Singh v Vaughan
[2000] FMCA 9
•17 November 2000
IN THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
Registry: Sydney Applicant Renuka Devi Singh Respondent 1: Michael John Vaughan File No: SZ 29/2000 Hearing Dates: 8 November 2000 Date of Decision: 17 November 2000 Before: Kenneth Raphael FM Primary Legislation: Bankruptcy Act 1966 (Cth) ss 30, 41(6A), 41(7) Application: To set aside Bankruptcy Notice Matter for Decision: Principal Matter REPRESENTION Applicant: Self-litigant Respondent: Mr C Stomo
Instructed by Johnston VaughanORDERS: 1. Application dismissed
2. Applicant to pay the Respondent’s costs
IN THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
SYDNEY REGISTRY
No SZ /2000
BETWEEN:
RENUKA DEVI SINGH
Applicant
and
MICHAEL JOHN VAUGHAN
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
1. This application has been brought by the debtor, Ms Renuka Devi Singh to set aside a bankruptcy notice dated 28 March 2000 and served on 24 May 2000 at the request of Michael John Vaughan the respondent to these proceedings. The application was stated to have been made under ss. 30, 41(6A) of the Bankruptcy Act and also under s.41 (7) of the Bankruptcy Act. It was common ground that no proceedings to set aside the original judgment had been instituted and that basis of the application was abandoned. In respect of the “other grounds” (other than those under s.41 (7)) the applicant stated that the bankruptcy notice was invalid because the certificate of taxation upon which it was based had not been registered with the Kogarah Local Court. It transpired during the course of the proceedings that this had in fact occurred although the copy of the certificate of taxation, which was annexed to the bankruptcy notice served upon the applicant, did not contain such a stamp.
2. The application under s.41 (7) raised more complex issues that are discussed in more detail in these reasons. Essentially the point being put by Ms Singh was that the allegations which she has made against Mr Vaughan were not capable of being considered in the context of a taxation of costs in the Family Court and therefore constituted a counter-claim, set-off or cross demand that could not have been set up in the original action and was equal to or exceeded the amount claimed in the bankruptcy notice.
HISTORY
3. Ms Singh swore an affidavit on 8 March 2000 and gave evidence from which the following history has been obtained.
4. In about March 1998 she retained the respondent practising under the name of Johnston Vaughan, as her solicitor in connection with Family Court proceedings which she had instigated against her former husband. She was seeking a property settlement. This could only be obtained by setting aside a conveyance from her former husband to his two brothers of his interest as a joint tenant in a house in Arncliffe. Mr Vaughan commenced to act, brought the necessary proceedings, and attended to various interlocutory steps in relation to those proceedings. But his retainer was removed in or about June 1999 when Ms Singh changed her solicitors to Messrs BJ Murphy Angelovski & Associates. This firm completed the property settlement case which was settled on the basis of a payment to Ms Singh of $65,000. Mr Vaughan sent Ms Singh an account for $17,765 on 9 June 1999 which was unpaid. On 1 July 1999 he commenced proceedings against Ms Singh for that amount in the Kogarah Local Court. A notice of grounds of defence was filed on 27 August 1999 by Mr LV Angelovski stating that a notice disputing the bill of costs had been filed in Sydney Registry of the Family Court on 8 July 1999 and that the matter had been set down for hearing on 20 September 1999.
5. In evidence before this court from Ms Singh the court learnt that no hearing took place on 20 September 1999 because Ms Singh had produced a doctor’s certificate stating that she was unfit to attend court on that day. The matter was adjourned to another later date, but by that time Ms Singh had dispensed with the services of BJ Murphy Angelovski & Associates and did not attend that hearing. On 21 February 2000 Mr Vaughan applied to the Registrar of the Family Court for a certificate of taxation on the grounds that the applicant had not taken any steps with regard to her objection to the bill and a certificate of taxation was issued on 14 March 2000. The certificate was in the form known as form 58 pursuant to Family Law Rules O38 r 49 and 50 and certified that the amount payable by Ms Singh to Johnston Vaughan was $17,765, inclusive of the costs of taxation.
