Marinchek v O'Sullivan
[2014] NSWLC 5
•22 May 2014
Local Court
New South Wales
Medium Neutral Citation: Marinchek v O'Sullivan [2014] NSWLC 5 Hearing dates: 01/05/2014; 15/05/2014 Decision date: 22 May 2014 Jurisdiction: Civil Before: Magistrate C O'Brien Decision: 1.The Notice of Motion filed 25 March 2014 is dismissed.
2.The judgment debtor is to pay the judgment creditors' costs of the motion on the ordinary basis as agreed or assessed.
Catchwords: CIVIL PROCEDDINGS - review of Registrar's decision - instalment orders - principles to be applied in the making of instalment orders - indemnity costs Legislation Cited: Civil Procedure Act 2005
Uniform Civil Procedure Rules 2005Cases Cited: Cahill v Howe [1986] VR 630
Calderbank v Calderbank [1975] 3 All ER 333
Chint Australasia Pty Ltd v Cosmoluce Pty Ltd [2008] NSWSC 1054
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Hamod v State of New South Wales (2002) 188 ALR 659
Harrison v Schipp [2001] NSWCA 13
Helliar Capital Pty Ltd v Richard Albarran [2009] NSWSC 403
Huntsman Chemical Co Australia Ltd v International Pools Australia Pty Ltd (1995) 36 NSWLR 242
IceTV v Duncan Ross & Others [2011] NSWSC 1300
Leichhardt Municipal Council v Green [2004] NSWCA 341Texts Cited: Civil Trials Bench Book, Judicial Commission of NSW
Ritchie's Uniform Civil Procedure NSW, LexisNexisCategory: Interlocutory applications Parties: Scott Michael Marinchek (applicant/ judgment debtor)
Bernard Michael O'Sullivan
Roger Keith O'Sullivan
Sean Richard O'Sullivan (respondents/judgment creditors)Representation: Applicant/judgment debtor in person
Norton Rose Fulbright Australia for the respondents/judgment creditors
File Number(s): 2013/245346
Judgment
This is a Notice of Motion filed by the judgment debtor seeking a review of the Registrar's decision made on 20 March 2014 to rescind an instalment order that had initially been made in chambers, following the filing of a Notice of Motion to pay by instalments on 7 February 2014.
The parties have been involved in lengthy and no doubt hideously expensive litigation over many years in this Court, the District Court and the Court of Appeal. Theirs is a building dispute. The judgment that is the subject of these proceedings is one entered in this court on 14 August 2013 in an amount of $75,364. Following the entry of that judgment, the judgment debtor sought a stay of proceedings which application was ultimately dismissed by consent on 7 February 2014. On that same day, the judgment debtor filed his initial application to pay by instalments. That application was dealt with by a Registrar in chambers and an order was made that the judgment debt be paid by monthly instalments in the sum of $2,462.59. The judgment creditor objected to that determination and on 20 March 2014, another Registrar rescinded the previous instalment order made. The judgment debtor now challenges the decision of the Registrar and seeks in effect the reinstatement of the initial instalment order.
The court's power to review the decision of the Registrar derives from rule 49.19 of the Uniform Civil Procedure Rules 2005. That rule provides:
49.19 Review of registrar's directions, certificates, orders, decisions and other acts
If in any proceedings a registrar gives a direction or certificate, makes an order or decision or does any other act, the court may, on application by any party, review the direction, certificate, order, decision or other act and make such order, by way of confirmation, variation, discharge or otherwise, as the court thinks fit.
The power of the court to make an instalment order comes from section 107 of the Civil Procedure Act 2005 and the mechanism for how an application for the making of such an order is to be dealt with is found in rule 37.4 of the Uniform Civil Procedure Rules. That rule is in the following terms:
(1) This rule applies if the court is dealing with:
(a) an application for an instalment order pursuant to rule 37.2 (3) (b), or
(b) an objection against an order made under rule 37.3 (1) (a) or (b).
