Burrows v Macpherson and Kelley Lawyer (Sydney) NSW
[2022] FedCFamC2G 1048
Federal Circuit and Family Court of Australia
(DIVISION 2)
Burrows v Macpherson and Kelley Lawyer (Sydney) NSW [2022] FedCFamC2G 1048
File number(s): SYG 874 of 2022 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 16 December 2022 Catchwords: BANKRUPTCY – application to set aside bankruptcy notice – whether applicant applied to set aside bankruptcy notice before the time for complying with its requirements expired – assuming application to set aside bankruptcy notice was made before the time for complying with its requirements expired, whether the time for complying with the bankruptcy notice should be extended pending the determination of an application to set aside on the ground of fraud the judgment debt on the basis of which the bankruptcy notice was issued – whether judgment debtor has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt – whether reason has been shown for questioning whether behind the judgment debt there is, in truth and reality, a debt due to the creditor – whether amount demanded in the bankruptcy notice overstated the amount of the judgment debt – application dismissed. Legislation: Bankruptcy Act 1966 (Cth) ss 40(1)(g), 41(6A)
Bankruptcy Regulations 2021 (Cth) s 102
Competition and Consumer Act 2010 (Cth) Sch 2, s 18(1)
Family Law Act 1975 (Cth) s 121
Family Law Rules 2004 (Cth) r 24.13
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) r 3.02
Legal Profession Act 2004 (NSW) ss 134(1), 139(1)
Uniform Civil Procedure Rules 2005 r 33.13
Cases cited: Banque Commerciale S.A. v Akhil Holdings Limited (1990) 169 CLR 279
Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29
Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd [2021] NSWCA 148
Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264
Clyne v Deputy Commissioner of Taxation (1982) 66 FLR 301
Derek George Shephard v Chiquita Brands South Pacific Limited [2004] FCAFC 76
Forrest v Australian Securities and Investments Commission (2012) 247 CLR 486
Glew v Harrowell, in the matter of Glew [2003] FCA 373
Hearne v Street [2008] HCA 36
Re Brink; Ex parte The Commercial Banking Company of Sydney Ltd [1980] FCA 78; (1980) 44 FLR 135
Three Rivers District Council v Bank of England (No 3) [2003] 2 AC 1
Wallingford v Mutual Society (1880) 5 App. Cas. 685
Wentworth v Rogers (No 5) (1986) 6 NSWLR 534
Wren v Mahony (1972) 126 CLR 212
Zali Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd No 2 NSWDC [2019], 28.02.2020
Zali Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd No 2 NSWDC [2019], 20.12.2019
Division: General Number of paragraphs: 122 Date of last submission/s: 31 October 2022 Date of hearing: 21 October 2022 Place: Sydney Counsel for the Applicant: Ms R Winfield Solicitor for the Applicant: Zali Burrows Counsel for the Respondent: Mr D Neggo Solicitor for the Respondent: Macpherson Kelley Pty Ltd ORDERS
SYG 874 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: ZALI BURROWS
Applicant
AND: MACPHERSON AND KELLEY LAWYER (SYDNEY) NSW ACN 127 962 298
Respondent
order made by:
JUDGE MANOUSARIDIS
DATE OF ORDER:
16 december 2022
THE COURT ORDERS THAT:
1.The application by the applicant for leave to rely on the document titled “Applicant’s Submissions in reply 31.10.2022” is dismissed.
2.The application to set aside bankruptcy notice BN256021 is dismissed.
3.Subject to order 4, the applicant pay the respondent’s costs.
4.The parties have liberty to apply within 28 days after these orders are pronounced to vary or discharge order 3.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
introduction
The applicant, Ms Burrows, applies to set aside a bankruptcy notice that was issued on 20 April 2022 on the application of the respondent, Macpherson & Kelley Lawyers (Sydney) Pty Ltd (MKL). The bankruptcy notice demands that Ms Burrows pay $130,000 to MKL (Judgment Debt). That represents the amount of costs the District Court of New South Wales (District Court), on 28 February 2020, ordered Ms Burrows pay to MKL (District Court Costs Order) in a proceeding Ms Burrows brought in the District Court (District Court proceeding) against MKL, as first defendant, and against Ms Di Condio, as second defendant.
Ms Burrows relies on four grounds.
(a)First, “there are proceedings to set aside the underlying judgment”. That may be taken to be a reference to the proceeding (Supreme Court proceeding) Ms Burrows commenced in the Supreme Court of New South Wales (Supreme Court) on 20 October 2022 to set aside, on the ground of fraud, the orders made in the District Court proceeding (including the District Court Costs Order), and the orders (Court of Appeal orders) made by the Court of Appeal of the Supreme Court New South Wales (Court of Appeal) dismissing an application to appeal against the orders made in the District Court proceeding.
(b)Second, Ms Burrows claims she has a counter claim or set off that exceeds the amount of the Judgment Debt. That is a reference to the claims Ms Burrows makes in a proceeding she commenced in the Federal Court of Australia (Federal Court proceeding).
(c)Third, Ms Burrows claims the Judgement Debt is not based on a true debt because MKL undertook the legal work by which it defended itself in the District Court proceeding; and, for that reason, MKL incurred no liability for the legal work that was performed to defend itself for which it is entitled to be indemnified by an order for costs.[1]
(d)Fourth, Ms Burrows claims the bankruptcy notice overstates the debt she might otherwise owe because the bankruptcy notice does not take into account $50 held in a trust account.
[1] Relying on Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29
MKL disputes each of the grounds on which Ms Burrows relies. MKL submits there is no substance in the claims Ms Burrows makes in the Federal Court and in the Supreme Court proceedings. MKL also submits that findings have been made in the District Court proceeding and in the Court of Appeal that MKL retained an incorporated legal practice, M & K Lawyers Group Pty Ltd (MKLG), to provide professional legal services in the District Court proceeding, and MKL incurred costs when retaining MKLG in relation to which it was entitled to be indemnified by an order for costs. MKL also submits that the bankruptcy notice was served on Ms Burrows on 24 May 2022, but she failed to apply to set aside the bankruptcy notice before the time for compliance with its requirements had expired and, for this reason, the Court does not have jurisdiction to consider Ms Burrows’ application to set aside the bankruptcy notice.
To be in a position to consider and determine the grounds on which the parties rely, it will be necessary to set out the circumstances in which MKL applied for the issue of the bankruptcy notice, and the claims Ms Burrows makes in the Federal Court and in the Supreme Court proceedings. Before I undertake these tasks, it will be necessary to refer to what occurred at and after the hearing on 21 October 2022 of Ms Burrows’ application to set aside the bankruptcy notice.
the hearing to set aside the bankruptcy notice
At the end of the hearing I granted Ms Burrows leave to file by 28 October 2022 written submissions “by way of reply to submissions made by” MKL by reference to exhibits JDS-1 and JDS-2, being exhibits referred to in the affidavit Mr Siddle, MKL’s lawyer, made on 11 October 2022. I also granted each of the parties leave to file a note that identifies evidence relating to MKL seeking access to documents from the Family Court of Australia (Family Court). MKL filed a note on 28 October 2022, but Ms Burrows did not file her submissions by 28 October 2022. Instead, on 31 October 2022 Ms Burrows sent to my associate’s inbox an email which attached a document titled “Applicant’s Submissions in Reply 31.10.2022” (ASR). The ASC comprises 148 paragraphs, and refers to approximately 180 pages of documents (Additional Documents). In her email Ms Burrows stated as follows:[2]
Dear Associate
With sincere apologies for their lateness, I attach the Applicant’s submissions in response to Applicant’s[sic] submissions.
I am having difficulty with uploading at this stage with the portal and will keep trying.
The delay was caused by having to peruse sheer volume of material filed by the Respondent on 11 October 2022 in the affidavit of Mr Jeffrey Siddle with 667 pages of exhibits in a link (due 28 September, filed 13 days late with no application for leave, no apology and no explanation).
The Respondent declined to consent to our filing these submission, late.
The Applicant seeks leave to reopen to tender documents, as attached, which would have been sought had the Respondent filed in a more timely fashion:
The Respondent produced a document called Notice to Law Society at page 557 of exhibit to affidavit of Jeffrey Siddle worn 20 October 2022. Ultimately, the Respondent did not read the affidavit but the Applicant now seeks leave to tender that document, Rory Amon's email re trust account, Registrar Campbell’s orders, the Applicant’s costs included fees for the Respondent’s undertaking this exercise and other documents in response (indexed attachments to the submission).
We sincerely apologise for the day.
[2] I have, in chambers, marked ASR and the documents that accompanied it as “MFI1”.
On 1 November 2022 I directed my associate to send the following email to the parties:
Subject to any contrary submission the parties may wish to make, his Honour proposes to approach the applicant’s submissions, and the additional documents referred to in the submissions, as an application by the applicant for leave to rely on submissions served outside the time provided for by the orders his Honour made on 21 October 2022, and an application by the applicant for leave to reopen. If his Honour refuses both applications, his Honour will proceed to give judgment giving reasons for the refusal, together with the issues that were addressed at the hearing. If his Honour grants the applicant leave to rely on her submissions, or to reopen her case, his Honour will give judgment on those questions and set the matter down for further hearing.
Whether I should grant the applicant leave to rely on the ASR (and, therefore, the Additional Documents) largely turns on whether there would be any utility in permitting Ms Burrows to rely on the ASR.
background
Family Court proceeding
In around 2011 Ms Burrows retained MKL to provide professional legal services in connection with a parenting proceeding in the Family Court (Family Court proceeding). Ms Di Condio, a lawyer who was then employed by MKL, had carriage of the matter on behalf of Ms Burrows.
MKL was incorporated on 11 October 2007;[3] and its main business address was in New South Wales.[4] On 1 February 2008 MKL’s main name was changed to “Macpherson & Kelley Lawyers (Sydney) Pty Ltd”; and on 30 August 2010 the business name “MACPHERSON & KELLEY LAWYERS” was added.[5] It is open to infer, and I find, that at the time Ms Burrows engaged MKL to provide legal services, MKL was an “incorporated legal practice” within the meaning of s 134(1) of the (now repealed) Legal Profession Act 2004 (NSW) (LP Act), which traded using the name “Macpherson & Kelley Lawyers”.