6. In the meantime Ms Singh had taken out a notice of motion to strike out the plaintiff’s claim in the Kogarah Local Court and this notice was due to be heard on 13 April 2000. The notice of motion contained the affidavit to which I have referred and a letter of demand dated 9 February 2000. Both of these documents go into considerable detail of allegations of sexual harassment, conspiracy and failure to act in accordance with instructions against Mr Vaughan. They and the notice of grounds of defence filed on 7 March 2000 clearly suggest that Ms Singh had a counter-claim against Mr Vaughan of at least $35,000. The proceedings in the Kogarah Local Court never went ahead. Once Mr Vaughan obtained the certificate of taxation he no longer needed those proceedings. He therefore discontinued them. Ms Singh was unrepresented. She was given no apparent assistance by the Kogarah Local Court and that court did not consider the documents which had been filed so clearly represented a cross-claim that they were able to discontinue the claim but allow the cross-claim to remain on foot. This is obviously what should have happened.
7. Ms Singh took no further steps in relation to the Kogarah Local Court proceedings. She did not issue her own claim against Mr Vaughan or request that her “defence” be considered to include a cross-claim which remained on foot. On 28 March 2000, Mr Vaughan arranged for the Official Receiver to issue the bankruptcy notice which is the subject matter of this application. The judgment he relied on was the certificate of taxation filed on 14 March 2000.
8. After service of the bankruptcy notice Ms Singh took out this application in the Federal Court of Australia. Orders were made extending the time for compliance with the requirements of the bankruptcy notice and the matter was set down for mention before his Honour Sackville J who on 8 September 2000 transferred it into the Federal Magistrates Court of Australia pursuant to s.32AB of the Federal Court of Australia Act 1976.
THE APPLICATION
9. Ms Singh represented herself in this application. Lest it be thought that she was an experienced personal litigant because of the processes carried out at the Kogarah Local Court, it should be said that these appear to have been organised for her by a friend, Mr Schultz. At my suggestion she had gone to the Marrickville Legal Centre who had provided her with some advice dated 23 October 2000 that became exhibit (1) to these proceedings. That advice was that the bankruptcy notice was defective in that it attached a copy of the certificate of taxation rather than the original certificate, judgment or order. Section 40(1)(g) Bankruptcy Act makes no mention whatsoever of the requirement to serve the original certificate of taxation rather than a copy. The regulations (Bankruptcy Regulation 4.02) refer to Form 1 in Schedule 1 and that form refers to “a copy of the judgment or order relied upon is attached”. The matter of copies being attached to bankruptcy notices was discussed exhaustively by Hill J in St George Bank v Maxwell John Klintworth [1998] 1066 FCA (25 August 1998). His honour found that the word ‘copy’ should not be construed narrowly. I cannot find any authority to support the Marrickville advice.
10. There being no other formal complaints concerning the bankruptcy notice the matter comes to be considered on the basis on s.41 (7) namely that “the debtor had a counter-claim, set-off or cross demand as is referred to in paragraph 40(1)(g)”.
11. The applicant did not raise in this court the question of whether or not the certificate of taxation was “a final judgment or order”. This conundrum exercised the mind of his Honour Einfeld J in the matter of McGregor; McGregor v Clancy & Triado Pty Ltd (1991) 100 ALR 431. His Honour took the view that the certificate was not such an order but it is fair to say that in subsequent cases this view has not been much supported. The matter was commented upon by Drummond J in Re Allen Harry Gibbs ex parte Paul Antony Triscott [1995] 65 FCR 80 where his Honour said at p :
“While I do not agree with these reasons, Einfeld J’s decision to dismiss the bankruptcy notice was, in my respectful opinion, correct: before a bankruptcy notice can be issued, s.40 (1)(g) requires there to be a judgment or order. There was no judgment or order for costs to support the bankruptcy notice issued here, only a certificate of taxation that, by the relevant Family Court Rules, was deemed to be a judgment. Section 40(3) of the Bankruptcy Act extends the meaning of the expression “final judgment or final order” in s.40 (1)(g), but (save for arbitral awards which are, by s.40 (3)(a), covered by the expression “a final judgment or final order” in s.40 (1)(g) of the Bankruptcy Act) that sub-section only applies to certain judgment or orders which would otherwise not amount to final judgments or final orders: it does not purport to make something which is not a judgment or order, but which is only deemed to be that, a judgment or order for the purposes of s.40(1)(g).”
