Collard v Warne - [2001] FMCA 33

FEDERAL MAGISTRATES COURT OF AUSTRALIA

COLLARD v WARNE [2001] FMCA 33

BANKRUPTCY – Application to set aside Bankruptcy Notice – whether notice invalid as name on Bankruptcy Notice different to name on judgment which is the basis of the Bankruptcy Notice – Costs orders on Claim and Counterclaim – whether two separate orders or judgment

Bankruptcy Act s 27(1) s 30(1) s 40(1)(g) s 41(1) s 41(2) s 306
Bankruptcy Regulations – Reg 4.01(1)

Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71
Australian Steel Company (Operations) Pty Ltd v Lewis [2000] FCA 1915.
Commonwealth Bank v Horvath (1999) 161 ALR 441
Shepherd v Blueberry Farms of Australia (Corindi Limited) (2001)
Shanks & Co Pty Ltd v Hohne (1963) VR 198
Melpomeni Kyriakopoulou v Crock (2000) FCA 1762 (7 December 2000)

Applicant:

GRAHAM ALEXANDER COLLARD

Respondent:

ROGER WARNE

File No:

MZ 268 of 2001

Delivered on:

1 August 2001

Delivered at:

Melbourne

Hearing Date:

7 May 2001

Judgment of:

McInnis FM

REPRESENTATION

Counsel for the Applicant:

Mr T Ellis

Solicitors for the Applicant:

Dan Horesh

Counsel for the Respondent:

Mr J Nolan

Solicitors for the Respondent:

Septimus Jones & Lee

ORDERS

The Application filed 26 April 20001 be dismissed.
The Applicant Debtor pay the Respondent Creditor’s costs to be taxed in default of agreement including reserved costs provided however that if a sequestration order is made against the Applicant on a Petition relying upon non-compliance of the Bankruptcy Notice herein the Respondent’s costs of this Application be costs in the Petition.

FEDERAL MAGISTRATES

COURT OF AUSTRALIA AT

MELBOURNE

MZ268 of 2001

GRAHAM ALEXANDER COLLARD

Applicant

And

ROGER WARNE

Respondent

REASONS FOR JUDGMENT

Introduction

GRAHAM ALEXANDER COLLARD (the Debtor) makes application to set aside a bankruptcy notice number VN549/01 (the bankruptcy notice) which was served upon him on 4 April 2001. ROGER WARNE (the Creditor) is named as the Creditor in the bankruptcy notice.
The bankruptcy notice claims that the Debtor owes the Creditor a debt of $20,872.80 comprising costs ordered on 7 March 2000 by the County Court of Victoria in action no 06545 of 1998. In that action the Creditor was the Plaintiff and “Graham Collard” was the First Defendant (the County Court Action).
The costs were awarded on a claim by the Creditor as Plaintiff against the First Defendant in the County Court Action named “Graham Collard”. The costs had been taxed in the sum of $21,997.60 by an order of a Deputy Registrar on 5 October 2000 but this was then varied by order of a Judge on 5 December 2000 to the figure of $21,254.80 with a further order in favour of the First Defendant that the Creditor pay his costs in relation to the review from the Taxing Officer. Hence the net amount claimed as a result of the orders is $20,872.80 after further deducting the costs ordered against the Creditor of $382.00.
The orders made by the County Court to which I have referred were all attached to the Bankruptcy Notice.
It should be noted at the outset that there is an obvious difference in the name of the Debtor on the Bankruptcy Notice and the name which appears in the County Court proceedings as the relevant Defendant. In the Bankruptcy Notice the name is referred to as “Graham Alexander Collard” whilst in the Writ the First Defendant is referred to as “Graham Collard”. The court heading on the order made by the Court on 7 March 2000 refers to the First Defendant as “Graham Alexander Collard”. The court heading on the order made by the Registrar refers to the Defendant as “Graham Collard” and likewise the court heading on the order on review of the Taxing Officer’s Decision refers to the Defendant as “Graham Collard”. The Bankruptcy Notice addressed to “Graham Alexander Collard” refers to his address as being “73 Station Street Malvern in the State of Victoria 3144”. This is exactly the same address referred to in the Writ issued in the County Court as being the address of the Defendants. In the County Court proceedings an Affidavit was sworn by “Graham Alexander Collard” with the court heading referring to the first Defendant as “Graham Collard”. In the Affidavit sworn