[3] Exhibit JDS-1, page 636
[4] Exhibit JDS-1, page 646
[5] Exhibit JDS-1, page 646
That inference is confirmed by an email an officer of the Law Society of New South Wales sent to Mr Lavada, a lawyer employed by MKLG, on 25 July 2022 in which it was confirmed that “the Registry records show that Macpherson & Kelley Lawyers (Sydney) Pty Ltd, Law Practice Number 19720, was an incorporated legal practice registered with the Law Society of New South Wales, from 1 February 2008 to 30 June 2015”.[6] That MKL was an incorporated legal practice is also confirmed by a document which includes a heading “Notice of Termination of Provision of Legal Services under s.139(1)” of the LP Act dated 14 July 2015 (139 Notice). [7] The notice relates to “Macpherson & Kelley Lawyers (Sydney) Pty Ltd”, that is, MKL, and states that MKL intends to cease to engage in legal practice as an incorporated legal practice in New South Wales on 30 June 2015; and it also states that another law practice, “M & K Lawyers Group Pty Ltd” (that is, MKLG), has taken over the business of MKL.[8]
[6] Affidavit Z Burrows 21.10.2022, [4]; annexure “ZB-2”, page 6. (The annexure note on annexure ZB2 incorrectly records it is annexed to an affidavit of 20 June 2022.)
[7] Affidavit Z Burrows 21.10.2022, [4]; annexure “ZB-2”, page 8. (The annexure note on annexure ZB2 incorrectly records it is annexed to an affidavit of 20 June 2022.)
[8] Affidavit Z Burrows 21.10.2022, [4]; annexure “ZB-2”, page 9. (The annexure note on annexure ZB2 incorrectly records it is annexed to an affidavit of 20 June 2022.)
The Family Court proceeding was listed for hearing on 4 October 2011. On 30 September 2011 Ms Burrows and the father of their child agreed to consent to the Family Court making parenting orders; but they did not agree about costs. On 4 October 2011 the matter came before a Registrar of the Family Court who, after hearing argument on the question of costs, made parenting orders in terms of the parties’ agreement, but also made an order that the father pay Ms Burrows’ costs on a party/party basis, as agreed or as assessed (Family Court Costs Order).[9]
[9] Zali Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd NSWDC [2019], 20.12.2019, at [14]-[18]
On 1 November 2011 the father filed an application to discharge the Family Court Costs Order. On 10 November 2011 Ms Di Condio informed the father that Ms Burrows offered to accept $20,000 in satisfaction of the Family Court Costs Order, but that if the father did not accept the offer within 14 days Ms Burrows would proceed to have her costs assessed. The father made a counter offer, but the parties were unable to agree. Ms Di Condio prepared a costs assessment, and incorrectly advised Ms Burrows she was required to submit the costs assessment to the Supreme Court for determination by a costs assessor.[10] By early 2012 Ms Burrows became aware that the application to the Supreme Court for the assessment of her costs was misconceived, and that Ms Burrows’ costs could only be assessed under Schedule 3 to the Family Law Rules 2004 (Cth) (Family Law Rules).[11]
[10] Zali Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd NSWDC [2019], 20.12.2019, at [30]-[33]
[11] Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd [2021] NSWCA 148, at [30]
On 4 October 2012 Ms Burrows applied for an order that the father pay her $22,188.43 in satisfaction of the Family Court Costs Order. That application came before the Family Court on 5 June 2013, on which day procedural orders were made. The matter came back before a Registrar on 2 August 2013. By that time Ms Burrows and the father had reached agreement on the parenting of their children; and the terms of the agreement were recorded in a document titled “Consent Orders” (Family Court Consent Orders) signed by Ms Burrows and the father, which commenced with the words: “That all prior Orders are discharged and dismissed”. The Registrar made the following orders:[12]
BY CONSENT and pursuant to Part 10.4 of the Family Law Rules, orders, declarations and notations are made in terms of the “Consent Orders” attached.
[12] Zali Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd NSWDC [2019], 20.12.2019, at [38]-[41]
MKL applies to have costs assessed
On 1 October 2014 MKL applied to the Supreme Court for an assessment of the costs of legal services MKL had provided to Ms Burrows in the Family Court proceeding. On 6 March 2015 a costs assessor determined that MKL’s reasonable costs were $12,240.01 (Local Court Costs Order); and MKL caused the costs assessor’s determination to be registered as a judgement of the Local Court of New South Wales (Local Court).
MKL and MKLG
An ASIC extract relating to MKL records that on 21 June 2015 “the business name MACPHERSON & KELLEY LAWYERS” was removed.[13] An ASIC extract in relation to MKLG records that on 22 September 2015 “the business name Macpherson Kelley was added”.[14] MKLG was incorporated on 31 October 2006 as D J Clark Group Pty Ltd. On 14 December 2007 MKLG changed its name to “M & K Lawyers Group Pty Ltd”;[15] and on 2 May 2019 MKLG changed its name to “Macpherson Kelley Pty Ltd”.[16]
[13] Exhibit JDS-1, page 646
[14] Exhibit JDS-1, page 664
[15] Exhibit JDS-1, page 665
[16] Exhibit JDS-1, page 664
ASIC’s records of the removal from MKL of the name “MACPHERSON & KELLEY LAWYERS”, and the addition to MKLG of the name “Macpherson Kelley” appear to relate to the matters recorded in the 139 Notice, and to the following findings Acting Judge M Craig QC (Craig ADCJ) made in the judgment his Honour delivered in the District Court proceeding on 26 February 2020:[17]
Until late 2012, the first defendant owned and traded under the business name “Macpherson Kelley”. In late 2012 (no date is stated in the evidence) the defendant ceased trading as Macpherson Kelley, that business name then being acquired by M & K Lawyers Group Pty Ltd. That company changed its name to Macpherson Kelley Pty Ltd on 30 May 2019. According to the ASIC register, it held the name M & K Lawyers Group Pty Ltd from 14 December 2007 until the name change in May 2019. The principal place of business is recorded as being at a Victorian address as its registered office.
[17] Zali Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd No 2 NSWDC [2019], 28.02.2020, at [10]
This findings appears to be incorrect to the extent it says MKL ceased trading as MacPherson Kelley in late 2012. It appears MKL ceased trading as MacPherson Kelley by 1 July 2015. That is suggested by the 139 Notice itself. It is also suggested by a letter dated 13 May 2015 Macpherson + Kelley Lawyers Pty Ltd sent to Ms Di Condio:[18]
Over the last few months, we have been working on a project to move the Victorian, NSW and Queensland state practices into a single company. You will have heard about this from one of Damian Paul’s presentations earlier in the year and additionally in recent communications. At its core, this change is about improving our consistency and efficiency across all offices.
This move to one firm takes effect on 1 July 2015.
In terms of your employment, this simply means that on 1 July 2015 your employment with Macpherson & Kelley Lawyers (Sydney) Pty Ltd will transfer to M&K Lawyers Group Pty Ltd.
Therefore, subject to the restructure completing on 1 July, I am pleased to offer you employment in your current role commencing on this date with M&K Lawyers Group Pty Ltd. Your current rate of pay and other terms of employment will stay the same, or as adjusted as part of the 2015 annual review process.
As part of this offer, your prior service with Macpherson & Kelley Lawyers (Sydney) Pty Ltd will be recognised as continuous. Any accrued entitlements that you have to annual leave and personal leave (sick leave and carer's leave), as well as your length of service for the purposes of parental leave and long service leave will be assumed and recognised by M&K Lawyers Group Pty Ltd.
We also remind you of your obligations to make sure you are familiar with, understand and comply with the firm's policies and procedures (as amended from time to time). These can be found at . . . .
In addition to this letter, it is compulsory for all employees including Principals to complete a new tax file number declaration form and return to . . . .
Below are the details you provided on your last tax file number declaration for your reference.
[18] MFI1, Additional Documents, page 1
District Court proceeding
On 3 November 2015 Ms Burrows commenced the District Court proceeding. In her amended statement of claim filed on 18 November 2016 Ms Burrows makes the following claims:[19]
(a)In breach of duty, MKL and Ms Di Condio failed or refused to enforce the Family Court Costs Order.
(b)MKL did not have authority to pay to a barrister $4,400 of the $4,785 it paid to the barrister.
(c)MKL was not entitled to the costs in relation to which the Local Court Costs Order was made, and MKL acted improperly in seeking to enforce the Local Court Costs Order.
[19] Exhibit JDS-1, pages 18-26
In its further amended defence MKL admitted a number of allegations, but denied it acted in breach of any duty it owed to Ms Burrows.
The matter came for hearing before Craig ADCJ on 18 April 2018. In the course of his opening, Mr Foster, counsel for Ms Burrows, indicated that Ms Burrows had made an affidavit that morning that she proposed to read. Counsel submitted that Ms Burrows’ affidavit responded to an affidavit made by Ms Smith, a solicitor instructing Mr Neggo, counsel for MKL, which had been provided to Ms Burrows on 15 February 2018. Mr Neggo submitted that Ms Burrows’ affidavit was not in reply to Ms Smith’s affidavit. Mr Neggo submitted as follows:[20]
As I say, none of that’s in reply in Ms Smith’s affidavit, which was served on Monday. It goes to a very discrete point, which is efforts we have made, so far unfortunately unsuccessfully although some optimism still remains – but efforts we have made to obtain from the Family Court file a form of orders that was made later than 2011, which, in our view, is the most important document in the case.
So having been able to obtain that, notably because of objection by the plaintiff in the Family Court, we have an affidavit from Ms Smith, who says, “I went down, I saw the file, I’ve seen the orders. I’m not allowed to make a copy of them, but I’ve made a notation of what the relevant orders are and this is what they are”. We’ve put on a notice to produce for those orders. Hopefully, there will be some positive response to that this morning when I call on it. That’s the only document we want.
