Rimac v Costa
[2003] FMCA 251
•23 June 2003
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| RIMAC v COSTA | [2003] FMCA 251 |
| BANKRUPTCY – Application to set aside bankruptcy notice – whether applicant has a set off, cross claim or cross demand against the respondent creditor – whether the judgment supporting the bankruptcy notice is a final judgment – whether the bankruptcy notice is an abuse of process. |
Bankruptcy Act 1966 (Cth), s.40
Lindholdt v Merritt Madden Printing Pty Ltd [2002] FCA 260
| Applicant: | MIRKO RIMAC |
| Respondent: | PLACIDO COSTA |
| File No: | SZ1 of 2003 |
| Delivered on: | 23 June 2003 |
| Delivered at: | Sydney |
| Hearing dates: | 22 April 2003 23 June 2003 |
| Judgment of: | Driver FM |
REPRESENTATION
| Counsel for the Applicant: | Mr M Abdul-Karim |
| Solicitors for the Applicant: | John McEncroe & Co |
| Counsel for the Respondent: | Ms P Conway |
| Solicitors for the Respondent: | Oliveri Attorneys |
ORDERS
The application is dismissed with costs.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SZ1 of 2003
| MIRKO RIMAC |
Applicant
And
| PLACIDO COSTA |
Respondent
REASONS FOR JUDGMENT
On 2 January 2003 Mirko Rimac applied to set aside bankruptcy notice NN2349 of 2002, apparently served on him on 13 December 2002. On the same day Registrar Kavallaris extended time for compliance with the bankruptcy notice up to and including 18 February 2003. On that day, Registrar Segal further extended time for compliance with the bankruptcy notice until 25 March 2003. I extended time for compliance with the bankruptcy notice on that day until 24 April 2003. I heard the application on that day but adjourned the hearing until today, and further extended time for compliance with the bankruptcy notice until today.
The applicant claims to have a counter-claim, set off or dross demand of the kind referred to in s.40(1)(g)(ii) of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”). The applicant also claims that the bankruptcy notice should be set aside on the ground that the judgment relied upon by the respondent is not a final judgment against the applicant.
The application is supported by affidavits by Mr Rimac filed on 2 January 2003, 8 April 2003 and 22 April 2003, as well as by an affidavit by his solicitor John McEncroe filed on 4 March 2003.
Mr Rimac deposes that he was one of three defendants in company winding up proceedings in the Equity Division of the Supreme Court of New South Wales (proceedings number 2347 of 1993) and the second of two plaintiffs in further proceedings in that Court (proceedings number 1972 of 1998) in which declarations, damages and equitable compensation were sought against Mr Costa. For convenience I will refer to those proceedings as the “damages proceedings”. Mr Rimac claims to have had no interest in either of those proceedings and that he effectively took no part in the proceedings. He claims that he was a party to the proceedings as a matter of form and apparently on the basis that at some stage his name appeared as a director of a company known as Satate Pty Limited. Mr Rimac admits that at one stage he was a shareholder of that company.
The winding up proceedings were instituted by Mr Placido Costa against Satate Pty Limited, Mr Nenad Rimac (the father of the present applicant) and Mirko Rimac. The result of those proceedings was that Satate Pty Limited was wound up. Mr Costa claimed an interest in Satate Pty Limited which was disputed by Nenad Rimac. That dispute was continued by Nenad Rimac late in 1998 in the damages proceedings. These proceedings were instituted also in the name of Mirko Rimac as second plaintiff, and the address for service given by both plaintiffs was Mr McEncroe’s.
The bankruptcy notice arises out of costs orders against Mr Mirko Rimac and Nenad Rimac in those proceedings.
There is no substance to the applicant’s claim that he has a counter claim, set-off or cross demand against Mr Costa. On his own evidence Mr Mirko Rimac claims to have no interest in Satate Pty Limited that was the subject of the proceedings between his father and Mr Costa. There is no evidence of any other claim by Mirko Rimac against Mr Costa. The damages proceedings between Mirko Rimac and his father and Mr Costa were disposed of by His Honour Santow J on 16 October 2001. An appeal by Nenad Rimac against that decision was unsuccessful. The High Court refused special leave to appeal on 20 June 2003. To the extent that, contrary to his evidence, Mirko Rimac had some claim against Mr Costa in association with his father, that claim has now been finally dealt with.
