In the Matter of Marcus Andrew Rose (also known as Marcus Andre Charles Rose) and Anor; Pyramid Building Society (in liq) v Rose, Marcus Andrew and Anor

[1997] FCA 1562

FEDERAL COURT OF AUSTRALIA

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 7605  of   1997

IN THE MATTER OF MARCUS ANDREW ROSE (ALSO KNOWN AS MARCUS ANDRE CHARLES ROSE) AND PHILLIP WARREN ROSE

BETWEEN:

PYRAMID BUILDING SOCIETY (IN LIQUIDATION)
APPLICANT CREDITOR

AND:

MARCUS ANDREW ROSE (ALSO KNOWN AS MARCUS ANDRE CHARLES ROSE)
FIRST RESPONDENT CREDITOR

PHILLIP WARREN ROSE
SECOND RESPONDENT CREDITOR

JUDGE:

MERKEL J

DATE OF ORDER:

8 DECEMBER 1997

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

The creditor’s petition dated 23 September 1997 be dismissed.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 7605 of 1997

IN THE MATTER OF MARCUS ANDREW ROSE (ALSO KNOWN AS MARCUS ANDRE CHARLES ROSE) AND PHILLIP WARREN ROSE

BETWEEN:

PYRAMID BUILDING SOCIETY (IN LIQUIDATION)
APPLICANT CREDITOR

AND:

MARCUS ANDREW ROSE (ALSO KNOWN AS MARCUS ANDRE CHARLES ROSE)
FIRST RESPONDENT DEBTOR

PHILLIP WARREN ROSE
SECOND RESPONDENT DEBTOR

JUDGE:	MERKEL J
DATE:	8 DECEMBER 1997
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

On 15 December 1995, Eames J in the Supreme Court of Victoria appeared to order that the debtors in the present matter pay the petitioning creditor’s costs of the proceeding No 5618 of 1991.  The form of his Honour's order was as follows:

“Pyramid be entitled to execute the order made by His Honour Mr Justice Eames on 15 December 1995 namely that the plaintiff and the defendants by first counter claim pay Pyramid's costs of the proceeding.”

The plaintiff in the matter was a corporate entity, Tenth Dancote Pty Ltd and the defendants included the two debtors in the present case.  On 15 May 1996 the petitioning creditor took out a summons for taxation of those costs pursuant to Order 63 of the Rules of the Supreme Court of Victoria.  Under O 63 r 13, subject to court order, a party is only entitled to recover any costs of a proceeding from any other party in accordance with O 63.

On 5 August 1996 Master Bruce taxed the costs payable pursuant to the order of Eames J in the sum of $179,648.25.  A difference emerged between the parties as to a number of matters including the costs order made in the original orders of Eames J dated 15 May 1995.  As a consequence his Honour varied his original orders including his order as to costs in the order dated 15 December 1995.  The variation, as authenticated on 8 October 1996, provided as follows in respect of costs:

“3       (a) In the original proceeding, the Plaintiff by original proceeding pay the costs of the Defendant to the original proceeding;
(b) In the First Counterclaim, the Defendants to the First Counterclaim pay the costs of the Plaintiff by the First Counterclaim;
(c) In the Second Counterclaim the Plaintiffs by Second Counterclaim pay the costs of the Defendant to the Second Counterclaim.”

The effect of the authenticated order was to replace the original orders that, inter alia, the debtors pay the petitioning creditor’s costs of the proceedings, with orders that:

1. Tenth Dancote Pty Ltd, the plaintiff in the original proceeding, pay the petitioning creditor’s costs of the original proceeding; and

1. The debtors and certain other persons pay the petitioning creditor’s costs of the first and second counterclaim in the proceeding.

As a consequence of the variation to the orders, as from 8 October 1996 there was no longer an order of the Supreme Court that the debtors pay the petitioning creditor’s costs of the proceeding, being the only costs which had been  taxed under O 63.  There had been no taxation of the costs payable under paragraphs 3(b) and 3(c) of the varied orders.  A bankruptcy notice was issued on 14 November 1996 in reliance on the original and varied order of Eames J and on the taxation of costs under O 63 as a result of those orders.

After the debtors’ failure to comply with the bankruptcy notice by the extended date, the petitioning creditor presented a creditor's petition under the Bankruptcy Act 1966.  The petition relied upon the debtors’ failure to comply with the bankruptcy notice on or before 31 March 1997 in respect of the taxed costs of $179.648.25. No further taxation of costs occurred as a result of the varied orders of Eames J.

The petition relies upon a failure on the part of the debtors to pay a final judgment or order in the sum of $179,648.25:  see ss 40(1)(g), 41(1) and 52(1).  However, for the reasons set out above, on the date of the alleged act of bankruptcy, that is 31 March 1997, there had not been a taxation of the costs payable under paragraphs 3(b) and 3(c) of the final judgment then extant in favour of the petitioning creditor and upon which it was required to rely in its bankruptcy notice and creditor's petition.

Put another way, this is not a case of overstatement of an amount due under a judgment debt.  It is a case where the amount due under O 63 remained to be determined as a result of the variations made to the original orders upon which the taxation orders made on 5 August 1996 relied.  As from the date of the varied orders there was no longer a final judgment to sustain the earlier taxation orders.  I am satisfied that as a consequence of the foregoing the bankruptcy notice failed to meet a requirement made essential by the Act and was therefore a nullity:  see Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 at 79.

An alternative way of looking at the matter is that the order for taxation now relates to what in essence are two judgments in favour of the petitioning creditor.  The first judgment, in the original proceeding, was against the corporate plaintiff and the other on the two counterclaims was against (inter alia) the debtors.  To found a bankruptcy notice on two such judgments also runs afoul of the established principle in bankruptcy that a bankruptcy notice must be founded on one and not two or more judgments.  See Re Bond; Ex parte HongKongBank of Australia Limited (1991) 33 FCR 426 at 433-435 and the cases there referred to.

For these reasons I have come to the conclusion that the petition is to be dismissed. 

Whilst I accept counsel for the debtors’ statement that the point upon which he has succeeded was only appreciated recently, the present ground of opposition ought to have been raised earlier and, in particular, when the debtors applied for an extension of time to comply with the bankruptcy notice.  In all the circumstances I do not propose to make any order for the costs of either party. The only order I make is that the creditor's petition dated 23 September 1997
be dismissed.

I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Merkel

Associate:

Dated:            

Counsel for the Applicant:	Miss S Horovitz
Solicitor for the Applicant:	Madgwicks
Counsel for the Respondent:	Mr R S Randall
Solicitor for the Respondents:	Best Hooper
Date of Hearing:	8 December 1997
Date of Judgment:	8 December 1997