Re Udowenko, Michael
[1997] FCA 110
•19 Feb 1997
NOT FOR GENERAL DISTRIBUTION
NO QUESTION OF PRINCIPLE
BANKRUPTCY ACT
IN THE FEDERAL COURT OF AUSTRALIA )
EXERCISING FEDERAL JURISDICTION )
IN BANKRUPTCY ) No NP 856 of 1996
GENERAL DIVISION )
Re:MICHAEL UDOWENKO
HELEN UDOWENKO
WOLODYMYR UDOWENKO
Ex parte:ALAN BERNARD MITCHELL
CORAM:Lindgren J
PLACE:Sydney
DATE:19 February 1997
REASONS FOR JUDGMENT
(ex tempore)
INTRODUCTION
This is the hearing of a creditor's petition presented by Alan Bernard Mitchell against Michael Udowenko, Helen Udowenko and Wolodymyr Udowenko. Without any disrespect I will refer to members of the Udowenko family by their first names when it is necessary to distinguish between them. I will refer to Michael, Helen and Wolodymyr collectively as "the Debtors". I will refer to the petitioning creditor, again without disrespect, as "Mitchell".
Mitchell is a solicitor. Michael and Helen are the parents of Wolodymyr. Another son, Valentyn, also featured in the background events at an early stage.
EARLIER APPLICATION FOR EXTENSION OF TIME FOR COMPLIANCE WITH BANKRUPTCY NOTICE
The matter has had a long history. On 9 October 1996 I gave reasons for dismissing the Debtors' application filed on 1 October 1996 for an order extending the time for compliance with a bankruptcy notice issued by Mitchell on 19 December 1995. In the Reasons for Judgment, I noted that it was common ground that the notice had been served on the Debtors on 21 March 1996. It allowed 21 days after service for compliance. That period was extended several times by Deputy Registrars. The period of the last extension expired on 4 June 1996. The creditor's petition was issued on 12 July 1996 founded on the Debtors' failure to comply with the bankruptcy notice on or before 4 June 1996. The petition was pending at the time of my earlier decision on 9 October 1996.
I held that I lacked power to extend the time for compliance because the application for the extension was not in aid of an application to set aside either the judgment in respect of which it was issued or an application to set aside the bankruptcy notice itself. No application to set aside the judgment or the bankruptcy notice had been pending when the bankruptcy notice expired on 4 June 1996. An earlier application to set it aside had been filed by Wolodymyr on behalf of the Debtors on 3 April 1996, but it had been dismissed at about 10.10 am on 4 June 1996, and so had ceased to be a pending application by the time when the extended time for compliance with the notice expired on that date.
BACKGROUND FACTS
It is convenient to describe some of the background facts by incorporating as part of the present Reasons, the account that appeared in my earlier Reasons for Judgment.
"12 March 1992
On this date, Bryson J gave judgment for the plaintiff, Rasevi Pty Ltd ("Rasevi"), in proceeding No 3483/91 in the Equity Division of the Supreme Court of New South Wales against the Debtors and Valentyn Udowenko.
........ ........ ........ ........ ........ ........ ....
The proceeding before Bryson J arose out of a business of agisting horses which was allegedly conducted by all four defendants on a property known as "Windarra", Gresford Road, Vacy in the Hunter Valley. Alan Bernard Mitchell ("Mr Mitchell") of Borthwick Wilson & Mitchell, Solicitors, acted for the defendants in that proceeding.
20 August 1992
After Mr Mitchell had unsuccessfully sought payment of his costs from the defendants, he issued on this date summons No 24/92 against them in the Local Court at Dungog ("the Dungog proceeding"). After difficulties associated with service, the summons was served on 5 November 1992.
2 December 1992
Wolodymyr filed grounds of defence and an affidavit in support in the Dungog proceeding.
15 April 1993
In the Equity Division proceeding, Michael and Helen, and one of the sons, Valentyn, applied to set aside the judgment given by Bryson J and on this date Waddell CJ in Eq delivered judgment on that application. Teakle Ormsby & Associates represented Michael, Helen and Valentyn on the application to set aside. The basis of the application was that, allegedly, Wolodymyr had not bound Michael, Helen or Valentyn by the instructions which he had given to Mr Mitchell and that Mr Mitchell had, in law, represented Wolodymyr alone in the proceeding before Bryson J. Waddell CJ in Eq dismissed the application by Michael and Helen but set aside the judgment against Valentyn on the basis that it had not been shown that the proceeding had come to his knowledge.
