Re Komesaroff, Morris Ex Parte Law Institute of Victoria
[1996] FCA 327
•8 May 1996
IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT
OF THE STATE OF VICTORIA No VN 1986 of 1995
RE: MORRIS KOMESAROFF
Debtor
EX PARTE: LAW INSTITUTE OF VICTORIA
Creditor
Coram: Olney J
Place: Melbourne
Date: 8 May 1996
MINUTE OF ORDERS
The Court is not satisfied that the judgment debtor has such a set-off, counter-claim or cross demand as is referred to in s 40(1)(g) of the Bankruptcy Act 1966 and orders that:
The judgment debtor pay the judgment creditor's costs of this proceeding.
In the event that a sequestration order is made against the estate of the judgment debtor based on an act of bankruptcy committed by him as a result of his failure to comply with the demand contained in the bankruptcy notice herein, the costs referred to in paragraph 1 of this order be deemed to be costs in the administration of the bankruptcy.
NOTE: Settlement and entry of orders is dealt with in rule 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT
OF THE STATE OF VICTORIA No VN 1986 of 1995
RE: MORRIS KOMESAROFF
Debtor
EX PARTE: LAW INSTITUTE OF VICTORIA
Creditor
Coram: Olney J
Place: Melbourne
Date: 8 May 1996
REASONS FOR JUDGMENT
THE PROCEEDING
On 24 September 1991 the judgment creditor (the Institute) obtained an order for costs against the judgment debtor in the Supreme Court of Victoria in proceeding No 7865 of 1991. The costs were taxed on 13 November 1992 and allowed in the sum of $10,883.80. On 21 August 1995 the Institute caused a bankruptcy notice to be issued in which it claimed the sum of $14,571.88 being the amount of the taxed costs plus $3,688.08 for interest calculated on the sum of $10,883.80 at the rate applicable pursuant to the Penalty Interest Rates Act 1983 (Vic) from 13 November 1992 to 17 August 1995. The bankruptcy notice which required a response from the judgment debtor within 14 days after service was served on 16 October 1995. On 26 October 1995 the judgment debtor filed an affidavit pursuant to s 41(7) of the Bankruptcy Act to the effect that he has a cross demand which he could not set up in the proceeding in which the costs order was obtained. The matter came before the Court on 30 April 1996 for the purpose
of determining whether it is satisfied that the judgment debtor has such a cross demand.
In the affidavit filed pursuant to s 41(7) of the Bankruptcy Act the judgment debtor sought to raise a number of other issues said to affect the validity to the bankruptcy notice but these matters were either not pressed or were abandoned in the course of argument. In the circumstances, no reference has been made to them in these reasons.
BACKGROUND
The judgment debtor is a barrister and solicitor by profession. In 1991 the secretary of the Institute one Cornall refused to issue to the judgment debtor a practising certificate pursuant to s 84 of the Legal Profession Practice Act 1958 (Vic) (the Practice Act). The judgment debtor appealed to the Supreme Court of Victoria pursuant to s 87 of the Practice Act. The form prescribed by Rule 45(3) of the Solicitors' (Audit and Practising Certificates) Rules 1990 for the purpose of instituting such an appeal requires that it be served on the Institute and accordingly the Institute became a party to the appeal (proceeding No 7865 of 1991). On 24 September 1991 Brooking J dismissed the appeal with costs. The judgment debtor then sought to appeal to the Full Court of the Supreme Court but that appeal was incompetent and was struck out with costs. On 25 June 1992 the judgment debtor issued an originating motion in the Supreme Court (proceeding No 7925 of 1992) in which he named the Council of the Law Institute of Victoria (the Council) and Cornall as defendants. The judgment debtor sought declaratory and injunctive relief relating to various matters arising under the Practice Act some of which matters, but not all, had to do with the refusal of Cornall to issue a practising certificate to the judgment debtor for 1991. Subsequently, the judgment debtor issued a further originating motion (proceeding No 8345 of 1994) in which the Council, Cornall and others were named as defendants. In the second proceeding certain further declaratory relief was sought and in addition the judgment debtor claimed "costs of this motion and the loss and damage suffered by him for and in respect of the breach of (certain alleged) duties by each defendant".
The two originating motions were heard together in the Supreme Court by Ashley J over a period of 5 days in November 1995. On 22 December 1995 Ashley J dismissed both motions. The judgment debtor filed notice of appeal against the decision of Ashley J on 18 January 1996. Amongst the orders sought in the appeal is an order that the judgment debtor "is entitled to recover damages and his loss suffered arising from the refusal of the Council and the Secretary to consider the appellant's application for a practising certificate and arising from the breach of the duties of the Council and Secretary". The appeal is yet to be heard.
THE CROSS DEMAND
In his affidavit of 26 October 1995 the judgment debtor asserts that as a result of the refusal of Cornall to issue a practising certificate he (the judgment debtor) has suffered loss and damage by reason of being unable to carry on practice as a solicitor. He claims that his loss of earnings in respect of the years 1991, 1992, 1993, 1994 and 1995 amounted to at least $200,000 which loss and damage he says he is seeking to recover against the Institute and Cornall.
