary judge and filed an affidavit of Ms Annaliese Battista in opposition, from which the grounds opposing reliance on the purported cross demand can be discerned (in particular at [37]-[38] of the affidavit). As the writ had not been served, no occasion had arisen for the Council to plead any defence to it at the time of the hearing before the primary judge.

Turning to the grounds

Preliminary

41 As to their misfeasance claim, the Andersons refer to s 123 of the Local Government Act 20 20 (Vic), which provides that a person who is, or has been, a councillor or a member of a delegated committee must not intentionally misuse their position to gain or attempt to gain, directly or indirectly, an advantage for themselves or for any other person or to cause or attempt to cause, detriment to the Council or any other person.

42 They also refer to the tort of misfeasance in public office, citing Cannon v Tahche (2002) 5 VR 317, which sets out the necessary components of the tort of misfeasance in public office. The components relevantly include:

(a) the misuse or abuse by the holder of a public office of a relevant power which is an incident of the office;

(b) that such wrongful conduct was actuated by malice, in the sense either:

(i) that the power was used not for the public benefit, but for an ulterior purpose with the intent that harm be caused to the plaintiff (or in reckless disregard of such a likely consequence), or

(ii) that there was a purported exercise of the power with knowledge that it did not exist (or in reckless disregard as to its existence);

(c) that the duty to exercise the relevant power properly is owed to the claimant as a member of the public.

43 As to the conspiracy claim, the Andersons assert conspiracy by both lawful and unlawful means. They cited the summary of elements set out by Hely J in Australian Wool Innovation Ltd v Newkirk [2005] FCA 290 at [60]-61. If conspiracy by lawful means is alleged, it is necessary to prove that the acts were done with the sole or predominant purpose of injuring the claimant. The elements that must be established are:

(a) a combination or agreement between two or more individuals (required for both types of conspiracy);

(b) an intent to injure (required for both types of conspiracy but must be shown as the sole or predominant purpose for lawful conspiracy);

(c) pursuant to which combination or agreement and with that intention certain acts were carried out; and

(d) resulting loss and damage to the claimant.

44 Relevantly, Hely J observed that, 'like fraud', such claims should not be made lightly: at [59]. His Honour also observed at [62]:

A conspiracy can be proved without evidence of an express agreement. A court is entitled to have regard to the overt acts pleaded, and to infer from those acts that there was an express agreement to further the common object of the combination. All of those said to be parties to the conspiracy should be sufficiently aware of the surrounding circumstance, and share the same object, for it properly to be said that they are acting in concert.

45 The Andersons also allege that the Council is vicariously liable for the 'misfeasance of public officers' ([26] of writ), or, as to the conspiracy claim, for the conduct of councillors, employees and agents of the Council ([30] of writ).

Whether prima facie case of victimisation by the Council because of laneway litigation – ground 1

46 The Andersons contended that there was a prima facie case that there was a link between the laneway closure and the imposition of the heritage overlay and submitted that this was demonstrated by both direct evidence (two examples relied upon) and available inference.

47 The first example said to be 'direct evidence' was the account in Ms Anderson's affidavit evidence of part of a Council meeting on 3 April 2014. Ms Anderson said that Cr Koce prevented her from asking questions of Cr Chandler about the issue of the closure of the laneway. She stated that in response to her suggestion that she might redevelop the Property into apartments, Cr Koce said, 'We would never let that happen. You will be prevented from doing so and you will lose a significant amount of money'.

48 The second example referred to Cr Chandler's alleged interference with the building permit process. Ms Anderson alleged that a neighbour had informed her that he had changed his position on consent to a proposed renovation. According to emails in evidence, Ms Anderson said that the neighbour changed his mind and would consent to the permit if the Council consented. Ms Anderson stated in her affidavit that the neighbour said he changed his mind after a conversation with Cr Chandler and another resident, Mr Imhoff, during which the laneway dispute was raised and the neighbour told her he was asked to withdraw his consent.

49 Neither of these examples evidences a persuasive or even prima facie link between the laneway litigation and the imposition of the heritage overlay.