At that time the relevant order in the Family Court Rules was O38 r42 (3) which provided that:
“(3) A certificate issued under sub-rule (1) shall be deemed to be a judgment for debt immediately due and payable and recoverable in accordance with law.”
12. This rule was the subject of the criticism contained in the passage from the judgment of Drummond J recited above. However, the rule has now been changed so that it reads as follows:
“63(1) [Judgment for debt] The total amount payable for costs specified in a certificate of taxation is:
(a)immediately due and payable; and
(b)recoverable in any court of competent jurisdiction;
as if the certificate were a judgment for a debt of the amount specified in the certificate.
…”
The effect of this rule is that the certificate is no longer “deemed” to be a final judgment but would in fact “be” a final judgment or order.
13. The applicant is therefore left with the argument that she has a cross-claim which could not have been made in the proceedings in which the judgment or order was obtained.
14. Strictly speaking Ms Singh alleges she has both a defence and a cross-claim. Ms Singh believes that Mr Vaughan’s advice was so poor and so inappropriate that it was not worth paying for at all. That is her “defence”. In addition she says that she was sexually harassed by Mr Vaughan and that he conspired with her brothers-in-law so that she only received a reduced value in respect of her husband’s interest in the property. Those matters are matters of cross-claim for which damages could be awarded and, if they were awarded, were likely to be awarded in a sum greater than the amount claimed.
15. Ms Singh did have an opportunity to raise her defence before the Registrar of the Family Court. Order 38 r35 of the Family Court Rules provides:
“35 At a hearing, or on an application, and whether or not objection is taken, the court may:
(a)if costs have been improperly, unreasonably or negligently incurred – direct that the costs be disallowed; or
(b)direct the taxing officer to examine the costs incurred and disallow any costs that the taxing officer finds have been improperly, unreasonably or negligently incurred.”
This rule is different from the former O38 r29 which was the subject of some discussion in In the Marriage of Cooke (1992) 112 FLR 365 where Murray J held that a Registrar has no power to determine a general allegation of negligence which goes to the whole action but that she had the power to determine whether specific items of costs could be disallowed on any of the three grounds specified in that rule. It would seem to this court that the new O38 r35 would be broad enough to allow the matters which I have described as Ms Singh’s “defence” to have been raised before the Registrar which might have had the effect of reducing her bill to nil. In any event she did not take up that opportunity even though she had originally instructed solicitors on her behalf to do so.
16. I am, however, satisfied that the Registrar could not have dealt with those matters which are the subject matter of Ms Singh’s “cross-claim”. I believe this much was conceded (and properly so) by Mr Stomo who appeared on behalf of the respondent. He proceeded on the basis that he was prepared to persuade me that I could not be satisfied that:
“The debtor had presented prima facie evidence of the truth of the counter-claim and shown a reasonable chance of success” per Einfeld J Bhattacharya v Berger [1999] FCA 883 at para 28. See also the comments of the High Court in Guss v Johnstone [2000] HCA 26 11 May 2000 at para 14, and those of Lockhart J in Re Brink; Ex Parte Commercial Banking Company of Sydney (1980) 44 FLR 135 at 142 and quoting Latham CJ in Vogwell v Vogwell (1939) 11 ABC 83 at 85,86.
17. Mr Vaughan had filed an affidavit denying the allegations of Ms Singh relating both to the sexual harassment and to his alleged conspiracy with her brothers-in-law. He was cross-examined by Ms Singh.
18. Mr Vaughan gave his evidence in a confident and competent manner. Notwithstanding the serious nature of the allegations made by Ms Singh he was at all times polite to her in responding to her questions. He did not lose his temper. I found him to be a reliable and truthful witness. I also heard evidence from Ms Singh on this conspiracy point. In the end the gravamen of her complaint seemed to be the when she first came to see Mr Vaughan he intimated to her that her claim was worth approximately $128,000. She believed that because she did not achieve a settlement of $128,000 she was entitled to claim the balance from Mr Vaughan.
