Winn v Brian Ward & Partners Pty Ltd
[2007] FMCA 1090
•11 July 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WINN v BRIAN WARD & PARTNERS PTY LTD | [2007] FMCA 1090 |
| BANKRUPTCY – Application to review Registrar’s decision – Costs order where Bankruptcy Notice set aside by consent – whether payable by Creditor or Debtor. |
| Bankruptcy Act 1966, ss.32, 306 Legal Practice Act 1996 (Vic), s.106(1) |
| Guss v Veenhuizen (1976) 136 CLR 47 Jones v Porsche Centre Melbourne Pty Ltd, in the matter of Jones [2000] FCA 1423 McAuliffe Williams & Partners v Pecoult [2003] FMCA 278 Croft v Erom Pty Ltd [2005] FMCA 114 |
| Applicant: | JULENE WINN |
| Respondent: | BRIAN WARD & PARTNERS PTY LTD |
| File number: | MLG351 of 2007 |
| Judgment of: | McInnis FM |
| Hearing date: | 18 June 2007 |
| Delivered at: | Melbourne |
| Delivered on: | 11 July 2007 |
REPRESENTATION
| Applicant: | In person |
| Counsel for the Respondent: | Mr T.J. Scotter |
| Solicitors for the Respondent: | Brian Ward & Partners Pty Ltd |
ORDERS
The order of the Registrar dated 12 April 2007 be varied by inserting “Brian Ward & Partners Pty Ltd” in lieu of “Brian Ward & Partners” as the name of the Respondent
The Application for Review filed 2 May 2007 be otherwise dismissed.
The Applicant shall pay the Respondent’s costs to be taxed in default of agreement pursuant to Order 62 of the Federal Court Rules.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG351 of 2007
| JULENE WINN |
Applicant
And
| BRIAN WARD & PARTNERS PTY LTD |
Respondent
REASONS FOR JUDGMENT
In these proceedings Julene Winn (the Applicant) by an Application for Review filed 2 May 2007 seeks to set aside orders made by a Registrar on 12 April 2007.
The Applicant who is a barrister appears on her own behalf. The Application for Review seeks a number of orders as follows:-
“1. The applicant has leave to adduce further evidence.
2.The orders made by the Registrar on 12 April 2007 are set aside.
3.The application to set aside the Bankruptcy Notice is amended to name Susan Phillips as the respondent.
4.The Bankruptcy Notice is declared invalid and a nullity.
5.The Bankruptcy Notice proceeding is declared a contravention of s.106(3) of the Legal Practice Act 1996 (VIC).
6.If it is necessary to have regard to the Magistrates Court Order made on 2 October 2006 that order is deemed null and void ab initio.
7.Susan Phillips pay on an indemnity basis the Applicant’s costs of and incidental to the application to set aside the Bankruptcy Notice and the Applicant’s costs of and incidental to the application for Review of the Registrar’s decision.”
I have deliberately set out the orders sought to indicate the somewhat curious nature of this Application for Review given that the orders made by the Registrar on 12 April 2007 included an order that Bankruptcy Notice No VN221 of 2007 be set aside. That order is precisely the primary order which had been sought by the Applicant in her Application filed 26 March 2007.
When the Applicant appeared on her own behalf before this Court it became evident that she wished to pursue a wide range of issues and it was noted that the Applicant, although a barrister, has not sought or received any independent legal advice. At the commencement of the proceedings the Applicant complained that reasons given by the Registrar for the setting aside of the Bankruptcy Notice were “actually incorrect”.
It is clear to me that the significant outstanding issue in this Application for Review would in reality appear to be a further order made by the Registrar in the following terms:-
“2.The Applicant pay the Respondent’s costs of this application fixed in the amount of $1,500.00.”
After claiming that the reasons of the Registrar were “actually incorrect” the Applicant then proceeded to advise the Court that “the matter wasn’t heard in the sense that the Respondent appeared to consent and therefore proceeded to require its costs, therefore the substantive issues of the invalidity of the notice were not ventilated and remarked upon and the orders weren’t based on my application.”
