Bezina v Stojic
[2018] FCCA 1310
•25 May 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BEZINA v STOJIC | [2018] FCCA 1310 |
| Catchwords: BANKRUPTCY – Application to set aside two bankruptcy notices – whether each of the bankruptcy notices issued electronically had judgment attached to them – whether judgment on the basis of which one of the bankruptcy notices was issued was a nullity – whether any abuse of process in applying for and serving the bankruptcy notices – application dismissed. |
| Legislation: Bankruptcy Act 1966 (Cth), s.40(1)(g) Bankruptcy Regulations 1996 (Cth), regs. 4.01, 4.02 |
| Cases cited: Curtis v Singtel Optus Pty Ltd [2014] FCAFC 144 Kassem & Secatore v Koutavas [2012] NSWSC 236 |
| Applicant: | JOSIP BEZINA |
| Respondent: | SIMON STOJIC |
| File Number: | SYG 2268 of 2017 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | 7 May 2018 |
| Date of Last Submission: | 7 May 2018 |
| Delivered at: | Sydney |
| Delivered on: | 25 May 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr J Johnson |
| Solicitors for the Applicant: | Lexes Lawyers |
| Counsel for the Respondent: | Mr S Golledge |
| Solicitors for the Respondent: | Boyd House & Partners |
ORDERS
The application is dismissed.
Subject to order 3 the applicant pay the respondent’s costs as agreed or taxed.
The parties have liberty to apply within 14 days of the pronouncement of these orders to vary or discharge order 2.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 2268 of 2017
| JOSIP BEZINA |
Applicant
And
| SIMON STOJIC |
Respondent
REASONS FOR JUDGMENT
Introduction
Before the Court is an application for declarations in relation to two bankruptcy notices and an order that the bankruptcy notices be set aside.
The applicant, Mr Bezina, claims that both bankruptcy notices are invalid because the judgments on the basis of which they were purportedly issued were not attached to the bankruptcy notices as required by reg.4.01 and reg.4.02 of the Bankruptcy Regulations 1996 (Cth) (Regulations). Mr Bezina also claims that one of the bankruptcy notices is invalid for the additional reason that it has been issued on the basis of an irregular judgment. Finally, Mr Bezina claims the respondent, Mr Stojic, applied for the issue of the bankruptcy notices for the purpose of placing illegitimate pressure on him and, therefore, the issue of the bankruptcy notices constitutes an abuse of process.
Before I consider the grounds on which Mr Bezina claims the bankruptcy notices are invalid and an abuse of process, it will be necessary to set out the nature of the judgments on the basis of which, and the circumstances in which, the bankruptcy notices were issued.
The judgments
The bankruptcy notices were issued in relation to two judgments Mr Stojic obtained from the Supreme Court of New South Wales on 8 March 2016 against Mr Bezina, one for $167,737.65, and the other for $6,339.91.
The judgment for $167,737.65 reflects the amount stated in a certificate (first certificate) that was issued by a costs assessor pursuant to s.368(1) of the Legal Profession Act 2004 (NSW) (LP Act).[1] The first certificate constitutes the determination by the costs assessor of the fair and reasonable costs that were the subject of an application for the assessment of costs made by Mr Stojic under s.353(1) of the LP Act. That subsection provided as follows:
A person who has paid or is liable to pay, or who is entitled to receive or who has received, costs as a result of an order for the payment of an unspecified amount of costs made by a court or a tribunal may apply to the Manager, Costs Assessment for an assessment of the whole of, or any part of, those costs.
[1] Now repealed
There is no dispute that the costs specified in the first certificate remain unpaid; that it was open to Mr Stojic to file with the Supreme Court of New South Wales the first certificate; and that, by operation of s.368(5) of the LP Act, on Mr Stojic’s filing the first certificate the amount of the unpaid costs is taken to be a judgment of the Supreme Court of New South Wales. There is also no dispute that the judgment that was entered by operation s.368(5) of the LP Act on the filing of the first certificate with the Supreme Court of New South Wales is a “final judgment or final order” within the meaning of s.40(1)(g) of the Bankruptcy Act 1966 (Cth).
