Maher v CBA
[2007] FMCA 400
•19 March 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MAHER v CBA | [2007] FMCA 400 |
| BANKRUPTCY – Application to set aside bankruptcy notice – grounds relied on: notice confusing; issued in name of one party where there is a joint judgment; costs order not a final order; order for costs relied on invalid because previous order not discharged; registrar obligated to exercise her own mind in respect of an estimate of reasonable costs; proceedings in another court equal to or in excess of claim – grounds not made out – application dismissed. |
| Bankruptcy Act 1986, ss.40, 41 Bankruptcy Regulations 1996, reg.4.02 Federal Court Rules, o.32 r.6, o.35 r.3, o.35 r.9, o.36 r.2, o.62 r.45, o.62 r.46 Trade Practices Act 1974 |
| Re Hamor; ex parte Deamer (1968) 11 FLR 261 Thompson, Re; Ex parte Thompson, Grimley Pty Ltd and Another (1995) 135 ALR 700 Australian Workers Union v Bowen (1946) 72 CLR 575 ANZ Banking Group Ltd v Menso (2006) FMCA 1522 Re Ryan; ex parte Ryan and Jupiters Management (1992) 111 ALR 246 Re James; ex parte Carter Holt Harvey Roofing (Aust) Pty Ltd (1994) 123 ALR 342 Shepherd v Blueberry Farms (2001) FMCA 2 |
| Applicant: | DENNIS MAHER |
| Respondent: | COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124) |
| File number: | MLG 1191 of 2006 |
| Judgment of: | O'Dwyer FM |
| Hearing dates: | 15 and 16 March 2007 |
| Delivered at: | Melbourne |
| Delivered on: | 19 March 2007 |
REPRESENTATION
| The Applicant: | Appearing on his own behalf |
| Counsel for the Respondent: | Mr R.D. Shepherd |
| Solicitors for the Respondent: | Commonwealth Bank Group |
ORDERS
The Applications and Notices of Motion relevant to the setting aside of the Bankruptcy Notice VN1355 of 2006 be dismissed.
The Order made by this Court on 16 March 2007 extending the time for compliance with the Bankruptcy Notice to 4.00 pm on 20 March 2007 is vacated.
The Applicant pay the costs of the Respondent relevant to the Applications and Notices of Motion, including all reserved costs.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 1191 of 2006
| DENNIS MAHER |
Applicant
And
| COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124) |
Respondent
REASONS FOR JUDGMENT
(ex tempore)
This proceeding has a protracted history in its own right. It is also just one proceeding in many involving the applicant and the respondent.
In this proceeding the conduct of the applicant has been characterised by a flurry of filings and further or amended notices of motion on the day of the hearing or a day before; generally resulting in an adjournment.
Last Friday, however, it was agreed by the applicant that the matter proceed and that an earlier request for an adjournment would not be pursued.
A full hearing of the issues was afforded the parties on Friday, and this ex tempore judgment is made as soon as practicable, allowing for the business of today to be conducted.
This is an application to set aside a bankruptcy notice. With the agreement of the respondent, all formalities and procedural requirements to allow the applicant to present new grounds as of Friday last are waived. The presentation of the applicant’s case is perhaps not as concise or structured as would be desired and has made for some confusion and lack of definition as to the exact grounds relied on.
I do not make these comments by way of criticism of the applicant, who appears unrepresented. They are made by way of explanation as to why my reasons may appear to be, to some degree, repetitive; but I have tried to follow the same sequence as that of the applicant.
I should note that the manner otherwise of how the applicant presented his case was commendatory. He presented as a skilled advocate for one not trained in the law; obviously an intelligent man who was well researched.
The various grounds the applicant relies on to support his request to set aside the notice come under two broad heads. First, the notice is invalid for a number of reasons; and secondly, the applicant has a set‑off or a cross‑claim equal to or greater than the amount claimed in the notice. I shall address each of those grounds shortly. Before doing so, it is helpful to give a short history of some of the litigation between the parties.
