Re Gibbs; Ex parte Triscott
[1995] FCA 1016
•7 DECEMBER 1995
CATCHWORDS
BANKRUPTCY - application to set aside bankruptcy notice - bankruptcy notice founded on a certificate of taxation of costs issued following a Queensland Supreme Court order - s 41 requirements as to the form of the bankruptcy notice considered - service of a costs order, taxation having not been completed, is not necessary before execution can issue - a costs order, once taxed, is an order enforceable by execution and accordingly a "final judgment or final order" within s 40(1)(g) - application dismissed.
Bankruptcy Act 1966 (Cth) - s 40(1)(g), 40(3)(b), 41(1), 41(2)
Supreme Court Rules - O 44 r 2(1), O 47 rr 1 3 18 and 20,
O 48 r 1, O 87 rr 13(1) and 16(1), O 91 rr 116 117 118 119 and 121
Cases Followed
Re Doenitz; Ex parte State Government Insurance Office (1977) 45 FLR 198
Cases Not Followed
Re McGregor; McGregor v Clancy & Triado Pty (1991) 100 ALR 431
Re Ravasio; Ex parte Leonard Norman Pty Ltd (1965) 6 FLR 373
Cases Considered
In re Alexander; Ex parte Alexander [1892] 1 QB 216
In re a Bankruptcy Notice [1907] 1 KB 478
In re Binstead; Ex parte Dale [1893] 1 QB 199
Bjelke-Petersen v Warburton [1990] 1 QdR 517
Re Black; Ex parte Jeffery (1932) 4 ABC 157
Re Borg [1965] ALR 926
Cartwright v Barker [1975] 2 All ER 970
Re Crump; Ex parte Crump (1891) 64 LT 799
Re a Debtor [1981] LS Gaz R 631
Farden v Richter (1889) 23 QBD 124
Re Stanton Hayek (1957) 19 ABC 1
Kayo Contractors v Jose Fernandez (1984) 71 FLR 34
Land Credit Company of Ireland v Lord Fermoy [1870] LR 5 Ch App 323
Re McAlister; Ex parte McAlister v Edith Moore (1936) 8 ABC 283
Ex parte Moore; In Re Faithful (1885) 14 QB 627
Re Pannowitz; Ex parte Wilson (1975) 38 FLR 184
Pepper v McNiece (1941) 64 CLR 642
In re Riddell; Ex parte Earl of Strathmore (1888) 20 QBD 512
Shaw v Neale (1858) 6 HLC 580
Re Short, a Debtor [1963] ALR 88
Re Skinner's and Smith's Application (1982) 45 ALR 553
Re Smith; Ex parte Chesson (Hill J, unreported, 26 February, 1992)
Wilmot v Buckley (1984) 2 FCR 540
Re Alan Harry Gibbs;
Ex parte Paul Anthony Triscott
QN 1333 of 1993
Drummond J
Brisbane
7 December, 1995
IN THE FEDERAL COURT OF AUSTRALIA ) No. QN 1333 of 1993
GENERAL DIVISION )
BANKRUPTCY DISTRICT OF )
THE STATE OF QUEENSLAND )
RE:ALAN HARRY GIBBS
Applicant
EX PARTE:PAUL ANTHONY TRISCOTT
Respondent
MINUTES OF ORDER
JUDGE MAKING ORDER: Drummond J
DATE OF ORDER: 7 December, 1995
WHERE MADE: Brisbane
THE COURT ORDERS THAT:
The application to set aside the bankruptcy notice is dismissed.
The applicant pay the respondent's costs of and incidental to the application, to be taxed.
NOTE:Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.
IN THE FEDERAL COURT OF AUSTRALIA ) No. QN 1333 of 1993
GENERAL DIVISION )
BANKRUPTCY DISTRICT OF )
THE STATE OF QUEENSLAND )
RE:ALAN HARRY GIBBS
Applicant
EX PARTE:PAUL ANTHONY TRISCOTT
Respondent
CORAM: Drummond J
PLACE: Brisbane
DATE: 7 December, 1995
REASONS FOR JUDGMENT
Mr. Gibbs applies to set aside a bankruptcy notice issued by Mr. Triscott on the ground that he has a counter-claim, set-off or cross-demand of the kind referred to in s. 40(1)(g) the Bankruptcy Act 1966 (Cth). In the course of the hearing, Mr. Gibbs also relied on a number of other arguments to attack the notice. He referred to circumstances in which Mr. Triscott ultimately withdrew a petition founded on his alleged non-compliance with an earlier bankruptcy notice and, as I understood him, contended that the notice was defective in form. Relying on Re McGregor; McGregor v Clancy & Triado Pty. (1991) 100 A.L.R. 431, he submitted that the costs order on which the bankruptcy notice was based was not a "final judgment or final order" within s. 40(1)(g). A question was also raised in argument as to whether the costs order was one which Mr. Triscott was entitled to enforce by execution at the time his bankruptcy notice was issued. The hearing was adjourned part-heard, to give Mr. Triscott an opportunity to answer these new contentions.
