Re Gardiner, B.G. & anor Ex parte The Debtors

[1992] FCA 401

4 0 1 42

JUDGMENT NO. - -

IN THE FEDERAL COURT OF AUSTUIA )

BANKRUPTCY DISTRICT OF THE	1	NO B 3660 of 1991
STATE OF NEW SOUTH WALES	1

Re :  B E R N A R D G E O R G E

GARDINER & SUSANNE

LEONIE GARDINER

Applicants

Ex Parte:  THE DEBTORS Respondents

EX TEMPORE JUDGMENT

SYDNEY 25 FEBRUARY 1992

This piece of litigation between members of the same family involves the sum of $7574.10. It is not the first time the matter has been before a Court. It is a shameful waste of public money and the Court's time.

On 4 June 1986 judgment was given by the Supreme Court of New South Wales in its Equity Division (the Equity Court) in which there was included an order that the present applicants, who are the debtors in a bankruptcy notice, pay the costs of the present respondents, the judgment creditors. The judgment of the Equity Court was entered on 24 June 1986 and pursuant to the order for costs, a certificate of taxation was issued on

been taxed six months earlier, and seeking a new hearing of	the taxation of costs. By consent, on 22 May 1989 a Deputy
Registrar in Equity ordered that the time for objecting to the taxation of those costs be extended up to and including 29 May 1989. The Deputy Registrar also ordered by consent (the consent orders) that interest should run on what was described as "all disputed items eventually found in favour of the plaintiffs" as from 29 November 1988, and that the applicant debtors pay the respondent creditors' costs of the motion. By the term "all disputed items eventually found in favour of the plaintiff S", the consent orders could only have meant the costs allowed to the creditors in the Equity Court proceedings.
In due course, on 31 October 1990, all of seventeen months after the consent orders, the re-taxing of the bill of costs of the Equity Court proceedings took place. Costs were certified at $21,125.97, or just over $330 less than had been taxed in November 1988. By how much that $330 was less than the costs incurred in the re-taxing exercise can only be a matter for horrified speculation. On the same day, 31 October
were certified in the sum of $518.00. The consent orders were 1990, the costs of the motion settled by the consent orders
also entered on that day.
On 20 December 1990, the judgment creditors issued a bankruptcy notice for these costs against the present applicants as debtors. This notice was set aside by Justice Wilcox on 20 March 1991 with an order that the creditors pay the debtors' costs.
On 17 May 1991 the creditors issued another bankruptcy notice, No B 1667 of 1991. It sought $21,125.97, being the amount certified by the taxing officer on 31 October 1990, together with two amounts of interest. The first of these, $1077.71, was in respect of a period of 98 days, commencing on 22 November 1990. The second interest claim of $728.12 was in respect of a later period not now relevant. The total was expressed in the following tens in that bankruptcy notice:

29 November 1988 in the sum of $21,458.37. Subsequently a

notice of motion was filed by the applicant debtors seeking to extend the time for objecting to the bill of costs which had

making a t o t a l due by you o f $22,931.80 and no more

t o the judgment c r e d i t o r s under a f i n a l judgment o r

f i n a l o r d e r for c o s t s ob ta ined by the judgment

c r e d i t o r a g a i n s t you i n t h e Supreme Court o f New

Sou th Wales , Sydney R e g i s t r y , Egui t y D i v i s i o n , such

o r d e r b e i n g made on 4 June 1986, b e i n g t h e costs

c e r t i f i e d a s t h e p l a i n t i f f ' s c o s t s i n C e r t i f i c a t e o f

Taxa t i on da t ed 31 October 1990.

The underlining is mine. That bankruptcy notice was disposed of by payment on 27 September 1991 of the total sum claimed in the notice.

Another bankruptcy notice, the one now before the Court, No	3660 of 1991, was issued and dated 9 October 1991, some twelve
days after the payment of the earlier one. The debtors now seek to set aside this bankruptcy notice. It claims the sum of $7574.10 which is described as being:

. . . the interest o n l y due t o the Judgment C r e d i t o r s

i n r e s p e c t o f the sum o f $21,125.97.

