Gorczynski v Perera
[2009] FMCA 940
•25 September 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| GORCZYNSKI v PERERA & ANOR | [2009] FMCA 940 |
| BANKRUPTCY – Application to set aside a Bankruptcy Notice on the basis of a counter-claim, set-off or cross demand that exceeds the amount in the Notice – prima facie case established – Bankruptcy Notice set aside. |
| Bankruptcy Act 1966, s.40 Federal Court Rules (Cth), O.35, r.8 Land and Environment Court Act 1979 (NSW), s.69A (repealed) Legal Profession Act 2004 (NSW), s.364 Supreme Court Rules 1970 (NSW), Schedule J Uniform Civil Procedure Rules 2005 (NSW), Schedule 5 |
| Carson v Minister for Administering the Environmental Planning & Assessment Act 1979 (1994) 82 LGERA 179 Ebert v Union Trustee Co of Australia Ltd (1960) 104 CLR 346 Glew v Harrowell; In the matter of Glew [2003] FCA 373 Gorczynski v AWM Dickinson & Son [2005] NSWSC 277 Gorczynski v Beilby [2005] NSWSC 884 Gorczynki v Holden [2008] NSWSC 334 Gorczynski v Perera & Ors [2007] HCATrans 189 Gray v Gray [2005] NSWCA 129 Hones v Gorczynski [2002] FMCA 253 Leda Pty Ltd v Weerden & Anor (No 2) [2007] NSWCA 283 Nemeth v Prynew [2009] NSWSC 511 Scope Data Systems Pty Ltd v Agostini Jarrett Pty Ltd [2005] NSWSC 691 |
| Applicant: | PETER FRANCIS GORCZYNSKI |
| First Respondent: | RAVINI NELUKA PERERA |
| Second Respondent: | REBECCA PATRICIA DEE-BRADBURY |
| File Number: | SYG 652 of 2008 |
| Judgment of: | Lloyd-Jones FM |
| Hearing date: | 3 July 2009 |
| Delivered at: | Sydney |
| Delivered on: | 25 September 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr N Connolly (solicitor) |
| Solicitors for the Applicant: | Niall Connolly Lawyers |
| Counsel for the Respondents: | Mr Van Ede (solicitor) |
| Solicitors for the Respondents: | E.H. Tebbutt & Sons Solicitors |
| Solicitors for the Supporting Creditor: | Garland Hawthorne Brahe Lawyers |
ORDERS
The Bankruptcy Notice NN 0540/2008 be set aside.
The respondents, Ravini Neluka Perera and Rebecca Patricia Dee-Bradbury, are to pay the costs of the applicant, Peter Francis Gorczynski, to be agreed or in the absence of agreement, to be assessed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 652 of 2008
| PETER FRANCIS GORCZYNSKI |
Applicant
And
| RAVINI NELUKA PERERA |
First Respondent
| REBECCA PATRICIA DEE-BRADBURY |
Second Respondent
REASONS FOR JUDGMENT
The proceedings
By an application filed on 11 March 2008, Peter Francis Gorczynski, the applicant debtor, seeks pursuant to s.40 of the Bankruptcy Act 1966 (Cth) to have Bankruptcy Notice NN0540 of 2008 issued by the respondent creditors, Ravini Neluka Perera and Rebecca Patricia Dee-Bradbury, set aside on the basis that he has a counter-claim, set-off or cross demand that exceeds the amount of the Bankruptcy Notice.
The orders sought in the application are as follows:
1. That Bankruptcy Notice No NN0540/08 be set aside. A copy of that Bankruptcy Notice accompanies this application.
2. That the time for compliance with the Bankruptcy Notice no. NN0540/08 be extended until after the completion of the assessment of the costs orders made in favour of the applicant tin the Land and Environment Court proceedings no.40012 of 2000 and Supreme Court proceedings number 2134 of 2000 and the Federal Magistrates Court proceedings no. SYG 2893 of 2007.
3. Costs
4. The Bankruptcy Notice no NN0540/08 was served on me on 26 February 2008.
The application is opposed by Ms Perera and Ms Dee-Bradbury on the grounds set out in the Notice Stating Grounds of Opposition to the Application filed on 4 April 2008:
Prior to the application filed on 18 March 2008 in these proceedings, the applicant has not taken any active steps to obtain assessments of costs for the costs orders obtained by him:-
(a) in the Supreme Court on 21 July 2000;
(b) in the Land and Environment Court on 6 February 2003; and
(c) in the Supreme Court on 5 July 2004.