50 As to the first example, it was submitted on behalf of the Andersons that the words 'didn't need to be said unless there was some intent to harm or injure'. We do not agree. What was said is entirely consistent with the Council being concerned to preserve the heritage value of the Property rather than see the development of apartments. Warning the Andersons that they might embark on a course that would be unsuccessful and inevitably cost them money does not prima facie evidence any malevolent intent. No ulterior motive is suggested by the communication, even accepting the evidence at its highest.

51 The second is Ms Anderson's report of what someone told her about a conversation between that person and others. Evidence of that nature is hardly compelling 'direct' evidence. Further, accepting the evidence at its highest, the fact that the laneway dispute may have been mentioned in the same conversation as the topic of consent to renovations is hardly indicative of any causative connection between the laneway litigation and the imposition of the heritage overlay. It was not suggested that the heritage overlay was mentioned in the neighbour's conversation with the other persons. The Andersons in reply submitted that a link is apparent because the permit process was a step aimed at delaying building works until a heritage overlay was in place. This submission is purely speculative, and a finding of such link does not naturally arise from the content of the evidence relied upon.

52 In the circumstances, it is unsurprising that the primary judge did not explicitly refer to such evidence, as it did not support the allegation of victimisation made by the Andersons and did not assist their case. The failure to refer to it, when it was of little or no probative value, does not mean the evidence was not considered.

53 Her Honour was entitled to proceed by seeking to identify and consider evidence that might assist the Andersons' case.

54 The Andersons submitted that the purported link which supported their claim of victimisation was in any event established by inferences that should have been drawn.

55 In this regard they relied on the affidavit evidence of Ms Anderson, which relevantly included:

(a) correspondence between the Andersons and the Council about the laneway that revealed serious disputation, including allegations made by Ms Anderson about the conduct of councillors;

(b) evidence of steps taken by the Council in relation to interim heritage protection of buildings in the municipality in 1992;

(c) a July 2014 'Heritage Place – Citation Assessment' relating to the Property authored by Bryce Raworth, dated 'soon after' the Andersons applied for a demolition and building permit (in June 2014) (the heritage assessment ran to some 14 pages and recommended that the Property be added to the schedule of the heritage overlay for the City of Stonnington planning scheme);

(d) correspondence from the Department of Transport, Planning and Local Infrastructure to the Council dated 17 September 2014 that referred to the Council having made a 'number of site-specific requests for interim heritage controls' and suggested that the Council should expedite heritage work and determine whether there should be a planning scheme amendment, rather than deal with ad hoc requests;

(e) correspondence between the Andersons' builders and the Council in January 2015 and February 2015 in which the builders sought dispensation relating to certain side and rear setbacks, and such dispensation was refused;

(f) correspondence in March 2015 from the Council to the Andersons' building code consultant to inform him, pursuant to provisions of the Building Act 1993 (Vic), that he should suspend further consideration of a proposed partial demolition permit for the Property because on 20 March 2015 the Council had requested the Minister to prepare an amendment to the planning scheme; and

(g) a Panel Report prepared by Planning Panels Victoria dated 23 April 2015 relating to the Property (which stated that there had been a directions hearing on 29 January 2015 and a panel hearing on 25 and 26 March 2015).

56 Although Ms Anderson's affidavit contained a lengthy narration of events and annexed many other emails, the above categories are those principally relied upon by the Andersons in relation to ground 1.

57 In summary, the Andersons submitted that an inference (relevantly as to victimisation because of the laneway litigation) arose from:

(a) the climate of ongoing serious disputation between them and the Council about the laneway that continued throughout the heritage overlay process (including serious allegations made by Ms Anderson about the conduct of councillors);

(b) the fact that the steps by the Council to impose a site-specific heritage overlay were implemented very soon after the Andersons' application for the demolition permit;

(c) the Council's decision to pursue a site-specific heritage overlay despite the letter from the Department of 17 September 2014;

(d) the alleged failure of the Council to 'take like action' in relation to other similar properties;

(e) the alleged interference with building works and the building permit process; and

(f) the retrospective nature of the heritage overlay, allegedly preventing work already permitted by building permits from proceeding.

58 The difficulty for the Andersons is that it is apparent that the primary judge had regard to these and other matters but declined to draw the inference.

59 Her Honour expressly acknowledged the history of disputation concerning the laneway. Whilst her Honour did not record in her reasons each communication or complaint made by the Andersons during the relevant period, there was no obligation to do so. It is readily apparent from the details and references to Ms Anderson's affidavit that it had been read, considered and taken into account.

