Sommer v C Pty Ltd (No.3) - [2020] FCCA 2156

FEDERAL CIRCUIT COURT OF AUSTRALIA

SOMMER v C PTY LTD (No.3)

[2020] FCCA 2156

Catchwords:
BANKRUPTCY – COURTS AND JUDICIAL SYSTEM – respondent who served a bankruptcy notice on applicant purports to concede bankruptcy notice is based on a costs determination that is affected by jurisdictional error and for that reason accepts the bankruptcy notice C Lawyers should be set aside – whether respondent in truth concedes the costs determination is affected by jurisdictional error such as to render it of no effect – assuming the respondent in truth concedes the costs determination is affected by jurisdictional error and for that reason renders the bankruptcy notice liable to be set aside whether the Court is bound to terminate the proceeding by making an order setting aside the bankruptcy notice without determining the other issues in the proceeding – application to terminate proceeding by making order setting aside bankruptcy notice dismissed.

Legislation:

Australian Constitution, ss.76(ii), 77(i)

Bankruptcy Act 1966 (Cth), s.27(1)

Legal Profession Uniform Law Application Act 2014 (NSW), ss.70, 82, 83(1), 83(1A), 85
Legal Profession Uniform Law (NSW), ss.172, 198

Cases cited:

Australian Securities and Investment Commission v Edensor Nominees Pty Ltd [2001] HCA 1; (2001) 204 CLR 559
Baxter v Commissioners of Taxation (NSW) [1907] HCA 76; (1907) 4 CLR 1087
Kimber v The Owners Strata Plan No.48216 [2017] FCAFC 226
Minister for Immigration and Multicultural Affairs v Bhardwaj [2002] HCA 11; (2002) 209 CLR 597
Neil v Nott (1994) 68 ALJR 509
Obrart v Grego [2017] FCCA 929
Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd [1981] HCA 7; (1981) 148 CLR 457
Rana v Google Inc [2017] FCAFC 156
Re Judiciary Act 1903-1920 & In re Navigation Act 1912-1920 [1921] HCA 20; (1921) 29 CLR 257
Re Wakim; ex Parte McNally [1999] HCA 27; (1999) 198 CLR 511
Rizeq v The State of Western Australia [2017] HCA 23; (2017) 262 CLR 1
Serobian v Commonwealth Bank of Australia [2010] NSWCA 181
Sommer v C Pty Ltd [2020] FCCA 1412
Sommer v C Pty Ltd (No.2) [2020] FCCA 1898

Applicant:

MS SOMMER

Respondent:

C PTY LTD

File Number:

SYG 697 of 2020

Judgment of:

Judge Manousaridis

Hearing date:

31 July 2020

Date of Last Submission:

31 July 2020

Delivered at:

Sydney

Delivered on:

7 August 2020

REPRESENTATION

Applicant in person, by telephone

Counsel for the Respondent:

Mr D Edney, by telephone

Solicitors for the Respondent:

ICL Lawyers

ORDERS

The respondent’s application that the proceeding be terminated by the Court making an order setting aside bankruptcy notice …54 issued on … 2020 is dismissed.
Subject to order 3, the applicant has liberty to apply on such notice as the circumstances warrant for an order that the respondent be restrained from taking any further steps in relation to the “Application for review of determination(s) of a Costs Assessor” referred to in paragraph 8 of the affidavit of Mr L affirmed on 30 July 2020 (Costs Review Application

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2020] FCCA 2156
Decision Date: 7 August 2020

CaseChat Overview and Summary

The Federal Circuit Court of Australia considered an application by the respondent to terminate proceedings by setting aside a bankruptcy notice. The applicant had sought to set aside the bankruptcy notice, which was based on a costs determination. The respondent initially purported to concede that the costs determination was affected by jurisdictional error, thereby rendering the bankruptcy notice liable to be set aside.

The central legal issue before the Court was whether, assuming the respondent conceded the costs determination was affected by jurisdictional error, the Court was bound to terminate the proceeding by setting aside the bankruptcy notice without determining other outstanding issues. The Court also considered the respondent's subsequent application for an extension of time to seek a review of the costs determination.

Judge Manousaridis reasoned that the respondent's purported concession regarding jurisdictional error did not automatically compel the Court to set aside the bankruptcy notice. The Court retained discretion to consider the broader context and the respondent's subsequent actions, including the application for a review of the costs determination. The Court noted that the respondent had not withdrawn its application to set aside the bankruptcy notice, but rather had filed a separate application to extend time for a costs review. The Court found that the respondent's actions indicated an intention to pursue the costs review rather than simply concede the bankruptcy notice was invalid.