(2) On receiving the application or objection, the court:
(a) must set the matter down for hearing, and
(b) must give notice of the time, date and place of the hearing to the judgment creditor and the judgment debtor, and
(c) if it has not already been done, must also give to the judgment creditor a copy of the affidavit referred to in rule 37.2 (2) (b).
(3) The court may determine an application for an instalment order, or an objection against an order refusing such an application:
(a) by making an instalment order in relation to the amount owing under the judgment debt, or
(b) by dismissing the application.
(4) The court may determine an objection against the making of an instalment order:
(a) by varying or rescinding the instalment order, or
(b) by dismissing the objection.
(5) As soon as practicable after making its determination, the court must give notice of the determination, and (if it makes or varies an instalment order) of the terms of the order or the order as varied, to the judgment creditor and the judgment debtor.
The matter came before me for hearing in the motions list on 1 May 2014. The judgment debtor appeared in person and Mr Lichtwark, solicitor, appeared for the judgment creditors. In the course of the hearing I gave the judgment debtor leave to file in court an affidavit sworn on that day and purporting to set out details of his financial position. He had filed an earlier financial statement in support of the initial application for an instalment order that had been dealt with by the Registrar(s). That initial affidavit was also before me, as annexure (P) to the primary affidavit that he had filed in support of his motion, being an affidavit sworn 25 March 2014. That primary affidavit contained a significant amount of unnecessary and superfluous detail dealing with and touching upon the lengthy history of the parties tortured litigious path.
On 1 May 2014 I was not satisfied that the judgment debtor had put all relevant information before me. Given that he was unrepresented I provided him with an adjournment until 15 May to allow for further material in support of his motion to be filed and served. On the 13 May 2014 the judgment debtor filed a document entitled "Summary of submission of behalf of judgment debtor". Relevantly no further evidence was filed. Notwithstanding the judgment debtor's failure to provide further evidence I have nonetheless had regard to his further submissions. On 15 May I adjourned the matter for decision until 22 May 2014. I also made further directions on that day for the filing of written submissions concerning an application foreshadowed by the judgment creditors for indemnity costs and for an order preventing the judgment debtor from obtaining any further stay of execution.
The thrust of the judgment debtor's application is that an order should be made that he pays the judgment debt by instalments in the sum of $2,462.59 per month. He says that if such an order is made the judgment debt will be discharged in 3 years. The judgment creditors object to such an instalment order being made for a number of reasons to which I will shortly come, and say that if the orders sought by the judgment debtor are made, then payment of the judgment debt would not be completed for approximately four years having regard to prevailing interest rates.
As will be clear from the above, these parties are unable to even agree on the mathematical calculation for the period of time required to satisfy the judgment debt having regard to current interest rates and the quantum of the instalments.
The judgment debtor's case can be broadly put in the following terms:
(1) He acknowledges the debt and is doing his best to satisfy it.
(2) He has a strong history of employment in the financial services and aged care industry.
(3) He has more recently elected to voluntarily absent himself from the workforce and become a full time carer for his 3 year old son.
(4) His debts significantly outweigh his assets.
(5) He has no current income and is maintaining himself, his partner and his son by funds being advanced to him by what he describes as "friendly creditors". No evidence was provided by these "friendly creditors" despite the judgment creditor being given the opportunity to do so by the adjournment between the 1 and 15 May 2014.
(6) He intends to return to work at some time in the future, although no precise date has been set for that return. Not even an approximate date for that return to work was advised me. He estimates that on his return to paid employment he will earn a substantial income. His affidavit sworn 1 May 2014 estimates that income to be in the weekly amount of $6,731.
(7) He believes that if his application to pay by instalments is refused then the judgment creditors will proceed to bankrupt him and that, as a consequence, the judgment creditors will not be paid what is owed to them. He asserts that the best and indeed only way that the judgment debt will be satisfied is by his being allowed to pay it by instalments in the amount that he has suggested. He asserts further that if the instalment order is not made then his "friendly creditors" will terminate the current credit facility that has been provided.
(8) That the granting of his application would avoid undue hardship to him and would be in the best interest of all parties.
