FEDERAL COURT OF AUSTRALIA
Scott v NIMLAW Pty Ltd [2024] FCA 26
Appeal from: Application for leave to appeal: Scott v NIMLAW Pty Ltd (No 2) [2023] FCA 1472 File number(s): SAD 177 of 2023 Judgment of: MCELWAINE J Date of judgment: 25 January 2024 Catchwords: BANKRUPTCY – Application for leave to appeal from interlocutory judgment of the Federal Court of Australia – where applicant sought a stay of orders dismissing her application to set aside a bankruptcy notice pending determination of an appeal – failure to identify error in the reasoning of the primary judge – no basis for the exercise of discretion to grant leave to appeal – application dismissed Legislation: Federal Court Rules 2011 (Cth) r 35.11 Cases cited: Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685
Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397
Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 27; 261 CLR 132
Division: General Division Registry: South Australia National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Number of paragraphs: 11 Date of last submission/s: 22 December 2023 (Respondent)
8 January 2024 (Applicant)Date of hearing: Determined on the papers Counsel for the Applicant: The Applicant appeared in person Counsel for the Respondent: Mr P Quinn Solicitor for the Respondent: Stewart Rattray Lawyers ORDERS
SAD 177 of 2023 BETWEEN: SUSAN JANE SCOTT
Applicant
AND: NIMLAW PTY LTD
Respondent
ORDER MADE BY:
MCELWAINE J
DATE OF ORDER:
25 JANUARY 2024
THE COURT ORDERS THAT:
1.The application accepted for filing on 1 December 2023 is dismissed.
2.The applicant is to pay the respondent’s costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
MCELWAINE J:
Dr Scott is a self-represented litigant. She is in dispute with her former solicitor, an incorporated legal practice: NIMLAW Pty Ltd, which is the respondent to the present application. The core of the dispute is a contest about the liability of Dr Scott to pay for legal services provided by the respondent to her. Dr Scott does not dispute that the respondent competently performed legal work pursuant to a retainer agreement, which is in writing. Dr Scott did not pay the respondent for services performed. A proceeding was commenced by the respondent to recover professional costs and disbursements claimed to be owing to it culminating in a judgment being entered against Dr Scott in the District Court of South Australia on 5 June 2023 in the sum of $20,312.98. Dr Scott did not pay that amount. Nor did she appeal the entry of that judgment. I refer to this as the judgment debt.
On 20 July 2023, the respondent caused to be issued a bankruptcy notice which required Dr Scott to pay the judgment debt, plus an amount for interest – in total $20,446.82. The bankruptcy…
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Details
- AGLC
- Scott v Nimlaw Pty Ltd [2024] FCA 26
- Case
- [2024] FCA 26
- Decision Date
CaseChat Overview and Summary
The parties involved in the case are Dr Scott and NIMLAW Pty Ltd, an incorporated legal practice that was formerly Dr Scott's solicitor. The dispute revolves around Dr Scott's refusal to pay for legal services provided by NIMLAW Pty Ltd, culminating in a judgment debt of $20,312.98 against Dr Scott in the District Court of South Australia. NIMLAW Pty Ltd issued a bankruptcy notice demanding the judgment debt plus interest, totaling $20,446.82. Dr Scott applied to set aside the bankruptcy notice on the grounds of a counter-claim, set-off, or cross demand under section 40(1)(g) of the Bankruptcy Act 1966 (Cth). The Federal Court of Australia, presided over by Charlesworth J, dismissed Dr Scott's application on 15 November 2023, leading to the present application for leave to appeal that decision. The court had to decide whether Dr Scott had a valid counter-claim, set-off, or cross demand that could justify setting aside the bankruptcy notice. The court evaluated Dr Scott's submissions, which included claims about the nature of the debt, the existence of security interests, the application of promissory estoppel, and various grievances related to other legal proceedings. The court found that none of these submissions constituted a valid defence, counter-claim, set-off, or cross demand under the relevant statute. Consequently, the court dismissed Dr Scott's application to set aside the bankruptcy notice.
The court's reasoning was grounded in the statutory provisions of the Bankruptcy Act 1966 (Cth), particularly sections 40(1)(g) and 41(7). Charlesworth J meticulously examined each of Dr Scott's grounds for setting aside the bankruptcy notice, concluding that none of them satisfied the legal criteria for such a remedy. The court held that Dr Scott's grievances and claims, while possibly relevant in other legal contexts, did not pertain to the private rights and obligations between Dr Scott and NIMLAW Pty Ltd regarding the debt. Therefore, the court found no basis for setting aside the bankruptcy notice. The court also noted that Dr Scott's failure to identify any error in the primary judge's reasoning further undermined her application for leave to appeal. The court's decision was clear and concise, emphasizing that the statutory requirements for setting aside a bankruptcy notice had not been met.
The final orders of the court were that Dr Scott's application for leave to appeal the dismissal of her originating application was dismissed, and Dr Scott was ordered to pay NIMLAW Pty Ltd's costs. The dismissal of the application for leave to appeal meant that the lower court's decision stood, and Dr Scott remained liable to pay the bankruptcy notice debt. The court's ruling reinforced the stringent requirements for setting aside bankruptcy notices and the need for applicants to demonstrate clear legal grounds that meet the statutory criteria.
