Lavan Legal v Kenyon
[2017] FCCA 2529
•20 October 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| LAVAN LEGAL v KENYON | [2017] FCCA 2529 |
| Catchwords: WORDS AND PHRASES – “certify” – “writing” – “certify in writing”. |
| Legislation: Acts Interpretation Act 1901 (Cth) Bankruptcy Act 1966 (Cth), ss.40, 41, 43, 44, 52, 309 Bankruptcy Regulations 1996 (Cth), Schedule 1, reg.16.01 |
| Cases cited: Bulic v Commonwealth Bank of Australia Ltd [2007] FCA 307; (2007) 5 ABC(NS) 122 C2C Investments Pty Ltd, in the matter of C2C Investments Pty Ltd v Leigh (No 3) [2012] FCA 680 Cassimatis & Anor v Australian Securities and Investments Commission [2016] FCA 131; (2016) 334 ALR 350 Cavill Business Solutions Pty Ltd v Jackson [2005] WASC 138 Civic Video Pty Ltd v Warburton [2013] FCA 934; (2013) 216 FCR 61; (2013) 11 ABC(NS) 568 Commonwealth Bank of Australia v Jeans (No 3) [2006] FCA 693; (2006) 4 ABC(NS) 288 Deputy Commissioner of Taxation v Barnes [2008] FMCA 7; (2008) 70 ATR 776 Deputy Commissioner of Taxation v Webb [2017] FCCA 1137; (2017) 320 FLR 371 de Robillard v Carver [2007] FCAFC 73; (2007) 159 FCR 38; (2007) 240 ALR 675; (2007) 5 ABC(NS) 92 Kerr in his Capacity as Trustee of the Bankrupt Estate of Cross & Anor v Akcan [2017] FCCA 1128 LM v K Lawyers (No 3) [2016] WASC 204 Ramsay Health Care Australia Pty Ltd v Compton (No 2) [2017] FCA 629 Re Ditford; Ex parte Deputy Commissioner of Taxation (1988) 19 FCR 347; (1988) 83 ALR 265 Sanders v Snell (No 2) (2000) 174 ALR 53 Skalkos v T & S Recoveries Pty Ltd [2004] FCAFC 321; (2004) 141 FCR 107; (2004) 213 ALR 311; (2004) 3 ABC(NS) 51 Totev v Sfar [2006] FCA 470; (2006) 230 ALR 236; (2006) 4 ABC(NS) 325 University of Southern Queensland v Luck [2017] FCCA 639; (2017) 318 FLR 147 Vogwell v Vogwell (1939) 11 ABC 83 Zhang v Ehrenfeld [2015] FCCA 877; (2015) 295 FLR 74 Macquarie Dictionary (7th Edn) (Sydney: Macquarie Dictionary Publishers, 2017) |
| Applicant: | LAVAN LEGAL |
| Respondent: | TERENCE GILBERT KENYON |
| File Number: | PEG 330 of 2016 |
| Judgment of: | Judge Antoni Lucev |
| Hearing date: | 18 May 2017 |
| Date of Last Submission: | 18 May 2017 |
| Delivered at: | Perth |
| Delivered on: | 20 October 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr DP Butler |
| Solicitors for the Applicant: | Lavan |
For the Respondent: | In person |
ORDERS
That orders 2 and 3 of the orders of a Registrar of this Court made on 16 January 2017 sequestrating the estate of the Respondent and ordering that costs be paid from the estate of the Respondent be set aside.
That the Creditor’s Petition filed by the Applicant on 26 July 2016 be dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PERTH |
PEG 330 of 2016
| LAVAN LEGAL |
Applicant
And
| TERENCE GILBERT KENYON |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application by the respondent Terence Gilbert Kenyon (“Kenyon”) to review the exercise of power by a Registrar of this Court (“Review Application”) in making a sequestration order under s.52 of the Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”) against Kenyon on 16 January 2017 (“Sequestration Order”) based on a creditor’s petition on 26 July 2016 (“Creditor’s Petition”) filed by the applicant, Lavan Legal (“Lavan”).
The Review Application is made pursuant to s.104(2) of the Federal Circuit Court of Australia Act 1999 (Cth) (“FCCA Act”).
On the face of the Review Application, Kenyon seeks:
a)that the Creditor’s Petition be dismissed;
b)the costs of the matter, including any reserved costs, be paid by Lavan.
Lavan submits that the Review Application must fail because, in summary, Kenyon:
a)owes a debt of over $5,000 to Lavan; and
b)has failed to put before the Court any material or substantiated evidence as to his purported solvency; and
c)has failed to put before the Court any material or substantiated other sufficient reason for the Sequestration Order not to be confirmed against him.
Evidence
Lavan’s evidence
Lavan relied upon on the following affidavit evidence:
a)affidavit of Blair Llewellyn Strickland (“Strickland”) regarding service of the Bankruptcy Notice sworn 25 July 2016 (“Strickland Service Affidavit”);
b)affidavit of Strickland regarding search of the National Personal Insolvency Index (“NPI Index”) sworn 25 July 2016 (“Strickland Search Affidavit”);
c)affidavit of Daniel Paul Butler (“Butler”) regarding verification of the Creditor’s Petition sworn 25 July 2016 (“Butler Verifying Affidavit”);
d)affidavit of Melissa Marydale Ferreira (“Ferreira”) supporting the application for substituted service sworn 15 November 2016 (“Ferreira Substituted Service Affidavit”);
e)affidavit of Cheryl Lorraine Harrison (“Harrison”) regarding service attempts sworn 15 November 2016 (“Harrison Service Affidavit”);
f)affidavit of Ferreira regarding service and the consent to act as trustee sworn 12 January 2017 (“Ferreira Service Affidavit”);
g)affidavit of Harrison regarding substituted service attempts sworn 13 January 2017 (“Harrison Substituted Service Affidavit”);
h)affidavit of Jemma Leigh Hunstman (“Hunstman”) regarding search of the NPI Index sworn 13 January 2017 (“Huntsman Search Affidavit”);
i)affidavit of Alison Jane Robertson (“Robertson”) regarding debt owed sworn 13 January 2017 (“Robertson Affidavit of Debt”);
j)subject to the objections dealt with at [10]-[56] below, the affidavit of Kenyon supporting application for stay of sequestration order and referring to solvency sworn 20 January 2017 (“First Kenyon Affidavit”);
k)affidavit of Kenyon supporting the application for review and referring to dispute regarding debt owed and non-receipt of bankruptcy notice and creditor’s petition sworn 20 January 2017 (“Second Kenyon Affidavit”);
l)affidavit of Ferreira regarding debts owed by Kenyon sworn 10 April 2017 (“Ferreira Affidavit of Debt”);
m)affidavit of Ferreira regarding search filed 17 May 2017 (“Ferreira Search Affidavit”); and
n)affidavit of Robertson regarding debt owed, sworn 17 May 2017 (“Second Robertson Affidavit of Debt”).
There was no cross-examination of any of the deponents to the affidavits relied on by Lavan.
Kenyon’s evidence (and the objections thereto)
Kenyon relied upon the following affidavit evidence:
a)the First Kenyon Affidavit;
b)the Second Kenyon Affidavit;
c)the affidavit of Kenyon sworn 23 January 2017 (“Third Kenyon Affidavit”), which the Court notes is identical in its terms to the Second Kenyon Affidavit;
d)the affidavit of Kenyon sworn 16 May 2017 (“Fourth Kenyon Affidavit”); and
e)the affidavit of Kenyon (regarding his medical condition) sworn 16 May 2017 (“Fifth Kenyon Affidavit”).
Kenyon was not cross-examined on any of his affidavits.
Lavan objected to various paragraphs and parts of the First Kenyon Affidavit, which elicited a response from Kenyon, and a reply from Lavan. The objections which are maintained are dealt with hereunder.
Paragraph 12
Paragraph 12 is as follows:
12. It is my understanding that Lavan were not entitled to unilaterally decide to cease to act for me in circumstances were [where] there was no costs agreement in place, and that the additional expenses that I incurred due to their conduct, I should be able to recover from Lavan.