[20] Exhibit JDS-1, page 68.35-50
It is open to infer, and I find, that the “Family Court file a form of orders” to which Mr Neggo referred are the Family Court Consent Orders.
After further discussion Mr Neggo indicated he would call on the notice to produce and, if documents are produced in answer to it, it may not be necessary for Mr Neggo to read Ms Smith’s affidavit. Mr Neggo called on the notice to produce requiring production by Ms Burrows of the Family Court Consent Orders;[21] but there was nothing to produce because Mr Foster said Ms Burrows “doesn’t have them”.[22] It is apparent from the reasons for judgment Craig ADCJ delivered on 20 December 2019, however, that the Family Court Consent Orders were produced, and they became exhibit 4.[23]
[21] Exhibit JDS-1, page 70.45
[22] Exhibit JDS-1, page 74.30
[23] Zali Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd NSWDC [2019], 20.12.2019, at [66]
On 20 December 2019 Craig ADCJ delivered reasons for judgment in which his Honour concluded that judgment should be entered against Ms Burrows, and that Ms Burrows should pay the defendants’ costs, as agreed or assessed.[24] Craig ADCJ found there was no breach of duty by MKL.[25] His Honour also found that Ms Burrows suffered no loss in relation to her claim that MKL failed to enforce the Family Court Costs Order:[26]
Having regard to the events that occurred and the terms in which the orders made on 2 August 2013 are expressed, I find that the order for costs made on 4 October 2011 has been “discharged and dismissed”, with the consent of the plaintiff, as a result of which she no longer has an entitlement to recover those costs. In the context of the present proceedings and importantly for her claim in negligence, she is not able to demonstrate that she has sustained damage by reason of the conduct alleged against the defendants.
If contrary to my finding, the order made on 2 August 2013 did not operate to discharge and dismiss the costs order made on 4 October 2011, the consequence for the plaintiff is that her application formalised on 5 October 2011 for either an order for payment of a fixed sum or leave to bring an assessment of costs out of time remains to be determined. That application having been made subsequent to the termination of the first defendant's retainer, it was for the plaintiff to pursue and agitate the determination of that application. She has not done so. As a consequence, on that account she has not demonstrated damage so as to satisfy her entitlement to sustain her claim in negligence and further on the claim for breach of contract she has, by her own inaction, failed to mitigate any loss.
[24] Zali Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd NSWDC [2019], 20.12.2019, at [107]
[25] Zali Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd NSWDC [2019], 20.12.2019, at [75]-[78]
[26] Zali Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd NSWDC [2019], 20.12.2019, at [70], [71]
On 24 January 2020 MKL applied for a gross sum costs order, and Craig ADCJ heard the application on 26 February 2020. Counsel for Ms Burrows accepted MKL was entitled to recover the disbursements it incurred in the District Court proceeding; but counsel submitted, on the basis of the judgments in Bell Lawyers Pty Ltd v Pentelow,[27] that MKL was not entitled to recover any amount for professional legal services. MKL, on the other hand, submitted that it did not act for itself in the District Court proceeding. MKL submitted that legal services were provided to it by a separate legal entity, MKLG.
[27] Bell Lawyers Pty Ltd v Pentelow [2019] FCA 29
Craig ADCJ found MKL provided legal services to Ms Burrows under the name “Macpherson Kelley” in relation to the Family Court proceeding; but in late 2012, after MKL ceased providing legal services to Ms Burrows, a separate company, MKLG, acquired the name “Macpherson Kelley”. His Honour further found that MKLG provided professional legal services to MKL in connection with MKL’s defence of the claims Ms Burrows made in the District Court proceeding. For that reason, Craig ADCJ concluded MKL was entitled to an order for costs against Ms Burrows to indemnify it for the costs it incurred in retaining MKLG to provide legal professional services to MKL in connection with the District Court proceeding.
MKL’s communications with the Family Court Registry
It would be convenient at this point to refer to the circumstances in which MKL sought and obtained access to Family Court file for the Family Court proceeding (Family Court proceeding file). That is necessary because MKL’s accessing that file is a central factual foundation of the claims Ms Burrows makes in the Federal Court proceeding.
On 14 February 2018 Ms Smith sent an email to the enquiries section of the Family Law Court.[28] Ms Smith noted that “[w]e were the solicitors” for Ms Burrows in the Family Court proceeding; that MKL was then involved in proceedings against Ms Burrows in the District Court; that on about 18 May 2016 the District Court requested the Family Court proceeding file to be transferred to the District Court; and from reviewing the Family Court file, it appeared Ms Burrows had filed an application in a case on 3 October 2012, and the father filed a response on 23 May 2012, but no other document in the Family Court proceeding file had been provided to the District Court. Ms Smith requested that the Family Court proceeding file be reviewed, and that MKL be informed whether the file contains any further documents. Ms Smith said that if it is confirmed that the Family Court proceeding file contains additional documents, MKL will apply to inspect the file.
[28] Exhibit JDS-1, page 580
On 20 February 2018 the Client Services Officer of the Family Court sent an email to Ms Smith confirming there is a “further Family Court file”. The email referred to r 24.13 of the Family Law Rules, which provided that the Registrar of the Family Court may grant permission to a person with a “proper interest” to search the Family Court file. The email also identified the information the Registrar was required to consider on an application for inspection of the Family Court proceeding file. Ms Smith provided the information in a letter to the Registrar of the Family Court dated 26 February 2018.[29] In that letter Ms Smith set out the reasons MKL wished to inspect the Family Court file. These included the following:[30]
We are looking for any documents that have been filed, or any orders made, after Mr Alexander filed his response to Ms Burrows’ application on 23 May 2013 with respect to Ms Burrows’ application for her costs to be assessed. We need to understand what occurred with respect to Ms Burrows’ application tp [sic] have her costs assessed. Any documents that shed light on what happened with Ms Burrows’ application to have her costs assessed are directly relevant to the case that Ms Burrows has commenced against Macpherson Kelley in the District Court.
[29] Exhibit JDS-1, page 585
[30] Exhibit JDS-1, page 586
On 12 March 2018 a Registrar of the Family Court granted MKL leave to inspect the Family Court proceeding file. By letter dated 14 March 2018 MKL confirmed to the Registrar that MKL had inspected the Family Court proceeding file, and requested a copy of the orders made by Registrar Cameron on 5 June 2013, and the Family Court Consent Orders.[31]
[31] Exhibit JDS-1, page,590
On 5 April 2018 the Family Court informed MKL that the Registrar would not grant MKL leave to obtain a copy of the orders, but that MKL would instead have to request the District Court to request the Family Court to provide the Family Court proceeding file to the District Court. MKL made this request of the District Court by letter dated 6 April 2018.[32] It is not apparent whether the District Court requested the Family Court to deliver to it the Family Court proceeding file. As I have already noted, however, the Family Court Consent Orders were admitted into evidence in the District Court proceeding.
[32] Exhibit JDS-1, page 599
Appeal proceeding
Ms Burrows appealed to the Court of Appeal against the orders of the District Court, including the District Court Costs Order. On 16 July 2021 the Court of Appeal refused Ms Burrows leave to appeal the orders the District Court made on 19 December 2019. The Court of Appeal granted Ms Burrows leave to appeal against the District Court Costs Order, but it dismissed the appeal.[33] In relation to Ms Burrows’ challenge of the District Court Costs Order, the Court of Appeal held that MKL “was not a self-represented litigant in the DC proceeding, and its ability to obtain a costs order based on its representation by [MKLG] is unaffected by anything in Bell Lawyers”.[34]
[33] Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd [2021] NSWCA 148, at [139]
[34] Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd [2021] NSWCA 148, at [137]
Application for special leave to the High Court
On 13 August 2021 Ms Burrows filed with the High Court an application for special leave to appeal against the Court of Appeal orders.[35] The High Court dismissed Ms Burrows’ application for special leave on 19 September 2022.[36]
[35] Affidavit of Zali Burrows 20.06.2022, [4]; annexure “ZB-2”, pages 8-20
[36] Exhibit JDS-1, page 634
Service of bankruptcy notice
As I have already noted, MKL applied for the issue of a bankruptcy notice in relation to the Judgment Debt, and a bankruptcy notice was issued on 20 April 2022. The bankruptcy notice identified Ms Burrows’ address as “L 1 299 Elizabeth St, Sydney, NSW, Australia”. MKL engaged Mr Khoury to serve the bankruptcy notice on Ms Burrows. In his affidavit of service Mr Khoury says that at 9.00 am on 24 May 2022 he handed the bankruptcy notice to a person at Level 1, 299 Elizabeth Street, Sydney, during which he had the following conversation:
Mr Khoury:Can you accept services of these documents on behalf of Zali Burrows?
Person:Yes I am authorised to accept and can pass them on to Ms Burrows.
Mr Khoury:May I have your name?
Person: “Vai”
Mr Khoury also deposed as follows:
In accordance with Regulation 102 of the Bankruptcy Regulation 2021 (Cth), I placed the documents in a sealed envelope addressed to Zali Burrows and marked ‘Private & Confidential’ and left them with the female at the Debtor’s known last known business address.
In evidence given under cross-examination Mr Khoury said he had placed the bankruptcy notice in the envelope, and sealed the envelope before he arrived at level 1, 299 Elizabeth Street. Also during cross-examination Mr Khoury was shown four photographs. Mr Khoury confirmed the photographs depicted premises that looked like the premises at which he delivered the sealed envelope containing the bankruptcy notice. One of the photographs depicts a reception area; another depicts the same reception area but also a hall lined with entrances to other rooms; one photograph depicts the area immediately in front of the reception, which includes two lifts; and the fourth depicts the same area from a different perspective.[37]
[37] Exhibit A
Ms Burrows has given the following evidence which relate to the circumstances in which Ms Burrows says she first received notice of the bankruptcy notice:[38]
On 16 June 2022 at 4.05 pm, an envelope containing documents was couriered to my residential address by Crisis Courier from Genesis Office that is located at 1, 299 Elizabeth Street Sydney NSW 2000. Genesis Office is a document exchange to send and receive documents for me. It is the usual course of business that Genesis Office couriers or express posts me documents sometime after they are received. Accordingly, I personally became aware of the Bankruptcy Notice after 21 days had lapsed from the date of service.