2. The applicant has not submitted to the respondents any calculation of costs relating to the costs order obtained by him in the Federal Magistrates Court on 23 January 2008.
3. The respondents should not be prejudiced in proceeding with the Bankruptcy Notice NN0540/08 due to the applicant’s delay in:-
(a) preparing or obtaining any assessments of costs for the costs orders made on 21 July 2000, 6 February 2003 and 5 July 2004;
(b) submitting any calculation of costs for the costs order made on 23 January 2008.
4. The application filed on 18 March 2008 to set aside the above mentioned Bankruptcy Notice is vexatious and an abuse of Court process.
An affidavit supporting the grounds of opposition is filed with this notice.
The Bankruptcy Notice was issued on 19 February 2008. Ms Perera and Ms Dee-Bradbury claim a debt of $153,609.47 based on a Certificate of Judgment issued in the District Court of New South Wales on 26 November 2007. Mr Gorczynski was required within 21 days to repay Ms Perera and Ms Bradbury the amount of the debt or make arrangements to the satisfaction of Ms Perera and Ms Bradbury for settlement of the debt.
The matter was referred to me by the Duty Registrar on 8 April 2008 for allocation of a hearing date. On the 29 April 2008 I made the following orders (which include the amendments by the orders I made on 19 May 2008)
1. Leave be granted to Ms Obart of Counsel and Mr R Kent of Kent Attorneys to withdraw as legal representatives for the applicant.
3. Pursuant to subsection 41(6A) of the Bankruptcy Act 1966 and r.3.03 of the Federal Magistrates Court (Bankruptcy) Rules 2006, on condition that Bankruptcy Notice NN 540 of 2008 was served on the applicant on 26 February 2008, the time for compliance by the applicant with the requirements of the Bankruptcy Notice is extended up to and including 19 May 2008.
4. The applicant to file and serve the affidavit of Ghania Dib attached with the report of G D Thompson by Monday, 12 May 2008.
5. The respondent to file and serve any affidavit in reply to the affidavit of Ghania Dib by Thursday, 15 May 2008.
6. Both parties have liberty to apply on three days’ notice.
The matter was adjourned by consent on a further 9 occasions to enable Mr Gorczynski to have prepared and placed before the Court an assessment of costs in favour of him in respect of:
a)Land and Environment Court proceedings number 40012 of 2000;
b)Supreme Court of New South Wales proceedings number 2134 of 2000;
c)Federal Magistrates Court proceedings number SYG2893 of 2007.
Background
In setting out the following summary I have quoted directly or paraphrased from affidavits filed in these proceedings and make no further attribution as this would make the summary unwieldy. The summary is provided to assist in understanding the nature of the application and not to establish any evidentiary point.
The debt claimed in the Bankruptcy Notice is a result of various Land and Environment Court proceedings between Mr Gorczynski, Ms Perera and Ms Dee-Bradbury in which some costs were awarded to Mr Gorczynski and some to Ms Perera and Ms Dee-Bradbury. The Bankruptcy Notice arises from Ms Perera and Ms Dee-Bradbury’s costs assessment application and a subsequent District Court judgment following that application. Mr Gorczynski claims to have a counter claim or set off totalling about $332,813.23 from costs orders made against Ms Perera and Ms Dee-Bradbury. He claims that this figure does not include costs ordered in his favour in previous Federal Magistrates Court proceedings.
Mr Gorczynski claims that between 5 September 2003 and 25 June 2004, there was a series of letters between him and the solicitors representing Perera/Dee-Bradbury which resulted in the parties agreeing to resolve the costs issue so as to avoid an expensive costs assessment process.
Mr Gorczynski indicates that he wrote to the solicitors on the other side on 26 June 2004 responding to a request for an estimate of the total costs he would be claiming against Ms Perera and Ms Dee-Bradbury. He gave a figure of $316,000 and said that he was prepared to continue holding off from having his costs assessed, on the basis that the parties agreed on the set-off figure or to have all costs assessed at the same time.