Lavan submits that paragraph 12 is argumentative, submission and expressing matters of legal conclusion. Kenyon says that although expressed as an understanding by Kenyon, paragraph 12 is a truthful statement that Lavan had no right to unilaterally terminate their retainer with Kenyon over a dispute related to charges, when there was no retainer that allowed that.
Paragraph 12 is not a statement of fact, but rather a conclusion or submission by Kenyon based upon his understanding of an agreement. It is therefore argumentative, a submission, and the expression of a legal conclusion as to the effect of that agreement. Paragraph 12 will therefore be struck out.
Paragraph 17
Paragraph 17 is as follows:
17. It is my understanding that I have a strong case against Lavan for recovery of the legal fees that I have paid in defending the District Court Writ and for the damage that the issue of the writ caused to me in destroying my credit rating, as without a costs agreement, Lavan had no right to issue the invoices that they did and no right to issue the District Court Writ.
Lavan submits that paragraph 17 is argumentative, submission and expressing matters of legal conclusion.
Kenyon submits that:
a)paragraph 17 is an expression of fact;
b)Registrar Dixon of the Supreme Court of Western Australia (“WASC Registrar’s Orders”) determined that there was no costs agreement entered into: see Kenyon v Lavan Legal (unreported, Supreme Court of Western Australia, Registrar Dixon, 26 September 2014) [“WASC Registrar’s Costs Determination”] (“Lavan Legal”), which means that the invoices that were issued by Lavan totalling $335,163.45 should not have been issued and the District Court Writ issued by Lavan for the recovery of those invoices should not have been issued either; and
c)it is a matter of fact that Kenyon can recover the costs of the District Court Writ, and the Fourth Kenyon Affidavit at Annexure TK-B includes a copy of the Consent Order where Lavan agrees to pay the costs of the District Court Action incurred after 11 January 2013.
As with paragraph 12, paragraph 17 is argumentative, makes submissions and expresses matters of legal conclusion in relation to the effect of various documents and the WASC Registrar’s Orders. Paragraph 17 will therefore be struck out.
Paragraph 21
Paragraph 21 provides as follows:
21. Registrar Dixon made a finding that there was no costs agreement that had been entered into. Annexed hereto and marked Annexure TK1 is a true copy of the decision of Registrar Dixon that was delivered on 26 September 2014, along with a true copy of the Orders that he made on 26 November 2014. Those Orders stipulate that Lavan are to pay the costs of the determination, to be taxed. It is my estimation based on advice from my then solicitor Harold Paiker that taxed costs for the determination would be about $15,000. I had instructed my then solicitor Harold Paiker to recover those costs, but I am not aware that he has done anything to progress that and he is currently overseas.
Lavan says that paragraph 21 is argumentative, submission and expresses matters of legal conclusion, but only from the words “Those Orders” to the end of the paragraph. Kenyon submits that paragraph 21 confirms the WASC Registrar’s Orders, and that the reference to an estimate of costs is clarified in the Fourth Kenyon Affidavit at Annexure TK-A, which is a draft Bill of Costs prepared by a lawyer pursuant to the WASC Registrar’s Orders.
In relation to paragraph 21:
a)the sentence commencing “Those Orders” is a statement of fact as to the terms of the WASC Registrar’s Orders, and is unobjectionable. The sentence does not express any conclusion or make any argument with respect to the terms of the WASC Registrar’s Orders which are straightforward and reflected in that sentence, and although the WASC Registrar’s Orders largely speak for themselves, the objection to that sentence will be dismissed;
b)the sentence commencing “It is my estimation” is objectionable, as it expresses a conclusion with respect to the amount of taxed costs based on advice which is not before the Court, and in relation to a matter upon which Kenyon is not qualified to give an opinion, and it will therefore be struck out; and
c)the sentence commencing “I had instructed” reflects an instruction that Kenyon says that he gave to his solicitor, and Kenyon’s understanding of the progress in relation thereto. The sentence is not argumentative, does not make submissions, and does not express a legal conclusion, and the objection to it is dismissed.
Paragraph 22
Paragraph 22 provides as follows:
22. After that hearing, during which I was extensively cross-examined by Tim Coyle from Lavan, Mr Coyle spoke to me privately and said to me words to the effect of: “you have made a mistake taking us on and you will regret ever having tried. We will destroy you.” I regarded those comments as a threat, but to also be indicative of the attitude that Lavan had shown to me throughout the dispute.
Lavan argues that paragraph 22 is irrelevant and scandalous. Kenyon says that it is a statement of fact, and is neither irrelevant nor scandalous, and that it provides the Court with relevant context in relation to the proceedings and is highly relevant to the issue of whether the proceedings are an abuse of process and there is other sufficient cause to set aside the Creditors Petition. Kenyon further says that Lavan has not filed anything to refute or deny the alleged statement by Mr Tim Coyle (“Coyle”), despite having had ample opportunity to do so.
The content of paragraph 22 is relevant to the issue of abuse of process in relation to the issue of a bankruptcy notice, BN 189704, issued by the Official Receiver on 18 April 2016 (“Second Bankruptcy Notice”), which may go to whether or not there is other sufficient cause to refuse to make a sequestration order against Kenyon’s estate: Bankruptcy Act, s.52(2)(b). As the foundation for such an argument paragraph 22 is not scandalous within the meaning of the relevant authorities: C2C Investments Pty Ltd, in the matter of C2C Investments Pty Ltd v Leigh (No 3) [2012] FCA 680 at [5]-[6] per Yates J; Cavill Business Solutions Pty Ltd v Jackson [2005] WASC 138 at [25] per Hasluck J; Sims v Jooste & Ors (No 3) [2016] FCCA 1751 at [24]-[30] per Judge Lucev. For the above reasons, the objection to paragraph 22 will be dismissed.
Paragraphs 25 to 27
Paragraphs 25 to 27 provide as follows:
25. I note that s.304(1) of the Legal Profession Act 2008 (WA) states that “A taxing officer must determine the costs of a costs assessment” . There is no such determination on the bill of costs.
26. I note that s.305(1) of the Legal Profession Act 2008 (WA) states that “The taxing officer must certify in writing - (a) the amount of disputed costs allowed; and (b) the costs of the costs assessment”. There is no such certification on the bill of costs.
27. I note that s.305(3) of the Legal Profession Act 2008 (WA) states that “A certificate under subsection (1) bears interest, and may be enforced against any person liable to pay, as if it were a judgment of the Supreme Court for the payment of the amount mentioned in the certificate.”
Lavan submits that paragraphs 25 to 27 are argumentative, submission and express matters of legal conclusion.
Kenyon submits that paragraphs 25 to 27:
a)have been repeated in Kenyon’s submissions and pose no prejudice to Lavan;
b)serve to make Lavan aware of what Kenyon is asserting;
c)are statements of fact as the bill of costs does not contain either a determination of the costs of the costs assessment, or a certification of the costs of the costs assessment, and that if the bill of costs did contain either a determination or a certification, then Lavan would have pointed to that fact, but they have not been able to do so; and
d)that reference to the relevant legislative provision merely places the statement of fact in context.
Paragraphs 25 to 27 are argumentative and make submissions on one of the issues in dispute which is for the Court to determine in these proceedings, that is, whether or not a taxing officer has made a determination of costs, and certified a bill of costs, giving rise to a debt of more than $5,000 owed by Kenyon to Lavan, in litigation between Lavan and Kenyon. As such, the paragraphs are objectionable, and will be struck out.
Paragraph 28
Paragraph 28 is as follows:
28. Based on the signed bill of costs, if it is accepted as an assessment of costs for the purposes of s.305(3) of the LegalProfessionAct2008(WA) with the necessary certifications, which I do not accept that it is, then the total costs that I was required to pay to Lavan for the matter is $95,000.
Lavan submits that paragraph 28 is argumentative, submission and expresses matters of legal conclusion.
