Forrest v Black
[2009] FMCA 261
•16 March 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| FORREST v BLACK | [2009] FMCA 261 |
| BANKRUPTCY – Bankruptcy notice – attachment of copy of judgment or order – judgment arising in NSW from filing of certificate of costs assessment – entry of judgment is required before an enforceable judgment exists – evidence of an entered judgment is required to be attached to bankruptcy notice – bankruptcy notice attaching filed costs assessment certificate was invalidly issued – set aside on application of debtor. |
| Bankruptcy Act 1966 (Cth), ss.40(1)(g), 41, 115, 123, 306 Civil Procedure Act 2005 (NSW), s.133 Conveyancing Act 1919 (NSW), s.12 Legal Profession Act 2004 (NSW), s.368 Uniform Civil Procedure Rules 2005 (NSW), r.36 |
| Abigroup Ltd v Abignano (1992) 39 FCR 74 American Express International v Held (1999) 87 FCR 583 Carr v Swart [2008] FCA 1495 Commonwealth Bank of Australia v Horvath (Junior) (1999) 161 ALR 441, [1999] FCA 143 Hall Chadwick Pty Ltd v Doyle t/as The Builder’s Lawyer [2006] NSWSC 1195 Maher v Honeysett (2009) 222 FLR 407 Mejias v Federal Express (Australia) Pty Ltd [2007] FMCA 1817 Swart v Carr (No.2) [2008] FMCA 1204 Carr v Swart [2008] FCA 1495 |
| Applicant: | JOHN JAMES FORREST |
| Respondent: | RICHARD BLACK |
| File Number: | SYG 3001 of 2008 |
| Judgment of: | Smith FM |
| Hearing date: | 16 March 2009 |
| Delivered at: | Sydney |
| Delivered on: | 16 March 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr R Hughes |
| Solicitors for the Applicant: | Hughes & Co. Solicitors |
| Counsel for the Respondent: | Mr R Black |
| Solicitors for the Respondent: | Forshaws Neill |
ORDERS
Bankruptcy Notice NN4139/08 issued on 28 October 2008 is set aside.
The respondent must pay the applicant’s costs, including reserved costs, as agreed or taxed under the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth).
The applicant must provide a copy of this order to the Official Receiver within 2 days.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 3001 of 2008
| JOHN JAMES FORREST |
Applicant
And
| RICHARD BLACK |
Respondent
REASONS FOR JUDGMENT
(revised from transcript)
This is an application to set aside bankruptcy notice no.4139 of 2008, which was issued by the official receiver on 28 October 2008. The bankruptcy notice identified Mr Black as the creditor, and claimed that Mr Forrest owed the creditor a debt of $92,763.74. Paragraph two of the Bankruptcy Notice stated:
The creditor claims that the debt is due and payable by you. A copy of the judgments or orders relied upon by the creditor is attached. At the time of applying for this notice, execution of the judgments or orders have not been stayed.
There is no affidavit of service of the bankruptcy notice put in evidence by Mr Black, but Mr Forrest deposes to being given the notice by Mr Black at a meeting with him on 30 October 2008. According to Mr Forrest's affidavit, the bankruptcy notice comprised the eight-page prescribed form ending with the signature of the official receiver, and a further three pages which were attached. The further three pages were: (i) a one page ‘registration of judgment/order’ form 45, signed by Mr Black and marked as filed in the District Court of NSW on 16 or 15 October 2006; (ii) a one page unsworn statement signed by Mr Black and dated 9 October 2008 in support of ‘an application to register the attached order as a judgment in the District Court’; and (iii) a one page ‘Certificate as to Determination of Costs’ issued by a costs assessor on 30 September 2008 in the sum of $92,763.74.
The costs assessment certificate identifies the legal practitioner who applied for the certificate, and was found entitled to the assessed practitioner/client costs, as ‘Malcolm Douglas Carr trading as Forshaws Neill’, and not Mr Black. Mr Black’s unsworn statement asserts that “I acquired the practice of Forshaws Neill pursuant to an agreement dated 2 July 2008 and have given the Respondent [i.e. Mr Forrest] notice of the assignment of the order/Certificate as to Determination of cost” identified as page (iii). It states: “I request that the order be registered as a judgment in the sum of $92,763.74 together with $72 for an individual being the filing fee for registration of the order as a judgment”.