The judgment for $6,339.91 requires different attention. It represents the amount stated in a certificate (second certificate) that was issued pursuant to s.369 of the LP Act. Section 369 applies, among other things, to a costs assessment to which s.364 of the LP Act applies, namely, an assessment of legal costs payable as a result of an order made by a court or tribunal. Under s.369(2) of the LP Act the costs assessor is “to determine the costs of a costs assessment” to which s.369 applied. Section 369 further provided as follows:
(5)On making a determination, a costs assessor may issue and forward to each party and the Manager, Costs Assessment a certificate that sets out the costs of the costs assessment.
. . . . .
(7)The certificate is, on the filing of the certificate in the office or registry of a court having jurisdiction to order the payment of that amount of money, and with no further action, taken to be a judgment of that court for the amount of unpaid costs.
(8)The costs of the costs assessor are to be paid to the Manager, Costs Assessment.
The amount of $6,339.91 stated in the second certificate, therefore, constitutes the costs of the determination of the costs stated in the first certificate.
It is not in dispute that Mr Stojic filed with the Registry of the Supreme Court of New South Wales the second certificate, and that, as consequence of that filing, judgment for $6,339.91 was entered in favour of Mr Stojic. What is in dispute, however, is whether the judgment should have been entered in favour of Mr Stojic and, if not, whether, as Mr Bezina claims, that rendered the judgment irregular and a nullity.
Issue of the bankruptcy notices
Mr Stojic, through his former lawyers, applied for the issue of the bankruptcy notices by means of a website maintained by the Australian Financial Security Authority (AFSA), “being the government agency for the administration of the personal insolvency system”.[2] On 26 June 2017 AFSA sent two emails in identical terms to Mr Stojic’s former lawyers. Each email contained words and numbers next to the word “Attachments” that appear on the header of the emails. A hard copy of each of the emails and the attachments to the emails have been admitted into evidence; and it will be sufficient if I only describe the information contained in and the documents attached to the email sent in relation to the judgment for $167,737.65.[3]
[2] Curtis v Singtel Optus Pty Ltd [2014] FCAFC 144, at [15]
[3] Exhibit A
I begin with the words and numbers next to the word “Attachments” that appears in the header of the email:
Attachments: C214866_CORR-BN001R-01_6_1.pdf; BankruptcyNotice.pdf; Sealed Judgment - $167737.65.pdf
In the copy of the email and the attachments that are in evidence, there are three documents attached to the email. One is a letter from AFSA to Mr Stojic’s former lawyers which relevantly stated as follows:
Your application for the issue of a bankruptcy notice in respect of the debtor/s specified above has been accepted.
The bankruptcy notice 214866 was issued on 26 June 2017.
Please find enclosed the bankruptcy notice that you need to serve on the debtor/s, in addition to any judgments, orders and other documents supporting its issue.
The other two documents that are attached to the email are the bankruptcy notice and the first certificate.
Grounds based on non-compliance with formal requirements
Mr Bezina submits that the bankruptcy notices that were issued in the manner I have described are invalid because they were not issued in the manner required by reg.4.02 of the Regulations. That regulation prescribes Form 1 as the form of bankruptcy notice the Official Receiver must issue on the application of a creditor; and it has been held that when issuing a bankruptcy notice there must be “attached” to the bankruptcy notice, at the time of issue, the judgment or order on which its issue is based.[4] Mr Bezina submits that although AFSA transmitted to Mr Stojic’s former lawyers by separate emails each of the bankruptcy notices and the judgments on which they were based, the judgments were not attached to the bankruptcy notices that were transmitted to Mr Stojic’s lawyers.
[4] Curtis v Singtel Optus Pty Ltd [2014] FCAFC 144, at [34], [35], [42]
The question raised by counsel for Mr Bezina is the same as that which was considered by the Full Federal Court in Curtis v Singtel Optus Pty Ltd[5], namely, “whether the pdf copy of the judgment could be treated as “attached” to the pdf of the bankruptcy notice, both being attached (together with the letter) to the email” sent to the creditor who applied for the issue of the bankruptcy notice.[6] The Full Federal Court answered that question in the affirmative:[7]
The question is whether the pdf of the copy judgment could be treated as “attached” to the pdf of the bankruptcy notice, both being attached (together with the letter) to the email. Now clearly they were both attached to the email. The question is whether they were attached to each other. In our view, they were so attached. They were attached to the same email and electronically proximate to each other. Both were sent together rather than separately. Moreover, the one electronic communication (the email and attachments) was not divisible electronically at the time of issue or immediate receipt. Later, of course, one could choose to separately open each pdf and print hard copies separately. But at the time of electronic issue, the bankruptcy notice and the copy judgment or order were together and not separated. In one sense they were electronically “glued” together. They were electronically “fastened” to each other. Short of the two documents being constituted in the one pdf, they were as close electronically as they could be. Further, if they had been constituted in the one pdf, then it might have been argued that they were one and the same document, rather than being a notice with an attachment. Moreover, the fact that each pdf was itself attached to the email does not entail that each pdf could not also be attached to each other.
