Kedem v Johnson Lawyers Legal Practice Pty Ltd
[2012] FMCA 1118
•30 November 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| KEDEM v JOHNSON LAWYERS LEGAL PRACTICE P/L | [2012] FMCA 1118 |
| BANKRUPTCY – Application to set aside bankruptcy notice – application refused. |
| Bankruptcy Act 1966 (Cth), ss.40, 41 Commonwealth of Australia Constitution Act 1900 (Cth), Chapter 3 Federal Magistrates Court Act 1999 (Cth), ss.102, 103, 104 Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth), rr.2.03, 20.03 |
| Patane v Asteron Life Limited (2004) 2 ABC (NS) 85; [2004] FCA 232 |
| Applicant: | EINAV KEDEM |
| Respondent: | JOHNSON LAWYERS LEGAL PRACTICE P/L ACN 087 954 498 |
| File Number: | ADG 80 of 2012 |
| Judgment of: | Simpson FM |
| Hearing date: | 21 September 2012 |
| Date of Last Submission: | 21 September 2012 |
| Delivered at: | Adelaide |
| Delivered on: | 30 November 2012 |
REPRESENTATION
| Applicant: | In person |
| Counsel for the Respondent: | Mr James |
| Solicitors for the Respondent: | Johnson Lawyers |
ORDERS
The Application for Review filed on 1 August 2012 is dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE |
ADG 80 of 2012
| EINAV KEDEM |
Applicant
And
| JOHNSON LAWYERS LEGAL PRACTICE P/L ACN 087 954 498 |
Respondent
REASONS FOR JUDGMENT
Introduction
I have before me an application brought by Mr Einav Kedem (“the applicant”) for review of a registrar’s decision declining to set aside a bankruptcy notice The respondent company happens to be the applicant’s former solicitors.
The Registrar’s orders were made on 16 July 2012 and the Application for Review was filed on 1 August 2012. It was therefore within the 21 days allowed by r.2.03 of the Federal Magistrates Court (Bankruptcy) Rules 2006.
The applicant has been unrepresented before me. He stated in his Outline of Argument that he “did not always articulate his case well …” because of his command of the English language and also because of his “style of speaking …”. I have made due allowance for the applicant’s difficulties.
Evidence
The applicant relied on his affidavit sworn and filed on 24 April 2012, his affidavit sworn and filed on 1 August 2012, his affidavit sworn and filed on 27 August 2012, and his affidavit sworn on 7 September and filed on 21 September 2012.
The respondent relied on an affidavit of John Vincent James, a solicitor within the law firm having the conduct of the matter for the respondent, sworn and filed on 30 August 2012.
Findings
Bankruptcy Notice 1861 of 2012 was issued by the Official Receiver on 29 March 2012 and was served on the applicant on 10 April 2012. The Bankruptcy Notice states that the respondent has obtained a number of judgments against the applicant for sums totalling $5,785.29 together with legal costs of $814.65 and interest accruing since the dates that the judgments were obtained in the sum of $455.16 . The total sum due and payable is therefore $7,055.10.
The judgment debts in chronological order of obtaining the orders are as follows:
a.A judgment obtained in the Supreme Court of South Australia, being Action No. 1704 of 2010, obtained on 17 May 2011 in the sum of $1,000.00;
b.A judgment obtained in the District Court of South Australia, being Action No. 1271 of 2010, obtained on 26 May 2011 in the sum of $3,800.00;
c.A judgment obtained in the District Court of South Australia, being Action No. 1271 of 2010, obtained on 23 August 2011 in the sum of $250.00; and
d.A judgment obtained in the Supreme Court of South Australia, being Action No. 1704 of 2010, obtained on 3 November 2011 in the sum of $814.65.
The respondent’s affidavit helpfully summarises the proceedings giving rise to the judgments as well as the claim for damages that the applicant has brought in the Federal Court.
On 14 September 2005, proceedings were issued in the Magistrate’s Court to recover the sum of $4,235.21 in respect of the unpaid legal fees that the applicant owed the respondent. Those proceedings were assigned action number AMCCI-05-8283 (“MC Action”). A copy of the court record for the MC Action as at 11 January 2012 discloses that the applicant attended a directions hearing on 26 October 2005 but failed to attend the trial of the MC Action on 23 February 2006. A default judgment for $4,578.21 (which included further legal costs) was entered against the applicant on that occasion.
On 4 June 2012, the applicant brought an application to have the default judgment in the MC Action set aside. That application was heard in the Magistrate’s Court on 7 July 2010 and was dismissed.