8 February 1999 the deponent on oath says, “I am the First Defendant herein”.
An Affidavit sworn on 4 May 2001 by Mr Dan Horesh the solicitor for the Debtor confirms that he acted for the Debtor in relation to the County Court Action though in that action the Debtor was referred to as “Graham Collard”.
Hence there can be no dispute that the Debtor was the First Defendant in the County Court Action.
In the County Court Action there was a dispute referred to in the Statement of Claim over a Porsche motor vehicle. The claim was the subject of a Counter-claim dated 11 June 1999 whereby the Debtor claimed against the Creditor an entitlement to possession of the said motor vehicle and I was told during the course of submissions that this was apparently a significant dispute between the two parties.
In any event by order made in the County Court on 7 March 2000 the Court ordered that on the claim the Debtor should pay the Creditor’s costs taxed on Scale “C” and on the Counter-claim ordered that the Debtor pay the Creditor’s costs taxed on Scale “D”.
The Debtor represented by Mr Ellis of Counsel essentially relied upon two submissions as follows:
(a) The certificate of judgment or order attached to the bankruptcy notice is not one that could be properly issued by the County Court in County Court proceeding 98 number 06545 because it does not relate to a relevant party named in the proceeding, namely Graham Collard. It is in the circumstances not an order on which execution could issue and/or properly found the notice.
(b) The Creditor in the bankruptcy notice effectively claims money under two orders made in differing actions or proceedings namely in the claim, action or proceeding and the counterclaim, action or proceeding. In the circumstances the notice is invalid on the basis that two or more order debts cannot be included in the same bankruptcy notice.
The parties have agreed that the facts can be summarised in accordance with the details set out in the statement by the Debtor of Facts Law and Submissions namely as follows:-
15 Dec 98 Writ issued in County Court by Creditor against Debtor
8 Feb 99Affidavit sworn by Debtor as First Defendant filed in County Court action
11 Jun 99Counterclaim by Debtor filed in County Court action
7 Mar 2000Orders made by Judge Ostrowski that:-
On the claim, Debtor to pay Creditor costs taxed on Scale “C”
On Counterclaim Debtor to pay Creditor costs taxed on Scale “D”
5 Oct 2000Registrar allows aggregated taxed costs of $21,997.60 be paid by Debtor to Creditor
5 Dec 2000Judge Lewis on review of Registrar’s taxation – allows aggregated costs $20,872.80 to be paid by Debtor to Creditor
28 Mar 2001     Bankruptcy Notice issued by Creditor against Debtor
4 April 2001      Bankruptcy Notice served
26 April 2001     Application to set aside Bankruptcy Notice and extend time for compliance filed
26 April 2001     Order by Judge Ostrowski dated 7 March 2000 reissued in names of “Roger Warne” and “Graham Collard”
1 May 2001Application referred by Registrar Efthim for hearing by Federal Magistrate – time for compliance extended to 7 May 2001 at 4.15 p.m.
In support of the application the Debtor has relied upon the Affidavits of Graham Alexander Collard sworn 24 April 2001 and 30 April 2001, the Affidavits of Dan Horesh sworn 27 April 2001, 4 May 2001 and

6 May 2001.
The Creditor relied upon an Affidavit by James David Mapleston sworn 30 April 2001.
In addition to oral submissions both Counsel relied upon written outlines of submissions.

Ground (a) – Bankruptcy Notice does not relate to a relevant party named in the County Court action

