Perkins v Harris
[2001] FMCA 19
•20 March 2001
FEDERAL MAGISTRATES COURT OF AUSTRALIA
Kevin Perkins v Arthur Harris [2001] FMCA 19
BANKRUPTCY – Bankruptcy Notice – Notice under s.41(5) – Adequacy of Wording – Requirement for both orders for costs and Certificate of Taxation to be annexed – Set Off – Calculation of Interest – Mis-statement – Section 306(1)
Bankruptcy Act 1966 ss41(5), s41(6A), s41(7), s306(1)
Legal Profession Act 1987 (NSW) s208J(2), s208JA(4),
Federal Magistrates Act 1999 Cwth s3(2)(a), (b)
CASES REFERRED TO Lang v Kirkness SCNSW 110 69/97 Harrison M, Seovic Civil Engineering Pty Ltd v Groeneveld [1999] FCA 255, re Brink; ex-parte Commercial Banking Co of Sydney Limited (1980) 44 FLR 135 at 142, re Scerri (1998) 82 FCR 146, Commonwealth Bank of Australia v Horvath [1999] FCA 143, re Crump; ex-parte Crump (1891) 64 LT 799, Re Cartwright; ex-parte Cartwright v Barker (1975) 1 WLR 573, Wilmot v Buckley (1984) 2 FCR 540, American Express International Inc. v Held (1999) 87 FCR 583.
ApplicantKevin Perkins
Respondent: Arthur Harris
File No:SZ165 of 2000
Delivered on: 20 March 2001
Delivered at: Sydney
Hearing Date: 19 March 2001
Judgment of:
REPRESENTATION:
Solicitors for the Applicant: Douglas Knaggs
Counsel for the Respondent: Paul Bolster
Solicitors for the Respondent: Verekers
ORDERS:
The Bankruptcy Notice dated 10 August 2000 be set aside.
The Respondent pay the Applicant’s costs.
IN THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
REGISTRY
No SZ165 of 2000
Kevin Perkins
Applicant
and
Arthur Harris
Respondent
REASONS FOR JUDGMENT
This application is only the latest in a series of skirmishes between the applicant and the respondent which commenced well over a decade ago when the applicant published a book entitled "The Gambling Man". Parts of that book were the subject of legal proceedings between the parties and awards of damages and costs were made against the applicant in favour of the respondent.
On 10 August 2000 Mr Harris, the respondent creditor, issued a Bankruptcy Notice against Mr Perkins, the applicant debtor. It was served on 28 October 2000. Paragraph 1 of the Notice claims that the debtor owes the creditor the sum of $14,917.73 as shown in the schedule. Paragraph 2 states:
“The creditor claims that the debt is due and payable by you. A copy of the judgment or order relied upon by the creditor is attached. At the time of applying for this Notice, execution of the judgment or order had not been stayed.”
The schedule is in the following form:
| Column 1 | Column 2 |
| 1. Amount of judgment or order | $22,199.35 |
| plus 2. Legal costs if ordered to be paid and a specific amount | NIL |
| Plus 3. If claimed in this Bankruptcy Notice, interest accrued | $7,145.15 |
| 4. Subtotal | $29,344.50 |
| Less 5. Payments made and/or creditors allowed since date of | $14,426.77 |
| 6. Total debt owing | $14,917.73 |
(NB: Amounts, where applicable, are to be inserted in Column 2.)
Note 1 to the Schedule states:
“Legal costs (item 2 of the Schedule)
If legal costs are being claimed in this Bankruptcy Notice, a certificate of taxed or assessed costs in support of the amount claimed must be attached to this Bankruptcy Notice.”
Note 2 of the information notes states as follows:
Interest accrued (item 3 of the Schedule)
If interest is being claimed in this Bankruptcy Notice, details of the calculation of the amount of interest claimed are to be set out in a document attached to this Bankruptcy Notice. The document must state:
(a) the provision under which the interest is being claimed; and
(b) the principal sum on which, the period for which, and the interest rate or rates at which, the interest is being claimed.
(NB: if different rates are claimed for different periods, full details must be shown)”
The Schedule of Interest claimed is as follows:
“Interest is claimed pursuant to Section 95 of the Supreme Court 1970 on the judgment sum as follows:
Principal: $22,199.35
Periods and rates:
(i)1 May 1977 – 31 August 1997 @10.5% = $785.49,
(ii)1 September 1997 – 31 August 1998 @10% = $2,219.94,
(iii)1 September 1998 – 29 February 2000 @ 9.5% = $3,160.52
(iv)1 March 2000 – 8 August 2000 @ 10% = $979.20;
(v)Total = $7,145.15.”
There was annexed to the Bankruptcy Notice a document entitled “Certificate of Taxation” dated 30 April 1997 and sealed with the seal of the Supreme Court of New South Wales. That certificate stated:
“I certify that pursuant to an order made on 6 June 1994 the party and party costs payable by the claimant, Kevin Perkins, to the opponent, Arthur Harris, has been taxed and allowed at $22,199.35.