The second part of the present application is that the judgment supporting the bankruptcy notice is not a final judgment. On its face it clearly is. The costs judgment was entered by the Supreme Court on 4 October 2002 following an assessment of costs on which the applicant was represented. There is no outstanding appeal against the assessment of costs. However, Mr Abdul-Karim, for Mr Mirko Rimac, submits to me that I should go behind the costs judgment, because, to the extent that costs were ordered against Mr Mirko Rimac, the judgment is unsafe and unjust.
I adjourned the hearing of this matter on 22 April 2003 so that the Supreme Court files in the winding up and damages proceedings could be obtained, and to await the outcome of the special leave application in the High Court. I have now looked through the Supreme Court files. At paragraphs 16 and 17 of his ex tempore judgment on 16 October 2001 (revised on 23 October 2001), Santow J says this:
Because the Second Plaintiff at the commencement of the hearing sought to withdraw from the case, and in light of the orders I then made giving that leave but reserving the question of costs, I need to consider what appropriate orders should be made so far as the Second Plaintiff is concerned. Prima facie, the Second Plaintiff should, as the Defendant contends, be ordered to pay, with the First Plaintiff, the Defendant’s costs up to and including the date of withdrawal, namely 9 October 2001. However, because the Second Plaintiff is not present to put any matters to the contrary, I will make orders having that result, but deferred from operation for seven days to give him that opportunity to be heard.
I make the following orders:
1. The Plaintiffs’ proceedings should be dismissed with costs on the basis that the First and Second Plaintiffs shall be liable for the said costs, in the case of the Second Plaintiff up to and including 9 October 2001 but not thereafter.
2. So far only as the Second Plaintiff is concerned, the order in paragraph 1 shall not take effect until the expiry of 23 October 2001, with liberty to apply in the meantime on reasonable notice.
The reference to the withdrawal of the second plaintiff is a reference to the fact that on 9 October 2001, at the commencement of the trial of the damages proceedings, Mr Mirko Rimac attended Court and told Santow J that he had nothing to do with the proceedings and wished to withdraw. He was permitted to do so. His then potential liability for costs did not continue in respect of costs incurred after that date.
What happened after the decision of Santow J is set out in the judgment of Campbell J on 18 March 2003, on the hearing of a motion brought by Mirko Rimac in the Supreme Court to extend time for applying pursuant to the leave granted by Santow J. Campbell J found that no application was made by Mirko Rimac although, on 25 October 2001, apparently following an appearance by Mirko Rimac, time was extended until 5 November 2001. On 5 November 2001, Mr Mirko Rimac presented an affidavit (which was put in evidence before me) in which he deposed as to his lack of interest or role in the proceedings leading to the costs order. That affidavit apparently was not used because no application was filed. At paragraphs 10 and 11 of his judgment Campbell J says this:
In the meantime, proceedings were taken to assess the costs which Santow J had ordered be paid. Those proceedings resulted in a judgment being entered by the Court on 4 October 2002 requiring the first and second plaintiffs in proceedings 1972/98 to pay the defendant’s costs in the sum of $116,517.23. once the judgment had been entered, there was no longer any prospect of exercising the leave which Santow J had granted, even with an extension of time, to enable the question of Mr Mirko Rimac’s liability to pay costs to be any further agitated. Once there was a judgment of the Court for the amount of the costs, which had not been appealed against, that was the end of the matter so far as establishing liability to pay those costs is concerned.
The fact that one party to litigation chooses to appeal against a judgment does not affect the liability of any party who does not appeal. The judgment for costs which has been entered on 4 October 2002 and not appealed against is not affected by the possibility (about the actual prospects of which I express no view) of Mr Nenad Rimac being granted special leave to appeal by the High Court of Australia in June 2003.
There has been no appeal against the judgment of Campbell J. Today Mr Abdul-Karim sought a further adjournment of these proceedings to enable Mr Mirko Rimac to go back to the Supreme Court to attempt to belatedly present an application to Santow J to exercise the leave granted by him up until 5 November 2001. In the light of the decision by Campbell J the prospects of success of such an attempt are nil and I refused a further adjournment. The costs judgment against Mr Mirko Rimac is a final judgment and the second element in the application before me also fails.
