Alvaro v Legalwest Pty Ltd
[2013] FCCA 1799
•15 November 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| ALVARO v LEGALWEST PTY LTD | [2013] FCCA 1799 |
| Catchwords: PRACTICE AND PROCEDURE – Application to set aside orders dismissing application for non-appearance – basis for setting aside orders in default of appearance – explanation for non-appearance – delay – prejudice – arguable case on merits. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.40(1)(g), 41(7), 52(2) |
| Alvaro v Legalwest Pty Ltd [2012] FMCA 1088 Australian Securities and Investments Commission v Forge (2003) 133 FCR 487; [2003] FCAFC 274 Devonshire v Magellan Powertronics Pty Ltd & Ors (2013) 275 FLR 273; [2013] FMCA 207 Elliott v Water Wheel Holdings Ltd (2004) 178 FLR 459; [2004] FMCA 37 La Pegna & Anor v Commissioner of Taxation (2006) 204 FLR 364; [2006] FMCA 1643 McPhee v Glentham Pty Ltd [2006] FMCA 1508 New South Wales Crime Commission v Vu [2009] NSWCA 349 Re Athans; Ex parte Athans (1991) 29 FCR 302 See v Granich & Associates [2008] FMCA 27 Silver Fox Co Pty Ltd (as Trustee for The Baker Family Trust) & Ors v Lenard’s Pty Ltd & Ors (No.3) (2004) 214 ALR 621; [2004] FCA 1570 Singh v Official Trustee in Bankruptcy & Anor [2008] FMCA 521 Warner v Frost [1999] FCA 830 Yap v Granich & Associates [2002] FMCA 284 |
| Applicant: | ROCCO DOMENIC ALVARO |
| Respondent: | LEGALWEST PTY LTD |
| File Number: | PEG 281 of 2013 |
| Judgment of: | Judge Antoni Lucev |
| Hearing date: | 4 November 2013 |
| Date of Last Submission: | 4 November 2013 |
| Delivered at: | Perth |
| Delivered on: | 15 November 2013 |
REPRESENTATION
| For the Applicant: | In person |
| Counsel for the Respondent: | Mr R Gillon |
| Solicitors for the Respondent: | Lawton Gillon |
ORDERS
That the applicant’s Application in a Case filed 29 October 2013 be dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PERTH |
PEG 281 of 2013
| ROCCO DOMENIC ALVARO |
Applicant
And
| LEGALWEST PTY LTD |
Respondent
REASONS FOR JUDGMENT
Introduction
Before the Court is an application in a case[1] by the applicant, Mr Alvaro, to set aside orders[2] made by the Court on 29 October 2013 dismissing Mr Alvaro’s application to set aside a bankruptcy notice,[3] BN 165414 issued on 20 September 2013,[4] and for Mr Alvaro to pay the costs of the respondent, Legalwest Pty Ltd,[5] the Substantive Application Orders being made as a consequence of Mr Alvaro’s non-appearance at the hearing of the Substantive Application.
[1] “Application in a Case”.
[2] “the Substantive Application Orders”.
[3] “Substantive Application”.
[4] “the 2013 Bankruptcy Notice”.
[5] “Legalwest”.
The Substantive Application and Substantive Application Orders
The Substantive Application was filed on 22 October 2013. The grounds in support of the Substantive Application are as follows:
a)The Applicant has a counterclaim, set off or cross demand equal to or exceeding the amount claimed in the bankruptcy notice.
b)The Applicant has in the Respondent’s Trust Account, which it holds in trust for the Applicant, amounts equal to or exceeding the amount claimed in the bankruptcy notice.
c)The Respondent was given authority by the Applicant, to draw on monies/funds that the Respondent has in its Trust Account being held for the credit of the Applicant to pay any valid amount (if any) owed to the Respondent.
d)That the Bankruptcy Notice is an abuse of process.
e)The Respondent has not notified, demanded, made or attempted to make collection of the claimed amount by any other method other than the issuance of this Bankruptcy Notice.
e)That the Respondent’s sole aim of the bankruptcy notice is to render upon the Applicant a collateral attack.
Mr Alvaro also sought:
a)the payment of his costs, and leave to counterclaim for loss and damages; and
b)by way of interim orders, that the time for compliance with the 2013 Bankruptcy Notice be extended up to and including the day of the hearing and thereafter.
The date of the hearing of the Substantive Application to set aside the 2013 Bankruptcy Notice was endorsed on the Substantive Application as 9.00am on 29 October 2013.
The Substantive Application is supported by an affidavit by Mr Alvaro sworn on 22 October 2013.[6] Service of the Substantive Application and the First Affidavit was effected on the offices of Legalwest by Mr Alvaro personally on 23 October 2013.[7] In any event, Legalwest filed a notice of address for service on 25 October 2013.
[6] “First Affidavit”.
[7] See Mr Alvaro’s Affidavit of Service sworn 28 October 2013.
At the hearing of the Substantive Application at 9.00am on 29 October 2013 there was no appearance by Mr Alvaro (the matter having been called outside the Court).