11 August 1994 to 13 October 1994
On 11 August 1994 Teakle Ormsby & Associates advised Mr Mitchell that they no longer acted for any of the Udowenkos. On 9 September 1994 Mr Mitchell filed a notice of motion in the Dungog proceeding for an order striking out Wolodymyr's grounds of defence. The notice of motion and supporting affidavit were served on 21 September 1994. On 13 October 1994, a "certificate of readiness" was served on Michael, Helen and Wolodymyr.
3 November 1994
Mr Mitchell recovered judgment against Michael, Helen and Wolodymyr in the Dungog proceeding for $24,621.00 plus costs of $110.00 and professional costs of $632.00, making a total of $25,363.00. Of course, interest accrued on the amount of the judgment.
6 January 1995
Mr Mitchell caused a writ of execution to be issued in the Dungog proceeding. This did not produce any money, but the writ was registered against the title to the land of Michael and Helen [Valentyn was also a registered proprietor and the writ was registered "as regards" the interests of Michael and Helen].
19 December 1995
Mr Mitchell procured the issue of the subject bankruptcy notice No NN 4014/95.
21 March 1996
On the basis noted earlier that the bankruptcy notice was served on this date, it allowed until 11 April 1996 for compliance.
3 April 1996
The Debtors, representing themselves, filed an application to set aside the bankruptcy notice. On the same date, a Deputy Registrar ordered, pursuant to sub-s 41 (6B) of the Bankruptcy Act 1966 ("the Act"), that the time for compliance with the bankruptcy notice be extended to 22 April 1996.
22 April 1996
A Deputy Registrar ordered by consent that the application to set aside the bankruptcy notice be adjourned until 21 May 1996 and that the time for compliance with it be extended up to and including that day.
21 May 1996
A Deputy Registrar ordered by consent that the application to set aside the bankruptcy notice be adjourned to 4 June 1996 and that the time for compliance with it be extended up to and including that day.
4 June 1996
At about 10.10 am a Deputy Registrar ordered that the Debtors' application to set aside the bankruptcy notice be dismissed and that the Debtors pay the Creditor's
costs. Consistently with that dismissal, there was no further extension of the time for compliance beyond 4 June 1996.
12 July 1996
Mr Mitchell filed a creditor's petition which was returnable on 23 August 1996. Accordingly to the creditor's petition, the amount of the debt including interest had risen to $32,999.87. The act of bankruptcy on which the petition was based was the Debtors' failure to comply on or before 4 June 1996 with the bankruptcy notice.
15 August 1996
The creditor's petition was served.
23 August 1996
On this, the first return date of the creditor's petition, the petition was, as against Michael and Helen, adjourned to 13 September 1996 but as against Wolodymyr, it was adjourned to 27 August 1996. Wolodymyr had sought an adjournment until a date after 3 September 1996 when an appeal by him to the New South Wales Court of Appeal against the judgment of Bryson J was to be heard, in order to allow him to prosecute that appeal, but that application was refused.
27 August 1996
Wolodymyr filed an application for review of the Deputy Registrar's refusal to adjourn the creditor's petition as against him to a date after 3 September 1996 and that application for review of the Deputy Registrar's decision was itself adjourned to 3 September 1996.
3 September 1996
The New South Wales Court of Appeal dismissed Wolodymyr's appeal against the judgment of Bryson J. The creditor's petition, as against Wolodymyr, was adjourned to 17 September 1996.
10 September 1996
On or about this date the Debtors instructed Antonuccio & Associates, their present solicitors.
12 September 1996
Michael, Helen and Wolodymyr filed in the Dungog Local Court a notice of motion for an order that the judgment of 3 November 1994 be set aside, which was made returnable on 28 November 1996. The supporting affidavit asserted that Helen and Michael had not been aware of Mr Mitchell's claim against them in the Dungog proceeding as Wolodymyr had not advised them of it because he considered that the debt was not related to them and did not wish to worry them. The affidavit asserted that Michael and Helen wished to defend Mr Mitchell's claim and that Wolodymyr himself had filed grounds of defence in 1994 "and was not aware of the Court date" and wished to have his defence heard. Apparently on the filing of the application to set aside, the Local Court granted an urgent stay of execution on the judgment until 26 September 1996 when the application for a further stay was heard and decision reserved until 2 October 1996.
