Girgis v Gells Lawyers Pty Ltd

[2012] FMCA 669

FEDERAL MAGISTRATES COURT OF AUSTRALIA

GIRGIS v GELLS LAWYERS PTY LTD [2012] FMCA 669

BANKRUPTCY – Application to set aside bankruptcy notice – notice validly issued and served – instalment order obtained before expiry of time for compliance – automatic stay on execution – whether Court should set aside the bankruptcy notice – judgment by solicitor for fees owing by former client – whether counter‑claim in negligence exceeding amount of judgment – Court not satisfied as to any ground for setting aside bankruptcy notice – application dismissed.

Bankruptcy Act 1966 (Cth), ss.40(1)(g), 41(3)(b), 41(6A)(a), 41(7)
Civil Procedure Act 2005 (NSW), ss.107(1), 107(2)
Family Law Act 1975 (Cth), s.117
Family Law Rules 2004 (Cth), r.19.08
Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth)
Legal Profession Act 2004 (NSW)
Uniform Civil Procedure Rules 2005 (NSW), r.37.2

Coshott v Barry (2009) 113 ALD 358, [2009] FCA 1521
Davis v Fletcher (2006) 206 FLR 361, [2006] FMCA 1620
Glew v Harrowell of Hunt & Hunt Lawyers [2003] FCA 373, (2003) 198 ALR 331
Horton v Warranted Financial Solutions Pty Ltd (in liquidation) (2011) 253 FLR 159, [2011] FMCA 748
Massih v Esber (2008) 250 ALR 648, [2008] FCA 1452
Murdaca v Accounts Control Management Services Pty Ltd [2008] HCATrans 101
Murdaca v Accounts Control Management Services Pty Ltd [2007] FCA 964
Re Johnson; Ex parte Johnson v Tonkin (1994) 53 FCR 70
Re Schekeloff; Ex parte Schekeloff v The Hopkins Group Pty Ltd (1989) 22 FCR 407
Seller v Deputy Commissioner of Taxation (2011) 282 ALR 80, [2011] FCA 865
Vaughan v Pagotto & Ors (2006) 202 FLR 321, [2006] FMCA 1287

Applicant: MARCELLE GIRGIS

Respondent:

GELLS LAWYERS PTY LTD

ACN 103 093 081

File Number: SYG 1114 of 2012

Judgment of: Smith FM

Hearing date: 30 July 2012

Delivered at: Sydney

Delivered on: 30 July 2012

REPRESENTATION

Counsel for the Applicant: Mr F Maghami

Solicitors for the Applicant: Paul & Paul Lawyers

Counsel for the Respondent: Mr B Skinner

Solicitors for the Respondent: Gells Lawyers

ORDERS

1. The application is dismissed.

2. The applicant must pay the costs of the respondent, including reserved costs, as agreed or taxed pursuant to the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth).

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYG 1114 of 2012

MARCELLE GIRGIS

Applicant

And

GELLS LAWYERS PTY LTD

ACN 103 093 081

Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

1. This judgment explains why I have decided to dismiss Ms Girgis’ application to set aside a bankruptcy notice served on her by Gells Lawyers Pty Ltd (“Gells”). 

2. Ms Girgis is a dentist who was involved for many years in matrimonial litigation in the Family Court of Australia involving issues of parenting and property.  During some of this litigation she employed a solicitor, Mr Coffey, at a firm trading as “Gells Lawyers”.  She paid an amount of fees in respect of his services, but has refused to pay a judgment made and entered in the Local Court on 21 February 2012 in the sum of $22,598.60, upon the registration of a certificate under the Legal Profession Act 2004 (NSW) of a solicitor/client costs assessment.

3. Ms Girgis has refused a demand for payment of the judgment debt plus interest, made in a bankruptcy notice issued on 15 March 2012, which was served on Ms Girgis on 3 May 2012.  The bankruptcy notice set a period for compliance which was due to expire, on 24 May 2012.  In accordance with the prescribed form, it demanded: 

   1.You are required, within 21* days after service on you of the Bankruptcy Notice, to either: 

   (a)pay to the creditor the amount of the debt claimed; or

   (b)make arrangements to the creditor’s satisfaction for settlement of the debt. 

   *A Bankruptcy Notice served in Australia must be complied with within 21 days after service.  The Court may fix a different time for compliance where it gives leave to serve a Bankruptcy Notice outside of Australia. 

4. Before that date arrived, Ms Girgis filed the present application to set aside the bankruptcy notice on 22 May 2012.  A Registrar made an ex parte order extending time for compliance on that date, and similar orders have been made by consent at subsequent listings before a Registrar on 4 June 2012, 2 July 2012 and 16 July 2012.  The last extension is due to expire today. 