Kenyon submits that paragraph 28 states that even though Kenyon does not believe there has been an assessment of costs undertaken, if there has been, the assessed amount is $95,000, and that that is not an issue in contention as it is what Lavan positively asserts.
Paragraph 28 is effectively a submission in that it argues as to the effect of the signed bill of costs, and expresses a conclusion derived from that argument. As such, paragraph 28 is objectionable, and will be struck out.
Paragraph 38
Paragraph 38 is as follows:
38. In addition, there is the outstanding costs order of Registrar Dixon, referred to in paragraph 19 herein that is owed by Lavan to me, the matter of additional legal costs incurred in the Supreme Court matter as a result of the conduct of Lavan, the legal costs incurred by me in the District Court Writ that Lavan were not entitled to issue and the simple realty that I have not been able to obtain from Lavan trust statements to determine exactly what money was paid to them for this matter that they have applied to different matter codes.
Lavan submits that paragraph 38 is irrelevant. Kenyon submits that it is highly relevant. Kenyon says that the issue in dispute between he and Lavan relates to, amongst other things, Lavan’s alleged failure to account for money received into its trust account, and in particular a sum of $40,000, plus other sums owing for legal costs (although the Court notes that none of those have yet been assessed) and the possible effect of those matters on the amount owing to Lavan.
In the Court’s view the content of paragraph 38, whilst not well particularised, and therefore not necessarily particularly helpful in determining the facts, can nevertheless be said to be arguably relevant to Kenyon’s solvency, or whether there is other sufficient cause to dismiss the Creditor’s Petition: Bankruptcy Act, s.52(2). The objection to paragraph 38 will therefore be dismissed.
Paragraph 43
Paragraph 43 is as follows:
43. I also note that the Bankruptcy Notice relies upon the taxed bill of costs as being a final judgment or final order as per s.40(1)(g) of the Bankruptcy Act 1966 (Cth), presumably pursuant to s.305(3) of the Legal Profession Act 2008 (WA), and I would repeat my comments in paragraphs 24-27 herein, refer to annexure TK2 herein and state that the signed bill of costs is not a certificate under subsection 305(1) of the Legal Profession Act 2008 (WA).
Lavan submits that paragraph 43 is argumentative, submission and expresses matters of legal conclusion.
Kenyon submits that paragraph 43 has been repeated in Kenyon’s submissions and poses no prejudice to Lavan and merely serves to make Lavan aware of what Kenyon is asserting.
Paragraph 43 is argument and submission and posits a legal conclusion as to the nature of the signed bill of costs which is an issue which is before the Court for determination. As such, paragraph 43 is objectionable, and will be struck out.
Paragraph 44
Paragraph 44 is as follows:
44. Annexed hereto and marked TK9 is a true copy of the letter dated 15 June 2016 that was sent with the Bankruptcy Notice dated 18 April 2016. I note that the letter does not state the date on which the letter was posted, it merely has a date on the letter, so that if I had received the letter and the Bankruptcy Notice dated 18 April 2016, I would not have known when the 21 day period for compliance would have commenced.
Kenyon submits that paragraph 44 is a statement of fact, and that the letter does not state the date on which it was posted.
The first sentence of paragraph 44 is not objectionable as it merely annexes a copy of a letter. The second sentence is not objectionable insofar as it states that the letter does not state a date on which it was posted but merely has a date on the letter, those being observable facts. The remainder of paragraph 44 from the words “so that if” to the end of the second sentence is however an argued submission, and is objectionable, and those words will be struck out.
Paragraph 50
Paragraph 50 is as follows:
50. Paragraph 4 of the affidavit of Mr Cutler [Butler] does not verify all of what is said in paragraph 4 of the Creditors Petition and in particular, it does not verify the date of service of the bankruptcy notice.
Lavan submits that paragraph 50 is argumentative, submission and expressing matters of legal conclusion.
Kenyon submits that paragraph 50 is a statement of fact, and that the Butler Verifying Affidavit does not verify the date of service of the Bankruptcy Notice that is stated in the Creditor's Petition.
Paragraph 50 is effectively a submission as to the effect of the Butler Verifying Affidavit, and is therefore objectionable, and will be struck out.
Paragraphs 52 and 53
Paragraphs 52 and 53 provide as follows:
52. The affidavit of Blair Llewellyn Strickland does not state where the ordinary post letter of 15 June 2016 (containing the Bankruptcy Notice copy) was posted from, but on the assumption that it was posted from the 6000 post code area, for a letter to arrive at the 6053 post code area, the Australia Post delivery time is between 2 - 6 business days for regular mail and 1 - 4 business days for priority mail, which means that the earliest the letter could have arrived was Friday 16 June 2016 and the latest was Thursday 23 June 2016. Annexed hereto and marked TK12 is a true copy of a search of the Australia Post website showing the delivery times for a letter posted on 15 June 2016, which would be I submit the ordinary course of postal delivery times.
53. Based on the method of service of the bankruptcy notice, it is not possible for Lavan to state in the Creditors Petition that the bankruptcy notice was served on 17 June 2016, which may be the reason why no-one has verified that part of the Creditors Petition.
Lavan submits that paragraphs 52 and 53 are argumentative, submission and express matters of legal conclusion.
Kenyon submits that paragraphs 52 and 53 are also statements of fact, and says that:
a)if a party relies upon the delivery of a letter in the usual course of business, then they must state what the usual course of business is and Lavan has not done so; and
b)Australia Post, as the official carrier of post in Australia, sets out on their website what the delivery time for post is, in the usual course of business, based on the fact that Australia Post has now changed the manner in which they deliver post in Australia, to a two-tiered delivery system with different delivery costs and delivery times, which directly impacts upon how time is calculated pursuant to the Acts Interpretation Act 1901 (Cth), which is an issue of fact.
Paragraph 52 is argumentative, taking the content of the Strickland Service Affidavit, making assumptions in relation to the content thereof, and making submissions based on hearsay evidence (the search of the Australia Post website showing delivery times) about the ordinary course of postal delivery times. That is then extrapolated in paragraph 53 into a submission as to why Lavan cannot (in Kenyon’s submission) verify the date of service of the Creditor’s Petition. The whole of paragraphs 52 and 53 are argument and submission and are therefore objectionable, and will be struck out.
Paragraph 62
Paragraph 62 is as follows:
62. It is my understanding that Lavan was a partnership trading name and that the partnership has now changed its trading name to Lavan, but that a partnership entity with the same ABN has registered both trading names. Annexed hereto and marked TKI 3 is a true copy of a current and historical Australian Securities & Investments Commission search that I had undertaken of the trading name Lavan.
Lavan submits that paragraph 62 is irrelevant.
Kenyon submits that paragraph 62 is relevant and that:
a)the identity of Lavan is relevant to whether Lavan is a creditor or not;
b)the ASIC search sets out the identity of Lavan and the ownership changes that Lavan has gone through over the course of the matter;
c)it is a fact that Lavan is a partnership, which the ASIC search shows and the paragraph states (which has not been denied by Lavan) and that it can therefore issue a bankruptcy notice in the name of the firm;
d)the membership of the firm has changed numerous times during the course of, and after, the conclusion of the matter, which directly impacts upon the identity of the partners that sit behind the firm name; and
e)Lavan does not deny that there have been changes to the partners of the firm as set out in the ASIC search, such that the partners have changed 21 times up until the issue of, presumably, the Second Bankruptcy Notice.
There is no doubt that a partnership which is a creditor of an individual can issue a bankruptcy notice, and no dispute in this case that the Second Bankruptcy Notice and Creditor’s Petition were issued by Lavan (the question of proper service of the Second Bankruptcy Notice is dealt with separately: see [100]-[117] below). Changes in the composition of the partnership are irrelevant to the fact that the partnership is said to be the creditor of the alleged debtor and which has issued the Creditor’s Petition. As such, paragraph 62 is irrelevant and will be struck out.