The underlining appears in the notice as shown. There then follows the calculation of the sum of $7574.10. There are four periods of interest mentioned.

The first is 29 November 1988 to 28 February 1989, said to be a period of 92 days. The commencing date was, of course, the date of the first but aborted certificate of taxation and the date from which interest on the costs allowed on taxation was to be calculated by reason of the consent orders.

The second period is 28 February to 31 August 1989 said to be a period of 183 days. It will first be observed that the opening date, 28 February 1989, is mentioned in both of the first two periods and this is obviously impermissible. The second erroneous aspect of this claim, according to the debtors, is that the period including 28 February is 185 days, not 183 days. In fact if the period commences, as it should, from 1 March, it would be 184 days on the debtors' calculations. I have myself not checked the number of days

assertions.	but no objection has been taken by the creditors to these
The third period is 1 September 1989 to 31 August 1990, clearly one whole year of 365 days, which is quoted as 336 days. The fourth period is from 1 September 1990 to 22 November 1990 said to be 81 days which the debtors say is 83 days. More importantly, as has been seen, 22 November 1990 was actually the commencing date of the interest claimed in

the bankruptcy notice No B 1667 of 1991 which was paid in full on 27 September 1991. Thus the last day to which that claim could legitimately have been was 21 November 1990 which would, on the debtorst calculations, have been an allowable 82 days.

The debtors say that based upon the correct number of days involved for the allowable periods, the correct amount would have been $7,958.42 although that may have to be recalculated down a little for the reasons I have given. The amount involved is nevertheless clearly almost $400 more than the amount claimed in the bankruptcy notice, which goes on after the calculation in the follawing terms:

making a t o t a l o f $7,574.10 d u e by you t o the

Judgment C r e d i t o r s under a f i n a l judgment or f i n a l

o r d e r o b t a i n e d by the Judgment C r e d i t o r s a g a i n s t you

i n the Supreme C o u r t o f New S o u t h Wales , S y d n e y

R e g i s t r y , E q u i t y Division, made on 2 2 May 1989 and

e n t e r e d on 31 October 1990, b e i n g interest only i n

r e s p e c t o f costs i n the sum o f $21.125.97 a s

c e r t i f i e d a s the	P l a i n t i f f ' s	costs	i n C e r t i f i c a t e o f
T a x a t i o n d a t e d	31	O c t o b e r ,	1990.

Again the underlining appears in the notice.

The New South Wales Supreme Court Act 1970 provides in section

Where judgment i s g i v e n or a n o r d e r i s made f o r the

payment o f money, interest s h a l l , u n l e s s the C o u r t

o t h e r w i s e o r d e r s , be p a y a b l e a t the p r e s c r i b e d r a t e

from the d a t e when the judgment or o r d e r t a k e s

e f f e c t on so much o f the money a s i s from t i m e t o

t i m e u n p a i d .

Part 40 rule 3 of the Supreme Court rules says in subrule 1 that where a judgment is given in Court, it shall take effect as of the date on which it is given. Otherwise it takes effect as of the date of entry. Subrule 3 provides that subject to subrule 1, an order shall take effect as of the date on which it is made. Subrule 4 says that where an order of the Court directs the payment of costs to be taxed, the order shall take effect as of the date of the certificate of taxation. Subrule 5 provides that the Court may nonetheless order that a judgment or order shall take effect on a different date either earlier or later than the date fixed by

the rules. I presume that "the Courtu includes a Registrar.

