Broadbent v Medical Board of Australia
[2014] FCCA 1406
•29 May 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BROADBENT v MEDICAL BOARD OF AUSTRALIA | [2014] FCCA 1406 |
| Catchwords: BANKRUPTCY – Bankruptcy notice – application to have bankruptcy notice set aside – formal defect or irregularity – whether the creditor was in fact a creditor of the debtor – whether the name of the creditor in the bankruptcy notice was misdescribed and misleading – whether the bankruptcy notice was issued in accordance with the supporting judgment – whether the amount claimed in the bankruptcy notice was incorrect – whether the debtor had a set-off which could not have been raised in the proceedings the subject of the judgment – application dismissed – costs awarded. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.40, 41, 306 |
| Broadbent v Medical Board of Queensland (2011) 195 FCR 438 Cosenza v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] FCA 85 Deputy Commissioner of Taxation v Cumins (No.5) (2008) 72 ATR 398 Glew v Harrowell, in the matter of Glew [2003] FCA 373 Godfrey v Weriton Finance Pty Ltd [2013] FCA 1057 Hudson v Donald & Whalan (unreported, Federal Court of Australia, Lindgren J, 12 August 1997) Ivory v Telstra Corporation Ltd [2010] FCA 1361 Ivory v Telstra Corporation Limited and Ors [2010] FMCA 123 James v Commissioner of Taxation [1956] ALR 79 McDermott v Wakim [2013] FCCA 1950 Medical Board of Australia v Broadbent [2012] QCAT 120 Medical Board of Queensland v Broadbent [2010] QCAT 280 Medical Board of Queensland v Broadbent (No.3) [2010] QCAT 488 Medical Board of Queensland v Broadbent (No.4) [2010] QCAT 507 Melbourne v Relativity Pty Ltd [1999] FCA 160 Re Hansen; Ex parte Hansen (1985) 4 FCR 590 St George Wholesale Finance Pty Ltd v Spalla [2000] FCA 1094 Stec v Orfanos [1999] FCA 457 Wren v Mahony (1972) 126 CLR 212 | ||
| Applicant: | DR MICHAEL RUSSELL MARK BROADBENT | |
| Respondent: | MEDICAL BOARD OF AUSTRALIA |
| File Number: | BRG 192 of 2014 |
| Judgment of: | Judge Burnett |
| Hearing dates: | 29 April 2014; 23 May 2014 |
| Date of Last Submission: | 23 May 2014 |
| Delivered at: | Brisbane |
| Delivered on: | 29 May 2014 |
REPRESENTATION
| Counsel for the Applicant: | Mr A. C. Barlow |
| Solicitors for the Applicant: | Hawkes Lawyers |
| Counsel for the Respondent: | Ms A. Wheatley |
| Solicitors for the Respondent: | Rodgers Barnes & Green |
ORDERS
That the application be dismissed.
That the applicant pay the respondent’s costs of and incidental to this application, including any reserved costs, as agreed between the parties and failing agreement to be taxed under Part 40 of the Federal Court Rules 2011.
| FEDERAL CIRCUIT COURT AT BRISBANE |
BRG 192 of 2014
| DR MICHAEL RUSSELL MARK BROADBENT |
Applicant
And
| MEDICAL BOARD OF AUSTRALIA |
Respondent
REASONS FOR JUDGMENT
(Revised from Transcript)
On 13 February 2014 Dr Michael Russell Mark Broadbent (“the debtor”) was served with Bankruptcy Notice 169248 (“the Notice”) which issued on 7 February 2014. He now applies to have the Notice set aside.
Counsel for the debtor contends that relief ought to follow because of one or more of the following grounds:
a)on a jurisdictional basis:
i)that the Medical Board of Australia (“the creditor”) had no entitlement to request the issue of the Notice because it was not a creditor of the debtor;
b)on discretionary grounds:
i)that the name on the Notice misdescribed the creditor and was therefore misleading;
ii)that the Notice was not issued in accordance with its judgment;
iii)that the amount claimed in the Notice is incorrect; and
iv)that the debtor has a set-off claim which could not have been raised in the proceedings the subject of the judgment.
Background facts
The debtor has been engaged in protracted litigation with the relevant professional bodies for medical practitioners in various courts and tribunals over many years. The initiating proceedings in 2008 relate particularly to allegations of professional misconduct founded upon complaints about the manner in which the debtor undertook certain surgical procedures between 2000 and 2006. There were 13 complaints made, some of which were disposed of; others have not been finalised or are not being pursued.
In initial proceedings before the Health Practitioners Tribunal (“HPT”) he faced 10 complaints of misconduct, one involving death, the balance relating to unfortunate medical outcomes. A subsequent amended referral notice sought further declarations in respect of a further two instances, giving rise to 13 complaints. On 7 September 2009 the HPT dismissed an application made by the debtor for a stay of those proceedings on the basis of undertakings that he had given. The matter ultimately proceeded for final hearing before QCAT[1] which, in the meantime, had assumed the powers and responsibilities of the HPT.
[1] Queensland Civil and Administrative Tribunal.
On 10 June 2010 QCAT delivered a judgment which outlined its factual findings.[2] It determined that it was satisfied that the debtor had engaged in unsatisfactory professional conduct but granted no formal relief at that time. That date (10 June 2010) is significant, because to that point the prosecution had been advanced by the Medical Board of Queensland. Beyond noting that general outcome, it is unnecessary to consider why that result was achieved.
[2] Medical Board of Queensland v Broadbent [2010] QCAT 280.