Litigation between the parties
The genesis of the litigation stems from the applicant’s tenancy of residential premises in West Melbourne over which the respondent held a mortgage. When the respondent attempted to realise its security over the premises because of default under the mortgage by the applicant’s landlord, the applicant attempted to either maintain possession or regain possession of the premises. He also sought damages for personal effects that were removed from the premises at the direction of the respondent.
These proceedings were dismissed by his Honour, Finkelstein J of the Federal Court as being frivolous on 26 September 2001. His Honour ordered that the applicant pay the costs of the named defendants to the applicant’s proceeding, one of whom was the respondent and the other two being a bank manager employed by the respondent and the respondent’s agents.
The applicant successfully appealed the decision of Finkelstein J, when the Full Court of Federal Court on 16 April 2002 set aside Finkelstein J’s orders of 26 September 2001; although there is some dispute about the nature of how those orders may have affected costs orders.
The Full Court remitted the further hearing to Finkelstein J, who, because of the non‑appearance of the applicant, dismissed the proceeding with costs on 2 February 2004. On application made on
5 February 2004, Finkelstein J was persuaded to reinstate the proceedings should certain security for costs be paid by the applicant.
The applicant informed this court that because of his impecuniosity he was not able to satisfy that condition, and as a consequence, the merits of his case have not been considered after the Full Court remitted the matter back. The original orders of Finkelstein J of 2 and
5 February 2004 remain extant.
Significantly, an order for costs was obtained from Registrar Bardsley on 9 February 2005 based upon the three costs orders made by Finkelstein J on 26 September 2001, 2 and 5 February 2004. This costs order was made in circumstances where the order of
26 September 2001 may have been set aside.
The matter again came before Finkelstein J on 26 July 2005 in respect of an application by the applicant to have the order of Registrar Bardsley and the supporting certificates of taxation set aside.
I am satisfied that on that occasion his Honour set aside the orders of Registrar Bardsley because, first, he found that the costs associated with the order of 26 September 2001 could not be valid because the order no longer subsisted after the appeal – although again, as I stated, there is some dispute as to the accuracy of his Honour’s understanding about what orders were made in the Full Court and the effect of those orders on previous orders made by Finkelstein J; and secondly, because he couldn’t be satisfied that the registry of the Federal Court, as it was required to do, had sent a copy of the estimated costs under the orders of 2 and 5 February 2004 to the applicant.
It is to be noted that although Finkelstein J made orders on
26 July 2005, those orders were not entered or authenticated until
20 September 2006. After Finkelstein J’s orders, on 28 July 2005, by consent, the bankruptcy notice based upon the costs order of Registrar Bardsley was set aside in this court as the respondent was left with no alternative than to concede that the bankruptcy notice was fatally flawed.
After Finkelstein J’s orders on 26 July 2005, Registrar Mussett made an order for costs against the applicant jointly in favour of the three respondents named in the Federal Court proceedings. The foundation for her order was the orders of 2 and 5 February 2004. The amount of those costs was $57,603, exactly the same as ordered by Registrar Bardsley in respect of those two later orders.
Despite requests from the applicant, written reasons for his decision of 26 July 2005 have not been provided by Finkelstein J. The combination of the late entering or authentication of Finkelstein J’s order of 26 July 2005 and the non‑production of written reasons for his decision that day has a significant impact, the applicant contends, on the ability of the respondent to act in reliance on it. This is discussed more fully below.
The matter to highlight from that brief history is that at the time the respondent could be said, perhaps, to know that the orders of
26 September 2001 ceased to exist, namely after the Full Court appeal, the respondent nonetheless proceeded to obtain an order for costs based on that order and thereafter had the bankruptcy notice issued which made demand for payment for costs not due to the respondent, or so it is said.
As set out below, the applicant ascribes sinister motives and objectives to the respondent, and others, for undertaking this course of action.
It should also be noted that the applicant unsuccessfully applied to have the order of Registrar Mussett set aside and to obtain a declaration that because Finkelstein J had failed to give reasons, the order of
26 July 2005 is not capable of enforcement. The applicant has an appeal pending in respect of Jessup J’s dismissal of that application.