(9) That since the instalment order was initially made, he has met his obligations pursuant to it, and that he had, as at 1 May 2014 paid 2 instalments in the sum of $2,462.59. His further submission filed 13 May 2014 asserted that he had made a further instalment payment since 1 May 2014, and I note that no issue was taken with that assertion by Mr Lichtwark when the matter came before me on 15 May 2014. He says that these payments demonstrate a capacity to meet the instalment order previously made.
The affidavits relied upon by the judgment debtor were sworn on 7 February 2014 (the first affidavit), 25 March 2014 (the second affidavit) and being the affidavit that I have earlier referred to as the primary affidavit in these proceedings, and 1 May 2014 (the third affidavit). On any view of it, these affidavits demonstrate that the judgment debtor is in a most parlous financial position.
The first affidavit indicated that the judgment debtor's weekly income was in the sum of $122 comprised solely of social security payments. He swore to assets of $76,958 and weekly expenses of $4,879. The total of his liabilities were in the sum of $1,422,411.
The second affidavit set out, as previously indicated, a significant degree of detail concerning the lengthy dispute between the parties. Paragraphs 50 and following deal with issues concerning this motion, and include submissions on what it is contended by the judgment debtor is the relevant law to be applied.
The third affidavit deposes to the fact that the judgment debtor's weekly income had increased to $5,446 comprised of $140 of social security with the balance being provided from debt and borrowing facilities provided by "friendly creditors". These "friendly creditors" are not identified, nor has the judgment debtor filed with the court any affidavit evidence from them, which deals with or touches upon the terms and conditions attaching to these facilities. This it seems to me is a significant deficit in the evidence relied upon by him. The affidavit sworn 1 May 2014 indicates that the judgment debtor has assets including what he describes as anticipated assets in the sum of $575,864. In my view, the estimated interest and cost recovery assets that he deposes to within that affidavit being in the sum of $345,980, are so speculative as to not warrant my taking them into account in respect of this application. It is entirely unclear as to when, if ever, those assets would be realised.
Whichever of the financial statements I have regard to indicates that the judgment debtor has liabilities that substantially exceed his assets. In the first affidavit this disparity is in the sum of $1,345,453 and in the third affidavit $1,466,592.00. Of course these calculations also demonstrate that in the period between the judgment debtor swearing his first affidavit on 7 February 2014 and his third affidavit on 1 May 2014, a period just short of 3 months, his overall financial position has deteriorated by an amount of $121,139.
The judgment creditors essentially contend that:
(1) Under Rule 37 of the Uniform Civil Procedure Rules, there is no further process available for the judgment debtor to bring this application. I should indicate that I do not accept this submission. The hearing before me is a hearing de novo of the application dealt with by the Registrar.
(2) The judgment debtor's motion is prejudicial to the judgment creditors.
(3) The judgment debtor's motion does not identify any issues or errors in the decision of the Registrar or demonstrate any basis for setting aside the order made. For the reasons indicated in (1) I do not accept this submission. The hearing before me is de novo.
(4) The making of any instalment order would be futile given the judgment debtor's financial circumstances.
(5) There is no evidence before the court to enable a conclusion to be drawn that the instalment order can in fact be met on a continuing monthly basis.
(6) The period of time over which payment would be required to be made if the instalment order were granted is unreasonable.
(7) In the circumstances of such long running and hard fought litigation the judgment creditors are entitled to the "fruits of their success".
The Law
What then is the test to be applied in respect of this motion? As noted in Ritchie's Uniform Civil Procedure NSW at [37.4.5]:
... ordinarily a judgment creditor is entitled to payment. If the judgment debt relates to significant commercial litigation, particular circumstances would have to apply before it would be appropriate to make, or continue an instalment order in relation to such a judgment debt.