The Court proceeded to make the Substantive Application Orders in the following terms:
1.The application be dismissed under r.13.03C(1)(c) of the Federal Circuit Court Rules 2001 (Cth).
2.The applicant pay the respondent’s costs of today to be taxed if not agreed.
Rule 13.03C(1)(c) of the Federal Circuit Court Rules 2001 (Cth)[8] allows the Court to dismiss an application if a party to a proceeding is absent from a hearing, including a first court date.
[8] “FCC Rules”.
The Application in a Case
The Application in a Case seeks the following orders:
1.That default judgement/Orders of Judge Lucev on 29 October 2013 be Set Aside Under r.16.05(2)(a) of the Federal Circuit Court Rules.
2.This matter be hear[d] before 4 November 2013
3.The Respondent/s pay the Applicant’s Costs of this Application.
The Application in a Case is supported by an affidavit sworn by Mr Alvaro on 29 October 2013,[9] which relevantly states that:
[9] “Second Affidavit”.
3.On the 22 October 2013 I made and filed with this court an application to set aside the following bankruptcy notice, BN 165414 dated 20 September 2013, issued by the respondent.
4.The Application was set for hearing, this morning 9.00am 29 October 2013.
5.On my way to the court for the hearing I was slightly delayed due to unexpected traffic through Perth city.
6.I arrived at the Foyer of this court at approximately 9.05am.
7.I proceeded to be security screened at the foyer.
8.At approximately 9.07am I took the lift to level 6 of the court to attend the hearing.
9.On Level 6, I looked at the notices for the court room of the hearing, which was confirmed as courtroom 6.2.
10.At approximately 9.10am I saw that courtroom 6.2 was locked and no one was in attendance.
11.I proceeded to the registry to ask if it was going to be opened.
12.One of the male court registrars went to see if it were open. No one was there.
13.The same person then said that he will ring Judge Lucev’s associate to enquire as to the situation.
14.I was then informed that the matter had already been heard and my application dismissed in default due to my absence to the hearing.
15.As a result of my dismissed application, default judgement/Orders were entered under r.13.03C(1)(c) of the Federal Circuit Court Rules 2001 (Cth).
16.I have, today, made application to set aside the orders made this morning under r.16.05(2)(a) of the Federal Circuit Court Rules 2001 (Cth).
17.I do not feel it to be just and reasonable for my matter not to be heard because of a minimal delay in my attendance to the hearing for matters out-side of my control.
18.I verily believe that I have good reasons to set-aside the respondents bankruptcy notice and I ought to be given the opportunity to stating my case, against the respondent in a full and open hearing.
19.The respondent will not be prejudiced in any way with the court granting the default orders to be set aside, however the opposite will be the case for the applicant.[10]
[10] Second Affidavit, paras.3-19.
The Application in a Case and the Second Affidavit were served on Legalwest on 29 October 2013.[11]
[11] See Mr Alvaro’s Affidavit of Service sworn 29 October 2013.
Significant parts of both the First Affidavit and the Second Affidavit are hearsay, and would not normally be admissible in proceedings in this Court.[12] These proceedings are, however, interlocutory in nature, and hearsay evidence may therefore be admitted, where evidence of the source of that evidence is also adduced, as has occurred here (albeit that the ultimate underlying source documents are not in evidence).[13] Evidence of a source rather than an ultimate source is sufficient in interlocutory proceedings.[14] The Court will, therefore, admit the hearsay evidence contained in the First Affidavit and the Second Affidavit, and have regard to it in these proceedings.
[12] Evidence Act 1995 (Cth), s.59(1) (“Evidence Act”).
[13] Evidence Act 1995, s.75.
[14] New South Wales Crime Commission v Vu [2009] NSWCA 349 at paras.42 and 46 per Spigelman CJ (with whom Allsop P and Hodgson JA agreed).
Leave to set aside previous order
Under r.16.05(2)(a) of the FCC Rules the Court may set aside an order after it has been entered if the order is made in the absence of the party.
The criteria to be applied when exercising the Court’s discretion as to whether or not to set aside orders previously made are those set out in Singh v Official Trustee in Bankruptcy & Anor,[15] and followed in Alvaro v Legalwest Pty Ltd,[16] namely:
a)that there is an adequate reason for the non‑appearance;
b)that there is no delay in making the application to set aside;
c)whether the party in whose favour orders have been made would be prejudiced by a new hearing in any respect which could not be adequately compensated by a suitable award of costs or the giving of security; and
d)that there is an arguable case on the merits of the substantive application.[17]
[15] [2008] FMCA 521 (“Singh”).
[16] [2012] FMCA 1088 (“Alvaro (2012)”).
[17] Singh at para.19 per Lucev FM (and cases cited therein at fn.8), followed in Alvaro (2012) at para.9 per Lindsay FM.
Delay
The Court is satisfied that there was no delay by Mr Alvaro. The Application in a Case was made the same day as the orders sought to be set aside.