13 September 1996
The creditor's petition as against Michael and Helen was adjourned to 1 October 1996.
17 September 1996
The Debtors filed, through their present solicitors, a notice of intention to appear on the hearing of the creditor's petition. Wolodymyr's application for review of the Deputy Registrar's decision was dismissed. The creditor's petition as against Wolodymyr was adjourned to 1 October 1996.
1 October 1996
The Debtors filed before a Deputy Registrar their application to set aside the bankruptcy notice and for an extension of time for compliance which was referred to me on the same day for hearing.
2 October 1996
Pursuant to discussion which took place on the hearing before me, counsel for the Debtors and counsel for Mr Mitchell have both advised my Associate of the orders made in the Dungog proceeding on 2 October 1996, on the basis that I am entitled to take this into account. That advice is that the hearing of the Debtors' application to set aside the judgment was brought forward from 28 November 1996 and heard on 2 October 1996 together with the Debtors' application for a continuation of the stay of execution of the judgment, and that it was ordered that both applications be dismissed."
The Debtors' second application to set aside the bankruptcy notice and for an extension of time for compliance with it, filed on 1 October 1996 was, as noted above, heard on 2 October 1996, and my order dismissing the application, in so far as it sought an extension of time, was made on 9 October 1996. On 14 October 1996, no reason being advanced why the remainder of the Debtors' application (seeking an order setting aside the bankruptcy notice) should not be dismissed, I dismissed it. As well, directions were given in connection with the anticipated hearing of the creditor's petition.
ISSUES ON THE PRESENT HEARING
Three issues have arisen on the hearing of the creditor's petition. The first is whether I should exercise the discretion which I undoubtedly have to go behind Mitchell's judgment for the purpose of ascertaining if the Debtors are truly indebted to him.
The second issue is related to the first. The Debtors have contended, quite recently in the history of the proceeding, that, according to the submission, Mitchell was not entitled to bring the Dungog proceeding because he had failed to comply with the requirements of the then s 198 of the Legal Profession Act 1987 (NSW) as to the prior giving of a bill of costs.
The third issue concerns an erroneous statement in the creditor's petition as to the date of service of the bankruptcy notice on Wolodymyr. This is something which I observed and raised with the parties. The problem comes about in this way. Paragraph 4 of the petition alleges that the Debtors failed, on or before 4 June 1996, to comply with the requirements of the bankruptcy notice, which, according to the paragraph, was served on them on 21 March 1996. Yet according to affidavits of service of the sheriff's officer on the Court file, while the notice was served on Michael and Helen on 21 March 1996, it was not served on Wolodymyr until 12 June 1996. In consequence, the date of the commission by Wolodymyr of the relevant act of bankruptcy (failure to comply with the bankruptcy notice) was also wrongly stated in the notice. It was said to be 4 June 1996, but should have been 3 July 1996.
THE FIRST ISSUE
In relation to the first matter, it is necessary to refer to further aspects of the factual background. It will be recalled that in proceeding No 3483/1991 in the Equity Division of the Supreme Court of New South Wales, Rasevi, as plaintiff, obtained a judgment against Michael, Helen, Wolodymyr and Valentyn. The amount of the judgment was $2,758. The hearing which led to that judgment concluded before Bryson J on 24 February, 1992. Mitchell represented the Debtors and Valentyn in that proceeding. He appeared for them on the hearing which occupied two days. In the Dungog proceeding Mitchell has attempted to recover his costs.
Wolodymyr is the only person who was active in representing the interests of the various family members in resisting the claim made by Rasevi, and who has been active in doing so in relation to the claim made by Mitchell. Michael, Helen, Wolodymyr and, perhaps, Valentyn, lived on the "Windarra" property. Its registered proprietors are Michael, Helen and Valentyn. Valentyn, while giving it as his address, apparently visited it only occasionally. It has always been the case of Michael, Helen and Valentyn, and, for that matter, of Wolodymyr, that Michael, Helen and Valentyn had had no dealings whatever with Rasevi or its representative, a Mr Jones, and that Wolodymyr and Rasevi alone had been the parties to whatever dealings may have occurred. The case that Michael, Helen and Valentyn were not parties to any arrangement with Rasevi was put to Bryson J and rejected by him. There was an appeal to the New South Wales Court of Appeal which, it may be recalled, was dismissed on 3 September 1996.
