Gama v Agostini Jarrett Pty Ltd
[2009] FMCA 1006
•14 October 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| GAMA v AGOSTINI JARRETT PTY LTD | [2009] FMCA 1006 |
| BANKRUPTCY – Application to set aside bankruptcy notice – judgment debt for assessed solicitor’s costs against former client – whether court might go behind judgment – client’s estate becoming subject to protective management – effect of NSW legislation on pending bankruptcy proceedings – need to appoint a litigation guardian – reasons for vacating hearing. |
| Bankruptcy Act 1966 (Cth), ss.40(1)(g), 41(7) Federal Magistrates Court Rules 2001 (Cth), r.11.11 Guardianship Act 1987 (NSW), s.25E Human Rights and Equal Opportunity Commission Act 1986 (Cth) NSW Trustee and Guardian Act 2009 (NSW), ss.5, 6, 71 |
| Colquhoun v Graffione (2000) 97 FCR 376 Gama v Qantas Airways Ltd (No.2) [2006] FMCA 1867 Glew v Harrowell [2003] FCA 373, (2003) 198 ALR 331 L v Human Rights & Equal Opportunity Commission [2006] FCAFC 114, (2006) 233 ALR 432 Massih v Esber [2008] FCA 1452 Olivieri v Stafford (1989) 91 ALR 91 Qantas Airways Ltd v Gama [2008] FCAFC 69, (2008) 167 FCR 537 Treadwell v Hickey [2006] 206 FLR 367 Vaughan v Pagotto (2006) 202 FLR 321 |
| Applicant: | WILLIAM CHARLES GAMA |
| Respondent: | AGOSTINI JARRETT PTY LTD |
| File Number: | SYG 3195 of 2008 |
| Judgment of: | Smith FM |
| Hearing date: | 14 October 2009 |
| Delivered at: | Sydney |
| Delivered on: | 14 October 2009 |
REPRESENTATION
| Counsel for the Applicant: | In Person |
| Counsel for the Respondent: | Mr D Begg |
| Solicitors for the Respondent: | David Begg & Associates |
ORDERS
The hearing is vacated and the application is listed for further directions on 19 November at 10.15.
Any interim application for the appointment of a litigation guardian under Federal Magistrate Court rules 11.11, by the NSW Trustee and Guardian or by any other person or for that agency or other person to join the proceedings, shall be filed and served on all parties including Mr Gama no later than 9 November 2009 and shall be returnable for hearing on 19 November 2009 at 10.15.
Any affidavit, outline of submissions, list of authorities or other document intended to be relied upon by any person at that listing shall be filed and served on all parties no later than 4 pm on 17 November 2009.
The time for compliance with the bankruptcy notice is extended till 5 pm on 19 November 2009.
Costs in relation to today’s listing are reserved.
The NSW Trustee and Guardian and any solicitor instructed by that agency has leave to inspect the file in the proceedings and to uplift any parts thereof for purposes of photocopying subject to such conditions determined by a registrar.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 3195 of 2008
| WILLIAM CHARLES GAMA |
Applicant
And
| AGOSTINI JARRETT PTY LTD |
Respondent
REASONS FOR JUDGMENT
(revised from transcript)
This is a judgment explaining why I have been compelled to vacate for the third time a hearing appointed in this application. It is Mr Gama’s application to set aside a bankruptcy notice before the time for compliance expires. The bankruptcy notice was issued on 3 November 2008 by Mr Gama’s former solicitors, demanding payment of $10,055.45 under a Local Court judgment obtained ex parte by the filing of a certificate of costs assessment. Mr Gama applied to set aside the notice on 3 December 2008. He disputes his indebtedness and has complaints about the legal services he received.
The matter has appeared in my lists many times since February, and in the course of those listings I have appointed hearings for 13 March 2009, 15 June 2009, and today. Mr Gama has been keen to have the issues resolved. He has unsuccessfully tried to obtain legal assistance, and has endeavoured as well as he can, acting for himself with the assistance of his wife, to present all the facts and documents that are relevant to his case. The file of the court is now very thick.
The first hearing was vacated by consent, because Mr Gama had an outstanding application for review of the refusal by the Legal Aid Commission of NSW of legal aid in relation to this proceeding. At the subsequent directions hearing on 20 March 2009, Ms Naismith, a solicitor from the Legal Aid Commission, appeared, and informed the court that legal aid had recently been granted by the review panel in relation to these proceedings, and that further time would be needed for his appointed solicitor to prepare his case.
