Efficient Pure Plumbing Pty Ltd v Warren

Case [2023] FCA 1301

FEDERAL COURT OF AUSTRALIA

Efficient Pure Plumbing Pty Ltd v Warren [2023] FCA 1301

File number(s): VID 591 of 2022
Judgment of: MCELWAINE J
Date of judgment: 30 October 2023
Catchwords: BANKRUPTCY – De novo application for review of a sequestration order – multiple errors in bankruptcy notice and creditor’s petition – amendment of the petition – whether satisfied that in truth and reality a debt is owing that exceeds the statutory minimum – where respondent debtor ordered to pay arbitration costs in the Magistrates’ Court of Victoria in excess of the statutory cap – application allowed, sequestration order set aside
Legislation:

Bankruptcy Act 1966 (Cth) ss 40, 44, 52

Bankruptcy Regulations 2021 (Cth) reg 10A

Civil Procedure Act 2010 (Vic) ss 10-26, 28, 29, 30

Courts (Further Amendments) Act 1986 (Vic) Part 1, ss 72A, 72B, 72D

Magistrates Court Act 1989 (Vic) ss 4 102, 103, 104, 105, 106A, 131

Magistrates’ Court General Civil Procedure Rules 2020 (Vic) r 36.08

Magistrates’ Court (Miscellaneous Civil Proceedings) Rules 2020 (Vic) rr 2.01, 2.08, 2.11, Appendix AA

Cases cited:

Anthony Horden and Sons Ltd v The Amalgamated Clothing and Allied Trades Union of Australia (1932) 47 CLR 1

Attorney-General (NSW) v Mayas Pty Ltd (1988) 14 NSWLR 342

Australia & New Zealand Banking Group Ltd v Luck (1995) 4 Tas R 328

Barry v Melbourne Magistrates’ Court [2001] VSC 228

Bechara v Bates [2021] FCAFC 34; 286 FCR 166

Buyer Central Pty Ltd v Sodhi [2021] VMC 22

Clyne v Deputy Commissioner of Taxation (1983) 57 ALJR 673

Corney v Brien (1951) 84 CLR 343

Cristovao v Tan & Tan Lawyers Pty Ltd [2018] FCAFC 41

Emmerson v Wreckair Pty Ltd (1992) 33 FCR 581

Farrow Mortgage Services Pty Ltd (in liq) v Tunevitsch [1994] TASSC 88

Guss v Deputy Commissioner of Taxation [2015] FCA 841; 238 FCR 509

Karmine Pty Ltd v Zambelli, unreported Supreme Court of Victoria 15 August 1994

Muir v Jenks [1913] 2 KB 412

New South Wales v Kable [2013] HCA 26; 252 CLR 118

Newcastle City Council v McShane (No 3) [2005] NSWCA 437; 65 NSWLR 155

Olivieri v Stafford (1989) 24 FCR 413

Petrie v Redmond [1943] St R Qd 71

Porter v Ghasemi [2021] FCAFC 144; 286 FCR 556

Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28; 261 CLR 132

Re Hanby; Ex parte Flemington Central Spares Pty Ltd (1967) 10 FLR 378

Re Zagordis; Ex parte Q’Plas Group Pty Ltd (1990) 27 FCR 108

Stuart v Rabobank Australia Ltd (No 2) [2021] FCA 1626

SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; 262 CLR 362

Taylor v Hartley, unreported Supreme Court of Victoria, 1 December 1992

Valladares as executor of the estate of Sabrina Karen Andreazza v De Angelis [2020] FCA 1865

Warren v Efficient Pure Plumbing Pty Ltd [2022] VSC 594

Wren v Mahony (1972) 126 CLR 212
Dal Pont GE, Law of Costs (3rd ed, LexisNexis,…

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Details
AGLC
Efficient Pure Plumbing Pty Ltd v Warren [2023] FCA 1301
Case
[2023] FCA 1301
Decision Date