[5] [2014] FCAFC 144
[6] Curtis v Singtel Optus Pty Ltd [2014] FCAFC 144, [51]
[7] Curtis v Singtel Optus Pty Ltd [2014] FCAFC 144, [51]
Counsel for Mr Bezina accepts that the facts before me are indistinguishable from the facts considered in Curtis, save for one matter; and he submits that that one matter should lead me to conclude that the judgments on the basis of which the bankruptcy notices in the case before me were issued were not attached to the bankruptcy notices. The matter which counsel for Mr Bezina submits distinguishes the facts before me from those in Curtis is that the statement in the letter from AFSA that the recipient of the letter needed to serve the bankruptcy notice “in addition to any judgments, orders and other documents supporting its issue”. Counsel submits that this statement indicates the Official Receiver (on whose behalf AFSA sent the letter) was aware the judgments were not attached to the bankruptcy notices.
I do not accept counsel’s submission that the statement on which he relies distinguishes the facts before me from those in Curtis. In Curtis the Full Federal Court, in concluding that the judgment was attached to the bankruptcy notice, relied solely on the manner in which the bankruptcy notice and judgment were transmitted by email. The manner in which the bankruptcy notices and supporting judgments were transmitted by email in the case before me is no different. What, therefore, may have been said on behalf of the Official Receiver in the covering letters that were also sent by email to Mr Stojic’s former lawyers, is irrelevant to whether the judgments in the case before me were attached to the bankruptcy notices.
Counsel for Mr Bezina formally submitted in the alternative that if the facts before me are not distinguishable from those in Curtis, the Full Federal Court’s decision in Curtis is wrong. Counsel, however, accepted I am bound by Curtis.
For these reasons the first of the grounds on which Mr Bezina relies for setting aside the two bankruptcy notices fails.
Ground based on irregularity of judgment
Counsel for Mr Bezina submits that the bankruptcy notice that is based on the judgment for $6,339.91 should be set aside because the judgment is “invalid and of no effect and the registered registration is a nullity”;[8] and the basis on which counsel submits it is invalid is that, on the proper construction of s.369(7) of the LP Act, the only person in whose favour a judgment may be entered on the filing of a certificate issued under s.369(5) of the LP Act is the “the Manager, Costs Assessment”. The basis of that submission is s.369(8) of the LP Act which, as I have already set out, provided that the “costs of the costs assessor are to be paid to the Manager, Costs Assessment”.
[8] Outline Submissions of the Applicant, [8]
Counsel for Mr Bezina relies on the judgment of Ward J (as her Honour then was) in Kassem v Koutavas.[9] In that case Ward J considered an application to set aside a judgment based on the filing of two certificates of costs, one issued under s.368(5) of the LP Act, and one issued under s.369(7) of the LP Act. It was contended that the judgment was irregularly entered to the extent it included the amount stated in the certificate purportedly issued under s.369(7) of the LP Act because, so it was submitted, s.369 of the LP Act entitled only the “Manager, Costs Assessment” to recover the costs stated in a certificate issued under s.369(5) of the LP Act. Ward J said:[10]
I have difficulty, however, with the proposition that the costs judgment arising automatically (by operation of the statutory provisions referred to above) from the filing a s 369 costs of cost assessment certificate of itself imposes an obligation on the party against whom the assessment is made to pay those costs to the party in whose favour the assessment is made (as opposed to being liable to pay those costs to the Manager, Costs Assessment), where that seems to be contradicted by the express provision that the costs of the costs assessment are to be paid to the Manager, Costs Assessment.