At that time, I drew her attention to a concern as to the mental capacities of Mr Gama, which was clearly raised by medical reports on the file of the court, and which I had previously drawn to the attention of the respondent’s solicitor. I allowed a generous time for the preparation of the case under the grant of legal aid, and appointed a hearing in June. However, it seems that the solicitor to whom the referral was made formed a negative view of the merits of the matter, reported this to the Legal Aid Commission, and legal aid was withdrawn at some time during July 2009.
A directions hearing was appointed on 29 May 2009, due to Mr Gama’s concern that he was not being informed as to how his appointed solicitor was preparing his case, because the Registry was refusing to receive his own documents for filing, and because my directions had not been complied with. Mr Gama appeared in person with Mrs Gama, and no solicitor attended from the Legal Aid Commission nor the solicitor who had received the referral. Mr Gama was in a state of complete confusion as to whether he did or did not have legal representation, and the Court was similarly left in doubt. I expressed my concerns, and ordered that the transcript should be sent to the parties, to the appointed solicitor and to the Legal Aid Commission. The transcript also recorded the extent of Mr Gama’s incapacity to organise and express his thoughts when under pressure in court. In those circumstances, I vacated the June hearing, gave further directions to clarify the situation in relation to Mr Gama’s legal representation, and allowing Mr Gama to file any documents he wished me to read, regardless of their formal compliance with the rules. Mr Gama subsequently filed a large number of documents.
At the next directions hearing, on 10 July 2009, Mr and Mrs Gama were in attendance. No solicitor appeared for them, but the Court had received a letter from the solicitor appointed by the Legal Aid Commission which said that “we have no instructions to appear for” Mr Gama and “are advised that the grant of aid to Mr Gama will be terminated by the Legal Aid Commission”. This and other communications to Mr Gama from the Legal Aid Commission appeared to end any prospect of legal assistance for Mr Gama in this proceeding. I therefore gave directions appointing the hearing today.
Yesterday afternoon, the court received a facsimile letter from Ms Naismith attaching an order made by the NSW Guardianship Tribunal two days ago, on 12 October 2009, under s.25E of the Guardianship Act 1987 (NSW). Ms Naismith is identified as the applicant for the order, but the Court has been given no information as to the circumstances of the making of her application. The order is in the following terms:
(1) The estate of Mr William Charles Gama be subject to management under the provisions of the NSW Trustee and Guardian Act 2009, and
(2) The management of the estate of Mr William Charles Gama be committed to the NSW Trustee.
In her covering letter, Ms Naismith said that she anticipated receiving instructions to file a notice of appearance on behalf of the NSW Trustee, who I note is “a NSW government agency” “with the corporate name of the NSW Trustee and Guardian” (see ss.5 and 6 of the NSW Trustee and Guardian Act 2009 (NSW)). Ms Naismith’s letter said:
It would seem appropriate to further adjourn the hearing listed for 14 October 2009 and I ask that the Court do so. Mr Gama’s outstanding legal and financial issues are not limited to the current bankruptcy matter and the resolution of one issue will impact upon another. As a result, it may take some time to gain full instructions from the Trustee.
Ms Naismith has repeated this application for adjournment today at the hearing, which she attended by telephone. Neither she, nor the solicitor for the respondent, were in a position to address me on the legal effects of the making of the financial management order in relation to the present bankruptcy notice and proceedings. However, I note that section 71(1) of the NSW Trustee and Guardianship Act provides:
The power of a managed person to deal with his or her estate is suspended in relation to so much of that estate as is subject to management under this Act.
There are a variety of legal issues arising as to the effect of this provision on the scheme of the Bankruptcy Act and Rules which bear on the present proceedings. Of immediate interest are:
i)whether Mr Gama retains any capacity to appear in and pursue his present application to set aside the bankruptcy notice;
ii)whether the order has the effect of staying or requiring the indefinite adjournment of the present proceedings, and an extension of time for compliance with the notice, while the NSW Trustee has the management of Mr Gama’s estate; and
iii)whether the divesting from Mr Gama of his capacity to ‘deal’ with his estate by complying with the notice or by seeking to satisfy the Court in terms of s.40(1)(g) of the Bankruptcy Act provides, in itself, a sufficient and good reason for the Court to set aside the bankruptcy notice or to dismiss the present application as ‘moot’ (compare the situation upon the death of a debtor: Colquhoun v Graffione (2000) 97 FCR 376 at [16]-[18]).