Paragraph 65
Paragraph 65 is as follows:
65. I have never received any notices from Lavan pursuant to s.20(1) of the PropertyLawAct1969(WA).
Lavan argues that paragraph 65 is argumentative, submission and expresses matters of legal conclusion.
Kenyon submits that paragraph 65 is a statement of fact.
Paragraph 65 is a statement by Kenyon that he has not been served with the notices therein referred to. Whether that be right or wrong is another matter, but for evidentiary purposes it is a statement of asserted fact, and not argument, submission or the expression of a legal conclusion. As such, paragraph 65 is unobjectionable, and will not be struck out.
The Review Application
Nature of the review of the Registrar's decision
A hearing under s.104(2) of the FCCA Act is a hearing de novo and the relevant matter is considered afresh: Pattison v Hadjimouratis [2006] FCAFC 153; (2006) 155 FCR 226; (2006) 236 ALR 1; (2006) 4 ABC(NS) 367 at [3]-[20] per Nicholson J and [39] per Jacobson J; Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; (2000) 203 CLR 194; (2000) 74 ALJR 1348; (2000) 99 IR 309; (2000) 174 ALR 585 at [13] per Gleeson CJ, Gaudron and Hayne JJ; Cassimatis & Anor v Australian Securities and Investments Commission [2016] FCA 131; (2016) 334 ALR 350 at [12] per Edelman J (“Cassimatis”); University of Southern Queensland v Luck [2017] FCCA 639; (2017) 318 FLR 147 at [94] per Judge A Kelly.
Upon the hearing of an application under s.104(2) of the FCCA Act to review a sequestration order the party seeking a sequestration order must still satisfy the Court that the necessary conditions required to be proved by s.52(1) of the Bankruptcy Act for a sequestration order have been met: Totev v Sfar & Anor [2008] FCAFC 35; (2008) 167 FCR 193; (2008) 247 ALR 180; (2008) 5 ABC(NS) 691 at [27]-[29] per Emmett J (“Sfar-Full Court”); Zdrilic & Anor v Hickie & Anor [2016] FCAFC 101; (2016) 246 FCR 532; (2016) 14 ABC(NS) 232 at [66] and [72] per Katzmann, Farrell and Markovic JJ; Kerr in his Capacity as Trustee of the Bankrupt Estate of Cross & Anor v Akcan [2017] FCCA 1128 at [29] per Judge Driver; Deputy Commissioner of Taxation v Webb [2017] FCCA 1137; (2017) 320 FLR 371 at [17] per Judge Joshua Wilson.
A fresh hearing does not require the exclusion of the relevant record of the proceedings including the conclusion reached by the Registrar. In Cassimatis at [16] per Edelman J the Federal Court observed that in Sanders v Snell (No 2) (2000) 174 ALR 53 at 56 per Kirby J it was suggested that by not using the label "de novo" (that description is not used in s.104(2) of the FCCA Act) there is an inference that the review may take into account, and place weight upon, the discretion of the Registrar particularly where the discretion is exercised with some frequency and skill.
Formal requirements for a sequestration order
Pursuant to s.52(1) of the Bankruptcy Act, at the hearing of the Creditor’s Petition the Court requires proof of:
a)the matters stated in the Creditor’s Petition (for which purpose the Court may accept the affidavit verifying the Creditor’s Petition as sufficient);
b)service of the Creditor’s Petition; and
c)the fact that the debt or debts on which Lavan relies is or are still owing.
The Court notes that at the time a sequestration order issues:
a)section 43 of the Bankruptcy Act requires presence of the debtor or his estate within Australia; and
b)section 44(1)(a) requires that "there is owing by the debtor to the petitioning creditor a debt that amounts to $5,000" (this flows on from s.41 of the Bankruptcy Act which requires the bankruptcy notice to refer to a final judgment or order for an amount “of at least $5,000”).
Part 4 of the Federal Circuit Court (Bankruptcy) Rules 2016 (Cth) (“FCC Bankruptcy Rules”) requires that Lavan file affidavits:
a)verifying the Creditor’s Petition;
b)of search of court records;
c)of service of the Bankruptcy Notice;
d)of search of the NPI Index; and
e)of debt still owed by Kenyon,
those affidavits going to the fulfilment of the requirements of s.52(1) of the Bankruptcy Act.
On proof of the matters in s.52(1) of the Bankruptcy Act "the Court will generally proceed to make an order for sequestration": Totev v Sfar [2006] FCA 470; (2006) 230 ALR 236; (2006) 4 ABC(NS) 325 at [37] per Allsop J (“Sfar”).
Onus on respondent to establish a sufficient cause
Section 52(2) of the Bankruptcy Act imposes on Kenyon the obligation of satisfying the Court that he is able to pay debts or that a sequestration order ought not be made for "other sufficient cause": Ling v Enrobook Pty Ltd (1997) 74 FCR 19; (1997) 143 ALR 396; FCR at 24 per Davies, Wilcox and Branson JJ (“Enrobook”). To constitute other sufficient cause to decline to make a sequestration order a matter must be of significant weight to displace the public interest in avoiding insolvent trading: Ramsay Health Care Australia Pty Ltd v Compton (No 2) [2017] FCA 629 at [26]-[37] per Flick J (“Compton No 2”). The Court observes that in Compton (No 2) the Federal Court said as follows, relevant to the circumstances of this case, at [36]-[37] per Flick J:
36 “Other sufficient cause” may also be found in, for example, a cross-claim a debtor may have against a creditor: Ling v Enrobook (1997) 74 FCR 19 at 25. The Court there observed:
A review of the authorities discloses that in certain circumstances, but not in all circumstances, the fact that the debtor has pending before a court a legitimate claim to funds sufficient to satisfy the petitioning creditor’s debt will amount to “other sufficient cause” not to make a sequestration order …
The Court thereafter went on to further observe (at 26):
The above authorities do not, in our view, support the appellant’s contention that the courts recognise a public interest in allowing a debtor to prosecute litigation commenced by the debtor…
The authorities also show that satisfaction that the debtor is well advanced with litigation likely to result in the debtor being in a position to pay his or her debts may well provide a basis for a finding that there is a “sufficient cause” for a sequestration order not to be made (see, for example, Maddestra v Penfolds Wines Pty Ltd [(1993) 44 FCR 303]). But the authorities do not suggest that it is in the public interest to allow insolvent debtors to prosecute litigation generally. They only recognise that it is not in the public interest for a debtor to be forced into bankruptcy by reason of a state of insolvency likely to be of only short duration.
See also: Commonwealth Bank of Australia v Jeans (No 3) [2006] FCA 693 at [11], (2006) 4 ABC(NS) 288 at 291 per Rares J.
37 A further basis upon which a debtor may establish “other sufficient cause” could also potentially be found where there is reason to question the judgment debt upon which a creditor’s petition otherwise proceeds. Even in the absence of an appeal from the judgment, a debtor may be able to make out a case that the judgment was procured in circumstances which give rise to questions as to whether a sequestration order ought to be made. Even cases falling short of fraud in procuring a judgment or abuse of process may suffice.
Issues raised by Kenyon
The issues raised by Kenyon which may require determination by the Court include:
a)whether there is a final judgment or final order for a debt of more than $5,000;
b)whether there was proper service of the Second Bankruptcy Notice;
c)whether the issue of the Second Bankruptcy Notice was an abuse of process;
d)whether there was proper service of the Creditor’s Petition;
e)whether the Creditor’s Petition is accurate and correctly verified; and
f)whether Kenyon is solvent (this also being an issue of significance in Lavan’s submissions).