The Debtor submitted that the Court should set aside the bankruptcy notice as the County Court proceedings upon which it relied were instituted against Graham Collard and not “Graham Alexander Collard”.
As indicated it was conceded by Counsel for the Debtor that there is no issue of identification but simply an issue of description. The complaint related to the absence of a second given name in the County Court proceedings whereas the bankruptcy notice refers to the Debtor as “Graham Alexander Collard”.
It was noted that two orders have been authenticated by the County Court in relation to the order made by Judge Ostrowski on 7 March 2000. The first order to be authenticated refers to “Graham Alexander Collard”. The second order which was authenticated by the County Court and is Exhibit DH1 to the Affidavit of Dan Horesh sworn 27 April 2001 refers to the First Defendant as being “Graham Collard”.
It is common ground that in this case the second authenticated order refers to the First Defendant in identical terms to those used in the Court heading in the Writ and Counterclaim in the County Court proceedings. It is also noted that the two other orders referred to by the Registrar and a County Court Judge reviewing the Registrar’s decision on taxation both refer to the Applicant as Graham Collard.
On the Debtor’s behalf it was submitted that the first certificate of judgment or order could not be properly issued by the County Court because it does not relate to a relevant party in the proceedings and hence it is not an order upon which execution could issue and/or be properly found a bankruptcy notice.
In support of the submission on behalf of the Debtor Mr Ellis further submitted that it is an essential requirement of the Bankruptcy Act that a valid order be attached to the bankruptcy notice and that as a result of the defect which he had referred to no such valid order was attached.
The Court was referred to the High Court Decision in Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 and also the Decision of the Full Court of the Federal Court in Australian Steel Company (Operations) Pty Ltd v Lewis [2000] FCA 1915.
It was submitted by the Debtor’s Counsel that those authorities make it clear that a Bankruptcy Notice will be a nullity if it fails to meet an essential requirement of the Bankruptcy Act 1966. I was referred to the Decision of Finkelstein J in Commonwealth Bank v Horvath (1999) 161 ALR 441 where His Honour said, “The question here is whether the failure to attach a copy of the three costs orders is a failure to meet an essential requirement of the Act”. It was held in that case that the failure to attach the three orders made the Bankruptcy Notice a nullity.
I was further referred to a Decision of Driver FM in the matter of Shepherd v Blueberry Farms of Australia (Corindi Limited) (2001) FMC 2 where it was held that a Bankruptcy Notice was valid notwithstanding the fact that an order attached to the notice whilst bearing the correct names of the parties in substance had transposed those names. It was submitted on behalf of the Debtor that that case could be distinguished from the present case on the basis that the notice under consideration in the present case did not bear the name of the Defendant.
Counsel for the Debtor referred to a Decision of the Full Court of the Federal Court in Melpomeni Kyriakopoulou v Crock (2000) FCA 1762 (7 December 2000) and it was submitted I could distinguish that case from the present case as the names in that case were accurately stated in the order and it was only the details of the order that were incorrect.
It was submitted further in support of this ground that I should disregard the Affidavit sworn by Graham Alexander Collard on

8 February 1999 which was filed in the County Court action. It was further submitted that the orders of the County Court attached to the Bankruptcy Notice were entered in names of a non party and in those circumstances were a nullity and incapable of being orders appropriate to a Bankruptcy Notice under s40(1)(g) of the Bankruptcy Act.
The Creditor submitted that the order made by the Court on 7 March 2000 had been accurately set out in the authenticated order. It is submitted that there is no question the Debtor is accurately described in the authenticated order as an Affidavit sworn by him in the proceedings is the same as the authenticated order. Obtaining an authenticated order with a correction it is submitted complies with order 36.07 of the Rules of the County Court which provide that, “The Court may at any time correct a clerical mistake in a judgment or order or an error arising in a judgment or order from a accidental slip or omission.” The exercise of the power under that order does not invalidate the previous authenticated order but merely corrects it in respect to a clerical mistake. The order therefore attached to the Bankruptcy Notice was a valid order at the date of issue of the Bankruptcy Notice and correctly reflected the judgment given by the Court and was therefore a valid order for the purpose of the bankruptcy regulations 4.01(1). I was again referred to the Kyriakopoulou case.
In my view it would be fanciful for a Court to disregard an Affidavit filed in the County Court action wherein the deponent Graham Alexander Collard deposes that he is “the First Defendant herein” and where the heading of that Affidavit refers to the First Defendant as “Mr Graham Collard”.
It is clear in my view that there has been a slip of a minor nature corrected in accordance with the Rules which does not in any way detract from or invalidate the Bankruptcy Notice in the present case. Whilst it is true and the Writ refers to the First Defendant as “Graham Collard” and the other documents to which I have previously referred contain some discrepancies I am satisfied that the error is of a minor nature and indeed similar to circumstances to which I have already been referred in Shepherd where names have been transposed or may be incomplete.
Hence the ground relied upon in the Application to set aside the Bankruptcy Notice must fail. It is important in my view that the Court of Bankruptcy should not simply disregard the reality of Court proceedings where one party has on oath clearly indicated that he is the Defendant so named in the proceedings and then allow that party to take advantage of a slip in those proceedings to somehow gain a benefit in the setting aside of a Bankruptcy Notice. To permit that to occur would be to embark upon an artificial and as I have indicated somewhat fanciful approach to the evidence on Affidavit and the reality of the situation.