The bankruptcy notice is founded on a costs certificate for $3,166.86, issued out of the Supreme Court of Queensland on 24 September, 1992. This certificate was for Mr. Triscott's costs of an appeal by Mr. Gibbs to the Court of Appeal; Mr. Gibbs unsuccessfully sought to overturn the order of the Supreme Court directing payment to Mr. Triscott of money paid into court by Mr. Gibbs in his proceedings for the review of a decision of the taxing officer of the Supreme Court. The taxing officer had taxed Mr. Triscott's original bill of costs against Mr. Gibbs and his company in a solicitor and client taxation at $6,675. On 7 April, 1992, the Court of Appeal dismissed this appeal by Mr. Gibbs "with costs".
Has Mr. Gibbs shown he has a cross-demand?
Mr. Gibbs submits that he has a claim against Mr. Triscott for unliquidated damages for wrongful prosecution which will exceed the amount of the costs certificate. The question for me is whether Mr. Gibbs in his affidavit filed 3 December, 1993, together with the material in his affidavits filed on 15 December, 1993 and 15 February, 1993 that can properly be regarded as supplementing the claims made in his first affidavit, has satisfied me that he has a cross-demand against Mr. Triscott of the kind referred to in s. 40(1)(g) the Bankruptcy Act. If so, the bankruptcy notice must be set aside. If not, Mr. Gibbs' application must fail, in so far as this particular challenge to the notice is concerned.
The basis of this claim is Mr. Gibbs' contention that Mr. Triscott only ever had a retainer from his company, not from Mr. Gibbs personally, and that Mr. Triscott, by pursuing Mr. Gibbs personally for costs, has engaged in conduct that gives rise to Mr. Gibbs' claim against him for malicious prosecution and perjury. The same claim was the subject of District Court proceedings which Mr. Gibbs issued against Mr. Triscott. That Court struck out those proceedings in 1993. Mr. Gibbs' appeal to the Queensland Court of Appeal was unsuccessful. This was an appeal subsequent to the appeal in respect of which the costs certificate the subject of the bankruptcy notice was issued. However, the Court of Appeal reviewed the history of the litigation between Mr. Triscott and Mr. Gibbs and said of the contentions that Mr. Gibbs then made:
"Behind all of the appellant's [i.e., Mr. Gibbs'] arguments presented to this Court was a submission that he was not personally liable for the respondent's original costs bill. He said that the various steps in the proceedings taken against him when he was challenging the basis of the claim, gave rise to his own claims for relief."
And again, at p. 7, the Court said:
"A number of the matters which have been set out above as constituting the basis for the appellant's claims against the respondent emerged only in the course of the appellant's presentation of the arguments to this Court ...
While the appellant may consider himself harassed by multiple proceedings and has opposed them as best he could without the benefit of legal representation, it neither appears from his plaint that he has outlined a sufficiently clear basis for claiming damages under his chosen headings of defamation, malicious prosecution and perjury, nor in his argument has he managed to project a picture of what could be thought of as a legitimate legal complaint even one poorly expressed or incompletely adumbrated. Making all allowances for the fact that the plaintiff was not legally represented and for the fact that the courts are reluctant to shut out parties from a reasonable opportunity to present their cases, the matter remains in a state where the conclusion is justified that it was an embarrassment for the respondent to require him to make a defence against the plaint in the form in which it currently appears. It is an additional consideration that the appellant's arguments in support of his position all appeared to be totally unpromising."
It was not (and could not properly be) suggested that, if he has a cross-demand against Mr. Triscott, it was one which he would have been entitled to raise in the proceedings that were concluded in the Court of Appeal in which the costs order was made on which the bankruptcy notice was founded.
I have read Mr. Gibbs' three affidavits and the written submission upon which he relies. He is relying upon essentially the same claims against Mr. Triscott which he failed to persuade the Court of Appeal had any substance to them. The material upon which he now relies goes nowhere near, in my opinion, identifying any possible basis for any cause of action that might yield Mr. Gibbs any damages against Mr. Triscott. I am thus in the same position as the Court of Appeal in thinking that the matters upon which he wishes to rely are "totally unpromising". Moreover, there is nothing in the material before me anywhere near sufficient to suggest that even if, contrary to what I have just said, Mr. Gibbs might have a claim for damages against Mr. Triscott, it is likely to equal or exceed the amount of the certificate and so be a good answer to the bankruptcy notice.
