Adamson v Miller
[2008] FMCA 1173
•19 August 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| ADAMSON v MILLER | [2008] FMCA 1173 |
| BANKRUPTCY – Challenge to bankruptcy notice – whether debtor has a counter claim of equal or greater value than the debt due on the bankruptcy notice considered – whether the debt due on the bankruptcy notice had been compromised considered – extension of time for compliance with the bankruptcy notice to enable the debtor to seek funds to pay the debt. |
| Bankruptcy Act 1966, s.41(6A) Legal Profession Act 1987 (NSW), ss.208L, 208M Limitation Act 1969 (NSW), s.23 |
| Adamson v Miller [2005] NSWSC 971 Bhagat v Global Custodians Ltd [2002] FCA 223 Burbidge v Wolf [2008] NSWSC 60 Coshott v Lenin [2007] NSWCA 153 Franks v Warringah Council [2003] FCA 1047 |
| Applicant: | CHRISTOPHER MICHAEL ADAMSON |
| Respondent: | ADRIAN HAIGH MILLER |
| File Number: | SYG 729 of 2008 |
| Judgment of: | Driver FM |
| Hearing date: | 19 August 2008 |
| Delivered at: | Sydney |
| Delivered on: | 19 August 2008 |
REPRESENTATION
The Applicant appeared in person
| Counsel for the Respondent: | Mr J Bartos |
| Solicitors for the Respondent: | David Begg & Associates |
ORDERS
The application filed on 28 March 2008 is dismissed.
The applicant shall bear the respondent’s costs of and incidental to that application, including any reserved costs.
Orders 1 and 2 shall take effect on and from 19 September 2008 and shall not be entered before 22 September 2008.
Pursuant to s.41(6A) of the Bankruptcy Act 1966 (Cth), the time for compliance with the bankruptcy notice is extended up to and including 19 September 2008.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 729 of 2008
| CHRISTOPHER MICHAEL ADAMSON |
Applicant
And
| ADRIAN HAIGH MILLER |
Respondent
REASONS FOR JUDGMENT
(revised from transcript)
I have before me an application filed on 28 March 2008 seeking orders setting aside bankruptcy notice number NN0327 of 2008 served on the applicant debtor on 7 March 2008. The application also seeks costs and other orders thought appropriate by the Court. The application is supported by two affidavits by the applicant debtor, which I received subject to submissions.
The application is resisted by the respondent creditor who relies upon an affidavit of David John Begg made on 17 April 2008 and an affidavit of Stefano Laface made on 22 April 2008. I also received those affidavits subject to submissions. None of the deponents were required for cross-examination. In addition, I have before me as evidence a letter dated 14 March 2006 to the applicant from the respondent’s solicitors enclosing a proposed deed of settlement[1] and a letter dated 25 July 2008 to Mr Adamson and the solicitors for Mr Miller dealing with the assessment of costs in earlier proceedings challenging an earlier bankruptcy notice[2].
[1] exhibit R1
[2] exhibit R2
The background facts relating to this matter are adequately summarised in the respondent's outline of submissions filed in Court by leave today and I adopt, with minor amendments, for the purposes of this judgment paragraphs 1 through to 26 of those submissions:
The applicant, Christopher Michael Adamson (“Adamson”) is a solicitor. He alleges that he did legal professional work for the respondent Adrian Haig Miller (“Miller”) in 1998-1999.
In October 2004 Mr Adamson served a bill of costs on Mr Miller seeking payment for his costs. On 18 November 2004 Mr Adamson filed an application for assessment of costs based on an alleged agreement constituted by a deed between Mr Adamson and Mr Miller’s brother and sister-in-law. The application was determined by Costs Assessor, Terence Stern on 14 April 2005 who found that no costs agreement was entered into between Mr Miller and Mr Adamson and thus no costs were payable by Mr Miller to Mr Adamson.
On 6 May 2005 Mr Adamson filed a summons in the Supreme Court of New South Wales against the cost assessment. The appeal, proceedings no. 1813 of 2005, was heard on 27 September 2005 by Associate Justice Malpass.
On 6 October 2005 His Honour delivered judgment finding that the claim failed and ordered that Mr Adamson pay the costs of the Summons, see Adamson v Miller [2005] NSWSC 971[3].
[3] Annexure A to the affidavit of David John Begg dated 17 April 2008
On 2 November 2005 Mr Adamson filed a holding summons for leave to appeal against the decision of Associate Justice Malpass in proceedings no. CA 40145 of 2006.