Following the giving of judgment by Bryson J on 12 March 1992, the allegation of non-involvement of Michael, Helen and Valentyn took on a new form. They applied to have the judgment set aside on the ground that the hearing had taken place in their absence (cf Pt 40 r 9 (2) of the Supreme Court Rules) and that they had a defence on the merits, the defence being that the business on "Windarra" was carried on solely by Wolodymyr. There were two elements to the contention that the hearing had taken place in their absence: first, that they had not been served with the summons; and secondly, that they had not authorised Wolodymyr to instruct Mitchell to represent them on the hearing.
The application to set aside the judgment was heard by Waddell CJ in Eq over two days on 16 and 17 March 1993, and his Honour delivered judgment on 15 April 1993. It was common ground that Valentyn had not been served personally. Waddell CJ in Eq accepted the sheriff's officer's evidence that he had delivered Valentyn's copy of the summons to Wolodymyr. With some misgiving, his Honour said that he was not satisfied that the summons had been brought to Valentyn's notice, and so he set aside the judgment as against Valentyn. However, his Honour refused to set it aside as against Michael and Helen. His Honour referred to a statement in para 10 of an affidavit of Wolodymyr dated 6 May 1992 filed in support of the notice of appeal to the Court of Appeal, reading as follows:
"On the 5th July, 1991 a summons was handed to my mother, father and myself by a Commercial Agent. My brother (Valentyn) was not given a summons, as he was not at 'Windarra' that day, and to this date he has never received a summons."
His Honour observed out that the first sentence was contrary to Wolodymyr's sworn evidence given in support of his parents' application to set aside, to the effect that they, like his brother Valentyn, had not been given a copy of the summons. His Honour accepted the sheriff's officer's evidence that he had personally served Michael and Helen, as well, of course, as Wolodymyr.
The next matter which was addressed by Waddell CJ in Eq was an allegation by Wolodymyr that he had instructed his solicitor and barrister to inform the court that his brother and parents had not been involved with Rasevi, but that they had not carried out that instruction. His Honour said that this was "clearly untrue", because in his judgment, Bryson J, had referred to the fact that Wolodymyr maintained the position that he alone had contracted with Mr Jones of Rasevi and that the other three members of the family were not parties to the arrangement. As noted earlier, however, Bryson J, had not accepted that submission.
Waddell CJ in Eq, who had the benefit of hearing the oral evidence of Wolodymyr, said of that evidence:
"In my opinion, the evidence of Wolodymyr should not be relied upon unless inherently probable or corroborated by other evidence."
Mitchell was not called as a witness by either side on the application to set aside. His Honour drew an inference that Mitchell's understanding had been that he had been representing all four defendants in the Rasevi proceeding.
Importantly, for present purposes, his Honour found that Michael and Helen had authorised Wolodymyr to defend the Rasevi action on their behalf as he saw fit, and noted that whether the authorisation was express or implied was not a matter of consequence. In the result, he held that the trial before Bryson J had not been held in the absence of Michael and Helen, and declined to set aside the judgment against them.
The defence that Mitchell was not authorised to represent and appear for Michael and Helen is the basis on which they say that they are not indebted to Mitchell, notwithstanding his judgment against them in the Dungog proceeding. It is true, as counsel for the Debtors submits, that Mitchell was not a party to the Rasevi litigation and that no issue estoppel as between him and Michael and Helen arises from the decision of Waddell CJ in Eq. But it remains a weighty consideration, relevant to the exercise of my discretion whether to go behind the judgment, that the issue whether Mitchell was authorised by Michael and Helen to represent them in that litigation was contested over two days before his Honour when Michael and Helen were legally represented, and was decided against them by his Honour in a 14 page judgment on 15 April 1993.
I turn now to Mitchell's attempt to recover his costs in the Dungog proceeding. Over a period from 10 June 1991 to 20 May 1992, Mitchell had forwarded to Wolodymyr bills for his costs. Nothing was paid. On 20 August 1992, Mitchell commenced the Dungog proceeding against Michael, Helen, Wolodymyr and Valentyn to recover his costs. A defence and affidavit in support were filed. Eventually, on 3 November 1994, Mitchell obtained judgment against Michael, Helen and Wolodymyr for $25,363. According to an affidavit of Mitchell, on 23 May 1996 Wolodymyr applied for a stay of execution but the application was dismissed on 30 May 1996. Although the affidavit does not say so, I presume that the application was made by Wolodymyr on behalf of all three Debtors and that it was associated with an application to set aside the judgment which was dismissed simultaneously.