60 Her Honour carefully considered the fact that the heritage overlay affected only the Property. Her Honour properly had regard to the Panel Report which was in evidence through Ms Anderson's affidavit. The following extracts from the primary judge's reasons (PJ [44]) are important in this regard:

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.

61 In assessing whether an inference as to victimisation could properly be drawn from the evidence, her Honour was entitled to assess whether the Panel process and report undermined or conflicted with the inferential case the Andersons propounded. In our view, not only have the Andersons failed to point to any error in her Honour's assessment of the significance of the Panel process and report, but her Honour was clearly correct to come to the view that the evidence as a whole fell short of providing a proper foundation for a prima facie case of victimisation. We note that counsel for the Andersons preferred the language of whether there was a 'fair chance of success' rather than a 'prima facie case', but nothing rests on this distinction, having regard to what was said in Glew at [9]. Her Honour referred to the inclusion of the phrase in Glew (PJ [28]). Her Honour's findings are consistent with a conclusion that the Andersons' case did not have a fair chance of success, even if that phrase was not expressly used in her findings.

62 Whilst Ms Anderson clearly holds firm and long-standing views and opinions about the conduct of the Council, repeating those opinions and alleging misconduct in her communications does not elevate them to the status of evidence.

63 In the face of persuasive evidence such as the Panel Report and having regard to the objective likelihood that a Council might move to consider issues of heritage protection in circumstances where demolition and building permits relating to a property have actively been sought, no error is revealed in the primary judge's assessment that the Andersons' claims of victimisation were speculative and based on no more than suspicion. Ground 1 is not made out.

Identification of councillors and the elements of a cause of action – ground 2

64 As noted, the Council is the only named defendant in the writ.

65 As is apparent from the elements of the torts that the Andersons identified in their submissions, set out at [41]-[43] above, the causes of action that the Andersons seek to rely upon by way of cross demand require a level of specificity. Furthermore, the basis upon which it is said the Council is vicariously liable for the conduct of others must be sufficiently disclosed. Without a level of specificity, the task of assessing whether there might be a prima facie case cannot properly be undertaken.

66 In the writ and in the written and oral submissions before the primary judge, the Andersons referred to conduct of the Council 'through its councillors, its agents and its employees' (writ at [14]; written submissions filed 22 August 2024 at [57]; transcript of hearing at p 25). There were also references to conduct by 'delegated committees' and numerous references to conduct by 'the Council'.

67 The primary judge said the Andersons did not identify the 'councillors, agents and employees', or members of the 'delegated committee' in a manner that permitted an assessment 'even at a prima facie level' of whether the Council might be liable for their actions. Her Honour was undoubtedly correct in this finding.

68 The Andersons submitted that contrary to her Honour's findings at PJ [43], there was sufficient identification in the affidavit material of 'those involved in conduct targeting the Andersons'. Relevantly they referred to:

(a) the report by Ms Anderson that a neighbour told her of a conversation with Cr Chandler (see [48] above);

(b) Ms Andersons' allegation of a conflict on Cr Chandler's part in relation to the laneway because of his 'relationship' with a neighbour;

(c) Ms Anderson's allegation that that Cr Koce prevented her from asking questions about the closure of the laneway;

(d) the reference in Ms Anderson's affidavit to 'Council' meeting to consider 'interim and permanent heritage protection' on 21 July 2014 – the Andersons submitted that 'Council' should be taken to mean all members of Council at that time;

(e) a letter written by Ms Anderson to the Mayor and Council on 1 May 2015 in which she made complaints about the 'Council's' 'harassment', the purported targeting of the heritage overlay to their Property, and the conduct of 'councillors'; and

(f) the conduct by the 'Council' in resolving to adopt the heritage amendment overlay at its meeting on 4 May 2015 – the Andersons submitted the reference to 'Council' means 'the persons involved in the decision'.