A copy of email from Genesis dated 16 June 20122 [sic], confirming delivery of documents and a text message from the Crisis Courier is annexed hereto and marked “ZB-1” and appears at page 7.
[38] Affidavit Z Burrows 20.06.2022, [2]
Ms Burrows does not identify the documents she says were contained in the envelope; and the email from Genesis Offices that is annexed to Ms Burrows’ affidavit only refers to Crisis Courier having left “the parcel (1 x B4 Envelope with mail) at your front door”. Nevertheless, Ms Burrows appears to intend to convey that the bankruptcy notice was included in the envelope that was delivered to her residence on 16 June 2022.
I am not prepared to find that the envelope that was delivered to Ms Burrows’ address on 16 June 2022 is the envelope Mr Khoury deposes he left at Level 1, 299 Elizabeth Street on 24 May 2022. If the envelope did in fact contain the bankruptcy notice, it is reasonable to expect that Ms Burrows would have so stated in her affidavit. Further, if the envelope that was couriered to Ms Burrows’ residence was the envelope Mr Khoury served on 24 May 2022, there is no evidence that explains why it took Genesis Offices 22 days to arrange to courier the envelope to Ms Burrows. In the absence of such evidence, it is implausible that Genesis Offices, a provider of a service that receives and sends documents for users of its services, would wait 22 days to deliver a document to one of the users of its services, Ms Burrows.
Events after Ms Burrows accepts she was served with the bankruptcy notice
After the day on which Ms Burrows accepts she was served with the bankruptcy notice, Ms Burrows initiated three other proceedings or applications.
Federal Court proceeding
On 20 June 2022 Ms Burrows commenced the Federal Court proceeding against MKL and Mr Christopher Stephen Frawley. In a further amended application filed on 15 September 2022 Ms Burrows named MKLG as an additional respondent.[39] The claims Ms Burrows makes are contained in an amended statement of claim filed on 29 August 2022.[40] The amended statement of claim may be summarised as follows:
[39] Exhibit JDS-1, page 576
[40] Exhibit JDS-1, page 540
(a)MKL failed to follow Ms Burrows’ instruction to enforce a costs order (this being the Family Court Costs Order I defined above) that was made in the Family Court proceeding against the respondent father in accordance with the appropriate rules.[41]
[41] Amended Statement of Claim, [18], [19]
(b)MKL sought to recover from Ms Burrows legal fees of $12,240.05, which included work MKL carried out to rectify the error they made in advising Ms Burrows to assess her costs with the Supreme Court.[42]
[42] Amended Statement of Claim, [21], [22]
(c)MKL did not, during the District Court proceeding, disclose it was not an incorporated legal practice, but instead stated on record that it represented itself in that proceeding.[43]
[43] Amended Statement of Claim, [26]
(d)MKL circumvented 33.13 of the Uniform Civil Procedure Rules 2005 (UCPR) by applying to the Family Court, without notice to Ms Burrows, to inspect a consent parenting order for the purpose of using that document to contend in the District Court proceeding that Ms Burrows forwent pursuing Family Court Costs Order.[44]
[44] Amended Statement of Claim, [24]
(e)MKL did not, before 26 July 2022, disclose to the District Court or to the applicant that MKL was not a “qualified entity” pursuant to s 10 and s 11 of the Legal Profession Uniform Law (NSW) (LPU Law), and, for that reason MKL was not entitled to recover any amount, and must repay any amount received, “in respect of anything” MKL did in contravention of s 10(2) of the LPU Law.[45]
[45] Amended Statement of Claim, [30], [31]
(f)Contrary to s 11 of the LPU Law, MKL misrepresented that it was entitled to engage in legal practice by (among other things):[46]
[46] Amended Statement of Claim, [32]
(i)continuing to operate its Legal eOrganisation in the Lawlink portal to file documents in the Local Court, District Court, Supreme Court, and Court of Appeal;
(ii)continuing to operate a trust account for the applicant “as a client” to 18 February 2016; and
(iii)representing it was entitled to engage in legal practice in matters in the Supreme Court of New South Wales after it was no longer entitled to engage in legal practice.
(g)MKL engaged in conduct that was misleading or deceptive, contrary to s 18(1) of Schedule 2 (ACL) to the Competition and Consumer Act 2010 (Cth) by (among other things) falsely claiming that it required access to the Family Court proceeding file to defend itself in the District Court proceeding.[47]
(h)MKL failed to comply with r 33.13 of the UCPR by applying directly to the Family Court for access to the Family Court proceeding file.[48]
(i)MKL breached duties of confidence it owed to Ms Burrows by inspecting the Family Court proceeding file, which contained information that was confidential to Ms Burrows; and in breach of that duty MKL used the confidential information to defeat the claims Ms Burrows made against MKL in the District Court proceeding.[49]
(j)By accessing the Family Court proceeding file MKL also breached (among other things):
(i)the implied undertaking considered by the High Court in Hearne v Street [2008] HCA 36;[50] and
(ii)s 121 of the Family Law Act 1975 (Cth) and r 24.13 of the Family Law Rules.[51]
(k)MKL engaged in misleading or deceptive conduct by omitting its ACN and, therefore, not publishing its true identity, in email correspondence with the Family Court.[52]
[47] Amended Statement of Claim, [36]-[38]
[48] Amended Statement of Claim, [41]
[49] Amended Statement of Claim, [44]-[56]
[50] Amended Statement of Claim, [57], [58]
[51] Amended Statement of Claim, [59]-[64]
[52] Amended Statement of Claim, [65], [66]
The amended statement of claim ends with the following two paragraphs:
Particulars of Damage
71.The economic and other damage suffered by the Applicant as a result of matters pleaded above:
(a)$17,636.82 as per Costs order 4 October 2011 in the Family Court proceedings including Counsel Costs fees.
(b)no less than $250,000.00 including:
i.Costs incurred by the Applicant in being subject of the Costs Order awarded against her;
ii.The Applicant’s costs of defending the proceedings
iii.Psychological and other non-economic loss sustained as a result of the Professional Negligence Proceedings, including the ultimate result including the Costs Orders
72.By reason of the breaches referred to herein, the Applicant has suffered and continues to suffer economic and non-economic loss and damages
Particulars
(a) TBA
Stay application
Also on 20 June 2022, Ms Burrows filed a notice of motion in the District Court. Ms Burrows sought an order that the execution of the Judgment Debt be stayed pending the determination of the Federal Court proceeding and Ms Burrows’ application for special leave to appeal to the High Court. Ms Burrows’ application was heard and dismissed on 2 September 2022.[53]
[53] Exhibit JDS-1, page 628
Supreme Court proceeding
On 20 October 2022 Ms Burrows filed a statement of claim with the Supreme Court seeking declarations that MKL and its legal representatives committed a fraud on the District Court and on the Court of Appeal; an order that the Court of Appeal orders be quashed; and an order that the District Court proceeding be remitted to that Court for rehearing. The claims appear to be based on a number of alleged fraudulent misrepresentations.
Representation that MKL and MKLG are separate legal entities
The first alleged representation is as follows:[54]
The Representation: In the Costs hearing on 26 February 2020 David Neggo of Counsel represented to the Court inter alia that the First and Second Defendants were represented by Macpherson & Kelley Lawyers Pty Ltd ACN122 450 337 (formally known as M&K Group Lawyers Pty Ltd) and that the First Defendant and M&K Lawyers Group Pty Ltd are two discrete entities.
[54] Statement of Claim, [20]
That representation, which is alleged in paragraph 20 of the statement of claim, must be read with paragraph 19. The statement of claim alleges that during the hearing of MKL’s application for a lump sum costs order in the District Court, MKL, through its counsel, “changed the positon as to their representation” in the District Court proceeding, thus enabling MKL to claim an entitlement to a lump sum costs order; and that counsel had “made this representation knowingly, or without belief in its truth or recklessly, careless whether it was true or false”.[55] Paragraph 19 contains the following particulars:
i.In the hearing of the professional negligence matter David Neggo of Counsel submitted to the Court that the First Defendant was acting for itself and also acting for the Second Defendant.
ii.On 13 April 2018, in Court the Defendants sought to file a further amended defence in Court and Counsel for the Defendants submitted:
NEGGO: “The answer is this, when these proceedings commenced, the second Respondent was still employed by the first Respondent and the first Respondent, that's the firm, went on the record for both. Then the solicitor left the firm at which stage the firm ceased acting for her for a while and on its own behalf it filed an amended defence but because the firm no longer acted for both Respondents, references to Respondents denying things were changed to the first Respondent denies. Then later although the solicitor has not come back into our employ we have gone back on the record for her. The firm has gone back on the record for her.”
iii.The Notice of Change of Solicitor filed by Second Respondent gave the First Defendant as her legal representative (not the holding company Macpherson Kelley Lawyers Pty Ltd ACN 122 450 337).