Importantly, no formal orders were made on that occasion, nor were costs determined at that time. Formal orders giving effect to the QCAT determination were not made until 2 September 2010.[3] The transcript of proceedings for that date recorded that QCAT, having been satisfied that grounds for disciplinary action had been established, received an undertaking from the debtor that he would retire permanently from medical practice. It ordered that the “details of this undertaking be recorded in the Board’s register for the period for which the undertaking is in force.”
[3] Medical Board of Queensland v Broadbent (No.3) [2010] QCAT 488; see also Medical Board of Queensland v Broadbent (No.4) [2010] QCAT 507.
Argument was also heard on that day on the question of costs, but judgment in that matter was not delivered until 22 October 2010. On 22 October 2010 an order concerning costs was made in these terms:
“The [debtor] pay 70% of the Applicant’s costs of the hearing (not including investigation costs) (but including the costs of two counsel) to be assessed on the standard basis unless agreed.”
It should be noted that the proceedings that had been determined by QCAT to that point related to only two of the initial 13 complaints. The Medical Board of Queensland sought to withdraw the remaining 11 referrals, but the debtor’s response to that proposal was to seek orders against the Medical Board of Queensland for costs. At the time he made submissions on that matter. He raised issues of bad faith, misfeasance, fraud and abuse of power; matters relevant to this application and to which I will turn in due course.
QCAT permitted the Medical Board of Queensland to withdraw the remaining 11 referrals and, in respect of them, made no order as to costs. It follows that at that point the only order outstanding was the order of October 2010 which I have earlier addressed. It should be noted that in the meantime the debtor appealed the decision of QCAT to the Queensland Court of Appeal. Leave to appeal was refused with costs, and orders were made to that effect on 10 December 2010.
The next contest with the QCAT outcome was when the debtor sought judicial review of certain aspects of QCAT’s jurisdiction in the Federal Court.[4] That application was also determined against the debtor with costs, in that case costs being awarded against him on the indemnity basis. Orders were made to that effect dismissing his application on 25 August 2011. I note that the debtor appeared on his own behalf in each of the appeals before the Queensland Court of Appeal and the judicial review application in the Federal Court. In each instance the respondent was noted as the Medical Board of Queensland.
[4] Broadbent v Medical Board of Queensland (2011) 195 FCR 438.
Finally, the debtor has issued proceedings in the Supreme Court of Queensland claiming damages against a series of named defendants, each of them medical practitioners. The initial claim and proceeding was struck out and is the subject of further ongoing application, but at least for present purposes it was contended on behalf of the debtor that application will be made to file an Amended Statement of Claim which will seek to discontinue against the initially proposed defendants, and in their place proceed against the Australian Health Practitioner Regulation Agency (“AHPRA”). As the opening paragraph of the proposed amended pleading observes, it proceeds on the premise that the whole of the previous Statement of Claim is deleted, that being the Statement of Claim that addressed against each of those various defendants allegations of bad faith, misfeasance, fraud and abuse of process.
The claim which is proposed against the Australian Health Practitioners Regulatory Agency is one for damages for negligence, for breach of a general duty of care and duty as a citizen and for a breach of duty to the debtor as a registrant. The allegations appear to concern complaints that the Medical Board of Queensland imposed unreasonable conditions in response to the QCAT determination. It contends that those conditions imposed by QCAT at the request of AHPRA and its predecessors were in breach of those duties and that he has suffered loss by reason of those matters. It is that action which, as I have noted, had been earlier characterised by the debtor against the other doctors as bad faith, misfeasance, fraud and abuse of process.
In the meantime, the creditor’s costs in the QCAT proceedings were assessed. An assessor’s certificate was filed, that being the allocatur, and an order issued in the District Court of Queensland for costs in the sum of $387,862.17. Against that background further issues arose concerning the costs themselves. The debtor claimed indemnity from his professional indemnity insurer in respect of costs.
Mr McCay, the Head of Professional Conduct – Queensland for Avant Law Pty Ltd, is also the State Manager of Avant Insurance Limited (“Avant Insurance”). Avant Insurance is the professional indemnity insurer for the debtor. Mr McCay observed that the debtor had been subject to a costs order which I have earlier described; however, he says that Avant Insurance was only obliged to indemnify the debtor in respect of part of the costs in QCAT, and not the costs in the Queensland Court of Appeal and the Federal Court.
Insofar as costs were ordered in the sum of $387,862.17 from the QCAT proceedings, Avant Insurance was only liable to indemnify the debtor in respect of that part of the claim (and associated costs) which related to a particular patient, Mrs Pearce. He stated that the insurer has no obligation to indemnify the debtor in respect of the costs attributable to another patient, Mrs MacLeod. He says that agreement was reached between Avant Insurance, for the debtor, and the Medical Board of Australia’s solicitors in respect of the costs attributable to Mrs Pearce, and that the agreement was that the Medical Board of Australia would accept $140,000.00 from Avant Insurance in discharge of that component of the costs which related to her part of the application. That sum of $140,000.00 was paid, and the costs liability of the debtor to the creditor was accordingly reduced. I will return to that matter in due course.
The Notice issued in respect of the judgment sum and credit was allowed but only in the sum of $140,000.00, not the full quantum of the Pearce costs which were discharged by the agreement between Avant Insurance and the Medical Board of Australia, namely a sum of $152,037.23. It is against that background that the debtor now makes his application.
The jurisdiction ground
Status of the creditor
The debtor, as I have noted, commenced by raising a preliminary point. The point essentially goes to jurisdiction. He contends that the respondent in this application is not the correct creditor, and says that it had no right to issue the Notice. To understand that point it is necessary to refer to the Health Practitioner Regulation National Law Act 2009 (Qld) (“HPRNLA”). By operation of that Act there was a substantial rearrangement of medical boards reflecting events throughout Australia.