I am prepared to find that pages (ii) and (iii) probably accompanied the form 45 when it was filed in the District Court, and that all three pages were attached to the bankruptcy notice when it was issued by the official receiver. However, for reasons which I shall now explain, I do not accept that these three documents constitute, or evidence, a “final judgment or final order” for the benefit of Mr Black in the amount claimed by the bankruptcy notice, as is required by s.40(1)(g) and s.41 of the Bankruptcy Act. It is well established that such a judgment must be one upon which the creditor is “in a position to issue execution” (see Abigroup Ltd v Abignano (1992) 39 FCR 74 at 80). Nor do they constitute a ‘copy of’ a ‘judgment or order’ in favour of Mr Black, as was required to be attached to the prescribed form of bankruptcy notice. I have concluded that the bankruptcy notice was, therefore, invalid when issued and served, and Mr Forrest is entitled to an order setting it aside.
Under cross-examination of Mr Forrest, it was put to him that additional documents were also given to him at his meeting with Mr Black on 30 October 2008, and he agreed that this was the case. These may have included the statement of reasons of the costs assessor, and he admits also that they included a document signed by Mr Black which is headed: “Notice of Assignment”. It states:
To John James Forrest,
I RICHARD DAMIEN BLACK hereby notify you that by an instrument in writing dated 2 July 2008 under the hand of Malcolm Douglas Carr who traded as Forshaws Neill Solicitors the said Malcolm Douglas Carr assigned to me absolutely the judgment debt payable by you in the sum of $92,763.74.
Dated 30 October 2008
Plainly, that document could not have been attached to the bankruptcy notice issued by the official receiver, since it is dated subsequent to the date of issue of the Bankruptcy Notice. On the balance of the evidence before me, I find that the bankruptcy notice served on Mr Black probably attached only the three pages which I have described above, and that no additional documents were attached to it when it was issued by the Official Receiver.
I note that there is no evidence that in fact, as asserted by Mr Black in his unsworn statement which was attached to the Form 45 and to the Bankruptcy Notice, any other notice of the alleged assignment had been given to Mr Forrest prior to 30 October 2008. On the evidence before me, notice of the asserted assignment had not been given to Mr Forrest at the time that the application for registration of the costs certificate was filed in the District Court on 15 October 2008.
It is not suggested in any evidence that the bankruptcy notice issued by the official receiver attached a certificate of a judgment issued by the District Court, which recorded or evidenced that a judgment was, in fact, entered in the District Court in favour of Mr Black for the amount which he demanded. I find that it did not attach such a document.
Relevant statutory provisions allowing registration and enforcement of a costs assessment certificate in NSW are noted on the Form 45 itself. It refers to s.133 of the Civil Procedure Act 2005 (NSW) and Uniform Civil Procedure Rules (NSW) rr.36.10 and 36.11. Section 133 provides:
(1)A judgment or order of the Court may not be enforced until it has been entered in accordance with the uniform rules.
(2)This section extends to:
(a)any judgment, order, determination or decree of a court, and
(b)any adjudication or award of a person having authority to make an adjudication or award
that may be filed or registered in the court, or of which a certificate may be filed or registered in the court, under any other Act or law.
(3)In subsection (2), "law" includes:
(a)a law of the Commonwealth, and
(b)a law of another State or Territory, and
(c)in relation to the Supreme Court, a law of a foreign country.
This section makes clear that the requirement of ‘entry’ of a judgment by the relevant court applies to a judgment which arises from the registration of an adjudication or award whose filing or registration in the Court is provided under any other Act or Law. Without entry of a judgment, the creditor is in no position to enforce such a judgment through any process of execution.
Rule 36.10 addresses the filing of a costs assessor’s certificate issued after a solicitor-client or party-party costs assessment under the Legal Profession Act, and makes provision for the entry of judgment. It provides:
(1)A cost assessor’s certificate:
(a)may be filed in the proceedings to which it relates, or
(b)may be filed in fresh proceedings, whether in the same court or another court.
(2)If, in relation to proceedings in which a cost assessor’s certificate is filed, there is also filed an affidavit, sworn not earlier than 14 days before it is filed, stating:
(a)if the affidavit is filed with the certificate, how much of the amount of costs included in the certificate has not been paid, and
(b)otherwise, the amount of the costs included in the certificate that, at the time the certificate was filed, had not been paid,
the registrar may enter judgment for the amount of the costs that have not been paid, without a direction of the court or request of a party.
Rule 36(11) repeats and explains the provisions of s.133, by providing:
(1)Any judgment or order of the Court is to be entered.
(2)Unless the Court orders otherwise a judgment or order is taken to be entered when it is recorded in the Court's computerised Court records system.