[55] Statement of Claim, [20]
Representation that MKL not the alter ego of MKLG
The second representation is that MKL was not the alter ego of MKLG, but MKL and MKLG were two discrete firms.[56] The statement of claim alleges this representation was made during the hearing of MKL’s application for a lump sum costs order on 26 February 2018. Ms Burrows alleges the representation was made “knowing that the representation was false or, without belief in its truth, or alternatively recklessly because the representations were made not caring whether it was true or false.” These allegations are purportedly supported by the following particulars:
i.In both written and oral submissions before Acting Judge Craig SC, the Defendants submitted it is not a case of the first defendant being the alter ego of Macpherson & Kelley Lawyers Pty Ltd ACN122 450 337 with different shareholders and directors.
ii.Same shareholders: The First Defendant is a wholly owned subsidiary company of Macpherson & Kelley Lawyers Pty Ltd ACN122 450 337, Macpherson & Kelley Lawyers Pty Ltd ACN122 450 337 is a wholly owned subsidiary company of M&K Lawyers Holdings Pty Ltd ACN 122 449 334.
iii.Same directors: Gregory Francis Peach was a director of the first defendant company and also a director of Macpherson & Kelley Lawyers Pty Ltd ACN122 450 337. Damien John Paul was a director of the first defendant company, also a director of Macpherson & Kelley Lawyers Pty Ltd ACN122 450 337 and also a director and shareholder of M&K Lawyers Holdings Pty Ltd ACN 122 449 334. Paul Kirton was a director of the first defendant company, also a director of Macpherson & Kelley Lawyers Pty Ltd ACN122 450 337 and also a director and shareholder of M&K Lawyers Holdings Pty Ltd ACN 122 449 334. James Alexander Sturgess was a director of Macpherson & Kelley Lawyers Pty Ltd ACN122 450 337 and also a shareholder of M&K Lawyers Holdings Pty Ltd ACN 122 449 334. Jeffrey David Siddle is also a director of Macpherson & Kelley Lawyers Pty Ltd ACN122 450 337 and of M&K Lawyers Holdings Pty Ltd ACN 122 449 334.
iv.On 25 July 2022 Nicolas Lavanda solicitor employed Macpherson & Kelley Lawyers Pty Ltd ACN 122 450 337 disclosed 2 documents (annexed to an affidavit filed in Federal Court proceedings NSD 461 of 2022) being A Notice of Termination of Provision of Legal Services under s.139(1) Legal Profession Act 2004 to the Law Society of New South Wales dated 15 July 2015 signed by Gregory Francis Peach declaring Macpherson Kelley Pty Ltd (formally known as M&K Lawyers Group) has taken over the business of the law practice of trading name ‘Macpherson & Kelley Lawyers’.
v.Also disclosed on 25 July 2022, an email from Nicolas Lavanda dated 25 July 2022 to the Law Society of New South Wales stating that their office had traded as Macpherson & Kelley Lawyers (Sydney) Pty Ltd and was an incorporated legal practice with the Law Society.
vi.The business of the First Defendant had been taken over by Macpherson Kelley Pty Ltd ACN 122 450 337 (formally known as M&K Group Lawyers Pty Ltd) on 30 June 2015 as revelled [sic] in the Notice to the Law Society of NSW dated 14 July 2015.
[56] Statement of Claim, [22]
Representations that in 2012 MKL ceased trading under the name “Macpherson Kelley”
The statement of claim alleges that Mr Frawley, in an affidavit he made on 24 January 2020, represented that until around 2012 MKL traded under the name “Macpherson Kelley”, and that MKL stopped trading as MacPherson Kelley in 2012, which is when MKLG began trading as “Macpherson Kelley”.[57] The statement of claim alleges these representations are false because MKLG had taken over the business of MKL’s law practice in 2015; and that Mr Frawley made the representations knowing they were false.
[57] Statement of Claim, [27]
Representation that MKL does not operate any business
Mr Frawley represented that MKL does not operate any business. This was false, and Mr Frawley knew this to be false, because MKL continued to provide legal services in 2016. The statement of claim refers to three proceedings in which MKL was described as the solicitor on the record.[58]
[58] Statement of Claim, [27], Particulars, paragraph (e)
Consequences of alleged fraud
The statement of claim alleges that the fraudulent representations induced both Craig DCJ and the Court of Appeal to erroneously conclude that MKL was entitled to an order for costs on the basis that MKL and MKLG were separate legal entities.
When was the bankruptcy notice served?
There can be no dispute on the evidence, and I find, that the bankruptcy notice was left with a person at premises situated at Level 1, 299 Elizabeth St, Sydney, on 24 May 2022 (Premises). Further, Ms Burrows herself deposes, and I find, that the Premises are used as a document exchange operated by an entity that trades under the name “Genesis Office” who, in its usual course of business, couriers or sends by express post to Ms Burrows documents addressed to Ms Burrows that are left at the Premises. In those circumstances, MKL submits that Mr Khoury’s leaving at the Premises an envelope addressed to Ms Burrows containing the bankruptcy notice constituted service of the bankruptcy in the manner permitted by s 102 of the Bankruptcy Regulations 2021 (Cth) (Regulations), which provides:
(1)Unless the contrary intention appears, if a document is required or permitted by the Act or this instrument to be given or sent to, or served on, a person (other than the Inspector-General, the Official Receiver or the Official Trustee), the document may be:
(a)sent by a courier service to the person at the address of the person last known to the person serving the document; or
(b) left, in an envelope or similar packaging marked with the person's name and any relevant document exchange number, at a document exchange where the person maintains a document exchange facility.
(2) In the absence of proof to the contrary, the document is taken to have been received by, or served on, the person when the document would, in the due course of business practice, be delivered to that address or document exchange.
The address of the Premises is the address for service Ms Burrows notified in her appeal to the Court of Appeal,[59] and it is the address Ms Burrows recorded in an email she sent on 9 July 2022.[60] According to Mr Siddle, the managing principal lawyer employed by MKL, Ms Burrows’ email sent on 9 July 2016 is the last email MKL received from Ms Burrows. It is therefore open to find, and I find, that the address of the Premises is the address of Ms Burrows that was last known to MKL as at 24 May 2022, being the day on which Mr Khoury left at the Premises the envelope containing the bankruptcy notice. It is also open to find, and I find, that Mr Khoury’s delivering the bankruptcy notice to the Premises constituted the provision of a courier service to MKL; and MKL’s engaging Mr Khoury to so deliver the bankruptcy notice to the Premises constituted MKL’s serving the bankruptcy notice by a courier service within the meaning of s 102(1)(a) of the Regulations.
[59] Exhibit JDS-1, page 390
[60] Affidavit of J D Siddle 10.08.2022, [2], annexure “A”
In her written submissions,[61] Ms Burrows submitted there is no evidence that Mr Khoury brought to the attention of the person with whom he left the envelope the specific nature of the documents. It is the case that Mr Khoury did not inform the person with whom he left the envelope containing the bankruptcy notice that the envelope contained a bankruptcy notice. Paragraph 102(1)(a) of the Regulations, however, does not require that the person who delivers a document by use of a courier service must bring to the attention of any person the specific nature of the document.
[61] Applicant’s Outline Submissions, [6]
Ms Burrows also submitted[62] that the circumstances in which Mr Khoury left the bankruptcy notice at the Premises are similar to the circumstances that led Lockhart J in Clyne v Deputy Commissioner of Taxation to set aside a bankruptcy notice.[63] I do not agree. In Clyne an order was made permitting service of a bankruptcy notice by post; and the order provided that service was to be deemed to have been effected “upon the expiration of fourteen (14) days from the date of posting the said documents pursuant to these orders”.[64] His Honour found there was no way the debtor could have known when the bankruptcy notice was posted and, for that reason, it was not possible for the debtor to calculate the time by which he was required to comply with the bankruptcy notice.
[62] Applicant’s Outline Submissions, [6], [7]
[63] Clyne v Deputy Commissioner of Taxation (1982) 66 FLR 301
[64] Clyne v Deputy Commissioner of Taxation (1982) 66 FLR 301, at page 306
The circumstances in Clyne that led in that case to the bankruptcy notice being set aside differ from the circumstances before me. The bankruptcy notice that Mr Khoury left at the Premises on 24 May 2022 required Ms Burrows to comply with it “within 21 days after service”, not after the date of posting. Under s 102(1)(a) of the Regulations a document may be served by sending it by a courier service to the person at the address of the person last known to the person serving the document. I have found that MKL served the bankruptcy notice by a courier service to Ms Burrows at the Premises, being Ms Burrows’ address last known to MKL, and that Mr Khoury left the document at the Premises on 24 May 2022. That means that the bankruptcy notice was served on Ms Burrows on 24 May 2022 and the bankruptcy notice, therefore, required Ms Burrows to comply with it by 21 days after 24 May 2022, that is, by 14 June 2022. Ms Burrows, however, purported to apply to set aside the bankruptcy notice by filing her application to set aside the bankruptcy notice on 21 June 2022.
The Court has power to extend the time for compliance with the requirements of a bankruptcy notice, and to set a bankruptcy notice aside; and that power is conferred by s 41(6A) of the Bankruptcy Act 1966 (Cth) (Act) which provides:
Where, before the expiration of the time fixed for compliance with a bankruptcy notice:
(a) proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or
(b) an application has been made to the Court to set aside the bankruptcy notice;
the Court may, subject to subsection (6C), extend the time for compliance with the bankruptcy notice.
There is no “statutory grant of power to extend the time for compliance except in accordance with the requirements of s 41(6A) of the Act”, and that “the only possible source of authority for the order made by the primary Judge in the present case is s 41(6A)”.[65] Given I have concluded that the bankruptcy notice was served on Ms Burrows on 24 May 2022, and that Ms Burrows did not apply to set aside the bankruptcy notice before 14 June 2022, being the time fixed by the bankruptcy notice for compliance with its requirements, this Court does not have power to set aside the bankruptcy notice. For this reason, Ms Burrows’ application to set aside the bankruptcy notice must be dismissed.
[65] Derek George Shephard v Chiquita Brands South Pacific Limited [2004] FCAFC 76, at [48] (Sackville J)
Grounds assuming power to set aside
Even though I have concluded the Court does not have power to extend the time for compliance with the requirements of the bankruptcy notice that was served to Ms Burrows, or to set it aside, it would be appropriate if I considered each of the grounds on which Ms Burrows relies on the assumption that I am incorrect in concluding the Court does not have such power.
Ground stated in paragraph 2 of originating application
The first ground on which Ms Burrows relies is set out in paragraph 2 of her originating application filed on 21 June 2022:
To set aside the Bankruptcy Notice BN256021 on the basis that there are proceedings to set aside the underlying judgment: ss 41(6A)(a) and 41(6C) of the Bankruptcy Act and Rule 3.02(4) of the Bankruptcy Rules.
At the time Ms Burrows filed her application to set aside the bankruptcy notice, the only proceeding that could conceivably have been considered to be a proceeding to set aside the Judgement debt was Ms Burrows’ application for special leave to the High Court. That application has been dismissed. The ground, however, is capable of applying to the Supreme Court proceeding which, as I have already noted, Ms Burrows filed on 20 October 2022.