Those arrangements took effect from 1 July 2010, that is, midway between the findings of fact made by QCAT on 6 June 2010, the formal order made on 2 September 2010 and the final order for costs made on 22 October 2010. The effect of the measures introduced in the HPRNLA was to dissolve the state medical boards and the Medical Board of Australia, as well as create AHPRA. Those steps were effected by the passage of clauses which became ss.23 and 29 of the HPRNLA. They provide:
“Part 4 Australian Health Practitioner Regulation Agency
Division 1 National Agency
23 National Agency
(1) The Australian Health Practitioner Regulation Agency is established.
(2) The National Agency–
(a) is a body corporate with perpetual succession; and
(b) has a common seal; and
(c) may sue and be sued in its corporate name.
(3) The National Agency represents the State.”
Section 25 HPRNLA deals with the functions of the “National Agency.” It provides, inter alia:
“25 Functions of National Agency
The functions of the National Agency are as follows–
(a) to provide administrative assistance and support to the National Boards ...
...
(e) to establish and administer an efficient procedure for receiving and dealing with applications for registration as a health practitioner and other matters relating to the registration of registered health practitioners;
...
(i) to establish an efficient procedure for receiving and dealing with notifications against persons who are or were registered health practitioners ...”
Part 5 deals with “National Boards.” It provides:
“Part 5 National Boards
Division 1 National Boards
31 Establishment of National Boards
(1) Each of the following National Health Practitioner Boards is established for the health profession listed beside that board in the following Table–
…”
The table shows the “Medical Board of Australia” as being part of the “Health profession” described as “medical.” It continues:
“(2) A National Board–
(a) is a body corporate with perpetual succession; and
(b) has a common seal; and
(c) may sue and be sued in its corporate name.
(3) A National Board represents the State.”
Those provisions essentially established the new regime; however, as I have earlier indicated, these events occurred in the transitional phase.
The HPRNLA also provides for transitional functions of the “National Boards”:
“Division 2 Functions of National Boards
35 Functions of National Boards
(1) The functions of a National Board established for a health profession are as follows–
(a) to register suitably qualified and competent persons in the health profession and, if necessary, to impose conditions on the registration of persons in the profession;
...
(h) to establish panels to conduct hearings about–
(i) health and performance and professional standards matters in relation to persons who are or were registered in the health profession under this Law or a corresponding prior Act; and
...
…
(i) to refer matters about health practitioners who are or were registered under this Law or a corresponding prior Act to responsible tribunals for participating jurisdictions;
...
(l) in conjunction with the National Agency, to keep up-to-date and publicly accessible national registers of registered health practitioners for the health profession;
…”
As earlier noted there was a need to consider the transitional provisions because in this instance events occurred both before and after the material date, which was 1 July 2010. Part 12, the “Transitional provisions” section, provides:
“264 Members of National Boards
(1) A person who was, immediately before the commencement day, a member of a National Health Practitioner Board under the repealed Law is taken to be a member of the National Board of the same name under this Law;
…”
The statute continues:
“Division 13 Complaints, notifications and disciplinary proceedings
288 Complaints and notifications made but not being dealt with on participation day
…
(2) From the participation day, the complaint or notification is taken to be a notification made under this Law to the National Agency.
…
289 Complaints and notifications being dealt with on participation day
(1) This section applies if, immediately before the participation day for a participating jurisdiction, a local registration authority for the jurisdiction had started but not completed dealing with a complaint or notification about a person registered in a health profession by the authority.
(2) From the participation day–
(a) the complaint or notification is taken to be a notification made under this Law and is to be dealt with by the National Board for the health profession; and
(b) the notification is to continue to be dealt with under the Act of the participating jurisdiction under which it was made, and any proceedings or appeal relating to the notification may be dealt with, as if that Act had not been repealed.
…
Division 14 Local registration authority
294 Definition
In this Division–
transfer day, for a participating jurisdiction [Queensland], means–
(a) for a health profession other than a relevant health profession–
(i) 1 July 2010; or
...
295 Assets and liabilities
(1) From the transfer day for a participating jurisdiction–
(a) the assets and liabilities of a local registration authority for a health profession in a participating jurisdiction are taken to be assets and liabilities of the National Agency and are to be paid into or out of the account kept in the Agency Fund for the National Board established for the profession; and
...
(c) any property that, immediately before the participation day, was held on trust, or subject to a condition, by the local registration authority continues to be held by the National Agency on the same trust, or subject to the same condition and is to be paid into the account kept in the Agency Fund for the National Board.”
The debtor’s contention is that the Medical Board of Australia is not the proper creditor; further, that the costs assessment relied upon has been conducted under the wrong provisions of the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”) and that objection is taken to the present respondent relying upon that assessment as the basis of the Notice. It was contended for the debtor that on 10 June 2010 QCAT had pronounced judgment in favour of the Medical Board of Queensland in order that there would be a finding of unsatisfactory professional conduct, and it was as a result of that judgment and order that costs were awarded.
It says that by force of s.295 HPRNLA on 1 July 2010 the assets and liabilities of the Medical Board of Queensland became the assets and liabilities of AHPRA. It contends that at the time of the transfer of the assets of the Medical Board of Queensland to AHPRA the right to costs had arisen and that, accordingly, the Medical Board of Australia was not a debtor in respect of Dr Broadbent. That is, on 1 July 2010 the proceeding before the tribunal had been completed; accordingly, the right to costs vested in the “National Agency,” by operation of s.295.