Adequate reason for non-appearance
The reason given for Mr Alvaro not attending the hearing of the Substantive Application at 9.00am on 29 October 2013 is an unexpected traffic delay in Perth city. There is, however, no evidence as to what time Mr Alvaro left wherever it was that he departed from to come to the Court on 29 October 2013. At hearing Mr Alvaro said in submissions that on 29 October 2013 he came to Perth from Subiaco, but chose a different route from that that he normally took. There is no evidence as to how long that trip would usually take, or how long it took on 29 October 2013, or what route Mr Alvaro chose to come by. The reference to “unexpected traffic through Perth city” is entirely self-serving. There is no evidence as to why any delay might be said to be “unexpected”. As the Court observed to Mr Alvaro in submissions, it is presently notorious that there are significant traffic delays in Perth city. In any event:
a)Mr Alvaro was travelling in peak hour when delays might ordinarily be expected; and
b)the Court is entitled to expect that a person appearing before it will make proper allowance when travelling for a reasonable or possible delay (especially when travelling in peak hour), so as to be at Court before the time appointed for a hearing, and not after. That is especially so in circumstances:
i)as set out above; and
ii)where that person has, as Mr Alvaro has, previously had an application to set aside a bankruptcy notice[18] dismissed for non-appearance (in that case it would appear by his then solicitor),[19] and had on that occasion (just a year ago, in November 2012) to make an ultimately unsuccessful application to set aside the orders then made dismissing the application to set aside the 2012 Bankruptcy Notice for non-appearance.[20]
[18] “the 2012 Bankruptcy Notice”.
[19] Alvaro (2012) at para.7 per Lindsay FM.
[20] Alvaro (2012) at para.25 per Lindsay FM.
For the above reasons the Court does not consider that the reason for Mr Alvaro’s non-attendance on 29 October 2013 was one which was outside of his control as asserted. Moreover, there is no sufficient evidence of an adequate reason for the non-appearance. In all of the circumstances, the Court finds that there was not an adequate reason for Mr Alvaro’s non-appearance at the hearing of the Substantive Application on 29 October 2013.
Prejudice
As to prejudice the Court is of the view that Legalwest will be prejudiced, at least insofar as it was entitled to view the litigation as having ended, and to have been entitled to the fruits of that litigation. That view would, however, have been short-lived by reason of the service of the Application in a Case later on the same day that the Substantive Application Orders were made. The prejudice might, therefore, be perceived to be slight, and not sufficient to weigh against Mr Alvaro in the exercise of the Court’s discretion.
The arguability of the merits of the Substantive Application
The judgment in Alvaro (2012)
In order to deal with Mr Alvaro’s argument that the merits of the Substantive Application are arguable it is necessary to first examine the judgment in Alvaro (2012). It is necessary to do so because:
a)it appears that much of the evidence relied upon or referred to in the First Affidavit is similar to that which was the subject of the judgment in Alvaro (2012); and
b)Legalwest says that the evidence in Alvaro (2012) was the same, or so similar as to effectively be the same, and therefore the matter of the arguability of the merits referred to in the First Affidavit has already been determined in Alvaro (2012), and therefore an estoppel arises.
Alvaro (2012) involved an unsuccessful application in a case by Mr Alvaro to set aside orders dismissing an application to set aside the 2012 Bankruptcy Notice on the basis of Mr Alvaro’s non-appearance. The 2012 Bankruptcy Notice in issue in Alvaro (2012) emanated from proceedings between Mr Alvaro and Legalwest in the District Court of Western Australia, wherein an order had been made with respect to the costs of those proceedings, plus interest, in a total sum of about $20,000.[21]
[21] Alvaro (2012) at paras.1-8 per Lindsay FM.
In Alvaro (2012) the Federal Magistrates Court of Australia[22] observed as follows with respect to the arguability of the merits of the substantive application to set aside the 2012 Bankruptcy Notice in those proceedings:
[22] “FMCA”.
12. Mr Alvaro says that in his long and complicated dealings with the creditor law firm, there have been sundry, wrongful appropriations of funds in his trust account; wrongful in the sense that money has been taken from the ledgers or identified in the ledgers of his trust account and used to pay costs and expenses of other and related parties to the various acts of litigation. The most explicit statement of his claim in that regard, is really to be found in the draft affidavit, annexure A, and it is the contention of paragraph 12 of that draft affidavit that in breach of its duty, the respondent creditor has not accounted correctly to the applicant for all moneys received by the respondent, and then in paragraph 13, there are a series of contentions about failing to account to Mr Alvaro for various payments, and there are significant amounts of money involved in that.
13. That is the most explicit articulation of the matter. It is also to be found in his reliance upon a report of an accountant, a Mr Sines, which is annexure RA 8 to his affidavit filed on 15 June. I do not want to say too much about Mr Sines’ report. It has been constructed on the basis of information provided by Mr Alvaro, and I accept that the information that he has provided included information provided to him by the creditor, in particular, the various statements of trust accounts that would have been rendered to him from time to time, showing the crediting of trust moneys and then the appropriation of trust moneys for various purposes.