CaseChat Overview and Summary

The case of Efficient Pure Plumbing Pty Ltd v Warren involves a dispute between a contractor and a homeowner over an alleged debt. The homeowner, Mr Warren, disputes his obligation to pay the contractor, Efficient Pure Plumbing Pty Ltd, for work done on a gas ducted heating appliance installation. The contractor initiated a proceeding in debt against Mr Warren in the Magistrates' Court of Victoria, claiming a debt of over $4,000. The Judicial Registrar found in favour of the contractor and ordered Mr Warren to pay the claimed amount, including costs. The contractor then lodged a creditor's petition for Mr Warren's sequestration, which led to a review application by Mr Warren. The key issue before the court was whether the court was satisfied that there was a debt owing by Mr Warren to the contractor that exceeded the statutory minimum required to present a creditor's petition. The court found that the amount ordered by the Judicial Registrar exceeded the statutory cap and thus the sequestration order was set aside and the petition dismissed. The court held that the contractor's claim for costs was excessive and beyond the scope of the original agreement, and therefore, the debt did not meet the statutory minimum required for a creditor's petition. The court allowed the review application, set aside the sequestration order, and dismissed the creditor's petition. The question of costs will be determined on the papers.

Orders

Orders of the court

1. The interim application for review filed by the respondent on 5 June 2023 is allowed.

2. The sequestration order made on 16 February 2023 is set aside.

3. The creditor’s petition lodged on 11 October 2022 and the amended creditor’s petition lodged on 26 September 2023 are each dismissed.

4. Subject to any further order of the Court, the question of costs, including the costs and expenses of the trustee in bankruptcy, Mr Stephen Dixon, will be determined on the papers as follows:

(a) The petitioning creditor is to provide a copy of these reasons to Mr Stephen Dixon of the firm HM Advisory, Level 21, 114 William Street, Melbourne, VIC 3000 within 7 days of the date of this order.

(b) The petitioning creditor, the supporting creditor, the respondent and Mr Dixon may each file and serve written submissions as to all consequential orders, including as to the costs and disbursements incurred by Mr Dixon in his administration of the bankrupt estate of the respondent, of no more than 5 pages which submissions must be provided within 28 days of the publication of these reasons and with a right of reply also limited to 5 pages to be filed and served within a further period of 14 days.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

As I explain, the fundamental question before me is whether I am satisfied as required by s 52 of the Bankruptcy Act that there is in truth and reality a debt owing by Mr Warren to the applicant that exceeds the statutory minimum required to present a creditor’s petition: s 44 of the Bankruptcy Act. I am not, and it follows that the sequestration order must be set aside and the petition dismissed.THE RELEVANT BACKGROUND In June 2020, Mr Warren desired to have installed at a property in Melbourne, which he then occupied, a new gas ducted heating appliance. On 2 June 2020 he received a written quotation from the applicant to undertake the necessary work comprising the supply and connection of the unit for a total price of $2,880 including GST (quotation). Accompanying it were eight pages of contractual conditions (21 major clauses and numerous subclauses), to which Mr Warren expressed his agreement by subsequently signing and returning the quotation to the applicant. The quoted work was undertaken by the applicant but Mr Warren did not pay the amount due, because he disputed his obligation to do so where, on his case, the installation was poorly performed and where he contended that the dispute was required to be resolved in accordance with the procedures set out in the Domestic Building Contracts Act 1995 (Vic) (Building Act). The applicant commenced a proceeding in debt against Mr Warren in the Magistrates’ Court in the form of a complaint on 17 August 2020. On the face of the complaint, the applicant claimed a debt of $4,199.51, comprising the invoiced amount of $2,880, contractual interest of $86.56, “recovery costs” of $1,183.45 and “search costs” of $49.50. Mr Warren disputed and defended the claim. A hearing occurred before a Judicial Registrar on 9 February 2022, who relevantly exercised the powers of a Magistrate: Magistrates’ Court (Judicial Registrars) Rules 2015 (Vic). The Judicial Registrar reserved her decision and delivered it on 15 February 2022. There is in evidence the transcript of the reasons for decision. There is no doubt that the Judicial Registrar exercised the jurisdiction of the Magistrates’ Court pursuant to the arbitration procedure for small claims at Div 2 of Pt 5 of the Magistrates’ Court Act. In her reasons, the Judicial Registrar rejected Mr Warren’s defence and found that he had agreed to pay for the heating unit in accordance with the quotation. As I explain, the defence raised by Mr Warren assumes some importance. It is summarised by the Judicial Registrar in her reasons. Two matters were put in issue. One, a contention that the workmanship in installing the unit was of “poor quality”, which phrase the Judicial Registrar deployed. In evidence before me, Mr Warren explained that the issue concerned a failure to comply with Mr Warren’s request, on completion of the installation, that the unit be tested to certify that it could be safely operated. In answer, Mr Warren’s unchallenged evidence is that the applicant’s employees locked the unit to render it inoperative and left the site. Thereafter Mr Warren received demands from debt collectors for full payment prior to certification. It should be noted that the quotation description of the work to be undertaken included the supply and installation of the unit, a “6 year plumbing certificate included” and “connect gas pipe to gas line & test connections for leaks.”