Whether there is a final judgment or final order for a debt of more than $5,000
Kenyon submits that:
a)the Bankruptcy Act sets out at s.44 that an applicant shall not present a creditor's petition against a respondent unless an applicant can show:
i)there is a debt of no less than $5,000 owing to the applicant by the respondent;
ii)the debt is for a liquidated sum due at law or equity;
iii)the liquidated sum is payable either immediately or at a certain future time; and
iv)the respondent has committed an act of bankruptcy within 6 months before the presentation of the creditor's petition.
b)one of the essential aspects of the requirements set out in s.44 of the Bankruptcy Act is for the debt of $5,000 or above to be a liquidated sum, which means the amount to be paid must be certain;
c)the Bankruptcy Act also sets out at s.41 the requirements for a valid bankruptcy notice, which includes that if an applicant has obtained a final judgment or order that is of a kind described in s.40(1)(g) of the Bankruptcy Act, an applicant may issue a Bankruptcy Notice;
d)if Lavan was not able to comply with ss.41 and 40(1)(g) of the Bankruptcy Act, they were not able to present a valid bankruptcy notice, as there would not be a liquidated sum presently payable that would form the basis of a Bankruptcy Notice. Issuing a Bankruptcy Notice that was not in compliance with ss.41 and 40(1)(g) of the Bankruptcy Act would be an abuse of process of the bankruptcy proceedings and of the Court’s processes;
e)the dispute between Kenyon and Lavan arises from the quantum of legal fees that Lavan has charged Kenyon and the amount of money that Kenyon has already paid Lavan towards those legal costs;
f)Lavan and Kenyon were unable to agree on the quantum of legal fees, which resulted in Lavan commencing legal proceedings against Kenyon in the District Court of Western Australia at Perth for the sum of $324,767.13;
g)subsequently Kenyon requested an assessment of Lavan’s legal fees pursuant to s.295(2) of the Legal Profession Act 2008 (WA) ("LP Act").
h)the LP Act provides at s.305 that:
(1) The taxing officer must certify in writing -
(a) the amount of the disputed costs allowed; and
(b) the costs of the costs assessment.
(2) Subject to sections 299(2)(c) and 308, a certificate under subsection (1) is binding on the parties to the costs assessment.
(3) A certificate under subsection (1) bears interest, and may be enforced against any person liable to pay, as if it were a judgment of the Supreme Court for the payment of the amount mentioned in the certificate.
i)section 305(1) of the LP Act has mandatory obligations for the taxing officer, which are clearly expressed in terms of what the taxing officer "must" do. Likewise, s.304(1) of the LP Act states that “A taxing officer must determine the costs of a costs assessment.”;
j)the costs assessment provisions of the LP Act require that the taxing officer must do certain things, as the purpose of those provisions is to allocate costs between the solicitor and client and to determine if any reduction in disputed costs has been so significant that it warrants referral to the Complaints Committee for disciplinary action: s.307 of the LP Act. For those reasons, a costs assessment certificate must comply with the provisions of the LP Act;
k)no such certificate as referred to in s.305(1) of the LP Act was issued by the taxing officer;
l)in relation to the Bill of Costs prepared by Lavan for assessment by the taxing officer: First Kenyon Affidavit, Annexure TK3, it is not certified in terms of s.305(1) of the LP Act and the taxing officer merely states:
I certify I have this 27th day of January 2016 allowed by consent the within Bill of Costs and allows the same at $95,000.
(“Certificate of Taxation”).
m)the Certificate of Taxation does not satisfy the requirements of the LP Act for the assessment of costs to have been done pursuant to the LP Act and the statement by the taxing officer is no more than a recording of the agreement reached between the parties as to the quantum of costs between solicitor and client for the matter - the quantum was agreed without there being a costs assessment;
n)the Certificate of Taxation is not the same as a Supreme Court judgment, it can merely be enforced as if it was a judgment, but for that to be the case, the Certificate of Taxation must be issued pursuant to s.305(1) of the LP Act, which was not the case here;
o)consistent with the view that the Certificate of Taxation was no more than a recording of the agreement reached between Lavan and Kenyon in relation to the quantum of costs, is the ongoing dispute in relation to the treatment of the money that Kenyon has paid to Lavan;
p)at Annexure TK5 of the First Kenyon Affidavit (page 38) is a bankruptcy notice that Lavan issued dated 17 March 2016 for $95,000 (“First Bankruptcy Notice”). When Kenyon received the First Bankruptcy Notice, he sent a letter to Lavan advising them that he disputed the amount as he had made payments to them of $25,854.50 based on their own records and that he had also paid at least a further $40,000 to them;
q)nothing further was done with the First Bankruptcy Notice;
r)the Second Bankruptcy Notice (Annexure TK8 of the First Kenyon Affidavit at page 45) was for an amount of $69,145.50 based on payments having been made by Kenyon of $25,854.50;
s)the Ferreira Affidavit of Debt attaches various trust statements as Annexures MMF1 to MMF5 and at page 8 of that affidavit Ferreira states that she verily believes Kenyon is indebted to Lavan for an amount exceeding $5,000, but does not specify what that amount may be;
t)Annexure MMF2 of the Ferreira Affidavit of Debt shows that payments were made by Kenyon of $60,284.50 and Annexure MMF3 of the Ferreira Affidavit of Debt shows a further $6,705.00 was paid. Payments have been made by Kenyon totalling $66,989.50. None of the amounts in the trust statements have any relevance to the amount that Lavan says has been paid by Kenyon in the Second Bankruptcy Notice;
u)the inconsistency of the treatment of Kenyon's payments that appear in the trust accounts show that there is still a dispute in relation to the amount claimed as owed by Kenyon, and Lavan has not yet committed to an amount that they claim is due to Lavan;
v)the Ferreira Affidavit of Debt which was filed in response to the First Kenyon Affidavit, still does not state a liquidated sum that is supposedly owed to Lavan by Kenyon; and
w)the Ferreira Affidavit of Debt deliberately does not state a liquidated sum, but merely refers to an unliquidated sum that is more than $5,000.
Kenyon also submits that:
a)the Second Bankruptcy Notice does not comply with s.41 of the Bankruptcy Act in that it has not been issued based on a final judgment or order that is of a kind described in s.40(1)(g) of the Bankruptcy Act;
b)the Second Bankruptcy Notice does not comply with Schedule 1 of the Bankruptcy Regulations 1996 (Cth) (“Bankruptcy Regulations”) in that it does not have attached to it a final judgment or final order in terms of s.40(1)(g) of the Bankruptcy Act; and
c)the Second Bankruptcy Notice has been issued contrary to the requirements of s.41(3) of the Bankruptcy Act because it has been issued without a final judgment or final order in terms of s.40(1)(g) of the Bankruptcy Act.
Lavan submits that:
a)the Second Bankruptcy Notice attached the Certificate of Taxation. Pursuant to s.305 of the LP Act the Certificate of Taxation may be enforced against any person liable to pay, as if it were a judgment of the Supreme Court for the payment of the amount mentioned in the Certificate of Taxation. The Certificate of Taxation is a final judgment not more than 6 years old;
b)the debt owed by Kenyon is an amount of more than $5,000; and
c)even if the Court is minded to accept Kenyon’s assertions in relation to the quantum of the debt, it is not disputed that Lavan remains owed an amount significantly in excess of $5,000 by Kenyon.
Consideration as to whether final judgment or final order for debt of more than $5,000
Section 305(3) of the LP Act is set out at [66(h)] above.
The Certificate of Taxation is handwritten at the end of the bill of costs submitted for assessment by Lavan. The Court assumes, for immediately present purposes, that the Certificate of Taxation is a proper assessment of costs and determination of the costs of that assessment (as to which see [83]-[94] below).
In Franks v Warringah Council [2003] FCA 1047; (2003) 131 FCR 287 (“Franks”) the Federal Court dealt with an assertion that a bankruptcy notice was defective because it was not founded upon a final judgment or final order of a court. The importance of the particular regime in force in the relevant jurisdiction for the assessment and recovery of legal costs was highlighted in Franks at [17] per Branson J. Having reviewed the authorities, the Federal Court at [24] per Branson J observed that:
24. The above authorities illustrate that the status of an order or certificate of an officer of a court, or other person, authorised to assess the amount payable under an order of a court which requires the payment of unquantified legal costs is dependent on the terms of the statutory instrument governing the relevant order or certificate. Unlike the allocatur considered by the Full Court in Stec v Orfanos, neither a determination made by a costs assessor nor a certificate that sets out a determination made by a costs assessor is itself expressly made enforceable by either the Legal Profession Act or the Supreme Court Rules (NSW).