When solicitors were acting for the Debtors, they applied again in September 1996 for an order setting aside Mitchell's judgment and a stay of execution. After an urgent temporary stay was given, this second application by the Debtors was dismissed on 2 October 1996. The major ground of the application in so far as it related to Michael and Helen, was that they had not aware of Mitchell's claim against them because Wolodymyr had not informed them about it. In his affidavit in support, Wolodymyr stated that he had never been served with an itemised bill of costs.
Again when solicitors were acting for them, the Debtors filed a further application dated 4 November 1996 in the Dungog proceeding to set aside the judgment and for a stay of execution of it, and, as well, for an order transferring the hearing of the application "to the Newcastle Registry". Michael, Helen and Wolodymyr swore affidavits in support also dated 4 November 1996. These again made the allegation that Mitchell had not been authorised by Michael and Helen to represent them in the Rasevi proceeding. As well, they raised the complaint that Mitchell had not supplied an itemised bill of costs with the result that "the Debt is Bad in Law". Annexed to each of the three affidavits were Mitchell's bills addressed to Wolodymyr and correspondence with him about costs. (Interestingly, Michael and Helen also swore that they had never been served with a bankruptcy notice, an allegation which has not been raised on their behalf before me.) In the event, this third application by the Debtors for a setting aside and a stay was dismissed on 28 November 1996.
On 6 November 1996, the Debtors and Valentyn filed an ordinary statement of claim No 344 of 1996 in the District Court of New South Wales at Newcastle against Mr Mitchell. The case is pleaded as follows:
"1.The Defendant is a Solicitor of the Supreme Court of New South Wales.
2.On or about June 1991 the 3rd Plaintiff retained and employed the Defendant as his Solicitor on retainer to advise him and act for him in the conduct and defence of action instituted against all the plaintiffs in the Supreme Court of NSW brought by Rasevi Pty Limited in 1991.
3.The Defendant acted negligently in his conduct of the business he undertook to perform for the Plaintiff.
Such negligence on the part of the Defendant consisted in appearing for the Plaintiffs before Justice Bryson sitting in Equity Division in 1992, rather than ensuring the briefed counsel Miss Marlow represented the Plaintiffs and in failing to take all necessary steps to ensure representation was competent and satisfactory before Justice Bryson.
5.Such negligence on the part of the Defendant consisted in presuming he possessed a retainer to act and advise for the first, second and fourth plaintiffs, and failing to take all necessary steps to ensure such retainer in fact existed.
6.Such negligence on the part of the Defendant consisted in permitting, without instructions from the 3rd Plaintiff Wolodymyr Udowenko, Costs in the Rasevi Pty Ltd action to exceed $24,621.00 where in fact the judgement debt did not exceed $2,758.00.
Particulars of Damage
7.Damages suffered by the Plaintiffs are as follows:
i)to costs for the Defendants service, in excess of $32,389.00
ii)to costs for the action by Rasevi Pty Limited, in excess of $35,000.00
iii)to costs for moneys paid to the Solicitor for the Plaintiffs, in excess of $20,000.00.
8.It is alleged that by reason of such conduct on behalf of the Defendant, the 1st, 2nd and 3rd Plaintiffs are at risk of being made bankrupt which will cause great personal hardship to the said plaintiffs and their family, in respect of a debt which the 1st, 2nd, 3rd and 4th Plaintiffs maintained and still maintain was not recoverable in law against them by the defendant nor Rasevi Pty Limited."
The hearing date for the action in the District Court is 23 September 1997.
In the light of the extensive litigation which has already taken place as to Mitchell's retainer to represent Michael and Helen in the Rasevi action, I exercise the discretion vested in me against going behind the judgment for the purpose of ascertaining whether there is an indebtedness of the Debtors to Mitchell for costs. The hearing before Waddell CJ in Eq and the dismissals of the three applications in the Dungog proceeding are strong considerations which weigh against doing so. The issue of authority is essentially a factual one. With respect, it was examined thoroughly by Waddell CJ in Eq.