14. That is the source of the information for the two tables that are set out in page 2 of that report, which is page 3 of the affidavit. It is not possible for me to discern the weight that might be given to the contentions that are found in Mr Sines’ report. It is not possible for me to have any meaningful understanding of what the reference to negative balances in trust accounts are. That is the first table. It is not possible for me to know what weight might be given, ultimately, to the assertion in the bottom half of that page that a series of amounts totalling just under $35,000 were “incorrectly credited” to the trust accounts.
15. The contention appears to be that moneys which had been credited to Mr Alvaro’s trust account were appropriated in respect of accounts to other debtors of the creditor law firm, and I suppose, implicitly that that was done without the consent of Mr Alvaro; Mr Sines’ report and the material that is to be found in Mr Alvaro’s draft affidavit and Mr Stokes has identified those crossovers. So my first difficulty is that I am really only left with Mr Alvaro’s assertions. I am not able, on the base of the information provided by Mr Alvaro, to assign any weight or posit the possibility of any weight in future being assigned to the Sines’ report.
16. Armed with the Sines’ report back in 2009, Mr Alvaro tells us in his 15 June affidavit and we have subsequently the letter whereby he instructed Mr Stokes, his solicitor, to send an acknowledgement that he will pay and implicitly that he owes the amount that would be constituted by the amount in the Bankruptcy Notice less the sum which he says ought to have been credited pursuant to the orders of 21 May 2010 against that account.
17. But the principal problem is that I am just left with Mr Alvaro’s assertions in the draft affidavit as to these irregularities in the operation of the trust account of the creditor law firm in his various matters. Intensifying my concerns in relation to the adequacy of his case is the circumstance that the proceedings that were settled in May 2010 included a counterclaim and once again, as Mr Stokes has assiduously and properly drawn my attention, when we go to the particularity of that counterclaim, it related to only two matters, two “files” – and if I may use that expression – that were conducted by the creditor on behalf of the debtor. The counterclaim did not purport to deal with the range of other files that are identified either in the Sines’ report or in the subsequent Alvaro affidavit; but if the counterclaim was not that extensive (and I accept it was not) there is no explanation as to why it ought not to have encompassed those matters.
18. If in truth Mr Alvaro thinks there is any substance in the Sines’ report and if in truth he thinks there is any substance in his contentions as to the significant sums of money being misapplied rather than misappropriated, he would have agitated those matters in his counterclaim. There is no rational explanation for him cherry picking, as it were, an odd two of the multiplicity of complaints he now has in relation to the crediting and assignment of trust moneys. As I say, at the end of the day I am left only with Mr Alvaro’s assertions and I take into account too that the Sines’ report which encompasses a good many of these complaints has been available to Mr Alvaro now for a period of approximately three years.
19. If I were not to set aside the default judgment that has been entered, I am not satisfied that Mr Alvaro would be losing the opportunity to agitate an action in respect of which he had any reasonable prospect of success. I am not finding the application would be bound to fail, but I have a very high degree of reservation as to whether it would have any reasonable prospect of success, and I say that having regard to the purpose of the application, which is of course that which is set out in s.41(7) of the Bankruptcy Act:
Where, before the expiration of the time fixed for compliance with the requirements of 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.[23]
[23] Alvaro (2012) at paras.12-19 per Lindsay FM.
In these proceedings, the Substantive Application arises from the 2013 Bankruptcy Notice which concerns the non-payment by Mr Alvaro of the taxed costs of the proceedings in Alvaro (2012), in which a costs order was made by the FMCA on 2 October 2012 providing for Mr Alvaro to pay Legalwest’s costs of the application to be taxed if not agreed between the parties. On taxation, a Registrar allowed costs in the sum of $8,760.25. The Certificate of Taxation dated 19 July 2013 is attached to the Substantive Application.
The First Affidavit
The First Affidavit was filed in support of the merits of the Substantive Application. What appears to be asserted by Mr Alvaro in the First Affidavit is that:
a)Legalwest has failed to account for trust monies received by it, and held on trust for Mr Alvaro;[24]
b)independent accountants have reviewed relevant documents, including accounts, invoices payments and “movement of my trust accounts” with Legalwest, and a report prepared arising from the review states that Mr Alvaro is owed $38,717.52 from the Legalwest trust account;[25]
c)on 24 June 2013 Mr Alvaro commenced proceedings in the Magistrates Court of Western Australia at Fremantle against Legalwest for the recovery of all funds, monies, costs and interest owed to him, claiming $75,378.90;[26] and
d)the Bankruptcy Notice is an abuse of process designed to pressure Mr Alvaro rather than invoke the Court’s jurisdiction with respect to insolvency, and is a collateral attack upon Mr Alvaro.[27]
[24] First Affidavit, paras.7-9.
[25] First Affidavit, para.10 and annexure RDA1 (“Accountant’s Trust Report”).