Principles
The discretion conferred by s 41(6A) of the Act has been described as being “at large”.[66] One factor that is relevant to exercising that discretion is the merits of the proceedings to set aside the judgment in relation to which the bankruptcy notice has been issued. Where the relevant proceeding is an appeal to set aside the judgment, Lehane J, in Byron v Southern Star Group Pty Ltd, said:[67]
[T]he authorities suggest that, reluctant as the Court may in most cases be to enter into the merits of an appeal, the merits may be relevant, at least where the Court is able to regard the prospects of success as “slight” . . . or, possibly, in a case where it is apparent that the prospects of success are unusually strong . . .
[66] Re Taylor; Ex parte Deputy Commissioner of Taxation (Cth) (1983) 74 FLR 377, at 379
[67] Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264, at pages 270-271
In the same case Lehane J further said that:[68]
“ . . . it is relevant, as a consideration reinforcing the Court’s reluctance to extend time in the absence of a stay, that an appeal has already been dismissed and the proceeding in question is (as here) an application for special leave to make a further appeal.”
[68] Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264, at page 271
Determination
The principal question I must consider is whether there is sufficient merit in the claims Ms Burrows makes in the Supreme Court proceeding to justify the exercise of the discretion conferred by s 41(6A) of the Act to extend the time for complying with the requirements of the bankruptcy notice.
As I have already noted, Ms Burrows alleges MKL made four fraudulent misrepresentations, and these misrepresentations induced the District Court to make the District Court Costs Order, and also induced the Court of Appeal to make the Court of Appeal orders. Whether there is any merit in these claims depends on whether, in relation to each of the four alleged misrepresentations, Ms Burrows has any reasonable prospect of establishing all of the following:
(a)MKL made a representation to the effect alleged in the statement of claim.
(b)The representation was false or misleading.
(c)The representation was made with knowledge it was false or with reckless indifference to its being true.
(d)The District Court and the Court of Appeal acted on the misrepresentation in making the orders they made. In other words, the representation was material to the District Court’s and the Court of Appeal’s orders.
I will address these questions in relation to each of the representations alleged in the statement of claim.
Representation that MKL and MKLG are two discrete legal entities (first representation)
Was the representation made? It may be accepted that such representation was made; it was the factual foundation of MKL’s application for costs, both in the District Court proceeding, and in the Court of Appeal.
Was the representation false? There are two matters on which the statement of claim relies for alleging the first representation is false: a statement MKL’s counsel made on 13 April 2018 to Craig ADCJ to the effect that MKL had acted, and then had ceased to act, for Ms Di Condio; and Ms Di Condio filing a notice of appearance that recorded MKL, not MKLG, as acting for her.
These are matters that are capable of evidencing admissions by MKL that it, rather than MKLG, provided legal services to MKL in the District Court proceedings. But this evidence must be viewed against other evidence; and in particular the matters contained in the 139 Notice which record that as at 1 July 2015 MKL ceased to be an incorporated law practice, and that MKLG had taken over the business that had been conducted by MKL. These admissions would also have to be viewed against the matters stated in the letter dated 13 May 2015 from Macpherson + Kelley Lawyers Pty Ltd to Ms Di Condio to which I have referred above. In the light of this evidence, Ms Burrows would have no reasonable prospects of succeeding on the claim the first representation is false.
If made, was the representation made fraudulently? It is a fundamental and long-established principle that, in all cases based on fraud, “particulars of the fraud claimed must be exactly given and the allegations must be established by the strict proof which such a charge requires”;[69] and “if a case of fraud is to be mounted, it should be pleaded specifically and with particularity”.[70] The “mere labelling of an allegation as fraud amounts to little”,[71] because “[n]obody can be expected to meet a case . . . upon mere allegations of fraud without any definite character being given to those charges by stating the facts upon which they rest”.[72] Also useful is the following passage from the speech of Lord Millett in Three Rivers District Council v Bank of England (No 3):[73]
[A]n allegation of fraud or dishonesty must be sufficiently particularised, and that particulars of facts which are consistent with honesty are not sufficient. This is only partly a matter of pleading. It is also a matter of substance. As I have said, the defendant is entitled to know the case he has to meet. But since dishonesty is usually a matter of inference from primary facts, this involves knowledge not only that he is alleged to have acted dishonestly, but also the primary facts which will be relied upon at trial to justify the inference. At trial the court will not normally allow proof of primary facts which have not been pleaded, and will not do so in a case of fraud. It is not open to the court to infer dishonesty from facts which have not been pleaded, or from facts which have been pleaded but are consistent with honesty. There must be some fact which tilts the balance and justifies an inference of dishonesty, and this fact must be both pleaded and proved.
[69] Wentworth v Rogers (No 5) (1986) 6 NSWLR 534, at page 538 (Kirby P). The quote was made in the context of actions to set aside judgments for fraud, but it was prefaced by the words: “As in all actions based on fraud”.
[70] Forrest v Australian Securities and Investments Commission (2012) 247 CLR 486; [2012] HCA 39, at [26]
[71] Banque Commerciale S.A. v Akhil Holdings Limited (1990) 169 CLR 279, at pages 294-295 (Dawson J)
[72] Wallingford v Mutual Society (1880) 5 App. Cas. 685, at page 701, being part of the passage set out in the judgment of Dawson J in Banque Commerciale S.A. v Akhil Holdings Limited (1990) 169 CLR 279, at page 295
[73] Three Rivers District Council v Bank of England (No 3) [2003] 2 AC 1, at [186]
The statement of claim does not meet the standard of particularity required to plead fraud; and for that reason alone Ms Burrows would have no reasonable prospects of establishing that the first representation, if false, was fraudulently made.
Was the representation material? Craig ADCJ held that MKL and MKLG were separate entities; and his Honour did so on the basis of ASIC records that were in evidence.[74] Ms Burrows, therefore, would have no reasonable prospects of establishing that Craig ADCJ held that MKL and MKLG were separate entities because of any representation MKL may have made.
[74] Zali Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd No 2 NSWDC [2019], 28.02.2020, at [9]-[11]
The Court of Appeal proceeded on the basis that MKL and MKLG were separate legal entities; but the Court of Appeal did so because Ms Burrows did not submit that MKL and MKLG were not separate legal entities. Ms Burrows’ case on appeal was that the affairs of MKL and MKLG were intertwined and, for that reason, MKL and MKLG were in substance one company.[75] The Court of Appeal did not accept that contention. The Court of Appeal concluded that the matters on which Ms Burrows relied for contending that MKL and MKLG were intertwined went no further than showing MKLG controlled MKL, but that control alone is not a sufficient basis for disregarding the separate corporate personalities of companies.[76]
[75] Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd [2021] NSWCA 148, at [76], [77]
[76] Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd [2021] NSWCA 148, at [124]-[127]
Conclusion. Ms Burrows has no reasonable prospects of setting aside the Judgment Debt on the basis of the first representation.
Representation that MKL not the alter ego of MKLG (second representation)
Was the representation made? Given that both in the District Court and in the Court of Appeal MKL submitted that MKL and MKLG are separate legal entities, it may be taken that MKL submitted that MKL is not the alter ego of MKLG.
Was the representation false? The matters on which Ms Burrows relies for claiming the second representation is false are incapable of supporting a finding to the effect that MKL was the alter ego of MKLG and, for that reason, the second representation was false. As I have already noted, the Court of Appeal concluded that the matters on which Ms Burrows relied for contending that the affairs of MKL and MKLG were intertwined went no further than showing MKLG controlled MKL, but control alone is not a sufficient basis for disregarding the separate corporate personalities of companies.[77] Ms Burrows has not pointed to anything that is reasonably capable of supporting a finding that the relationship between KMLG and MKL went beyond either company controlling the other.
[77] Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd [2021] NSWCA 148, at [124]-[127]
If made and false, was the representation made fraudulently? The statement of claim does not meet the standard of particularity required to plead fraud. For that reason alone, Ms Burrows would have no reasonable prospects of establishing the second representation, if false, was fraudulently made.
Was the representation material? The Court of Appeal did not rely on any representation to the effect of the second representation. The Court of Appeal considered for itself whether the separate corporate personalities of MKL and MKLG should be respected, and concluded that it should because Ms Burrows failed to show anything further than control.
Conclusion. Ms Burrows has no reasonable prospects of setting aside the Judgment Debt on the basis of the second representation.
Representations that in 2012 MKL ceased trading under the name “Macpherson Kelley” (third representation)
Assuming Mr Frawley made any such representation, Ms Burrows would have reasonable prospects of establishing the representation was incorrect. The statement of claim, however, does not meet the standard of particularity required to plead fraud; and, for that reason alone, Ms Burrows would have no reasonable prospects of establishing that Mr Frawley fraudulently made a representation to the effect the third representation.
Further, Ms Burrows has no reasonable prospect of establishing that a representation to the effect of the third representation was material to the orders Craig ADCJ or the Court of Appeal made. The evidence, and in particular the 139 notice, shows that as at 1 July 2015 MKL ceased to be an incorporated law practice, and that MKLG had by then taken over the business that had been conducted by MKL. What was relevant to MKL’s application for costs was whether, in the District Court proceeding which Ms Burrows commenced on 3 November 2015, MKL acted for itself, or whether MKLG acted for MKL. That Mr Frawley may have incorrectly represented that it was in 2012 that MKLG took over the law practice conducted by MKL does not alter the fact that by the time Ms Burrows had commenced the District Court proceeding MKLG had taken over the law practice conducted by MKL.
Ms Burrows has no reasonable prospects of setting aside the Judgment Debt on the basis of the third representation.
Representations that MKL does not operate any business (fourth representation)
Assuming Mr Frawley, in an affidavit made on 24 January 2020, represented that MKL does not operate any business, the fact that MKL was on the record in three proceedings in 2016 by itself is incapable of showing that on 24 January 2020, when Mr Frawley made the fourth representation, MKL was operating a business and, for that reason, the fourth representation is false.