In Franks the Federal Court went on to observe that a certificate issued by a costs assessor under s.208J of the Legal Profession Act 1987 (NSW) (“LP Act (NSW)”) was upon its filing enforceable as a judgment of the relevant court. That was based upon s.208J(3) of the LP Act (NSW) which provided that the amount of costs not having been paid, a certificate of costs was, once filed, taken to be a judgment of the relevant court for the amount of any unpaid costs.
Section 208J(3) of the LP Act (NSW) imposed a requirement additional to that in s.305(3) of the LP Act, namely that the relevant certificate be filed, and then it was able to be taken to be a judgment of the relevant court. It followed that the determination of a costs assessor under s.208J of the LP Act(NSW) could not found a bankruptcy notice without being filed in a court of competent jurisdiction: Franks at [17] per Branson J.
One of the cases referred to in Franks was Stec v Orfanos [1999] FCA 457 (“Stec”), in relation to which the Federal Court in Franks observed as follows at [18]-[19] per Branson J:
18 Stec v Orfanos concerned an order for costs made by the Supreme Court of South Australia. Attached to the bankruptcy notice in that case was an order of a Judge of the Court, which reinstated an order for costs made by a Master of the Supreme Court which had earlier been set aside, and a signed and sealed allocatur issued by the Registrar of the Supreme Court. As in the case of each of the bankruptcy notices before me, the judgment or order relied upon in Stec v Orfanos was itself an order for the payment of costs. The Rules of the Supreme Court of South Australia at the relevant time provided that, when duly signed and sealed, an allocatur has the effect of, and is enforceable in the same manner as, a judgment of the Court for the amount of the allocatur. At [18] the Full Court said:
“ … The allocatur determined in a final manner Mr Stec's liability for costs. It is thus a final judgment or final order for the purposes of s 41(3) of the Act.”
19 The reference in [15] of the judgment in Stec v Orfanos to the order of the Judge of the Supreme Court being “ … the source of the obligation to pay those costs … ” was not, in my view, intended to derogate from what was said by the Court at [18]. The order of the judge was the ultimate source of the obligation on the debtor to pay the costs, but that obligation having become reflected in the allocatur, it was the allocatur itself which determined finally the debt due to the creditor. The allocatur itself was enforceable as a judgment of the Supreme Court.
Franks and Stec demonstrate that there is a distinction between a statutory provision which requires that the costs assessment or determination be filed with a court before it is enforceable, and a costs assessment or determination which is said to be enforceable as a judgment of a court.
The issue has recently been considered in Francis v Eggleston Mitchell Lawyers Pty Ltd [2014] FCAFC 18; (2014) 12 ABC(NS) 25 (“Eggleston Mitchell”) where the Full Court of the Federal Court dealt with the question of whether an order by a Master of the Supreme Court of Victoria was a final order capable of being the subject of a bankruptcy notice relied upon in the creditor’s petition presented upon which a sequestration order was made: Eggleston Mitchell at [23] per Rares, Flick and Bromberg JJ.
The relevant statutory provision under consideration appears in Eggleston Mitchell at [24] per Rares, Flick and Bromberg JJ. That statutory provision was r.63.11(1) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) which provided that:
If costs are taxed otherwise than under a judgment or order for costs, an order of the Taxing Master for payment of any amount found to be due may be enforced in the same manner as a judgment for the payment of money.
For practical purposes, there is no difference between the above rule and s.305(3) of the LP Act.
In Eggleston Mitchell the Full Court of the Federal Court went on to observe at [27]-[31] per Rares, Flick and Bromberg JJ as follows:
27 It is not necessary to examine the source under which the Master's order was made for the purposes of this appeal. Critically, the Master's order was an order for the payment of money made by a superior court of record, namely the Supreme Court of Victoria. An order of a superior court of record, even if made in excess of jurisdiction, is, at the worst, voidable, and is valid and binding unless and until it is set aside: Cameron v Cole (1944) 68 CLR 571 at 590 per Rich J with whom Latham CJ agreed at 585, see too at 598, 599 per McTiernan J and 607 per Williams J; Re Macks; Ex parte Saint (2000) 204 CLR 158 at [20]-[21] per Gleeson CJ, 184 [49], 187 [57] per Gaudron J, 215-217 [152]-[156] per McHugh J and 235-236 [216] per Gummow J; see too DMW v CGW(1982) 151 CLR 491 at 507 per Mason, Murphy, Wilson, Brennan and Deane JJ.
28 The Master's order was an order made for the purpose of resolving a dispute between the parties as to the quantification of the amount owing by Ms Francis on the firm's contested bill of costs. The Master's order brought finality to that aspect of the dispute. It required that Ms Francis pay the sum of $11,847.40 to the firm. It was an order of the Supreme Court that was valid and binding. The order was expressed as being made by consent, but it came to be made after a contested hearing before the Master.
29 A judgment or order for the payment of an amount of money is “final” within the meaning of the Act if it ascertains or establishes a pre-existing right of the party in whose favour it is given. In Clyne v Deputy Commissioner of Taxation (NSW) (1983) 48 ALR 545 at 547-548, Gibbs CJ, with whom Murphy, Wilson, Brennan and Deane JJ agreed, said of the phrase “final judgment” as used in ss 40(1)(g), (3)(d) and 41(3)(a) of the Act:
“A final judgment within the meaning of the provisions of the Bankruptcy Act has been held to mean a judgment obtained in an action by which the question whether there was a pre-existing right of the plaintiff against the defendant is ascertained or established: … In other words it is a judgment which finally disposes of the rights of the parties: … The fact that a judgment is subject to appeal or that it may later be set aside or become inoperative does not mean that it is not final: … ”
(Emphasis added).
30 The word “final” in the expression “final judgment or final order” in s 40(1)(g) is used in this sense: Autron Pty Ltd v Benk (2011) 195 FCR 404 at [26] per Lander, Tracey and Yates JJ. An order for costs that are subsequently quantified in a sum certain by a taxation and, pursuant to rules of court, then inserted into an order that the amount be paid, is a final order for the purposes of s 40(1)(g) of the Act: Worchild v The Drink Nightclub (Qld) Pty Ltd (2005) 224 ALR 339 at [10] per Kiefel, Jacobson and Greenwood JJ.
31 The Master's order was a final order for the payment of money. That is because the order itself resolved a pre-existing dispute. It was made by a court for the payment of money by Ms Francis and had the effect of ascertaining the firm's and her rights in respect of that dispute: Clyne at 547-548. It follows that the Master's order was a final order for the purposes of ss 40(1)(g), (3)(d) and 41(3)(a). Therefore, the second ground of appeal fails.
Two cases in the WASC, Golden West Resources Ltd v Maxim Litigation Consultants [2016] WASC 384 (“Golden West”) and LM v K Lawyers (No 3) [2016] WASC 204 (“LM Case”), considered the predecessor of s.305 of the LP Act, that being s.240 of the Legal Practice Act 2003 (WA). In both cases reference was made to a certificate of taxation having effect ‘as if it were’ a judgment in respect of seeking enforcement. Registrar Boyle in the LM Case at [22] stated the plain meaning of the words is to apply.
In Rankilor v Circuit Travel Pty Ltd [2012] WASCA 155 at [65] per Murphy JA (with whom McLure P and Newnes JA agreed) (“Rankilor”) the Supreme Court of Western Australia, Court of Appeal stated:
By O 66 r 57, the costs allowed by the taxing officer on an interim or final certificate of taxation is deemed to be a judgment of the court and recoverable accordingly. The certificate, sometimes referred to as the allocatur, signed by the registrar at the foot of the bill which has been taxed, is the certificate referred to in the rules. Although the court can and will, if asked, sign and seal under O 43 a separate document as a certificate: Civil Procedure Western Australia [66.57.2].