More significantly, the debtor contends that this was a matter that should have been progressed in the name of AHPRA rather than the Medical Board of Queensland. It follows, in his contention, that there is no indebtedness to the Medical Board of Queensland as the money is owed to AHPRA, and accordingly the Medical Board of Australia has no basis upon which to bring its application.
The debtor ultimately did concede that the proceeding was one that had been started but not completed at the participation date, that is, QCAT had only resolved the factual issue but had not at that time determined the final relief. That did not occur until final orders were made in September 2010. Indeed, it might be that QCAT was not fully functus until it disposed of the reserved costs matter on 22 October 2010, it having been argued on 2 September 2010. The fact that the QCAT proceeding was addressed by s.289, however, does not dispose of the debtor’s argument. Section 289 simply means that the Medical Board of Queensland was able to proceed to dispose of the application and respond to the appeal as if it was the Medical Board of Australia.
The Medical Board of Australia became the beneficial party to the QCAT proceedings and the Medical Board of Queensland was authorised to conduct those proceedings on its behalf. However, the result of those proceedings was that the Medical Board of Queensland, for the Medical Board of Australia, became the beneficiary of the costs order which crystallised into a sum of $387,862.17. The debtor says that this was AHPRA’s entitlement and not that of the Medical Board of Australia, by operation of s.295.
I do not agree with the debtor’s contention in respect of s.295. On my reading of s.295 it appears to contemplate a trust arrangement whereby AHPRA becomes a central treasury for assets and liabilities of each board, but otherwise the boards themselves retain title to the matters which are paid into accounts kept in the agency fund established for them. Rather than saying that the assets and liabilities “become” the assets and liabilities of AHPRA and are thereby expropriated, a more passive phrase is used, that is, the assets and liabilities “are taken to be” those of the “National Agency.”
That appears consistent with what follows in s.295(1)(a), namely, that the assets and liabilities are then to be:
“... paid into or out of the account kept in the Agency Fund for the National Board established for the profession …”
It seems likely that the term “become” was not used in order to emphasise that s.295 did not expropriate assets, but rather was simply intending that the assets and liabilities of the various medical boards be administered through a central agency (AHPRA); those funds were otherwise held in trust for the respective board.
It follows that, as s.295(1)(c) contemplates, if something such as a costs award, which is a contingent asset, is held, as it was in this instance by the Medical Board of Queensland, once the condition was fulfilled that sum might be payable into an account kept by the “Agency Fund,” but it would be payable into an account administered for the Medical Board of Queensland, and not for AHPRA itself. Title, in my view, never was intended to pass. So it follows on that basis that, as I find the matters, s.295 does not assist the debtor.
In any event, the debtor’s contention ignores the establishment of the National Boards and the provision that the National Boards are body corporates with perpetual succession which may still sue and be sued in a corporate name. It seems to me incompatible with the duties and obligations that follow a separate corporation that the assets and liabilities would be transferred to a third party entity without recourse to that corporation. It follows that I do not think that s.295 is an expropriation clause.
An additional point was made by the debtor, in any event, concerning the manner of assessment of costs. However, any errors in assessment merged with the judgment for costs, and there has been no appeal made against the order for costs; as it stands before this Court the judgment is regular.
However interesting those points might be, more fundamentally, the answer to the debtor’s concerns about the creditor’s entitlement is to be found not only in the transitional provisions addressing the change of nomenclature for the Medical Board of Queensland, but also in s.40(3)(d) Bankruptcy Act 1966 (Cth). It provides:
“…
(d) a person who is for the time being entitled to enforce a final judgment or final order for the payment of money shall be deemed to be a creditor who has obtained a final judgment or final order;
…”
Here, the Medical Board of Australia has a judgment that is not subject to a stay, and no application has been made to set it aside. No question of jurisdiction was raised before the District Court of Queensland. It follows that, in my view, there is no basis to go behind the judgment.[5] The Medical Board of Australia is deemed to be the creditor and had standing to seek the issue of the Notice.
The discretionary grounds
[5] See generally the observations in Wren v Mahony (1972) 126 CLR 212; James v Commissioner of Taxation [1956] ALR 79.
Identification of the creditor
The debtor submitted that the Notice ought be set aside because it does not accord with the prescribed form in that the wrong creditor is identified. It is accepted that compliance with Regulation 4.02 in Form 1, Schedule 1 of the Bankruptcy Regulations 1996 (Cth) is mandatory. The debtor contends that the creditor set out in the Notice is the Medical Board of Australia; however, the judgment was handed down in favour of the Medical Board of Queensland.
It appears correct, as was submitted, that there is no suggestion that the creditor had notified Dr Broadbent of the issue of the Notice, its change of name or that it was, in effect, a completely different entity. The debtor contends that such an error is fatal to the Notice. It maintains that it is not accepted in all the circumstances that it was plain to Dr Broadbent that the Medical Board of Australia was the proper creditor, there being no judgment or costs order made in favour of that entity.
In particular, the debtor relies upon observations made by Beaumont J in Re Hansen; Ex parte Hansen (1985) 4 FCR 590, a case where his Honour at 594 made the observation that, in his opinion:
“… it is essential to the validity of a bankruptcy notice that the judgment debtor be in no reasonable doubt as to the identity of the judgment creditor.”
In this case I am of the view that there can be no question about the debtor being misled.
The debtor sought judicial review of the QCAT determination purportedly on the basis that the Medical Board of Queensland was transformed into a Commonwealth agency, and its officers became officers of the Commonwealth.[6] In his judgment dealing with the application for judicial review, Greenwood J noted:
[6] Broadbent v Medical Board of Queensland (2011) 195 FCR 438.