The Uniform Civil Procedure Rules do not identify those factors that the court is to take into account in determining whether an instalment order should be made, and each application will fall to be determined on its merits and in the exercise of the court's discretion. In IceTV v Duncan Ross & Others [2011] NSWSC 1300 at [6], Brereton J had the following to say:
... it seems to me that the policy that informs the Civil Procedure Act, section 107, is to avoid undue hardship to judgment debtors - including in particular the potential for bankruptcy and its consequences - when there is a realistic possibility that they may be able to pay the judgment debt by instalments, within a reasonable time and particularly where such a course may afford better prospects of ultimately satisfying the judgment than by immediate resort to bankruptcy.
Plainly I must have regard to the policy consideration identified by Brereton J, and I will do so. Further, a consideration of the limited authorities touching upon the issue of when an instalment order should be made indicate that the following matters will also be of relevance:
(a) Whether any order made would be realistic, that is, whether there is evidence available that can satisfy the court that it is likely that the order would be adhered to - See Cahill v Howe [1986] VR 630.
(b) Does the evidence establish that the judgment debtor requires the instalment order to meet the judgment debt?
(c) What prejudice would be suffered by the judgment creditors if an instalment order were made?
(d) Prima facie a successful litigant is entitled to the fruits of its success.
In respect of (b) - (d) above - see especially Chint Australasia Pty Ltd v Cosmoluce Pty Ltd [2008] NSWSC 1054 per Einstein J. In Chint, the judgment debt was in an amount of more than $5 million and an application was made to pay that debt over a period of 2 years. That application was unsuccessful.
(e) An instalment order ought not to be made if the judgment debtor's means are sufficient to enable him or her to pay the judgment debt in full.
(f) The period of time over which payment is to be made must be reasonable.
(g) There is a real public interest in enabling parties who have litigated their disputes to enforce the victory that they have achieved.
(h) There is a legitimate public interest in allowing skilled and trained people to remain in employment and performing work that benefits the community, particularly if their bankruptcy, which may follow any refusal to make an instalment order, would prevent them from so doing.
(i) There is a significant public interest in the proper support of dependants by persons who are "breadwinners". If a person is prevented by bankruptcy from earning his living and supporting his dependants then these persons will suffer.
In respect of (e) - (i) above - see especially Helliar Capital Pty Ltd v Richard Albarran [2009] NSWSC 403 per McDougall J. In Helliar Capital the judgment debt was for a sum of $1.6 million and the court allowed payment of the judgment debt over a period of some 4 years.
The judgment debtor placed considerable reliance on the decision in Helliar Capital, and particularly factor (i) above touching upon the question of "breadwinners" and the social utility in courts providing support to persons who can be so described. In my assessment, the term "breadwinner" applies to people who are in paid employment and earning an income that is intended for the support of their family. I would not expect that such a description would be regarded as controversial. That of course is not the situation in this case.
It seems to me that there are two factors of real significance which distinguish Helliar Capital and what was said in that matter by McDougall J concerning breadwinners from the facts of this case. Firstly, the judgment debt in Helliar Capital was for a sum more than 21 times greater than is the case here, in circumstances where the period of time in respect of which repayment was to be made was approximately the same. Secondly, the breadwinner scenario referred to by McDougall J arose in circumstances where the judgment debtor in that case, Mr Albarran, was in full time employment as an insolvency practitioner and was working to earn a living and support his family. The situation here is to the contrary, in that the judgment debtor, apparently following entry of the judgment, made a conscious decision to absent himself from the workplace and to spend time with and support his young son. While that may well be an admirable approach to take to his duties as a parent, it is not in my assessment one that the judgment creditors should be forced to pay for, and does not establish a basis upon which an instalment order should be made. The comments by McDougall J concerning breadwinners do not in my view have any relevance to the factual circumstances present in this case.