Dated: 30 April 1997
Signed: Taxing Officer”
When Mr Perkins received the Bankruptcy Notice he completed a document entitled “Application to Set Aside Bankruptcy Notice” in Form 5 of the Federal Court forms. That form is divided into two halves so that the applicant can indicate by ticking the relevant box or boxes the application which he is making. On the left hand side reference is made to applications under s.30, 41(6A) of the Bankruptcy Act and on the right hand side application under s.41(7) of the Bankruptcy Act. Mr Perkins who at that stage was acting in person ticked the box on the right hand side and completed that part of the form. Mr Perkins swore an affidavit giving the grounds under which he was making the application. In that document he states:
“To Arthur Harris:
I Kevin, Perkins, pursuant to s.41(5) of the Bankruptcy Act 1966, give you notice that I dispute the validity of the Notice on the ground that you have misstated the amount in fact due to you. Further, I have commenced proceedings against Mr Harris for defamation in the Supreme Court (No 20631 of 2000 and I have a setoff in respect of the proceedings in the claims made by Mr Harris.”
A close reading of this form would indicate that Mr Perkins ought to have completed both boxes and possibly completed the claim for interlocutory relief in relation to the application under s.41(6A). However, this was not argued before me and an extension of time for compliance of the Bankruptcy Notice was automatically given in relation to the application under s.41(7) which was articulated by Mr Perkins although not argued in any detail before me.
Mr Perkins filed affidavits on 20 November, 8 December and 13 December 2000. In paragraph 3.6 of 20 November affidavit he makes reference to the mis-statement of interest in the Bankruptcy Notice and in his affidavit of 13 December 2000 he expands that in considerable detail. By that stage Mr Perkins appears to have had a solicitor, Mr J Leary, but the style of the affidavits would tend to indicate that they were probably drawn by Mr Perkins himself.
When the matter came before me Mr Douglas Knaggs appeared on behalf of the applicant and he sought leave to file an amended application to set aside the Bankruptcy Notice. I reluctantly granted that leave over the objections of Mr Bolster who appeared for the respondent. I took the view that it was important that all the relevant issues be before the court in an appropriate manner and that the Federal Magistrates Court, whilst being sensible of the requirements to comply with the Bankruptcy Act as interpreted by the Federal Court of Australia, should comply with its objects found in the Federal Magistrates Act 1999 s3(2)(a) and (b) to enable the court to act as informally as possible and to use streamlined procedures.
The amended application referred to the supplementary affidavit of the applicant dated 20 November 2000, to the overstatement of interest and that the Bankruptcy Notice should have been accompanied by a copy of the judgment or order relied upon in the Notice.
Mr Knaggs gave what I thought was a concession that he was not really pursuing all the matters dealt with in the November 20 affidavit (possibly because he felt he had a very strong case on the two remaining matters) and with the exception of the alleged cross-claim there was no mention of them before me.
In respect of the claim under s.41(7) I informed Mr Knaggs that given the fact that the judgment relied on arose out of proceedings in which an order was made on 6 June 1994 I would be reluctant to set aside the Bankruptcy Notice because of a cross-claim constituted by defamation proceedings commenced in 2000. As things have transpired it is not necessary for me to give a decision in relation to that matter.
I deal with each of the remaining points in turn.
INTEREST
Mr Knaggs’ submission is simple. He says the calculation of interest is patently incorrect because whilst the creditor acknowledges the existence of a set off he makes no allowance for it when calculating the interest due but has calculated the interest on the whole of the judgment debt.
Mr Bolster argued that the set off represented assessed costs awarded to the applicant which had not, at the time the Bankruptcy Notice was issued, been registered with the Local Court. He submitted that the effect of the Legal Profession Act 1987 s.208JA(4) was that the certificate of assessment did not operate as a debt until it was registered “in the office or registry of a court having jurisdiction to order the payment of that amount of money.”
It is clear that no interest runs on the certificates of assessment until they are filed in the appropriate court (Lang v Kirkness SC NSW 110 69/97 Harrison M) but that is not really the point in issue in these proceedings. What is in issue is whether or not the certificate of assessment is a debt even though it cannot be enforced as if it were a judgment until it has been registered.
It is my view that s.208JA(4) is merely an enabling section. Although it would be foolish and unnecessary to do so, I can see no reason why the holder of such a certificate could not sue for the money which a costs assessor indicates in his certificate represents the assessed costs. I believe I am supported in this by the terms of s.208J(2) which states:
“In the case of an amount of costs that has been paid, the amount (if any) by which the amount paid exceeds the amount specified in any such certificate may be recovered as a debt in court of competent jurisdiction.”
In the instant case the existence of a debt arising out of the certificate of assessment appears to have been acknowledged by the respondent. It gave the applicant credit for the amount of the certificate when making the calculation of the principal amount payable under the Bankruptcy Notice. But the respondent did not indicate the date from which the set off was given and proceeded to calculate interest on the whole of the amount of the taxed costs from the date of the certificate of taxation up until the date of the issue of the Bankruptcy Notice. It then deducted the amount of the set off from that final figure.