The Certificate of Taxation was a final order for the payment of money which resolved a pre-existing dispute and had the effect of ascertaining the rights of Kenyon and Lavan in respect of that dispute, and was therefore a final order for the purposes of ss.40(1)(g) and(3)(d) and 41(3)(a) of the Bankruptcy Act.
The question to which the Court now turns is whether or not the Certificate of Taxation did in fact “certify in writing” the amount of disputed costs allowed and the costs of the costs assessment for the purposes of s.305(1) of the LP Act.
To “certify” relevantly means “to testify to or vouch for in writing”: Macquarie Dictionary (7th Edn) (Sydney: Macquarie Dictionary Publishers, 2017), page 255 (“Macquarie Dictionary”).
The words “certify” and “certificate” are not defined in the LP Act or the Interpretation Act. There is only one other use of the word “certify”, in s.169 of the LP Act, which provides no assistance in interpreting or ascertaining what is meant by “certify in writing” in s.305(1) of the LP Act.
The meaning of the phrase “certify in writing” may however be affected by s.3 of the Interpretation Act 1984 (WA) (“Interpretation Act”) which provides the following definition of “writing”:
Writing and expressions referring to writing include printing, photography, photocopying, lithography, typewriting and any other modes of representing or reproducing words in visible form.
The definition of “writing” set out above is very broad, and is an inclusive definition, not an exclusive one. Relevantly, the word “writing” means:
That which is written; characters or matter written with a pen or the like
handwriting
any written or printed paper, document, or the like.
Macquarie Dictionary, page 1737.
In tracing the historical background of the LP Act, s.240 of the Legal Practice Act 2003 (WA) and s.70 of the Legal Practitioners Act 1893 (WA) contained provisions identical to the current s.305 of the LP Act. A similar provision is found in the Legal Profession Act 2004 (NSW) s.368 and the Solicitors Act 1974 (UK) s.70(7). Both of these provisions provide no definition of “certify’ or “certify in writing”. Other jurisdictions often prescribe a specific form for the certificate of taxation to be issued: High Court Rules 2004 (Cth), rr.57.04.1-57.04.3, Form 2; Federal Court Rules 2011 (Cth), r.40.32, Form 132; Court Procedures Rules 2006 (ACT), Form 2.46; Supreme Court Rules (NT), r.63.54; Supreme Court (General Civil Procedure) Rules 2015 (Vic), r.63.56.
In accordance with s.19 of the Interpretation Act the Court may have regard to extrinsic materials to assist with the interpretation of a provision. The Explanatory Memorandum in reference to what became s.305 of the LP Act states:
The outcome of a costs assessment is to be certified by the taxing officer and is binding on the parties to the costs assessment. The certification is to state the amount of the disputed costs allowed and the costs of the assessment. Interest is payable on the costs included in the certificate.
The explanation in the Explanatory Memorandum adds little to the terms of s.305 of the LP Act itself, but it can be inferred that the Parliament focused upon the substance and content of the certificate, thus implying that the validity of a certificate under s.305 of the LP Act is not necessarily affected by its actual form, or the form of any written certification.
The Court considers that the Certificate of Taxation in this case conforms with the requirements of s.305(1) of the LP Act in that it is a certification in writing, and that the handwritten form of the Certificate of Taxation is sufficient to comply with the requirements of s.305(1) of the LP Act (and to the relevant extent s.304(1) of the LP Act which requires a determination), and that no formal or separate certificate, or any form of typewritten certificate, is required to comply with the phrase “certify in writing”, although such forms would necessarily so comply, and may indeed be asked for: Rankilor at [65] per Murphy JA; Rules of the Supreme Court, 1971 (WA), O 43.
Kenyon also took issue with the fact that there had not been a formal determination of the costs of the costs assessment: LP Act, s.304(1), and argued that the Certificate of Taxation did not therefore comply with the requirement in s.305(1)(b) of the LP Act that the costs of the costs assessment be certified in writing by the taxing officer. There are two answers to this submission. The first answer is that there were no costs of the costs assessment to be certified in writing because the parties consented to an order that an amount of costs be allowed, and, on the face of the record, do not appear to have required that the taxing officer deal with the issue of costs. That is confirmed by Kenyon’s submission that “before” the assessment of costs could be done the parties had agreed to consent to the amount of $95,000. There were therefore no costs of the costs assessment to certify in writing, and the Court considers that the determination of the costs of a costs assessment for the purposes of s.304(1) of the LP Act can only be required where such a determination is actually required, and likewise the certification in writing of the costs of the costs assessment can only be required where there are such actual costs. The second answer is that, in any event, the Certificate of Taxation is not rendered invalid until it is set aside by a court of competent jurisdiction: Eggleston Mitchell at [27] per Rares, Flick and Bromberg JJ, here the WASC, and there is no evidence that there was an application to set aside the Certificate of Taxation, let alone any order setting aside the Certificate of Taxation.
Kenyon also argued that there was not a final judgment or final order for more than $5,000 because he had made certain payments and had certain off-setting claims. The fact that Kenyon has made certain payments to Lavan by reason of the Certificate of Taxation issuing, and that he has certain off-setting claims (if that be the case), do not alter the fact that the Certificate of Taxation has the effect of being a final order for the purposes of the Bankruptcy Act as explained above: see [69]-[71] above.
Kenyon also argued, and this argument went further than the fact that the Certificate of Taxation was not a final judgment or final order, that the amount in which he was indebted to Lavan was less than $5,000. It is convenient to deal with this issue at this juncture. Put shortly, Kenyon argues that he has paid a sum of $25,854.54 to Lavan in relation to the $95,000 owed pursuant to the Certificate of Taxation. That much is not in dispute. Kenyon also argues that there is a sum of $40,000 which he has paid, and which it appears that Lavan argues is a disbursement for Counsel fees, and which Kenyon therefore says reduces the amount of his indebtedness by a further $40,000. Kenyon also says that there have been various other payments made and that the amount outstanding is a maximum of $23,890.50: First Kenyon Affidavit at [36]. There is also a suggestion that a further amount of $8,525 ought to be treated as a payment of the amount due under the Certificate of Taxation: First Kenyon Affidavit at [37]. That leaves a remainder of more than $15,000 unpaid in relation to the Certificate of Taxation, on Kenyon’s own account of the relevant payments.
Kenyon then also argues that other costs orders in his favour reduce the debt of approximately $15,000 to a debt of less than $5,000, and that there is therefore no debt upon which a bankruptcy notice could have been founded, such debt being required to be in an amount of at least $5,000: Bankruptcy Act, ss.41 and 44(1)(a). Kenyon points to draft bills of costs prepared by solicitors acting on his behalf in matters in which there are costs orders in his favour, and says that that is evidence that the debt owed by him to Lavan is less than $5,000. Even if such evidence were admissible (and to the extent that objection was taken to Kenyon’s evidence of one of those draft bills of costs it is not admissible: see [19(b)] above) it does not establish any quantum payable by Lavan to Kenyon, and it is simply not possible to determine either at all, or with sufficient certainty, whether those bills of costs when assessed, and if off-set against the debt currently owed by Kenyon to Lavan, would result in a debt owing by Kenyon to Lavan of less than $5,000. In the circumstances, the Court finds that there is still a debt owing by Kenyon to Lavan under the Certificate of Taxation which exceeds $5,000.
The Registrar’s Varied Substituted Service Orders made on 16 January were as follows:
1. Sub-paragraph (a) of paragraph 2 of the orders of Registrar Stanley made on 20 December 2016 be set aside.
2. The estate of Terence Gilbert Kenyon be sequestrated under the Bankruptcy Act 1966.
3. The Applicant’s costs be fixed in the sum of $7,703.00 and be paid from the estate of the Respondent in accordance with the Bankruptcy Act 1966.
The Court notes that the date of the act of bankruptcy is 8 July 2016.