The Institute says that whatever cross demand the judgment debtor may be seeking to pursue in the appeal from Ashley J, it is not a cross demand against it and therefore in no circumstances can the cross demand be an answer to the demand made in the bankruptcy notice. There is in my opinion substance in this point. My reasons for this conclusion are as follows:
The Institute is an incorporated body having the usual incidents of a legal entity (Practice Act ss 16, 17). The Council is the governing body of the Institute and is constituted pursuant to s 21 of the Practice Act. The Practice Act clearly distinguishes between the functions and powers of the Institute and the Council. The judgment debtor is a legal practitioner of some years standing who has sought to litigate at considerable length and in some detail in relation to the construction of the Practice Act and in particular in relation to the respective duties and functions of the Council and the secretary under that Act. I infer that in commencing proceedings by way of originating motion in 1992 and in 1994 against the Council as distinct from the Institute (which was the party named in the 1991 proceeding) he did so advisedly. Furthermore, the Council entered appearances to the originating motions and contested them as the Council and not as the Institute. The judgment debtor now says that on the hearing of his appeal against Ashley J's decision he will move to amend the name of the Council to that of the Institute and he is confident that such amendment will be granted as a matter of course. I do not share his confidence. Be that as it may, the judgment debtor has not previously sought to make a claim against the Institute and he was unable to articulate the basis upon which he says the Institute is liable for damages by reason of the conduct of its secretary.
It is patent from a consideration of the two originating motions and from Ashley J's reasons for judgment that the thrust of the judgment debtor's case was that the Council and the secretary were in breach of duties imposed upon them by the Practice Act. It is in my opinion too late for the judgment debtor now to say that it is the Institute and not the Council which breached the provisions of the Practice Act. That is not how the case was put; nor is it the basis of the decision. The judgment debtor now seeks to rely upon a different case namely an alleged breach of duty by the Institute but has failed to demonstrate any basis upon which such a claim may support an action for damages against the Institute.
The judgment debtor has not in this proceeding or in the proceedings heard and determined by Ashley J attempted to establish that he has even a prima facie case against the Institute. The mere assertion of the existence of a cross demand is not sufficient (re Brink; Ex parte Commercial Banking Company of Sydney Ltd (1980) 30 ALR 433 at 439; Eastick v ANZ Banking Group Ltd (1981) 53 FLR 91; re Racheha, Ex parte Antonious (1980) 40 FLR 423).
In the matter presently before the Court the judgment debtor relies upon the assertion in his affidavit of 26 October 1995
I claim that my loss of earnings in respect of the years 1991, 1992, 1993, 1994 and 1995 amounted to at least $200,000, which loss and damage I am seeking to recover from the Institute and Robert Cornall
but otherwise he has adduced no evidence to support the quantum of his claim. Instead, he invites the Court to take judicial knowledge of the fact that a solicitor would earn more than the amount owing to the Institute if he practiced for the periods indicated. There are several problems with this line of reasoning. First, the Supreme Court in 1991 upheld the refusal to grant the judgment debtor a practising certificate for 1991. It has not been demonstrated how it is that the judgment debtor can now assert a claim in damages against the Institute in respect of a year in which he was unable to obtain a practising certificate. Second, the reasons of Ashley J record (and it is not disputed) that the judgment debtor withdrew his application for a practising certificate for 1992 and that he did not apply for a certificate in 1993, 1994 and 1995. Given these facts the mere assertion contained in the judgment debtor's affidavit does not provide even a prima facie basis for his alleged cross demand.
Furthermore, the judgment debtor asserted in both the second originating motion and the notice of appeal that his claim for damages is against the Council and others, including the secretary of the Institute. In re Edward John Brown (1923) 40 WN (NSW) 73, Street CJ in Equity held that to come within the meaning of the legislative precursor to s 40(1)(g) of the Bankruptcy Act the cross demand must be against the judgment creditor solely. He observed at page 74 of the judgment:
I am of opinion that on the true construction of section 4(1)(g) of the Act [the precursor to s 40(1)(g) of the Bankruptcy Act 1966] a cross-demand to come within it must be a cross-demand against the judgment creditor solely. I do not think it was ever contemplated by the legislature that a judgment creditor should be compelled to hold his hand while his debtor prosecutes a claim which he has against him and some other person jointly.
This dictum has been consistently followed in this Court and in my opinion, even if it be said that the claim against the Council should be equated with a claim against the Institute, is applicable on the facts of this case.
CONCLUSION
I am not satisfied that the judgment debtor has such a set-off, counter-claim or cross demand as is referred to in s 40(1)(g) of the Bankruptcy Act.
I certify that this and the preceding 7 pages are a true copy of the Reasons for Judgment of the Honourable Justice Olney
Associate:
Dated:
Heard: 30 April 1996
Place: Melbourne
Judgment: 8 May 1996
Appearances:
The judgment debtor appeared in person.
Mr S. Gardiner (instructed by Tress Cocks & Maddox) appeared for the judgment creditor.
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