In any event, the statement of claim does not meet the standard of particularity required to plead fraud; and for that reason alone, Ms Burrows would have no reasonable prospects of establishing Mr Frawley fraudulently made a representation to the effect of the fourth representation. Further, Ms Burrows has no reasonable prospects of establishing that a representation to the effect of the fourth representation was material to the orders Craig ADCJ and the Court of Appeal made.
Ms Burrows, therefore, has no reasonable prospects of setting aside the Judgment Debt on the basis of the fourth representation.
Conclusion
Ms Burrows does not have any reasonable prospects of setting aside the Judgment Debt on any of the claims she purports to plead in the statement of claim by which she commenced the Supreme Court proceeding. Even if, therefore, Ms Burrows had applied to extend the time for compliance with the bankruptcy notice before that time had expired, I would have refused to exercise the discretion conferred by s 41(6A) of the Act to extend the time.
Going behind the judgment?
During oral address counsel for Ms Burrows submitted that the Judgment Debt did not represent a true debt. Ms Burrows develops that submission in the ASR, to which I will refer when I consider whether to grant Ms Burrows leave to rely on the ASR.
Ground stated in paragraph 3 of application
The second ground on which Ms Burrows relies is set out in paragraph 3 of her application:
To set aside the Bankruptcy Notice BN256021 on the grounds of a counter-claim or a set-off: s 40(1)(g) and 41(7) of the Bankruptcy Act and Rule 3.02(3) of the Bankruptcy Rules. An Initiating Application and a Statement of Claim was filed in the Federal Court of Australia on 20 June 2022 for claim for Breach of Confidence and Misleading and Deceptive Conduct s18(1) Australian Consumer Law, Schedule 2 of the Competition and Consumer Act 2010, seeking relief of economic loss for the sum of $250,000.00 and non-economic loss as to be assessed. The amount claimed by the Applicant exceeds the claim of $130,000 on the Bankruptcy Notice BN256021.
In her written submissions Ms Burrows goes no further than referring to the Federal Court proceeding. In her oral submissions counsel for Ms Burrows described in a little detail the claims Ms Burrows makes in the amended statement of claim. Counsel submitted that, if Ms Burrows’ claims are upheld, Ms Burrows would be entitled to damages in an amount that is not less than $130,000, being the amount of the Judgment Debt. Counsel contended that, had MKL not wrongfully obtained access to the Family Court proceeding file, it would not have become aware of the Family Court Consent Orders, and would therefore not have been in a position to rely on it in the District Court proceeding and use it to defeat Ms Burrows’ claims. MKL, on the other hand, make no submission other than that Ms Burrows claims in the Federal Court proceeding “have no discernible or factual merit”.
Principles
A judgment debtor on whom a bankruptcy notice is served does not commit an act of bankruptcy if he or she satisfies the Court that he or she has:[78]
a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained.
[78] Act, s 40(1)(g)(ii)
The matters of which a Court must be satisfied before it can conclude that a debtor has a counter-claim, set-off, or cross demand against the creditor have been stated in different ways, and in ways that sometimes overlap. The various statements were summarised by Lindgren J in Glew v Harrowell, in the matter of Glew.[79] In broad terms, a debtor must satisfy the Court that the counter-claim, set-off, or cross demand is made in good faith, and there is sufficient substance to the counter-claim, set-off or cross demand asserted to make it one which the debtor should, in justice, be permitted to have heard and determined in the usual way, rather than be forced to comply with the bankruptcy notice by payment or to commit an act of bankruptcy.
[79] Glew v Harrowell, in the matter of Glew [2003] FCA 373, at [9]
That the judgment debtor may have a “counter-claim, set-off or cross demand equal to or exceed the amount of the judgment debt” within the meaning of s 40(1)(g) of the Bankruptcy Act is relevant to whether a bankruptcy notice can be set aside only if the counter-claim, set-off, or cross demand “could not have been set up” by the judgment debtor “in the action or proceeding” in which the judgment was obtained. The expression “could not have been set up in the action or proceeding” has been construed narrowly:[80]
The words “that he could not have set up in the action or proceeding in which the judgment or order was obtained” mean “which he could not by law set up in the action”: see Re Jocumsen (1929) 1 A.B.C., at p. 85; Re A Debtor per Avory J. [1914] 3 K.B., at p. 730 and Re Stockvis (1934) 7 A.B.C. 53 especially per Lukin J. where his Honour said: “I take a counter claim, set off, or cross demand which could not be set up as one which, from the point of time, or from its nature, or from absence of empowering provisions, or from positive inhibition so to do, could not be set up in the particular case in which judgment was obtained . . . Mere failure to take advantage of the opportunity can hardly be said to be inability” (1934) 7 A.B.C., at p. 57.
[80] Re Brink; Ex parte The Commercial Banking Company of Sydney Ltd [1980] FCA 78; (1980) 44 FLR 135, at page 139 (Lockhart J)
Also relevant is r 3.02 of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth), which relevantly provides:
(1) An application to set aside a bankruptcy notice under the Bankruptcy Act must be accompanied by an affidavit stating:
(a) the grounds in support of the application; and
(b) the date when the bankruptcy notice was served on the applicant.
(2) A copy of the bankruptcy notice must be attached to the affidavit.
(3) If the application is based on the ground that the debtor has a counter‑claim, set‑off or cross demand referred to in paragraph 40(1)(g) of the Bankruptcy Act, the affidavit must also state:
(a) the full details of the counter‑claim, set‑off or cross demand; and
(b) the amount of the counter‑claim, set‑off or cross demand and the amount by which it exceeds the amount claimed in the bankruptcy notice; and
(c) why the counter‑claim, set‑off or cross demand was not raised in the proceedings that resulted in the judgments or orders to which the bankruptcy notice relates.
Determination
Ms Burrows has not in any affidavit deposed why the claims she makes in the Federal Court proceeding were not raised in the District Court proceeding. Nor has Ms Burrows made any submission about why she did not raise those claims in the District Court proceeding. It is clear that Ms Burrows could have raised those claims in the District Court proceeding, particularly the claims Ms Burrows makes in relation to MKL accessing the Family Court proceeding file. As I have already noted, on the first day of the hearing in the District Court proceeding, counsel for MKL called for the production of the Family Court Consent Orders; and counsel made it clear how MKL became aware of their existence. It was open to Ms Burrows to apply to the District Court to file a cross claim in relation to the MKL’s having inspected the Family Court proceeding file. The second ground on which Ms Burrows relies to set aside the bankruptcy notice, therefore, fails because Ms Burrows has not attempted to show, and in any event, would be unable to show, that the claims she makes in the Federal Court proceeding are claims she could not have set up in the District Court proceeding, being the proceeding in which the Judgment Debt was obtained.
Quite apart from this difficulty, the allegations of fact contained in the amended statement of claim, even if established, are incapable of supporting a finding that Ms Burrows suffered any loss that would result in the award of $130,000 in damages. I do not accept Ms Burrows’ counsel’s submission that, had MKL not wrongfully obtained access to the Family Court proceeding file, MKL would not have become aware of the Family Court Consent Orders and would therefore not have been in a position to rely on the consent orders in the District Court proceeding, and therefore would have lost. As I have already noted, Craig ADCJ concluded Ms Burrows suffered no loss, whether or not the Family Court Consent Order discharged the Family Court Costs Order. Ms Burrows has not submitted that there is any evidence before me which, if accepted, would lead me to doubt Craig ADCJ’s conclusion that Ms Burrows suffered no loss, whether or not the Family Court Consent Order discharged the Family Court Costs Order.
Conclusion
Even if Ms Burrows had filed her application to set aside the bankruptcy notice before the time by which she was required to comply with its requirements, Ms Burrows would not have satisfied me that she has any counter-claim, set-off or cross demand equal to or exceeding the amount of the Judgment Debt, being a counter-claim, set-off or cross demand that she could not have set up in the District Court proceeding.
Ground stated in paragraph 4 of application
The third ground on which Ms Burrows relies is set out in paragraph 4 of her application:
To set aside the Bankruptcy Notice BN256021 on ‘other grounds’ that the claim is overstated and that the debtor does not owe the debt alleged in the Bankruptcy Notice BN256021 on the basis monies held by the Respondent have not been accounted for from the debt alleged: s 41(6A)(b) of the Bankruptcy Act.
This ground relates to $50 held on trust. Mr Siddle has given the following evidence about that amount:[81]
As at the date of this affidavit, Macpherson Kelley holds $50 on trust for the Applicant (the “Trust Funds”). The Trust Funds are held in relation to the matter opened by the Respondent [that is MKL] while it acted for the Applicant, which bears the matter number 212431. Annexed at pages 119 to 122 and marked “F” is a copy of the Trust Account Statement for matter number 212431. I have redacted portions of the Trust Account Statement, which I consider may be confidential to the Applicant.
[81] Affidavit of Jeffrey David Siddle 22 July2022, [15]
In her counsel’s written submissions Ms Burrows submitted that the trust account records, to which Mr Siddle referred, show that on 18 February 2016 the $50 was transferred from the trust account. MKL was the trustee to this trust account, of which MKLG was the trustee. Ms Burrows submitted that the transfer shows “that Macpherson and Kelley Lawyers (Sydney) Pty Ltd was taken over by M&K Lawyers Group Pty Ltd which was the incorporated legal practice”; that the “two organisations became one”; and that, in “those circumstances, M&K Lawyers Group and the Respondent were one and the same and unable to charge legal fees”.[82] Those submissions do not address the third ground. In oral submissions, counsel for Ms Burrows submitted that the transfer of the $50 from an account held in the name of MKL to one held by MKLG is a breach of trust.
[82] Applicant’s Brief Outline of Submissions, [22], [23]
Ground 3 has no merit. The $50 has remained in trust, and MKL has not purported to apply, and it is in any event prohibited from applying, the $50 it held on trust to pay any part of the Judgment Debt. The Judgment Debt, therefore, does not overstate the amount Ms Burrows owes on the Judgment Debt by $50. Further, even if the $50 was transferred in breach of trust, Ms Burrows has suffered no loss. The trust property is intact; and it is open to Ms Burrows, as it has been for years, to direct MKL or MKLG to pay her the $50 that is currently held in trust.
the asr and additional documents
The ASR (being the “Applicant’s Submissions in Reply 31.10.2022” to which I referred at the beginning of these reasons) deals with a number of subjects.