Ultimately it seemed to me that the Applicant was concerned about the description of the Respondent in the order of the Registrar made on 12 April 2007 to the extent that the Court heading on that order referred to the Respondent as “Brian Ward & Partners” and not “Brian Ward & Partners Pty Ltd”. It is noted that the Bankruptcy Notice which was the subject of the substantive application simply referred to “Brian Ward & Partners” as “the Creditor” hence the apparent error in the Registrar’s decision arose directly from the description of the Creditor in the relevant Bankruptcy Notice. Given that the Bankruptcy Notice was set aside by the Registrar and that the parties before Court ultimately did not dispute that that order should remain in full force and effect, it seemed to me that any error in description is not a matter which should be of significant concern to the Court upon the hearing of this Application for Review. I accept that according to an extract from the Australian Business Register “Brian Ward & Partners” as an entity name/trading name ceased in February 2004 (see Exhibit R1).
I am satisfied that the real issue to be agitated before this Court is the costs order made by the Registrar and whether that costs order should have been made at all or indeed whether an order should be made against the Respondent in favour of the Applicant upon the setting aside of the Bankruptcy Notice.
The Applicant, who as I have noted is a barrister, endeavoured to emphasise the misdescription and indeed at one stage even sought to join as another party a solicitor employed by the Respondent. In my view those issues are of no significance to these proceedings. Even if there had been a misdescription in the Bankruptcy Notice and the Court was considering the matter on its merit then that misdescription would simply have resulted in leave to amend the Bankruptcy Notice and could properly be regarded in this instance as a defect which could not mislead the Applicant and could be curable pursuant to s.306 of the Bankruptcy Act 1966 (the Bankruptcy Act).
Despite the somewhat narrow ambit of this application it is noted that the Applicant has relied upon an Affidavit in support of the Application for Review sworn 2 May 2007, an Affidavit sworn 6 June 2007 and an Affidavit in reply sworn 3 July 2007 purportedly filed and served pursuant to orders made by this Court on 18 June 2007.
The Respondent has relied upon Affidavits of Susan Mary Phillips sworn 25 May 2007 and 21 June 2007 together with an Affidavit of Rebecca Jane Artis sworn 21 June 2007.
The relevant background in this matter has been set out by both parties in earlier affidavits arising out of the substantive application to set aside the Bankruptcy Notice. It is not necessary to refer in detail to the Affidavit material save to note that at all material times Ms Phillips has been a Director of Brian Ward & Partners Pty Ltd and on 26 October 2005 it filed a complaint against the Applicant seeking payment of legal costs amounting to $6,600.00 plus interest of $39.70 and costs. The proceedings were commenced in the Victorian Magistrates Court (the VMC) at Melbourne and a Defence was served on 3 January 2006. A hearing occurred in the VMC on 2 October 2006. It is common ground that the Applicant did not appear at that hearing though instead forwarded by facsimile transmission to the Court what is described as an Application for Stay of Proceedings on the basis that the complaint was alleged to be in breach of s.106(1) of the Legal Practice Act 1966 (Vic) (the LPA). Orders were made in the VMC on 2 October 2006 resulting in a judgment in favour of the Respondent against the Applicant. It is noted that in those proceedings the Respondent is referred to as “Brian Ward & Partners Pty Ltd”. The Bankruptcy Notice which is the subject of the proceedings before this Court annexed to it a certified extract of the judgment in the VMC.