5. The application was referred to me from the Registrar’s list today for hearing.  Neither party sought further time to present more evidence.  In particular, counsel for Gells did not seek an adjournment to answer a late affidavit sworn today, in which Ms Girgis endeavours to give substance to her claim to have a counter‑claim for professional negligence against Mr Coffey or Gells exceeding the amount of the judgment debt.  I shall address that issue further below. 

6. I shall first note that the affidavit in support of the application to set aside the bankruptcy notice appeared to raise two other issues.  The first was whether the amount of the debt demanded exceeded the amount, in fact, owing to Gells, in particular by including specified amounts in relation to which evidence of payment to Gells was submitted.  However, Mr Coffey has sworn an affidavit showing that these amounts were, in fact, taken into account to the credit of Ms Girgis in the course of the costs assessment process.  His evidence has not been challenged today, and Ms Girgis’ counsel did not maintain before me any arguments inviting the Court to go behind the judgment debt or disputing the existence of the debt asserted in the bankruptcy notice. 

7. The second issue raised by the affidavit in support of the application, was whether the Court should grant final relief by way of an extension of time for compliance with the bankruptcy notice, pursuant to its powers under s.41(6A)(a) of the Bankruptcy Act 1966 (Cth). It provides:

   41     Bankruptcy notices 

   … 

   (6A)Where, before the expiration of the time fixed for compliance with the requirements of 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. 

8. The affidavit in support referred to an application made in the Local Court to set aside the default judgment, which Ms Girgis filed on 22 May 2012.  However, Mr Coffey’s affidavit somewhat imprecisely asserted that the application was “eventually rejected by the registry of the Local Court because it was filed in the wrong matter number”. This contention also has not been disputed today by Ms Girgis’ counsel. He has not maintained that she has presented evidence of a pending challenge to the judgment, allowing the Court now to extend time under s.41(6A)(a).

9. As has recently been held by Edmonds J in Coshott v Barry (2009) 113 ALD 358, [2009] FCA 1521, and Flick J in Seller v Deputy Commissioner of Taxation (2011) 282 ALR 80, [2011] FCA 865, in the absence of power to extend time under paragraph (a) of s.41(6A), the Court has power to extend time for the compliance with the notice only pursuant to paragraph (b), and to do so only during the pendency of the application in this Court to set aside the bankruptcy notice. Upon the dismissal of such an application, the Court has no further power to extend time for compliance with the notice.

10. The consequence therefore of my making an order today dismissing the application to set aside must be that the Court would have no further power to extend time for compliance with the present notice. 

11. The application to set aside was supported today by Ms Girgis’ counsel on two bases, the first of which was an invitation to the Court to be satisfied in terms of s.40(1)(g) and s.41(7) as to the existence of a relevant counter‑claim. These provisions state:

    40     Acts of bankruptcy 

    (1)A debtor commits an act of bankruptcy in each of the following cases: 

    … 

    (g)    if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:  

    (i)where the notice was served in Australia—within the time specified in the notice; or

    (ii)where the notice was served elsewhere—within the time fixed for the purpose by the order giving leave to effect the service;

    comply with the requirements of the notice or satisfy the Court that he or she has 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; …

    41     Bankruptcy notices 

    (7)Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has applied to the Court for an order setting aside the bankruptcy notice on the ground that the debtor has such a counter‑claim, set‑off or cross demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter‑claim, set‑off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied. 

    Most of the hearing was occupied with that contention and I shall address it below. 

12. It is convenient for me first to address Ms Girgis’ second contention made to me today, which involves issues of law rather than of fact. This was somewhat unclearly formulated, but as I understood it, her counsel submitted that the bankruptcy notice was rendered invalid or ineffective after it was served and before the expiry of the time for compliance, by reason of an instalment order by the Local Court pursuant to s.107(1) of the Civil Procedure Act 2005 (NSW) and r.37.2 of the Uniform Civil Procedure Rules 2005 (NSW) in respect of the judgment debt. There is evidence that such an instalment order was made by a Registrar of that Court on 1 June 2012 in accordance with its usual ex parte procedure. Under s.107(2) of the Civil Procedure Act 2005 (NSW) “execution of a judgment for the payment of money is stayed while the judgment is the subject of an order in force under this section”. 