“[67] At paragraph 20 of his “Brief Submissions”, the applicant contends that the Medical Board and its officers became officers of the Commonwealth by the nationalisation of the regulation of the Australian health workforce in 2009 and 2010 and thus the conduct and decisions of the Medical Board are reviewable as agents of the Commonwealth.
[68] The applicant contends that the enactment of the model law as a schedule (the “National Law”) to the Health Practitioners Regulation National Law Act 2009 (Qld) had the effect of nationalising the regulation of the health professions in Australia. However, the National Law Act and therefore the National Law did not commence operation until 1 July 2010. It is therefore difficult to see how the National Law Act had the effect of transforming the Medical Board (or its officers) into “officers of the Commonwealth” prior to that date (if at all).
…
[132] The Medical Practitioners Registration Act and the Medical Board (Administration) Act [both Queensland acts] were repealed on 1 July 2010 by s 123 of the Amendment Act. According to the Explanatory Notes to the Health Legislation (Health Practitioner Regulation National Law) Amendment Bill 2010 this had the effect of abolishing the Medical Board and the Office of the Medical Board (see Explanatory Notes at p 4.5, 30-37). All matters previously dealt with by the Medical Board under the Medical Practitioners Registration Act are to be dealt with under the National Law by the Medical Board of Australia after 1 July 2010. The administrative support that the Office of the Medical Board previously provided to the Medical Board is, post 1 July 2010, provided to the Medical Board's successor, the Medical Board of Australia by the Australian Health Practitioner Registration Agency.
…
[137] At the commencement date of the National Law on 1 July 2010, proceedings had been started by the Medical Board of Queensland before QCAT concerning the notification in relation to Mr Broadbent's conduct in connection with Mrs MacLeod and Mrs Pearce but those proceedings had not been completed. By 1 July 2010, the hearings in relation to penalty and costs had not been completed before QCAT.
[138] Section 289(2)(a) provides that in respect of such a notification, the notification from 1 July 2010, is taken to be a notification made under the National Law and is one to be dealt with by the National Board for the health profession, namely, the Medical Board of Australia. However, by reason of the conjunction with s 289(2)(b), the notification continues to be dealt with under the Act of the participating jurisdiction under which it was made. That Act so far as it relates to Mr Broadbent is the HPPS Act.
[139] The Medical Board of Queensland remained the applicant before QCAT in relation to the questions of penalty and costs. Those matters were the subject of QCAT's decision on 2 September 2010. The undertaking given by Mr Broadbent earlier mentioned was framed in terms of never seeking registration with the National Board for the Health Profession in Australia responsible for registration, namely the Medical Board of Australia.”
Matters relevant to the transition of the Medical Board of Queensland to the Medical Board of Australia were clearly addressed and explained in the proceedings before Greenwood J, as was reflected in the judgment delivered on 25 July 2011. Given the stubborn approach of the debtor to these matters, I do not doubt that he had clearly read, understood and considered that judgment following his unsuccessful application. I am sure that these matters were the subject of exchange between his Honour and the debtor given my earlier observations of his Honour’s consideration of the debtor’s arguments.
The test to be applied in determining whether a debtor is misled in respect of a bankruptcy notice has been recently articulated clearly by Perry J in Godfrey v Weriton Finance Pty Ltd [2013] FCA 1057, where her Honour explained the test as follows:
“… As earlier explained, it is clear (as both parties accepted) that the test is not whether the applicant was in fact misled but rather whether the Notice was capable of misleading the applicant and that, in answering that question, it may be relevant to have regard to extraneous circumstances such as (relevantly here) the fact that the Notice was served upon the applicant on two different days. I do not, however, consider that the test is transformed into a subjective one because regard is had to such matters as Mr Godfrey’s experience in corporate insolvency. There is still no inquiry into the question of whether he was in fact misled. The question remains whether the Notice was capable of misleading this debtor in all of the circumstances.”
I do not believe that a person in the position of the debtor would have been misled by the identity of the creditor in this case. Plainly, such a person would have understood who the creditor was. In coming to that conclusion I have had regard to whether the debtor was in fact misled, and whether a reasonable or ordinary debtor in the current debtor’s circumstances would have also been misled.
Although I have addressed the matters that were observed in the judgment of Greenwood J in coming to the view that I have, there were other matters that have informed that outcome.
They include that on 22 March 2012 QCAT granted leave to withdraw proceedings in respect of which the debtor was a party and ordered that each party bear their own costs relating to the remaining 11 patient referrals. In that instance the debtor sought indemnity costs against the Medical Board of Australia, a matter which was disposed of in Medical Board of Australia v Broadbent [2012] QCAT 120. Further, on 20 February 2013 the deputy registrar of the District Court of Queensland ordered that the costs of the Medical Board of Australia be assessed pursuant to r.708 UCPR, which is effectively a default assessment.
Service of the costs statement must be proved. In this instance, the costs statement was that of the Medical Board of Australia. On 9 April 2013 the costs assessor sent a copy of his assessment in Medical Board of Australia v Broadbent[7] to the debtor. On 10 April 2013 the assessment and other correspondence was emailed to him, as is evidenced in the material.
[7] QCAT proceeding BD 242 of 2013.
On 22 April 2013 the costs assessment for the Medical Board of Australia on the QCAT matter was then sent to Avant Insurance, and on 15 January 2014 the creditor’s solicitors served on the debtor a demand for payment in respect of the costs orders then payable. The letter and costs orders specifically referred to the Medical Board of Australia. On 28 January 2014 Dr Broadbent responded to the correspondence of 15 January 2014, noting that he was aware that the Medical Board of Queensland had “ceased to exist as a legal entity.” The new entity of AHPRA was also referred to.