It is submitted on behalf of the creditors that the effect of these statutory and regulatory provisions is that the order for costs made by the Equity Court on 4 June 1986 did not take effect until the certificate of taxation of 31 October 1990. It is said that so far as interest is concerned, the consent orders mean that interest on the taxed costs, which would	otherwise commence to be payable from that certificate of	taxation, in fact commenced to be payable from 29 November
1988.
The concept that interest should ordinarily only run from the date of the certificate of taxation militates in favour of delay by the person ordered to pay costs. It also would tend to increase substantially the occasions on which an unsuccessful party would require the successful party to go to
taxation rather than to assess costs by agreement. This might explain why there is such a long delay in getting appointments for taxations of costs. In this case it was not possible to obtain an effective certificate of taxation until more than four years after the completion of the litigation in which the order for costs was made.
The debtors say firstly that the payment in full of the earlier bankruptcy notice No B 1667 of 1991 denies the creditors the right to issue the present bankruptcy notice. They argue that the use of the words "and no more" after the calculation of the two periods for interest and of the words "final judgment or final order for costs obtained by the judgment creditor against you in the Supreme Court...on 4 June
1986 being the costs certified as the plaintiffs' costs in
Certificate of Taxation dated 31 October 1990n, effectively means that the amount claimed in the present bankruptcy notice has been waived.
orders on which the amounts in dispute are based are different The creditors reply that a waiver cannot apply where the
orders. The amount presently claimed is based upon the consent orders of 22 May 1989 whereas the earlier bankruptcy notice was based upon the order of the Equity Court made on 4 June 1986 and entered on 24 June 1986. Both of these "orders" describe the amount on which the interest is calculated as the same figure and they both announce that the costs were certified in the same certificate of taxation.
In Re The Bankru~tcv Act 1966: Ex Darte Commercial Bankinq Com~anv of Svdnev Limited [l9791 23 ALR 522 at 528 Justice Lockhart, in dealing with a notice in similar form to the notice No B 1667 of 1991 so far as it used the words "and no more" in respect of the alleged debt, said this:

In m y opinion a judgment d e b t o r r ead ing t h e n o t i c e would

conclude t h a t whether he owed t h e judgment c r e d i t o r more

than t h e t o t a l sum mentioned i n t h e bankruptcy n o t i c e or

n o t , a l l t h a t was be ing claimed from him was the t o t a l

sum s p e c i f i e d and t h a t , i f t h e r e were any f u r t h e r sums

due, t h e y were b e i n g claimed no l onger .

I respectfully agree with his Honour's assessment.

The second submission of the debtors was that the sum of $21,125.97 did not relate to what is described in the bankruptcy notice as the final judgment or the final order obtained by the creditors in the Equity Court on 22 May 1989 and entered on 31 October 1990, but that in fact this was a judgment or an amount that was due pursuant to the order of

effectively no difference between the current bankruptcy	the Equity Court in June 1986. In other words, there is
notice and the one that was paid out, No B 1667 of 1991.
The debtors further say that the consent orders were interlocutory and were therefore not final orders as required by section 40(l)(g) of the Bankruptcy Act 1966 as further expanded or interpreted by section 40(3)(b). The creditors reply that, because of the Supreme Court Act and Rules, interest would not have been payable from November 1988 were it not for one of the consent orders. Their submission is that in fact this was a distinct and final order made by a Deputy Registrar, not the judge who heard the first case, and was in a completely separate legal proceeding.
In Wilmot v Buckley [l9841 2 FCR 540 Justice Beaumont held that a certificate of taxation without the entry of a judgment in the action was not a final judgment. His Honour said at 544 that had the judgment been entered, it probably would have been enough to satisfy section 40(3)(b):

The b e n e f i t o f t h i s p r o v i s i o n may have been

a v a i l a b l e t o t h e r e sponden t s i n c e r t a i n

c i rcums tances .	Thus,	i f the responden t had	caused	a
formal	judgment	e x p r e s s i n g	t h e o r d e r s made	by Rath

J . on 2 J u l y 1982 t o be drawn up, s e a l e d and

e n t e r e d , t h e n , s u b j e c t to f i l i n g an a f f i d a v i t under

P t 44 , r. 7 , they cou ld have l e v i e d e x e c u t i o n a g a i n s t

the a p p l i c a n t . . . That would have enabled the

re sponden t s t o rely upon S . 40 ( 3 ) (b) o f the A c t upon

the f o o t i n g t h a t t h e o r d e r f o r costs should be

t r e a t e d a s i f it were a s e p a r a t e judgment. I t would

have been deemed t o be a f i n a l judgment and t h u s

a v a i l a b l e to be r e l i e d upon a s such provided f i r s t ,

the	judgment	o f	19	J u l y	1982	h a s	been	e n t e r e d ;
s econd l y ,	the	c o s t s had	been	taxed;	and	t h i r d l y ,	a s

C a r t w r i q h t ' s c a s e shows, t h e n o t i c e a c c u r a t e l y

de sc r ibed t h e source of t h e a p p l i c a n t ' s l i a b i l i t y .