On 8 July 2010, the applicant applied in the District Court for a review of the MC Action dismissal of his application to set aside the default judgment. These proceedings were assigned action number DCCIV-10-1271(“ the DC action”).
On 17 August 2010, Judge Bampton of the District Court set aside the default judgment obtained in the MC action on discretionary grounds. On 24 August 2010, Her Honour Judge Bampton having heard submissions and having received evidence from the applicant and respondent, found that the applicant was liable to the respondent for legal fees but that the quantum of those fees fell to be determined by the Supreme Court as that Court had exclusive jurisdiction to determine the legal fees payable. The MC Action was adjourned to allow the taxation of costs to occur.
On 10 December 2010, the respondent commenced proceedings for taxation of outstanding bills in the Supreme Court. Those proceedings were assigned action number SCCIV-10-1704 (“the SC action”).
A hearing of the taxation of costs was held in the Supreme Court on 17 May 2011. The applicant failed to attend as a result of which Judge Lunn of the Supreme Court made a summary determination of the quantum of the fees payable by the applicant to the respondent, being $2,800.00, and certified that fees were payable in that amount. Costs of the taxation in the SC Action were assessed in the sum of $1,000.00 were ordered to be paid by the applicant. This judgment for $1,000 is the judgment referred to in paragraph 7(a) of these reasons.
A further hearing in the DC Action to set aside the default judgment was heard on 26 May 2011. Again the applicant did not attend. Judgment was entered for $2,800.00 (being the amount of the taxation ordered by Judge Lunn) plus costs of a further $1,000.00. Those two amounts comprise the judgment debt referred to in paragraph 7(b) of these reasons.
On 10 June 2011, the applicant applied to have the summary determination of costs on 17 May 2011 set aside. This application was argued on 6 July 2011 and on 14 July 2011 Judge Lunn published his reasons for dismissing the application. Costs of this application were awarded against the applicant and subsequently quantified in the sum of $814.65 on 3 November 2011. This debt comprises the judgment referred to in paragraph 7(d) of these reasons.
On 28 July 2011, the applicant made an application in the DC Action, to have the second judgment set aside. His application was heard on 23 August 2011 and was dismissed by Judge McIntyre. Costs in the sum of $250.00 were awarded against the applicant. This debt comprises the judgment referred to in paragraph 7(c) of these reasons.
On 13 July 2012, the applicant issued proceedings against the respondent in the Federal Court claiming, inter alia, damages for negligence. Those proceedings are action SAD 161 of 2012 (“the FC Action”). Annexed to the respondent’s affidavit are copies of the applicant’s originating application in the FC Action together with his supporting affidavit. Also annexed is a copy of the applicant’s affidavit filed in the Federal Court on 1 August 2012.
The Law
Section 104(2) of the Federal Magistrates Court Act 1999 (Cth) provides that a party to a proceeding in which a Registrar has exercised any of the powers of the Federal Magistrates Court under s.102(2) or under a delegation under s.103(1) may apply to the Federal Magistrates Court for review of that exercise of power. Under s.104(3) the Federal Magistrates Court may, on an application under s.104(2) or on its own initiative, review an exercise of power by a Registrar under s.102(2) or pursuant to a delegation under s.103(1) and may make any order or orders it thinks fit in relation to the matter in respect of which the power was exercised. Rule 20.03 of the Federal Magistrates Court Rules 2001 (Cth) provides that the review of an exercise of power by a Registrar shall proceed by way of hearing de novo. The current application is therefore not an appeal from the Registrar’s decision in the strict sense, but is a complete re-hearing of the matter, but this time before a justice within the meaning of Chapter 3 of the Commonwealth of Australia Constitution Act 1900 (Cth).
Bankruptcy notices are dealt with in s.41 of the Bankruptcy Act 1966 (Cth). The relevant parts of s.41 are as follows:
41 Bankruptcy notices
(1)An Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained against a debtor:
(a)a final judgment or final order that:
(i) is of the kind described in paragraph 40(1)(g); and
(ii) is for an amount of at least $5,000; or
(b)2 or more final judgments or final orders that:
(i) are of the kind described in paragraph 40(1)(g); and
(ii) taken together are for an amount of at least $5,000.
(2)The notice must be in accordance with the form prescribed by the regulations.
(3)A bankruptcy notice shall not be issued in relation to a debtor:
(a)except on the application of a creditor who has obtained against the debtor a final judgment or final order within the meaning of paragraph 40(1)(g) or a person who, by virtue of paragraph 40(3)(d), is to be deemed to be such a creditor;
(b)if, at the time of the application for the issue of the bankruptcy notice, execution of a judgment or order to which it relates has been stayed; or
(c)in respect of a judgment or order for the payment of money if:
(i) a period of more than 6 years has elapsed since the judgment was given or the order was made; or
(ii) the operation of the judgment or order is suspended under section 37.
