Re Gold, Patricia Isobel; Ex parte Gold, Patricia Isobel v The Proprietors - Units Plan No. 52

[1996] FCA 111

RE: PATRICIA ISOBEL GOLD; EX PARTE PATRICIA ISOBEL GOLD

CATCHWORDS

BANKRUPTCY - Annulment of Bankruptcy - claimed annulment for miscellaneous impropriety - annulment for fraud - grounds for annulment not demonstrated.

REAL PROPERTY - Unit Titles Act (ACT) - alleged contractual character of statutory provisions - alleged breach of contract by body corporate - refusal to pay properly levied fees not justified.

Bankruptcy Act 1966 (Cth), s153B

Unit Titles Act 1970 (ACT), s48

Wentworth v Rogers (No 5) (1986) 6 NSWLR 534

RE: PATRICIA ISOBEL GOLD; EX PARTE PATRICIA ISOBEL GOLD

NO AB 158 of 1993

FINN J

CANBERRA

29 FEBRUARY 1996

IN THE FEDERAL COURT OF AUSTRALIA )

GENERAL DIVISION )

BANKRUPTCY DISTRICT OF THE AUSTRALIAN CAPITAL TERRITORY )

No. AB 158 of 1993

RE: PATRICIA ISOBEL GOLD

A Bankrupt

Ex Parte: PATRICIA ISOBEL GOLD

Applicant

THE PROPRIETORS - UNITS PLAN NO 52

First Respondent

MR BARRY A TAYLOR

TRUSTEE IN BANKRUPTCY

Second Respondent

COURT: FINN J.

PLACE: CANBERRA

DATE: 29 February 1996

MINUTES OF ORDER

THE COURT ORDERS THAT:

The application be dismissed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA )

GENERAL DIVISION )

BANKRUPTCY DISTRICT OF THE AUSTRALIAN CAPITAL TERRITORY )

No. AB 158 of 1993

RE: PATRICIA ISOBEL GOLD

A Bankrupt

Ex Parte: PATRICIA ISOBEL GOLD

Applicant

THE PROPRIETORS -

UNITS PLAN NO 52

First Respondent

MR BARRY A TAYLOR

TRUSTEE IN BANKRUPTCY

Second Respondent

COURT: FINN J. 

PLACE: CANBERRA  

DATE: 29 February 1996

REASONS FOR JUDGMENT

This case had its genesis in mid-1985 in the circumstances in which a new manager of the Proprietors of Units Plan No 52 ("the first respondent") was appointed by its body corporate members. Mrs Gold ("the applicant") objected

then to the manner of that appointment. Her objection has not abated over time. Regrettably, it committed her to a course of action which she mistakenly believed would result in her objection being fully and properly ventilated. It has in fact resulted in a sequestration order being made against her. It is the making of that order which she now challenges under the Bankruptcy Act 1966, s153B. As I will indicate, there is no available ground open to me which would justify acceding to this application. I would add that the time has long since passed for Mrs Gold to be able to challenge the real cause of her grievance by other - and I would add appropriate - means.

I mean no disrespect for Mrs Gold at all when I say that her perseverance in defending the various proceedings brought against her has, in my view, been the result of considerable misapprehension on her part of what she could achieve through such defence. She has, in the main, acted without legal advice or representation - though in the particular litigation which founded the debt giving rise to the sequestration order she was represented.

Before turning to a narrative of the events leading to this application I should note first the provisions of the Bankruptcy Act 1966, s153B insofar as presently relevant:

If the Court is satisfied that a sequestration order ought not to have been made ... the Court may make an order annulling the bankruptcy.

Chronology

Extensive affidavit evidence to which no objection was taken, was read in these proceedings. In addition, with the acquiescence of the parties represented - the first respondent took no active part in the proceedings - I read the transcripts of, and the judgments delivered in, the various proceedings to which I will later make reference.

In the material she has placed before me, Mrs Gold has given an extensive and in some instances minutely detailed account of the course of legal proceedings between the first respondent and herself. While an understanding of that material is important to an appreciation of the injustice Mrs Gold considers she has suffered - and I express no opinion on that - the material to which reference needs be made in these proceedings falls within a narrow compass given the particular question I am called upon to decide.

As I noted at the outset, the appointment of a new managing agent of the body corporate of which she was a member was the cause of the dispute which has led to Mrs Gold's present plight. In order to have her grievances at that time ventilated she resolved not to pay body corporate levies made on her, her object being to force the first respondent to sue her. It was her expectation that in such proceedings she could have the managing agent's appointment examined.