13. Contrary to my initial suggestion to counsel, Ms Girgis’ contention cannot be that the bankruptcy notice was invalidly issued or served, by reason of a stay on execution of the judgment which was in existence at either of those dates. The terms of s.107(2) show clearly that an instalment order giving rise to a stay of execution operates at the time it is made and into the future until the instalment order ceases to be ‘in force’. The stay obtained as a consequence of Ms Girgis’ later instalment order would not retrospectively render the judgment existing at the date of issue or service of the bankruptcy notice a judgment “the execution of which has [not] been stayed” within s.40(1)(g) and s.41(3)(b). On all the evidence before me, in fact, at those two dates, execution on the judgment had not been stayed. The bankruptcy notice therefore does not fail on grounds of invalidity at the time of issue or service, which I found in Davis v Fletcher (2006) 206 FLR 361, [2006] FMCA 1620.

14. Counsel for Ms Girgis was unable to explain to me the legal basis upon which the Court is suggested to have power to set aside a bankruptcy notice which was validly issued and served, by reason of the fact that the judgment debt upon which it is based was stayed after service but before expiry of the date for compliance.  Established authority which has been almost uniformly applied in the Federal Court and this Court, was explained by Spender J in Re Johnson; Ex parte Johnson v Tonkin (1994) 53 FCR 70 at 77:

    … it is a necessary requirement of the Act that a judgment or order founding a bankruptcy notice be one which is not stayed (within the wide meaning given to that phrase) both at the time of issue of the bankruptcy notice and at the time of its service. 

15. However, I am aware of no judgment, and none was cited to me, which has taken the further step to hold that the Court has power to set aside a validly issued and served bankruptcy notice before time for compliance has expired, on the grounds that a stay on execution has subsequently come into effect under State procedural laws governing the enforcement of judgment debts. 

16. Counsel for Ms Girgis relied upon an observation by Branson J in Murdaca v Accounts Control Management Services Pty Ltd [2007] FCA 964 at [15], in what appears to have been an ex tempore judgment. Her Honour was not addressing an application to set aside a bankruptcy notice before the expiry of its time for compliance, but an oblique challenge to a sequestration order on the ground that the petition was not supported by the alleged act of bankruptcy. Branson J granted a stay on proceedings under the sequestration order pending the hearing of a special leave application to the High Court (which was subsequently refused: see [2008] HCATrans 101). Branson J said:

    13The authority that should have been drawn to the attention of the Federal Magistrate is Schekeloff; Ex Parte Schekeloff v The Hopkins Group Pty Limited (1989) 22 FCR 407. In that case Burchett J gave consideration to a factual situation relevantly indistinguishable from the present. His Honour concluded that, for the purposes of s 40(1)(g) of the Bankruptcy Act, the time for consideration whether a judgment on which a bankruptcy notice is founded has not been stayed is the time of issue, or at the latest, service of the notice. In reaching this conclusion Burchett J placed considerable weight on Re Dennis; Ex Parte Dennis (1888) 60 LT 348, a decision of the Court of Appeal concerning the service of a garnishee order nisi on the judgment debtor after the service of a bankruptcy notice on him. 

    14Schekeloff has been referred to in a number of Federal Court judgments with apparent approval, but in none that I have been able to identify has a comparable factual situation been under consideration (see, for example, Re Frasersmith; Ex Parte J Blackwood & Son Limited (1992) 36 FCR 144 (Beaumont J); Re Roberts; Ex Parte Bower (1994) 48 FCR 350 (Einfeld J); Re Johnson; Ex Parte Johnson v Tonkin (1994) 53 FCR 70 (Spender J); Re Sgambellone; Ex Parte Jacques (1994) 53 FCR 275 (Drummond J)).

    15In my respectful view, the correctness of the decision in Schekeloff is open to reasonable question.  It is at least arguable, in my view, that a debtor does not commit an act of bankruptcy by not complying with a demand to pay a judgment debt which becomes unenforceable during the period allowed for compliance with the demand – albeit that the debt had been due and payable at the dates of issue and service of the bankruptcy notice. 

17. With respect, I have some difficulty understanding what the argument was that her Honour thought could have been mounted against an act of bankruptcy occurring upon the expiry of a bankruptcy notice which was validly issued and served, and was not complied with in accordance with its terms, and was not the subject of an application to set it aside before its date for compliance.  Prima facie, a bankruptcy notice such as the present demands payment of the full amount of its specified debt, or an arrangement with the creditor, or the making of an application to a bankruptcy court under s.41(7) of the Bankruptcy Act. If none of these events has occurred before the expiry of the bankruptcy notice, it appears irrelevant to the occurrence of an act of bankruptcy that the debtor might have obtained a stay on other procedures for the enforcement of the underlying judgment. It is similarly irrelevant whether the debtor paid the full amount of the debt to the creditor after the occurrence of an act of bankruptcy, since the act of bankruptcy remains available to support a petition of another creditor.

