FEDERAL MAGISTRATES COURT OF AUSTRALIA
| LORD & ANOR v RANKINE & ORS | [2010] FMCA 668 |
| BANKRUPTCY – Application to set aside bankruptcy notice – Applicants joint liquidators of respondents’ company, Neilson & Moller Autoglass – where bankruptcy notice based on costs order awarded against liquidators – where original judgment and subsequent bankruptcy notice incorrectly named each of the respondents as creditors when only Mr and Mrs Rankine were entitled to recover the debt – whether notice should be amended or considered defective – where local court filing fee was added to amount stated on bankruptcy notice – whether bankruptcy notice overstated amount of the debt and therefore defective – whether original judgment was a nullity. Cross claim – where applicants had commenced by way of cross claim in the NSW Supreme Court proceedings against respondents in their capacity as joint liquidators – where applicants’ cross demand would exceed judgment debt – mutuality – where original claim for costs involved the applicants in their personal capacity and the cross demand was brought in their capacity as liquidators of Neilson & Moller Autoglass. Abuse of process – whether bankruptcy notice issued for improper purposes – solvency. |
| Legal Profession Act 2004 (NSW), s.368 Uniform Civil Procedure Rules 2005 (NSW) |
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Details
- AGLC
- Lord v Rankine [2010] FMCA 668
- Case
- [2010] FMCA 668
- Decision Date
CaseChat Overview and Summary
The case of Lord v Rankine involved the joint liquidators of Neilson & Moller Autoglass who sought to set aside a bankruptcy notice issued against the respondents, the Rankines. The bankruptcy notice was based on a costs order awarded against the liquidators. The respondents argued that the bankruptcy notice was defective for several reasons, including that the notice incorrectly named the creditors and that the local court filing fee was improperly added to the amount stated on the bankruptcy notice. The liquidators also argued that the original judgment was a nullity and that the bankruptcy notice was issued for improper purposes, namely to abuse the legal process. The dispute was heard in the Supreme Court of New South Wales.
The primary legal issues before the court were whether the bankruptcy notice should be set aside due to the overstatement of the debt, whether the original judgment was a nullity, and whether the bankruptcy notice was issued for improper purposes. The court also had to determine whether the local court filing fee could be added to the amount stated on the bankruptcy notice. The court needed to assess the validity of the bankruptcy notice and the accompanying cross-claim, as well as the solvency of the respondents.
The court found that the bankruptcy notice was indeed defective because the local court filing fee was improperly added to the amount stated on the notice. The court held that there was no power to add the amount of the fee as it did not constitute an award of costs. The court relied on the case of Croker v The Commissioner of Taxation to support its decision, stating that there was no legislative or regulatory provision which would authorise the entry of judgment in the sum that included the filing fee. The court noted that while the situation was unsatisfactory, it could be remedied through an amendment to the legislation. The court also found that the incorrect naming of the creditors on the bankruptcy notice provided a further ground to set aside the notice. The court did not find it necessary to consider the issue of whether the original judgment was a nullity or whether the bankruptcy notice was issued for improper purposes, as it had already decided to set aside the notice on the basis of the overstatement of the debt.
The court ordered that the bankruptcy notice NN1325 of 2010 be set aside and that the respondents pay the applicants’ costs to be taxed, if not agreed, pursuant to the relevant provisions of the Bankruptcy Act.
The primary legal issues before the court were whether the bankruptcy notice should be set aside due to the overstatement of the debt, whether the original judgment was a nullity, and whether the bankruptcy notice was issued for improper purposes. The court also had to determine whether the local court filing fee could be added to the amount stated on the bankruptcy notice. The court needed to assess the validity of the bankruptcy notice and the accompanying cross-claim, as well as the solvency of the respondents.
The court found that the bankruptcy notice was indeed defective because the local court filing fee was improperly added to the amount stated on the notice. The court held that there was no power to add the amount of the fee as it did not constitute an award of costs. The court relied on the case of Croker v The Commissioner of Taxation to support its decision, stating that there was no legislative or regulatory provision which would authorise the entry of judgment in the sum that included the filing fee. The court noted that while the situation was unsatisfactory, it could be remedied through an amendment to the legislation. The court also found that the incorrect naming of the creditors on the bankruptcy notice provided a further ground to set aside the notice. The court did not find it necessary to consider the issue of whether the original judgment was a nullity or whether the bankruptcy notice was issued for improper purposes, as it had already decided to set aside the notice on the basis of the overstatement of the debt.
The court ordered that the bankruptcy notice NN1325 of 2010 be set aside and that the respondents pay the applicants’ costs to be taxed, if not agreed, pursuant to the relevant provisions of the Bankruptcy Act.
Orders
Orders of the court
1.
Bankruptcy Notice NN1325 of 2010 be set aside.
2.