The court's reasoning was grounded in the statutory provisions of the Bankruptcy Act 1966 (Cth), particularly sections 40(1)(g) and 41(7). Charlesworth J meticulously examined each of Dr Scott's grounds for setting aside the bankruptcy notice, concluding that none of them satisfied the legal criteria for such a remedy. The court held that Dr Scott's grievances and claims, while possibly relevant in other legal contexts, did not pertain to the private rights and obligations between Dr Scott and NIMLAW Pty Ltd regarding the debt. Therefore, the court found no basis for setting aside the bankruptcy notice. The court also noted that Dr Scott's failure to identify any error in the primary judge's reasoning further undermined her application for leave to appeal. The court's decision was clear and concise, emphasizing that the statutory requirements for setting aside a bankruptcy notice had not been met.
The final orders of the court were that Dr Scott's application for leave to appeal the dismissal of her originating application was dismissed, and Dr Scott was ordered to pay NIMLAW Pty Ltd's costs. The dismissal of the application for leave to appeal meant that the lower court's decision stood, and Dr Scott remained liable to pay the bankruptcy notice debt. The court's ruling reinforced the stringent requirements for setting aside bankruptcy notices and the need for applicants to demonstrate clear legal grounds that meet the statutory criteria.
Orders
Orders of the court
1. The application accepted for filing on 1 December 2023 is dismissed.
2. The applicant is to pay the respondent’s costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
Dr Scott is a self-represented litigant. She is in dispute with her former solicitor, an incorporated legal practice: NIMLAW Pty Ltd, which is the respondent to the present application. The core of the dispute is a contest about the liability of Dr Scott to pay for legal services provided by the respondent to her. Dr Scott does not dispute that the respondent competently performed legal work pursuant to a retainer agreement, which is in writing. Dr Scott did not pay the respondent for services performed. A proceeding was commenced by the respondent to recover professional costs and disbursements claimed to be owing to it culminating in a judgment being entered against Dr Scott in the District Court of South Australia on 5 June 2023 in the sum of $20,312.98. Dr Scott did not pay that amount. Nor did she appeal the entry of that judgment. I refer to this as the judgment debt. On 20 July 2023, the respondent caused to be issued a bankruptcy notice which required Dr Scott to pay the judgment debt, plus an amount for interest – in total $20,446.82. The bankruptcy notice was served on Dr Scott on 27 July 2023. Dr Scott did not pay the amount claimed. Rather, on 8 August 2023, she commenced an originating proceeding in this Court to set aside the bankruptcy notice on the basis that Dr Scott claimed the benefit of a counter-claim, set-off or cross demand of the type referred to at s 40(1)(g) of the Bankruptcy Act 1966 (Cth). That is proceeding SAD 104/2023. On 15 November 2023, Charlesworth J dismissed the originating application: Scott v NIMLAW Pty Ltd [2023] FCA 1420. Her Honour dismissed each ground relied on by Dr Scott in admirably succinct reasons at [18]-[23] as follows:First, she alleges that NIMLAW is not a company to which she owes a debt. In that respect, she made submissions about the sale of the business previously operated by the Firm with which she originally dealt. I accept that a submission of that kind may form the basis of a defence to an action in debt brought by a debtor. However, I am not satisfied that it is a defence that could not have been set up in the action or proceeding in which the judgment was obtained. It does not constitute a defence, counter-claim or set-off within the particular meaning of s 40(1)(g). For present purposes it matters not whether the defence was in fact raised or, if raised, whether the judge in the debt action provided the correct answer to the question.The next submission, as I understand it, is that the debt forming the subject matter of the bankruptcy notice is one that is secured in the sense that there are caveats lodged on Dr Scott’s property in respect of it. The lodging of a caveat, in and of itself, does not demonstrate that the Firm may exercise the rights of a secured creditor. Much would depend on the existence and terms of any underlying security that the caveat may be there to protect. In any event, the submission that a debt is secured is no answer to a demand for payment. Even if I am wrong about that, the circumstance that there may exist a security interest in relation to the debt does not constitute a defence, counter-claim or set-off that could not have been set up in the action or proceeding in which the judgment or order was obtained; that is, in the proceeding in the District Court of South Australia.The third submission was to the effect that circumstances exist that give rise to a promissory estoppel such that she was not presently obliged to pay the debts. The principles of promissory estoppel may well form the basis of a counter-claim, set-off, cross demand or defence in answer to a claim founded in debt. However, once again, I am not satisfied that a defence of that kind could not have been set up in the action or proceeding in which the judgment or order was obtained.Fourthly, Dr Scott’s oral and written submissions primarily focused on a series of injustices that she alleges have occurred in her dealings with the justice system more generally, and especially in her pursuit of justice with respect to wrongs that she alleges have been committed in connection with her mother’s treatment, her mother’s death, and the administration of her mother’s deceased estate.That sense of grievance is a genuine one and occupied much of the time of the hearing before the Court. When I say it is a genuine one, it is one that I understand Dr Scott to hold bona fide and to be pursuing on the basis of her understanding of the operation of the law. However, the grievances to which Dr Scott refers are not grievances that affect the private rights and obligations as between her and the Firm. It is not being shown, for example, that the retainer was subject to any clause that the debts would not be due and payable until Dr Scott was finally vindicated in the pursuit of her rights in actions relating to her mother. They do not give rise to a counter-claim, set-off, cross demand or defence vis-à-vis Dr Scott and the Firm in relation to the debt stated on the bankruptcy notice.For the purposes of s 41(7) of the Act I am not satisfied that Dr Scott as the debtor has the counter-claim, set-off or cross demand of the kind referred to in s 40(1)(g). She has not satisfied me that the bankruptcy notice should be set aside on that basis.
Ratio Decidendi
Legal Principle Established
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