The notice, the subject of this application, was issued and served on the applicant. The basis of the notice was the order of Registrar Mussett made on 24 July 2006. I emphasise that the foundation for her costs order was the two orders of 2 and 5 February 2004. Although initially the applicant took issue over the service upon him by post of the notice and alleged it was a cause of confusion as to when he should comply with the demand in the notice, at the hearing and in later material filed by him he seems to have abandoned his contentions in these regards.
I believe the above history gives context to the grounds proffered by the applicant to justify the notice being set aside.
Contentions re bankruptcy notice
In respect of the contention that the notice is invalid, the applicant states the following grounds:
a)The notice was confusing because it demanded the full costs be paid to one of the three parties jointly entitled to them.
b)There was a requirement that the demand for payment should be on behalf of all of the parties jointly entitled to the costs and each should have been named in the notice for that purpose.
c)
Because the order of Finkelstein J of 26 July 2005 setting aside the order of Registrar Bardsley was not entered or authenticated until 20 September 2006, Registrar Bardsley’s order still subsisted. The purported order of Registrar Mussett on
24 July 2006 was not valid, as it is an abuse of process to have two orders about the same costs at the one time, and Registrar Mussett did not have power to make an order until Finkelstein J’s order was formally entered.
d)
Finkelstein J has not provided reasons for his decision on
26 July 2005, and as a consequence, his decision is not capable of enforcement.
e)Registrar Mussett was obligated to exercise her own judgment and estimate herself the level of costs properly payable, which she manifestly did not do, because her estimate of costs was exactly the same as Registrar Bardsley’s for costs associated with the orders of 2 and 5 February 2004.
f)There was a requirement for the original orders of Finkelstein J made on 2 and 5 February 2004 to be attached to the notice as they were the orders that gave Registrar Mussett the power to make her order of 24 July 2006.
In addition, the following ground was also articulated by the applicant as justification for setting aside the notice. That ground is under s.40(1)(g) of the Bankruptcy Act 1986 (the Act). The applicant relies on that section. He has issued in the County Court of Melbourne a writ claiming damages against the respondent and the other two respondents to his Federal Court proceedings and, additionally, the present legal adviser to the respondent. He alleges against all that they have breached the Trade Practices Act1974 for misleading and deceptive conduct, have engaged in malicious prosecution, have been negligent, and have breached a duty of care owed to him.
The damages the applicant seeks is quantified, as to out‑of‑pocket expenses, in the sum of $712. However, he claims an unspecified amount for damages for anxiety, distress, pain and suffering, aggravation of a hip disorder and defamation of character. Additionally, he claims punitive or exemplary damages.
The applicant seeks to have the claim heard before a jury, and the assessment of his claim, should he establish liability, “will be in the hands of the jury”. His expectation is that he will receive in excess of the claim made by the respondent in the notice.
I shall now address each of those grounds.
Confusion caused by demanding payment to the one party
In respect of the confusion caused by demanding payment to the one party, I say as follows. The applicant simply contended that he was confused – or, more precisely, the notice was capable of confusing, by the demand. The confusion flows from a concern that, should he have complied with the notice and paid the full amount to the respondent, the other parties named as jointly entitled to the costs could each make a claim for the full costs.
There is no doubt that the costs orders are joint orders in respect of the three parties. There is no doubt, in my view, that the demand to pay all of the costs to one party is very clear. To that extent, the notice cannot be said to be confusing. The applicant’s confusion, I understand, arises as to whether compliance with the notice will protect him from claims by the other two parties. As a matter of law, it would.
I refer to Re Hamor; Ex parte Deamer (1968) 11 FLR 261 per Gibb J at 264. Whilst this principle of law may not be readily known to the applicant at the time of service of the notice, there is still no basis to conclude that it was confusing or for claiming it was capable of confusing. It speaks very clearly for itself. It was open, incidentally, to the applicant to clear any confusion in his mind by obtaining advice as to the effect of paying one of the three jointly‑entitled parties.