These issues will need to be addressed by the legal representatives who appear in the proceedings in the future. They may not be simple issues, since my brief researches, including when revising this judgment, have not yet found any provision in legislation nor previous authority directly on point. There may be issues of consistency between the legislation which would need to be addressed under s.109 of the Constitution, although I am inclined to think that the two areas of legislation can be reconciled by processes of statutory construction.
In relation to the first issue, it is not obvious to me that the pursuit of an application to set aside a bankruptcy notice is a “dealing with” the financial estate of the person, although I can see that arguments could be made either way. However, the legal and practical capacity of the person served with a bankruptcy notice to comply with the bankruptcy notice or satisfy the Court in terms of s.40(1)(g) would appear to be clearly impacted upon by s.71(1) of the NSW Act, assuming that it can be construed to operate consistently with the scheme of the Bankruptcy Act and Rules.
A subsidiary area of uncertainty concerns the standing of the NSW Trustee in the present proceedings. Possibly, the making of the management order itself constitutes the Trustee as a person with standing to intervene as a party in the proceedings. Alternatively, he must or should apply to the court to be appointed as Mr Gama’s litigation guardian in the proceedings pursuant to Federal Magistrates Court Rule 11.11, which applies in relation to bankruptcy proceedings. I am inclined to the latter view, and that such an appointment would in any event be appropriate while there is uncertainty whether Mr Gama has lost standing or capacity to continue the proceedings by acting in person.
Ms Naismith was not able to assist me in relation to any of these issues today, and it will be necessary for her to take instructions on these issues as well as other issues in relation to the future of the present proceedings, if she does accept instructions from the NSW Trustee. In all the circumstances, I have reluctantly decided that I shall have to vacate today’s hearing, and appoint a further directions hearing at which any application can be made for the appointment of a litigation guardian or for the NSW Trustee to join as a party. The parties should also prepare submissions as to the future progress of the proceedings.
My reluctance to adjourn the hearing arises from the previous unfortunate history of failed efforts to obtain legal assistance for Mr Gama, and from his very serious, and possibly rapidly deteriorating, mental condition. Mr Gama himself today urged me to complete the case today so that he can sleep peacefully. Mrs Gama, however, appeared to appreciate that it may be necessary again to adjourn the matter, to allow someone else another opportunity to properly assess Mr Gama’s case and provide him with appropriate professional assistance.
Before completing this judgment I do, however, propose to say something about the nature and merits of the proceedings. I have, in preparation for today’s hearing, spent a great deal of time reading all the papers filed by Mr Gama and the papers filed by the respondents. My observations, which are necessarily highly provisional, on the merits of the matter may assist both the Trustee and the respondent to consider how the present proceeding might be resolved without incurring disproportionate additional expense.
It is undoubted that Mr Gama has a serious mental incapacity which has been deteriorating over recent years. Mr Gama’s mental condition was ruled upon by Raphael FM in proceedings under the Human Rights and Equal Opportunity Commission Act 1986 (Cth) against his long-time employer Qantas Airways Limited (see Gama v Qantas Airways Ltd (No.2) [2006] FMCA 1867). In a lengthy judgment, Raphael FM referred at [123] to evidence as to Mr Gama’s condition in 2005. His Honour accepted an opinion by Mr Gama’s treating psychiatrist that he had developed “depressive symptoms, despair, helplessness, anxiety, panic attacks, intense suicidal thoughts, global insomnia, several kilograms weight loss, extreme fatigue, inability to concentrate and loss of memory and intellectual capacity. His depressive symptoms rendered him unable to work from June 2002”. Raphael FM concluded that this disability was partly caused by incidents of racial discrimination suffered by Mr Gama in the course of his employment, and he awarded compensation which he apportioned to a degree of contribution which he assessed at 20 per cent. His Honour’s judgment in that respect was upheld on appeal by the Full Court (see Qantas Airways Ltd v Gama [2008] FCAFC 69, (2008) 167 FCR 537).
In the course of the present proceedings, the extent of Mr Gama’s incapacity was further revealed by medical reports which are in evidence, from a neuropsychologist, Ms Naismith, dated 1 March 2005, and from his treating psychiatrist, Dr Orlay, dated 30 January 2009. A letter from Mr Gama’s general practitioner, Dr Ambrose, dated 10 February 2009 said:
William Gama, age 63, is under specialist treatment for the management of severe depression, anxiety attacks, cognitive and intellectual impairment and possibly dementia, as yet not formally diagnosed. He is easily confused, often preoccupied with his own thoughts, and has great difficulty in being able to make decisions. He often feels suicidal. If he is put into a situation that is unexpected or for which he hasn’t prepared himself for he has anxiety attacks that completely disable him. These often take several hours to pass over and usually require him to sleep for him to be able to recover. I ask that you please take this into consideration with his court presentations.