Service of bankruptcy notice
The ASR makes the following submissions:
(a)Mr Khoury’s affidavit of service appears to have been witnessed by his wife. That could be considered to be an actual or perceived conflict of interest.[83]
(b)On Mr Khoury’s evidence the bankruptcy notice was not brought to the attention of Genesis Officer because he gave the reception a sealed envelope marked “confidential” containing the bankruptcy notice.
(c)MKL’s submission that the bankruptcy notice was not served by post “is semantics, because the document was delivered to what is effectively a post box similar to a document exchange. There was no personal service.”
[83] ASR, [2]
Ms Burrows did not have leave to make submissions on service of the bankruptcy notice. In any event, none of these submissions have any substance. Service by means of s 102(1) of the Regulations does not require personal service, or proof that the nature of the document served in accordance with s 102(1) has specifically been brought to the attention of the intended recipient.
“One entity not two”
Ms Burrows submits that “the two practices had become one, notwithstanding retention of the respondent’s ACN”.[84] This does not appear to be an independent section of the ASR, but appears to be part of the section headed “Court can go behind the underlying Judgment”.
[84] ASR, [12]
Court can go behind the underlying Judgment
This section of the ASR refers to many matters, apparently in support of the submission that the Court should go behind the Judgment Debt.
In Wren v Mahony Barwick CJ identified the circumstances in which the bankruptcy court may go behind a judgment:[85]
The judgment is never conclusive in bankruptcy. . . . But the Bankruptcy Court may accept the judgment as satisfactory proof of the petitioning creditor’s debt. In that sense that court has a discretion. It may or may not so accept the judgment. But it has been made quite clear by the decisions of the past that where reason is shown for questioning whether behind the judgment or as it is said, as the consideration for it, there was in truth and reality a debt due to the petitioning creditor, the Court of Bankruptcy can no longer accept the judgment as such satisfactory proof. It must then exercise its power, or if you will, its discretion to look at what is behind the judgment. . . . The Court’s discretion in my opinion is a discretion to accept the judgment as satisfactory proof of that debt. That discretion is not well exercised where substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner.
[85] Wren v Mahony (1972) 126 CLR 212, at pages 224-225. See now Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28
Although this part of the ASR refers to a large number of matters, the ASR does not articulate how these matters constitute a reason for questioning that the Judgment Debt does not represent a true debt. More particularly, the ASR does not articulate how these matters constitute a reason for questioning the basis on which the Court of Appeal upheld the District Court Costs Order. As I have already noted, the Court of Appeal held that MKL and MKLG are separate entities, and that something more than control by MKLG of MKL must be established before MKL and MKLG may not considered to be separate entities. The ASR does not submit that the material to which it refers identifies matters that show something beyond the existence of control by one of MKL or MKLG over the other.
Rights and liabilities and overstatement of debt
Ms Burrows submits that the transfer of the $50 from one trust account to another was a breach of trust “but consistent with the attitude that there was only one entity”.[86] That submission is untenable. The allegation of breach of trust necessarily implies the unauthorised transfer from one entity to another. In any event, the ASR does not articulate the connection between the alleged breach of trust and the grounds on which Ms Burrows relies to set aside the bankruptcy notice
The judgment debt includes charges for work items in respect of breaching the nonpublication order, the copy order and undertaking in Hearne and Street
[86] ASR, [53]
This part of the ASR purports to identify improper charges in a ledger report.[87] The ASR does not, however, articulate the connection between the matters to which it refers and the grounds on which Ms Burrows relies to set aside the bankruptcy notice.
If the Respondent was holding itself out as an Incorporated Legal Practice to the Family Court then not entitled to recovery any monies
[87] ASR, [63]-[66]
In this part of the ASR it appears to be submitted that MKL applied to the Family Court to inspect the Family Court proceeding file and, in doing so, held itself out as being an incorporated legal practice and, for that reason, could not have recovered any fees.[88] I have set out earlier in these reasons the letters Ms Smith sent to the Family Court seeking access to the Family Court proceeding file, and correspondence which is incapable of supporting a finding that MKL held itself out as an incorporated legal practice. Even if, however, MKL did so hold itself out, the ASR does not articulate any legal consequences to Ms Burrows’ application to set aside the bankruptcy notice. There can be no legal consequence. That MKL may have led itself out as being an incorporate legal practice does not mean it could not or did not engage MKLG to provide legal services to it in the District Court proceeding.
A denial of natural justice – undue pressure by trial judge to attend the Family Court for copy of the Parenting Orders made by consent
[88] ASR, [67]-[71]
Ms Burrows claims she was placed under pressure, and felt compelled, to approach the Family Court and obtain the Family Court Consent Orders when she not required to do so; and, for that reason, Craig ADCJ manifested bias.[89] The matters to which the ASR refers are incapable of supporting a finding of actual or reasonably apprehended bias; and to the extent it is capable of supporting such finding, there is no evidence Ms Burrows applied to Craig DCJ to disqualify himself.
[89] ASR, [72]-[78]
Applicant’s evidence relevant to going behind the underlying judgment
This part of the ASR identifies material Ms Burrows alleges falls “within the special circumstances category to have the underlying judgment debt investigate to go behind the judgment”.[90] ASR does not articulate how these matters constitute a reason for questioning the basis on which the Court of Appeal upheld the District Court Costs Order. As I have already noted, the Court of Appeal held that MKL and MKLG are separate entities, and that something more than control by one of MKL or MKLG of the other must be established before MKL and MKLG are considered the same entity. The ASR does not submit that the material it refers to shows something more than MKL or MKLG having control over the other.
[90] ASR, [80]-[85]
Lump sum $130,000 costs agreed
The only point this part of the ASR appears to intend to make is that the evidence Mr Frawley gave in an affidavit about the “trading history of the two entities” is correct.[91] The ASR does not articulate the connection between this and the grounds on which Ms Burrows relies to set aside the bankruptcy notice
[91] ASR, [89]
Letter of offer to Ms Di Condi and role of Gregory Peach
The ASR refers to the letter dated 13 May 2015 from Macpherson + Kelley Lawyers Pty Ltd to Ms Di Condio, to which I have referred above, and references in the transcript of the hearing on 26 February 2020 before Craig ADCJ.[92] The ASR does not articulate the connection between the matters to which it refers and the grounds on which Ms Burrows relies to set aside the bankruptcy notice.
Costs hearing, Applicant unable to appear, adjournment not granted, did not agree to $130k lump sum costs; and offer of compromise
[92] ASR, [91]-[94]
This part of the ASR does not articulate the connection between the matters to which it refers and the grounds on which Ms Burrows relies to set aside the bankruptcy notice.[93]
[93] ASR, [95]-[105]
Discharge of the Family Court costs order
This part of the ASR does not articulate the connection between the matters to which it refers and the grounds on which Ms Burrows relies to set aside the bankruptcy notice.[94]
[94] ASR, [106]-[116]
Registrar Campbell’s orders have been omitted from the correspondence and chronology in those pages
The ASR appears to make submissions in support of the matters that are the subject of the claims Ms Burrows makes in the Federal Court proceeding. For reasons I have given, Ms Burrows does not have any counter-claim, set-off or cross demand equal to or exceeding the amount of the Judgment Debt, being a counter-claim, set-off or cross demand that she could not have set up in the District Court proceeding. Here, the ASR does not submit that the material to which it refers identifies matters that show something beyond the existence of control by one of MKL or MKLG over the other.
The Respondent claims 2 entities
Ms Burrows submits that MKL “claims 2 entities” was a “revelation” that “did not come to light until they filed a Notice of Motion seeking a lump sum costs order”.[95] The ASR does not articulate the connection between the matters to which it refers and the grounds on which Ms Burrows relies to set aside the bankruptcy notice.
[95] ASR, [127]
Challenge to costs
Ms Burrows submits that she was not present at the hearing when was no challenge made to the reasonableness of $130,000 as a fair measure of MKL’s costs.[96] The ASR does not articulate the connection between this and the grounds on which Ms Burrows relies to set aside the bankruptcy notice.
[96] ASR, [139]
Connection between the misrepresentation, the use of the information gained
The ARS refers to the “connection between the misrepresentations”, and the “use of the information”.[97] It is unclear to what this is intended to refer. To the extent it is intended to refer to the misrepresentations Ms Burrows alleges in the statement of claim she has filed in the Supreme Court proceeding, for the reasons I have already given Ms Burrows does not have any reasonable prospects of setting aside the Judgment Debt on the basis of any of the alleged fraudulent misrepresentation.
[97] ARS, [140]-[142]
ASIC searches
The purpose of this part of ASIC appears to be to submit there is a third company, M & K Holding Pty Ltd that holds 100% of the shares of MKLG, and there are common directors.
Conclusion
To some extent the ASR identifies matters that are intended to show that MKL and MKLG were in substance one firm and, for that reason, MKL was not entitled to the order for costs that resulted in the Judgment Debt. The difficulty is that Ms Burrows does not submit that any of these matters show or are reasonably capable of showing that the relationship between MKL and MKLG included something more than control. In the absence of such material, there is no basis on which to find there is reason for questioning the judgment of the Court of Appeal that MKL was entitled to an order for costs. The ASR otherwise refers to matters without articulating their connection to the grounds on which Ms Burrows relies for seeking to set aside the bankruptcy notice.
The ASR is not reasonably capable of supporting the grounds on which Ms Burrows relies for seeking to set aside the bankruptcy notice and, for that reason, it would be futile to permit Ms Burrows to rely on the ASR.
disposition
I will make an order refusing Ms Burrows leave to rely on the ASR, and an order that the proceeding be dismissed. I will also order that Ms Burrows pay the costs of MKL, but I will reserve to the parties liberty to apply within 28 days to vary or discharge that order.
I certify that the preceding one hundred and twenty-two (122) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 16 December 2022
3
17
0