THE SECOND ISSUE
The second issue to which I referred is the question of the alleged defence under s 198 of the Legal Profession Act 1987 (NSW) to the claim made by Mitchell in the Dungog proceeding. This matter was not explored in detail in the submissions made on behalf of the Debtors. Counsel for the Debtors contented himself with submitting that Mitchell had not supplied an "itemised" bill of costs as required by "s 192 (formerly s 198) of the Legal Profession Act 1987", and referring me to Zizza v Seymour [1976] 2 NSWLR 135 (CA). However, the relevant provision in 1992 when the Dungog proceeding was commenced was s 198 which was as follows:
"198.(1) Proceedings for the recovery of costs incurred by a solicitor in transacting any business shall not be commenced or maintained against any person unless at least one month has passed since the person has been given a bill of the costs so incurred.
(2)A bill of costs must be signed by the solicitor or by some other solicitor who is a partner of, or is employed by, the solicitor.
(3)It is sufficient compliance with subsection (2) if a letter that is so signed is attached to, or enclosed with, the bill of costs.
(4)If the regulations so require, a bill of costs shall be in such form, and contain such particulars, as may be prescribed by those regulations.
(5)In the event of any inconsistency between the requirements made by the regulations and the requirements made by or under any other Act, the requirements made by the regulations shall prevail.
(6)A bill of costs may be given to a person -
(a)by delivering it personally to the person;
(b)by sending it by post to, or by leaving it for the person at, the person's place of business or residence last known to the solicitor; or
(c)by delivering it to the appropriate place in a document exchange in which the person has receiving facilities.
(7)Nothing in this section prevents the Supreme Court from making an order authorising a solicitor to commence or maintain proceedings against a person before one month has passed since the person has been given a bill of costs, but such an order shall not be made unless the Supreme Curt is satisfied that the person is about to leave New South Wales."
It is not disputed that at least one month before Mitchell commenced the Dungog proceeding on 20 August 1992, he gave bills of costs, at least to Wolodymyr. The complaint made is that the bills were not "itemised" and that they were not given to Michael or to Helen. A course of judicial decision establishes that in order to satisfy s 198 a bill of costs must allocate specific charges to items of work: see the survey of the authorities in Trinity Properties Pty Ltd v Gilles (1996) 20 ACSR 22 (FCA/Finn J) esp at 27. The Debtors submit that Mitchell's non-compliance with s 198 would have afforded them a complete defence to the Dungog proceeding.
It seems to me that two fundamental considerations bear on this submission. The first is that the present hearing is not in the nature of an appeal against any judgment or order in the Dungog proceeding. Rather, the issue before me is whether, on the evidence, I should go behind that judgment on this hearing of the creditor's petition. Secondly, the present submission is not a submission that there was not an indebtedness of the Debtors to Mitchell underlying the judgment in the Dungog proceeding. Rather, it is a submission that Mitchell was not entitled to obtain the judgment for the costs owed to him by the Debtors which he in fact obtained in that proceeding and on which the bankruptcy notice was based. Consistently with the submission, the Debtors may have been indebted to Mitchell for the very amount of the judgment for which he was entitled to obtain judgment in another proceeding after complying with s 198.
Mitchell submits that waiver deprives a client of the benefit of s 198 (Dodd v Gillis (1989) 16 NSWLR 623 (Yeldham J)) and that the Debtors have, by their conduct from a time prior to their being served with the summons in the Dungog proceeding to date, waived the defence. So far as the evidence reveals, the present point was first raised on 20 September 1996 in an affidavit of Wolodymyr filed in this proceeding. In support of the waiver submission, the solicitor appearing for Mitchell on the hearing before me has referred to eight letters written by Mitchell to Wolodymyr prior to the commencement of the Dungog proceeding and to an affidavit of Wolodymyr dated 27 August 1996 filed in the present proceeding, in which he said that if the appeal to the New South Wales Court of Appeal should succeed, he would obtain an order that Rasevi pay the costs of the hearing before Bryson J and that enforcement of that order against Rasevi would enable him to satisfy Mitchell's judgment.
While I entertain some doubt as to whether, on the basis of the existing evidence, there has been a waiver by Michael and Helen, I am not persuaded by the Debtors' submission based on s 198 to go behind the judgment in the Dungog proceeding. The chief consideration which dissuades me from doing so is the one previously mentioned, namely, that the particular submission made does not go to the existence of an underlying debt in the very amount for which Mitchell obtained judgment. Rather, it goes to the question whether any debt was "recoverable" in the Dungog proceeding.