On 27 May 2005, Mr Gorczynski received a letter from the other side which enclosed a table setting out the costs they would claim against him in respect of the various costs orders in their favour. They advised that their costs were $230,468 and asked Mr Gorczynski to agree to pay $184,374. Mr Gorczynski advised his solicitors at the time that the figure of $230,468 could not be sustained in the assessment and that the other side needed to reconsider their request for payment in light of the fact that his estimated costs of $316,000 far exceeded that of Ms Perera and Ms Dee-Bradbury.
The solicitors for Ms Perera and Ms Dee-Bradbury filed an application for an assessment of their costs in the sum of $173,830.88, which was reduced by the costs assessor to $146,047.58.
Evidence
Mr Connolly, appearing for the applicant, indicated that he read the following affidavits:
a)Affidavit of Peter Gorczynski sworn on 18 March 2008 (first affidavit of Mr Gorczynski) (“Exhibit A1”)
b)Affidavit of Peter Gorczynski sworn on 4 August 2008 (second affidavit of Mr Gorczynski) (Exhibit “A2”)
c)Exhibit A3 - Affidavit of Peter Gorczynski sworn on 5 November 2008 (Exhibit “A3”) which annexes the application for assessment of costs. This were objected to on the basis of relevance and that the costs assessment had been completed.
d)Affidavit of Peter Gorczynski sworn on 2 July 2009 with exhibit bundle marked “PG-3”
Mr Van Ede, appearing for the respondents, filed the following exhibits:
a)Exhibit “R1” – copy of the decision Hones v Gorczynski [2002] FMCA 253;
b)Exhibit “R2” – copy of the decision Gorczynski v AWM Dickinson & Son [2005] NSWSC 277;
c)Exhibit “R3” – copy of the decision Gorczynski v Beilby [2005] NSWSC 884;
d)Exhibit “R4” – Copy of the decision Scope Data Systems Pty Ltd v Agostini Jarrett Pty Ltd [2005] NSWSC 691;
e)Exhibit “R5” – Copy of the decision Gorczynksi v Holden [2008] NSWSC 334;
f)Exhibit “R6” – Federal Court and Federal Magistrates Court search;
g)Exhibit “R7” – Affidavit of Peter Gorczynski sworn 19 September 2007;
h)Exhibit “R8” – Affidavit of Peter Gorczynski sworn 18 October 2008;
i)Exhibit “R9” – Affidavit of Peter Francis Gorczynski sworn 29 November 2007;
j)Exhibit “R10” – Copy of Gorczynski v Perera & Ors [2007] HCATrans 189.
Applicant’s submissions
Mr Connolly appearing for Mr Gorczynski indicated to the Court that Ms Perera and Ms Dee-Bradbury initially issued a Bankruptcy Notice in August 2007 arising from costs that Mr Gorczynski was ordered to pay in connection with Land and Environment Court proceedings. Mr Gorczynski challenged that Notice as defective on the basis that he had a counter claim or set off that exceeded the amount in the Notice. On 23 January 2008, Mr Gorczynski succeeded in having that first Notice set aside and Ms Perera and Ms Dee-Bradbury were ordered to pay his costs as agreed or assessed.
On 19 February 2009, Ms Perera and Ms Dee-Bradbury caused a fresh Bankruptcy Notice to be issued which gave rise to the current application before this Court. The amount claimed in that Notice was $153,609.47. The current application is founded on the original counter-claim and the further costs order awarded to Mr Gorczynski on 23 January 2008.
Mr Connolly referred to a certificate of determination of costs by costs assessor, Rosemary Workman, issued on 20 May 2009 which was provided to Mr Gorczynski and his solicitor on 1 July 2009. The assessment is in the sum of $95,997.81 payable to Mr Gorczynski (Exhibit “A3”, Annexure PG2, Tab 8).
Mr Connolly also relied upon a certificate of determination of costs issued by Ms Workman (assessment number 13354 of 2008) arising from Supreme Court proceedings number 134 of 2000, in favour of Mr Gorczynski in the amount of $6,082.51 inclusive of disbursements and GST (Exhibit “A3”, Annexure PG3, Tab 1, p.3). In addition there is registration of Certificate of Judgment/Order from the Local Court (case number 802/2009) for the amount of $668.85 in favour of Mr Gorczynski (Exhibit “A4”, Annexure PG3, Tab 1, p.4).