69 We invited counsel for the Andersons to identify any further passages in the transcript of the hearing before her Honour that might have assisted in the assessment of a prima face case for vicarious liability. We were given a number of references which were said to assist. For example, counsel for the Andersons (who was not counsel on the appeal) told the primary judge at the hearing that 'it doesn't matter [whether] each and every person alleged to be a co-conspirator is identified', because all that was required was a prima facie case. Counsel referred to Cr Chandler and Cr Koce being 'supportive of the laneway closure'. Counsel said that Ms Anderson said that other councillors (Cr Stubbs and Cr Bullen) told her that Cr Chandler was a friend of a neighbour and was 'lobbying behind the scenes'. Counsel referred to a complaint made by the Andersons about Cr Chandler's conduct in changing his position on the laneway, and a response from the corporate counsel for the Council (which contained no admissions that would assist the Andersons) and indicated that Council considered the matters to be at an end. There was also a submission made by counsel that the Council acted 'through its councillors, its agents and its employees'.

70 In our view, neither the matters initially raised in the written submissions or the matters identified at [69] above overcome the difficulties identified by the primary judge at PJ [42]-[43]. Nothing in what has been identified establishes even on a prima facie basis which councillors had the requisite intent to misuse their position, that they misused their position, that they held any requisite ulterior purpose or reckless disregard, that they acted with the predominant purpose of injuring the Andersons, or that between themselves they had made any such agreement to injure. Neither identifying that Cr Chandler allegedly told third persons about issues with a building permit, nor alleging that he was friends with a neighbour constituent, nor alleging that he changed his mind in relation to his position on the laneway are evidence of sufficient probative value to support a prima facie case. Nor, in our view, are such allegations a sufficient or sound basis for inferring any malevolent intent of the nature required for the torts of misfeasance or conspiracy.

71 There is no doubt that the Andersons and the Council were involved in a hotly contested planning dispute. The fact that parties are in conflict and do not agree does not establish misfeasance or conspiracy. Nor does the fact that elected members of a council, tasked with making contestable decisions, may seek to persuade others to agree with their position. The Andersons' allegations are serious allegations that must be set out carefully, with specificity. The Andersons in their submissions moved between allegations of conduct by the 'Council' and conduct by individuals. Their purported case was obscured behind general allegations of conduct 'by' the Council, its employees or agents or committees without any descent into sufficient detail.

72 Nor did the Andersons identify a basis from which the Court might properly infer that the Council acted through others and was vicariously liable for conduct of the nature of misfeasance or conspiracy.

73 The primary judge was clearly aware that the Andersons were not required to prove their cross demand. However, a level of specificity is still required for the purpose of establishing a prima facie case. Her Honour proceeded correctly, cognisant in the Andersons' favour of the lower threshold for a prima facie case. We are not satisfied that any error on the part of the primary judge as alleged by ground 2 is made out.

The contractual interference claim – ground 4

74 The primary judge addressed the contractual interference claim in a number of parts of the reasons: PJ [32], [35], [37(3)(c)] and [58]. In particular, her Honour recited the Andersons' claim that the Council was aware of their contract with their builder and that they had a building surveyor, and was not entitled to ask the builder to stop work, or to ask the building surveyor to cease work on issuing a permit.

75 Her Honour recited the Council's response, which was to the effect that:

(a) even if on the evidence a claim could be made out, a justification defence was available because 'self-evidently, builders being instructed to cease building when such works were unlawful cannot be a legitimate cause of action'; and

(b) 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 had in regard to any specific contract and was not in position to assess whether the Council would be held vicariously liable.

76 It is fair to say that in the section of the reasons headed 'Consideration' the primary judge did not expressly make a finding as to whether there was a prima facie case made out in relation to the contractual interference claim. The reasons focus on the victimisation claim which form the basis of the misfeasance and conspiracy cross demands.

77 However, it might be assumed that her Honour's conclusion in this section at PJ 45 was intended to address each of the tortious claims:

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.

78 Some support is provided for this assumption because her Honour states at PJ [47] that given her findings, it is not strictly necessary to decide the other matters raised by the Andersons. It might also be said that the issue of failing to identify the individuals responsible for the impugned conduct and how the Council might be vicariously liable extended to the contractual interference claim, in respect of which a similar point was taken by the Council.

79 However, we accept that there is no clear acceptance of the Council's submissions, nor a clear rejection of the Andersons' position, nor a distinct finding directed at the third tortious claim. However, for reasons that follow in relation to quantum, even if we were to uphold the substance of ground 4, there would be no change to the orders made by the primary judge.

Whether a prima facie case – ground 5

80 It is not necessary to separately address this ground (ground 5). The issues it raises have been addressed in our discussion of grounds 1, 2 and 4.

