Schiffer v Pattison

Case [2005] FCA 494

FEDERAL COURT OF AUSTRALIA

Schiffer v Pattison [2005] FCA 494

BANKRUPTCY – bankrupt discharged from bankruptcy – trustee issued proceedings in Federal Magistrates Court to recover money from bankrupt – trustee’s calculation based upon assessments of amount of income bankrupt likely to have derived during certain specified contribution assessment periods – reasonable remuneration used as basis for calculations – no payment made – trustee issued certificate of outstanding contribution, filed in Federal Magistrates Court – trustee sought summary judgment against respondent – respondent challenged validity of certificate of outstanding contribution – respondent also filed purported cross-claim seeking declaratory relief – Federal Magistrate held no arguable defence raised, summarily dismissed cross-claim, and made findings as to respondent’s lack of cooperation with trustee – appeal to Federal Court – whether leave to appeal required from summary judgment – whether leave to appeal should be granted – whether appellant needed to pursue cross-claim for declaratory relief – whether Federal Magistrate should have dealt with appellant’s challenges to validity of key documents – whether Federal Magistrate erred by having regard to irrelevant considerations

Bankruptcy Act 1966 (Cth) ss 139S, 139W(1), 139Y, 139ZG(4) and (5)

Re Ellis; Ex parte Jefferson & Stevenson (unreported, Federal Court of Australia, 17 February 1995) discussed
Kluska v Kluska [1965] VR 457 referred to
Tampion v Anderson (1974) 3 ALR 414 considered
Port of Melbourne Authority v Anshun Pty Ltd (1980) 147 CLR 35 considered
MZWHW v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCA 466 at [6] referred to
Cox Brothers (Australia) Ltd v Cox (1934) 50 CLR 314 followed
Standard Discount Co v La Grange (1877) 3 CPD 67 referred to
In re a Debtor (1903) 19 TLR 152 referred to
Salter Rex & Co v Ghosh [1971] 2 QB 597 at 601 referred to
Weatherall v Satellite Receiving Systems (Aust) Pty Ltd (1999) 30 ACSR 698 referred to
National Mutual Life Association of Australasia Ltd v Grosvenor Hill (Qld) (2001) 183 ALR 700 referred to
Cubillo v Commonwealth (2001) 112 FCR 455 at 503 referred to
Johnston v Cameron (2002) 124 FCR 160 at [8] followed
Decor Corp Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 followed
Geoffrey Inc v Luik (1997) 38 IPR 555 referred to
Dey v Victorian Railways Commissioners (1949) 78 CLR 62 followed
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 followed
McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409 at [12]–[19] referred to
Energex Ltd v Alstom Australia Ltd [2004] FCA 575 at [157]-[161] referred to

HORST DIETER SCHIFFER v PAUL ANTHONY PATTISON
V436 OF 2004

WEINBERG J
26 APRIL 2005
MELBOURNE


IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

V436 OF 2004

BETWEEN:

HORST DIETER SCHIFFER
APPELLANT

AND:

PAUL ANTHONY PATTISON
RESPONDENT

JUDGE:

WEINBERG J

DATE OF ORDER:

26 APRIL 2005

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1.Assuming leave to appeal is required, leave be granted.

2.The appeal be allowed.

3.Orders one and three of the orders…

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Schiffer v Pattison [2005] FCA 494
Case
[2005] FCA 494
Decision Date

CaseChat Overview and Summary

In Schiffer v Pattison, the appellant, Mr Schiffer, sought leave to appeal against a decision of the Federal Magistrate, which ordered that he pay his trustee in bankruptcy, Mr Pattison, the sum of $96,961.74. The dispute centred around the trustee's claim for income contributions that Mr Schiffer was liable to pay during specified periods after his bankruptcy. Mr Schiffer argued that the Federal Magistrate had erred in law in granting summary judgment against him, and that the matter should be remitted for a full hearing. The central legal issue was whether the Federal Magistrate erred in granting summary judgment to the trustee, effectively dismissing Mr Schiffer’s cross-claim without a full hearing. The court considered whether the summary judgment granted in favour of the trustee was interlocutory or final, and if it warranted an appeal. The court noted the lack of clear authority on whether summary judgment in favour of a plaintiff is interlocutory or final, though it found substantial authority that such judgments in favour of a defendant are typically interlocutory. It highlighted the case of Cox Brothers (Australia) Ltd v Cox, where the High Court held that an order giving leave to enter final judgment was interlocutory and required leave to appeal. The court concluded that given the uncertainty in this area, and the potential for significant prejudice to Mr Schiffer if the matter was not fully heard, it was appropriate to grant leave to appeal. The appeal was allowed, and the orders made by the Federal Magistrate were set aside. The matter was remitted to the Federal Magistrate for a full hearing according to law.