Mr. Gibbs also complains that Mr. Triscott obtained a default judgment in the Magistrates Court in respect of certain other costs by means of a perjured affidavit. However, this judgment against Mr. Gibbs was later set aside by the Magistrates Court on his own application. Mr. Triscott's conduct with respect to the obtaining of this default judgment is unrelated to the appeal in which the costs order was made that, after taxation, threw up the amount claimed in the bankruptcy notice of concern to me. It is, I think, irrelevant to the question whether Mr. Gibbs has a cross-demand against Mr. Triscott that overtops the amount claimed in the bankruptcy notice. In any event, even if Mr. Triscott's alleged perjury were sufficient to generate a damages claim by Mr. Gibbs against him, there is no evidence before me that could permit of a finding of satisfaction that such damages would equal or exceed the amount of the certificate on which Mr. Triscott relies.
I am therefore not satisfied that Mr. Gibbs has a cross-demand of the kind referred to in s. 40(1)(g).
Is the bankruptcy notice defective in form?
Mr. Triscott's attempt to obtain a sequestration order on a petition founded on an earlier bankruptcy notice demanding payment of this same amount of $3,166.86 failed, in proceedings before Sweeney J. That bankruptcy notice was held to be defective because it described Mr. Triscott's entitlement to the sum in question as an entitlement to the amount of a Supreme Court judgment, when his entitlement was to the amount due in respect of costs under the Supreme Court order once those costs had been quantified by taxation.
If a notice is to satisfy the requirements of ss. 41(1) and (2) as to form, it must correctly identify the source of the applicant's liability to make the payment demanded by the notice. A bankruptcy notice will be bad if it identifies the certificate of taxation, rather than the judgment under which the costs are authorised to be taxed, as the final judgment: Cartwright v Barker [1975] 2 All E.R. 970 and Wilmot v Buckley (1984) 2 F.C.R. 540 at 543. Before the judgment or order of the Court awarding costs can constitute a final judgment or order for the purposes of s. 40, it must be one which the debtor can satisfy by payment, since it is only such a judgment or order in respect of which a notice of the kind referred to in the sub-section can be issued. Until the amount of the costs has been fixed, it is not possible for the debtor to tender an amount which will satisfy his liability to costs under the order. The source of the debtor's liability to make the payment demanded in respect of a judgment or order for costs is the judgment or the order; but because nothing is payable in respect of that liability until the costs have been quantified by taxation, the notice must refer to both the judgment or order and to the taxing officer's determination, if it is to be valid in form.
This notice complies with the requirements of s. 41. It correctly identifies the judgment of 7 April, 1992 as the source of the debtor's liability to pay the amount demanded in respect of costs and it refers to the certificate of taxation that issued pursuant to the judgment on 24 September, 1992. I do not think the notice can fairly be said to have misled the debtor in any relevant respect, even though it did not, in express terms, refer to the amount demanded by the notice as the amount for which the certificate of taxation referred to in the notice had issued.
Was the costs order able to be enforced by execution?
Only a judgment on which a creditor is entitled to issue execution at the time of the issue of the bankruptcy notice can constitute a final judgment of the kind referred to in s. 40(1)(g) the Bankruptcy Act: see Pepper v McNiece (1941) 64 C.L.R. 642 at 657; Re Pannowitz; Ex parte Wilson (1975) 38 F.L.R. 184 at 187-188. It follows that if there was any impediment to Mr. Triscott executing on the costs order, which impediment was not cleared away before the bankruptcy notice was issued, then Mr. Triscott, as a creditor of Mr. Gibbs, would nevertheless not have had an order of the kind referred to in s. 40(1)(g) when the notice was issued.
I have before me a sealed copy of the judgment of the Court of Appeal which is, so far as is relevant, in these terms: "It is this day ordered that the Appeal be dismissed with costs." I also have before me a sealed copy of the certificate of taxation dated 24 September, 1992, which is in these terms: "Party and Party costs of Paul Triscott, Solicitor to be taxed and paid by Alan Harry Gibbs pursuant to the Judgment of the Court of Appeal dated the 7th day of April, 1992. I hereby certify that the above Bill of Costs has been taxed and allowed at the sum of [$3,166.86]."
When execution may issue on a costs order is governed by O. 47 the Supreme Court Rules. Order 47, r. 3 provides:
"A judgment or order for the payment of money to any person, whether by way of debt, damages, costs, or otherwise, may be enforced by writ of fieri facias or writ of elegit, or ..."
Order 47, r. 20 provides:
"Upon a judgment or order for the payment of a sum of money and costs, the party entitled thereto may sue out, at the party's election, either 1 writ or separate writs of execution for the money and for the costs ..."
Form 223 in the First Schedule to Supreme Court Rules is the form, prescribed by O. 48, r. 1 for the purposes of O. 47, r. 3, in which a writ of fieri facias issues by way of execution on a judgment or order for costs. It is in these terms:
"We command you that of the lands, tenements you cause to be made the sum of for certain costs, which by a judgment [or an order] of Our Supreme Court of Queensland bearing date the day of were adjudged [or ordered] to be paid by the said CD to AB, [and which have been taxed and allowed at the said sum, as appears by the certificate of the taxing officer of Our said Court filed the day of ] ..."
