Slaveski v Rotstein and Associates

[2013] FCCA 257

FEDERAL CIRCUIT COURT OF AUSTRALIA

SLAVESKI v ROTSTEIN & ASSOCIATES PTY LTD [2013] FCCA 257

Catchwords:
BANKRUPTCY – Application to set aside bankruptcy notice – applicant challenging court order on which notice based – applicant asserting counter-claim – evidence of creditor heard – creditor believed – no counter-claim that could not have been brought in the action in which the order was obtained – application dismissed. 

Legislation:
Bankruptcy Act 1966 (Cth), ss.40(1)(g), 40(1)(6)

Cases cited:
Slaveski v Rotstein & Associates [2012] VSC 435

Applicant: LJUPCO SLAVESKI

Respondent: ROTSTEIN & ASSOCIATES PTY LTD

File Number: MLG 1166 of 2012

Judgment of: Judge Burchardt

Hearing dates: 22 February & 1 March 2013

Date of Last Submission: 1 March 2013

Delivered at: Melbourne

Delivered on: 15 May 2013

REPRESENTATION

The Applicant: In person

Counsel for the Respondent: Mr Pedley

Solicitors for the Respondent: Rotstein Commercial Lawyers

ORDERS

1. That the application be dismissed. 

2. That the Applicant pay the Respondent’s costs. 

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 1166 of 2012

LJUPCO SLAVESKI

Applicant

And

ROTSTEIN & ASSOCIATES PTY LTD

Respondent

REASONS FOR JUDGMENT

Introductory

1. By an application filed on 19 September 2012 Ljupco Slaveski, the Applicant, seeks orders that:

   a.The Bankruptcy Notice dated 29 August 2012 be set aside or dismissed; or

   b.The Bankruptcy Notice be stayed or on hold pending the Appeal at the Supreme Court of Appeal;

   c.The Bankruptcy Notice should be dismissed as the Applicant has a counter-claim against the respondent;

   d.The time for compliance be extended.

2. Time for compliance with the Bankruptcy Notice has been routinely extended, although I note that, probably due to oversight, time was not extended on 22 February 2013 or at the final hearing of the matter on

   
   

   1 March 2013.  Nothing turns on this omission for present purposes.

3. Although, in his first affidavit filed on 19 September 2012, the applicant took issue with the service upon him of the Bankruptcy Notice, that aspect of his material was not pressed at any point before the Court.  Rather, as matters emerged, it is apparent that the applicant seeks to set aside the Bankruptcy Notice both on the footing that the original claim upon which the Bankruptcy Notice rests, namely a Judgment of the Victorian Magistrates Court, is not properly founded, and also on the footing that he has a counter-claim.

4. For the reasons that follow, I do not think that these claims can be made out and it follows that the application must be dismissed.  

The history of the matter in the Victorian Courts

1. From the affidavit of Hamish Solomon Rotstein filed 18 October 2012, and not the subject of challenge as to what follows, it is apparent that the Respondent commenced proceedings in the Magistrates Court of Victoria against the Applicant in August 2007 for the recovery of unpaid legal fees and disbursements.  

2. On 25 July 2011, following a hearing before Magistrate Lauritsen (as his Honour then was), the Court ordered that:

   (a)the Applicant to pay the Respondent the sum of $100,000 plus costs of $17,516; and

   (b)the Applicant’s counter-claim against the Respondent be struck out. 

   Exhibit HSR-1 is the Court orders.  

3. The Applicant appealed the Order of Mr Lauritsen to the Supreme Court of Victoria, and the appeal was heard by Associate Justice Daly on 14 November 2011.  Exhibit HSR-2 is a copy of the Judgment of Daly AsJ.  That shows that following a hearing on 14 November 2011, her Honour gave Judgment on 22 June 2012.  I note that her Honour’s decision at paragraph 1 records inter alia that:

   “… Rotstein’s complaint was first lodged in August 2007, and a defence was filed on 17 September 2007.  Mr Slaveski also lodged a counter-claim for the return of moneys already paid by him and Sky Empire to Rotstein.”

4. I note that at paragraph 2 of her Honour’s decision, her Honour noted inter alia:

   “Mr Slaveski denied liability for Rotstein’s claim on the basis that:

   (a)Rotstein represented the defendants knowing of their difficult financial situation;

   (b)the fees claimed exceeded the initial estimate of approximately $5,000;

   (c)     the fees claimed included charges for work not done;

   (d)the retainer included a term that if the defence and counter-claim was struck out again, Rotstein would re-plead at no additional cost to the defendants; 

   (e)     Mr Rotstein went on holidays and neglected the file;

   (f)the invoices prepared by Rotstein were fabricated for the purpose of claiming costs from the Commonwealth Bank; and

   (g)in breach of their retainer, Rotstein is holding the registers of Sky Empire and documentation in respect of 16 luxury cars.”

5. Her Honour noted that the relief claimed by the counter-claim included the sum of $98,000, an order that the plaintiff’s claim be dismissed, an order that certain original documents be returned forthwith, and interest and costs.

6. I note that her Honour reserved her decision as she deemed it necessary to listen to the entire recording of the Magistrates’ Court hearing before Magistrate Lauritsen (paragraph 15 of the Judgment).  

7. I note from her Honour’s description of the events recorded before the Magistrates’ Court that Mr Slaveski departed the courtroom, and that after he did so the case proceeded.  Mr Rotstein was called and gave evidence in support of his case.  

8. Her Honour dismissed Mr Slaveski’s application and noted at paragraph 34:

   “… While Mr Rotstein’s testimony was untested by cross-examination, he gave careful, cogent and plausible evidence about the retainer, the terms of the retainer, the payments by Mr Slaveski and the discussions between them about the payment arrangements.  Twenty eight documents were tendered.  It is noteworthy that despite the fact that Mr Slaveski has given evidence that he has heard the recording of the proceeding, he does not in his affidavits identify where Mr Rotstein gave evidence that Mr Slaveski would have challenged or been able to disprove the evidence of Mr Rotstein, except to make generalised allegations of overcharging and duress.  Therefore, there is a strong likelihood that even if Mr Slaveski’s submissions regarding bias and lack of natural justice are arguable (and I have formed the view that they are not), remitting the proceeding to the Magistrates’ Court for further hearing would be futile in any event, given the poor prospects of the defence and counter-claim.”

9. The Applicant appealed the decision of Daly AsJ and the appeal was initially dismissed on 3 September 2012 by Kaye J.  The Applicant did not attend Court on that day. 

10. Notwithstanding this, the matter was eventually heard by Dixon J on 17 September 2012, his Honour’s decision being handed down on

    
    

    26 September 2012. 

11. Mr Slaveski was represented on that occasion by his wife.  His Honour rejected a submission that he should disqualify himself because his superannuation fund held shares in the Commonwealth Bank.

12. His Honour’s decision was essentially concerned with the natural justice matters raised by Mr Slaveski, but I note at [35]-[36] his Honour said:

    “35.  In all other respects I would, with respect, adopt the reasoning of the learned associate judge.  The magistrate committed no error in continuing to hear the proceeding in Mr Slaveski’s absence.  His absence was not caused by agitation and upset at the presence of armed PSOs within the courtroom.  Mr Slaveski well understood that the case would proceed in his absence and he left the hearing voluntarily, and for his own tactical reasons.  Mr Slaveski probably intended to persuade the magistrate into acceding to his demands with his stated intention to go immediately to the Practice Court and make an application to restrain the magistrate.  Not being legally advised, Mr Slaveski would not appreciate that such an application was bound to fail.  In any event, no such application was made.

    36.  The proper course for Mr Slaveski to have adopted would have been to complete the hearing.  If his defence had ultimately failed he could then have considered his position.  That the proceeding continued in Mr Slaveski’s absence was entirely the result of his petulant display towards the magistrate’s rulings. …”

13. At paragraph [38] his Honour said:

    “The final ground which, as the associate judge noted is not expressly stated in the notice of appeal, concerns the procedure on the counter-claim.  I would add to the reasons expressed by the learned associate judge that the magistrate gave Mr Slaveski every opportunity to prosecute his counter-claim, if he had limited it to the jurisdiction of the court.”

The matters asserted by the Applicant in affidavits

1. It should be noted that the Applicant’s affidavit material, and for that matter his oral submissions, proceeded in a rather scattergun and disjointed way and are not always easy to follow.  His first affidavit filed 19 September 2012 refers to the proceedings in the Supreme Court which I have paraphrased above.  He also referred to a hearing before the Court of Appeal and stated at paragraph 15:

   “… on 13 February 2012, when Mr Slaveski had an Appeal in a unrelated matter to this, before 3 Judges, Presidents Maxwell Associate and the Acting DPP Prosecutor Gavin Silbert are caught on Video CCTV Footage threatening and plotting Mr Slaveski that he need a 38 Caliber ventilation to be killed with...” (sic)

2. The Applicant also deposed at paragraph 25 and following:

   “25.  Friday afternoon 31 August 2012, Mr Slaveski received an email containing a Bankruptcy Notice from Rotstein.

   26.  It will be in the interest of Justice that the Bankruptcy Notice is set aside or Orders made on 25 July 2011 be stayed pending the Supreme Court of Appeal and the investigation.

   27.  Mr Slaveski has a Counter-claim against Rotstein the Plaintiff and Defendant by Counter-claim and he should not be allowed to proceed with the Bankruptcy Notice.”

3. Although the affidavit sets out a number of matters, the only matter, in my view, relevant is at paragraph 44 where Mr Slaveski said:

   “I ask this Court to Set aside the Bankruptcy Notice and to extend the time for compliance until the matter is dealt with / heard, and until the finalization of the Supreme Court hearing/appeal, and or the High Court, as this is ALL Fabricated, because I have in my possession an Original Document with Rotstain’s signature that he will do the Defense and Counter Claim for only $5000 (this documents can be showed to the court).  so how did it came $130,000?

4. Paragraph 47 includes a reference to the documents relating to the 16 prestige cars referred to in Daly AsJ’s decision.  

5. The Applicant’s wife’s affidavit filed 19 September 2012, relevantly asserts again that there is a counter-claim for an amount of $98,000, a copy of which could be shown to the Court.  

6. The other matters contained in her affidavit, in my view, take the matter no further.  

7. A further affidavit filed by the Applicant on 26 November 2012 once again re-traverses the matters said to have occurred in the Court of Appeal of Victoria.  There is reference to an Application for Special Leave from the High Court in relation to the Appeal Court’s decision.  In  paragraphs 7 to 8 Mr Slaveski deposed:

   “7.    I was denied those rights at the Magistrates Court.  I went there to give evidence and defend the Claim from Rotstein and present my Counter-claim but was denied the opportunity to give evidence and was denied my Natural Justice and Human Rights.

   8.    I want this Court to have the Bankruptcy Notice set aside or dismissed and the time for compliance be extended pending the appeal to the High Court or the Bankruptcy Notice should be dismissed on the grounds that I Ljupco Slaveski have a Counter-claim against Rotstein & Associates.”

8. A further affidavit filed on 7 February 2013, in my view, adds nothing to the evidentiary picture, save that at paragraph 16 Mr Slaveski asserts, “I also submit to the Court that the affidavit of Rotstein should be rejected as the contents are not true”.  Mr Slaveski did not say in what fashion Mr Rotstein’s affidavit was untrue.  I note that Mr Rotstein’s affidavit essentially set out the procedural history of the matter which I have already traversed.  

9. I interpolate at this stage to say that Mr Rotstein’s affidavit filed

   
   

   15 February 2013 annexes a copy of the Judgment of the Supreme Court of Victoria Court of Appeal dated 16 November 2012 by which Warren CJ and Maxwell P dismissed an application for leave to appeal the Judgment of Dixon J.  The affidavit also annexed an Application for Special Leave to Appeal lodged in the High Court of Australia on 21 December 2012 which seeks special leave to appeal the decision of Warren CJ and Maxwell P.  Its terms would not suggest on their face that the Special Leave Application has any chance of success.  

10. The final affidavit of Mr Slaveski filed by leave of the Court on

    
    

    22 February 2013 is once again largely concerned with the events in the Supreme Court of Victoria.  Relevantly for these purposes Mr Slaveski deposed:

    “Rotstain was my former Solicitor, and he was in conspiracy with the oposicion Gaden Lawyers acting CBA Bank, also David Raichenberg, and most of the Supreme Copurt Judges that have shares in CBA Bank, and few Magistrates, such as Lawertson and Garnet, they are both corrupted, I will tell the Court.

    Further more Rotstain is a thief, a crook, he stole my 2 Company Registrars, my day to day 6 or more yearly diaries, and up to 20 Prestige Cars Original Documents, and all of this prejudice my case.

    I like to put the Court on Notice that, if the Magistrates / Judge know any of the people that I have / will mention in my affidavits, and is Jewish I want that Magistrates / Judge to disqualify them self, as I was told by opposition Gaden Lawyers acting CBA Bank, Parthner of Gadens David Raichenberg that he knows most of the Judges, and a l,ot of them are Juwish, and he stated that; “I / Slaveski will never win”.” (sic)

The preliminary bias issues

1. Having read Mr Slaveski’s affidavit I canvassed with him the, as it were, preliminary objections he had articulated.  In retrospect, it is debatable whether I should have engaged in this process but at the time, and perhaps even in hindsight, it seemed the only practical way to proceed.  I disclosed to Mr Slaveski that I did own a parcel of shares in the Commonwealth Bank, that I was not Jewish and that I did not know Mr Reichenberg.  In response to a further question from Mr Slaveski, I indicated that I knew Michael Sifris, a Supreme Court judge (another person named in Mr Slaveski’s list of objectionable individuals).  I disclosed that I had known Mr Sifris since we went to the Bar and had been opposed to him on several occasions but that I did not know him socially in any meaningful way.

2. Mr Slaveski said he would think about the matter, but I informed him that he must either make a disqualification application or not.  He elected not to do so.

The course of the proceeding

1. Mr Slaveski told me that he never signed any agreement with Rotstein & Associates, and never agreed any terms and conditions with him.  He then expressed a desire to cross-examine Mr Rotstein.  It should be noted that the matter was adjourned on 22 February 2012 because

   
   

   Mr Slaveski expressed desire to cross-examine Mr Rotstein despite not having given notice of intention to do so.

2. In an endeavour to move the matter forward, I arranged for Mr Rotstein to give his evidence straight away.

3. Mr Rotstein gave evidence of his retainer, the circumstances surrounding it, and the work that was done.  It was clear that there was never any agreement that the total to be charged was limited to $5,000.  

4. It is not necessary to traverse Mr Rotstein’s evidence in any detail. 

   
   

   Mr Rotstein’s evidence was that he had done an incredible amount of work for Mr Slaveski, and was to the effect that the fees for which he sued were well and truly earned.  

5. I note that Daly AsJ described the answers given by Mr Rotstein before Magistrate Lauritsen as cogent, and I would say that exactly that description applied to the evidence he gave before me.

6. Mr Rotstein was an entirely credible witness whose evidence I entirely accept. 

7. Mr Slaveski tendered a number of documents.  Exhibit A1 is the execution page of the letter dated 23 August 2006 sent to him by Rotstein & Associates.  This letter, without the execution, is exhibit A2.  It should be noted that the cost estimate of $5,000 given was clearly only “up to the stage of filing and serving an amended defence and counter-claim”.

8. The letter also stated:

   Our costs estimate is our best estimate at this time, not a cap on what we will charge.

9. I note that exhibit A1 has an addition to it clearly added by Mr Slaveski in these terms:

   If the amended Defenses and Counter-claims get struck out again, then I would like you to re-plead the Defenses and Counter-claims at no extra cost.

10. It is clear that Mr Rotstein never agreed to any such condition, and indeed his evidence, which as I say I have accepted, is that the counter-claim was not struck out.

11. Exhibit A3 is apparently the counter-claim in the proceeding heard before Magistrate Lauritsen.  The counter-claim seeks payment of $98,000, but there is no itemisation as to how that figure is made up.  I note that Daly AsJ characterised the figure as repayment of legal fees already paid.

12. In his oral submissions, Mr Slaveski made a number of complaints.  Relevantly for these purposes, and omitting a large amount of irrelevant and objectionable remarks alleging conspiracies by inter alia Gadens Lawyers, the Commonwealth Bank and, if my notes are correct, Mr Rotstein (matters all asserted in the affidavit material in any event), Mr Slaveski asserted that he never had the opportunity to have Mr Rotstein in the witness box, that there was no defence to his counter-claim, and that his defence and counter-claim had never been accepted by the Magistrates Court.

13. He asserted again that he has a counter-claim. 

14. The submissions made by counsel for the respondent were short.  It was submitted that there was no counter-claim within the meaning of s.40(1)(g) of the Bankruptcy Act 1966.  The applicant could and should have brought his claim in the proceedings before Magistrate Lauritsen.  

15. Counsel submitted that there was no point in extending the time for compliance pursuant to section 40(1)(6) of the Act, notwithstanding the applicant’s application for special leave to the High Court, because that application had no prospects of success.

What legal issues does Mr Slaveski’s application raise?

1. In my view, there are two matters raised by Mr Slaveski that constitute controversies justiciable by this Court.  The first is whether or not the debt upon which the bankruptcy notice is founded, namely the order made by Magistrate Lauritsen, is indeed owing.  The second is whether in any event Mr Slaveski has a counter-claim equal to or exceeding the amount of the judgment debt that he could not have set up any action or proceeding in which the judgment was obtained.

2. It is well established that the Court has a discretion to look behind a judgment debt, and this discretion is more likely to be enlivened when the judgment was entered in default.

3. Here the judgment was not entered in default in appearance or defence.  Mr Slaveski attended the hearing before Magistrate Lauritsen and absented himself from it in the circumstances described by Dixon J.

4. In a sense, however, I have permitted the applicant to seek to go behind the judgment by requiring the attendance of Mr Rotstein for cross-examination.

5. As I have earlier indicated, Mr Rotstein was an excellent witness whose evidence I accept.  It is clear that the judgment made by Mr Lauritsen was not one which in the circumstances the Court should reject.  I accept that the moneys ordered to be paid by Magistrate Lauritsen were properly so ordered.  I have seen and observed Mr Rotstein give his evidence.  As earlier indicated, I accept it.

1. The next question is whether Mr Slaveski has a counter-claim that he could not have set up in the original proceeding which equals the amount ordered against him.

2. The amount ordered against Mr Slaveski was $100,000, being made up of interest pursuant to statute and approximately $72,000 in unpaid fees originally owing.  This combined total was, of course, the jurisdictional limit of the Court.

3. The counter-claim has only ever been asserted as being in the amount of $98,000 and remains completely unparticularised.  Nonetheless with interest it would likewise reach the statutory maximum. 

4. In circumstances where the counter-claim is so poorly defined, it is difficult to imagine that it would have great prospects of success, but this is not the important aspect of the matter.

5. The important aspect of the matter is that this was a counter-claim that Mr Slaveski not only could have set up in the previous proceeding in front of the Victorian Magistrates Court, but in fact did set up in that case.  He elected in effect not to pursue it as described by Dixon J.

6. The point can be put shortly. The terms of s.40(1)(g) are relevantly that:

   A debtor commits an act of bankruptcy in each of the following cases:

   (g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not…

   comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross-demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained.

7. There is no question that the respondent creditor has obtained a final judgment and order against Mr Slaveski.  Equally there is no question, as I say, that the counter-claim now sought to be propounded by Mr Slaveski not only could have been but was set up in the original proceeding.

8. In this case therefore Mr Slaveski has clearly committed an act of bankruptcy.

Conclusion

1. For the above reasons it is clearly the case that the bankruptcy notice ought not be set aside.  I will therefore order that the application be dismissed with costs. 

I certify that the preceding fifty-eight (58) paragraphs are a true copy of the reasons for judgment of Judge Burchardt.

Date:  15 May 2013