The applicant, through the proceedings in this court and in the Federal Court, has sought advice from competent sources about the legality of his position. I am satisfied that the notice considered objectively is not confusing and that any subjective confusion on the part of the applicant could have been readily resolved by inquiry on his part. The notice complies with s.41(2) of the Act and reg.4.02 of the Bankruptcy Regulations 1996. Consequently, the applicant’s contention on this ground must fail.
The requirement that the demand be from all parties
In respect of the contention that the notice should have demanded that payment be made to all parties, the applicant relies on obiter from Spender J in Thompson, Re; Ex parte Thompson, Grimley Pty Ltd and Another (1995) 135 ALR 700; and Australian Workers Union v Bowen (1946) 72 CLR 575. In Thompson, Spender J observed:
“Where there is a joint order in favour of parties one party cannot demand payment under a bankruptcy notice unless authorised by the others to do so. Likewise, it can be said, in my view, the Bowen case stands for the same proposition that one can only act for the others with a joint order in their favour when all of the parties agree.”
In this case the respondent asserts it was acting for all of the parties. The evidence for this was provided in two affidavits filed by the respondent, namely from Peter Pouki sworn 23 October 2006 at paragraphs 12 and 17, and that of Michelle Kumarich sworn on 22 July 2007 at paragraphs 3 and 5. Mr Pouki deposes at those paragraphs to the fact that the other parties were employed or acted for the respondent and the notice was applied for by Ms Alison Harewood Solicitor with the authority of the bank, Firth, and Johnson and Gray.
The applicant objected to the evidence on this issue because it was provided by people who, although they were employed by the respondent, gave their evidence from a perusal of the respondent’s file. I am satisfied that this evidence is admissible and the matter deposed to, namely the authority of the solicitor for the respondent to issue the bankruptcy notice with a demand that full payment be paid to the respondent only, had the authority of the other parties entitled to that amount.
Bowen was determined on a question of fact, namely that two of the parties in whose name the notice was said to have been issued had not in fact authorised the issue of that notice. In contradistinction with Bowen, in this case I am satisfied as a matter of fact that the respondent was authorised to collect all of the costs on behalf of the other two. This ground also fails.
The validity of Registrar Mussett’s order
The applicant sought to establish that Registrar Mussett’s order of
24 July 2006 was invalid because of the irregularities associated with Finkelstein J’s orders on 26 July 2005; namely, the delay in entering it and the failure to provide reasons for the decision. The applicant’s argument, as I understand it, was that for the order of 26 July 2005 to be enforceable and have effect there is a requirement under the Federal Court Rules that it be entered or authenticated, (there the applicant referred to o.36 r.2) and that reasons be given for the decision.
The applicant contends that without compliance with those requirements, the order of Finkelstein J is, in effect, a nullity, leaving extant the orders of Registrar Bardsley. This is an unsustainable contention. Order 35 r.3 of the Federal Court Rules provides that:
“a judgment or order shall take effect on the date on which it is pronounced or made, unless the court orders that it takes effect on an earlier or later date.”
The applicant has predicated his contention on the premise that the order of Finkelstein J made on 26 July 2005 required it to be entered because it was an order the respondent was attempting to enforce by Registrar Mussett’s order. Clearly the respondent was not attempting to enforce Finkelstein J’s order. Registrar Mussett’s order was not dependent upon enforcing Finkelstein J’s order. The foundation for Registrar Mussett’s order is the two orders made on 2 and 5 February 2004.
I am satisfied that the order made by Finkelstein J on 26 July 2005 was effective and that the order of Registrar Bardsley and the taxation certificates associated with his order were set aside. The orders of
2 and 5 February 2004 remain unaffected and form the foundation, as I have already said, of Registrar Mussett’s order of 24 July 2006. Registrar Mussett’s order is not invalid and, to the extent that the applicant relies on that contention, he must fail.
In saying that, there was one further contention of the applicant about Registrar Mussett’s order, namely the allegation she failed, as she was obliged to, to exercise her own mind as to the estimate of the costs. Order 62 r.46 of the Federal Court Rules is applicable. From my understanding of the facts, Registrar Mussett has not failed in any obligation imposed upon her under that rule. A taxing officer is to make the estimate, which was done in support of the taxation certificates issued in respect of the orders of 2 and 5 February 2004.