19. I did not think there were any major discrepancies between the evidence of Ms Singh and the evidence of Mr Vaughan in relation to these matters. The events which occurred would be familiar to any legal practitioner who deals with individuals who make claims against others arising out of tortious liability or in relation to family property. Ms Singh had a first interview with Mr Vaughan at which she described to him the property that her husband had owned at the commencement of the marriage in conjunction with his brothers. She gave Mr Vaughan her understanding of the arrangements between the brothers and armed with this information and with his local knowledge of the property market in the area Mr Vaughan gave Ms Singh an estimate as to her likely recovery. In all probability that was the sum of $128,000. I have little doubt that Mr Vaughan explained to Ms Singh that this was only his estimate and was based solely on the information presently before him. However, Ms Singh like many litigants before her and like the many who will come after her chose only to hear that figure and believed that it represented her entitlement. In fact the situation was more complex than Ms Singh had explained. Her husband had not made any payments of his contribution towards the mortgage for some time. Mr Vaughan claimed that he had a drinking problem and was an inveterate gambler and this was not denied by Ms Singh. He had no spare money and had not had some for some time. The property was simply not worth the $400,000 plus that had originally been suggested. At the time of the application there was a mortgage on the property of approximately $112,000 and its value was estimated by a valuer retained by Mr Vaughan (and not paid for by Ms Singh) at $320,000.
20. Mr Vaughan gave evidence that the proceedings went to what is known as an Order 24 conference. This is a conference with a Registrar of the Family Court in which the parties are supposed to put their cards on the table and the Registrar is supposed to advise them of the likely outcome of any proceedings in the hope that the matter can be settled. Mr Vaughan gave evidence that at the Order 24 conference Ms Singh was made fully aware of the fact that her entitlement would never reach $128,000.
21. Having found that the above facts represented what I believe to have occurred in the dealings between Mr Vaughan and Ms Singh I would have no hesitation in declaring that I was not satisfied that Ms Singh had established that she had a cross-claim which had a reasonable chance of success. But Ms Singh makes additional complaints. She says that Mr Vaughan tried to force her to accept a settlement of some $30,000. She says that he did this as part of a conspiracy with her brothers-in-law.
22. What evidence there is of this alleged conspiracy comes from Ms Singh. At a time which I assume to have been shortly before the Order 24 conference an offer to settle the case by the payment of $30,000 from the brothers to Ms Singh was made. Ms Singh says that Mr Vaughan spoke to the brothers and he then put an extreme amount of pressure upon her to accept the offer. Mr Vaughan does not deny that he spoke to the brothers but he says that he did that in the context of them telephoning him. He agreed that he put the offer to Ms Singh as he should have done but denies that he put pressure upon her to settle at that sum. In any event, when the parties attended the Order 24 conference a further offer of $55,000 was made so any complaint that Ms Singh might have about the $30,000 could not have manifested itself in a claim for damages. Ms Singh rejected the offer of $55,000, terminated Mr Vaughan’s retainer and employed other solicitors.
23. Eventually Ms Singh’s claim was settled for $65,000. She says it was settled for this sum because that was the amount of money that she requested in an offer of compromise which had been submitted by Mr Vaughan. She says that her barrister had told her that if it wasn’t for the offer of compromise he “could have got me $100,000”. An offer of compromise can always be withdrawn. There is no evidence that the offer was accepted before the new solicitors had an opportunity to withdraw it. If that firm genuinely believed that they could obtain a settlement of $100,000 for Ms Singh and that was a fair figure for her to accept then the failure to withdraw the offer of compromise is something for which they should be blamed and not Mr Vaughan.
24. Ms Singh further says that although she obtained $10,000 more as a result of employing the new solicitors, it cost her $13,000 to do so. To the extent that this might form a cross-claim which was not capable of being dealt with in the original proceedings it does not equal or exceed the amount of the judgment debt. Further, the difference exceeds the minimum amount for which a person may be made bankrupt. I am not satisfied that Ms Singh has in respect of any of these matters made out the test required by s.41 (7).
25. When I requested Ms Singh to make submissions to me on her claim she said there were three matters as follows:
(i)I got only $65,000, not $128,000;
(ii)He conspired with my brothers-in-law;
(iii)He didn’t do the job, I had to employ another solicitor and pay him $13,000. If he had told me things in the first place I would have known what was going on.
