Medovarski v Rickards (No.2)
[2008] FMCA 1532
•10 November 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MEDOVARSKI v RICKARDS (No.2) | [2008] FMCA 1532 |
| BANKRUPTCY – Application to review registrar’s decision – registrar refused to set aside the bankruptcy notice – whether counterclaim – whether court should go behind the judgment – application dismissed. |
| Bankruptcy Act 1966 ss.41(7) and 40(1)(g) |
| Applicant: | ZLATKO MEDOVARSKI |
| Respondent: | MICHAEL RICKARDS |
| File Number: | MLG 1113 of 2008 |
| Judgment of: | Riley FM |
| Hearing date: | 10 November 2008 |
| Date of Last Submission: | 10 November 2008 |
| Delivered at: | Melbourne |
| Delivered on: | 10 November 2008 |
REPRESENTATION
| Counsel for the Applicant: | In person |
| Counsel for the Respondent: | Mr O.N. Scoullar-Grieg |
| Solicitors for the Respondent: | Rickards Legal |
ORDERS
The application filed on 10 October 2008 is dismissed.
The applicant pay the respondent’s costs of the application to be taxed in default of agreement.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 1113 of 2008
| ZLATKO MEDOVARSKI |
Applicant
And
| MICHAEL RICKARDS |
Respondent
REASONS FOR JUDGMENT
(Revised from Transcript)
This is an application for review of a decision of Registrar Caporale that was made on 29 September 2008. On that date Registrar Caporale dismissed an application to set aside a bankruptcy notice.
The applicant said in his affidavit seeking the setting aside of the bankruptcy notice that it had been served on him on 24 August 2008. In his original affidavit, the applicant asked the court to set aside the existing default order and allow him to defend the claim and counterclaim damages for negligence.
The application to the Registrar said that the applicant had been overcharged for the provision of professional legal services and said that the applicant had instituted proceedings to set aside the bankruptcy notice.
There is also an affidavit sworn on 10 October 2008 where the applicant set out the background to the claim. He said that his house was burnt down, he had trouble with the insurance company, and he retained a firm of Mr Rickards, a solicitor, to represent him. The applicant said that Mr Rickards did not represent him well.
During a mediation with the assistance of Mr Rickards, an offer of $129,000 was made to the applicant. He refused it. Ultimately the matter was resolved, with the applicant being awarded $126,000 by the Insurance Enquiries and Complaints Panel. The applicant said that amount was awarded without the assistance of Mr Rickards.
Mr Rickards was not paid by the applicant. Mr Rickards issued proceedings in the Melbourne Magistrates’ Court. The debtor filed a notice of defence which shows that he was acting in person. The defence did not include any counterclaim. The applicant failed to appear at a pre-hearing conference in the Melbourne Magistrates’ Court on 15 March 2005. Consequently, judgment was entered against the applicant on 15 March 2005. That is, the judgment was entered in default.
The applicant said he did not appear at the pre-hearing conference because he did not know about it. However, that seems unlikely given that the applicant was appearing in person and his address for service was recorded on the defence that he had filed.
The respondent issued a bankruptcy notice on 6 June 2005. Afterwards, the applicant applied for a rehearing of the Melbourne Magistrates’ Court proceeding. That application was filed on 12 July 2005. The debtor was legally represented in that application by the firm McCormick Solicitors from Ballarat.
The application for rehearing was struck out on 12 October 2005. The material before the court does not indicate the reason for that. As noted, the debtor did have solicitors acting for him in connection with that matter. The debtor was asked why it was struck out and he said he did not know.
In any event, a bankruptcy notice was issued almost three years later on 29 July 2008. The debtor acknowledged service of that bankruptcy notice on 24 August 2008. He filed an application in this court to set aside the bankruptcy notice on 12 September 2008 and as mentioned, Registrar Caporale dismissed that application on 29 September 2008. The present application for review of the Registrar’s decision was filed on 10 October 2008.
The bases upon which the court might set aside the bankruptcy notice include that that the debtor has a counterclaim and that the court should go behind the judgment.
As to the counterclaim, the defendant did file a defence but the counterclaim was not expressed in that. The defence says that the plaintiff caused unnecessary delay, incurred unnecessary costs, misled the defendant as to the likely costs of legal fees and so on, but does not indicate that the plaintiff actually owed the defendant any money. It seems to me that on the material that is before the court, there is no proper basis for the conclusion that Mr Rickards owes any money to the debtor.
As to the question of going behind the judgment, it is well established that where there is good reason for doing so, the bankruptcy court may go behind a judgment to see if in truth there is a debt owing. The court is perhaps more inclined to do that where there is default judgment.
There is a default judgment in this case. However, what takes this case out of the ordinary run of cases where there is a default judgment, is that the applicant has already filed an application for rehearing in the Melbourne Magistrates’ Court. The debtor filed that application with the assistance of legal representatives. That matter was struck out on 21 October 2005.
It is not apparent on the material before the court why the application for rehearing was struck out. It is not apparent whether the matter was actually reheard. However, it seems to me that the applicant has certainly had the opportunity to have the judgment on which the bankruptcy notice is founded overturned. The judgment was entered about three and a half years ago. There is no reason why the applicant should not have had that judgment set aside if in fact he had proper grounds for doing so. (Additionally, it seems that he could now seek to leave to set aside that judgment. Whether he gets leave will depend in part on whether he is able to persuade a magistrate that he has reasonable prospects of success.) In all the circumstances, I do not consider that it is appropriate to go behind the judgment in this case.
I do not consider that the applicant has shown any proper basis for the court setting aside the bankruptcy notice. Accordingly, the application filed on 10 October 2008 is dismissed.
Addendum
While settling the oral reasons as set out above, I realised that the counterclaim, set-off or cross demand referred to in s.41(7) and 40(1)(g) of the Bankruptcy Act 1966 must be a counterclaim, set-off or cross demand that the applicant “could not have set up in the action or proceeding in which the judgment or order was obtained”. The applicant’s claim in negligence against Mr Rickards could have been set up in the proceeding in which the judgment was obtained. The applicant’s claim existed at the time that proceeding was on foot and it arose out of substantially the same circumstances as Mr Rickards’ claim. Indeed, the applicant’s affidavit in support of the application for a rehearing says that he asks for the existing default judgment to be set aside and asks to be allowed to defend the claim and counterclaim for damages for negligence. For this reason also, the applicant’s counterclaim argument does not form a proper basis for the setting aside of the bankruptcy notice in this case.
I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of Riley FM
Associate: Alexandra Sidoti
Date: 14 November 2008
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