Alvaro v Legalwest Pty Ltd
[2012] FMCA 1088
•9 November 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| ALVARO v LEGALWEST PTY LTD | [2012] FMCA 1088 |
| PRACTICE & PROCEDURE – Application to set aside order made in default of appearance of applicant – legal principles. |
| Bankruptcy Act 1966 (Cth), s.41(7) |
| Singh v Official Trustee in Bankruptcy & Anor [2008] FMCA 521 |
| Applicant: | ROCCO DOMENIC ALVARO |
| Respondent: | LEGALWEST PTY LTD |
| File Number: | PEG 129 of 2012 |
| Judgment of: | Lindsay FM |
| Hearing dates: | 6 & 9 November 2012 |
| Date of Last Submission: | 9 November 2012 |
| Delivered at: | Perth |
| Delivered on: | 9 November 2012 |
REPRESENTATION
| Counsel for the Applicant: | Mr B. Stokes |
| Solicitors for the Applicant: | Chris Stokes & Associates |
| Counsel for the Respondent: | Mr R. Gillon |
| Solicitors for the Respondent: | Lawton Gillon |
ORDERS
That the application filed by Mr Alvaro 3 October 2012 is dismissed.
That the applicant pay the respondent’s costs of and incidental to these proceedings fixed in the sum of $2,500.
That paragraph 1 of the orders of Lucev FM of 18 June 2012 be discharged.
That the time for compliance with the Bankruptcy Notice be extended to close of business on Friday, 23 November 2012.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 129 of 2012
| ROCCO DOMENIC ALVARO |
Applicant
And
| LEGALWEST PTY LTD |
Respondent
REASONS FOR JUDGMENT
This is an application by Mr Alvaro, the applicant in proceedings in this Court instituted on 15 June 2012 to extend the time for compliance with a Bankruptcy Notice. The notice is annexed as the first annexure to Mr Alvaro’s affidavit of 15 June 2012. It is a relatively modest amount of money that is sought. It is an amount of just over $18,000 with about $2,000 of interest.
The provenance of the debt is a costs order that was made in District Court proceedings (wrongfully referred to me earlier in argument with counsel as Supreme Court proceedings) which resolved in May of 2010. Those proceedings related to a claim by the creditor for fees owing by Mr Alvaro to it, totalling around about $75,000.
Those proceedings were resolved, essentially, by the parties agreeing to a taxation of those various costs. The costs of the proceedings to recover the fees, were, however, the subject of an order. They were to be agreed or taxed. They have been taxed. The amount referred to in the Bankruptcy Notice represents the outcome of the taxation process.
There is a specific provision of the consent orders made in the District Court in May 2010 that is a little ambiguous. It provides the creditor law firm with an opportunity to credit a specific amount of money, something just less than $5,000, against their costs. Quaere whether “costs” means costs of the action settled by the consent order or the costs as in a synonym for fees, as it were, in respect of the claim, the matters that have been sent to the taxation.
The affidavit filed by Mr Alvaro when he filed the proceedings in this Court focuses upon what he says is the wrongful crediting of that amount against one or other of the accounts which went to make up the claim for $75,000. He says the amount ought to have been credited against the outcome of the taxation process. Looked at on its own, that argument is an arguable one, just because of the latent ambiguity of the order itself. But, of course, that deals with only a minor proportion of the amount claimed.
The affidavit he filed at the time of the filing of the application to set aside this Bankruptcy Notice really focused upon that. It said that if that amount were credited to the taxed costs, he would pay the balance and that is also evidenced in some correspondence that his solicitor, Mr Stokes, sent to the creditor, which we have seen.
The proceedings were adjourned because of late filing of affidavit material. They came before Lucev FM on 18 June 2012. They were adjourned for hearing on 28 August 2012 but by consent that final hearing was adjourned until 2 October 2012 and orders were made in respect of filing additional affidavit material. On 2 October 2012 there was no appearance by or on behalf of Mr Alvaro, despite him having been called by my Associate in the precincts of the Court, and the application to set aside the Bankruptcy Notice was, itself, dismissed.
Very quickly, either the same day or the following day, Mr Alvaro, having informed himself by inquiry at the Court as to what happened, sought an opportunity to set the default judgment aside.