In proceedings before Magistrate Ward on 21 August 1987 judgment was given against her for $1369.55 in respect of her share of body corporate levies raised under the (then) Unit Titles Ordinance 1970, s38. (I will for consistency refer hereafter to this legislation as the Unit Titles Act 1970 though this involves some anachronism on my part.) The levies had been agreed to by the body corporate in general meeting. No order was made as to costs. In those proceedings Mrs Gold sought unsuccessfully to raise the issue of the appointment of the managing agent. The Magistrate held, in my view correctly, that the levies having been properly made, Mrs Gold as a member was obliged to pay them.

This she in fact did sometime shortly after the Magistrates Court proceedings. Then occurred an event which has had great significance in this matter. In October 1987 the first respondent sent Mrs Gold a letter acknowledging receipt of her $1369.55. As well it claimed costs of $1,836.60 under the Unit Titles Act 1970, s48 in respect of the expenditure incurred by the corporation (ie legal fees) in recovering the levies from her. To anticipate matters, the Full Court of this Court held on 16 August 1993 that the $1,836.60 costs could properly be claimed in that fashion. I should add that those costs were presented to Mrs Gold seemingly in the form of a bill of costs rendered by a firm of solicitors and addressed to the managing agent of the first respondent.

Mrs Gold did not pay these costs ("the s48 costs"). On 2 March 1988, Mrs Gold's counter-claim in respect of the claim heard by Magistrate Ward on 21 August 1987 was heard by the same Magistrate. It is unnecessary here to explore why the two claims were so severed. Mrs Gold's counter-claim was found to have no merit. The Magistrate gave judgment for the plaintiff "on the defendant's counter claim plus costs to be taxed". Mrs Gold, unfortunately, has attributed an especial significance to the order as to costs made here. She regarded such costs as were referred to therein as encompassing the s48 costs, with the consequence that she considered she was under no obligation to pay the latter until they were taxed. She has persisted in this view to this day.

From early 1988 until late 1991 the first respondent continued to claim the s48 costs as also new unit title levy contributions. It then instituted fresh proceedings against Mrs Gold claiming both the s48 costs and unpaid levies of $2,134.00. A claim also was made in respect of interest said to be payable under one of the Articles of the corporation. The later fate of that claim need not be outlined other than to note that on 20 January 1993 it resulted in the award to the first respondent of statutory interest in the sum of $324.78. This sum formed part of the judgment debt founding the sequestration order.

On 24 February 1992 Magistrate Dingwall gave judgment for the first respondent in the sum of $3,970.00 being made up of $1,836.00 (the s48 costs) and $2,134.00 unpaid levies. At that hearing - at which Mrs Gold was legally represented - the attempt again was made to ventilate the legality of the appointment of the managing agent. Further, it was indicated by Mrs Gold's counsel that that appointment would be the subject of proceedings in a higher court. The validity of the body corporate's decisions in making levies, I would add, was conceded by Mrs Gold's counsel.

An appeal against the judgment insofar as it related to the s48 costs was upheld by Higgins J in the Supreme Court of the Australian Capital Territory on 16 October 1992. It is not necessary for me to refer to his Honour's judgment at any length. I should note, though, that at p2 of his Reasons for Judgment, reference was made to an order in earlier proceedings which awarded "Judgment for the plaintiff with costs to be taxed". His Honour went on to observe that, whether or not there was power to make such an order - and this refers presumably to the proceedings before Magistrate Ward on 2 March 1988 - "no costs were ever taxed". His Honour also noted that the entitlement to the costs claimed in the proceedings of 24 February 1992 was by virtue of s48. I should add that the reference made by his Honour at that point in his Reasons to a hearing on 3 December 1991 is to a preliminary hearing by Magistrate Dingwall of (inter alia) the s48 costs claim.

The effect of Higgins J's decision was to reduce the judgment debt to $2,134.00. That sum, plus the award of statutory interest of $324.78 to which I made earlier reference, constituted the judgment debt on which the sequestration order was made by Neaves J on 21 June 1993.

To finish the chronology, on 16 August 1993 the Full Court of the Federal Court reversed the judgment of Higgins J and reinstated the order that Mrs Gold pay the first respondent the s48 costs.