Ground (b) – The Creditor claims money under two orders in differing actions namely claim and counterclaim

The Debtor submits that the Counterclaim should be characterised as an independent proceeding by the Debtor against the Creditor which was conveniently tried with the Creditor’s claim.
I was referred to Order 10.09 of the County Court Rules which provides,
“10.09 Where the Plaintiff succeeds on the claim and the Defendant succeeds on the counterclaim and a balance in favour of one of them results, the court may give judgment for the balance”.
It was submitted by Counsel for the Debtor in the light of reference to that order that the Court was not bound to pronounce a single judgment and may give judgment separately on the claim and the counterclaim. Because there is no aggregation or channelling into one order the two ordered debts on the claim and counterclaim and because they were on separate scales it was submitted on behalf of the Debtor that the Bankruptcy Notice therefore sought to claim monies due under two orders which offends the principle in bankruptcy proceedings that two or more judgment debts cannot be included in the same Bankruptcy Notice (See Commonwealth Bank v Horvath (1999) 161 ALR 441 per Finkelstein J at paragraph 16).
Counsel for the Creditor submitted there is no obligation imposed on a Creditor to explain in the Bankruptcy Notice the relationship between the taxing orders and that the attachment of those orders sufficiently discharges the Creditor’s duty to comply with the requirements of a Bankruptcy Notice. In the circumstances the attachments combined with the schedule on page 3 of the Bankruptcy Notice provide a clear indication as to the basis upon which the debt is claimed. It was submitted that the Bankruptcy Notice is based upon one judgment namely that given by the County Court on 7 March 2000 and despite the fact that orders were made in that judgment on the claim and counterclaim separately that that does not create two separate judgments or orders.
It was further submitted by Counsel for the Creditors that even if the orders made by the County Court on 7 March 2000 could be construed as separate orders then by pronouncing those orders in one judgment constitutes a channelling of the two orders into a single judgment.
It should be noted that in the present case the Judge in the County Court action on 7 March 2000 dismissed the Counterclaim with costs to be paid by the Debtor to the Creditor on Scale “D’ and in relation to the claim made an order that the Debtor pay the Creditor’s costs taxed on Scale “C”. There was no suggestion that this was a matter of giving judgment for the balance. Indeed the orders made in both the claim and counterclaim also provided that in taxing the costs one half of the costs of the actual hearing be treated as costs of the claim and one half be treated as costs of the counterclaim.
In my view there can be no doubt that a counterclaim may constitute an independent proceeding and the use of a counterclaim in proceedings where a Plaintiff has already commenced an action is a convenience which is afforded to a Defendant who may bring the counterclaim rather than commence fresh proceedings by way of a separate Writ or Summons.
Despite the fact however that there is a degree of independence which attaches to a counterclaim the fact that it is brought in the context of a claim already commenced has certain distinctive qualities which are not attributable to a separate Writ. For example a Defendant cannot raise a counterclaim for the first time after proceedings have come to an end by judgment (see Shanks & Co Pty Ltd v Hohne (1963) VR 198). There is some benefit in a counterclaim in relation to the application of the Limitation of Actions Act as the counterclaim is deemed to have been commenced for the purpose of Limitation of Actions Act on the same date as the proceeding commenced.
Although it is clear that a Court when dealing with a claim and counterclaim is not bound to deliver a single judgment the fact is in the present case that a single judgment resulting in costs orders was delivered.
In those circumstances it is the single judgment which has the consequence of an aggregate costs indebtedness which flows from dismissal of the counterclaim and an award of costs on both the claim and counterclaim against the Debtor and this distinguishes the present circumstances from one where there may be two separate judgments or two separate orders.
I am satisfied that where there is a single judgment and the Debtor has in County Court proceedings taken advantage of the convenience and indeed cost saving of using the counterclaim procedure which has then in turn resulted in a single judgment, it cannot be said that the costs orders which flow from that judgment would amount to separate orders of a kind that would not be permitted to form the basis of a Bankruptcy Notice.
In the case of Commonwealth Bank v Horvath to which I have been referred the taxation for orders had been made pursuant to orders of Justice Beach made in the Supreme Court of Victoria on 23 May 1995, Justice O’Bryan made on 2 April 1996 and a further order by Justice Beach on 10 May 1996. Copies of the orders were not attached to the notice.
In the present case there is one order which has generated the costs indebtedness albeit it an order made on the claim and counterclaim arising out of a single judgment. Hence in my view the Decision of Finkelstein J in Commonwealth Bank v Horvath can be distinguished from the present case.

Accordingly the second ground relied upon by the Debtor fails and I propose making the following orders:
(1)The Application filed 26 April 2001 be dismissed.
(2)The Applicant Debtor pay the Respondent Creditors costs to be taxed in default of agreement including reserved costs provided however that if a sequestration order is made against the Applicant on a Petition relying upon non-compliance of the Bankruptcy Notice herein the Respondent’s costs of this Application be costs in the Petition.

I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate:

Date: 1 August 2001