On or about 14 March 2006 an offer was made on behalf of Mr Miller to settle the dispute between them. The offer was contained in a draft deed of release (“deed of release”).
On or about 14 April 2006 Mr Adamson made a counter offer.
On 22 May 2006 the solicitors for Mr Miller wrote to Mr Adamson rejecting the counter offer and informing him that Mr Miller was still prepared to accept a compromise as per the deed of release, which included, inter alia, a covenant by Mr Adamson not to seek to appeal against Associate Justice Malpass’ judgment and to discontinue the holding summons.
Mr Adamson continued with the application for leave to appeal.
On 14 August 2006 Justices Mason and Tobias refused the application for leave to appeal. Their Honours ordered Mr Adamson to pay the costs of the summons.
On 17 August 2006 the solicitors for Mr Miller wrote to Mr Adamson informing him that Mr Miller incurred $4,200 in respect of the application for leave to appeal and offered to accept $4,000.
On 21 August 2006 Mr Adamson wrote to the solicitors for Mr Miller stating that he decided to accept the offer as set out in the deed of release.
On 25 August 2006 the solicitors for Mr Miller wrote to Mr Adamson rejecting his offer.
On 14 November 2006 Mr Miller filed an application for assessment of party/party costs in relation to the costs orders by Associate Justice Malpass and the Court of Appeal.
On 15 February 2007 Costs Assessor M W Robinson issued a Certificate as to Determination of Costs finding that Mr Adamson should pay Mr Miller $9,824.50 plus costs of the assessment of $1,168.75.
In May 2007 Mr Adamson filed an application for Review of Determination of a Costs Assessor. On 5 July 2007 the review panel’s members Peter Scammel and Greg Walsh affirmed the Certificate of Determination of Costs by Costs Assessor Robinson. The costs of the review paid by Mr Miller and payable by Mr Adamson were $ 513.33.
On 29 August 2007 bankruptcy notice NN3517/07 was filed on behalf of Mr Miller against Adamson.
Proceedings by Mr Adamson to set aside the bankruptcy notice
On 11 September 2007 Mr Adamson filed an application, NSD 1845 of 2007 to set the bankruptcy notice aside.
The application was supported by an affidavit by Mr Adamson dated 11 September 2007. There were several basis for the application. First, it was alleged that there was an agreement between the parties that resulted in Mr Miller being precluded from relying on Certificates of Assessment. Secondly, it was alleged that Mr Adamson had a counter-claim against Mr Miller based essentially on the same matters that were subject to the proceedings in the Supreme Court but put on the basis of unjust enrichment.
The bankruptcy notice was flawed because the costs determinations relied upon had not yet been entered as an order of the Supreme Court – see Franks v Warringah Council [2003] FCA 1047.
On 7 November 2007 the bankruptcy notice was set aside by consent. Mr Miller was ordered to pay Mr Adamson’s costs of the application.
Present bankruptcy notice and further application to set it aside
On 14 January 2008 the Supreme Court of New South Wales entered judgment in proceedings no. 11813 of 2005 based on the Certificates of Determination of Costs and ordered Mr Adamson to pay Mr Miller $11,506.58.
On 1 February 2008 a new bankruptcy notice, NN 0327/08 was issued by Mr Miller against Mr Adamson based on that judgment.
On 28 March 2008 Mr Adamson filed an application to have the bankruptcy notice NN0327/08 set aside – application SYG729 of 2008. The affidavit in support is also largely identical to Mr Adamson’s affidavit in support of the application NSD1845 of 2007 except that it now also raises the issue of a counter-claim in the form of a costs order that Adamson has in respect of the present application.
On 13 June 2008 Mr Adamson applied for taxation of costs in the proceedings NSD1845 of 2007.
On 25 July 2008 the Registrar gave the parties’ notice under Order 62, paragraph 46(3)(b) that the estimate of Mr Adamson’s costs in the proceedings NSD1845 of 2007 is $ 4,050.00. As no objection was lodged by either party the amount of the estimate is deemed to be the amount for which a certificate of taxation may be issued.
Additional background relating to the circumstances giving rise to the judgment debt are set out in the decision of Adamson v Miller [2005] NSWSC 971 in paragraphs 1 through to 9:
The plaintiff is a solicitor. He provided legal services for the defendant and others.
The defendant was an employee of Possam Holdings Pty Limited (Possam). His brother (Peter Miller) was the principal of Possam. Possam operated a restaurant and nightclub in Darlinghurst.