Beyond the above, Mrs Gold in her affidavits has made allegations about the conduct of others associated with this body corporate, about her treatment at meetings and about the failure of the body corporate/managers to act upon or rectify complaints she has made. Whether or not justified, these allegations go some distance in explaining the intensity of Mrs Gold's feelings in this matter. They are, though, not matters upon which I can or should enter upon in these particular proceedings. Whatever their relevance in proceedings which might have been brought to correct alleged maladministration in the affairs of this body corporate (for example proceedings under the Unit Titles Act 1970, S113) - and I express no opinion upon whether such proceedings may have been justifiable - these matters have no demonstrated relevance to the question raised before me.

To this I now turn.

Mrs Gold's Submissions

Written submissions, supplemented by submissions prepared by a friend of Mrs Gold and to which no objection was taken by the trustee, have been provided by Mrs Gold.

Though they traverse a number of matters the actual relevance of which is by no means apparent, the submissions were crystallised during the hearing to a two pronged attack on the making of the sequestration order.

The first attack, which was in the alternative, was that -

(a) the conduct of the affairs of the body corporate in 1985 so breached essential terms and conditions of the "contract" of the body corporate as to give Mrs Gold a legal right thereafter to treat her obligations under the Unit Titles Act 1970 as void; or

(b) the respondent has been fraudulent in its dealings with Mrs Gold in relation to this matter and this fraud vitiates the judgment obtained.

In either case, it is said, Mrs Gold was not, or should not have been placed, under any liability to pay the $2,134.00 body corporate levies.

The second attack is that she was not under any liability to pay the s48 costs until these were taxed and that by claiming them without taxation, the need for taxation being concealed in later proceedings, the award of s48 costs was not only offensive itself, it "tainted" the global claim made on her by the first respondent.

Though I will consider each of these in turn, I should indicate that in neither case has Mrs Gold made good her claim to have the sequestration order annulled.

1. The liability to pay $2134

As I have noted Mrs Gold has sought to evade her liability to pay body corporate levies as such, on alternative grounds. The first of these is that there were in 1985 such breaches by the body corporate of essential terms and conditions of the Unit Titles Act 1970 (and presumably of the Articles) as relieved her of any obligation to pay the levies later voted by the body corporate.

There is no substance in this submission at all. It is the case that the Articles of a body corporate under this legislation have a contractual character: Unit Titles Act 1970, s79(1). It likewise is the case that the Act imposes a variety of duties on a corporation created under it which include a responsibility "for the enforcement of its articles": s36(1)(a). But if a corporation fails to perform that or any other duty imposed by the Act, the Act itself provides the means to redress that failure - and one moreover which is available to each individual member of the body corporate. Section 113 of the Act provides:

113. (1) Where a corporation fails to carry out a requirement or perform a duty imposed on it by this Act, a proprietor or mortgagee of a unit may apply to the Court for an order requiring the corporation or the committee to carry out the requirement or perform the duty, as the case may be.

(2) On an application made under the last preceding subsection the Court may, if it is satisfied that the failure has occurred, make such order as it thinks just.

If, as alleged, "essential terms and conditions" of the Act were breached in 1985 - and I make no finding on this matter - the remedy lay in s113. It most decidedly did not lie in a unilateral denial of responsibility to pay levies which were raised as authorised by the Act itself. A statute is not so contract-like that its obligations can be discharged for breach.

In the proceedings before Magistrate Dingwall on 24 February 1992, Mrs Gold's counsel conceded that he could not question the validity of the decision of the body corporate to raise the levies in question. That concession was a perfectly correct one. It is regrettable that Mrs Gold has not been able to bring herself now to accept this.

Mrs Gold's alternative claim (which only emerged with any distinctness late in her oral submissions) seems to have been directed at the judgment ordering the payment of the levies. As I understood it, this submission would seem to be that the first respondent had conducted itself in a fraudulent fashion towards her in this matter - and the circumstances of the appointment of the managing agent appear to loom large in the charge made here. The consequence of this, seemingly, is that it was improper for the body corporate to take proceedings against her until it had in effect "purged" itself of this fraud by rectifying the wrongs committed in the conduct of the affairs of the body corporate.