It was these reports which have caused me concerns in this case as to Mr Gama’s capacity to conduct the proceedings in person. Some of the symptoms identified by Dr Ambrose became apparent at the listing on 29 May 2009, and they have appeared in a worsened condition today. However, in the absence of any application for the appointment of a litigation guardian by any person, in the face of Mr Gama’s earnest desire to present his case to the court, and given the limited capacity of this court to act on its own motion (see L v Human Rights & Equal Opportunity Commission [2006] FCAFC 114, (2006) 233 ALR 432), I have not done more than raise the issue with such legal representatives as have appeared in front of me.
However, in the light of that medical evidence, it is easy to imagine some of the difficulties facing both Mr Gama in giving instructions in the course of the proceedings before Raphael FM, and his lawyers in taking instructions and acting for him. The proceedings were fiercely defended by Qantas at first instance and on appeal. Mr Gama engaged a solicitor, Ms Jarrett, in 2005 to act for him, and she briefed counsel. They represented him in preliminary proceedings, and at the commencement of the hearing on two days in February 2006, but withdrew on 26 June 2006, leaving Mr Gama to represent himself at a further four days of hearing. A costs agreement in relation to the provision of her services appears to have been entered into on or about 26 April 2005, under which her services were to be provided by a firm of incorporated solicitors trading under the name Agostini Jarrett Pty Ltd. This is the present respondent to the current proceedings.
The current proceedings concern that firm’s claim that there is an unpaid balance of fees in relation to Ms Jarrett’s services billed during 2005. During 2008, the firm obtained a costs assessment in relation to three accounts which it claimed were outstanding. The certificates of assessment and costs dated 2 June 2008 were registered in the Local Court of New South Wales, and gave rise to a judgment debt entered on 22 September 2009 for $10,055.45. This is the debt upon which the bankruptcy notice is based.
Mr Gama’s documents in support of setting aside the bankruptcy notice raise a variety of issues in a jumbled fashion, in their presentation, documentation, and understanding of events and of law. However, I can discern in them claims which appear to me to be at least reasonably arguable on his behalf, or capable of being presented to the court as such if he were given adequate professional assistance in the present proceedings.
Thus, Mr Gama asserts that he made payments during 2006 to Ms Jarrett exceeding the amount of the claimed outstanding balance. He has receipts for amounts which were not taken into account by the costs assessor, showing that bank cheques in the name of Ms Jarrett were given to her in relation to two amounts of $6000 in July and October 2006. Another amount of $20,000 was also paid to her by way of a cheque made out to Griffith Nicholson Lawyers in April 2006. Mr and Mrs Gama also claim that among numerous instalments of $1,000 paid to Ms Jarrett in cash, there are some for which she did not provide a receipt.
Ms Jarrett appears to accept that the additional documented amounts were received as payments by Mr Gama for her services when acting for him in part of the proceedings before Raphael FM, and that these were not brought into the accounting which was accepted by the costs assessor. However, she asserts that they were properly appropriated to a different firm of solicitors, Griffith Nicholson Lawyers. In a statement by Ms Jarrett to the Legal Services Commissioner, she said:
I commenced employment with Griffith Nicholson Lawyers in January 2006 and Agostini Jarrett Proprietary Limited ceased to operate as an ILP. The Gamas were advised of my change of employment as were all my clients.
Mr Gama, in his evidence to the court, disputes that he received such advice, and suggested that he was overseas at that time. He asserts, and no evidence has been presented in rebuttal, that he was never given a fees agreement or costs disclosure by the firm Griffith Nicholson Lawyers before Ms Jarrett provided her services during 2006. He denies that he appointed that firm as his solicitors at any time while he received the services of Ms Jarrett. He claims in his evidence that at all relevant times, he believed her to be the lawyer with whom he had contractual arrangements, and that he was led to believe that her ‘move’ to Griffith Nicholson involved only a change of her address. He claims that he was confused and under duress at the time when he signed an acknowledgement of having employing Griffith Nicholson on the day when Ms Jarrett’s instructions were terminated, in part, because he was told that he had to do this before he could receive possession of the documents he needed to continue the proceedings before Raphael FM.