The determination of the costs assessor of the set off costs was actually made on 17 March 1996 and it would appear to me that this is the appropriate date from which the set off should be made. Therefore a correct application of the interest calculations would have interest on the net debt after the set off from 1 May 1997 (the day after the allocator) to the date of the Bankruptcy Notice. If this view is correct then the Bankruptcy Notice contains an overstatement which the applicant has correctly dealt with by giving notice under s.41(5) of the Bankruptcy Act within time.
It was open for the respondent to argue that the decision of the Full Bench of the Federal Court in Seovic Civil Engineering Pty Ltd v Groeneveld [1999] FCA 255 was that the statement made by the debtor in his affidavit in support of the application to set aside that:
“I dispute the validity of the Notice on the ground that you have misstated the amount in fact due to you.”
was insufficient. At paragraph 36 of that Judgment their Honours said:
“The expression “the mis-statement” strongly suggests that the debtor must do more than merely assert that there is a mis-statement in the Bankruptcy Notice. The sub-section requires the debtor to provide sufficient information in the Notice to enable the creditor to identify what is said to be the alleged mis-statement. Only then does the debtor’s Notice displace the general rule established by s.41(5), that the Bankruptcy Notice is not invalidated only by reason that the sum specified therein if the amount due to the creditor exceeds the amount in fact due.”
At paragraph 38 their Honours say:
“This view of s.41(5) of the Bankruptcy Act does not mean that a debtor, who is quite likely to be unrepresented, must identify the mis-statement with complete precision or specify the exact amount of the alleged excess of the claim.”
Their Honours argued that the point of the Notice was to draw the creditor’s attention to the mis-statement and that failure to provide a hint as to the nature of that mis-statement would allow a considerable risk that the debtor would be able to take unmeritorious advantage of minor errors.
In this case the applicant drew clear attention to what the mis-statement was in his affidavit of 20 November 2000 filed a few days after the original affidavit (paragraph 3.6) and went into even greater detail in his affidavit of 20 December. I have already allowed the amended application in in any event, but even if I had not I would have been inclined to give the original notice the “benevolent construction” which their Honours in Seovic borrowed from a decision of Lockhart J in re Brink; ex-parte Commercial Banking Co of Sydney Limited (1980) 44 FLR 135 at 142.
It follows from the above that I find that in this case the applicant has properly identified a mis-statement in the Bankruptcy Notice, has complied with the provisions of the Bankruptcy Act in relation to that mis-statement and, I would add, has convinced me that the mis-statement is one which is likely to mislead or confuse a debtor to whom the Bankruptcy Notice was addressed. This would make the mis-statement one which could not under any circumstances be excused under s.306(1) of the Bankruptcy Act.
REQUIREMENT FOR A COPY OF THE ORDER
The Bankruptcy Notice requires that a copy of the judgment or order relied upon is attached. Mr Bolster argues that this requirement has been complied with by attaching a copy of the Certificate of Taxation. Mr Knaggs disputes this and argues that what is required is a copy not only of the Certificate of Taxation but a copy of the Judgment of the Court of Appeal which ordered that the respondent pay the applicant’s costs to be taxed. Mr Knaggs submits that his authority for this proposal is the case re Scerri (1998) 82 FCR 146 in which he was the instructing solicitor for the successful applicant. Mr Bolster argued that Scerri was not relevant to the instant case because in Scerri no order whatsoever had been attached to the Bankruptcy Notice. I think Mr Bolster is correct in that view.
In Commonwealth Bank of Australia v Horvath [1999] FCA 143 Finkelstein J decided the same problem as is posed here. In paragraph 3 of the Judgment his Honour sets out the statutory basis for the requirement that the order be attached and in paragraph 7 explains why an allocator by a taxing master is not a judgment or order for the payment of money; re Crump; ex-parte Crump (1891) 64 LT 799 and explains that the judgment upon which the debt is founded is the judgment which orders that the costs be paid in the first place. He states in paragraph 7:
“Accordingly, the Bankruptcy Notice is defective in that there was not attached to it copies of the final orders which were the foundation for the debt described in the Notice.”
Having found that the attachment of the Certificate of Taxation was not in itself sufficient his Honour went on to consider whether or not the deficiency might be excused by the use of s.306(1) of the Bankruptcy Act. His Honour found against that proposition following re Cartwright; ex-parte Cartwright v Barker (1975) 1 WLR 573 and Wilmot v Buckley (1984) 2 FCR 540. The decision in Horvath was approved by Kenny J in American Express International Inc. v Held (1999) 87 FCR 583.
Mr Bolster advanced as a reason why I should apply s.306(1) to this case that the debtor could under no circumstances claim to have been confused. It is a submission with which I sympathise but with which Finkelstein J dealt in Horvath at paragraph 11. I can see no reason to depart from the findings in the cases cited and find that the Bankruptcy Notice is defective.
I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of Raphael FM.
Associate
Dated 20 March 2001
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