It is apparent to me that a debtor armed with that information could not have been misled by the issue of a bankruptcy notice where the creditor’s title was stated as being the “Medical Board of Australia” and previous litigation had been conducted against the then appropriate regulatory authority, the “Medical Board of Queensland.” The Notice is not misleading in respect of that matter.
Whether the wrong judgment was attached to the Notice
The debtor contends that the Notice was defective and failed to accord with the prescribed form because the wrong judgment was attached.
It is correct to state that the Notice must accord with the judgment. The debtor contended that in circumstances where costs are claimed, as is the case here, the judgment awarding costs is the judgment to be attached. It was contended that the correct judgment was not attached, as what was attached was the judgment of the District Court quantifying costs. He contended that this was a fatal error, and in doing so relied upon Stec v Orfanos [1999] FCA 457. Respectfully, I do not agree.
A review of Stec v Orfanos illustrates why there was no error in that instance. In that case that the original judge’s order ceased to have effect because it was subject to a stay application. In due course, the costs the subject of the order were assessed and an allocatur issued. The original order was reinstated on appeal. The bankruptcy notice was supported by the judgment made on the appeal, together with the allocatur. The argument concerned whether or not the bankruptcy notice ought to have had the original judgment, that is, the judgment that was under appeal, or whether it ought to have included the judgment of the appeal judge.
That case is distinguishable from these circumstances and is of no assistance. In answer to the debtor’s submissions the creditor contends that the judgment which was attached to the Notice is the judgment of the District Court of Queensland which ordered the costs. That was the final order, and that is the final order by operation of r.740 UCPR.
For its part, the creditor relies upon a decision of Wilson FM, as he then was, in Ivory v Telstra Corporation Limited and Ors [2010] FMCA 123, where his Honour observed:
“[14] As Senior Counsel for the respondent explained, in his excellent written submissions, the costs provisions of the Uniform Civil Procedure Rules (Qld) were changed on 10 December 2007, such that the issued addressed by me in Australian and New Zealand Banking Group Ltd v Menso [2006] FMCA 1522 are no longer apposite. Now, the effect of the Uniform Civil Procedure Rules is that the order signed by the Deputy Registrar after an assessment of legal costs takes effect as a “money order” and is enforceable in its own right. UCPR 740 makes it clear that the order made by the Deputy Registrar after the assessment of costs itself takes effect as a judgment of the court. The fact that the order of the Registrar is a money order, as defined in Sch 2 to the Supreme Court Act 1991 means that it is a final judgment or order as required by s 40(3)(b) Bankruptcy Act 1966. I accept the submissions of the respondent and find that the Bankruptcy Notice is not defective by reason of the attachment only of the order of the Deputy Registrar made 3 September 2008.”
It is to be noted that his Honour’s decision was upheld on appeal. See Ivory v Telstra Corporation Ltd [2010] FCA 1361 at [5]. As was noted by the creditor’s counsel, the question of whether a costs order made after an assessment or taxation is a final judgment is a matter that depends upon the rules of the particular court. In Queensland at least the UCPR now provides that after an assessment such an order is a judgment of the court. In this instance, that judgment has been attached to the Notice and, accordingly, it is not invalid on that basis. This ground is refused.
Whether the Notice claimed an incorrect and/or inflated amount
The debtor alleges that the Notice itself claimed an incorrect and inflated amount. I have earlier alluded to the involvement of the debtor’s professional indemnity insurer in its payment of part of the costs due on the judgment. There is no doubt that there was, by reason of that matter, an overstatement in the Notice of a sum of $12,037.23 because of a failure to allow for the discount that was afforded to the indemnity insurer in the resolution of that part of the costs in respect of which it was due to indemnify the debtor.[8]
[8] As can be deduced from the affidavit of Harry McCay filed 12 May 2014 at [5].
The debtor claims that, in those circumstances, the Notice erroneously represents the sum to be paid at $247,862.00. He contends that it is a significant failure to record accurately what is, in effect, a payment, and that, as such, the Notice is misleading and defective. In large part the debtor relied upon an observation made by Heerey J in St George Wholesale Finance Pty Ltd v Spalla [2000] FCA 1094. In that case there was an error in a bankruptcy notice at Item 5, which allows for payments made on and/or credit allowed since the judgment or orders. In that case a sum of money had been paid. Item 6 represented the total debt amount. In dealing with that overstatement of the total debt amount, his Honour stated:
“[28] … In my opinion this particular defect is not within s41(5) [Bankruptcy Act 1966 (Cth)][9] because the defect is not "only that the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due" (emphasis added). It is true that the amount specified in the notice as due ($2,781,173.50) exceeded the amount in fact due. However there was another and separate, albeit related, defect in the non-recording of payments or credits received. Since s41(5) does not apply, no question of extending the time for giving of a notice arises.”
[9] Section 41(5) Bankruptcy Act 1966 (Cth) states: “A bankruptcy notice is not invalidated by reason only that the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due, unless the debtor, within the time allowed for payment, gives notice to the creditor that he or she disputes the validity of the notice on the ground of the misstatement.”