It is apparent from the form that before a party who has obtained a judgment or order of the Supreme Court of Queensland for costs in his favour is entitled to execute on the order for costs, he must both obtain the taxing officer's certificate of taxation and file it in the court. This is consistent with O. 91, r. 121, which in terms permits a note of the result of the taxation to be attached to the judgment or order in the case, once the costs have been taxed, a procedure similar to the English practice referred to in Re Crump; Ex parte Crump (1891) 64 L.T. 799. This note, however, must be in Form 513 in Schedule 1, which requires the taxing
officer's certificate to have been obtained and filed before the judgment can be appropriately noted.
A costs order thus only becomes capable of enforcement by execution once the costs have been quantified in accordance with the procedures in O. 91 the Supreme Court Rules.
Pursuant to O. 91, r. 116 the Supreme Court Rules, when the taxation of costs is concluded, the taxing officer must state the result thereof in the form of an allocatur written on the bill of costs or a certificate "as the case may require". Although the Rules and the Schedule of fees to the Rules indicate that a certificate of taxation will not always be required in addition to the taxing officer's allocatur, they do not expressly indicate when an allocatur will suffice and when a certificate is required. An allocatur has the same finality as a certificate in bringing about an end to the taxing officer's functions: see rr. 117, 118 and the proviso to r. 119. Both are equally reviewable by the Court under r. 119. However, the distinction between the taxing officer's allocatur and his certificate appears clearly enough to reflect a practice, identical with the English practice referred to in The Annual Practice 1962, p. 1012, that execution can only issue on an order for costs if, in addition to the allocatur, a certificate of taxation is obtained. The difference between an allocatur and a certificate thus appears to be the traditional one, viz., the allocatur is merely the taxing officer's statement of the amount he considers due under an order for taxation while his certificate is the formal record of that. Cf. Shaw v Neale (1858) 6 H.L.C. 580. An allocatur will suffice if the party liable to pay the costs ordered is prepared to do so voluntarily. But if an order for costs has to be enforced by execution, the obtaining and filing of the certificate of taxation is essential before, in terms of the Rules, execution can issue.
Subject only to the question whether Mr. Triscott was required to serve the appeal court order on Mr. Gibbs before he was entitled to enforce the costs order by execution, once he filed the certificate of taxation dated 24 September, 1992, he would then have been entitled to the issue of a bankruptcy notice. It can be inferred from the fact that Mr. Triscott supported his application for the issue of the notice with an "office copy" of the certificate that the original was filed in the Supreme Court: see O. 87, rr. 13(1) and 16(1).
Order 47, r. 1 the Supreme Court Rules provides, so far as is relevant:
"When any person is by any judgment or order directed to pay any money, whether by way of debt, costs, damages, or otherwise ... it shall not be necessary to make any demand of performance of the judgment or order, but the person so directed shall be bound to obey such judgment or order upon being duly served with the same without demand."
There was no evidence before me at the initial hearing that Mr. Gibbs had ever been served with either the order of the Court of Appeal or the certificate of the taxing officer. The evidence tendered on behalf of Mr. Triscott when the hearing resumed fails to establish such service.
However, counsel for the judgment creditor submitted that, notwithstanding the wording of O. 47, r. 1, it was not necessary for the judgment creditor to serve the debtor with the order or the certificate of taxation before being entitled to proceed to execution on the order for costs. Counsel referred to the annotations to the rule in Queensland Supreme Court Practice , Vol. 1, para. 47.1.1, which appear to support this proposition, even though the order in question was not an order obliging the debtor to pay a particular sum of money, but only to pay costs and so was an order which would only become enforceable once those costs were ascertained. In Land Credit Company of Ireland v Lord Fermoy [1870] L.R. 5 Ch. App. 323, the Court of Appeal held that service of a decree, by which the debtor was ordered to pay a nominated sum by a particular date, with interest and costs, was not a pre-requisite to the issue of a writ of fieri facias. A comparison of the 1870 English Rules referred to in the judgment with the corresponding Queensland Rules confirms that those English Rules, unlike the Queensland Rules, expressly required service of the judgment on the defendant before the defendant would become bound to obey it as a pre-condition to enforcement by contempt; the English rule requiring the endorsement of a memorandum on the judgment warning the defendant of the consequences of non-compliance identified those consequences as liability to process to contempt proceedings: the Queensland rule requires an endorsement warning of liability to general execution which, under Queensland O. 47, rr. 3 to 7, comprehends a wide range of enforcement proceedings, including both execution by fieri facias and enforcement by contempt. Because of the material differences between the English Rules considered in Fermoy and the current Queensland Rules, I do not regard Fermoy as an authority for the proposition that service of the appeal court order here in question on Mr. Gibbs was required before Mr. Triscott could be entitled to execute on that order, once the certificate of taxation had been obtained. Nor can the practice referred to in Farden v Richter (1889) 23 Q.B.D. 124 at 128-129 and described in Hopton v Robinson, noted at 23 Q.B.D. 126, justify ignoring any requirement of service that may be imposed by a rule of court. However, Queensland O. 47, rr. 3 and 20 authorises the enforcement of an order for costs by, among other things, a writ of fieri facias and r. 18(1) provides: "A party may sue out a writ of fieri facias ... at any time after the date of the judgment or order in the party's favour", i.e., at any time commencing with the start of the day after the judgment or order was pronounced: Bjelke-Petersen v Warburton [1990] 1 Qd.R. 517 at 522 and O. 44, r. 2(1). This rule, applicable to execution by writ of fieri facias, elegit, capis ad satisfaciendum, possession or delivery, is inconsistent with the general provisions of O. 47, r. 1 being read as requiring service of the judgment or order on the defendant as a precondition to the plaintiff's right to have issued one of this limited range of writs of execution. The annotation to O. 42, r. 1 in The Annual Practice 1962, which is not limited, like its precursor considered in Fermoy, to enforcement by process of contempt and which is in identical terms to Queensland O. 47, r. 1, supports this reading of the Queensland rule. It provides:
"Where there is a direct order to pay money or right to recover money under a judgment or order the practice is well established that a [fieri facias or elegit] may issue immediately and as a matter of course. This Rule does not make service of the judgment or order upon the debtor necessary before suing out the writ under r. 17 ..."