The determination of this motion requires the court to seek to balance, in its discretion, the competing interests of both parties. After much thought I have concluded that the application of the judgment debtor should be dismissed. In the absence of evidence from the "friendly creditors" as to the terms and conditions of the credit facility advanced to the judgment debtor, I am unable to conclude that there is a realistic possibility that the entirety of the judgment debt and the interest that continues to accrue thereon could be ever be paid by instalments. In reaching this conclusion I have borne in mind the fact that the judgment debtor has made 3 instalments to date. I have also had regard to the overall parlous state of the judgment debtor's financial circumstances as deposed in his affidavit evidence, and to my view that such affidavit evidence on close scrutiny, demonstrates a significant deterioration in the judgment debtor's circumstances over recent months. The evidence simply does not allow me to conclude that the making of an instalment order would, in the long term, be other than futile. Even if I were to be in error as to these aspects, I am not satisfied that a period of between 3 and 4 years for payment of the judgment debt is a reasonable one especially given the amount of the debt itself. On this basis alone, it would not be proper in the circumstances of this matter for an instalment order to be made. In addition, I have had regard to public policy considerations and particularly to the need for successful litigants in hard fought litigation to enforce without undue delay the "fruits of their success".
As referred to earlier, on 15 May 2014, and with a view to obviating the need for any further court appearances by the parties, I invited them to make submissions as to costs, those submissions to be considered by me depending on the ultimate decision I reached in respect of this motion. The parties provided me with written submissions both as to the question of costs and dealing with an order sought by the judgment creditors that the judgment debtor be prevented from seeking any further stays of execution. Those submissions have been carefully considered. Costs should follow the event and the judgment debtor will be required to pay the judgment creditors' costs of the motion. Mr Lichtwark has sought an order that those costs be paid on an indemnity basis. A review of the law relating to the award of indemnity costs as set out in paragraph [8-0090] of the Civil Trials Bench Book published by the Judicial Commission of New South Wales indicates the following matters of general principle (so far as they relevant to this matter):
i. The courts power to award costs on an indemnity basis derives from section 98(1)(c) of the Civil Procedure Act.
ii. Caution should be exercised by court in making an order for indemnity costs: Leichhardt Municipal Council v Green [2004] NSWCA341.
iii. While there appears no fixed rule or rationale as to when the discretion to award indemnity costs might be exercised it requires a sufficient or unusual feature to justify it: Harrison v Schipp [2001] NSWCA 13; Colgate-PalmoliveCo v Cussons Pty Ltd (1993) 46 FCR 225.
iv. Indemnity costs are compensatory and not punitive: Hamod v State of NewSouth Wales (2002) 188 ALR 659.
v. A formal warning of an intention to claim it indemnity costs will make the awarding of them are more likely: Huntsman Chemical Co Australia Pty Ltd vInternational Pools Aust Pty Ltd (1995) 36 NSWLR 242.
vi. An order for indemnity costs should remain exceptional.
vii. The discretion to award costs on an indemnity basis is most often exercised where offers of compromise pursuant to the Uniform Civil Procedure Rules or Calderbank v Calderbank [1975] 3 All ER 333 have been made.
I am not satisfied that these proceedings and the conduct of the parties to them are sufficiently exceptional or unusual as would warrant an order for indemnity costs being made. I note that no offer of compromise or Calderbank offer was apparently made, and further that the application as put by the judgment debtor was seeking to restore the terms of an instalment order that had been previously made by an officer of the court. An order for indemnity costs is not to be used as a punishment for the losing party. This is particularly so in circumstances where that losing party did no more than exercise rights that are provided to him pursuant to the Uniform Civil Procedure Rules. An order for costs to be paid on the ordinary basis is appropriate. An order has also been sought by the judgment creditors that no further stay of execution is granted to the judgment debtor. The making of such an order would in my view be exceptional, and the court would not lightly limit the rights of a party in the manner suggested. I am not satisfied that this is an appropriate case for such an order to be made. I also remain to be convinced that the rule relied upon by the judgment creditors in support of this order, being rule 2.1, would entitle the court to so severely limit the rights of a party to proceedings.
ORDERS
The Orders of the court will be:
(1) The Notice of Motion filed 25 March 2014 is dismissed.
(2) The judgment debtor is to pay the judgment creditors' costs of the motion on the ordinary basis as agreed or assessed.
Magistrate Christopher O'Brien
Downing Centre Local Court
22 May 2014
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Decision last updated: 03 July 2014