His Honour took a very narrow view of s.41(5), observing that not only could it not apply, that is, the debtor could not give a notice under s.41(5) because of the overstatement of the total debt, but also that the bankruptcy notice itself was defective and beyond s.41(5) because it contained another error relating to the misstatement of credits due. He held that it was only in the event that there was an overstatement simpliciter that s.41(5) applied. That matter was subsequently considered by Gilmour J in Deputy Commissioner of Taxation v Cumins (No.5) (2008) 72 ATR 398, where his Honour was examining a similar issue. In that case Gilmour J observed that Lindgren J had considered a similar situation in Hudson v Donald & Whalan (unreported, Federal Court of Australia, Lindgren J, 12 August 1997) and on this point had expressed matters in these terms:
“How do subs41(5) and subs(6) apply to the new form? Clearly, the expression in subs41(5) "the sum specified in the notice as the amount due to the creditor" is apt to refer at least to the amount shown as "Total debt owing." Does it also refer to the component parts of that amount, in particular, "Amount of judgment or order"? Although the contrary is arguable, I think that it does, at least in a case such as the present, where the overstatement in the "Total debt owing" is no more than a reflection of an overstatement in one of those elements. Except in a case of an arithmetical error of addition, an overstatement of the "Total debt owing" will always predicate an error in one or more of the component elements. To confine the operation of the subsections to a case where there is an overstatement only of the "Total debt owing" due to an arithmetical error of addition, would be too narrow a construction. Where, as here, the overstatement of the amount of the "Total debt owing" is attributable to an overstatement in the amount of one or more components in the Schedule, the excessive specification of "the sum specified in the notice as the amount due to the creditor" to which subs41(5) refers, extends to embrace the corresponding and causative excessive specification in the Schedule of an amount or amounts of the latter kind.”
Gilmour J noted that an appeal from that decision was dismissed. As his Honour observed, the wider construction in Hudson v Donald & Whalan, which the Full Court endorsed, is plainly to be preferred to the narrow construction of St George Wholesale Finance Pty Ltd v Spalla. It follows that if there has been some error in the statement of the total debt amount, occasioned by any other error evident in any of its constituent elements in Items 1-5 earlier, the notice remains valid and it remains open in such a case for the debtor to give notice under s.41(5).
It follows that I do not accept that the authority cited by the debtor assists me in this instance. In this case the creditor says that the simple answer to any overstatement, if one has been identified by the debtor, is provided in s.41(5).
In this case the debtor knew that there had been a compromise with respect to the costs paid by his indemnity insurer in respect of part of the costs due pursuant to the judgment. As I have earlier noted it is a matter of which the debtor was aware, and accordingly had he any occasion to consider the matter he properly ought to have given notice under s.41(5). In any event, if one adopts a sympathetic approach to the debtor’s situation, that is that he did not recognise that there had been an overstatement, a question then arises as to whether or not he was misled because the Notice constituted a misstatement.
In part, that matter was also examined by Gilmour J in Deputy Commissioner of Taxation v Cumins (No.5). There his Honour observed:
“[40] The full court in Seovic Civil Engineering Pty Ltd v Groeneveld (1999) 87 FCR 120 in obiter set out what, in principle, is required to constitute notice of a “misstatement” for the purposes of s 41(5). In so doing it considered but doubted the correctness of both Re Murray (1959) 18 ABC 152 at 156 upon which the respondent here relies, as well as Re Wilhelmsen; Ex parte Gould (1986) 11 FCR 107 at 108. It said (at FCR 129 [36]; ALR 551 [36]):
“The expression ‘the mis-statement’ strongly suggests that the debtor must do more than merely assert that there is a mis-statement in the bankruptcy notice. The subsection requires the debtor to provide sufficient information in the notice to enable a creditor to identify what is said to be the alleged mis-statement. Only then does the debtor's notice displace the general rule established by s 41(5), that the bankruptcy notice is not invalidated only by reason that the sum specified therein as the amount due to the creditor exceeding the amount in fact due. (Emphasis in original.)”
The court continued:
“The point of the notice is to draw to the creditor's attention the mis-statement, thereby giving the creditor the opportunity to consider, for example, whether the bankruptcy notice should be withdrawn and a fresh notice, correcting the mis-statement, issued. If the creditor is given no hint in the notice as to the nature of the mis-statement, there is a considerable risk that the debtor will be able to take unmeritorious advantage of minor errors (such as the small mistake in the present case) and that unnecessary and wasteful litigation will eventuate. It is no answer to say that the creditor can ask for particulars, since the debtor would not be obliged to give any until after litigation had been instituted. Indeed, a debtor wishing to take advantage of the technicalities of the law of bankruptcy might be well-advised to say as little as possible for as long as possible about the true nature of the alleged mis-statement in the bankruptcy notice.”
The requirement for some specificity did not, the full court considered, extend to require the identification of the mis-statement with “complete precision” or that the debtor “specify the exact amount of the alleged excess.” A debtor's notice should be given a “benevolent construction.””
As I have noted, here there was no such notice, but on the facts as I see them there should have been. That leads me to the question of whether, adopting a benevolent approach from the debtor’s perspective, the Notice would mislead and/or would invite the operation of s.306 Bankruptcy Act 1966 (Cth)[10] in the absence of the operation of s.41(5). In my view, if applied for it would be an appropriate case to engage the operation of s.306, because no prejudice could be demonstrated to a debtor who was fully aware of the true quantum of the debt.
[10] “Formal defect not to invalidate proceedings.”
In any event, as I have earlier observed this is a case where I have determined that a s.41(5) notice was required but not given, and it follows that in respect of the alleged omitted credit, in the circumstances of this case, a reasonable debtor would not have been misled as to what was necessary for him to comply with the Notice. I accept the observation of Gilmour J that:
“[63] … A bankruptcy notice is not liable to be set aside by reason only of an overstatement unless the debtor gives notice to the creditor under s 41(5) …”
In this case, as in the matter before Gilmour J, a notice was required but not given. Similarly, no question of s.306 arises for consideration. It follows that this ground also fails.
