Slaveski v Rotstein & Associates Pty Ltd

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FEDERAL COURT OF AUSTRALIA

Slaveski v Rotstein & Associates Pty Ltd [2009] FCA 1428

BANKRUPTCY AND INSOLVENCY – bankruptcy notice – appeal from decision of Federal Magistrate refusing to sent aside a bankruptcy notice – whether appellant had a valid counterclaim – whether application for instalment order sufficient to set aside bankruptcy notice – relevant of other proceedings commenced by applicant against third parties – no counterclaim for purposes of s 40(1)(g) of the Bankruptcy Act 1966 (Cth) – no basis for setting aside bankruptcy notice – Federal Magistrate correct in refusal to set aside notice

PRACTICE AND PROCEDURE – apprehended bias – appellant engaged in other proceedings against large publicly listed company – where Federal Magistrate disclosed small shareholding in company – whether reasonable apprehension of bias – other proceedings irrelevant – no basis for Federal Magistrate to disqualify himself

Bankruptcy Act 1966 (Cth), s 40(1)(g)

Slaveski v Rotstein [2009] FMCA 443 affirmed
Slaveski v Rotstein and Associates Pty Ltd [2009] VSC 111 referred to
Re Glew; Glew v Harrowell of Hunt & Hunt Lawyers (2003) 198 ALR 331; [2003] FCA 373 followed

LJUPCO SLAVESKI v ROTSTEIN & ASSOCIATES PTY LTD (ACN 117 539 063)

VID 417 of 2009

MARSHALL J
7 DECEMBER 2009
MELBOURNE


IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 417 of 2009
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN:

LJUPCO SLAVESKI
Appellant
AND:

ROTSTEIN & ASSOCIATES PTY LTD (ACN 117 539 063)
Respondent

JUDGE:

MARSHALL J

DATE OF ORDER:

7 DECEMBER 2009

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1.The appeal is dismissed.

2.The appellant pay the respondent’s costs of the appeal.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.


The text of entered orders can be located using eSearch on the Court’s website.


IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 417 of 2009
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN:

LJUPCO SLAVESKI
Appellant
AND:

ROTSTEIN & ASSOCIATES PTY LTD (ACN 117 539 063)
Respondent

JUDGE:

MARSHALL J

DATE:

7 DECEMBER 2009

PLACE:

MELBOURNE

REASONS FOR JUDGMENT

  1. The appellant, Mr Slaveski, appeals from a judgment of Burchardt FM of the Federal Magistrates Court of Australia published on 6 May 2009. In the judgment below, his Honour dismissed Mr Slaveski’s application to set aside a bankruptcy notice served on him on behalf of the respondent company; see Slaveski v Rotstein [2009] FMCA 443.

    BACKGROUND TO THE APPEAL

  2. On 1 April 2008, the Magistrates’ Court of Victoria made a costs order in favour of the respondent against Mr Slaveski in the sum of $7,115.90. On 13 May 2008, the respondent served a bankruptcy notice on Mr Slaveski in respect of the costs order. On 30 May 2008, Mr Slaveski applied to the Federal Magistrates Court for the bankruptcy notice to be set aside. On that day Registrar Luxton extended the time for compliance with the bankruptcy notice. Several further extensions of time…

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Details
Case
[2009] FCA 1428
Decision Date

CaseChat Overview and Summary

The case of Slaveski v Rotstein & Associates Pty Ltd involves the appellant, Mr Slaveski, who is appealing against the decision of Burchardt FM of the Federal Magistrates Court of Australia, which dismissed his application to set aside a bankruptcy notice served on him by the respondent, Rotstein & Associates Pty Ltd. The bankruptcy notice was served in respect of a costs order made by the Magistrates’ Court of Victoria against Mr Slaveski. The appeal stems from the rejection of Mr Slaveski's application to set aside the dismissal of his earlier application to vacate the bankruptcy notice. The underlying costs judgment, which was upheld by the Supreme Court of Victoria, arose from a proceeding where Mr Slaveski was ordered to pay professional fees for legal services rendered.

The legal issues in this case revolve around whether the bankruptcy notice should be set aside based on three contentions raised by Mr Slaveski. These include the existence of a counterclaim in the Victorian Civil and Administrative Tribunal (VCAT) for $98,000 against Mr Rotstein, the application for an instalment order regarding the $7,115.90 judgment debt, and the allegation that the judgment was obtained through conspiracy, which the court treated as an allegation of fraud. Additionally, there was a question about the potential bias of the Federal Magistrate due to his shareholding in the Commonwealth Bank of Australia.

The Federal Magistrate dismissed Mr Slaveski's application to set aside the bankruptcy notice, finding that the VCAT claim did not constitute a tenable cross-demand against the respondent. The Magistrate also held that the application for an instalment order did not constitute a cross-demand and rejected the allegation of fraud based on the Supreme Court's affirmation of the costs order. The Magistrate further determined that the CBA proceeding was extraneous to the application to set aside the bankruptcy notice. Consequently, the appeal was dismissed, and Mr Slaveski was ordered to pay the respondent's costs of the appeal.