If Mr and Mrs Gama’s evidence in these respects was accepted, then he may have good arguments that all his payments made for legal services provided by Ms Jarrett should have been brought into the accounting of the firm with which he did enter a contract for legal professional services, that is, Agostini Jarrett, the present respondents. Alternatively, that his payments to Ms Jarrett should first have been applied in discharge of his indebtedness to that firm, before being appropriated to any indebtedness to the second firm. The mere fact that Ms Jarrett’s personal employment arrangements altered over the period in which she provided her professional services to Mr Gama would not necessarily answer this analysis, unless she could establish that Mr Gama was legally bound to accept the appropriation to Griffith Nicholson in preference to his prior indebtedness to Agostini Jarrett.
I have, of course, not heard the evidence in this proceeding yet. I have not seen Ms Jarrett in the witness box, nor Mr and Mrs Gama. I have not formed any concluded views as to the nature of the contractual arrangements under which Ms Jarrett’s services were provided to Mr Gama in relation to the proceedings before Raphael FM. My provisional assessments are made upon a body of material which is at present very poorly digested and presented to the Court.
However, it does appear to me that the court has been presented with evidence by Mr Gama which raises a prima facie case that the Local Court judgment does not represent the true state of his indebtedness to the respondent, which is sufficient for his application not to be regarded as lacking in reasonably arguable merit, and which deserves proper attention by somebody responsible for the management of his estate. I note that the court in its bankruptcy jurisdiction is able to look behind a judgment debt to see what is, in truth and reality, the state of the indebtedness relied upon in relation to a bankruptcy notice (see the authorities cited in Olivieri v Stafford (1989) 91 ALR 91).
It is exceptional that the court will “go behind” a judgment to find such a reason for setting aside a bankruptcy notice, although it might be more inclined to do this if the judgment can be regarded as a default judgment and the alleged debtor can explain why his or her defences were not raised previously. In the present case, the Local Court judgment was in accordance with a procedure for the registration of costs certificates which give the debtor no opportunity to contest the indebtedness. In relation to the antecedent costs assessment, Mr Gama has presented evidence suggesting that his mental state in 2008 meant that he was unable adequately to involve himself in that assessment process in the short time allowed by the costs assessor. If this evidence were accepted, the Court might be disposed to allow the matter to be fully litigated afresh in the present proceeding. However, I have not yet heard the submissions of the respondent on this issue, and I have not yet formed any conclusion whether this would be appropriate.
As well as claiming that he has made payments which should have been appropriated to his indebtedness to Agostini Jarrett Pty Ltd, Mr Gama also makes other claims that he was poorly or negligently assisted by Ms Jarrett’s services in the course of the proceedings before Raphael FM, giving rise to financial losses. Whether there is any substance to these claims is not something that I have been able to form even a preliminary impression about, but there may be merit in his manager further considering these aspects of the documents which he has presented to the court.
If there is substance to a possible cross-claim in contract or negligence against Agostini Jarrett Pty Ltd, it would be enough to obtain the setting aside of the bankruptcy notice that it could be presented to the court as a ‘prima facie case’ with a ‘fair chance of success’ (see authorities extracted in Glew v Harrowell [2003] FCA 373, (2003) 198 ALR 331). On current authorities, such a claim would be one that “he or she could not have set up in the action or proceeding in which the judgment or order was obtained” within s.40(1)(g) and s.41(7) of the Bankruptcy Act, since that proceeding was the ex-parte registration of the costs certificate (see Massih v Esber [2008] FCA 1452 at [44], also Vaughan v Pagotto (2006) 202 FLR 321 and Treadwell v Hickey [2006] 206 FLR 367).
As I have emphasised throughout this judgment, I have provided the above observations about Mr Gama’s case presented to the Court for the assistance of the Trustee in his consideration of how to involve himself in the present proceedings, and for the assistance of a respondent who has not yet had the benefit of a legal formulation of Mr Gama’s case. I make it absolutely clear that I have formed no opinions as to the outcome of the case if it does proceed. I certainly would not wish my comments to appear to control the hands of any manager or advisor of Mr Gama in relation to the future of the present proceedings. It has appeared to me from the start of my case-management, that there are excellent reasons facing both parties for considering whether the matter can be resolved without proceeding to a final hearing. However, this court is available to resolve according to law all the issues which I have identified above, if that is necessary.
For the above reasons, however, the hearing today is unable to proceed, and I shall appoint a future directions hearing at which the future course of the proceedings can be decided.
I certify that the preceding thirty-three (33) paragraphs are a true copy of the reasons for judgment of Smith FM
Associate: Michael Abood
Date: 19 October 2009
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