Orders

Orders of the court

1. Assuming leave to appeal is required, leave be granted.

2. The appeal be allowed.

3. Orders one and three of the orders made by the Federal Magistrate on 19 March 2004 be set aside.

4. In lieu thereof, the matter be remitted to his Honour to be heard and determined according to law.

AND THE COURT DIRECTS THAT:

1. Each party file and serve written submissions regarding costs, both of and incidental to the appeal, and before the Federal Magistrate, within twenty-one days of the publication of these reasons for judgment.

Background

Background to the litigation

By amended notice of appeal, filed on 11 November 2004, Mr Schiffer sought leave to appeal from the Federal Magistrate’s decision. In the meantime, on 6 September 2004, the Chief Justice directed, pursuant to s 25(1A) of the Federal Court of Australia Act 1976 (Cth), that a single judge of the Court hear and determine this matter. BACKGROUND Mr Schiffer was made bankrupt by a sequestration order on 17 May 1995. He was discharged from bankruptcy on 13 July 2003, eight years after he filed his Statement of Affairs. Mr Pattison was Mr Schiffer’s trustee in bankruptcy. In 1998, Mr Pattison objected to Mr Schiffer’s discharge from bankruptcy. On 20 July 1999, the Administrative Appeals Tribunal (“the AAT”) upheld that objection. On 10 August 2001, Kenny J dismissed an appeal against the decision of the AAT. After Mr Schiffer was finally discharged from bankruptcy, Mr Pattison issued proceedings in the Federal Magistrates Court seeking to recover from Mr Schiffer the sum of $96,961.74. The basis of the claim was that Mr Pattison, pursuant to s 139W(1) of the Bankruptcy Act 1966 (Cth) (“the Act”), had made various assessments of the amount of income that Mr Schiffer was likely to have derived during certain specified contribution assessment periods. Based on those assessments, Mr Pattison had determined the amount of the contribution that Mr Schiffer, though no longer a bankrupt, was liable to pay for each such period. There were four periods in question. They were:·8 December 1994 to 7 December 1995 – amount of contribution $24,583.50;·8 December 2000 to 7 December 2001 – amount of contribution $26,734.04;·8 December 2001 to 7 December 2002 – amount of contribution $28,090.99; and·8 December 2002 to 12 July 2003 – amount of contribution $17,553.21. Mr Pattison had determined Mr Schiffer’s income in the subsequent income assessments, based upon the reasonable remuneration figure used in the income assessment dated 10 November 1995 (“the November assessment”), with adjustments for changes in the consumer price index (“CPI”). Mr Pattison adopted that approach on the basis that Mr Schiffer had failed to complete and return annual statements of income for the period of his bankruptcy. On 26 June 2003, Mr Schiffer received a letter to which was attached a document titled “Explanation of Words Used in Assessment”. The explanation advised him, inter alia, that if he disagreed with Mr Pattison’s decision regarding the contributions or assessments, he could apply to the Inspector-General for review of that decision. Alternatively, he could lodge an appeal with the AAT. Mr Schiffer did not file an application for review by the Inspector-General in respect of the subsequent income assessments. Nor did he appeal Mr Pattison’s decision to the AAT. He did not pay any amount in reduction of the outstanding income assessments totalling $96,961.74. On 28 November 2003, Mr Pattison issued a certificate of outstanding contribution, pursuant to s 139ZG(4) of the Act, which was filed in the Federal Magistrates Court Registry on 15 January 2004.THE RELEVANT LEGISLATION