In my opinion, once he perfected the appeal court order and obtained and filed the certificate of taxation, Mr. Triscott was entitled at any time, from and including with the next day thereafter, to enforce the costs order by, among other things, issuing out a writ of fieri facias, even though he may not have served either the appeal court order or the certificate of taxation on Mr. Gibbs.
Was the order for costs a final order within s. 40(1)(g)?
Since this order for costs, once those costs were quantified by taxation, was able to be enforced by execution in the same manner as a final judgment obtained in an action, it was deemed by s. 40(3)(b) to be a final judgment obtained in an action, i.e., it was then an order in respect of which a bankruptcy notice could issue. See Re Skinner's and Smith's Application (1982) 45 A.L.R. 553 at 555. This is sufficient to meet Mr. Gibbs' challenge here. But it is appropriate to explain why I do not think Re McGregor, the decision on which Mr. Gibbs relied, can assist him in his attack on the notice.
That was a case in which solicitors had served a bankruptcy notice on a former client demanding payment of an amount certified by a Deputy Registrar of the Family Court as the balance of costs payable, following a solicitor and client taxation of those costs. It is not a case, like Mr. Gibbs', in which a bankruptcy notice is founded on a taxation of costs under a court judgment or order. Order 38, r. 42(3) the Family Court Rules deemed the certificate of taxation in Re McGregor to be "a judgment for debt immediately due and payable and recoverable in accordance with law" and r. 42(4) authorised the enforcement of payment of the amount specified in such a certificate "as if the certificate were an order made under the [Family Law] Act for the payment of costs of that amount". Einfeld J applied the decision of Clyne J in Re Ravasio; Ex parte Leonard Norman Pty. Ltd. (1965) 6 F.L.R. 373 and set aside the notice on the ground that the taxation could not give rise to a final order because, even though the former client was asserting against the solicitors a counter-claim for negligence by them in the very case in which the costs were incurred, it was not open to him in the taxation to raise that issue. While I do not agree with these reasons, Einfeld J's decision to dismiss the bankruptcy notice was, in my respectful opinion, correct: before a bankruptcy notice can be issued, s. 40(1)(g) requires there to be a judgment or order. There was no judgment or order for costs to support the bankruptcy notice issued here, only a certificate of taxation which, by the relevant Family Court Rules, was deemed to be a judgment. Section 40(3) the Bankruptcy Act extends the meaning of the expression "final judgment or final order" in s. 40(1)(g), but (save for arbitral awards which are, by s. 40(3)(a), covered by the expression "a final judgment or final order" in s. 40(1)(g) the Bankruptcy Act) that sub-section only applies to certain judgments or orders which would otherwise not amount to final judgments or final orders: it does not purport to make something which is not a judgment or order, but which is only deemed to be that, a judgment or order for the purposes of s. 40(1)(g). Cf. In re a Bankruptcy Notice [1907] 1 K.B. 478 at 482. For this reason, I do not accept Re McGregor as authority for the proposition that the costs order on which the bankruptcy notice here in question is founded is not a final order for the purposes of s. 40(1)(g).
Nor do I accept that the decision there relied on, Re Ravasio, is correct in identifying, as an essential characteristic of a final order for the purposes of s. 40(1)(g), that the order must be made in proceedings in which the debtor under the order could, if he wished, have raised a cross-demand. As I have said, it was not suggested that the proceedings in which the order for costs was made by the appeal court against Mr. Gibbs were proceedings in which Mr. Gibbs could have raised a counter-claim or set-off against Mr. Triscott. The authorities are conflicting on whether a costs order made in such proceedings is capable of being a final order for the purposes of the Bankruptcy Act. In my opinion, there is no justification for saying that an order for costs cannot be a "final order" unless it is made in proceedings in which the debtor had the opportunity of raising a cross-demand against the creditor.