……..
(3)In this rule, a reference to a judgment or order of the court includes a reference to any judgment, order, determination, decree, adjudication or award that has been filed or registered in the court, or of which a certificate has been filed or registered in the court, as referred to in section 133 (2) of the Civil Procedure Act 2005.
These statutory provisions make it clear that in NSW the filing of a certificate of a costs assessor with a request for its registration, using a Form 45, does not of itself constitute the entry of a judgment in the court in which it is filed. They make clear that there is no ‘final judgment or order’ which is capable of execution, unless or until the judgment has been entered according to the procedures of that court. They confirm the common experience of this Court in its bankruptcy jurisdiction, which is that it is necessary for a judgment creditor relying upon the registration of a costs assessment certificate to obtain a certificate evidencing an entered order in favour of that creditor, before seeking the issue of a Bankruptcy Notice based upon that costs assessment.
In the present case, I must consider whether the three documents attached to the bankruptcy notice amounted to a ‘copy of’ a judgment or order in favour of Mr Black for the debt claimed by him, as is required by the prescribed form of bankruptcy notice. I must also consider whether they evidenced the entry of such a judgment of the District Court, showing that Mr Black was in a position immediately to enforce payment through a process of execution. These issues were, in my opinion, sufficiently raised by Mr Forrest’s grounds of opposition, albeit somewhat imprecisely. They were isolated by me at the start of today’s hearing, and I received submissions upon them from both parties.
In my opinion, it is clear that the documents did not themselves constitute a ‘copy of’ a District Court ‘judgment or order’ in favour of Mr Black in the amount demanded. I consider that the prescribed form envisages that such a copy should be of a document which identifies the terms of a court order, and is sealed or certified by the court making the order, so as to demonstrate on its face the making of an order which is immediately enforceable as a judgment debt “obtained” by the creditor who has procured the issue of the bankruptcy notice (see s.41(1)). In my opinion the present attachments did not do this, and the notice was not ‘in accordance with’ the form prescribed under s.41(2). This was because it did not attach a sealed judgment, or a certificate of judgment otherwise entered in the District Court in accordance with its rules, giving rise to an enforceable judgment debt against Mr Forrest in favour of Mr Black.
To overcome the absence of a certificate of such a judgment, Mr Black contended that the three documents I have described were sufficient in themselves to constitute a final judgment or order in his favour for the purposes of s.40(1)(g) of the Bankruptcy Act. Reliance was placed on s.368(5) of the Legal Profession Act 2004 (NSW), or its earlier equivalent s.208J(3) of the Legal Profession Act 1987 (NSW). This provides:
S.368 Certificate as to determination
….
(5) In the case of an amount of costs that has not been paid, the certificate is, on the filing of the certificate in the office or registry of a court having jurisdiction to order the payment of that amount of money, and with no further action, taken to be a judgment of that court for the amount of unpaid costs, and the rate of any interest payable in respect of that amount of costs is the rate of interest in the court in which the certificate is filed.
However, in my opinion, this provision does not have the effect of converting an application for registration, which is filed accompanied by a Certificate of Costs Assessment, into a judgment or order of the sort required under s.40(1)(g) of the Bankruptcy Act. Nor, in my opinion, does it purport to override the effect of the provisions of the Civil Procedure Act and the Uniform Civil Procedure Rules which I have quoted above, by dispensing with the need for the entry of a judgment before the beneficiary of a costs assessment certificate is in a position to issue execution (compare Maher v Honeysett (2009) 222 FLR 407 at [16]).
I do not accept the submission to the contrary made to me by Mr Black, in which he relied upon Hall Chadwick Pty Ltd v Doyle t/as The Builder’s Lawyer [2006] NSWSC 1195, in which Rothman J said at [57]:
57 Moreover, the provisions of s208J(3) do not provide that the costs assessor’s certificate is a judgment. Nor does it provide that the Court shall issue a judgment on the basis of the costs assessment. It provides that “on the filing of the certificate in the office or registry of a court having jurisdiction…and with no further action, [the certificate is] taken to be a judgment of that court”. This means that for all purposes, and subject to the other provisions of the Act, the certificate is on its filing taken to be a judgment of the Court; this does not make it a judgment of the Court as such. Subsection 208J(3) is a deeming provision which creates a fiction for the purpose of the enforcement of the costs assessment. Indeed, the provisions of the subsection seem more concerned with the accrual of interest at a particular rate than giving the certificate of assessment the effect of a judgment of the Court.