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

WEINBERG J
Finally, in response to ground n), Mr Cull submitted that the cross-claim had not sought explicit relief. Mr Pattison’s notice of motion sought summary judgment, together with other necessary orders. In light of the purposes and “expected simplicity” of Federal Magistrates Court proceedings, the relevant rules should be read to provide for the summary dismissal of cross-claims, whether of the Federal Magistrate’s own motion, or in response to a successful application for summary relief by an applicant against a respondent.CONCLUSIONS It is somewhat surprising that there is such little authority on the question whether summary judgment in favour of a plaintiff (or, in this Court, an applicant) is interlocutory or final. By contrast, there is a substantial body of authority for the proposition that summary judgment in favour of a defendant (in this Court, a respondent) is interlocutory. See for example Tampion v Anderson (1974) 3 ALR 414 in which the Privy Council held that an order staying an action on the ground that it was frivolous, vexatious and an abuse of the process of the Court was an interlocutory judgment. On the other hand, in Port of Melbourne Authority v Anshun Pty Ltd (1980) 147 CLR 35 (“Anshun”), the High Court held that an order by a Supreme Court judge that proceedings in an action be stayed as an abuse of process on the ground that the matters in question could and should have been litigated in earlier proceedings is an order which finally disposes of the rights of the parties. Tampion v Anderson was considered, and distinguished. Gibbs J, as his Honour then was, observed that there might well be a difference between a case in which an action was frivolous or vexatious in the ordinary sense, or in which the proceedings disclosed no reasonable cause of action, and a case in which the abuse of process lay in an attempt to litigate an issue which was res judicata. His Honour observed that Tampion v Anderson had nothing to say about a case of the latter kind. See also MZWHW v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCA 466 per Kenny J at [6]. Perhaps the authority most directly in point with regard to summary judgment on behalf of a plaintiff is Cox Brothers (Australia) Ltd v Cox (1934) 50 CLR 314 (“Cox”). In that case, the High Court held that an order giving leave to enter final judgment pursuant to order XIV rule 1 of the Rules of the Supreme Court 1916 (Vic) upon a specially endorsed writ of summons was interlocutory and not final. Leave to appeal was therefore necessary. Two English cases were referred to in support of that conclusion: Standard Discount Co v La Grange (1877) 3 CPD 67 and In re a Debtor (1903) 19 TLR 152. In Tampion v Anderson, their Lordships noted that there was a continuing controversy regarding the question whether a given judgment was of a final or an interlocutory character. That controversy related to whether the broad test of finality in a judgment depended upon the effect of the order made, or on the application being of such a character that whatever order had been made in relation to it must finally have disposed of the matter in dispute. They cited the well-known observation of Lord Denning MR in Salter Rex & Co v Ghosh [1971] 2 QB 597 at 601:“This question of ‘final’ or ‘interlocutory’ is so uncertain that the only thing for practitioners to do is to look up the practice books and see what has been decided on the point. Most orders have now been the subject of decision.”

Ratio Decidendi

Legal Principle Established

Established by: WEINBERG J

Section 139Y sets out the conditions under which a trustee may regard a bankrupt as receiving reasonable remuneration. It states:“(1) If:(a)the bankrupt is engaging or has engaged during a contribution assessment period in employment or other work or in activities that resemble employment or other work; and(b)the bankrupt does not receive or did not receive any remuneration in respect of the employment, work or activities or receives or received remuneration that is less than the remuneration (in this subsection called the reasonable remuneration) that:(i)in the case of employment where an industrial award or agreement prescribes rates or minimum rates of salary or wages for the employment—might reasonably be expected to be or to have been received by the bankrupt in respect of the employment by virtue of that award or agreement; or(ii)in any other case—might reasonably be expected to be or to have been received by a person who engaged in similar employment, work or activities where there was no relationship or other connection between that person and the person for whom the employment, work or activities were carried out;then, for the purpose of making an assessment, the trustee may determine that the bankrupt receives or received the reasonable remuneration in respect of the employment, work or activities.(2) If:(a)the bankrupt enters or entered during a contribution assessment period into any transaction that might reasonably be expected to produce or to have produced income; and(b)the bankrupt does not derive or did not derive any income from the transaction or derives or derived income that is less than the income (in this subsection called the reasonable income) that might reasonably be expected to be or to have been derived if the transaction were or had been entered into at arm's length;then, for the purpose of making an assessment, the trustee may determine that the bankrupt derives or derived the reasonable income from the transaction.” Section 139ZG of the Act sets out the circumstances under which contribution is payable. Subsections 139ZG(4) and (5) provide:“(4) The trustee may, in connection with proceedings to recover the debt: (a)sign a certificate setting out the nature and the amount of the debt; and(b)file the certificate in the court in which the proceedings have been instituted.(5)In such proceedings, the certificate is prima facie evidence of the existence of the debt and the amount of the debt.”THE PROCEEDING BEFORE THE FEDERAL MAGISTRATE Mr Pattison brought proceedings in the Federal Magistrates Court against Mr Schiffer for what he contended was effectively a simple debt claim in relation to income contribution assessments made under the Act. In his amended statement of claim, Mr Pattison alleged that Mr Schiffer had, at all times during the period of his bankruptcy, been liable to pay a contribution of income derived during a contribution assessment period where such income was assessed by Mr Pattison to exceed the threshold amount applicable in relation to him. He pleaded that a series of demands had been made upon Mr Schiffer for payment of all such monies outstanding at such times, but that Mr Schiffer had not made any payment in response to those demands.