The matters that I will take into account in determining whether to set aside my judgment are those matters identified by Lucev FM in Singh v Official Trustee in Bankruptcy & Anor [2008] FMCA 521 at [19]:
The basis on which this Court might set aside orders previously made are:
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
I am proceeding on the basis there is no difficulty with b) and c) – there is certainly no delay at all in the making of the application to set aside. With respect to the reference to prejudice on the part of the other party, it will rarely be a matter that is determinative; I have to assume the prejudice is other than the prejudice that is associated with having to incur the cost of and the time of and the trouble of contesting an application which had been finalised. So there is a circularity to the consideration of that factor which is only avoided by my making the assumption that, as I do, the prejudice must be something other than that, and must be a prejudice that could not be compensated by an order for costs. I do not identify in the facts of this case any matter that would cause Mr Alvaro any difficulty here. The questions are whether there is an adequate reason for the non-appearance and whether there is an arguable case on the merits.
I deal with the latter matter first. I do not think there is an arguable case on the merits, and I say that notwithstanding that Mr Stokes, who has appeared on behalf of Mr Alvaro today, has said everything that could possibly be said on behalf of Mr Alvaro in the predicament he is in, in identifying what the matters are that Mr Alvaro relies upon in promoting his application to set aside the Bankruptcy Notice. I take into account the contents of the affidavit he filed in support of the application back on 15 June 2012 and I also take into account the affidavit that would be filed if I granted leave. It is an affidavit which appears as an annexure to Mr Alvaro’s affidavit of 3 October 2012.
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.
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.
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.
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.
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.
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.
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.
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.
In addition to that, I have difficulty with the remaining criteria in respect of an application of this nature. I am not satisfied there is an adequate reason for his non appearance. Mr Alvaro in his affidavit of 3 October deposed to a number of beliefs that he had in the period leading up to and on the day of 2 October. The solicitor that he was “dealing with” (I do not think I am entitled on the account Mr Alvaro has given or Mr Chris Stokes has given to me to say that Mr Chris Stokes had been “retained”), a Mr Stokes had a number of interactions with Mr Alvaro in the period leading up to 2 October.
Mr Alvaro says at [6] of that affidavit that he believed that a revised version of his affidavit, that is the affidavit that was due to be filed for the purposes of the hearing on 2 October, would be forwarded to him by Mr Stokes prior to him being required to file and serve it. Then in [8] he deposes to his belief that he did not need to attend Court because he had a belief that Mr Stokes would attend and he also had a belief that the hearing would not go ahead until his affidavit was filed and served.
I have read Mr Chris Stokes’ affidavit. I accept unreservedly what he tells me as to the events about which he makes his deposition, but ultimately I do not think it assists Mr Alvaro. Mr Stokes gives a history throughout August and September and into October of this year of his dealings with Mr Alvaro, which were complicated by his continuing requests for adequate financial arrangements to be made and Mr Alvaro’s unwillingness or inability to make those financial arrangements and that culminates in Mr Stokes telling me in [13] of his affidavit, that he would not be in a position to carry out that task, that is the task of the reply to notice of opposition and the proposed further affidavit, until the financial arrangements were put in place, but he agreed to meet with Mr Alvaro on 3 September and he did meet with him and the affidavit was reviewed. Mr Chris Stokes, with what seems to me to be an unnecessary degree of self criticism, purports to accept responsibility for Mr Alvaro not having understood that the affidavit would not be prepared and he would not appear on 2 October unless those financial arrangements he asked to be made and still which have not been made by Mr Alvaro were met.
I do not think there is a reasonable basis for the assumption being made by Mr Alvaro that he would not have been required to meet that financial arrangement prerequisite. There is no suggestion Mr Stokes withdrew the request or indicated that whereas he previously needed financial arrangements made, he no longer needed them made, but perhaps more significantly there is nothing that Mr Stokes tells us in his affidavit that assists Mr Alvaro in substantiating other beliefs he had. There is nothing in his interaction with Mr Stokes that Mr Stokes tells us about that would suggest that there is any rational foundation for Mr Alvaro’s belief that the hearing of 2 October would not go ahead until his affidavit in reply was filed and served. Mr Stokes did not say that to him. He would not have said it to him. Mr Alvaro had no basis for that belief.
I think the more likely state of affairs, the inference I am prepared to draw, is that Mr Alvaro well knew because of his inability or unwillingness to make the necessary financial arrangements with Mr Chris Stokes that the hearing would proceed and that Mr Stokes would not be present. I am not at all satisfied that an adequate reason for the non appearance of Mr Alvaro at the hearing of 2 October has been established.
In those circumstances the application to set aside my orders of 2 October 2012 is refused.
I think it is appropriate that there be an order for costs. There will be an order that the applicant pay the respondent’s costs of and incidental to these proceedings.
I certify that the preceding twenty-six (26) paragraphs are a true copy of the reasons for judgment of Lindsay FM.
Date: 21 November 2012
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