On the face of it, there is no evidence Registrar Mussett has failed to make an estimate. The mere fact that her estimate is the same as Registrar Bardsley does not lead to a conclusion she has failed to fulfil her statutory duty.
The requirement for Finkelstein J's orders of 2 and 5 February 2004 to be attached to the notice
The applicant relied on a number of authorities set out and discussed in ANZ Banking Group Ltd v Menso (2006) FMCA 1522 in support of his contention that the originating order that authorised the taxation of costs must be attached to the notice in addition to any order for any quantified costs. Those authorities related to proceedings in state jurisdictions where the state law was applicable for the determination of final costs orders. The orders giving the foundation for the bankruptcy notices were orders from state jurisdictions which were subject to the laws and regulations applying in each of those states.
However, in the federal jurisdiction, where this litigation has been prosecuted, O.62 r.45(3) has application. Wilson FM in the Menso case gives a succinct summary of the effect of that rule:
“In Worchild v The Drink Nightclub (Qld) Pty Ltd (2005) 224 ALR 339 the Full Federal Court held that an order of the Deputy District Registrar of the Federal Court was a final order capable of founding a bankruptcy notice. Order 62 r.45(3) Federal Court Rules provides that where costs remain unpaid 14 days after taxation, the registrar shall, at the request of the party in whose favour the costs are awarded, draw up, sign and seal an order in their favour. The form of order was:
“The court orders that the applicant pay the sum of $24,000 to the respondents.”
It can immediately be seen that, in those circumstances, due to the wording of the legislation, the obligation to pay derives from the order of the Registrar, which operated as an order in its own right. Their Honours considered that the sufficiency of attaching only the order of the Registrar depended on whether the order is one for the payment of money. Unlike a certificate of taxation, an order under O62 r.45(3) directs the payment of money.
Their Honours said at [10] that an important element in determining whether an order is final or not is whether it is capable of enforcement and execution. The Court applied the decision of von Doussa J in Re Draper; ex parte Australian Society of Accountants, in which his Honour said that even if there were any doubt about that matter it is removed by the provisions of s.40(3)(b).”
In my view, the order of Registrar Mussett is a final order, capable of enforcement and the applicant must fail on this contention.
Set ‑off or counterclaim
The most significant ground submitted by the applicant was that he had a set‑off or cross‑claim as envisaged by s.40(1)(g) of the Act.
His cross‑claim or set‑off cannot be said to be one that could have been considered at the time the costs orders were made on 2 and
5 February 2004 as its genesis arises after those dates from allegations against the respondent as to how the respondent, and others, have conducted themselves in the prosecution of the first bankruptcy notice served on him.
The real issues for this court are to determine the following:
a)whether there is a bona fide claim – and here I refer to Re Ryan; Ex parte Ryan and Jupiters Management (1992) 111 ALR 246; and Re James; Ex parte Carter Holt Harvey Roofing (Aust) Pty Ltd (1994) 123 ALR 342;
b)whether there is a prima facie case;
c)whether there is a reasonable prospect of success; and
d)not unconnected with the preceding issue, whether the County Court proceeding is for an amount that equals or exceeds the amount demanded by the notice.
Whether there is a bona fide claim
The applicant in this court on 20 November 2006 made a cross‑claim for damages against the respondent under the Trade Practices Act 1974. In conjunction with that application he sought a stay of the bankruptcy proceedings. He later withdrew that cross‑claim. He then filed the writ, discussed above, in the County Court on 12 February 2007.
One could perhaps question the bona fides of the applicant, having regard to the circumstances of his Trade Practices claim in this court, and interpret his conduct as tactical and not genuine. However, because of his later filing of the writ (which is significantly more detailed and defined than his claim in this court), and also because of the general nature of his longstanding complaint against how the respondent went about obtaining the issue of the first bankruptcy notice, I am, on balance, satisfied it reflects a bona fide claim.