[26] First Affidavit, paras.11 and 13 and annexure RDA2 (“WA Magistrates Court Claim”).
[27] First Affidavit, paras.16-20.
The Accountant’s Trust Report is dated 14 November 2012, and comprises a letter signed by Mr Sines, the accountant, summarising the conclusions reached, and attaches a summary of trust accounts seemingly held for Mr Alvaro by Legalwest. The opening paragraph of the letter is as follows:
Further to your request for clarification on my report dated the 1st July 2009, I confirm that the review was conducted on the basis of the information provided by yourself (Rocco Alvaro). Procedures to review and compare payments by Rocco Alvaro, Alvaro Design Consultants, to Lawton Gillon Barristers and Solicitors through the trust account statements and business bank statements from the 1st July 2003 to the 14th February 2008 were completed. Then the details of the settlement amounts were traced to debits in the trust accounts and subsequent payments of invoices or payments to Rocco Alvaro.[28]
[28] Accountant’s Trust Report.
There then follows a table setting out the balances remaining in each of the trust accounts, and giving an overall balance of $3,919.32 said to be owing to Mr Alvaro by Legalwest. In addition, the Accountant’s Trust Report says that certain amounts were incorrectly credited to certain trust accounts and these amounts should be reimbursed to Mr Alvaro by Legalwest. There follows a list in respect of which it is asserted that there is a balance owing to Mr Alvaro of $34,798.20. Mr Alvaro was, therefore, said to be owed $38,717.52 by Legalwest.
The Accountant’s Trust Report then provides as follows:
The report was prepared solely on the request of Rocco Alvaro, Alvaro Design Consultants and is not referred to or for general distribution. The procedures carried out did not constitute an audit and therefore we do not express an opinion about the accuracy or completeness of the trust books, records or financial information provided, or about whether or not there were any irregularities during the period which were not disclosed to us.[29]
[29] Accountant’s Trust Report.
The summary of the 16 separate trust accounts which are attached contains one line entry details of the income and expenses of each of the trust accounts and the balances of those accounts. The earliest income and expenses accounted for date from July 2003, and the latest from March 2008. Each page of the summary of the trust accounts contains the following notation:
This special purpose report may not be accurate. This information is compiled on the basis of the invoices and trust accounts provided by Lawton Gillon Barristers and Solicitors. Our procedures do not include the verification or validation of this information.[30]
The statement that the information is compiled on the basis of the invoices and trust accounts provided by Lawton Gillon Barristers and Solicitors, has to be read in light of the earlier statement that the information provided to the accountant was provided solely by Mr Alvaro. Thus, whilst the information provided is from Lawton Gillon, it is only such information from Lawton Gillon as was provided to the accountant by Mr Alvaro. There is no indication as to the completeness of the provision of that information by Mr Alvaro to the accountant.
[30] Accountant’s Trust Report.
WA Magistrates Court Claim
The WA Magistrates Court Claim is for the amount of $75,378.90, being a claim amount of $75,000, with court filing, service and travelling fees comprising the remainder.
The description of the WA Magistrates Court Claim is as follows:
1.Professional negligence.
2.Deceptive and misleading conduct.
3.Professional misconduct/unsatisfactory professional conduct.
4.Rendering of accounts of an amount which the Defendant was not entitled to seek.
5.Misappropriation of Trust Funds.
6.Failing to account of monies received.
7.Abuse of due process.
8.Monies had and received
9.Breach of Contract.[31]
[31] WA Magistrates Court Claim, under heading “Description of Claim”.
The claim is not particularised in any way. Further, there is no affidavit in support of the claim.
Alleged admission of credit
The First Affidavit also annexes email exchanges between solicitors for Mr Alvaro and Legalwest (trading as Lawton Gillon, a law firm), which precede the judgment in Alvaro (2012), and which Mr Alvaro alleges establish an admission by Legalwest that it holds in credit for Mr Alvaro in trust a sum of at least $4,796.84.[32]
Consideration – arguability of the merits of the Substantive Application
[32] First Affidavit at para.13, and annexures RDA3, RDA4, RDA5, RDA6 and RDA7.
Judicial comity
It is important that there be comity between judgments of this Court (and its predecessor the FMCA) in similar cases, and particularly in cases where the same or similar matters involving the same parties have already been considered. If the facts or issues are the same, and have already been determined, this Court ought not re-adjudicate the matter, unless there is additional material or unless it is of the view that the earlier judgment is clearly wrong.[33]
[33] See v Granich & Associates [2008] FMCA 27 at paras.17-18 per Lucev FM; Yap v Granich & Associates [2002] FMCA 284 at para.29 per McInnis FM; Devonshire v Magellan Powertronics Pty Ltd & Ors (2013) 275 FLR 273 at 283 and 292 per Lucev FM; [2013] FMCA 207 at paras.26(c) and 60 per Lucev FM.
