GRIZONIC v Maurice Blackburn Cashman (No.2)
[2005] FMCA 942
•28 June 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| GRIZONIC v MAURICE BLACKBURN CASHMAN (No.2) | [2005] FMCA 942 |
| BANKRUPTCY – Application to set aside Bankruptcy Notice – where debt is based upon solicitor’s assessed costs – whether a claim in negligence is a cross claim cross demand or set off that could have been raised in the proceedings in which the judgment was obtained – whether applicant has established his case to the standard required by the authorities. |
| Bankruptcy Act 1966, ss.40(1)(g), 41(7) Legal Profession Act1987, s.208J Federal Magistrates Court Rules 2001 Federal Court Act Federal Court Rules |
| Re Glew; Glew v Harrowell of Hunt & Hunt Lawyers Re Tresidder; Tresidder v Harrowell of Hunt & Hunt Lawyers [2003] FCA 73 and 198 ALR 331 |
| Applicant: | CLAUDIO GRIZONIC |
| Respondent: | MAURICE BLACKBURN CASHMAN PTY LTD (ACN 105 657 949) |
| File Number: | SYG1295 of 2005 |
| Judgment of: | Raphael FM |
| Hearing date: | 28 June 2005 |
| Date of Last Submission: | 28 June 2005 |
| Delivered at: | Sydney |
| Delivered on: | 28 June 2005 |
REPRESENTATION
| Counsel for the Applicant: | Mr D Oliveri |
| Counsel for the Respondent: | Mr J Johnson |
| Solicitors for the Respondent: | Maurice Blackburn Cashman |
ORDERS
Application dismissed.
Applicant to pay respondent’s costs including reserved costs to be taxed if not agreed pursuant to the Federal Court Act and Rules.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG1295 of 2005
| CLAUDIO GRIZONIC |
Applicant
And
| MAURICE BLACKBURN CASHMAN PTY LTD (ACN 105 657 949) |
Respondent
REASONS FOR JUDGMENT
I have before me proceedings brought by the debtor to set aside a bankruptcy notice pursuant to the provisions of ss.40(1)(g) and 41(7) of the Bankruptcy Act 1966.
The factual substratum of the application is as follows. The debtor was in a business and a personal relationship with another person. Towards the end of 2003 that relationship broke down. The parties had property and business in common. They were unable to resolve their differences. They resorted to the Supreme Court of New South Wales.
At a date which I am unable to accurately ascertain, but which is undoubtedly prior to 22 December 2003, the matter came before Barrett J in the Supreme Court of New South Wales. Heads of agreement were drawn up. They were signed by each of the parties and also by his Honour. They required certain things to be done. Those things were not done. The applicant sought advice from the creditor, a firm of solicitors incorporated under the Corporations Act 2001. Advice was given and action was taken. Within a short period of time the applicant debtor was asked for some money to be held in trust. He was unable to provide it. He withdrew his instructions.
The work undertaken by the firm of solicitors was undertaken by them following their advice to the debtor that the heads of agreement which he had produced to them were unenforceable. After dispensing with the services of the solicitors the debtor commenced his own proceedings. He was apparently assisted by counsel on a direct brief basis. He succeeded in those proceedings in obtaining orders from the Supreme Court and placing receivers into the property and the business. The solicitors delivered a bill. The applicant debtor was not satisfied with it. He sought that the bill be assessed pursuant to the provisions of the Legal Profession Act 1987 (NSW). He completed certain forms stating why he disputed the solicitor's bill. He indicated that the bill was “overpriced for little work, writing letters and not listening to requests.” He was asked to provide further particulars, which I understand he did. An assessment was made. That assessment was the subject of a review. The review supported the assessment. Pursuant to s.208J of the Legal Profession Act the solicitors obtained a judgment from the Local Court of New South Wales for the amount of the assessment.
The solicitors issued a bankruptcy notice numbered NN139/05 on 20 January 2005. On 19 May 2005 the applicant issued a statement of claim in the Supreme Court of New South Wales alleging negligence against the solicitors. The particulars of loss included costs unnecessarily incurred through the defendants’ attempting to re-negotiate a settlement when they already held heads of agreement that were enforceable, costs incurred through the unnecessary appointment of receivers and managers over the Valentino's Restaurant and costs incurred in having a trustee appointed over 9 Magdela Road, North Ryde.
The debtor submits that I should set aside the bankruptcy notice because he has a set off cross demand or cross claim that he could not have set up in the action of proceeding in which the judgment was obtained and it is necessary to look at all these matters in order to decide whether or not the application should be granted.
First it is necessary to look at the Rules of the Federal Magistrates Court. In respect of an application to set aside a bankruptcy notice the requirements are set out in Part 30 Rule 30.02(2). That states:
“(2) an application must be accompanied by:
(a) a copy of the bankruptcy notice;
(b) an affidavit stating:
(i) the grounds in support of the application; and
(ii)the date when the bankruptcy notice was served on the applicant; and
(c)a copy of any application to set aside the judgment or order in relation to which the bankruptcy notice was issued and any material in support of that application.