In or about February 1998, the defendant and others were convicted of offences under the Liquor Act 1982. Appeals were brought against the substantial monetary penalties imposed. The plaintiff was retained in or about March 1998.
Peter Miller and his de facto wife (Adelene Liu) executed a document which took the form of a deed poll (the document). It was headed “Deed: Solicitor Client Retainer; Mortgage Agreement and Assignment of Choses in Action and Authority to Deposit Monies into General Account”. Both the defendant and the plaintiff were named as parties to the document. It was not executed by either of them. It contained the following provision:-
2. “Paclaw” shall communicate with and to receive instructions from all or any of the “client” from Peter James Miller and/or Adelene Liu (or their nominee) who warrant and guarantee “Paclaw” that they have the authority of each of the other “client” to enter into this agreement of their behalf and to issue the instructions on behalf of the “client”.
The document purports to have been signed sealed and delivered on 13 March 1998. It also contained a provision that deemed it to have retrospective operation from 6 March 1998. All of the entities named as parties to the deed, save for the plaintiff, are described as “client”.
The legal services provided for the defendant were completed by 1 April 1999. Since the providing of the services, there has been considerable activity concerning payment of costs. As a result, the plaintiff recovered part of the costs claimed by him for those services.
Some of the activity proved to be unsuccessful. In September 2001, the plaintiff made an application for assessment of costs in relation to Adelene Liu. This application was withdrawn in or about February 2002. Ms Liu successfully brought proceedings which saw certain of the provisions of the document being set aside.
Action against the defendant began on 12 October 2004, when the plaintiff served a bill of costs on the defendant. The bill substantially claimed costs in respect of work that had been the subject of the action taken against Adelene Liu. The plaintiff filed an application for assessment on 18 November 2004. The application was referred to a costs assessor (Mr Stern). The plaintiff relied on the document as a costs agreement. On 14 April 2005, the costs assessor made a determination and issued his certificate. The costs were assessed at “Nil”.
On 6 May 2005, the plaintiff filed a summons in this court. He filed an amended summons on 28 July 2005. It seeks relief pursuant to s208L of the Legal Profession Act 1987 (the Act).
The bankruptcy notice is challenged on two bases. The first is that the applicant debtor has a counterclaim, set off or cross-demand of equal or greater value than the amount due on the bankruptcy notice that could not have been raised in the proceedings giving rise to the debt. Secondly, there is an assertion that the debt was compromised pursuant to the deed forming part of exhibit R1. I will deal with the second issue first.
I note at the outset that if Mr Adamson were to succeed on this ground he would necessarily fail on the first because the proposition is that the deed compromised all claims between the parties related to his provision of legal services to Mr Miller. That would include the asserted counterclaim, set off or cross-demand.
The respondent submits that the draft deed was provided on the basis that until the document was executed by both parties and exchanged there was no binding agreement. I accept the accuracy of that from exhibit R1. However, it would not follow from that that the respondent could resist this ground if, for example, the respondent was estopped from denying a compromise pursuant to the deed short of execution. More fundamentally, however, the claim of a compromise cannot succeed on the facts. The facts are that Mr Adamson was unhappy with the terms of the deed which, among other things, required him not to seek leave to appeal against the judgment of the Supreme Court and to discontinue a holding summons. Mr Adamson pointed out that he had already sought leave to appeal and so an amendment was required. When he finally purported to accept the deed by letter dated 21 August 2006, the application for leave to appeal had already been dismissed. The deed was proposed in order to avoid the cost and uncertainty of that proceeding and it did not remain open to Mr Adamson to accept it once that proceeding had concluded.
I accept the respondent's submission that following the dismissal of the application for leave to appeal by the Court of Appeal on 15 August 2006 the offer was no longer capable of acceptance. I reject the second ground in the application.
The first ground is somewhat more complex. Mr Adamson claims that he has an offsetting claim against Mr Miller based on unjust enrichment. He undoubtedly has a set off in part in relation to the costs of the earlier successful challenge against the first bankruptcy notice. I accept from exhibit R2 that that amount is $4,050. That amount is less than half of the amount due under the bankruptcy notice and does not provide a basis for the avoidance of all or any part of the amount due under the notice.