Mr Connolly referred to his letter dated 1 July 2009 addressed to Mr Van-Ede of E.H. Tebbutt & Sons Lawyers, which sets out a claim that Mr Gorczynski was entitled to statutory interest pursuant to s.69A (repealed) of the Land and Environment Court Act 1979 (NSW), enforced at the time of Cowdroy J’s judgment of 6 February 2003. That section of the Land and Environment Court Act indicates that interest is payable from the date the Court order is made, notwithstanding the amount to be paid not to be assessed until some later time:
Interest payable on money to be paid
(1) If an order is made by the Court for the payment of money, interest is payable at the prescribed rate from the date the order takes effect on so much of the money as is from the time to time unpaid, unless the Court otherwise orders.
(2) This section does not apply in a case of money ordered to be paid as a penalty.
(3) In the case of an order of the Court for the payment of compensation under the Lands Acquisition (Just Terms compensation) Act 1991, the rate of interest is the rate determined under that Act in respect of payments to compensation.
In support of this argument, Mr Connolly relied on Carson v Minister for Administering the Environmental Planning & Assessment Act 1979 (1994) 82 LGERA 179 per Bignold J:
I conclude that s.69A operates (in the absence of contrary orders of the Court) to provide for the payment of interest for costs from the date that the costs order is made, being relevantly “the date upon which the order takes effect” within the meaning of s.69A.
Mr Connolly submits that the words of s.69A are clear in their effect. Further that there is no reason why interest should not be ordered to be paid on unpaid costs. The approach adopted in Carson (supra) was approved by the Supreme Court of New South Wales, Court of Appeal in Gray v Gray [2005] NSWCA 129. Their Honours Young CJ, Sheller and Bryson JJA at [19] in approving the decision of the Court below said that the words “the date the order takes effect” in s.69A(1) refers to the date upon which an order for costs takes effect. According to Part 13, r.3 this is the date the order was made. Mr Connolly submits that interest is calculated pursuant to Schedule J of the Supreme Court Rules 1970 (NSW), which is now Schedule 5 of the Uniform Civil Procedure Rules 2005 (NSW).
In a second letter dated 1 July 2009, Mr Connolly calculated the interest in respect of the Land and Environment Court proceedings as:
| Period | Rate | Amount |
| 6/2/03-31/12/06 203 weeks (3.9 years) | 9% | $33,695.23 |
| 1/1/07-5/2/09 109.43 weeks (2.1 years) | 10% | $20,159.54 |
| 6/2/09-3/7/09 21.14 weeks (0.4 years) | 9% | $3455.92 |
| Total | $57,310.69 |
Mr Connolly submits that Mr Gorczynski is also entitled to costs pursuant to the various costs orders made in Supreme Court proceedings number 134 of 2000, where judgment was entered on 29 January 2009 for the amount of $6,823.36. The interest calculated in accordance with the prescribed rate in Schedule 5 of Uniform Civil Procedure Rules is as follows:
| Period | Rate | Amount |
| 29/1/09-5/3/09 5.14 weeks (0.1 years) | 10% | $68.23 |
| 6/3/09-3/7/09 17.14 weeks (0.33 years) | 9% | $202.65 |
| Total | $270.88 |
Mr Connolly submits that the assessed costs plus interest which Mr Gorczynski claims is as follows:
| Land and Environment Court Costs (as presently assessed) | $95,997.81 |
| Interest on Land and Environment Court Costs from the date the order was made on 6 February 2003 | $57,310.69 |
| Supreme Court proceedings 134 of 2000 | $6,823.36 |
| Interest on Supreme Court proceedings costs | $270.88 |
| Total (including claim for interest) | $160,402.74 |
Mr Connolly further submits that Mr Gorczynski was able to demonstrate in these proceedings that he has assessed costs for the purposes of s.40(1)(g) of the Bankruptcy Act 1966 (Cth), a counter-claim for cross demand greater than the amount claimed in the Bankruptcy Notice. Mr Connolly submits that in Glew v Harrowell; In the matter of Glew [2003] FCA 373 where His Honour Lindgren J set out the matters an applicant needs to satisfy the Court that they have a counter claim or cross demand exceeding the amount of the Bankruptcy Notice. Mr Connolly submits that on the evidence before this Court, Mr Gorczynski was able to demonstrate that he has a cross claim to exceed the amount of the Notice, notwithstanding that he is entitled to seek the costs assessor’s determination reviewed, which may result in a higher amount assessed.