I was informed by Mr Abdul-Karim today that the proposed further attempt to exercise the leave granted by Santow J would be supported by some allegations against by the legal representatives of Mr Costa. Mr Abdul-Karim sought to read the affidavit of Mirko Rimac filed on 26 May 2003. I refused to receive that affidavit as evidence on the basis of lack of relevance. It does not on its face support any contention of impropriety. I accept that a bankruptcy notice can be set aside where the issue of the notice constitutes an abuse of process: Lindholdt v Merritt Madden Printing Pty Ltd [2002] FCA 260. However, I am not persuaded that the present notice is an abuse of process.
Mr Mirko Rimac asserts that he played no role in the damages proceedings in the Supreme Court leading to the costs judgment against him. He asserts that Mr Costa and his legal advisers knew, or should have known, that he should not have been a party. I was referred by Mr Abdul-Karim to a number of affidavits filed in the damages proceedings which did not name Mr Mirko Rimac as a party. I place no significance on that omission. It is unfortunately relatively common for court documents not to be consistent in the naming of parties. I have examined the Supreme Court file and find that the great majority of documents filed, including the originating process and numerous pleadings, do name Mr Mirko Rimac as the second plaintiff. I also note that Mr John McEncroe, who acted for Mr Mirko Rimac in these proceedings, also purported to act for him in the Supreme Court damages proceedings. The Supreme Court file includes affidavits by Mr McEncroe in which he states that he acts for both Mirko and Nenad Rimac. I find it impossible to reconcile those statements with Mr Mirko Rimac’s contention at paragraph 10 of his affidavit of 5 November 2001 that he had nothing to do with the damages proceedings. Neither can I reconcile it with Mr Mirko Rimac’s statement, at paragraph 5 of his affidavit filed on 2 January 2003, that he was not legally represented. This comes close to an assertion that the proceedings were instituted and carried on in his name without his knowledge or consent. If that claim were true (and I make no finding on it) it would suggest some fault on the part of either Nenad Rimac or John McEncroe or both. It would suggest that either Mr McEncroe was misled as to his instructions by Nenad Rimac or that he improperly acted on behalf of Mirko Rimac without instructions. It would not suggest any fault on the part of Mr Costa or his legal advisers. I note that in his affidavit filed on 8 April 2003 Mr Mirko Rimac deposes that he had instituted the damages proceedings with his father (paragraph 7) but that he had assigned his rights in the proceedings to his father (paragraph 9) but that Mr McEncroe had forgotten this (paragraph 12). It does not appear that Santow J was informed of the alleged assignment, in relation to the costs issue. The affidavit presented on 5 November 2001 does not mention the alleged assignment of rights.
It is extremely unfortunate that Mr Mirko Rimac did not take advantage of the leave granted to him by Santow J. He deposes that he instructed Mr McEncroe to attend to it. It is extremely unfortunate that an affidavit but no application was presented on 5 November 2001.
I was told by Mr Abdul-Karim today that the matter was not pursued because Nenad Rimac appealed against the judgment of Santow J. However, Mirko Rimac did not appeal and, having withdrawn from the proceedings in the Supreme Court, his interests were different from those of Nenad Rimac. It is unclear to what extent Mirko Rimac was represented by Mr McEncroe. At critical times he seems to have been left to his own devices although I note that his affidavit of 5 November 2001 has Mr McEncroe’s name and address on it. In his affidavit filed on 4 March 2001 Mr McEncroe deposes that he prepared the affidavit for Mr Mirko Rimac. The belated attempts now to avoid the adverse consequences which have resulted for Mirko Rimac have been unsuccessful and any further attempt is doomed to failure. The unfortunate consequences for Mirko Rimac are not the fault of Mr Costa or his legal advisers and the bankruptcy notice is not an abuse of process. Mr Mirko Rimac has been careless in the protection of his own interests. If, and I make no finding, he relied upon his father and Mr McEncroe to attend to his interests it would seem that his interests were not properly protected.
I will dismiss the application with costs.
I certify that the preceding sixteen (16) paragraphs are a true copy of the reasons for judgment of Driver FM
Associate:
Date: 24 June 2003