18. Neither the bankruptcy legislation, nor the prescribed terms of the bankruptcy notice, appear to open up an avenue for avoiding an act of bankruptcy merely by the obtaining of an instalment order or other stay on full execution from the court issuing the judgment, subsequent to service of a valid bankruptcy notice. A stay on judgment obtained after service of the bankruptcy notice might become relevant in bankruptcy proceedings brought to avoid an act of bankruptcy, if the stay was obtained in support of a challenge to the judgment itself, and if an application were made to extend time for compliance under s.41(6A)(a). However, the appropriate relief which could be given by a bankruptcy court in such circumstances would be to suspend the occurrence of an act of bankruptcy by extending the date for compliance. In my opinion, the existence of the stay would not provide any ground for setting aside the notice so as to prevent an act of bankruptcy ever occurring.

19. I therefore do not share the opinion of Branson J that the contrary is “open to reasonable question”.  Moreover, I am bound to the contrary opinion by the decided authority in the Federal Court, to which her Honour referred.  I do not accept the submission of counsel for Ms Girgis that I am free to depart from that authority, even if I were inclined to do so.  I note that other Federal Magistrates continue to apply Schekeloff, including Burchardt FM in Horton v Warranted Financial Solutions Pty Ltd (in liquidation) (2011) 253 FLR 159, [2011] FMCA 748. I do not share Burchardt FM’s doubt about the Federal Court authorities, but consider that it is consistent with the insolvency objectives of the Bankruptcy Act.

20. I therefore do not accept the contention that I have power to order, or should order, the setting aside of the bankruptcy notice by reason of the making of the instalment order on 1 June 2012.  Whether the existence of the instalment order, or any other event in relation to the enforcement of the judgment debt, should provide an answer to the making of a sequestration order upon a petition based upon an act of bankruptcy arising under the present notice, is a different issue, which does not arise in the present application. 

21. I therefore now turn to the evidence presented by Ms Girgis in seeking to persuade me that she has a “counter‑claim, set‑off, or cross demand equal to or exceeding the amount of the judgment debt or sum payable”, under the Local Court judgment debt. 

22. I note that counsel for Gells did not ultimately, as I understood him, contend that it would have been open to Ms Girgis to counter‑claim for negligence in the proceedings in the Local Court in which the fees assessment certificate was registered.  The contrary has been held by Flick J in Massih v Esber (2008) 250 ALR 648, [2008] FCA 1452, and by me in an earlier judgment in Vaughan v Pagotto & Ors (2006) 202 FLR 321, [2006] FMCA 1287. It appears to me to be irrelevant whether a counter‑claim in negligence might have been set up, had Mr Coffey pursued alternative avenues for the taxation of his fees via procedures under the Family Law Rules. In fact, he did not follow that avenue, but sought assessment and enforcement under the State procedures.

23. Ms Girgis’ suggested claim in negligence was initially presented in an affidavit by Ms Girgis sworn 6 July 2012, which attached a draft statement of claim prepared by Ms Girgis’ new lawyers, not being the lawyers that are representing her in the present proceedings.  No verification of the allegations made in this draft were presented, nor any evidence in support of their merits.  

1. The draft pleading identifies the proposed defendant as Mr Coffey himself personally, “t/as Gells Lawyers”.  If indeed he did provide his services to Ms Girgis in that capacity, then there is an unexplained discrepancy between the judgment debt for the fees relating to his services obtained by the present respondent, “Gells Pty Limited trading as Gells Lawyers”.  This discrepancy was not clarified in Ms Girgis’ affidavits, and she has presented no evidence of the precise terms of the legal services agreement under which Mr Coffey’s services were provided, in particular, to show whether there was an agreed difference between the person providing the services and the person entitled to charge for them. 

2. I therefore accept the submission of counsel for Gells that prima facie the draft statement of claim does not assert claims against the judgment creditor who has obtained the bankruptcy notice. However, I shall assume that clarification of this point might be available by Ms Girgis on further investigating who the prospective defendant would be in a negligence action, and that she may be able to hold the present respondent liable for any professional negligence on the part of Mr Coffey.

3. A more significant difficulty facing Ms Girgis’ reliance on the draft statement of claim is its complete absence of any particulars of negligence, except in terms of such generality as to lack any meaningful precision.  There are general assertions, but these are not given any content in the pleading.  For example, it lacks any particulars of the actions or omissions by which it is alleged Mr Coffey failed to meet the duties which were pleaded: 

   5As the plaintiff’s legal adviser, the defendant also owed the plaintiff a duty to: 

   a.advise or properly advise the plaintiff of her rights and obligations in relation to the family law proceedings;

   b.advise or properly advise the plaintiff of her rights in relation to any settlement discussions with her former husband’s solicitors;

   c.advise or properly advise the plaintiff of her former husband’s requests and Orders that he was seeking in the family law proceedings in relation to children and property issues;

   d.advise or properly advise the plaintiff of her rights and obligations in relation to Orders made by the Family Court of Australia;

   e.advise or properly advise the plaintiff of options and avenues open to her in relation to her inability to comply with the Orders made by the Family Court of Australia;

   f.advise or properly advise the plaintiff of her rights to appeal the judgment of the Family Court of Australia. 