Initially, it might appear that the material in this matter is different from that in Alvaro (2012) as the Accountant’s Trust Report is dated 14 November 2012, that being five days after the delivery of judgment in Alvaro (2012). It is, however, evident from Alvaro (2012) that it was there asserted that Legalwest had failed to account for trust monies received by it, and held on trust for Mr Alvaro.[34] The same allegation is made in this matter.[35] In both Alvaro (2012) and this matter reference is made to a report prepared by Mr Sines.[36] That report is, in the Court’s view, the same report in both matters, having regard to the following:
a)it was dated 1 July 2009 according to the evidence in this case;[37]
b)when Alvaro (2012) was decided in November 2012 it was a report which had been available to Mr Alvaro “for a period of approximately three years”,[38] that is since sometime in 2009; and
c)it is evident from what follows that the content of the Accountant’s Trust Report and the report referred to in Alvaro (2012) is either the same, or essentially the same.
[34] Alvaro (2012) at paras.12-15 per Lindsay FM (as set out at para.21 above).
[35] First Affidavit, paras.7-10 and the Accountant’s Trust Report.
[36] Alvaro (2012) at para.14 per Lindsay FM; Accountant’s Trust Report.
[37] Accountant’s Trust Report.
[38] Alvaro (2012) at para.18 per Lindsay FM.
In Alvaro (2012) there was as part of the report a first table making reference to negative balances in trust accounts held on behalf of Mr Alvaro by Legalwest.[39] In this matter, the first table which appears in the Accountant’s Trust Report is a table referring to negative balances in trust accounts (as well as positive balances).[40] In Alvaro (2012) reference is made to the assertion that a series of amounts totalling just under $35,000 were “incorrectly credited” to Mr Alvaro’s trust accounts.[41] In this matter, precisely the same assertion is made in the Accountant’s Trust Report, using the same words used by the Court in Alvaro (2012), in respect of an amount of $34,798.20, that is, just under $35,000.[42]
[39] Alvaro (2012) at paras.14-15 per Lindsay FM.
[40] Accountant’s Trust Report.
[41] Alvaro (2012) at para.14 per Lindsay FM.
[42] Accountant’s Trust Report.
In Alvaro (2012) it was also asserted that a letter from Mr Alvaro’s solicitor recognised an acknowledgment that Mr Alvaro would pay the amount in the 2012 Bankruptcy Notice, less the sum which he asserted ought to have been credited pursuant to orders of the District Court of Western Australia of 21 May 2010 against the judgment debt sum referred to in the 2012 Bankruptcy Notice.[43] In this case, not only Mr Alvaro’s solicitors’ letter, but also a letter from Legalwest, trading as the creditor law firm, were relied upon and said to be an admission that the sum of $4,796.84, at least, was held in credit for Mr Alvaro in Legalwest’s trust account.[44]
[43] Alvaro (2012) at para.16 per Lindsay FM.
[44] First Affidavit, para.13 and annexures RDA3, RDA4, RDA5, RDA6 and RDA 7.
In Alvaro (2012) reliance was also placed on the fact that a settlement was reached in proceedings in the District Court of Western Australia, but in that case the counterclaim referred to only two matters or files, and not the range of other files or matters subsequently identified, and it was held that if it was considered that there was any substance in the contentions with respect to those other trust accounts being misapplied, then they would have been agitated in the counterclaim in the District Court of Western Australia proceedings which gave rise to the 2012 Bankruptcy Notice in Alvaro (2012).[45] In this case, Legalwest, in oral submissions from Counsel at hearing, asserts that those same matters are raised here by the Accountant’s Trust Report, that the facts are no different to those asserted in Alvaro (2012), and that the same result ought to follow.
[45] Alvaro (2012) at paras.17-18 per Lindsay FM.
It is evident that although initially there might appear to be some difference in the facts in relation to this matter, upon a more detailed examination, it is evident that this matter, like Alvaro (2012), relies upon the reports provided by Mr Alvaro’s accountants, which although appearing to be in different formats in Alvaro (2012) and in this matter, ultimately rely upon or disclose factual information which is the same in each matter, subject to one or two exceptions, consisting of some additional information, referred to below.
The only material factual differences which are readily apparent on an examination of the judgment in Alvaro (2012) and the material in this case are that:
a)the Accountant’s Trust Report, prepared by Mr Sines, in this matter is dated 14 November 2012, whereas the report of Mr Sines upon which Alvaro (2012) was based must have been an earlier report, but for reasons set out herein the differences are immaterial. In any event, in both cases, the reports appear to have been based on an earlier report dated 1 July 2009 and contain essentially the same material; and
b)in Alvaro (2012) the sum which Mr Alvaro asserted ought to have been credited pursuant to the orders of the District Court of Western Australia of 21 May 2010 against the 2012 Bankruptcy Notice in that case, was not expressly set out by reference to Mr Alvaro’s solicitors’ letter. In this case, the amount was set out in correspondence between the parties, but the alleged admission is not admissible because it is apparent from the correspondence that the communications concerned were communications prepared in connection with an attempt to negotiate a settlement of a dispute, and therefore, inadmissible under s.131(1)(b) of the Evidence Act 1995. Section 131(1) of the Evidence Act 1995 gives effect to a policy of ensuring that negotiations, in any form, are not adduced into evidence for the purpose of influencing the outcome on the primary matters in issue, subject to the exceptions, none of which apply in this case.[46] Because the alleged admission is not admissible the facts are, in reality, no different in this case to what they were in Alvaro (2012).