Whether there existed a set-off that could not have been set-off in the initial action
The last ground advanced by the debtor was that there was a cross-demand exceeding the judgment which could not have been set-off in the initial action. I have earlier referred to the proceedings which have now been commenced by the debtor in the Supreme Court of Queensland. I will not rehearse the history of them except to observe that they have gone through a significant transformation from broad-based proceedings, alleging, as I have earlier noted, bad faith, misfeasance, fraud and abuse of process against a series of doctors, to a more confined action for negligence against AHPRA. In order to succeed on this ground it is necessary to establish that there was or is a counter-claim, set-off or cross-demand that could not have been set-off in the proceedings in which the judgment was obtained.
It is necessary for the debtor to demonstrate that there is a prima facie case. The position concerning this matter was summarised by Lindgren J in Glew v Harrowell, in the matter of Glew [2003] FCA 373, where his Honour made this observation:
“There are authorities suggesting that Glew and Tresidder must satisfy me of the following interrelated and sometimes overlapping matters:
• that they have a "prima facie case", even if they do not adduce evidence which would be admissible on a final hearing making out that case (Ebert v The Union Trustee Co of Australia Ltd (1960) 104 CLR 346 ("Ebert") at 350; Re Brink; Ex parte Commercial Banking Co of Sydney Ltd (1980) 44 FLR 135 ("Brink") at 141; Gomez v State Bank of NSW Ltd [2002] FCAFC 101 at [17], [18]);
• that they have "a fair chance of success" or are "fairly entitled to litigate" the claim: Brink at 141; Re Gould; Gould v Day [1999] FCA 1650 at [27], [28]; Re Capsanis; Capsanis v The Owners - Strata Plan 11727 [2000] FCA 1262 at [11]); and
• that they are advancing a "genuine" or "bona fide" claim (Re Capsanis; Capsanis v The Owners - Strata Plan 11727 [2000] FCA 1262 at [11]).”
So far as this Court is concerned it is not necessary for it to embark upon a mini trial of the counter-claim, set-off or cross-demand; however, it must be supported by some evidence. The mere production of a statement of claim will not be sufficient. As Mansfield J observed in Cosenza v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] FCA 85:
“[42] The mere production of a statement of claim in an action alleging facts which, if true, might give rise to such a claim will be insufficient to satisfy the court as required: Re Cox (1934) 7 ABC 98. The debtor must “show” the existence of a prima facie case in support of the counterclaim, set-off or cross-demand, by producing evidence of it: Re Brink; Ex parte Commercial Banking Co of Sydney Ltd (1980) 44 FLR 135 at 140, even though the evidence that would make out its prima facie case would not need to be admissible as on a final hearing: Ebert v The Union Trustee Co of Australia Ltd (1960) 104 CLR 346 at 350. There must be some reasonable prospect of success on the claim.”
These matters have been recently reviewed by Judge Lloyd-Jones of this Court when he summarised the position in McDermott v Wakim [2013] FCCA 1950 as follows:
“[46] Mr Spencer contends that the mere production of a statement of claim in an action that pleads facts, if proven, is not sufficient. “A statement of claim is no evidence of anything”: Re Foster; Ex parte Basan (1885) 2 Morr 29 at 33 per Brett MR … Further, it is also not sufficient for a debtor to file an affidavit which merely propounds a claim and states how the debtor proposes to establish it …
[47] The obligation upon the debtor is to adduce evidence that provides reasonable grounds to litigate … In order to satisfy the obligations the debtor must provide sufficient evidence to the court to enable it weigh up considerations as to the legal and factual merits of the claim relied upon by the debtor and the justice of allowing the bankruptcy proceedings to go ahead or requiring them to await the determination of the debtor’s claim …”
I note also the comments of Moore J in Melbourne v Relativity Pty Ltd [1999] FCA 160:
“[33] Counsel for the respondents relied on a proposition in Re a Debtor (1983) 3 All ER 545 (at 553 per Warner J and 558 Sir Robert Megarry VC agreeing) that the affidavits filed in support of a contention that the debtor has a counter claim, set off cross demand must disclose a cross demand which is capable of being quantified if it is for an unliquidated amount and the [supporting] affidavits must quantify it. However the position in Australia is more flexible: see Re Donkin; Ex parte AGC Advances Ltd (1994) 52 FCR 271. In any event, as a matter of fact, in these proceedings an affidavit of the applicant sworn on 6 March 1998 and filed that day quantified the damage to the applicant's property at the restaurant at $200,000. However this affidavit was not read by counsel for the applicant as part of the substantive hearing of the application to set aside the bankruptcy notice. Rather it was indicated that the first affidavit could be treated as “assertions of [the applicant’s] case rather than evidence of them.””
In this case the debtor’s proposed Amended Statement of Claim is not verified, and there is no evidence to support any of the assertions or allegations made in the document. Additionally, as was contended for the creditor, there are serious hurdles to be bounded before the debtor is likely to be given leave to prosecute the Amended Statement of Claim which is now articulated. There are, for instance, issues in relation to limitations of action; there is to be a complete change of the defendant; and there is an entirely fresh cause of action pleaded against that background. Furthermore, there is no material before the Court to provide any affirmation, even in a most elementary way, of the matters that are alleged in a factual sense in support of that claim.
In summary, I do not think that the debtor has done enough to prove that there is a bona fide counter-claim, set-off or cross-demand to be prosecuted that could not have been set-off in the initial proceeding giving rise to the judgment. I also refuse the application on that ground.
Conclusion
It follows that none of the matters advanced by the debtor satisfy me that the Notice is invalid. The application is dismissed.
I certify that the preceding seventy-two (72) paragraphs are a true copy of the reasons for judgment of Judge Burnett
Date: 29 May 2014
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