4. The pleading alleges that Mr Coffey was engaged “in or about late 2006”, but does not plead when the contract for legal services was concluded. Nor is this clarified in the recent affidavit by Ms Girgis, although it appears to suggest that she lost confidence in Mr Coffey’s services and dispensed with them in early July 2008. In her affidavit, she refers merely to being led to change legal representative in July of 2008.

5. The precise identity and chronology of the litigation in the Family Court in which Mr Coffey was employed is not pleaded in the draft claim, nor identified in the affidavit.  It appears to have been proceedings involving both parenting and property issues.  Ms Girgis’ affidavit recounts a long litany of complaints about her solicitor and counsel, without clear chronological structure and precision in relation to potential particulars of negligence sounding in quantifiable damages. 

6. The tenor of the whole affidavit is that Ms Girgis became dissatisfied with consent orders which she executed on the second day of a hearing occurring before Waddy J on 3 and 4 September 2007, at which she was represented by counsel, Mr Johnston, instructed by Mr Coffey.  The terms of the consent orders which were before his Honour on that day are in evidence, attached to Ms Girgis’ affidavit.  They indicate that they were signed by her and by the respondent father, as well as by their respective solicitors.  The consent orders provided for various parenting and access arrangements in relation to two children of the marriage.  The order provided for the parties to “share equally the parental responsibility for the children”, and set out a precise timetable for future time to be spent by the children with the father.  They do not, to my untutored eye, reflect any particular deficiency in how they deal with the interests and desires of Ms Girgis, which might suggest professional fault on the part of her legal advisers at the time. 

7. The consent orders signed by Ms Girgis attached the usual terms of a Family Court information sheet headed “Penalties for breaking parenting orders”, which included advice to Ms Girgis which she does not deny reading: 

   Your legal obligations 

   §You must do everything that the parenting order says. 

   §The order remains in force until a new parenting order or registered parenting plan changes it in some way. 

   §Even if your circumstances, or those of your children or former partner change, the first court order continues to apply to you until it is formally changed in writing by the Court. 

   §You must continue to do what the parenting order says until the Court formally changes it. 

   §Sometimes people talk to each other about making an ongoing change to arrangements set out in a parenting order.  These talks do not change the order. 

   §If you both agree to change the arrangements you can ask the Court to change the parenting order.  You do this by applying for a ‘consent order’.  (If you have a registered parenting plan you change it by applying to revoke the original plan and registering a new one).  Registry staff can give you the forms you need.  Although you can apply yourself, you may benefit from the help of a lawyer. 

   §If you want to change the parenting order or registered parenting play and your former partner will not agree, you may need to seek help from the Court’s Mediation Service or other counselling or mediation organisation.  If you still cannot agree you can apply to the Court to alter the original order.  Again, registry staff can give you the forms you need.  The Law Society in your State or Territory can put you in contact with a lawyer specialising in family law or you may be able to receive some free advice from a community legal centre or Legal Aid. 

   Penalties for breaking a parenting order 

   You must attend a court hearing if your former partner makes a formal application alleging that you have broken a parenting order. 

   It if is the first time such a complaint has been made and the Court finds you have broken the parenting order without reasonable excuse, the Court must do one or more of the following: 

   §order you to attend a parenting program – the organisation running the program will assess if it is suitable for you 

   §make another parenting order to compensate your former partner for any contact time with the children lost as a result of your actions 

   §delay (‘adjourn’) the court action to allow either or both of you to apply for a further parenting order that cancels or changes the original order 

   §change the parenting order that has been broken. 

   Even if it is the first time, if your behaviour also shows serious disregard for the parenting order, the Court must give the appropriate penalty 

   Anyone who shows serious disregard for a parenting order faces the same range of penalties as a person who has broken a parenting order before and does so again without reasonable excuse. 

   In both these cases, if the Court decides it is not appropriate for you to go to a parenting program, it must order you to do one or more of the following: 

   §work in community service 

   §lodge a bond 

   §pay a fine of up to $6600 

   §go to gaol for up to 12 months. 