I am satisfied that the chronology of correspondence and events has otherwise been set out accurately in an earlier Affidavit of Susan Mary Phillips sworn 12 April 2007. In that earlier affidavit Ms Phillips deposes that the Bankruptcy Notice was served upon the Applicant on 9 March 2007. Ms Phillips received an email from the Applicant on 15 March 2007 which brought to the attention of Ms Phillips the alleged breach of the LPA and alleging that the order made in the VMC was a “legal nullity”. On 21 March 2007 Ms Phillips received a further email from the Applicant again referring to the LPA and a request that the Respondent “withdraw your Federal Court action”. It is not apparent to me that there was a “Federal Court action” pending at that stage and presumably the Applicant meant to refer to the Bankruptcy Notice. In any event Ms Phillips deposes that after receiving the email of 21 March 2007 from the Applicant she then communicated with the Applicant in the following terms:-
“Please provide us with a copy of your re-hearing application. On the basis that an application has been filed in the Magistrates Court of Victoria, we will undertake not to proceed with a creditor’s petition against you until the re-hearing matter has been determined.”
In response to that communication the Applicant appears to have advised Ms Phillips on 22 March 2007 by email that an Application for Re-Hearing had been filed and listed in the VMC. The Applicant then advises that she would make application to set aside the Bankruptcy Notice “due to the re-hearing” and then adds “but I will seek my full costs of having to make the application, including the costs of my legal advice provided to you yesterday and today”.
The Respondent then provided an undertaking to the Applicant not to proceed with issuing a Creditors Petition and further correspondence between the parties followed which I do not propose to restate. Significantly however in the chronology it is noted that on 28 March 2007 the Applicant served a copy of the VMC Re-Hearing Application upon the Respondent. The Application was heard on 11 April 2007 in the VMC. The Magistrate was advised that the Respondent would not oppose the setting aside of the judgment on the basis that the Applicant pay the Respondent’s costs. An order was made that the judgment be set aside and that the Applicant pay the Respondent’s costs of $1,276.00. The complaint was then listed for re-hearing.
Ms Phillips correctly notes that having regard to the orders made on 11 April 2007 the Bankruptcy Notice no longer had “any legal standing as the judgment has been set aside”.
Whilst other arguments may have been advanced by the Applicant challenging the Bankruptcy Notice it is clear to me that those arguments became otiose once the concession was made by the Respondent to agree to set aside the judgment which had been relied upon in the Bankruptcy Notice.
For reasons which I do not fully comprehend it would seem that the Applicant is aggrieved at the fact that the Respondent consented to the setting aside of the Bankruptcy Notice having regard to the setting aside of the judgment in the VMC and that the Applicant otherwise wanted to pursue other arguments concerning the validity of the Bankruptcy Notice. That in my view became a completely futile exercise before the Registrar as it is before this Court once the Respondent agreed to the setting aside of the Bankruptcy Notice for the reasons given.
One argument raised by the Applicant concerned whether Ms Phillips should be named as a party. This is irrelevant and in any event incorrect in relation to the proceedings both before the Registrar and indeed before this Court.
In her Affidavit sworn 25 May 2007 Ms Phillips relevantly deposes as follows:-
“4.On 11 April 2007, the applicant was advised by Trevor McLean of Counsel that as the Victorian Magistrate’s Court order of 2 October 2006 had been set aside, Brian Ward & Partners Pty Ltd would consent to the Bankruptcy Notice being set aside with no order as costs. The applicant declined this offer and the matter proceeded on 12 April 2007 in the Federal Magistrates’ Court before Registrar Mussett.
5.Registrar Mussett made orders on 12 April 2007 setting aside the Bankruptcy Notice and giving costs against the applicant in the sum of $1,500.00. Now produced and shown to me and marked with the letters ‘SMP-11’ is a true and correct copy of the Order of Registrar Mussett dated 12 April 2007.”
For reasons which will become apparent it is also significant to note that in the same affidavit Ms Phillips deposes:-
“8.At 5:25pm on 23 May 2007 I sent a letter to the applicant. Now produced and shown to me and marked with the letters ‘SMP-12’ is a true and correct copy of my letter addressed to Julene Winn dated 23 May 2007. At the time of swearing this my affidavit, I have not received a response from the applicant to my letter of 23 May 2007.”