Section 40(1)(g) the Bankruptcy Act is based upon the equivalent sections of the English Act. Prior to 1913, the English Act did not contain the words "final order", only the words "final judgment"; these words were strictly construed, and there was a long line of cases decided prior to 1913 as to what constituted a "final judgment", as opposed to a "final order": see Re Pannowitz at 187. These cases show that one of the characteristics of a final judgment was that it was a judgment which finally disposes of the rights of the parties: Re Pannowitz at 189. Another essential feature of a "final judgment" was that it had to be a judgment obtained in an action by which the question whether there was a pre-existing right of the plaintiff against the defendant was finally determined, in favour either of the plaintiff or of the defendant: In re Riddell; Ex parte Earl of Strathmore (1888) 20 Q.B.D. 512. A further requirement of a "final judgment" was identified in In re Binstead; Ex parte Dale [1893] 1 Q.B. 199, where it was held that the expression "final judgment" meant a judgment in an action in which the defendant might have a counter-claim or set-off or cross-demand which could be set up in the action in which the judgment was obtained; there, an order for costs against a co-respondent, included in a decree nisi for dissolution of divorce which had become absolute and in respect of which a certificate of taxation had issued, was held not to be a final judgment, for that reason.
Nevertheless, it was well-established that under the pre-1913 English legislation, an order for costs, once taxed, was within the expression "final judgment", provided it was incorporated in a judgment that was a final judgment in this sense. For example, in In re Alexander; Ex parte Alexander [1892] 1 Q.B. 216, the Court of Appeal held that an order for costs up to and including the trial, made in favour of a successful party, which order was incorporated in the judgment in a partnership dispute, was a "final judgment", even though the accounts and inquiries directed under the judgment had not been completed when the bankruptcy notice in respect of the unpaid costs was issued and even though the costs of the accounts and inquiries were reserved by the judgment. The Court relied upon Ex parte Moore; In Re Faithful (1885) 14 Q.B. 627, a similar case, in which it was held that the order for costs could found a bankruptcy notice on the basis that, if an order for the payment of costs forms part of a judgment which is itself final, the judgment cannot be divided into parts.
The inclusion in the English and the Australian legislation of the words "final order" expanded the operation of the section. Costs orders, once taxed, were held to be final orders: see, e.g., Re McAlister; Ex parte McAlister v Edith Moore (1936) 8 A.B.C. 283. Costs orders, even though not incorporated in an order which could be described as a "final judgment" and even though the proceedings in which the costs order was made were themselves interlocutory, were also held to be final orders: see, e.g., Re a Debtor [1981] L.S. Gaz. R. 631; Kayo Contractors v Jose Fernandez (1984) 71 F.L.R. 34.
However, although s. 52(j) the Bankruptcy Act 1924-1950 (Cth) permitted the issue of a bankruptcy notice not only in respect of final judgments but also in respect of final orders, Clyne J in Re Ravasio, applying the view he had expressed in Re Stanton Hayek (1957) 19 A.B.C. 1 and Re Borg [1965] A.L.R. 926, held that an order by the Bankruptcy Court that the debtor pay the petitioning creditor's costs of the creditor's dismissed petition for a sequestration order was not a final order and so could not, when taxed, found a bankruptcy notice. His Honour applied the pre-1913 English authorities on the meaning of "final judgment" and held that a final order had to have the same characteristics of finality required of a judgment if it were to be a "final" one; this meant that for an order to be final, it also had to be an order made in proceedings in which a previously existing liability of a defendant to a plaintiff was established and in which the defendant had the opportunity of setting up a counter-claim, set-off or cross demand. Riley J adopted this approach in Re Pannowitz.
In Re Doenitz; Ex parte State Government Insurance Office (1977) 45 F.L.R. 198, however, Matthews J disagreed with Clyne J and held that an order directing a person to pay a money sum made in proceedings in which that person had no right to raise a counter-claim or set-off against the claimant was nevertheless a final order capable of founding a bankruptcy notice. Matthews J traced the development of the proposition that a judgment would be final only if, among other things, it was made in proceedings in which the defendant had the opportunity to raise a counter-claim or set-off and how that requirement was carried over into the Australian cases. His Honour said, at 202 and 203, that the early English authorities took the question whether a judgment was a final one to be governed by whether it was made in an "action" and that, because an action was usually (but not invariably) a proceeding in which it was open to the defendant to raise a counter-claim or set-off, a judgment could only be a final one if it was made in a proceeding in which the defendant had that opportunity. The emphasis in the old cases on the importance of the proceedings in which the judgment was obtaining being an "action" is understandable: s. 4(1)(g) the Bankruptcy Act 1883 (UK) expressly identified the proceeding in which the final judgment on which a bankruptcy notice was based as an "action". Matthews J said, at 202:
"It seems to me, with respect, that what has happened by way of judicial decision is that something which may normally be associated with or be a common proceeding in an action, namely the setting up of a counter claim, set-off or cross demand, has become the test for determining what is an action."