The Court dismissed the respondent's application to terminate the proceeding by setting aside the bankruptcy notice. The Court granted the applicant liberty to apply for an order restraining the respondent from taking further steps in the costs review application, other than those necessary to withdraw or stay it, provided the respondent failed to provide a written undertaking not to proceed further within seven days of a request.

Orders

Orders of the court

The respondent’s application that the proceeding be terminated by the Court making an order setting aside bankruptcy notice …54 issued on … 2020 is dismissed.

Subject to order 3, the applicant has liberty to apply on such notice as the circumstances warrant for an order that the respondent be restrained from taking any further steps in relation to the “Application for review of determination(s) of a Costs Assessor” referred to in paragraph 8 of the affidavit of Mr L affirmed on 30 July 2020 (Costs Review Application) other than such steps as are necessary to withdraw the Costs Review Application, or to obtain an order staying the Costs Review Application, or to communicate to the Manager, Costs Assessment that the respondent does not intend to take any further steps in relation to the Costs Review Application.

The applicant is not to exercise the liberty reserved by order 2 unless:

(a) the applicant first requests the respondent to undertake in writing that it will not take any further steps in relation to the Costs Review Application other than such steps as are necessary to withdraw the Costs Review Application, or to obtain an order staying the Costs Review Application, or to communicate to the Manager, Costs Assessment that the respondent does not intend to take any further steps in relation to the Costs Review Application; and

(b) the respondent does not give an undertaking to the effect referred to in (a) within seven days after the day on which the applicant requests the respondent give such undertaking.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

When I published the first judgment I also set down for hearing on 10 July 2020 the application to set aside the bankruptcy notice, and made directions in relation to the hearing. As I noted in my reasons for judgment I published on 14 July 2020 (second judgment),[5] however, by email sent by the respondent’s lawyer to the applicant on 18 June 2020 the respondent purported to withdraw the bankruptcy notice. [5] Sommer v C Pty Ltd (No.2) [2020] FCCA 1898 On 10 July 2020, being the day on which I had set down for hearing the application to set aside the bankruptcy notice, I heard submissions about whether it was open to the respondent to unilaterally withdraw the bankruptcy notice. I reserved my decision on that question, indicating that I would give judgment on 14 July 2020, and I listed the matter for directions on 17 July 2020. On 14 July 2020 I published the second judgment in which I held it was not open to the respondent to unilaterally withdraw the bankruptcy notice. At the directions hearing on 17 July 2020 counsel for the respondent applied for the matter to be adjourned for two weeks to give the respondent an opportunity to consider whether it should apply for leave to appeal from my determination that it was not open to the respondent to unilaterally withdraw the bankruptcy notice. I granted the respondent’s request, and adjourned the matter to 31 July 2020. The respondent did not decide to apply for leave to appeal. Instead, on 23 July 2020 the respondent filed an application purportedly under s.83(1A) of the LP Act (Costs Review Application) for an order that the “Manager, Costs Assessment . . . extend the period for lodging an application”. The “application” to which s.83(1A) of the LP Act applies is that provided for by s.83(1), namely, one that a “party to a costs assessment” may make “within 30 days after the certificate of determination by the costs assessor has been forwarded to the parties” for “a review of the determination”. Thus, on 23 July 2020 the respondent applied for an order to extend the time provided for by s.83(1) of the LP Act to permit the respondent to apply for a review of the Costs Determination.[6] [6] Sommer v C Pty Ltd [2020] FCCA 1412, at [5] The respondent’s lawyer served the Costs Review Application on the applicant by email sent on 23 July 2020. The respondent’s lawyer did not explain to the applicant the contents of the Costs Review Application, or why the respondent decided to make such application. These matters must be inferred from the contents of the Costs Review Application, to which I now turn. The Costs Review Application (assuming an order extending time is granted under s.83(1A) of the LP Act) purports to invoke the jurisdiction conferred by s.85 of the LP Act on a “review panel”. Under s.82 of the LP Act, “review panels are established under the costs assessment rules and are each constituted by 2 costs assessors appointed under those rules”; and a “review panel may be established for one or more costs reviews”. Section 85 of the LP Act provides:(1) A review panel may, on an application made under section 83 or 84, review the determination of a costs assessor and may(a) affirm the costs assessor's determination, or(b) set aside the costs assessor's determination and substitute the determination that, in its opinion, should have been made by the costs assessor.(2) The review panel has, in relation to the application for review, all the functions of a costs assessor in relation to the assessment concerned and is to determine the application, subject to this Part and the costs assessment rules, in the manner that a costs assessor would be required to determine an application for costs assessment.(3) Without limiting subsection (2), the review panel is not bound by the rules of evidence and may inform itself on any matter in the manner it thinks fit.(4) If the costs assessors who constitute the review panel are unable to agree on a determination in relation to an application, the panel is to affirm the determination of the costs assessor.

Ratio Decidendi

Legal Principle Established

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