Kenyon’s reference to Barnes is unavailing in circumstances where there was no application for review of the Registrar’s Substituted Service Orders, and the Court must presume that the Registrar concerned was satisfied that there was a reasonable probability that Kenyon would be informed of the Creditor’s Petition as a result of the form of substituted service set out in the Registrar’s Substituted Service Orders.
With respect to the proper service of the Creditor’s Petition nothing turns on the issue of Kenyon’s home address in relation to the purported service of the Second Bankruptcy Notice and the service of the Creditor’s Petition, both for the reasons set out above: see [118]-[120] above, and because those events were separated by many months.
Having regard to the evidence in the Ferreira Service Affidavit and the Harrison Substituted Service Affidavit the Court is satisfied that Lavan attempted service pursuant to the Registrar’s Substituted Service Orders and satisfied all but order 2(a) of the Registrar’s Substituted Service Orders.
In Vincent a creditor obtained an order from a Registrar of the Federal Court for substituted service of a bankruptcy notice. The creditor was able to effect only two of the three modes of substituted service prior to the date deemed to be the date of service expiring. Thereafter, the creditor applied to the Federal Court to vary the Registrar’s order by deleting the requirement that service be effected by the third mode specified. The matter was then referred to a Judge of the Federal Court who granted the order sought, and specifically ordered both that service by the two modes employed constituted sufficient compliance with the original order, and that the bankruptcy notice should be deemed to have been served 14 days after the deemed date of service. An application by the debtor for leave to appeal was refused. When the creditor’s petition presented following non-compliance with the bankruptcy notice was heard the debtor argued that service of the bankruptcy notice had not been validly effected because the Federal Court had no power to make a retrospective order relating to service of the bankruptcy notice.
The Federal Court held that:
a)in circumstances where it was not suggested that there had been any question of substantial injustice, it was appropriate to treat the failure to serve in the third alternative way as a formal defect not invalidating the proceeding: Vincent at [68] per Hill J; and
b)section 309 of the Bankruptcy Act does not permit varying an order in a way which would authorise a mode of service which, at the time of the order, had already been effected: Vincent at [67] per Hill J.
In the circumstances, Vincent is authority for the proposition that the failure to serve in only one mode of service set out in the Registrar’s Substituted Service Orders does not mean that the Creditor’s Petition has otherwise not come to Kenyon’s attention, and the Court finds that the Creditor’s Petition was therefore served on Kenyon in accordance with the Registrar’s Substituted Service Orders.
In relation to whether there was power to make the Registrar’s Varied Substituted Service Orders, Vincent is authority for the proposition that there was no such power once the time for compliance with the Registrar’s Substituted Service Orders had passed. Although it appears that Vincent has not been applied, followed or even cited subsequently in relation to this aspect of the judgment, it is nevertheless authoritative, and binding on this Court: Minister for Immigration & Multicultural & Indigenous Affairs v SZANS [2005] FCAFC 41; (2005) 141 FCR 586; (2005) 215 ALR 733; (2005) 86 ALD 583 at [38] per Weinberg, Jacobson and Lander JJ; Suh & Ors v Minister for Immigration & Citizenship & Anor [2009] FCAFC 42; (2009) 175 FCR 515; (2009) 108 ALD 470 at [29] per Spender, Buchanan and Perram JJ. Judgments of the Federal Court which are on point, not distinguishable and not plainly wrong are binding on this Court, which is also bound by authoritative obiter of the Federal Court irrespective of the capacity in which it is pronounced by the Federal Court: Communications, Electrical, Electronic, Information, Postal, Plumbing & Allied Service Union of Australia (Western Australia Division) v Fortescue Metals Group Ltd [2016] FCCA 1227; (2016) 310 FLR 1 at [51]-[54] per Judge Lucev.
In those circumstances, the Court finds that there was no power in a Registrar to make the Registrar’s Varied Substituted Service Orders pursuant to s.309(2) of the Bankruptcy Act. For present purposes, however, that is immaterial, because for reasons otherwise set out above, and on the basis of Vincent, substituted service had already been otherwise properly effected notwithstanding that order 2(a) of the Registrar’s Substituted Service Orders had not been complied with, or had not been able to be complied with.
In the above circumstances, there was proper service of the Creditor’s Petition on Kenyon by Lavan.
Whether Creditor’s Petition accurate and correctly verified
Kenyon submits that:
a)the Creditor's Petition falsely states that Kenyon owes Lavan the amount of $69,145.50 when Lavan knows that the amount claimed is not the correct amount and that there is a valid dispute between the parties as to the amount owing, if any;
b)the Creditor's Petition falsely sets out that an act of bankruptcy was committed on 8 July 2016 based on the service of the Second Bankruptcy Notice on 17 June 2016 when, on the best case scenario for Lavan, there is no evidence of when the Second Bankruptcy Notice was posted, or the manner of its posting; and
c)the Butler Verifying Affidavit fails to swear to the accuracy of the statements made in paragraph 4 of the Creditors Petition, which deals with the act of bankruptcy and merely states that there was a failure to deal with a bankruptcy notice within 21 days of it being served, but does not confirm any of the dates contained in paragraph 4 of the Creditors Petition.
Lavan submits that:
a)on 17 June 2016 Lavan caused Kenyon to be served with the Second Bankruptcy Notice;
b)the Second Bankruptcy Notice satisfied the requirements of form and substance pursuant to the FCC Bankruptcy Rules;
c)the debt was not paid within the 21 day period provided pursuant to the Second Bankruptcy Notice, and remains unpaid by Kenyon, and the Second Bankruptcy Notice is not invalidated by reason only that the sum specified therein seemingly exceeds the amount in fact due: Bankruptcy Act, s.41(5);
d)Kenyon has not, and is unable to, put before the Court any substantive evidence of payments made to Lavan in excess of $25,854.50 (being the amount recorded as paid by Kenyon in the Second Bankruptcy Notice);
e)any submission that the Court ought to exercise its discretion to dismiss the Creditor’s Petition due to the circumstances surrounding the Second Bankruptcy Notice ought to be dismissed due to Kenyon’s inability to overcome the presumption of service and inability to negate the validity of the Bankruptcy Notice; and
f)rather, the Court in exercising its discretion must consider that Kenyon has failed to put before the Court any material and substantiated evidence of payments made by Kenyon, or his solvency.
Consideration as to whether Creditor’s Petition accurate and correctly verified
The only aspect in which the Creditor’s Petition is relevantly and plainly inaccurate is in relation to its statement that the Second Bankruptcy Notice was served on Kenyon on 17 June 2016. In that regard, the Court has found that there was not proper service of the Second Bankruptcy Notice for the reasons set out at [100]-[117] above.
Kenyon’s solvency
Kenyon bears the burden of proving his solvency: Bulic v Commonwealth Bank of Australia Ltd [2007] FCA 307; (2007) 5 ABC(NS) 122; Nathan v Burness (No 2) [2011] FCA 289.
Kenyon did not put before the Court any or any sufficient material evidence as to his solvency, that is evidence that any assets could be realised sufficient to pay the debt within a relatively short period of time: Re Ditford; Ex parte Deputy Commissioner of Taxation (1988) 19 FCR 347; (1988) 83 ALR 265.
In circumstances where the Court has found that Lavan failed to serve the Second Bankruptcy Notice, Kenyon’s failure to establish his solvency is, however, not material.
Conclusion and orders
The Court has concluded that the Second Bankruptcy Notice was not properly served on Kenyon, and as a consequence there was no act of bankruptcy as asserted by Lavan, and therefore no foundation for the issuance of the Sequestration Order by the Registrar on 16 January 2017.
In the circumstances, the Court will order that:
a)Orders 2 and 3 of the Registrar’s orders of 16 January 2017 be set aside; and
b)the Creditor’s Petition be dismissed,
The Court will hear the parties as to costs.
I certify that the preceding one hundred and fifty-one (151) paragraphs are a true copy of the reasons for judgment of Judge Antoni Lucev
Associate:
Date: 20 October 2017
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