In Re Allen Lawrence McGreaor: Ex uarte Clancv & Triado Pty (unreported 28 February 1991), I agreed with Justice Beaumont's conclusions but it seems to me that the circumstances of Wilmot v Bucklev and McGrecror are different to the present case in a significant way. What the creditors say here is that the entry of the consent orders on 31 October 1990 in effect provides the missing link that might otherwise exist in relation to the certificate of taxation.

So far as concerns the debtors' claims that the bankruptcy notice is bad because of the wrong calculation of the amounts due, the creditors merely draw attention to the fact that the error is an understatement and not an overstatement and that it would not on its face confuse the reader as to what was and what was not due. Re Farruaia: Ex Darte DeDUtV Commissioner

of Taxation (NSW1 [l9881 80 ALR 651 was a particular type of understatement case. There a Full Court of this Court

(Sweeney, Lockhart and Burchett JJ) held at 653:

If a judgment creditor chooses to claim interest on a judgment debt it is necessary for the calculation of the claim to be accurately stated in the notice and for the period during which the claim is made to be specified.

Their Honours went on:

It has not to our knowledge been said in any reported case that a bankruptcy notice is defective if the period for which interest on the judgment debt is claimed is specified as terminating on a date earlier than the date on which the bankruptcy

notice is issued.

In Kleinwort Benson Australia Limited v Crow1 [l9881 165 CLR

71 Chief Justice Mason and Justices Wilson, Brennan and

Gaudron, with Justice Deane dissenting, held at 80:

Understatement of the amount due whether it be an understatement of the judgment debt or of interest payable thereon, will thus constitute a defect which is substantive rather than formal only if the understatement is objectively capable of misleading the debtor as to what is necessary for compliance with the notice.

This bankruptcy notice therefore falls to be read with notice No B 1667 of 1991, which named, was served on and was paid out by the same persons as those on whom the current bankruptcy notice was served. Looked at objectively, it seems to me that any person reading bankruptcy notice No B 1667 of 1991 and paying the amount sought thereby, would come to the conclusion that what they were doing was paying the costs which had been ordered in and had arisen out of the Equity Court proceedings which concluded in June 1986, and the interest due on that amount. They would also have assumed that what they were doing was paying the costs as certified on 31 October 1990, and that no other sums were being claimed in respect either of the costs or the interest.

The same recipients would be in a highly confused state when, just a few days after paying that claim, they received the present bankruptcy notice claiming more interest, particularly because of the misstatement of days, the miscounting of days in an obvious way, such as one complete year being described