Submissions for the respondents
Mr Van Ede, for the respondents, submits that Mr Gorczynski has made assertions in relation to the Land and Environment Court proceedings and has costs in excess of the amount claimed in the Bankruptcy Notice. He submits that on this basis the Notice should be set aside. As recently as the week of the hearing the costs which have been in the process of assessment for the best part of twelve months, have been assessed, and the figure is $95,937.81. Part of Mr Gorczynski’s application to the costs assessor was the claim for interest under s.69A of the Land and Environment Court Act but this was disallowed because it was not the costs assessor’s role to grant it.
Mr Van Ede disagreed with Mr Connolly’s characterisation of the way in which s.69A applied to Mr Gorczynski.
Mr Van Ede acknowledges that Carson (supra) is the only reported decision in relation to s.69A(1). Because the section has been repealed, there is limited time in relation to its application. Mr Van Ede submits that s.69A (1) consists of two parts with the first being:
If an order is made by the Court for the payment of money, interest is payable at the prescribed rate from the date the order takes effect on so much as the money is from time to time unpaid, unless the Court otherwise orders (emphasis added)
Carson was to the effect that reference to payment of money could apply to costs which were awarded by the Court. However, it ignores the second leg which comes after the comma “unless the Court otherwise orders”. Justice Bignold went on to talk about matters which may come into play such that the award of interest would not be made in a particular case for various discretionary reasons. Mr Van Ede acknowledges that there is little to guide the Court in relation to this section because of the absence of case law. However, he submits that the Supreme Court has dealt with the issue of costs generally and those decisions are universal in their application.
Mr Van Ede submits that when considering the question of interest on costs, the key issue is the amount which has actually been paid by the person the beneficiary of the costs order. For example, if half the costs have been paid then the beneficiary is entitled to interest from the time that specific amount was paid. When awarding interest on costs, it is not intended to be a penalty but rather to ensure that the person who wins on costs is not penalised for having to fund litigation on an ongoing basis. It may be that costs have been delayed and unpaid due to an agreement to delay payment until a costs order is made. If a party has a dispute with its solicitor and does not pay its costs, the Supreme Court approach has been that no interest would be payable.
Mr Van Ede submits that in Leda Pty Ltd v Weerden & Anor (No 2) [2007] NSWCA 283, the Court sets out the mathematical formula used in approaching the question of interest on costs:
4. In this order:
X equals the total amount of costs and disbursements paid or liable to be paid to the respondent's legal advisers in connection with these proceedings;
Y equals the total amount of costs and disbursements allowed on assessment to the respondent in connection with these proceedings; and
The Allowed Percentage equals ((Y/X) x 100)%
Appellant to pay to the respondent interest on costs and disbursements, at the rates set out in Schedule 5 to the Uniform Civil Procedure Rules, on the Allowed Percentage of each amount for or on account of costs and disbursements actually paid to his legal advisers by or on behalf of the respondent, from the date of payment of each such amount until the first to occur of:
(a) such time as the appellant has paid the costs due to the respondent under order 3 above, or
(b) any further order relating to interest on costs in these proceedings.
5. Reserve liberty to apply on 7 days' notice for any further order pursuant to paragraph 4(b).
This approach was followed most recently in Nemeth v Prynew [2009] NSWSC 511.
Mr Van Ede submits that there is no evidence from Mr Gorczynski that any of the costs which have been claimed in the Land and Environment Court proceedings and which are subject to the award of costs by the costs assessor for $95,997.81 have been paid. Mr Van Ede submits that Mr Gorczynski is a person who has a history of being in dispute with his legal advisers and, in the words of His Honour Driver FM in Hones v Gorczynski at [14] (Exhibit “R1”), is a “recalcitrant debtor”. He submits that Mr Gorczynski uses Court proceedings as a method of avoiding payments.