Whether sufficient evidence that quantum of cross demand exceeds amount due under bankruptcy notice – grounds 6, 7, 8 and 9

81 The primary judge correctly observed that it was not necessary for a person seeking to set aside a bankruptcy notice 'to tender evidence that would be satisfactory at an ultimate trial' (at PJ [56]). However, her Honour found that the Andersons had not established 'even at a prima facie level' that the quantum of their claim met the threshold level provided by s 40(1)(g) of the Bankruptcy Act of a cross demand equal to or exceeding the amount of the judgment debt.

82 The Andersons relied on three heads of loss, being:

(1) the risk that the Andersons will need to demolish the works completed after the introduction of the heritage overlay;

(2) a reduction in the valuation of the Property by the introduction of the heritage overlay; and

(3) the additional costs to complete certain works on the Property resulting from the delay.

83 The first and second heads of loss are said to result from the alleged misfeasance and conspiracy, while the third head of loss is said to flow from the alleged contractual interference.

84 The Andersons criticised the primary judge for making reference to the manner in which the quantum was claimed in the writ. This was an odd submission in light of the fact the writ was in evidence before her Honour and formed the basis of the cross demand that the Andersons said they wished to pursue.

85 Be that as it may, her Honour addressed each of the three components of loss identified in the Andersons' submissions.

86 As to the risk of demolition, the Andersons claim they had spent $941,372 since the adoption of the heritage overlay and that if they are ordered to demolish those works, they would need to spend additional money to rectify the Property post-demolition and make it secure.

87 It should be observed that the Andersons undertook such work without seeking or obtaining the permit required because of the heritage overlay. They undertook the work knowing of the risk that their litigation as to the retrospective operation of the heritage overlay the subject of the litigation referred to at [15] above may not succeed. There are a number of uncertainties in relation to causation of the loss claimed. There was no evidence that the Andersons have been ordered to demolish works undertaken without a permit under the heritage overlay or are likely to be required to demolish such works. It is unclear whether a permit can now be sought for those works.

88 The primary judge noted the absence of any suggestion that demolition would be ordered, and found that the existence of such risk was not sufficient to satisfy her that the Andersons had a credible prima facie claim with respect to the requisite threshold quantum (PJ [55]).

89 It was open to the Andersons to adduce evidence that may have informed the assessment of risk in this regard. They contended that some discount could be taken into account to reflect uncertainty as to whether the risk might eventuate. No discount was suggested, and the basis upon which it might be calculated was not disclosed.

90 Absent any direct evidence, the primary judge was again left to consider any inferences that might sensibly be drawn. The Andersons relevantly contended that the risk of demolition is to be inferred from the fact that the Council sought to delay the issue of the partial demolition building permit when the Planning Panel process was instigated and opposed the litigation the Andersons instituted in relation to the heritage overlay. Having regard to the time that has passed, the potential for the Andersons to seek a permit and the absence of any evidence that the Council has suggested or ordered demolition, it is unsurprising that the primary judge was not satisfied to the requisite standard that the Andersons established something more than a mere risk of meeting demolition and rectification costs. Her Honour's finding that the mere existence of a risk was insufficient for the purpose of s 40(1)(g) does not disclose error. We agree with her Honour's finding on this issue.

91 As to the alleged diminution in value of the Property as a result of the heritage overlay, there was no admissible evidence before the primary judge. Her Honour found (PJ [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.

92 No error in this reasoning is disclosed. Her Honour was correct to describe any assessment of diminution as speculative. The Andersons claimed they were not required on an application to set aside a bankruptcy notice to go to the extent of obtaining expert evidence. That does not meet the point that it was necessary to establish a prima facie case that the quantum of the Andersons' claim would equal or exceed the judgment debt and that, absent any evidence, the Court is unable to speculate and it would be inappropriate to do so.

93 As to the third category of loss, the Andersons characterised their loss caused by the alleged contractual interference and resulting delay as increased building costs, including costs already incurred after the imposition of the heritage overlay, and costs of works that had not yet been completed.

94 The primary judge identified a number of issues with this part of the Andersons' claim, despite Ms Anderson's attempt to address quantum by way of her second affidavit (filed 14 October 2024).