respect of which interest had already been claimed and paid.	as 336 days, claiming one day twice, and including a day in
In that regard, the observations of Justice Lockhart in Commercial Bankina Com~anv are particularly pertinent. I must confess to having been somewhat confused myself, until it was painstakingly explained by counsel.
More importantly, it seems to me that the present bankruptcy notice is significantly misconceived. The order in respect of which costs of $21,125.97 were incurred and paid was made on 4 June 1986. Were it not for the order made by the Court on that day, there would not have even been one taxation let alone two, and no certificate of taxation could have taken effect at all. Yet 4 June 1986, the only particularly relevant date, is not mentioned in the present bankruptcy notice at all.
I doubt that anyone reading that notice would be able to square it with the earlier bankruptcy notice, which mentioned exactly the same figure for costs, but dated it as becoming due and payable from a completely different date. In my judgment therefore the bankruptcy notice is bad and must be set aside.
The question as to whether the consent orders, particularly order 2 which dates back the interest to 29 November 1988, were necessary at all is a fine question, but because of the other conclusions which I have reached, it is not necessary
an order for interest ordinarily is not needed in Supreme for me to pronounce on it conclusively. It seems to me that
Court proceedings where there is no dispute as to the date from which interest shall be able to be recovered.
It is an odd anomaly, and a fairly expensive one to successful parties, not to mention the Court, that interest can only be charged as opposed to be enforced from the date of taxation. In this particular case, for example, the finally enforceable taxation was not completed until almost four and a half years after the date of judgment. As the bankruptcy notices themselves indicate, the pertaining interest rate allowed by the Court on debts in those periods reached a height of 21% escalating from 15%, between November 1988 and 1 September 1989, a period of only ten months. In this period, unsuccessful parties were able to invest at high rates of interest, for their own benefit, money which did not actually belong to them, namely the costs owed to the successful parties awaiting taxation, while ultimately being required to pay the successful parties no interest at all.
In my opinion, the decisions that have held that interest becomes payable, in the sense that it can be added to a judgment for costs, only from the date when the costs are ascertained should be reviewed. It is not necessary that I do so in this case but I express my doubts on the matter in general principle as well as on the proper construction of section 95(1) and part 40 rule 3 of the Supreme Court Rules.
The debtors apply for indemnity costs. In this regard they
have tendered into evidence letters of 25 November 1991 and 21 February 1992 in which their solicitors drew to the attention of the creditors' solicitors the likely failure of the bankruptcy notice presently before the Court. Although dated 25 November 1991, that letter appears to be written on the basis that the present bankruptcy notice had not been issued because it says:

We would be pleased i f you would confirm as a matter o f urgency that your cl ient does not intend t o issue

a further bankruptcy notice.

Perhaps the present bankruptcy notice had not been served by 25 November 1991. Perhaps the writer assumed that the present notice would be withdrawn following the withering assault made on it and what was being sought was an assurance that another would not be substituted. However, the letter also refers to a bankruptcy notice in relation to what it describes as "the certificate of taxation dated 1 August 1989". I know of no certificate of taxation in this matter of that date.

The second letter of 21 February 1992 puts the argument more assertively by describing the present notice as oppressive. This letter outlines more of the arguments that have been put today. These relate to a cross-claim which the present debtors have against the creditors, possibly for the costs ordered by Justice Wilcox. The debtors gave notice in this

possible in these proceedings." They did not specifically	letter that they would seek "costs at the highest level
refer to indemnity costs. They requested that:

"...your cl ient [singular] enters in to a Deed or otherwise acknowledges that i t [ I presume they meant 'they'] w i l l refrain from persisting with t h i s

oppressive course o f Bankruptcy Notices and,

further, that your cl ient [singular], a d m i t s that

a l l matters between the parties are set t led, with

the exception o f the costs orders i n favour o f our
c l ients . . .

in the proceedings before Justice Wilcox, as well as some
other costs which are not presently relevant.

Of course, when that letter was written, this proceeding was already listed for hearing today, four days later. 2 1

February was last Friday. A weekend intervened and no doubt

counsel was already briefed for today's argument. Few costs would appear to have been added by reason of the failure of the creditors to respond to the letter of 21 February in the way requested. Having regard to the long history of litigation and dispute between these parties, I should have thought that using words like "refrain from persisting with this oppressive course of bankruptcy notices" would probably have added to rather than withdrawn fuel from the already blazing inferno that has inflicted the courts with these parties for so long and so often.

In the circumstances it seems to me that there is no warrant for an order for indemnity costs, but I order that the

notice be paid by the creditors.

debtors' costs of the application to set aside the bankruptcy

Following the delivery of this judgment, counsel for the creditors asked me to consider the possibility that my conclusions conflict with those of Justice Wilcox in relation to the earlier bankruptcy notice which his Honour set aside. As promised, I have now read Justice Wilcox's judgment and I can see no conflict at all. His Honour set aside that bankruptcy notice on the grounds that it combined two separate final orders which, as he said, "offends the principle that [it] must refer to only one final judgment or order". I have set aside this bankruptcy notice on quite a different basis. There is no need for anything further to be added or for anything to be reviewed.

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