Respondents to pay the Applicants’ costs to be taxed, if not agreed, pursuant to the
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
Section 133 of the CPA states:“133 Judgments and orders unenforceable until entered (1) A judgment or order of the court may not be enforced until it has been entered in accordance with the uniform rules. (2) This section extends to: (a) any judgment, order, determination or decree of a court, and (b) any adjudication or award of a person having authority to make an adjudication or award, that may be filed or registered in the court, or of which a certificate may be filed or registered in the court, under any other Act or law. (3) In subsection (2), "law" includes: (a) a law of the Commonwealth, and (b) a law of another State or Territory, and (c) in relation to the Supreme Court, a law of a foreign country.” Schedule 1 Column 1 Item 3 of the CPI prescribes a fee of $75.00 for:“Filing or registering a copy or certificate of a judgment, order, determination, decree, adjudication or award of any other court or person under section 133 of the Civil Procedure Act 2005”Clause 4 of the CPI applies in relation to civil proceedings in the Local Court and states:“(2) Subject to this Regulation, the fee that a person must pay in respect of a matter referred to in Column 1 of Schedule 1 is: (a) except as provided by paragraph (b), the fee specified in respect of that matter in Column 2 of that Schedule, or (b) if the person is a corporation and a fee is specified in respect of that matter in Column 3 of that Schedule, the fee so specified.” The approved form for the registration or filing of a certificate of judgment or order is Form 45. That requires a copy of the certificate of the judgment or order to be attached and refers to a registration filing fee but none of s.368(1) and (5) of the LPA, s.133 of the CPA, UCPR Pt 36 r 36.10 and 36.11, which relates to the entry of judgments or orders, or CPR clauses 4(1)(c) and 2(a), 7(1)(a), 8(1) and Sch Pt 5, Item 3, Columns 1 and 2 authorise the issuance of a judgment on a certificate in the amount of $150.00 which the Rankines were required to pay in order to have the certificate issued. The form itself is permissive. The power to charge the costs is not created by the form. The applicants do not accept the respondents’ argument that the fee is in fact part of the costs in the proceedings which, pursuant to s.98 of the CPA, the Court is entitled to award. There has been no award of costs in this separate proceeding created by the registration of the certificate. Hely J considered this matter in Croker v The Commissioner of Taxation [2005] FCA 127 (“Croker”) in respect of a costs certificate made pursuant to s.208J(3) of the Legal Profession Act 1987 which was the predecessor of the current Legal Profession Act, the relevant section of which is 368(5) and in respect of which there is no material difference. In that case costs were assessed at $12,972.30, the costs of registration were $63.00 and the certificate of judgment which issued under the seal of the Local Court stated that the plaintiff recovered judgment against the defendant in the sum of $13,035.30. A bankruptcy notice was issued against Mr Croker claiming $13,221.72 made up of the amount of the judgment or order $13,035.30 and accrued interest $186.42. Mr Croker argued that the bankruptcy notice was invalid because it overstated the quantum of his debt to the Commissioner in the sum of $63.00 and in a further sum being the proportion of the interest claimed which is referable to the inclusion of the $63.00 and the amount of the judgment or order. The applicants in the instant case make the same point. His Honour stated at [10]:“Mr Croker’s contention that the amount of the debt as claimed in the bankruptcy notice is overstated should be accepted. That is because s 208J(3) of the LPA specifies the consequences of filing a certificate in the Local Court, namely that the certificate is taken to be a judgment of that Court for the amount of the unpaid costs, ie a judgment for $12,972.30. Mr Melrose, the solicitor for the Commissioner, was unable to point to any legislative or regulatory provision which would authorise entry of judgment in the sum of $13,035.30. My attention was not directed to any provision equivalent to s 107(1)(a) of the Service & Execution of Process Act (Cth) which, in cases to which it applies (and the present is not such a case) allows recovery of the costs and expenses incidental to the lodging of a copy of the judgment in an appropriate Court of a State other than the place of rendition.”and continued at [12]:“[12]There have been cases such as Bhattacharya v Berger[1999] FCA 883 (on appeal [1999] FCA 1302) where the Court has proceeded on the assumption that the costs of registration of a certificate in the Local Court were properly added to the amount of the certified costs, but my attention has not been directed to any case in which the issue has been squarely argued or decided.”and at [13] and [14]:[13]In Croker v Federal Commissioner of Taxation (2003) 52 ADR 226 the Full Court said of a certificate such as the present (at 230):‘The purported "registration" of such a certificate as a judgment by the registrar of the Local Court is a mere clerical entry in the records of that court. It is not an order pronounced or a judgment given by a superior court of record.’[14]When a certificate is filed with the Local Court, the Local Court does not adjudicate upon anything. The records of the Local Court either correctly reflect the operation of s 208J(3) of the LPA in the circumstances of the case or they do not. If they do not, then the issue of a ‘certificate of judgment’ which incorrectly reflects the operation of s 208J(3) is devoid of any legal effect.”His Honour set aside the bankruptcy notice. Although the UCPR and Regulations have overtaken the legislation under which Croker was considered, there is in my view still no power to add the amount of the fee. I do not believe that the charging of the fee constitutes an award of costs and whilst the situation may be unsatisfactory it is one that can be easily cured by amendment to the legislation. In the instant case the applicants have filed a notice under s.41(5) of the BA that there has been an overstatement in the amount of the bankruptcy notice. I am satisfied that it is appropriate in all the circumstances to set aside the bankruptcy notice on this ground.
Ratio Decidendi
Legal Principle Established
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