8. Ms Girgis’ complaints about the legal assistance she gained from Mr Coffey before she executed these consent orders is found in her affidavit at several points, but in particular: 

   34.The Respondent failed to provide me with proper advice as to the options available to me in relation to the original orders that I ultimately entered into with my husband on the second day of the final hearing in September 2007 being the Orders dated 4 September 2007 made by His Honour Justice Waddy.  Mr Coffey further failed to obtain informed instructions from me, where I was not properly advised in relation to my options, obligations and potential advantages and disadvantages with the proposed orders and any instructions provided would not have been an adequate advice, thus not informed.  Annexed hereto and marked “A” is a copy of the said Orders dated 4 September 2007. 

   35.At the time I believed I had no option but to agree to certain consent orders so to allow more time for the father to spend with the children and I had been provided no advice or warning about such orders or possibilities before going to Court on that day in question. 

   36.I felt extremely pressured into entering into those Consent Orders by Mr Coffey and Mr Johnston of counsel and I was very distressed about being put in this position without any prior discussion, adequate advice and time to consider my instructions, in relation to the father wanting anything other than time every second / alternate weekend. 

   37.I was never advised nor made aware that I would be extensively cross‑examined on both the first and second days of the 3 day final hearing, which was an unpleasant experience that I was ill‑prepared for and ill advised by Mr Coffey and Mr Johnston.  When I returned home at the conclusion I felt traumatised by the whole experience and about the Orders I felt pressured by the Respondent and Mr Johnston to enter into. 

   … 

   42.As a consequence my husband was ultimately granted more time with the children than otherwise he may have been entitled to, had the Court made a final determination of the issue, or if I had been properly advised and made a different decision based on such advice.  I was not advised that if the Judge made a decision had I not in fact settled the matter, I would be able to potentially appeal it. 

   43.Prior to February 2007 I was only seeking that my ex‑husband spend time with the children every alternate weekend and had not entertained or been advised by Mr Coffey about any other time . 

   44.I say that prior to September 2007 I was not advised about shared parenting orders.  I was not aware whether my husband and / or his legal representatives had approached Mr Coffey and Mr Johnston about the fact that he wanted shared care of the children as per the above. 

9. It is notable that there is lacking in these parts of her affidavit or elsewhere in her affidavit or in the draft pleading, any particularisation of the precise advice given by counsel for which Mr Coffey took responsibility, or by Mr Coffey himself to Ms Girgis, in relation to the entry of the consent orders relating to shared time by the father, which is alleged to have been negligently given, so as to induce her to sign the consent orders.  It is notable that she does not complain that she did not understand the terms of the consent orders, nor the consequences of entering into them.  At highest, she shows that she later regretted accepting the orders, and now regrets that her case was not prepared in a different fashion.  Even so, she does not indicate what different parenting arrangements she believes would have been achievable, and explain how they would have been achieved, either by consent or by judicial determination at the hearing before Waddy J. 

10. Reading the whole of Ms Girgis’ recent affidavit, I am not satisfied that it raises a prima facie case of any negligence in relation to Ms Girgis’ agreement to the consent order, with a particularity that would allow me to be satisfied at even a highly provisional level that she has a case deserving of presentation and resolution in the District Court before she should be required to pay the judgment debt. 

11. The tests in this respect were summarised by Lindgren J in Glew v Harrowell of Hunt & Hunt Lawyers [2003] FCA 373, (2003) 198 ALR 331 at [8] through [12]:

    8In order to avoid committing the act of bankruptcy identified in par 40(1)(g) of the Act, Glew and Tresidder must satisfy the Court that they have a counter‑claim, set‑off or cross demand against Hunts of the kind described in that paragraph.  What they must do in order to “satisfy the Court” for the purposes of par 40(1)(g) of the Act that they have the asserted counter‑claim, set‑off or cross demand has been variously described.  The descriptions do not necessarily purport to be comprehensive definitions.  To state that a debtor in receipt of a bankruptcy notice must show X does not necessarily imply that he or she need not also show Y, or that he or she will not be defeated if the creditor shows Z. 

    9There are authorities suggesting that Glew and Tresidder must satisfy me of the following interrelated and sometimes overlapping matters: 

    ·that they have a “prima facie case”, even if they do not adduce evidence which would be admissible on a final hearing making out that case: Ebert v The Union Trustee Co of Australia Ltd (1960) 104 CLR 346 (“Ebert”) at 350; Re Brink; Ex parte Commercial Banking Company of Sydney Ltd (1980) 44 FLR 135 (“Brink”) at 141; Gomez v State Bank of New South Wales Ltd [2002] FCAFC 101 at [17], [18];

    ·that they have “a fair chance of success” or are “fairly entitled to litigate” the claim: Brink at 141; Re Gould; Gould v Day [1999] FCA 1650 at [27], [28]; Re Capsanis; Capsanis v Owners ‑ Strata Plan 11727 [2000] FCA 1262 at [11]; and

    ·that they are advancing a “genuine” or “bona fide” claim: Re Capsanis; Capsanis v Owners ‑ Strata Plan 11727 [2000] FCA 1262 at [11].