Exhibit “SMP-12” referred to in that paragraph relevantly includes the following,
“Offer of Settlement
As you are aware, you have not paid your legal costs (which you argue you should not be required to but with which we strongly disagree). In addition, you have caused me incredible stress and you have ensured that our firm has also suffered further substantial costs.
We do not want to deal with you in any way any longer. We are prepared to release you from any claims we have against you relating to the work performed by us on your behalf, including obtaining an order dismissing our current Magistrates’ Court action and dismissing the two outstanding costs orders we have against you. This agreement would be in full and final settlement of all matters between us and you would withdraw your current Federal Magistrates Court application. This offer is open for acceptance by 12 noon tomorrow, Thursday 24 May 2007.
If you refuse to accept this offer, we will vigorously defend both your current Federal Magistrates’ Court application and we will actively pursue our Magistrates’ Court action and we will produce this matter on the question of indemnity costs.”
That document was the subject of further affidavit evidence which the Court ordered the parties to file and serve given that a dispute occurred as to whether the Applicant had received the letter on the date that it was purportedly forwarded by email that is on Wednesday 23 May 2007. Ms Phillips in her affidavit sworn 21 June 2007 refers to paragraph 8 of her earlier affidavit set out above and deposes as follows,
“3.At paragraph 8 of my affidavit of 25 May 2007 I deposed as follows:
‘At 5:25 pm on 23 May 2007 I sent a letter to the applicant. Now produced and shown to me and marked with the letters ‘SMP-12’ is a true and correct copy of my letter addressed to Julene Winn dated 23 May 2007. At the time of swearing this my affidavit, I have not received a response from the applicant to my letter of 23 May 2007’.
4.I confirm the accuracy of paragraph 8 of my affidavit of 25 May 2007. I caused the letter dated 23 May 2007 to be sent to Ms Winn by email from my personal assistant Rebecca Jane Artis.”
I am prepared to accept the affidavit evidence of Ms Phillips corroborated in part by the affidavit of Ms Artis referred to earlier and find that the email attaching the letter dated 23 May 2007 was forwarded to the Applicant at 5:25 pm on 23 May 2007.
However, that leaves open the question of when the Applicant accessed and/or read that letter and email. The Applicant in her affidavit sworn 3 July 2007 relevantly deposes as follows:
“3.I rely on my affidavits sworn 26 March, 2 May, 6 June and 3 July 2007 and filed in support of my Application to Set Aside Bankruptcy Notice and my Application for Review of Registrar’s Order”.
Before the Court at the hearing on 18 June 2007 the Applicant referred to receipt of the email on 26 May 2007 and submitted that by date the deadline for acceptance of the offer had expired. The Applicant however otherwise confirmed that she did not attempt to seek an extension of the deadline for acceptance of the offer and indicated that in any event she did not agree with the terms of the offer. It is perhaps unfortunate that the Applicant did not consider that option or indeed seek independent legal advice in relation to the significance of the offer which contained what could only be described as a very broad release which perhaps was intended to resolve differences between the parties. If that be the intention then it was clearly a forlorn hope.
It should be noted in passing that the affidavit filed and served by the Applicant on 3 July 2007 appears to set out other information which clearly goes beyond the order of the Court confined as it was on 18 June 2007 to evidence concerning the forwarding alleged by email of the letter dated 23 May 2007 from the Respondent to the Applicant.
To the extent that the Applicant’s affidavit provides other material in support of assertions concerning validity of the Bankruptcy Notice, the Court does not regard it as helpful or relevant to these proceedings. It is clear however from the material that the parties have had protracted discussions and negotiations as evidenced in earlier correspondence.
I should note in passing that it is a pity that the Applicant apparently did not become aware of the offer of settlement until after the expiration of the time for acceptance and then sought to join issue with the means by which the offer had been communicated. I have no doubt that the Applicant would have been better advised to consider the substance of the offer , seek an extension and then deal with the matter on that basis rather than take what can only be described as an unduly technical point concerning the method of communication of the offer of settlement.