Orders

Orders of the court

1. The appeal is dismissed.

2. The appellant pay the respondent’s costs of the appeal.

Note:

Background

Background to the litigation

The appellant, Mr Slaveski, appeals from a judgment of Burchardt FM of the Federal Magistrates Court of Australia published on 6 May 2009. In the judgment below, his Honour dismissed Mr Slaveski’s application to set aside a bankruptcy notice served on him on behalf of the respondent company; see Slaveski v Rotstein [2009] FMCA 443.BACKGROUND TO THE APPEAL On 1 April 2008, the Magistrates’ Court of Victoria made a costs order in favour of the respondent against Mr Slaveski in the sum of $7,115.90. On 13 May 2008, the respondent served a bankruptcy notice on Mr Slaveski in respect of the costs order. On 30 May 2008, Mr Slaveski applied to the Federal Magistrates Court for the bankruptcy notice to be set aside. On that day Registrar Luxton extended the time for compliance with the bankruptcy notice. Several further extensions of time were granted throughout 2008. On 17 November 2008, Registrar Luxton dismissed Mr Slaveski’s application to set aside the bankruptcy notice. On that day, Mr Slaveski countered with an application to set aside that dismissal. It was the rejection of that application which has led to the current appeal. The sum of $7,115.90 awarded against Mr Slaveski on 1 April 2008 was the costs ordered against him by the Magistrates’ Court of Victoria in the course of a proceeding commenced by the respondent to recover unpaid professional fees from Mr Slaveski for legal services. The costs judgment was upheld by the Supreme Court of Victoria on 3 April 2009; see Slaveski v Rotstein and Associates Pty Ltd [2009] VSC 111 (“Rotstein and Associates”).JUDGMENT OF THE COURT BELOW The Court below observed that Mr Slaveski had on foot a proceeding against the Commonwealth Bank of Australia (“the CBA”) in which Mr Slaveski claims $3 million in damages (“the CBA proceeding”). His Honour also referred to a claim by Mr Slaveski “against Mr Rotstein” in the Victorian Civil and Administrative Tribunal (“the VCAT claim”). Mr Rotstein is the sole director of the respondent. The VCAT claim is for $98,000 for stress, including mental stress, caused allegedly by Mr Rotstein in the course of acting for Mr Slaveski. Mr Slaveski’s desire, his Honour observed, was to adjourn the proceeding concerning the bankruptcy notice until after the conclusion of the CBA proceeding and VCAT claim, but in particular the CBA proceeding. His Honour referred to three matters put by Mr Slaveski to support his application to set aside the bankruptcy notice. They were:·the VCAT claim for $98,000 (referred to as a “counterclaim”);·the application by Mr Slaveski for an instalment order in respect of the judgment sum of $7,115.90; and·the judgment for $7,115.90 was obtained by conspiracy.His Honour treated the last matter as an allegation of fraud. The Court below referred to s 40(1)(g) of the Bankruptcy Act 1966 (Cth) in the context of compliance with the bankruptcy notice not being required if there exists a cross demand equal to or in excess of the judgment debt which could not have been raised in the proceeding which led to the debt. His Honour considered that the VCAT claim did not raise a tenable cross‑claim against the respondent. It now appears that, subsequent to the judgment below, the matters raised in the VCAT claim were the subject of a counterclaim filed by the appellant in the Magistrates’ Court of Victoria proceeding on 12 August 2009.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

MARSHALL J
The costs judgment was upheld by the Supreme Court of Victoria on 3 April 2009; see Slaveski v Rotstein and Associates Pty Ltd [2009] VSC 111 (“Rotstein and Associates”).JUDGMENT OF THE COURT BELOW The Court below observed that Mr Slaveski had on foot a proceeding against the Commonwealth Bank of Australia (“the CBA”) in which Mr Slaveski claims $3 million in damages (“the CBA proceeding”). His Honour also referred to a claim by Mr Slaveski “against Mr Rotstein” in the Victorian Civil and Administrative Tribunal (“the VCAT claim”). Mr Rotstein is the sole director of the respondent. The VCAT claim is for $98,000 for stress, including mental stress, caused allegedly by Mr Rotstein in the course of acting for Mr Slaveski. Mr Slaveski’s desire, his Honour observed, was to adjourn the proceeding concerning the bankruptcy notice until after the conclusion of the CBA proceeding and VCAT claim, but in particular the CBA proceeding. His Honour referred to three matters put by Mr Slaveski to support his application to set aside the bankruptcy notice. They were:·the VCAT claim for $98,000 (referred to as a “counterclaim”);·the application by Mr Slaveski for an instalment order in respect of the judgment sum of $7,115.90; and·the judgment for $7,115.90 was obtained by conspiracy.His Honour treated the last matter as an allegation of fraud. The Court below referred to s 40(1)(g) of the Bankruptcy Act 1966 (Cth) in the context of compliance with the bankruptcy notice not being required if there exists a cross demand equal to or in excess of the judgment debt which could not have been raised in the proceeding which led to the debt. His Honour considered that the VCAT claim did not raise a tenable cross‑claim against the respondent. It now appears that, subsequent to the judgment below, the matters raised in the VCAT claim were the subject of a counterclaim filed by the appellant in the Magistrates’ Court of Victoria proceeding on 12 August 2009. Next, his Honour said that the application by Mr Slaveski to pay the judgment debt of $7,115.90 by instalments constituted an acknowledgement of that debt. In addition, Burchardt FM observed that a desire to pay by instalments does not constitute a cross demand. On the issue of the judgment debt being fraudulently obtained, his Honour referred to the judgment of Smith J in Rotstein and Associates, where the Supreme Court held the costs order was reasonably open and that no error was made in its making. Federal Magistrate Burchardt considered the CBA proceeding to be extraneous to the proceeding to set aside the bankruptcy notice. His Honour said that no valid ground had been established to set aside the bankruptcy notice either by reference to ss 40(1)(g) or 41 of the Act. The Federal Magistrate dealt at [52]–[55] in his reasons for judgment with what he called the “bias issue”. His Honour referred to his disclosure to Mr Slaveski that he owned a small tranche of shares in the CBA. His Honour understood Mr Slaveski not to object to him hearing the application but said that, had the objection been pressed, he would not have disqualified himself.THE BIAS ISSUE

Ratio Decidendi

Legal Principle Established

Established by: MARSHALL J

Full text does not contain this section.