His Honour disagreed with the appropriateness of that test and said, at 203:
"...It seems reasonable to think that `final judgment' in an action and `final order' in a proceeding are not interchangeable. Although the former would include the latter, the converse does not follow. Particularly is this so when one considers the many proceedings in which a party may not plead a counter claim or set-off.
It seems to me that when the idea of a final order was introduced into the bankruptcy legislation it was intended to make available as acts of bankruptcy or defaults not previously considered as constituting them."
Re Doenitz is consistent with the decisions in Re Black; Ex parte Jeffery (1932) 4 A.B.C. 157 and in Re Short, a Debtor [1963] A.L.R. 88 in which it was held that costs orders which, on the authority of In re Binstead, could not have been final judgments because, being made against co-respondents in divorce proceedings, they were not made in proceedings in which the debtors had any opportunity to counter-claim or set-off, were nevertheless a final judgment in Re Short and a final order in Re Black, within the provisions of the Bankruptcy Act 1924-1930 (Cth) which are substantially the same as s. 40(1)(g) of the 1966 Bankruptcy Act. In Re Black, Lukin J said, at 160-161:
"...The insertion of these further words [viz. `final order'] in the section extends its operation considerably, and a number of judgments in cases decided before the amendment, some of which were quoted and relied upon in the argument before me, have ceased to apply, although some of them are of service here as showing what the Courts considered the attributes of finality to be ...
It will be noted that s. 52(j) contemplates a final order not only in an action but also in a proceeding. A proceeding may mean something as distinct from an action or any step thereunder in which final orders are made for the payment of money. It may also mean a step in an action in which proceeding a final order is made for the payment of money. Sec. 52(j) does not of itself impose any restricted meaning on the word `proceeding' in the amendment, and there appears to be no reason for doing so. ...
An appeal is a proceeding in an action ...
Under the circumstances here obtaining, is Black `a person who is for the time being entitled to enforce a final order for the payment of money' therefore to `be deemed a creditor who has obtained a final judgment within the meaning of this paragraph': s. 52(j)? The order now under consideration was made by the Full Court in regard to the only question in the proceeding before it, that was, as to the right of Jeffery, as co-defendant, to a new trial, and as to the costs of such proceeding. The whole order, in both its aspects, was absolute, unconditional, definite in its terms, independent and unalterable in any other proceeding in the suit, and, as to costs, enforceable by execution."
In Kayo Contractors, O'Leary J, in rejecting an argument that an order that the claimant for worker's compensation pay the employer's costs of an adjournment was, despite taxation, not a "final order" within s. 40(1)(g), said at 38:
"The question is not now to be determined by reference to cases which, in the past, were helpful in considering whether a judgment was a final
judgment within the terms of s. 40(1)(g) of the Act."
In Re Smith; Ex parte Chesson (unreported, 26 February, 1992) although Hill J there found it was unnecessary to reach a final conclusion on the point, he expressed doubts about the applicability of the reasoning of Clyne J in Re Ravasio to the resolution of the question whether a judgment or order was a final one. (Hill J also said that, while he accepted that the result in Re McGregor was the correct one, he had difficulty in accepting some of the comments made by Einfeld J in that case.)