    It may be that the first and second formulations are intended to cover the same ground.  In Brink Lockhart J treated (at 141) the reference to a “prima facie case” in Ebert as a reference to “a fair chance of success”. 

    10In Brink Lockhart J said (at 141) that the Court is not required to “undertake a preliminary trial of the counter‑claim, set‑off or cross demand”. But, clearly, the application of the criteria above requires the Court to make some kind of preliminary assessment, though obviously not to determine the counter‑claim, set‑off or cross demand finally. And in Guss v Johnstone (2000) 171 ALR 598, Gleeson CJ, Gaudron, McHugh, Kirby and Callinan JJ stated (at 606):

    “[40]  The state of satisfaction referred to in s 40(1)(g), and s 41(7), involves weighing up considerations as to the legal and factual merit of the claim relied upon by the debtor, and the justice of allowing the bankruptcy proceedings to go ahead or requiring them to await the determination of the claim.” 

    11Plainly, in order to “satisfy” the Court for the purposes of par 40(1)(g), the debtor is not required to prove, as on a final hearing, the asserted entitlement to recover from the creditor.  Accordingly, evidence tendered on an application to set aside is to be tested for admissibility, not as if the proceeding were one in which the debtor’s claim was being finally determined, but by reference to the question whether the Court should be satisfied that the debtor has a claim deserving to be finally determined. 

    12Perhaps little more can usefully be said than that a debtor must satisfy the Court that 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. 

12. I consider that Ms Girgis has failed to identify with sufficient particularity what it is which gives her a prima facie case of a finding of negligent advice at the time that she entered the consent orders for parenting.

13. I also consider that she has not shown any monetary loss resulting from any such advice, which could sound in an amount of damages exceeding the amount of the judgment debt. Her affidavit when seeking to identify loss, appears to claim recovery of the total amounts paid for all of Mr Coffey’s services, but no basis for this is shown. It is impossible to detect how Ms Girgis might be able to show that the whole of her expenses in the litigation leading to the orders of Waddy J and beyond were incurred as a result of negligence on the part of Mr Coffey.

14. Ms Girgis also claims that she could recover all of the amounts paid to subsequent sets of lawyers in relation to subsequent proceedings involving Ms Girgis’ contravention of the parenting orders made by Waddy J, and subsequent appeals from adverse conclusions in relation to those contravention proceedings.  The contravention proceedings appear to have occurred in 2009, and the appeal proceedings in 2010. 

15. Ms Girgis’ affidavit has a general lack of precision and information concerning those matters.  None of the pleadings are attached, and none of the judgments are attached.  It is impossible to detect whether the subsequent proceedings revealed any grounds for doubting the proprietary of the terms of settlement, or the parenting orders which were ordered by Waddy J and to which Ms Girgis gave her consent on advice from Mr Coffey and Mr Johnston in September 2007.  The evidence of the subsequent proceedings as recounted by Ms Girgis provides no further basis, in my opinion, for finding a prima facie case of negligence in September 2007.  It certainly provides no prima facie case for negligence sounding in damages by way of recoupment of the fees paid to Ms Girgis’ lawyers in the contravention and appeal proceedings.  Since Ms Girgis’ actions which contravened the orders made by Waddy J would appear to be within her entire responsibility and control, it is difficult prima facie to see how there could be any causal nexus between any failings of Mr Coffey at or before the terms of settlement were entered into, and the costs derived from the contravention proceedings and appeal proceedings. 

16. The Court is in a situation, in relation to the contended quantification of amounts recoverable in negligence, that there appear prima facie to be good defences which would be available to Gells in any prospective proceedings if they were commenced, and no prima facie answer to such defences is raised, in my opinion, by the material now before the Court.  These defences would suggest that Ms Girgis has remote prospects of recovering amounts exceeding the amount of the debt asserted in the bankruptcy notice. 

17. Ms Girgis’ recent affidavit refers to two other incidents in the course of Mr Coffey’s acting for her, which she appears to suggest might reveal negligence sounding in damages. 