Submissions
Applicant’s Submissions
At the hearing the Applicant made submissions in support of the various orders referred to in the Application for Review. In relation to the issue of costs the Applicant in a sense sought to argue an entitlement for costs if the Bankruptcy Notice had been set aside after a contested hearing based upon her invalidity arguments. She further sought to argue that the costs should follow the event namely that the Bankruptcy Notice was set aside consistent with her original application.
It will be evident from the chronology of events that the day before the matter was due to be heard by the Registrar consent orders were made in the VMC setting aside the judgment that had been obtained against the Applicant. It may be noted in passing that the order setting aside the Bankruptcy Notice though not clear in its terms was in fact made by consent.
The Applicant claimed that her costs at the first hearing before the Registrar were “$1,578.00”. She sought an order that the costs of the hearing of and incidental to the proceedings on 12 April 2007 be fixed in the sum of $1,578.00. She claimed to have presented details of those costs to the Registrar and argued that they comprised a filing fee of $350.00 and $100.00 for drawing the Application. The Applicant relied upon a decision of the High Court in Guss v Veenhuizen (1976) 136 CLR 47 to establish an entitlement to professional costs together with filing fees and in that case Counsel’s fees. The Applicant then proceeded to itemise the costs sought by reference to Schedule 2 of the Federal Court Rules. It is not necessary for the Court to further refer to those details save that a costs order in the region of $1,500.00 up to and including the time of the proceedings before the Registrar is reasonable in my view and the real issue remains as to who should pay those costs.
In support of the argument for costs the Applicant again repeated what she claimed to be the confusion concerning the misdescription of the Respondent in the Bankruptcy Notice. For reasons given earlier in this judgment I do not accept that the confusion was of the kind referred to by the Applicant and in any event was not of a kind which would have then caused the Bankruptcy Notice to be set aside as I am satisfied the misdescription could have been corrected and was only an irregularity in this instance curable by operation of s.306 of the Bankruptcy Act. The Applicant seemed to argue that the misdescription has led her to be ordered to pay costs as she claimed “to a party that I had never had any dealing with”. I reject that argument on the ground that it is implausible particularly given the Applicant is a barrister.
The Applicant asserted that she had dealt with Ms Phillips of the Respondent. The Applicant seemed intent on somehow trying to make Ms Phillips responsible for the proceedings and presumably costs orders. There is nothing before the Court which impugns Ms Phillip’s conduct in any way.
Apart from referring to what the Applicant describes as “angst and concern and research” she then made further submissions regarding the Bankruptcy Notice and specifically that it was in her words “null and void” due to the breach of the LPA. The Applicant argued this meant that the VMC did not have jurisdiction to make the judgment made in her absence on 2 October 2006.
As I understood the Applicant’s submissions she argued that the null and void judgment in the VMC could not then provide a basis for the creditor to proceed with the Bankruptcy Notice as there was no enforceable judgment.
However during the course of submissions the Applicant conceded that she had consented to set aside the judgment in the VMC and to set aside the Bankruptcy Notice in this Court before the Registrar.
Respondent’s Submissions
The Respondent submitted that the decision to award costs against the Applicant by the Registrar was a correct exercise of the costs discretion found in s.32 of the Bankruptcy Act. It was argued that the Applicant’s failure to attend the hearing in the VMC lead to the entry of the judgment and the later order setting aside the judgment. Reference was made to Jones v Porsche Centre Melbourne Pty Ltd, in the matter of Jones [2000] FCA 1423 at [4] – [6] (Jones v Porsche) as follows,
“4 Later his Honour referred to the traditional exceptions to the usual order as to costs and pointed out that they focus on the conduct of the successful party, and that such conduct may disentitle the successful party to the beneficial exercises of the discretion. The underlying question is whether the conduct in question resulted in the unnecessary incurring of costs. His Honour indicated that the Court may properly depart from the usual order as to costs where the successful party by its lax conduct effectively invites the litigation.