Mr Van Ede in his written submissions drew the Court’s attention to the following matters:
a)Gorczynski v AWM Dickinson & Son – Solicitors’ bill of costs in 2000 disputed by Mr Gorczynski who then embarked on a process of assessment and review culminating in an appeal to the Supreme Court of New South Wales.
b)Gorczynki v Holden [2008] NSWSC 334 – Solicitors acting for Mr Gorczynski in litigation in 2003 and 2004 rendered accounts which were not paid. A default judgment was obtained and Bankruptcy Notice issued, at which time proceedings were commenced to set aside the original default judgments.
c)Gorczynski v Beilby – Solicitors’ bills for work carried out in 2000 to 2002. Mr Gorczysnki refused to pay and there was an assessment process and proceedings in the Supreme Court of New South Wales.
d)Scope Data Systems Pty Ltd v Agostini Jarrett Pty Ltd – Proceedings involving a company of which Mr Gorczynski is a director, in the Supreme Court of New South Wales arising from an action by solicitors against Scope Data for recovery of their unpaid costs in Local Court proceedings.
e)Hones v Gorczynski – A dispute arising from unpaid legal fees leading to issue of a Bankruptcy Notice which was not complied with.
Further issues were identified in Mr Gorczynski’s evidence in cross-examination. It was brought to the Court’s attention that there are a number of Bankruptcy Notices on foot relating to disputes between Mr Gorczynski and various legal advisers. Exhibit “R6” lists nine Federal Court and Federal Magistrates Court matters, four of which are still open.
Mr Van Ede submits that this is one of the matters as referred to in Carson (supra) which would disentitle Mr Gorczynski to interest if he brought such a claim. Mr Connolly’s calculation set out in his letter of 1 July 2009 (see [22]-[24] above) is the total evidence of Mr Gorczynski’s entitlement to interest. Mr Van Ede submits that this is arguably insufficient to get over the threshold on the question of interest. However even if there was an prima facie entitlement to interest, the second part of s.69A(1) could disentitle Mr Gorczynski. These costs have been on foot since 2003 and it was not until June 2009 that an assessment was undertaken. A Bankruptcy Notice was served on Mr Gorczynski in this matter more than 12 months ago and the issue of costs has been in issue during the entire intervening period.
Mr Gorczynski’s own sworn affidavit evidence demonstrates how long those bills have remained without assessment and this demonstrates the sense of procrastination involved. Exhibit “A1” at [6] states:
I believe that those bills will be completed and able to be served in approximately four weeks from now.
Exhibit “R9” at [23] states:
…My understanding is that I should be in possession of a bill of costs by Christmas.
Exhibit “R8” at [17] states:
I believe it will take in order of one month to have the assessment application prepared.
Mr Van Ede submits that there is sufficient doubt as to Mr Gorczynski’s entitlement to interest given all the circumstances, such that this Court cannot be satisfied that the applicant should be awarded any amount, even relying on s.69A(1), the decision of the Supreme Court subsequently or the actions of Mr Gorczynski.
Mr Van Ede argues that this Court should infer from the manner in which Mr Gorczynski conducts his affairs and litigation that the Court should not exercise its discretion to grant the application.
Conclusion
The significant issue in respect of Mr Gorczynski’s counter claim is that he is entitled to a statutory interest pursuant to s.69A of the Land and Environment Court Act which was enforced at the time of His Honour Cowdroy J’s judgment of 6 February 2003 in respect of proceeding 40012 of 2000: Gorczynski v Perera & Dee & Ors [Costs]. His Honour ordered that:
2. The first respondents (Ravini Neluka Perera and Rebecca Patricia Dee) pay the costs of the applicant including the costs incurred by the applicant regarding the reference.
The relevant provision with respect to interest is s.69A(1) and the second limb of that provision states:
Unless the Court otherwise orders.
No such qualification or limitation was made in Order 2. Nor is there any inference that can be drawn which would suggest that was the intention of the Court.
An application was filed on 27 August 2008 for party/party costs identified as costs assessment file number 13355 of 2008 which was undertaken by the costs assessor, Ms Workman. The assessment process is governed by s.364 of the Legal Profession Act 2004 (NSW) which stipulates the approach to be taken by costs assessors when assessing party/party costs. When there is an order for costs on a party/party basis the costs assessor must take into consideration the following issues:
364 Assessment of costs-costs ordered by court or tribunal
(1) In conducting an assessment of legal costs payable as a result of an order made by a court or tribunal, the costs assessor must consider:
(a) whether or not it was reasonable to carry out the work to which the costs relate, and
(b) whether or not the work was carried out in a reasonable manner, and
(c) what is a fair and reasonable amount of costs for the work concerned.