18. The first incident is referred to in paragraph 6 of her affidavit: 

    6.In February 2007, my husband failed to attend a 2 day final hearing as to parenting issues.  The Respondent failed to make an application for costs on my behalf, which I say would likely to have been ordered against the husband in my favour for costs thrown away, which were considerable as it entailed 2 days of counsel’s fees, my solicitor’s fees as well as preparatory work undertaken for the hearing.  Mr Coffey of the Respondent’s firm (“Mr Coffey”) failed in his duty of care.  The legal costs which I incurred due to costs thrown away was approximately $5,000.00 for Mr Johnston’s fees and Mr Coffey’s fees but possibly more. 

19. No further particulars are pointed to which would explain how the bare circumstances recounted in this paragraph would prima facie lead the Family Court to exercise its discretion under s.117 of the Family Law Act 1975 (Cth). That section raises a variety of circumstances which might bear on the Court’s discretion to depart from the normal rule that “each party to proceedings under this Act shall bear his or her own costs”.  On the affidavit account and submissions made to me, it does not appear to me that Ms Girgis has pointed to more than a possibly arguable claim to a costs order, which it is difficult to assess without hearing Mr Coffey’s explanations, which the late filing of her affidavit have prevented being shown to the Court. 

1. Moreover, there is no satisfactory explanation found in Ms Girgis’ affidavit or submissions as to why, if there was a negligent failure to seek a costs order against the husband in relation to the February 2007 listing, and a prospect of obtaining one, Ms Girgis did not apply for such a costs order subsequently, by so instructing Mr Coffey or the new solicitors she engaged in 2008.  Under Family Law Rule 19.08, she was entitled to do that at any time until 28 days after the final order was made in the matter, and she could also seek an extension of time to make a later application.  If leave were required, then it is likely to have been given if she had grounds for showing the failure earlier to seek costs was the result of negligent advice or omission by Mr Coffey.  There appears prima facie to be potentially good arguments by way of defence to a claim for damages in relation to that incident, and Ms Girgis’ affidavit fails to satisfy me as to a prima facie answer. 

2. Moreover, even assuming the correctness of Ms Girgis’ assertion of a loss of $5,000 arising from this incident, this would not point to a counter‑claim “exceeding the amount” of Gell’s judgment. 

3. Ms Girgis’ other complaint concerning Mr Coffey’s professional services related to events after there was an “incident involving my then husband at Newcastle” in April 2008, which appears to have led Ms Girgis to breach the previously agreed parenting orders.  Ultimately, this appears to have led to contravention proceedings against her, which were finally heard in February 2009, with Ms Girgis being assisted and represented by other lawyers.  However, she suggests that she was forced to change lawyers because: 

   21.On Friday 1 July 2008 Mr Coffey said to me words to the following effect:  “Mr Johnston of counsel is not available to represent you on the allocated Court date of 4 July 2008.  He has another matter in Court on Monday.  However, there is another barrister who can fill in for him.  His name is Mr Thornborough”.  On or about 23 July 2008 Mr Coffey said to me words to the following effect:  Mr Johnston is not available to appear on 28 July 2008”. 

4. The affidavit is unclear as to the nature of the listings and the circumstances of counsel’s unavailability on 4 and 28 July 2008, so as to show whether it was a listing at which counsel of the choice of the client was desirably required, and whether Mr Coffey could be held to be accountable in negligence for the unavailability of counsel of the client’s choice.  In short, no particulars of negligence by Mr Coffey in relation to Mr Johnston’s unavailability on those days are shown in the affidavit before me.  It is unnecessary to explore the additional difficulties facing Ms Girgis’ claims that Mr Coffey should be held liable for her expenses of employing different solicitors in the subsequent contravention and appeal proceedings. 

5. Taking into account the full narration of events found in Ms Girgis’ affidavits, and all the submissions made on her part by her counsel today, I am not satisfied that she has a counter‑claim in professional negligence against the present respondent which has any prospects of success once properly pleaded and brought in a court with jurisdiction. I do not consider that the case she has sought to present to me can be characterised as being a “prima facie case” or having a “fair chance of success”, nor that it satisfies any of the other tests pointed to in the authorities.

6. In terms of Lindgren J’s final suggestion, that the Court should form a judgment about whether Ms Girgis “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”, I am not persuaded that considerations of justice point to such a situation in relation to the suggested proceedings against the present respondent. Ms Girgis has had now many years, since dispensing with Mr Coffey’s services, properly to formulate and commence proceedings in negligence, and on the evidence before me she has taken no steps other than to obtain an inadequate draft pleading.

7. For all the above reasons, I am not persuaded that there is any good reason why the Court should be satisfied in terms of s.40(1)(g) or s.41(7) of the Bankruptcy Act.

8. I therefore dismiss the application. 

I certify that the preceding fifty (50) paragraphs are a true copy of the reasons for judgment of Smith FM

Date:  14 August 2012