(3)if the application is to set aside the bankruptcy notice on the ground that the debtor has a counterclaim set-off or cross-demand mentioned in paragraph 40(1)(g) of the Bankruptcy Act the affidavit must also state:
(a)the date when the bankruptcy notice was served on the debtor; and
(b)the full details of the counterclaim, set-off or cross-demand; and
(c)the amount of the counterclaim, set-off or cross-demand and the amount by which it exceeds the amount claimed in the bankruptcy notice; and
(d)why the counterclaim, set-off or cross-demand is not raised in the proceeding that result in the judgment or order in relation to which the bankruptcy notice was issued.”
Mr Johnson argues that the provisions of Rule 30.02(3) were not complied with. The affidavit before me certainly states the date upon which the bankruptcy notice was served. It purports to provide full details of the counterclaim by the annexure of a statement of claim issued in the Supreme Court. It does not state the amount of the counterclaim, set-off or cross demand because it does not set out the amount of the counter-claim set off or cross-demand or the amount by which it exceeds the amount claimed in the bankruptcy notice. I note that it does not ask that the costs which the applicant paid to the solicitors be refunded to him, although there is a general claim for damages at large.
The affidavit does not state why the counter-claim set off or cross-demand was not raised in the original proceedings. Mr Johnson argues that in these circumstances the application itself is invalid. He particularly refers to the failure to provide details of the amount of the counter-claim set off or cross-demand. He notes that the requirements of the rules are mandatory, although of course a court has the power to dispense even with mandatory rules if it believes it is appropriate to do so and in the interests of justice.
Whilst I would not encourage affidavits that do not comply with the Rules, I am prepared for the purposes of this case to admit this affidavit as complying because it seems to me that a claim for damages at large would include a claim that the original costs payable by the applicant to the solicitors for the alleged negligent advice should be refunded to him and insofar as they have not been paid cancelled. This would certainly equal the amount of the claim. I am also satisfied that the statement of claim does provide full details of the cross-demand although, as will become evident, does not establish it.
A case which comes very close to the facts of the one currently before me was decided by Lindgren J Re Glew; Glew v Harrowell of Hunt & Hunt Lawyers; Re Tresidder; Tresidder v Harrowell of Hunt & Hunt Lawyers [2003] FCA 73 and 198 ALR 331. In that case there was a concession by counsel for the respondents that the judgment obtained in the District Court of New South Wales by registration of a certificate as to determination of costs under s.208A of the Legal Profession Act was not a proceeding in which a counter claim set off or cross demand could be issued.
Mr Johnson does not make such a concession. He argues that the nature of the applicant's complaint about the solicitors was capable of being and was indeed raised in the substantive proceedings, namely the assessment proceedings. I propose to leave this matter to one side for the time being.
Mr Johnson goes on to argue that as clearly indicated by his Honour at [9] the applicant in this case must establish that he has a prima facie case even if he does not adduce evidence which would be admissible on the final hearing in making out that case, that he has a fair chance of success or is fairly entitled to litigate his claim and that he is advancing a genuine or bona fide claim. Mr Johnson argues that there is absolutely no evidence before me concerning the claim at all. What exists is a statement of claim which is a document making assertions only.
The statement of claim itself repeats the form of the consent agreement which the debtor and his former de facto partner entered into and then merely asserts in paragraph 14:
“The defendants advised the plaintiff that the Heads of Agreement were not binding and could not be enforced and that the plaintiff would have to negotiate further consent orders to enable the partnership to be dissolved.”
There are no particulars of how that advice was given, by whom it was given or when it was given. In Glew v Harrowell His Honour appears to have heard some evidence from the parties and both Mr Glew and Mr Tresidder filed affidavits.
His Honour was able, from reading those affidavits and from considering the cross-examination of the debtors to find that the debtors did have the form of case that was required. In [64] his Honour says:
With some doubt, I think that Glew and Tresidder have surmounted the relatively low threshold referred to at [9] above, in particular although their claim may well fail, I think it is one which they are "fairly entitled to litigate".
I cannot be so satisfied. I think I would need to know much more about the alleged advice given by this firm of solicitors and how it translated into loss for the applicant before I could satisfy myself as required by the authorities. Whilst the hurdle is not high, this applicant has not managed to surmount it.
In those circumstances it matters not whether the cross claim is one which could or could not have been raised in the original proceedings and I will leave a decision on that matter to another day. I dismiss the application. I order that the applicant pay the respondent's costs which are to be taxed if not agreed pursuant to the Federal Court Act and Rules. These costs to be the costs of the whole proceedings including any reserved costs.
I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date: