Slaveski v Rotstein

[2009] FMCA 443

FEDERAL MAGISTRATES COURT OF AUSTRALIA

SLAVESKI v ROTSTEIN [2009] FMCA 443

BANKRUPTCY – Application to reinstate pursuant to rule 16.05(2) – application to set aside Bankruptcy Notice – consideration of s.40(1)(g) Bankruptcy Act 1966.

Bankruptcy Act 1966
Judgment Debt Recovery Act 1984 (Vic)

Slaveski v Rotstein and Associates Pty Ltd [2009] VSC 111
Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337

Applicant: LUPCO SLAVESKI

Respondent: ROTSTEIN & ASSOCIATES PTY LTD

File Number: MLG 646 of 2008

Judgment of: Burchardt FM

Hearing date: 6 May 2009

Date of Last Submission: 6 May 2009

Delivered at: Melbourne

Delivered on: 15 May 2009

REPRESENTATION

Counsel for the Applicant: In person

Counsel for the Respondent: Mr B Basavanand

Solicitors for the Respondent: Rotstein Lockwood Reddy Lawyers Pty Ltd

ORDERS

1. That the Applicant’s interim application to reinstate his application filed on 17 November 2008 be granted.

2. That the application filed on 17 November 2008 be dismissed.

3. That the Applicant pay the Respondent’s costs, to be taxed in default of agreement pursuant to the Federal Court’s Rules.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLG 646 of 2008

LUPCO SLAVESKI

Applicant

And

ROTSTEIN & ASSOCIATES PTY LTD

Respondent

REASONS FOR JUDGMENT

Introductory

1. On 20 April 2009, Riethmuller FM ordered that Mr Slaveski's application filed on 17 November 2008 be dismissed pursuant to rule 13.03A(c) [sic] of this Court's rules.

2. By an interim application filed the same day, Mr Slaveski seeks to reinstate his application made on 17 November 2008. 

3. Although the interim application does not say so in terms, what Mr Slaveski seeks in substance is that the Bankruptcy Notice, VN784 of 2008, served upon Mr Slaveski on or about 13 May 2008 (see Mr Slaveski's affidavit filed 30 May 2008, paragraph 1) be set aside or stayed pending the determination of Supreme Court proceedings underway between Mr Slaveski and the Commonwealth Bank of Australia.

4. For the reasons that follow, I have concluded that the orders made by Riethmuller FM on 20 April 2009 should be set aside and that the substantive application made by Mr Slaveski should be reinstated.  I further have decided that the substantive application made by Mr Slaveski should be dismissed.

Procedural History

1. It is not possible to understand the nature of the proceeding before the Court, which is in many respects rather unusual, without an understanding of its procedural history.  On 30 May 2008, Mr Slaveski filed an application seeking that the Bankruptcy Notice be set aside or dismissed or alternatively "be on hold until the final decision of the Melbourne Magistrates Court". 

2. Mr Slaveski filed an affidavit in support also on 30 May 2008 in which he referred to a history of proceedings in the Magistrates Court of Victoria.  It is clear that on 1 April 2008 his Honour Mr Garnett ordered costs against Mr Slaveski in the sum of about $7,000 and also that his Honour disqualified himself from further hearing the matter.

3. It is also clear from the affidavit and from the materials filed in this proceeding that on 13 May 2008, Mr Slaveski was served with a Bankruptcy Notice arising out of the costs order.

4. It should be noted that counsel for the Respondent informed me when the matter was heard in this Court that the substantive proceeding between the parties was for unpaid fees sought by the Respondent from the Applicant.  This assertion was not challenged by Mr Slaveski and I accept that this was the case.

5. Mr Slaveski filed, on 30 May 2008, an originating motion in the Supreme Court of Victoria seeking to set aside the costs order made by his Honour Mr Garnett on the grounds that his Honour had been asked to withdraw and disqualify himself from the case before the order for costs was made.

6. On 30 May 2008, Registrar Luxton extended the time for compliance with the Bankruptcy Notice until the next mention on 17 June. Thereafter, the time for compliance was extended on a number of occasions throughout 2008.

7. On 9 October 2008, Hamish Solomon Rotstein, the principal of the Respondent law firm, filed an affidavit in opposition.  That affidavit confirmed that the original proceeding was for costs in the sum of $76,000.  It appended a sealed copy of the certified extract of order of Magistrate Garnett in the Respondent's favour for the sum of $7,115.90.  It also purported to append what was said to be the transcript of proceedings of the hearing before the Magistrates Court of Victoria which gave rise to the costs proceeding.  The accuracy of the transcript has not been the subject of criticism before me by Mr Slaveski.

8. The transcript seems to me to speak for itself.  It explains how it came to be that what on its face was a valid order of the Court was made to ground the debt of slightly in excess of $7,000 upon which the Bankruptcy Notice is founded.

9. Relevantly, Mr Slaveski filed an affidavit on 11 October 2008 in which he inter alia and relevantly explained his version of the march of events before his Honour Mr Garnett.

10. On 17 November 2008 Registrar Luxton determined the proceedings.  He ordered that the application be dismissed and that the Applicant pay the Respondent's costs.

11. On the same day, 17 November 2008, Mr Slaveski filed an application seeking that the order of Registrar Luxton be set aside and that the Bankruptcy Notice be set aside or dismissed.  He also sought alternatively that the Bankruptcy Notice be on stay or on hold pending the outcome of the originating motion filed in the Supreme Court of Victoria which was scheduled for a hearing on 16 February 2009, and that time for compliance with the Bankruptcy Notice be extended.

12. In his affidavit in support filed on 17 November 2008, Mr Slaveski referred to his originating motion in the Supreme Court which was due for hearing on 16 February 2009 and referred at paragraph 6 to:

    “Registrar Luxton should have stayed the Bankruptcy Notice - pending the outcome of the Supreme Court that is scheduled for a full hearing on 16th February 2009, before a Supreme Court Justice, and should have taken into consideration that my own lawyer Rotstein took sides with my opposition - (Commonwealth Bank –Gadens) just to make me Bankrupt - so I don't countersue CBA, because the trial is listed on 3 February 09 in the Supreme Court.”

13. By a further affidavit filed on 1 December 2008, relevantly, Mr Slaveski expanded somewhat on the proposition earlier indicated, namely that the Respondent wants to make Mr Slaveski bankrupt so that he cannot proceed with his action against the Commonwealth Bank of Australia scheduled for hearing on 3 February 2009.  On 8 December 2008 and on 16 March 2009, Mr Slaveski's interim application was adjourned. 

14. On 17 April 2009, the Respondent filed a notice stating grounds of opposition to Mr Slaveski's application. It is not necessary to traverse each and every objection taken but the substance of the objection could perhaps fairly be said to be that Mr Slaveski had not in his application indicated any matter set out in s 40(1)(g) of the Bankruptcy Act 1966 as the grounds upon which he was applying.

15. Reference was also made in the notice of objection to the fact that Mr Slaveski's judicial review application had been dismissed by Smith J in the Supreme Court of Victoria on 3 April 2009.  It is clear from the copy of the decision, being Slaveski v Rotstein and Associates Pty Ltd [2009] VSC 111, that that was indeed the outcome. At [20], Smith J observed:

    “As events unfolded, all the relevant decisions of the learned Magistrate, including the costs order, were reasonably open to him.  Mr Slaveski has been unable to demonstrate any error on the part of the learned Magistrate in this matter.  The application should therefore be dismissed.”

16. As I have earlier indicated, on 20 April 2009, Riethmuller FM dismissed the application that Mr Slaveski had filed on 17 November 2008 seeking to review Registrar Luxton's decision.

17. While it is clear that there is a typographical error in the order, the net effect was to dismiss the application.

18. As earlier indicated, Mr Slaveski has sought to set aside that decision.

19. In the first of his affidavits in support filed on 20 April 2009, Mr Slaveski deposes to having sought to tender a VCAT application to Riethmuller FM, that he went off to swear an affidavit to put the document in evidence and that the Court was closed when he returned.

20. In a second affidavit also filed on the same day, Mr Slaveski appends the application to VCAT to which he referred.  That is an application to the Civil Claims List and under paragraph 8 claims the sum of $98,000 from Mr Rotstein personally and under paragraph 11 states:

    “He was acting for me, and I paid him so much money, and he caused me to suffer a lot of stress, including mental stress.”

21. In an affidavit filed on 20 April 2009, apparently filed in the Court and I would presume in the currency of the proceedings, Mr Slaveski appends an application under the Judgment Debt Recovery Act 1984 (Vic) which he informed me at the hearing on 6 May 2009 is listed for 20 May 2009.

The Position as Articulated in Court

1. Mr Slaveski represented himself, with some assistance from his wife who sat behind him in Court.  As the transcript would I suspect clearly indicate, he had some difficulty in confining his submissions to the matters directly at hand.  It is obvious that he is very vividly engaged by what he perceives to have been his misfortunes imposed by various authorities including, most particularly, the Commonwealth Bank.

2. Leaving aside those matters which are of really no relevance, the substance of what he had to say was that he had suffered significant misfortune at the hands of the Commonwealth Bank, as had his mother and family generally.  He said he had an action in the Supreme Court of Victoria (that already referred to) against the bank for $3 million in damages and a further action which I infer arose out of an assault and/or false imprisonment by the bank and/or its agents in Sydney, in the sum of $1.5 million.

3. He said on more than one occasion that all he is asking for is to await the outcome of the Supreme Court action in Victoria to which he had already referred.  He pointed out, correctly enough, that the sum of $7,000 is trivial compared with the sum for which he is proceeding in the Supreme Court.  He also asserted that he had made his application for instalments and that application was listed, as I have said, on 20 May 2009.

4. Mr Basavanad, who appeared for the Respondent, asserted that the interim application should be dismissed. He asserted that the decision by Riethmuller FM took place because of the non-attendance of the Applicant. He denied the allegations made by Mr Slaveski that Riethmuller FM had been involved in a conspiracy against Mr Slaveski and concentrated his submissions upon the absence of any asserted grounds under s 40(1)(g) of the Bankruptcy Act.

5. Mr Basavanad pointed out that the Act of Bankruptcy had occurred, not least because the order extending the time for compliance had expired a considerable time ago.

6. In reply, Mr Slaveski pointed to what he said was a conspiracy on the part of his Honour Mr Garnett and Mr Rotstein to produce the costs order of some $7,000.  He pointed vividly to the fact that he had left Riethmuller FM's Court to swear the affidavit that he understood Riethmuller FM required to put the VCAT application on affidavit and that he returned to find the door locked.

7. I should interpolate at this stage and say that I have not sought to paraphrase Mr Slaveski's remarks more generally.  He made a number of assertions very critical of Riethmuller FM and indeed of other judicial officers, including Hansen J of the Supreme Court of Victoria.  In the circumstances, it seems best to me to make no further comment about those assertions.

The Substantive Issues

1. In substance, Mr Slaveski seeks to set aside Riethmuller FM's order dismissing his application.  Assuming he is successful in that regard, in substance, although it is in no way articulated in the materials filed or in the oral submissions, he seeks that time be extended to enable him to seek to review the decision of Registrar Luxton made on 17 November last year.

2. In substance, what he seeks is that the Bankruptcy Notice be set aside and/or that time for compliance be extended until the conclusion of his various actions against the bank.

3. I went to some trouble to clarify with Mr Slaveski what it was he wanted.  He confirmed unequivocally that what he really seeks is that the Bankruptcy Notice not be proceeded with until the conclusion of his proceedings against the bank in the Supreme Court.

4. I note that both parties agreed that costs should follow the event in this application.

Consideration of the Application to Reinstate the Application Made on 17 November 2008

1. The Court may set aside its judgment or order after it has been entered if it is made in the absence of a party (rule 16.05(2)). 

2. In this case, it is clear that Riethmuller FM made his order dismissing Mr Slaveski's application in his absence albeit, it seems equally clear, that he had previously been in front of the Court for at least part of the day.

3. It is not necessary, nor is it appropriate for me to go behind his Honour's order.   It is not necessary for me to make any positive findings as to what I suspect are likely to be disputed versions as to how that order came to be made.

4. That is because in the circumstances, I am entitled to accept Mr Slaveski's explanation that he went to swear an affidavit in the registry and that when he got back, the door of the Court was shut.

5. In these circumstances, and assuming everything in Mr Slaveski's favour as to what perhaps might be a disputed account of events, it seems to me appropriate to reinstate Mr Slaveski's original application.

Consideration of the Merits of Mr Slaveski's Application

1. Mr Slaveski seems to me to say three things which might be said to give rise to grounds under s 40(1)(g). They are

   (a) he says he has a VCAT cross-claim for $98,000;

   (b) he says he has applied for an instalment order;

   (c) he says that in any event the judgment was obtained by conspiracy

   (I am prepared to treat this as an allegation of fraud).

2. It should be noted that these are three matters distilled from the materials as a whole.  I repeat that before me, Mr Slaveski made it clear that what he really wants is that the Bankruptcy Notice be stayed pending the resolution of the Supreme Court action against the bank.

3. None of the matters raised by Mr Slaveski in my view have any merit.  The first matter he raises is the alleged cross‑claim in VCAT.  I have already set out its substance earlier in this judgment.  It has nothing in it to suggest that Mr Slaveski has a tenable cross‑claim against the Respondent. 

4. The second matter to which Mr Slaveski refers itself constitutes an acknowledgment of the debt of $7,000. Mr Slaveski is not yet bankrupt. That application to pay by instalments will take whatever course it takes. It does not constitute a counterclaim set-off or cross-demand of the sort envisaged by s 40(1)(g) of the Bankruptcy Act.

5. The third matter, being the allegation of conspiracy and fraud and therefore fraud on the part of the Magistrates Court of Victoria, is in my view, leaving aside its inherently outrageous and somewhat improbable nature, disposed of conclusively by the finding of Smith J to which I have already referred.

6. This brings us to the kernel of Mr Slaveski's case.  The insuperable problem he faces is that the Respondent creditor has issued the Bankruptcy Notice on the basis of a judgment debt regularly arrived at as Smith J found.  That debt is implicitly, albeit unintentionally, acknowledged by the application under the Judgment Debt Recovery Act made by Mr Slaveski.

7. The action against the Commonwealth Bank, in which Mr Rotstein acted on Mr Slaveski's part for at least a time, is a separate action wholly unrelated to this proceeding. Mr Slaveski may or may not have good grounds of action against the bank. The fact that it may or might in the fullness of time give rise to very substantial financial assets in Mr Slaveski's favour which would clearly, were that to be the case, be available to him to pay his debt in this proceeding, does not for one moment obscure the fact that Mr Slaveski has indeed committed the Act of Bankruptcy which he seeks to challenge. In the circumstances described, it seems to me that none of the conditions of s 41(6A) of the Act are satisfied. There has been no action to set aside the judgment in respect of which the Bankruptcy Notice was issued (s 41(6A)(1)). To the extent that there could be said to be an application to set aside the Bankruptcy Notice (s 41(6A)(2)), that application fails because there is, as I have found, no valid ground as referred to in s 40(1)(g) (see

   
   

   s 41(7)).

8. If, contrary to that viewpoint, there were some discretion available to the Court (see McQuade and Gronow “Australian Bankruptcy Law & Practice”, Thomson Reuters, Sixth Edition, para 41.6A.05), I would not be minded to exercise it in Mr Slaveski's favour.  His action against the Commonwealth Bank has been on foot for some four years, as he tells me, and from what he has told me about it, its prospects of being speedily concluded are extremely remote.

9. The suggestion that Mr Rotstein and his Honour Mr Garnett were involved in some sort of conspiracy to prevent the litigation against the Commonwealth Bank is inherently unbelievable and indeed, if looked at objectively, thoroughly offensive.

10. It follows that the application must be dismissed with costs.

Bias Issue

1. It became apparent early in Mr Slaveski's address to me that he retains a very considerable emotion about his proceedings against the Commonwealth Bank.  Although these proceedings do not involve the Commonwealth Bank, I felt it proper to disclose to Mr Slaveski that I was the owner of a (small) tranche of shares in that bank.  I drew this to his attention and asked him whether he wished to make any application that I should disqualify myself.  I outlined as best I was able the purport of what I understand to be the decision of the High Court in Ebner v Official Trustee so that he would be in a position to understand the basis upon which I would evaluate any such application.

2. The transcript will show that Mr Slaveski did not respond very directly to my inquiry but I think I understood him correctly to say that he did not object to my hearing the case.  I would indicate that had objection been pressed, I would not have upheld the application to disqualify myself on the basis of apprehended bias.

3. A small tranche of shares such as that which I have, even in the context of Mr Slaveski's combined $4.5 million case against the bank, would not be such as to give rise to a supposition on the part of a reasonable and informed lay observer that I would not be able to bring an unprejudiced mind to the case.

4. I have mentioned this matter only because Mr Slaveski's responses were not entirely direct and it is conceivable that he may wish to assert that I should have disqualified myself, even though he did not ask me to do so when invited to.

Creditor’s Petition

1. I have been informed following rising from the bench by my court officer that it appears that a Creditor’s Petition was served upon Mr Slaveski by counsel for the Respondent immediately outside Court immediately after the proceeding.  My court officer has informed me that Mr Slaveski has desired that I be shown a copy of the petition.  I have not seen a copy of the petition and it would be irrelevant to the matters I have had to decide in this case.  As with the bias point, I have only mentioned this issue to avoid any confusion in the event that there are further proceedings.

I certify that the preceding fifty-six (56) paragraphs are a true copy of the reasons for judgment of Burchardt FM

Deputy Associate

Date:  15 May 2009