The onus is on the cost applicant, in this case Mr Gorczynski, to establish that the costs are fair and reasonable. The costs assessor is not limited to an assessment of items which are subject to specific or general objection but is obliged to comply with the statutory requirements.
On 2 March 2009, Mr Gorczynski submitted a supplementary submission claiming interest upon the underpaid costs pursuant to s.69A of the Land and Environment Court Act. The costs assessor declined the award of interest and stated that her function was purely administrative and not judicial. Ms Workman indicated that she did not have the power to award interest in the absence of a specific Court order, nor did not have the power to award interest on unpaid costs. Clearly the Court made no order in respect of interest in these proceedings. However the entitlement to interest arises as a statutory right under the Land and Environment Court Act:
(1) If an order is made by the Court for the payment of money, interest is payable at the prescribed rate.
Regulation 36.7 of the Uniform Civil Procedure Rules states:
36.7 Payment of interest
(cf SCR Part 40, rule 7)
(1) The prescribed rates at which interest is payable under section 101 of the Civil Procedure Act 2005 are as set out in Schedule 5.
A similar statutory regime is found in O.35, r.8 of the Federal Court Rules (Cth).I accept Mr Connolly’s submissions that the decision in Carson (supra) where His Honour Bignold J stated:
I conclude that s.69A operates (in the absence of contrary orders of the Court) to provide for the payment of interest for costs from the date that the cost order is made. [emphasis added]
I believe that the correct approach for the calculation of statutory interest pursuant to the section is the approach taken by Mr Connolly in first obtaining a Certificate of Determination of Costs, where the sum of costs is determined and then interest is calculated on that sum in accordance with the Uniform Civil Procedure Rules. This is not part of the function of the costs assessor. In the absence of an order of the Land and Environment Court varying, limiting or excluding costs, the calculation operates using a statutory regime that is automatically applied to the assessed costs figure.
The argument advanced by Mr Van Ede is that when considering the question of interest on costs the key issue in that determination is dependant upon the amount actually paid by the person who is the beneficiary of the costs order. It is submitted that the Court must enquire what costs have actually been paid by the beneficiary. I find this suggestion contrary to the statutory regime established by the provision within the Act, see Carson (supra):
…section 69A operates (in the absence of contrary orders of the Court) to provide for payment of interest for costs from the date the costs order is made, being relevantly “the date upon which the order takes effect” within the meaning of s.69A. Accordingly the calculations prepared by Mr Connolly which indicate that the interest calculated from 6 February 2003 which is the date of the orders made in proceedings 40012 of 2000 by His Honour Cowdroy J is the relevant date from which interest is calculated.
As indicated in Mr Connolly’s submissions the approach taken in Carson was confirmed in the Court of Appeal: Gray v Gray (supra). When an application is made by a debtor seeking to set aside a Bankruptcy Notice on the basis of the existence of a counter-claim, set off or cross demand, the applicant must “satisfy the Court” that they have a prima facie case, see Ebert v Union Trustee Co of Australia Ltd (1960) 104 CLR 346 per Dickson CJ, McTiernan and Windeyer JJ:
…the applicant cannot satisfy the Court that a cross demand exists by showing no more than she propounds one and states how she should suggest that she may make it out.
In the application before this Court the counter-claim is based on a statutory regime in respect of the application of an interest calculation, starting with a costs order in the Land and Environment Court which has been assessed and a Certificate of Determination of Costs issued with a determined sum. From that point, a mathematical procedure is performed using formula and rates set out in the Uniform Civil Procedure Rules to establish the quantum of interest claimed. Nothing has been put before me to suggest that the process was not performed correctly. The net result of this statutory procedure indicates that Mr Gorczynski has established that he has a counter-claim which is greater than the amount contained in the Bankruptcy Notice and is entitled to have that Notice set aside.
I note the substantial body of material submitted by Mr Van Ede in respect of Mr Gorczynski’s previous actions against his various legal advisors. This was further demonstrated in cross-examination of Mr Gorczynski however I am not satisfied that this in any way defeats Mr Gorczynski’s counter claim as not being genuine or bona fide. Consequently, the Bankruptcy Notice should be set aside with an order of costs in Mr Gorczynski’s favour.
I certify that the preceding forty-nine (49) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM.
Associate:
Date: 25 September 2009
0
12
6