Mr Adamson, however, relies not on that sum but on the sum of $20,000 he says is due to him by Mr Miller for the legal services he provided to him. Mr Adamson has commenced proceedings in the Local Court against Mr Miller to recover that amount on an equitable basis of unjust enrichment, but conceded in argument before me that the Local Court probably did not have jurisdiction to deal with it. He also conceded that no steps had been taken in the proceeding for six months. The proceeding would either need to be transferred to the District Court or commenced afresh.
There are a number of difficulties with this claim. The first relates to a question of whether the claim could not have been set up in the proceedings leading to the judgment debt. Mr Adamson submits that he could not have raised an equitable claim before the costs assessor. However, viewed more generally, it is apparent from the decision of Adamson v Miller at [33] that it was probably open to Mr Adamson to raise before the costs assessor the issue of a proper assessment of costs independently of the asserted costs agreement. Further, and in any event, the judgment that gave rise to the debt was not the costs assessment but the proceedings in the Supreme Court.
Mr Adamson chose to pursue an appeal on a narrow basis pursuant to s.208L of the Legal Profession Act 1987 (NSW) (“the Legal Profession Act”) which provides for an appeal on a question of law. The Supreme Court drew attention to the broader basis of relief that might have been sought pursuant to s.208M of that Act. I am not satisfied that the claim Mr Adamson now seeks to agitate could not have been raised before the Supreme Court pursuant to s.208M. An additional obstacle to Mr Adamson's claim is the issue of disclosure under the Legal Profession Act. That was dealt with in Adamson v Miller at [35]. The Court stated:
This ground was doomed to failure because the material placed by the plaintiff before the costs assessor conceded that the only disclosure that took place was with Peter Miller and Adelene Liu.
In Burbidge v Wolf [2008] NSWSC 60 the Supreme Court of New South Wales dealt with a claim in somewhat similar circumstances. That decision would present an obstacle to Mr Adamson's claim. A further obstacle would be the question of the statute of limitations. In Adamson v Miller at [41] the Supreme Court found that a further costs assessment on a basis other than that initially addressed had become statute barred. Mr Adamson asserts that his equitable claim of restitution is not subject to the usual limitation period of six years but is subject to the longer limitation period under s.23 of the Limitation Act 1969 (NSW) as a claim for equitable relief. However, I accept the respondent's submission that proposition probably founders on the basis of the decision of the New South Wales Court of Appeal in Coshott v Lenin [2007] NSWCA 153, in particular at [14] to [17].
In all the circumstances, I am not persuaded that Mr Adamson has a counterclaim, set off or cross-demand of equal or greater value than the debt supporting the bankruptcy notice that could not have been set up in the proceedings giving rise to that debt. The existence of the present claim in the Local Court is not a basis for setting aside the bankruptcy notice.
In his submissions, Mr Adamson also put to me that while he is not able to pay the amount due under the bankruptcy notice immediately, he anticipates being able to do so within a reasonable short time on the basis of action he is pursuing against a Mr Ede. It is apparent there is a rather complex web of proceedings between Mr Adamson and Mr Ede and that both have obtained success at various points. I accept that Mr Adamson has judgments in his favour for very significant amounts which have not been satisfied. I also accept that if Mr Adamson is able to obtain satisfaction of even a reasonable portion of some of those judgments he would be able to meet the amount due on the bankruptcy notice.
Mr Bartos drew my attention to the decision of the Full Federal Court in Bhagat v Global Custodians Ltd [2002] FCA 223 at [2] where the Court noted that a judgment debtor may in some circumstances obtain an extension of time within which to comply with the bankruptcy notice on the ground that he or she has a genuine expectation that funds from an identified source will shortly be available of a size that will be sufficient to meet the judgment debt.
Mr Adamson has not been successful over a significant period in obtaining satisfaction from Mr Ede from the judgments against him and has instituted bankruptcy proceedings against him. It is possible that those proceedings may bear fruit sufficient to meet the debt due on the bankruptcy notice the subject of these proceedings. Mr Adamson is a solicitor and may be subject to some prejudice if he commits an act of bankruptcy. While he has had a significant period to deal with the judgment debt, I am prepared to extend a further period of grace to him.
I will order that the application filed on 28 March 2008 is dismissed. The applicant shall bear the respondent's costs of and incidental to application. Orders 1 and 2 shall take effect on and from 19 September 2008 and shall not be entered before 22 September 2008.
Pursuant to s.41(6A) of the Bankruptcy Act 1966 (Cth), the time for compliance with the bankruptcy notice is extended up to and including 19 September 2008.
I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of Driver FM
Associate:
Date: 5 September 2008
0
5
3