It remains to consider what Einfeld J had to say in Re McGregor to the effect that Wilmot v Buckley supports the view of Clyne J in Re Ravasio that it must be open to the respondent in the proceeding to counter-claim or set-off if the judgment or order determining the proceeding is to be a final one for the purposes of s. 40(1)(g) the Bankruptcy Act. In Wilmot v Buckley a debtor moved to set aside a bankruptcy notice. A Supreme Court judge had dismissed proceedings brought by Wilmot and ordered that he pay Buckley's costs. This oral order was never perfected. The Supreme Court Rules provided that, where proceedings were dismissed with costs and the costs were not paid within four days of the signing of the certificate of taxation of those costs, the party entitled to the costs could enter judgment for them. No such judgment was entered by the judgment creditor either. Beaumont J said, at 543, that if a formal judgment expressing the order of
dismissal is perfected, the entry of judgment for costs under this rule is not required, before execution can issue under the New South Wales Rules of Court for the taxed costs. Costs were, however, taxed and a certificate of taxation issued for the sum in respect of which the bankruptcy notice was issued. The notice made no reference to the judge's order, but claimed the sum as due under certificate of taxation obtained in the Supreme Court of New South Wales. Beaumont J, at 543, held that the notice was bad because the source of the debtor's liability in respect of the debt for costs was not the certificate of taxation referred to in the bankruptcy notice, but the order of the court awarding costs: the notice therefore contained a material omission. His Honour also held that the notice had to be set aside because there was no final judgment or order for the purposes of s. 40(1)(g). The basis for this conclusion appears clearly enough to be that, because the proceedings in which the costs order was made were dismissed and no special order made under the New South Wales Rules of Court to prevent the debtor from bringing fresh proceedings, there was no "final adjudication of the claims made" by the debtor in the proceedings in the Supreme Court and so the order for dismissal and the costs order could not, on the authority of In Re Riddell, be a judgment or order with the necessary finality: at 544. His Honour referred in this context to Re Ravasio, but only relied on it in so far as it held that, for a judgment to be a final one, it had to be made in proceedings brought to determine the validity of a claim that the defendant was under a pre-existing liability to the plaintiff; his Honour said that since the proceedings in which the costs order were made was the hearing of a petition for the winding up of a company, the order dismissing the petition and the order for costs did not have that quality. Beaumont J's reliance on Re Ravasio does not lend any support to the decision, in so far as it holds that an order will be a final one for the purposes of the Bankruptcy Act only if it is made in a proceeding in which the debtor could, if he wished, have counter-claimed or set-off. His Honour also observed that In re Riddell and Re Ravasio had to be read subject to the provisions of s. 40(3)(b) but that the judgment creditor could not rely on that provision because the oral order for costs could, under the New South Wales Rules, only be enforced as a judgment if the order were perfected (or if, without perfecting the oral order, the judgment creditor had relied on the rule empowering him to enter up judgment for the unpaid taxed costs).
None of the conflicting authorities on whether a costs order, to be a final order within s. 40(1)(g), must be made in proceedings in which the debtor could have made a cross-demand against the creditor, if he wished to do so, is binding on me.
I prefer the approach of Matthews J in Re Doenitz, supported as it is by Re Black, Re Short and the comments of Hill J in Re Smith and O'Leary J in Kayo Contractors, to the views of Clyne J in Re Ravasio, Re Hayek and Re Borg, notwithstanding that Clyne J has the support of Riley J in Re Pannowitz and Einfeld J in Re McGregor. The inclusion of the expression "final order" in s. 40(1)(g) gives the section a wider application than earlier provisions that operated only by reference to a "final judgment". The section also acknowledges that a final order can be made in either an action or a proceeding; so even if there is reason for holding that a judgment in an action will only be "final" for the purposes of s. 40(1)(g) if this requirement is satisfied, there is, in my opinion, no justification for holding that an order in a proceeding will be final only if the proceeding possesses a common but not invariable characteristic of an action, viz., that it is a proceeding in which it would have been open to the defendant debtor to have raised a counter-claim or set-off. There is no justification for finding, by reference to cases decided on the bankruptcy statutes when they did not permit a bankruptcy notice to issue in respect of a final order in a proceeding, but only in respect of a final judgment in an action, limitations on the phrase "final order in a proceeding" which was introduced into the Acts to widen their operation. The only limitations on whether an order is a final one are those to be gathered from the words of the section, viz., apart from those judgments or orders treated as final ones by s. 40(3), the order must be made by a court or tribunal in a proceeding between the person who later issues the bankruptcy notice and the person served with it; the order must give rise to an obligation on the part of the person to be served with the bankruptcy notice to pay a sum of money certain in amount so that the debtor will know what he has to tender to satisfy that obligation when served with a bankruptcy notice and it must be final in the sense that it finally disposes of the matter with which it deals, even though it does not dispose of the action or the proceeding in which it was made; it must also be able to be enforced by execution. An application in an action for an interlocutory injunction until trial or earlier order is, in my opinion, a proceeding within s. 40(1)(g); if an order for costs of such an application is made, that will conclude the question who is to bear those costs and such an order is, in my opinion, a final order in a proceeding for the purposes of s. 40(1)(g). An order for costs made on the dismissal of a complaint for a summary offence is, if it can be enforced by process of execution, also a final order in a proceeding. So is an order for costs of an adjournment of the hearing of an interlocutory proceeding in an action.
The judgment of the Court of Appeal finally disposed of the matters in dispute between the parties, i.e., who was entitled to the money paid by Mr. Gibbs into court and who was to bear the costs of the appeal that settled that question. Mr. Gibbs neither made an application to the taxing officer nor an application to a judge in chambers for a review of the taxation. The certificate of taxation thus fixed in a final way the amount of the costs which the appeal court judgment awarded to the judgment creditor. Once the certificate
issued, the costs order became a "final order" for the purposes of s. 40(1)(g).
The application to set aside the bankruptcy notice is dismissed.
I certify that this and the preceding
27 pages are a true copy of the reasons
for judgment herein of the Honourable
Justice Drummond.
Associate:
Date: 7 December, 1995
The applicant appeared in person.
Counsel for the respondent: Mr. P.J. Favell
Solicitors for the respondent: Baker Johnson
Date of Hearing: 9 and 14 December, 1995
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