[9] [2012] NSWSC 236
[10] [2012] NSWSC 236, [41]
Her Honour later concluded as follows:[11]
I accept, therefore, that the judgment arising on filing of the s 369 Certificate (while a judgment in favour of the plaintiffs in the sense that it determines the liability for the costs of the costs assessment in a manner favourable to them) is not in itself a judgment for the payment of those costs to the plaintiffs. However, I do not accept that this necessarily means that the judgment that has been entered in favour of the plaintiffs in this case should be set aside as an irregularity. The purpose of the entry of the judgment in the Court's records as a judgment of the court (as opposed to a judgment arising by operation of the relevant statutory provision) is to give effect to and record the judgment arising by operation of the statute (and to permit its enforcement).
[11] [2012] NSWSC 236, [45]
Ward J set aside the judgment and replaced it with two orders. The first was to the effect that the person liable to pay the costs specified in the certificate issued under s.368 of the LP Act (costs debtor) was to pay those costs to the person entitled (costs beneficiary). The second order was predicated on the costs beneficiary having paid the “Manager, Costs Assessment” the amount specified in the certificate issued under s.369 of the LP Act; her Honour ordered that the costs debtor pay to the costs beneficiary by way of reimbursement the costs stated in the certificate issued under s.369 of the LP Act the costs beneficiary paid to the “Manager, Costs Assessment”.
Counsel for Mr Stojic referred me to a number of cases which have construed s.369 differently from Ward J in Kassem. First, counsel relied on the judgment of Garling J in Weber v Aquaqueen International Pty Ltd.[12] In that case an application was made to set aside a judgment that was based on a number of costs certificates that included a certificate issued under s.369 of the LP Act. The applicant, purporting to rely on the judgment of Ward J in Kassem, submitted the judgment had been irregularly entered and, therefore, ought to be set aside ex debito justitia (that is, as a matter of right).[13] Garling J held the judgment had not been entered irregularly, and concluded that Ward J’s judgment in Kassem was incorrect to the extent her Honour held that the filing of a certificate that has been issued under s.369 of the LP Act took effect in favour of a person, namely, the “Manager, Costs Assessment”, who is not a party to the proceeding in which the order for costs was made.[14]
[12] [2013] NSWSC 1181
[13] [2013] NSWSC 1181, at [58]
[14] [2013] NSWSC 1181, at [114]
Counsel for Mr Stojic also referred me to the recent judgment of Judge Smith in Ritson v Commissioner of Police, New South Wales Police Force.[15] In that case his Honour considered the competing views of Ward J in Kassem and Garling J in Weber, and his Honour agreed with and adopted the reasoning of Garling J. Counsel for Mr Stojic submitted that unless I was satisfied Judge Smith’s judgment in Ritson is clearly wrong, I should follow what his Honour there decided, with the consequence that I should find that, contrary to what has been submitted on behalf of Mr Bezina, the judgment for $6,339.91 that was entered on the filing of the second certificate was not irregular or void.
[15] [2018] FCCA 916
I am not satisfied that Judge Smith’s judgment in Ritson is clearly wrong. That being so, Judge Smith’s decision and reasoning compel me to conclude that the judgment based on the second certificate is not invalid and, for that reason, the second ground on which Mr Bezina relies for setting aside the bankruptcy notice that was issued on the basis of the judgment of $6,339.91 fails.
There is a matter I should note that was not the subject of any submissions, but which, in my opinion, clearly arises from the cases to which I was referred. The question Garling J in Weber, and Judge Smith in Ritson, considered was whether the entry of a judgment based on the filing of a certificate issued under s.369 of the LP Act in favour of a person other than the “Manager, Costs Assessment” rendered the judgment irregular, such that it was liable to be set aside “ex debito justitia”. As is apparent from the second of the passages from the judgment of Ward J, however, her Honour expressly stated that the entry of a judgment based on a certificate issued under s.369 of the LP Act in favour of a person other than the “Manager, Costs Assessment” was not necessarily a nullity; and her Honour held that in the circumstances of the case before her Honour the entry of the judgment was not a nullity. Ward J set aside the judgment because her Honour was of the view that the judgment did not appropriately recognise and give effect to the costs determinations that had been made. Her Honour replaced the judgment by orders which, in her Honour’s opinion, did reflect and give effect to the costs determinations that had been made; and the effect of the orders her Honour made was in substance no different from the effect of the judgment her Honour had set aside. The effect of her Honour’s orders was to require the costs debtor to pay to the costs beneficiary the same amount the costs debtor would have been liable to pay had the judgment not been set aside. The only difference was that that instead of there being one order requiring the costs debtor to pay to the costs beneficiary the sum of the amounts stated in two certificates, one issued under s.368 and the other issued under s.369 of the LP Act, her Honour ordered that the costs debtor pay to the costs beneficiary two amounts, one on account of the amount specified in the certificate issued under s.368 of the LP Act, and one on account of the amount specified in the certificate issued under s.369 of the Act.
