Wilson, Allen John v Taaff, John Francis - [1997] FCA 1304

FEDERAL COURT OF AUSTRALIA

BANKRUPTCY - application to set aside bankruptcy notice - debtors not notified by former solicitor of proceeding relating to costs order - order as to costs made against them - debtors allege a collateral agreement was made with the creditor to limit the quantum of costs - alleged negligent failure of debtors’ legal advisors to voice set-off or cross-claim - whether such “could not have been set up in the action” - whether appropriate to go behind judgment

Bankruptcy Act 1966 (Cth), s 40

Autodesk v Dyason (No. 2) (1993) 176 CLR 300, applied
Walton v National Mutual Life Association A/Asia Ltd (1994) 49 FCR 406, applied

ALLEN JOHN WILSON AND ANOR v JOHN FRANCIS TAAFF
NG 7881 of 1997

MADGWICK J
SYDNEY

27 NOVEMBER 1997

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NG 7881 of 1997

BETWEEN:

ALLEN JOHN WILSON AND JOY PATRICIA WILSON
APPLICANT

AND:

JOHN FRANCIS TAAFF
RESPONDENT

JUDGE:

MADGWICK J

DATE OF ORDER:

27 NOVEMBER 1997

WHERE MADE:

SYDNEY

MINUTES OF ORDER

THE COURT ORDERS THAT:

The application to set aside the Bankruptcy Notice be dismissed.

The time for compliance with the Bankruptcy Notice be extended for twenty-eight (28) days, commencing 6 November 1997.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NG 7881 of 1997

BETWEEN:

ALLEN JOHN WILSON AND JOY PATRICIA WILSON
APPLICANT

AND:

JOHN FRANCIS TAAFF
RESPONDENT

JUDGE:

MADGWICK J

DATE:

27 NOVEMBER 1997

PLACE:

SYDNEY

REASONS FOR JUDGMENT

MADGWICK J: This was an application to set aside a Bankruptcy Notice which I dismissed, reserving my reasons. These are the reasons.

The notice was served on the applicants (“the Wilsons”) in July 1997. The notice was expressed to be in respect of a debt of $21,644.43, made up of $18,951 for legal costs and the balance for interest (pursuant to rule 8 of the Federal Court Rules). The judgment or order upon which the debt was based was an order made by Merkel J on 23 May 1996 in a proceeding in the Victorian Registry (No. NG 326 of 1993) that the Wilsons pay Mr Taaff’s costs, and a subsequent order (pursuant to Order 62 Subrule 45(3) of the Rules) quantifying the sum to be paid, following upon taxation of those costs.

As Merkel J remarked in the judgment which gave rise to the costs order, the saga is a “hard luck story” for the applicants. Mr Wilson had an innovative idea for a soft toy which he called the “Hollywood Horse”. In late 1992 the debtors met the creditor/respondent, Mr Taaff and agreed to give him a licence to use the invention. They had sought to obtain appropriate intellectual property for it and had achieved the registration of the design under the Designs Act 1906 (Cth). Mr Taaff used, as his vehicle for the project, a company the name of which was later changed to Hollywood Toys (Australia) Pty Ltd. The licence agreement was entered into between the…

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: [1997] FCA 1304
Decision Date: 27 NOVEMBER 1997

CaseChat Overview and Summary

This case involved an application to set aside a bankruptcy notice, brought by Allen John Wilson and Joy Patricia Wilson (the Wilsons) against John Francis Taaff. The Wilsons sought to avoid the bankruptcy notice on the basis that they had not been notified by their former solicitor of proceedings relating to a costs order made against them. They argued that the order was unfair due to an alleged collateral agreement with Mr Taaff to limit the quantum of costs. The Federal Court of Australia heard the matter, with Madgwick J delivering the judgment.

The key legal issues were whether the Wilsons' former solicitor's failure to inform them about the costs proceedings could justify setting aside the bankruptcy notice, and whether the Wilsons could have raised the alleged collateral agreement in the original proceedings. The court considered whether the Wilsons' claim about the collateral agreement could have been set up in the action before Merkel J, and whether it was appropriate to go behind the judgment in this case.

Madgwick J held that the Wilsons could not rely on their former solicitor's failure to notify them of the costs proceedings as grounds to set aside the bankruptcy notice. The court noted that there was no evidence that Mr Taaff or his solicitors knew that the Wilsons' former solicitors were no longer acting for them. The court also found that the Wilsons had known of the costs order for a long time and could have approached the court to vacate the costs order if they had believed it was unjust. Furthermore, the court held that the Wilsons could not have raised the alleged collateral agreement before Merkel J because they had no notice of the proceedings on 23 May 1996. The court decided that it was not appropriate to go behind the costs order to establish whether there truly was a debt founded thereon. Madgwick J dismissed the application to set aside the bankruptcy notice but extended the time for compliance with the bankruptcy notice for twenty-eight days.

The final orders of the court were that the application to set aside the bankruptcy notice be dismissed, and the time for compliance with the bankruptcy notice be extended for twenty-eight days, commencing on 6 November 1997.

Orders