(4)…
(5) …
(6)Where the amount specified in a bankruptcy notice exceeds the amount in fact due and the debtor does not give notice to the creditor in accordance with subsection (5), he or she shall be deemed to have complied with the notice if, within the time allowed for payment, he or she takes such action as would have constituted compliance with the notice if the amount due had been correctly specified in it.
(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.
(6C)Where:
(a)a debtor applies to the Court for an extension of the time for complying with a bankruptcy notice on the ground that proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; and
(b)the Court is of the opinion that the proceedings to set aside the judgment or order:
(i) have not been instituted bona fide; or
(ii) are not being prosecuted with due diligence;
the Court shall not extend the time for compliance with the bankruptcy notice.
(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.
Section 40 relevantly provides as follows:
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;
Submissions and Conclusions
In the present case, the applicant seeks orders setting aside the bankruptcy notice on the basis firstly, that there is no proper debt and, secondly, that he has a “counterclaim, set off or cross demand” equal to or exceeding the amount of the judgment debts.
The applicant makes numerous complaints about how the judgment debts referred to in paragraph 7 of these reasons were made. In an appropriate case, the Court has power to set aside a bankruptcy notice. In my opinion, there is no proper basis to set aside this bankruptcy notice as an abuse of process. The onus of proving abuse of process lies on the applicant. The applicant here has not made out a case for abuse of process.
Generally speaking a Court will accept a judgment as being conclusive of the existence of the debt. In an appropriate case the Court has the power to go behind the judgment debt to examine whether there is in truth consideration for the judgment debt. The Court will enquire into the validity of judgments when there is evidence they or any of them have been obtained by fraud or collusion or where there is reason to doubt that the judgments are founded on a real debt or real consideration. The evidence before me shows that each of the judgment debts were subject to adjudication by courts. In all the circumstances, it is not appropriate for this Court to go behind these judgments. In my opinion the applicant has not made out a case that any of the judgments were obtained by fraud. The applicant’s submission that there was no proper debt fails.
A bankruptcy notice should be set aside if the debtor has a “counter claim, set off or cross-demand equal to or exceeding the amount of the judgment debt …”[1] against the creditor. The counter-claim, set off or cross-demand has to be one that is effective against the creditor at the time of the hearing of the application to set aside the bankruptcy notice. The applicant relies on his claim against the respondent brought in the Federal Court.
[1] Subsection 40(1)(g).
Where a counter-claim, set off or cross-demand is, as here, unliquidated, the Court assessing the application to set aside the bankruptcy notice on this ground must, if possible, quantify the value of the counter-claim, set off or cross-demand so it can determine whether it equals or exceeds the amount of the judgment debt demanded in the bankruptcy notice.[2] On the evidence before me, I am not satisfied that the applicant has a claim against the respondent that justifies setting aside the bankruptcy notice or extending the time for compliance.
[2] Patane v Asteron Life Limited (2004) 2 ABC (NS) 85; [2004] FCA 232
The applicant says in his affidavit filed on 1 August 2012 that, “I filed a claim against Johnson lawyers, for a sum, far acceding (sic) johnsons (sic) lawyers’ sum of claim of bankruptcy notice.” He quantifies his claim as “… priceless, but say $5 billion”. There is no credible evidence from the applicant that gives me any proper indication of the quantum of his Federal Court claim. I totally reject the applicant’s suggestion that his claim is in the billions of dollars.
My principal concern about the applicant’s suggested cross-demand is whether the applicant will succeed at all in establishing liability in the Federal Court proceedings. The applicant’s affidavit filed on 21 September 2012 simply annexes his affidavit filed in the Federal Court on 5 September 2012 which affidavit in turn annexes numerous other documents. No attempt is made by the applicant to succinctly explain in his affidavits or submissions the basis of his negligence claim against the respondent. Having nevertheless read the affidavits filed by the applicant, I am not satisfied that the applicant’s claim has merit or is likely to succeed.
In my opinion, the applicant’s claim against the respondent in the Federal Court litigation provides no proper basis for the bankruptcy notice to be set aside or for the time within which it is to be complied with extended.
In all of the circumstances, I consider the applicant’s application should be dismissed.
There will be orders accordingly.
I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of Simpson FM
Associate:
Date: 30 November 2012
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