26. I have dealt with all these matters in the judgment. I have not yet dealt with the allegations of sexual harassment. Ms Singh is a litigant in person under considerable stress. Presenting a case in court is not easy for anybody and I do not think it fair to hold her to only those three matters with which she concluded her submissions. The question of sexual harassment was raised fairly and squarely in the affidavits. Mr Vaughan was questioned by his counsel and cross-examined by Ms Singh on these matters. He denies them vehemently. Neither the questioning nor the cross-examination was extensive. Allegations of this sort would have to be established to what is known as a Briginshaw standard of proof. Likewise the allegations of conspiracy between Mr Vaughan and the brothers-in-law which I have already dismissed. The events in question are alleged to have occurred between 1998 and mid-1999. Ms Singh changed her lawyers from Mr Vaughan to BJ Murphy Angelovski & Associates. Although she appears to have dismissed them in mid-1999 she was required to seek the advice of lawyers on another matter in September of that year. Notwithstanding the alleged seriousness of the complaints, she did not then, and has not yet, referred these matters to the Anti-discrimination Board of NSW or the Human Rights and Equal Opportunity Commission of the Commonwealth. Either of these parties could have investigated and conciliated her allegations. She did make a complaint about Mr Vaughan to the Law Society. This was referred to the Professional Conduct Committee. On 6 October 2000 the Law Society wrote to Mr Vaughan advising him that the investigation of the complaint was completed and was dismissed because the Committee was satisfied there was no reasonable likelihood that he would be found guilty by the Administrative Decisions Tribunal, Legal Services Division of either unsatisfactory professional conduct or professional misconduct. The unethical conduct alleged was:
(a) exerting undue pressure on the complainant to settle;
(b) being guilty of racial discrimination;
(c) attempting to force the complainant into a sexual relationship by blackmail or false pretences;
(d) conspiring with the complainant’s ex-husband;
(e) harassing the complainant;
(f) threatening the complainant with bankruptcy.
27. The letter went on to say “the complainant has been requested on two occasions to provide information and documents to support her version of events but has not done so.”
28. Given this failure by Ms Singh to press her complaints I cannot be satisfied that she has presented such prima facie evidence of the truth of them that would enable me to set aside the bankruptcy notice. The views of Sundberg J on the effect of delay in these matters was considered by the High Court in Guss at para 19. Even if Ms Singh became bankrupt as a result of a petition based upon an act of bankruptcy arising out of this bankruptcy notice she could still complain to the Anti-discrimination Board or the Human Rights and Equal Opportunity Commission. It may well be that any damages or settlement that she achieved as a result would be protected from her Trustee by virtue of s.116 (2)(g)(i) of the Bankruptcy Act 1966.
CONCLUSION
29. I am not satisfied there was any formal fault with the bankruptcy notice.
30. I am not satisfied that the complaints made about the quality of Mr Vaughan’s work are matters which could “not have been set up in the action or proceeding in which the judgment or order was obtained”.
31. I am not satisfied that the debtor has presented prima facie evidence of the truth of her alleged cross-claims or that she has shown that those alleged cross-claims have a reasonable chance of success. To the extent that there may have been an alleged cross-claim arising out of the payment made to her second solicitors, I am not satisfied that this is equal to or exceeds the amount of the judgment debt: Ebert v Union Trustee Co (Aust) Ltd (1960) 104 CLR 346, 350; 19 ABC 236; Re Billinghurst; Ex parte Australia and New Zealand Banking Group Ltd (1978) 36 FLR 62; Re a Debtor [1958] 1 Ch 81, 99; Guss v Johnstone [2000] HCA 26.
ORDERS
1. I dismiss the application
2. I order that the applicant pay the respondent’s costs.
I certify that the preceding thirty one (31) numbered
paragraphs are a true copy of the Reasons for Judgment
herein of Federal Magistrate Kenneth Raphael.
Associate
Dated 17 November 2000
BANKRUPTCY-Bankruptcy Notice-application to set aside - “counter-claim, set off or cross demand that could have been made in former proceedings” – taxation of family law costs – effect of certificate of taxation – O 38 R 35 Family Court Rules – complaints of conspiracy, sexual harassment and unprofessional conduct – matters of cross claim – not satisfied that debtor had presented prima facie evidence of the truth of the counter-claim and shown a reasonable chance of success.
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