[46] Silver Fox Co Pty Ltd (as Trustee for The Baker Family Trust) & Ors v Lenard’s Pty Ltd & Ors (No. 3) (2004) 214 ALR 621 at 623-624 per Mansfield J; [2004] FCA 1570 at para.36 per Mansfield J.
In Alvaro (2012) on the basis of the very similar facts there set out, and upon what is essentially the same information, the FMCA found that Mr Alvaro could not succeed in setting aside orders which had dismissed his application to set aside the 2012 Bankruptcy Notice, the FMCA concluding with respect to the merits of the application to set aside the 2012 Bankruptcy Notice that it had “a very high degree of reservation as to whether it would have any reasonable prospect of success”.[47] In arriving at that conclusion the FMCA had regard to the relevant provisions of the Bankruptcy Act 1966 (Cth), being ss.41(7) and 40(1)(g).[48] In all the circumstances, the Court is not persuaded that the judgment in Alvaro (2012) was plainly wrong, or wrong at all, and in the circumstances considers that it ought to be followed in this matter.
[47] Alvaro (2012) at para.19 per Lindsay FM.
[48] Alvaro (2012) at para.19 per Lindsay FM.
In the above circumstances, there is no sufficient basis to warrant this Court determining the matter any differently to Alvaro (2012), either as to the ultimate conclusion as to whether or not, on the facts, there was a reasonable prospect of success, or insofar as it relates to the weight to be given to the evidence in support of the Substantive Application.
Reliability of the evidence
In both Alvaro (2012) and in this case the alleged misapplication of funds in relation to the various trust accounts relies upon evidence which is inherently unreliable because that evidence:
a)is based upon evidence, not expressly identified or particularised, provided to the accountants by Mr Alvaro;
b)relates to events between 1 July 2003 and 27 March 2008, and is therefore aged, without any indication as to whether there have been further transactions in relation to the trust accounts since that time;
c)is subject to an express caveat by the accountants that no opinion about the accuracy or completeness of the relevant information upon which it is based, or any irregularities during the period to which the information relates, is expressed;
d)did not involve verification or validation of the information provided by Mr Alvaro, which appears to have been compiled from invoices and trust accounts provided by Legalwest trading as the creditor law firm; and
e)gives no proper indication that all of the original underlying source documentation has been examined by the accountants.
In the above circumstances, the Court would, even without the judgment in Alvaro (2012), have come to the view that the evidence was simply too uncertain and vague to justify a conclusion as to whether or not Mr Alvaro was or was not owed money from the relevant trust accounts. On that basis alone, it is not possible for the Court to conclude that there is an arguable case on merit, given that the alleged merit argument has its foundation, seemingly, in an assertion that there is an amount of $38,717.52 owed to Mr Alvaro by Legalwest from the various trust accounts.
WA Magistrates Court Claim
In the case of the WA Magistrates Court Claim the lack of arguable merit in relation to the amounts claimed to be owed to Mr Alvaro by Legalwest is compounded by the absence of particulars or affidavit evidence in support of that claim. The absence of particulars or evidence makes it impossible to ascertain the basis upon which an alleged amount of $38,717.52 said to be owing by Legalwest to Mr Alvaro in relation to the trust funds becomes a claim for $75,000 in the WA Magistrates Court Claim. Another reason why the WA Magistrates Court Claim lacks merit is that it was lodged on 10 June 2013. Insofar as the claim relies upon actions in tort, trust and contract, and for an account, large parts of it appear to be outside of the relevant six year limitation period under s.13 of the Limitation Act 2005 (WA).[49] Such a limitation period may be extended by a period of a further three years where a court is satisfied that the failure to commence the action was attributable to a fraudulent or other improper conduct of a defendant.[50] That is unlikely to aid Mr Alvaro given that it would appear that he was in possession of a report dated 1 July 2009, which forms the basis for the assertions now made, and which, if acted upon expeditiously, would have enabled a claim to be made within the limitation period for all of the transactions summarised in the Accountant’s Trust Report. To the extent that it might be applicable, the same result would flow from the application of the Limitation Act 1935 (WA), which was the predecessor to the Limitation Act.
[49] “Limitation Act”.
[50] Limitation Act, s.38(2).
For the above reasons there is nothing in the content of the WA Magistrates Court Claim which would indicate that it gives rise to an arguable counterclaim, set-off or cross-demand for the purposes of ss.40(1)(g) and 41(7) of the Bankruptcy Act.
Monies held in trust
For similar reasons as those set out above, it is not possible to conclude, as the applicant asserts in ground (b) the Substantive Application, that Legalwest holds in trust for Mr Alvaro an amount equal to or exceeding the amount claimed in the 2013 Bankruptcy Notice.