There are two further, albeit less cogent, factors which tell against going behind the judgment. In view of the finding of Waddell CJ in Eq that Wolodymyr was authorised by his parents to do whatever was necessary on their behalf to defend the Rasevi action, there is at least a question whether, for the purpose of s 198, Mitchell's giving of his bills of costs to Wolodymyr amounted to a giving of them to his parents as well. Further, it is arguable that any non-compliance with s 198 has been waived.
For all the reasons given above in relation to the first and second issues, I exercise my discretion against going behind the judgment in the Dungog proceeding.
THE THIRD ISSUE
The third issue to which I referred concerns the error in the creditor's petition. According to an affidavit of a sheriff's officer, the bankruptcy notice was served on Michael and Helen on 21 March 1996 and on Wolodymyr on 12 June 1996. As a result of an application to set aside the bankruptcy notice and for an extension of time for compliance by Wolodymyr on behalf of himself, Michael and Helen and filed on 3 April 1996, the time for compliance was extended, ultimately to 4 June 1996. In para 13 of Wolodymyr's affidavit sworn 3 April 1996 in support of the application, he refers to the bankruptcy notice in question by number (NN 4014/95). This suggests that he was in possession of, or had access to, the notice as early as at that date.
Mitchell submits that in these circumstances I should treat the bankruptcy notice as having been served on Wolodymyr, as on his parents, on 21 March 1996. Mitchell has referred in submissions to various authorities, but I do not think that they touch on situations such as the present one. The fact cannot be escaped that on the evidence service was effected on Michael and Helen on 21 March 1996 and Wolodymyr some 2½ months later, on 12 June 1996.
I think, however, that an order should be made in exercise of the power given by para 33 (1) (b) of the Act that the petition be amended. There is no prejudice to any party. Accordingly para 4 in the creditor's petition will be amended so as to distinguish between service upon, and the commission of an act of bankruptcy by, Michael and Helen on the one hand and Wolodymyr on the other. I will set out the precise wording at the end of these Reasons for Judgment. The effect of the amendment will be to allege that Michael and Helen committed the relevant act of bankruptcy on 4 June 1996 and that Wolodymyr committed the relevant act of bankruptcy on 3 July 1996. This presents no difficulty for the petition which was presented to the Court on 12 July 1996, that is to say, later than 3 July 1996.
CONCLUSION
I am satisfied of the matters of which s 52 of the Act requires that I be satisfied. The orders of the Court are as follows:
Order that paragraph 4 of the Creditor's Petition presented on 12 July 1996 be amended by deleting all words after "debtors" where the word is secondly used, and substituting the following:
"Michael Udowenko and Helen Udowenko failed on or before 4 June 1996 and the Debtor Wolodymyr Udowenko failed on or before 3 July 1996, either to comply with the requirements of a Bankruptcy Notice served in the case of the Debtors Michael Udowenko and Helen Udowenko on 21 March 1996 the time for compliance with which was extended by Court order, and in the case of the debtor Wolodymyr Udowenko on 12 June 1996, or to satisfy the Court that they
respectively had a counter claim, set off or cross demand equal to or exceeding the sum specified in paragraph (a) of the Bankruptcy Notice."
Order that a sequestration order be made against the estates of the Debtors.
Order that the Petitioning Creditor's costs be taxed and paid in accordance with the Bankruptcy Act 1966.
Order that a copy of these orders be given to the Official Receiver within 2 days of today.
Order pursuant to sub-section 52 (3) of the Bankruptcy Act 1966 that all proceedings under the sequestration order be stayed for a period of 21 days expiring at midnight on 12 March 1997.
Note that the date of commission of the act of bankruptcy of the Debtors Michael and Helen Udowenko is 4 June 1996, and of the Debtor Wolodymyr Udowenko, is 3 July 1996.
I certify that this and the preceding 21 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lindgren.
Associate:
Dated:27 February 1997
Heard: 5, 18 December 1996, 10 February 1997
Place: Sydney
Decision: 19 February 1997
Appearances: Ms L Steer, solicitor, agent for Borthwick Wilson and Mitchell, appeared for the petitioning creditor.
Mr D Alexander of counsel, instructed by Antonuccio & Associates appeared for the Debtors.
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