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

This requirement may be displaced in any of the circumstances at subsections (2)-(4), which are not presently relevant. The applicant’s claim was referred to and dealt with as an arbitration. There is no definition of what is an arbitration within the meaning of this provision, though a skeletal procedural outline is provided by s 103:Conduct of arbitration(1)An arbitration under this Division is to be conducted by the Court constituted by a magistrate or, if the Rules so provide, by a registrar.(2)In conducting an arbitration, the Court—(a)is not bound by rules of evidence but may inform itself on any matter in such manner as it thinks fit; and (b)is bound by the rules of natural justice; and(c)is not required to conduct any proceedings in a formal manner; and (d)may exercise any powers that the Court may exercise in hearing and determining a complaint.(2A)Nothing in subsection (2)(a) prevents the application of Part 3.10 of the Evidence Act 2008 to the conduct of an arbitration.(3)Evidence in an arbitration—(a)may be given orally or in writing; and(b)if the Court so requires, must be given on oath or affirmation or by affidavit.(4)The Court must determine according to law any question that arises for determination in an arbitration.(5)If the Court is satisfied that a party to an arbitration does not have a knowledge of the English language that is sufficient to enable the party to understand, or participate in, the arbitration, the Court may allow a competent interpreter to interpret the arbitration. It is to be noticed that arbitration pursuant to this statute does not adopt the common form whereby a court may refer a proceeding, or part thereof, to an arbitrator for arbitration and who conducts the arbitration separately from the court, as for example is the case with the appointment of arbitrators pursuant to s 53A of the Federal Court of Australia Act 1976. It is curious that the Victorian Parliament has chosen to deploy the terminology of arbitration which is ordinarily associated with contractual mechanisms for the resolution of civil disputes quite separately from the exercise of judicial power by a court. Nonetheless, that is the label which frames the simplified procedure for the resolution of minor monetary claims brought before the Magistrates’ Court of Victoria. The result of an arbitration is the making of an award, which must be in writing: s 104. The award is separate from a statement of the reasons for making it and when made “has effect as if it were an order made by the Court in a proceeding heard and determined by it”: s 104(2) and (3). Section 105 then provides for costs orders in an arbitration:Costs(1)If an arbitration relates to a complaint under which monetary relief is sought and the Court awards a party less than $500, the Court must not award costs unless satisfied that special circumstances make it appropriate to do so.(2)Subject to subsection (1), the Court may, in accordance with the regulations or, if there are no relevant regulations, then in accordance with the Rules, award costs to a party in respect of an arbitration under this Division.