The relevance of what I say in the preceding paragraph is this. If the judgment for $6,339.91 based on the second certificate is not a nullity then, unless there is a substantial reason shown for questioning whether behind that judgment there is in truth and reality a debt due to Mr Stojic, a court of bankruptcy may accept the judgment as satisfactory proof that Mr Bezina owes Mr Stojic the amount of the judgment, namely, $6,339.91.[16] It has not been suggested that the second certificate was not validly issued. Nor has it been suggested that Mr Stojic has not paid to the “Manager, Costs Assessment” the amount of $6,339.91 with the consequence that at the time the judgment for $6,339.91 was entered Mr Stojic was not entitled to an order that Mr Bezina pay such amount to Mr Stojic, being an order to the effect of the second order Ward J made in Kassem. In those circumstances Mr Bezina has shown no substantial reason for questioning whether behind the judgment for $6,339.91 there is in truth and reality a debt due to Mr Stojic in the amount of the judgment, being the amount stated in the second certificate. These matters afford an additional reason for not accepting the second ground on which Mr Bezina relies for setting aside the bankruptcy notice based on the judgment for $6,339.91.
[16] I have summarised the principles for going behind judgment in Obrart v Grego [2017], at [52]-[58]
Abuse of process
In his application Mr Bezina also claims a declaration that the issue of each bankruptcy notice constitutes an abuse of process. In his affidavit Mr Bezina deposes that Mr Stojic applied for the issue of the bankruptcy notices that were issued on 26 June 2017 in circumstances where there had been set down for hearing in the Supreme Court of New South Wales on 7 and 8 July 2017 a claim brought against Mr Bezina by a company of which Mr Stojic is said to be the controlling shareholder. Mr Bezina deposes he considers that the timing of the application for the issue, and the serving on him of, the bankruptcy notices was to bring pressure on him in relation to the hearing that had been fixed for 7 and 8 July 2017.
Counsel for Mr Bezina made no submissions in support of this part of the application, either in his written or oral submissions. Counsel for Mr Stojic, in his written submissions, did address this part of Mr Bezina’s application. Counsel referred to the following passage from the judgment of Gordon J (when her Honour was a judge of the Federal Court) in Yarranova Pty Ltd v Shaw (No 2):[17]
An abuse of process occurs when the purpose of bringing the proceedings is not to prosecute them to a conclusion, but to use them as a means of obtaining some advantage for which they are not designed or for some collateral advantage beyond what the law offers . . .
[17] [2014] FCA 616, at [90]
Counsel submitted there is an abuse of process if a creditor applies for, and serves a bankruptcy notice for a purpose other than the desire to invoke a court’s jurisdiction in relation to insolvency; there is no evidence, however, other than the asserted belief of Mr Bezina, that Mr Stojic applied for the issue of the bankruptcy notices for a reason other than to invoke a court’s jurisdiction in relation to insolvency; and the asserted belief of Mr Bezina is incapable of satisfying the Court that Mr Stojic applied for the issue of the bankruptcy notices for any purpose foreign to the legitimate purposes for which a creditor may apply for the issue of a bankruptcy notice. I accept counsel’s submission, which means this part of the application also fails.
Disposition
Mr Bezina has succeeded on none of the grounds on which he relies for setting aside the two bankruptcy notices. I propose to order, therefore, that the application filed on 19 July 2017 be dismissed.
There is nothing to suggest that costs should not follow the event. I propose, therefore, to order that Mr Bezina pay Mr Stojic’s costs, although I will reserve to the parties liberty to apply within fourteen days for a different costs order.
I certify that the preceding thirty-three (33) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Date: 25 May 2018
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