95 In her affidavit, Ms Anderson said she 'considered' that the costs for the work which was performed had increased by about 10% due to delay. Ms Anderson said she 'believed' that certain works were more expensive.

96 Having again acknowledged that a person applying to set aside a bankruptcy notice does not need to adduce evidence of the kind that would be necessary at trial, the primary judge rejected Ms Anderson's evidence as to the 10% increase as an 'unreasoned assertion', stating that 'it does not meet even the more limited standard required in applications such as the present' (PJ [59]).

97 Her Honour's characterisation of Ms Anderson's assertion was correct and no error is established. No basis for Ms Anderson's opinion was disclosed. We do not accept the Andersons' submission that they had 'done enough' to establish a prima facie case. Nor was the absence of any basis for the opinion on quantum met by their submission to the effect that they would have needed expert evidence. An applicant bears an onus on an application to set aside and where quantum is clearly relevant for the purpose of s 40(1)(g) of the Bankruptcy Act. That onus was not met by admissible or probative evidence, even allowing for the lower threshold than that which must be met at trial.

98 The primary judge also recognised the difficulty with Ms Anderson's evidence in relation to the Andersons' reliance on unascertained cost of works yet to be undertaken. Her Honour concluded that 'there [was] no suggestion' that the Andersons 'actually intend to complete further work that has not yet been undertaken' (at PJ [58]). There was no evidence of what the costs of such works might be. Apart from a generalised reference to a loft, elevator and fence that it appears were 'not completed', there was no evidence that the Andersons intended to undertake that work, no evidence that they had sought a permit to do so, and no evidence as to the cost of the work which the Andersons may intend to perform, nor evidence of the comparative cost of completing the work had circumstances been otherwise.

99 The Andersons in their written submissions acknowledged that Ms Anderson's evidence was imperfect, but submitted it was 'sufficient' and that it should be inferred that works would be completed.

100 We do not accept that submission. There was not sufficient material from which the primary judge could properly draw that inference, but even if there were, there was not sufficient material by which the primary judge could reach the requisite level of satisfaction as to the matters in s 40(1)(g) of the Bankruptcy Act.

101 It follows that none of the errors alleged by grounds 6, 7, 8 or 9 of the notice of appeal have been established.

Appeal grounds based on observations of primary judge – grounds 10, 11 and 12

102 Appeal grounds 10, 11 and 12 relate to observations made by the primary judge at PJ [63]-[64] in relation to whether the Andersons' claim was genuine, presumably having regard to the third matter identified in Glew.

103 The outcome of the application to set aside the bankruptcy notice, and so the appeal, was not determined by those observations, having regard to the failure of the Andersons to persuade the Court that they had a prima facie case in relation to a cross demand meeting the criteria of s 40(1)(g). It was readily apparent that the lack of prospects suggested by the Andersons' claim was such that the primary judge did not consider it just to allow them to pursue the claim, rather than face bankruptcy. Therefore, as the matters the subject of grounds 10, 11 and 12 are not determinative of the outcome, we do not consider it necessary to formally resolve them. However, we will provide brief comments.

104 Relevantly, the primary judge referred to the failure by the Andersons to set aside or vary the heritage overlay or, more relevantly, apply for a planning permit. Further, the primary judge referred to the delay of some nine years between the heritage overlay being imposed and the filing of the writ, service of which had been 'held back' and not effected at the time of the hearing.

105 The Andersons complain that such matters were not raised by the Council at the hearing before the primary judge and that they should not have been given weight. They submitted that they were genuine in their grievances and that the writ was filed in order to guard against limitation periods.

106 In our view the primary judge was entitled to have regard in particular to the absence of an application for a planning permit, as it was relevant to the quantum claim for the reasons already given. Further, there is no question that delay in pursuing proceedings, particularly when combined with the absence of other steps such as seeking a planning permit, were matters to which her Honour was entitled to have regard. We are not unsympathetic to the fact that the Andersons dealt with a serious personal issue during the period of delay. However, that does not render the delay period irrelevant, nor her Honour's reference to it an error.

107 Regardless, as we have said, these matters are not determinative of the appeal.

Outcome

108 It follows that the appeal is to be dismissed with costs.

| I certify that the preceding one hundred and eight (108) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Banks-Smith, Dowling and McDonald. |
Associate:

Dated: 27 March 2026

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