I do not understand his Honour to be suggesting that the ‘fictional’ judgment created by s.208J(3) includes a fictional entry of a judgment, and in my opinion his last sentence suggests the opposite. As his Honour pointed out, the provision seems directed at fixing a point of time from which interest can be calculated. I do not consider that it can be construed as overriding the requirement of an entry of judgment, after the filing of a costs certificate, which is imposed by the Civil Procedure Act and Uniform Civil Procedure Rules.
Moreover, even if s.368(5) had the effect which is contended by Mr Black, it would not operate so as to make Mr Black a judgment creditor under a judgment of the District Court. The provision operates according to the terms of certificate which is filed, not the terms of the application for its registration. The present certificate identifies the creditor, being the applicant identified in the Costs Assessment Certificate, as Mr Carr and not Mr Black. If the certificate was immediately converted into an entered judgment by s.368 upon its filing in the District Court, Mr Black did not become the judgment creditor. The fact that he may have attempted to have applied to the District Court to recognise an assignment, would not make him otherwise in my opinion. I note, moreover, that his request for registration might itself appear not to be capable of entry as a judgment under r.36.10(2), if it was not accompanied by an affidavit verifying the factual assertions made by Mr Black in his unsworn statement.
The facts of the present case clearly illustrate the wisdom of the rules requiring entry of judgment before enforcement, particularly where an assignment of a costs certificate is claimed, since the interpretation presented by Mr Black puts in the hands of a self claimed judgment creditor a capacity to procure a most misleading attachment to a bankruptcy notice. The potential misleading effect of the present documents as to the true identity of a judgment creditor and the capacity of the asserted creditor to execute under the judgment, would explain why I would not, had I been invited, have applied the provisions of s.306 of the Bankruptcy Act to overcome the formal irregularity arising by reason of the failure to properly attach evidence of an entered order of the District Court (see also Commonwealth Bank of Australia v Horvath (Junior) (1999) 161 ALR 441, [1999] FCA 143, American Express International v Held (1999) 87 FCR 583 and Mejias v Federal Express (Australia) Pty Ltd [2007] FMCA 1817 at [16] – [19]).
For the above reasons, I am satisfied that the present bankruptcy notice was invalidly issued and should be set aside.
I note that Mr Forrest’s grounds seeking the setting aside of the bankruptcy notice ranged very broadly over a number of other issues. As well as challenging the validity of the notice as issued, they disputed whether the costs assessment was accurate, whether Mr Forrest has a set-off arising from other dealings with Mr Carr, his former solicitor, which were not able to be addressed in the course of this particular assessment, and whether Mr Black ever acquired an enforceable assignment of Mr Carr’s entitlements under the Costs Assessment Certificate.
In relation to the last of these issues, Mr Forrest contends that an agreement made between Mr Carr and Mr Black on 2 July 2008, in which Mr Carr purported to sell his solicitor's practice to Mr Black, did not in its terms cover Mr Carr's entitlement to recover costs already accrued in relation to work no longer in progress. He contends that a further document, purporting to be a deed of assignment made on 2 July 2008 between Mr Carr and Mr Black which expressly assigned Mr Carr's entitlement to outstanding fees owed to him by Mr Forrest, was not made for consideration, and may not have been made on the date that it is dated. If this is the case, and if in fact no notice of assignment had been given to Mr Forrest under s.12 of the Conveyancing Act 1919 (NSW) before 30 October 2008, then Mr Black’s right to obtain judgment before that date is questionable. However, these contentions have not been fully explored before me, and I make no findings about them.
The background to the assignment or purported assignment of Mr Carr’s practice was that throughout 2008 Mr Carr was the subject of bankruptcy proceedings, which culminated in my making a sequestration order on 20 August 2008 based on an act of Bankruptcy occurring on 21 January 2008 (see Swart v Carr (No.2) [2008] FMCA 1204, upheld by Foster J in Carr v Swart [2008] FCA 1495). Doctrines of ‘relation back’ under s.115 of the Bankruptcy Act might therefore have vested Mr Carr's entitlements under the costs assessment in his trustee as part of his estate available to creditors, particularly if the purported assignment was made without consideration (see s.123). Mr Carr's trustee, it appears, has become alive to this issue in the course of the present proceedings, but has not sought to intervene so as to obtain a determination on it in the course of the present proceedings. As I have indicated, I have not found it necessary to do so, and it can be left for another day.
I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of Smith FM
Associate: Michael Abood
Date: 3 April 2009
0
10
5