If the burden of this submission is that the judgment for the levies was itself obtained by fraud it is clearly untenable. First, as I noted before, the levies were properly conceded to have been validly raised. Secondly, the matters relied upon by Mrs Gold as constituting improper behaviour by the body corporate - and again I need express no opinion on whether it was improper in fact - had been raised in varying ways (if not necessarily comprehensively) by Mrs Gold in the various Magistrates Court/Small Claims Court proceedings which pre-dated the making of the sequestration order. It is the case that the character and complexion attributed by Mrs Gold to actions of other members of the body corporate has changed over time. She admits as much. But she has not here brought forward such "newly discovered" matter as would raise for consideration even the possibility of setting aside Magistrate Dingwall's judgment for fraud: see Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 esp at 537-539.

The fraud claim in any event has not been particularised exactly, neither has it been "established by the strict proof which such a charge requires": Wentworth v Rogers (No 5), above, 538 per Kirby P. It is perfectly evident from a consideration of the Transcript of Proceedings before Neaves J that at that stage the broad character of Mrs Gold's complaints were known and, as Neaves J observed, she "had ample opportunity to raise all these matters": Transcript p21, 21.6.93.

It probably is the case, though, that this fraud submission was merely a reformulation of the submission already considered that the first respondent had so breached essential terms and conditions of the Unit Titles Act 1970 as to disentitle it to claim the levies. I have already rejected that submission.

2. The Tainting Effect of the s48 Costs Award

Mrs Gold's submission here is that, because of the decision of Magistrate Ward on 2 March 1988 that dismissed her counter-claim with "costs to be taxed", (i) she was under no obligation to pay the first respondent's legal fees unless and until these were taxed; and (ii) as the s48 costs were claimed as part of a composite debt of $3,970.00, she was not obliged to pay that debt. The claim for the s48 costs tainted the entire debt sued for.

As I have already noted, the costs claimed by the first respondent were in fact on account of legal fees it incurred in respect of the proceedings on 21 August 1987. Those costs it did not claim from Mrs Gold in virtue of any court order. Rather they were claimed under the Unit Titles Act 1970, s48. It is appropriate here to note that section's terms:

Recovery of expenditure resulting from fault

48. Where a corporation has incurred any expenditure or performed any repairs, work or act that it was required or authorised by its articles or by or under this Act or any other law in force in the Territory to perform, the expenditure, repairs, work or act having been rendered necessary by reason of any wilful or negligent act or omission on the part of, or breach of any provision of its articles by, a member of the corporation, the amount of that expenditure or any money expended by it in performing the repairs, work or act is recoverable by it from the member as a debt.

The Full Court of this Court in its judgment of 16 August 1993 held that legal costs incurred could constitute "expenditure" within the meaning of the section and that, if the other requirements of the section were met, could create "a statutory debt for which a member is liable as soon as the amount of the body corporate's expenditure has been ascertained": Reasons for Judgment, p7. That expenditure may in fact exceed what would be allowed to the body corporate as costs recoverable from an unsuccessful defendant on a taxation. But the section is not at all concerned with what it may recover under a court order. Its concern is with the recovery of the actual expenditure incurred. In other words, Magistrate Ward's costs order of 2 March 1988, even assuming it applied to the proceedings of 21 August 1987, had no relevance to the claim for the s48 costs. Mrs Gold's submission fails for this reason alone.

I would, though, for the sake of completeness make the following observations. First, the sequestration order was not made in respect of the s48 costs. That alone, one would have thought, would have rendered any consideration of them irrelevant to the question whether the order should have been made. On the hearing of the creditor's petition it was plain that the debt was founded on the unpaid levies plus interest. It was these that Mrs Gold then said she was unable to pay "at the moment": Transcript, p17.

Secondly, Mrs Gold has asserted that the costs order of 2 March 1988 has, in fact, been concealed from all courts that have considered the claim for s48 costs. She seems to submit that if they had been aware of the order, the s48 claim would not have been allowed. I have already indicated that the costs order has no bearing on the availability of the s48 claim. I would, though, note again in response to Mrs Gold's assertion of concealment that in his Reasons for Judgment, Higgins J makes direct reference to a costs order. The order

of 2 March 1988 seems to be the only available one to which his Honour could have been making reference.

In the event then Mrs Gold's application must be dismissed. No reason has been made out for annulling the bankruptcy. The administration of her estate must now take its course.

I certify that this and the

preceding 14 pages are a true

copy of the Reasons for Judgment

herein of the Honourable Justice Finn.

Associate

Dated: 28 February 1996

Solicitors for the applicant : P Gold appeared in person

Solicitors for the respondent : Hill & Rummery

Date of hearing : 16 February 1996

Date of judgment : 29 February 1996