5 In the present case it is pointed out on behalf of Porsche that the Victorian judgment, which formed the basis of the Bankruptcy Notice, was entered after Jones had failed to file an Amended Defence within the required time. This default by Jones in failing to file resulted in the issue of the Bankruptcy Notice and gave rise to the application to set it aside. If the Amended Defence had been filed within time the present proceeding would not have been necessary.
6 In my view an important consideration in the present matter is that the Bankruptcy proceedings were instituted as a consequence of the failure of Jones to file an Amended Defence within the required period. An explanation was proffered in relation to this insofar as it is asserted that default occurred as a consequence of incorrect advice from New South Wales solicitors. However, this is not something for which Porsche can be considered responsible.”
Further reference was made to a decision of this Court in McAuliffe Williams & Partners v Pecoult [2003] FMCA 278 at [53] – [57] as follows,
“53.In my view the principles which are applied to costs arising from the dismissal of a creditors petition where conduct of a debtor has rendered the petition nugatory provides useful guidance to the exercise of the Court’s undoubted discretion in the award of costs where a bankruptcy notice has been set aside.
54.In the present case I am satisfied that the reasoning of the Federal Court in the matter of Jones v Porsche and in particular the passages of the decision of Tamberlin J to which I have referred apply to the facts of the present case. I am satisfied that had the debtor in the present case arranged to enter an appearance then the default judgment would not have been entered. Whilst I have expressed some reservations about the conduct of the creditors in receiving a request for an opportunity to discuss the matter on Friday and then entering judgment the following Monday, it seems to me that it was not then for the creditors to protect the interests of the debtor nor indeed was there any legal obligation to advise Mr Butler making enquiry on behalf of the debtor that a judgment may be entered the following Monday. If Mr Butler was instructed to make enquiries for and on behalf of the debtor then he should also have been aware that in the circumstances the debtor’s interests had to be protected by seeking other legal advice rather than simply making a telephone call with the promise of a reply at some future date. From a practical point of view it may have been more desirable for the creditor to defer entering default judgment until after all discussions had been exhausted but there is no legal obligation to do so.
55.It is clear from the reasoning of the Deputy Registrar of the District Court that the judgment, although set aside, was regularly entered and it would be inappropriate for this Court sitting as a Court in bankruptcy to do anything otherwise than rely upon that finding of the District Court. Accordingly I am satisfied that the creditor had acted in a lawful and entirely appropriate manner by entering judgment in default of appearance and in accordance with the decision of the Deputy Registrar of the District Court I accept that the judgment so entered had been entered regularly.
56.I accept and apply the principles in relation to costs set out in the passage to which I have referred from McHugh J in the Oshlack case and further as indicated otherwise apply the principles to which I have been referred by Tamberlin J in the Jones v Porsche decision. I further add that the decision of Tamberlin J is consistent with the authorities to which reference has been made and is somewhat analogous where a creditors petition is dismissed but only because it has been rendered nugatory by the conduct of the debtor.
57.The failure of a debtor to take appropriate action to protect his own interests by the filing of an appearance which thereby leaves open the entering of a judgment in default where it cannot be said that the entry of the judgment was irregular provides special circumstances whereupon the setting aside of a bankruptcy notice based upon that default judgment costs would otherwise follow the event. There is nothing in the material that would suggest that the bankruptcy notice has been issued on anything other than a proper basis, that is a regularly entered default judgment. I cannot see in the conduct of the creditor any behaviour which would not support the finding that special circumstances exist whereby costs should not follow the event of setting aside the bankruptcy notice in a similar way to those cases where costs are awarded where a creditors petition is dismissed. In any event, as indicated, in my view the conduct of the debtor is in the present case similar to the conduct of the debtor in the Jones v Porsche case and the principles referred to by Tamberlin J in that case apply equally to the present application.”