Whether there is a prima facie case and reasonable prospect of success
However, I am not satisfied there is a prima facie case. There is some doubt that the respondent wrongly applied for the first bankruptcy notice.
There may very well exist some confusion in respect of this issue of whether or not all costs in respect of the proceeding up to
26 September 2001 were discharged. That issue is raised by the respondent in the notice of defence to the County Court proceedings.
The County Court writ attempts to extrapolate from Finkelstein J’s order of 26 July 2005 a myriad of culpable motivations and objectives for which, in my view, there is no evidence.
The writ is founded on a number of heads. First, there is the allegation that the respondent, and others, engaged in misleading and deceptive conduct, whether at common law or under the Trade Practices Act. Secondly, the applicant alleges the respondent, and others, engaged in malicious prosecution. Thirdly, the applicant asserts a duty of care was owed to him which was breached by the respondent, and others.
Alternatively, the applicant alleged that the respondent, and others, engaged in common law misrepresentation and deceit, with knowledge of its falsehood and with an intention to deceive. It was alleged also that the respondent, and others, obtained the first bankruptcy notice with the intention of inflicting injury upon the applicant or served that notice on him with reckless indifference to injury caused to the applicant.
There is a claim for aggravated and/or exemplary damages. It is fair to say that the applicant has extrapolated and articulated possibly all the available heads under which a claim may be made. Significantly, many rely on the proof of the mala fides of the respondent, and others, and in that regard no evidence whatsoever has been provided by the applicant that would form the basis for a finding in that regard.
The cross‑claim is a construct underpinned by conjecture and conspiratorial notions. As stated by Driver FM in Shepherd v Blueberry Farms (2001) FMCA 2 at paragraph 48:
“…it has been held by the High Court that the degree to which the bankruptcy court should be satisfied that a debtor has a counterclaim, set off or cross demand of the required amount “may be expressed by saying that the debtor must show that he or she has a prima facie case, even if then and there he or she does not adduce the admissible evidence which would make out a prima facie case before a court trying the issues that are involved in his or her counterclaim, set off or cross demand”: Ebert v Union Trustee Co (Aust) Ltd (1960) 104 CLR 346 at 350. However, the demand must be more than bona fide. The court must be satisfied that it has a reasonable probability of success. This court is not called upon to determine the validity of the counterclaim, set‑off or cross‑claim but it must be satisfied that the claim is a substantial and bona fide claim which the debtor should fairly be permitted to litigate before the bankruptcy proceedings are allowed to continue Re a Debtor; Ex parte Bolam (1909) 9 SR NSW 580. The state of satisfaction required involves weighing up considerations as to the legal and factual merit of the claim relied upon by the debtor, and the justice of allowing the bankruptcy proceedings to go ahead or requiring them to await the determination of the claim.”
In the terms of the analysis of Driver FM, I find that there is not a reasonable prospect of success by the applicant in his cross‑claim and it would not be fair to allow him to litigate that claim before the bankruptcy proceedings are allowed to continue.
Whether the County Court proceeding is for an amount that equals or exceeds the amount demanded by the notice
In any event, should the applicant be successful, I am not persuaded there is any reasonable prospect he will succeed to the extent he will be awarded an amount equal to or which exceeds the demand made in the notice.
Again, as Driver FM observed in Shepherd’s case at paragraph 50:
“…the debtor must establish that the counterclaim is equal to or exceeds the amount of the judgment debt. In this regard the counterclaim must be measurable in an amount of money: Re Brink; ex parte Commercial Banking Co of Sydney Limited (1980) 44 FLR 135 at 138. It is not necessary that the counterclaim be for a liquidated sum or even for a sum of money at all, but it must be capable of being quantified in terms of money and the affidavit filed by the debtor should quantify it.”
In those terms, I am of the view that the claim by the respondent is not capable of being quantified and be assured it would equal or exceed the demand made in the notice.
I certify that the preceding fifty–nine (59) paragraphs are a true copy of the reasons for judgment of O'Dwyer FM
Associate:
Date: 19 March 2007
3
6
4