Authority
There is no evidence, either in the First Affidavit or the Second Affidavit, or otherwise, that Legalwest was given authority by Mr Alvaro to draw on the trust accounts in order to pay any amount owed to Legalwest by Mr Alvaro as asserted in ground (c) of the Substantive Application.
Abuse of process etc
In relation to the assertions in grounds (d), (e) and (f) of the Substantive Application that the 2013 Bankruptcy Notice is an abuse of process because of the failure to notify, or make demand, or attempt to collect the amount the subject of the 2013 Bankruptcy Notice, and that the 2013 Bankruptcy Notice is therefore a collateral attack upon Mr Alvaro, those assertions have no merit. The amount the subject of the 2013 Bankruptcy Notice is the subject of an order of the FMCA in Alvaro (2012) that Mr Alvaro pay the taxed costs of Legalwest. Mr Alvaro is obliged to pay those costs by reason of the FMCA order, and no preliminary demand from Legalwest is required. There is an absolute obligation on Mr Alvaro to pay in accordance with the FMCA’s order, which the Court notes has not been the subject of any appeal.
Legislative purpose
The Court also observes that it must be remembered that the issuance of a bankruptcy notice, followed by a failure to comply with the bankruptcy notice, brings about an act of bankruptcy upon which all creditors can found a creditors petition seeking a sequestration order.[51] The legislative purpose is to “identify markers or criteria that point towards insolvency”.[52] The legislative purpose exists for a public benefit to which the Court must have regard when exercising a discretion of this kind.[53] Part of that public interest, as well as being a matter in the interests of creditors generally, is to ensure the appropriate determination of the relation-back date.[54] As has been previously observed there are potential adverse consequences if an act of bankruptcy is delayed, and it is in the interests of creditors generally, where a sequestration order ultimately follows, that the act of bankruptcy be earlier not later, and in the exercise of a specific discretion such as that presently under consideration that is a further factor which goes to whether or not to grant an application to set aside orders, where the effect of doing so might be to delay the time at which the act of bankruptcy occurs.[55] Further, if Mr Alvaro is able to marshal admissible evidence which supports the assertions he makes, and which were previously made in Alvaro (2012), then no doubt he will be able to avoid the issue of a sequestration order, if one is sought on the basis of the 2013 Bankruptcy Notice, because he ought to be able to satisfy the Court that he is able to pay his debts, or that there is sufficient cause for a sequestration order not to be made (namely, sufficient monies in trust accounts, which if authorised to be disbursed, would cover the amount of the debt).[56] That Mr Alvaro has not, alternatively, not properly, marshalled such evidence to date does not necessarily preclude him from doing so in the future, if that evidence exists.
[51] Re Athans; Ex parte Athans (1991) 29 FCR 302 at 311 per Hill J (“Athans”); La Pegna & Anor v Commissioner of Taxation (2006) 204 FLR 364 at 369-370 per Lucev FM; [2006] FMCA 1643 at para.27 per Lucev FM (“La Pegna”).
[52] Australian Securities and Investments Commission v Forge (2003) 133 FCR 487 at 493 per Emmett J; [2003] FCAFC 274 at para.30 per Emmett J (“Forge”); La Pegna FLR at 369-370 per Lucev FM; FMCA at para.27 per Lucev FM.
[53] Forge FCR at 490-491 per Branson and Stone JJ; 492-493 per Emmett J; FCAFC at para.15 per Branson and Stone JJ and paras.27, 29 and 30 per Emmett J; La Pegna FLR at 369-370 per Lucev FM; FMCA at para.27 per Lucev FM.
[54] Forge FCR at 489 per Branson and Stone JJ; FCAFC at para.9 per Branson and Stone JJ; La Pegna FLR at 369-370 per Lucev FM; FMCA at para.27 per Lucev FM.
[55] McPhee v Glentham Pty Ltd [2006] FMCA 1508 at para.40 per Lucev FM, citing Warner v Frost [1999] FCA 830 and Elliott v Water Wheel Holdings Ltd (2004) 178 FLR 459; [2004] FMCA 37.
[56] Bankruptcy Act, s.52(2).
Conclusion – arguability of the merits of the Substantive Application
For all of the above reasons, the Court has concluded that Mr Alvaro has no arguable case on the merits of the Substantive Application.
Conclusions and orders
The Court has concluded that in relation to the criteria to be applied when exercising the Court’s discretion as to whether or not to set aside orders previously made, that Mr Alvaro has not, in relation to the Substantive Application Orders, established:
a)an adequate reason for the non-appearance at the hearing on 29 October 2013; and
b)that there is an arguable case on the merits of the Substantive Application.
It follows from the above conclusions that Mr Alvaro’s Application in a Case must be dismissed. There will be an order accordingly.
The Court will hear the parties as to costs.
I certify that the preceding fifty-two (52) paragraphs are a true copy of the reasons for judgment of Judge Antoni Lucev
Associate:
Date: 15 November 2013
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