The Respondent further referred to another decision of this Court in the matter of Croft v Erom Pty Ltd [2005] FMCA 114 at [21] – [24] as follows,
“21In my view this Court is bound by the authority of the decision of Emmett J in Re Wilson which followed the decision of the Full Court in Emerson v Wreckair. The amount due at the time of the bankruptcy notice was issued must be the amount of the judgment. It is not appropriate for this Court to go behind that judgment despite the fact that after the judgment was entered by default as a result of the springing order in this case, it was subsequently varied with the amount being reduced and ultimately set aside. It is the amount due at the date the bankruptcy notice was issued which is relevant. The mere fact that the amount due was subsequently reduced does not of itself in my view invalidate the bankruptcy notice.
22.Having regard to the chronology of events it is my view that the debtor cannot rely upon the provisions of s.41(5) of the Bankruptcy Act. Whilst technically the extension of time granted as a result of numerous hearings pending the outcome of the application to set aside the default judgment may effectively have meant that the issuing of the notice under s.41(5) occurred within the time allowed for payment under the bankruptcy notice that does not in the circumstance of this particular case provide a proper basis upon which I can conclude that the notice was issued in a timely manner. The discrepancy in the amount was known to the debtor for many months and certainly was known to the debtor at or about the time the bankruptcy notice was served. It was incumbent upon the debtor at that point in compliance with s.41(5) of the Bankruptcy Act to then provide the appropriate notice which in this case was only provided after the judgment debt was in fact set aside. A debtor cannot simply use a provision of that kind against the backdrop of the chronology which has been recited in this judgment to then assert that the bankruptcy notice itself was invalid. Whilst s.41(5) provides an opportunity to challenge the validity of the bankruptcy notice by reason only that the sum specified in the notice is the amount due exceeds the amount in fact due, it does not provide a basis upon which this Court should go behind the judgment and nor does it support a contention that at the time the bankruptcy notice was issued it was invalid and that the amount due was not then due. I am satisfied the amount due in this instance was the amount stated in the bankruptcy notice being the amount of a judgment despite the fact that ultimately that amount was varied with what might be described as the acquiescence of the creditor.
23.This matter has had a somewhat unfortunate history and to some extent it may be arguable that the default judgment was entered through no fault of the debtor. That may be a matter for other proceedings or claims by the debtor against those then acting for and on his behalf. Nevertheless it does not provide this Court with a proper basis upon which it should go behind what I find to be a regularly entered judgment leading to a bankruptcy notice being issued for the amount due namely the amount of the judgment which at the time of issue was valid. The costs and expenses incurred by the creditor as a result of issuing the bankruptcy notice and responding to the application in this Court should be paid by the debtor. It is the debtor through his own conduct who has caused the entering of a default judgment which as I have indicated I accept on the findings of the Deputy Registrar was a regularly entered judgment. It is not for this Court to necessarily question the desirability of a creditor in those circumstances acting quickly to issue a bankruptcy notice as I can see no reason which would prevent a creditor in those circumstances from exercising the rights it undoubtedly has to execute a judgment and/or otherwise exercise those rights available under the bankruptcy legislation.
24.I otherwise accept the submissions on behalf of the creditor that in this case the Court should follow the decisions to which I have referred of the Full Court of the Federal Court in Emerson v Wreckair as followed by Emmett J in Re Wilson and I do not accept that this Court is bound by or should follow the reasoning of the Court in Re Prossimo. To follow the reasoning in Re Prossimo would lead to uncertainty following a regularly entered judgment as it would require parties to virtually ignore a judgment of that kind and to then further analyse what might actually be due at any given time rather than simply permitting a creditor to rely on the amount due in accordance with the judgment which had been regularly entered. It is clear to me that s.41(5) provides a remedy in relation to overstatement which in this case I have found was not exercised in a timely manner and/or which in any event I am satisfied is not an appropriate basis upon which I should accept that the creditor should pay the debtor’s costs. I further find that in any event at least until the default judgment was set aside there had been a regularly entered judgment which properly formed the basis upon which an amount due could be claimed under a bankruptcy notice and that the amount due at the time of issue of the bankruptcy notice was the amount of that judgment.”
It was argued that the issue now claimed to be relevant namely breach of the LPA was brought to the attention of the VMC and notwithstanding that fact judgment was entered. It is inappropriate according to the Respondent’s submissions for this Court to examine the basis upon which the VMC dealt with the point or to seek to treat the judgment as void and a nullity or unenforceable.
In any event it was argued there is no issue that arises from the reliance by the Applicant on the LPA as the thirty day period required in that legislation had elapsed before commencement of proceedings in the VMC. The LPA does not apply to these proceedings, it was argued, as the issue of the Bankruptcy Notice was not the commencement of legal proceedings to recover legal costs. Essentially it was submitted by the Respondent that any issue arising out of the LPA would be a matter for the VMC.
The Respondent otherwise made submissions concerning the irregularities in relation to the description of the creditor and whether Ms Phillips was entitled to sign the notice and whether as I have already found any irregularities identified could be cured by s.306 of the Bankruptcy Act.
Apart from seeking an amendment to the order made by the Registrar to identify the Respondent as “Brian Ward & Partners Pty Ltd”, the Respondent otherwise submitted the Applicant was not entitled to the orders sought in the Application for Review.
Reasoning
In my view the Application for Review should be dismissed save and except for the amendment in relation to the description of the Respondent as indicated earlier.
The Applicant in this instance has succeeded in obtaining by consent the setting aside of the judgment in the VMC the day before her application to set aside the Bankruptcy Notice was due to be heard before a Registrar.
In circumstances where an Applicant has failed to attend before the VMC and as a consequence judgment has been entered it is the responsibility of the Applicant to ensure that an Application to Set Aside the Judgment in the lower Court be expedited. Where her own application is the subject of consent orders to set aside the judgment in the lower Court the day before the scheduled hearing then despite succeeding in setting aside the Bankruptcy Notice I can see no error in the exercise of the Registrar’s discretion by awarding costs against the Applicant.
I can see no error in the amount of costs which were fixed. Hence, I do not propose setting aside the Registrar’s order but will make an appropriate amendment to that order in relation to the description of the Respondent.
I am also strengthened in the view that the Applicant should not have the benefit of costs having regard at least to the communication of the offer of settlement in a timely manner and the absence of any request for extension of time to accept that settlement offer by the Applicant, it was in all the circumstances on my assessment a reasonable and appropriate offer which would have resolved outstanding costs issues between the parties and significantly would have avoided the prospect of the dispute currently before the Court concerning the Registrar’s costs order.
Creditors should be encouraged to consent to the setting aside of judgments in summary Courts which may be the basis of a Bankruptcy Notice and further encouraged that upon doing so to then agree to set aside a Bankruptcy Notice in circumstances of this type having regard to the chronology of events and the persistence of the Applicant in the proceedings both before the Registrar and this Court in my view it is appropriate in the exercise of the Court’s discretion to refuse to interfere with the order of the Registrar.
It should be remembered that in the present case the judgment in the VMC was entered as a result of the failure of the Applicant to attend that Court. Further, any arguments now sought to be relied upon by the Applicant arising out of the provisions of the LPA are issues which are properly within the domain of the VMC and not this Court. Hence, I am satisfied having regard to the authorities relied upon by the Respondent including the decision of Tamberlin J in Jones v Porsche that in the exercise of this Court’s discretion it is appropriate that it should not interfere with the costs order made by the Registrar.
It follows for the reasons given that the orders of the Court should be
(1)The order of the Registrar dated 12 April 2007 be varied by inserting “Brian Ward & Partners Pty Ltd” in lieu of “Brian Ward & Partners” as the name of the Respondent
(2)The Application for Review filed 2 May 2007 be otherwise dismissed.
(3)The Applicant shall pay the Respondent’s costs to be taxed in default of agreement pursuant to Order 62 of the Federal Court Rules.
I certify that the preceding fifty-one (51) paragraphs are a true copy of the reasons for judgment of McInnis FM
Associate:
Date: 11 July 2007
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