Young v Cooke

Case [2016] FCA 1215

FEDERAL COURT OF AUSTRALIA

Young v Cooke [2016] FCA 1215

File number: NSD 496 of 2016
Judge: RARES J
Date of judgment: 15 September 2016
Legislation:

Bankruptcy Act 1966 (Cth) ss 40, 41

Civil Liability Act 2002 (NSW)

Companion Animals Act 1998 (NSW) ss 8, 69

Local Court Act 2007 (NSW) s 39

Cases cited:

Ebert v The Union Trustee Company of Australia Limited (1960) 104 CLR 346

Guss v Johnstone (2000) 171 ALR 598

Ramsay Healthcare Australia Pty Limited v Compton [2016] FCAFC 125

Young v Cooke [2013] NSWCA 79

Young v Cooke [2016] NSWSC 408

Date of hearing: 15 September 2016
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Category: No Catchwords
Number of paragraphs: 39
Counsel for the Applicant: The applicant appeared in person
Counsel for the Respondents: Mr D Stewart
Solicitor for the Respondents: Chapman Thackeray

ORDERS

NSD 496 of 2016
BETWEEN:

GARY YOUNG

Applicant
AND:

BILL COOKE

First Respondent

HELENA COOKE

Second Respondent

JUDGE:

RARES J

DATE OF ORDER:

15 SEPTEMBER 2016

THE COURT ORDERS THAT:

1.The order made by the Registrar on 27 April 2016 be amended by adding order 8 as follows:

8.Pursuant to s 41(6A) of the Bankruptcy Act 1966 (Cth) and r 3.03 of the Federal Court (Bankruptcy) Rules 2005, the time for compliance by the applicant, with the requirements of the Bankruptcy Notice No. 189043, is extended up to and including the hearing of the application by a judge.

2.The application be dismissed.

3.The time for compliance with Bankruptcy Notice No. 189043 be extended, up to and including, 6 October 2016.

4.The applicant pay the respondent’s costs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT
(REVISED FROM THE TRANSCRIPT)

RARES J:

  1. Gary Young has applied to set aside a bankruptcy notice issued by the official receiver in bankruptcy on the application of Bill and Helena Cooke on 15 March 2016 (the bankruptcy proceedings). The parties live in Gundary, a rural part of New South Wales outside Goulburn. Mr Young said he was served with the bankruptcy notice on 30 March 2016 and has applied for it to be set aside on the basis that he 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 of the subject of the bankruptcy notice, being a counter-claim, set-off or cross demand that he could not have set up in the action or proceeding in which the judgment or order was obtained within the meaning of s 40(1)(g) of the Bankruptcy Act 1966 (Cth).

  2. The amount sought in the notice was comprised of, first, $8,198.22, being principally the costs as assessed pursuant to an order of the Court of Appeal of the Supreme Court of New South Wales made on 28 March 2013:  Young v Cooke [2013] NSWCA 79 that was given effect…

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Details
AGLC
Young v Cooke [2016] FCA 1215
Case
[2016] FCA 1215
Decision Date

CaseChat Overview and Summary

The case of Young v Cooke involved the plaintiff, Mr Young, attempting to set aside a bankruptcy notice served on him by Mr and Mrs Cooke. The bankruptcy notice sought to recover costs of $8,198.22 and interest of $448.85. This amount stemmed from a previous dispute where Mr Young had unsuccessfully sought leave to appeal against the dismissal of his claim for conversion or detinue of a dog in the Local Court of New South Wales. The case raised significant legal issues concerning the jurisdiction of the magistrate in the Local Court to alter the effect of a costs judgment and the principles governing proceedings to set aside a bankruptcy notice.

The central legal issue was whether the Local Court magistrate had the jurisdiction to alter the effect of a costs judgment made by the Court of Appeal and confirmed by the Local Court. Additionally, the court had to determine whether Mr Young’s application to set aside the bankruptcy notice was meritorious under the Bankruptcy Act 1966 (Cth). Specifically, the court needed to assess whether Mr Young had a prima facie case that could justify setting aside the bankruptcy notice. The court considered the legal and factual merits of Mr Young’s claims, the justice of allowing the bankruptcy proceedings to continue, and whether Mr Young had demonstrated that it was proper and reasonable to litigate his claims.

The court concluded that the Local Court magistrate did not have the jurisdiction to alter the effect of the costs judgment. The magistrate’s order of 2 May 2016 was limited to the proceedings before him, and he had no authority to interfere with the Court of Appeal’s order. Furthermore, the court found that Mr Young’s claims did not have sufficient legal or factual merit to warrant setting aside the bankruptcy notice. The court held that the state of satisfaction under the Bankruptcy Act required Mr Young to show that he had a prima facie case, which he had not demonstrated. Consequently, the application to set aside the bankruptcy notice was dismissed, and costs were awarded to Mr and Mrs Cooke.

The final orders included amending the registrar’s order to extend the time for compliance with the bankruptcy notice up to the hearing of the application, dismissing the application, extending the compliance time up to and including 6 October 2016, and ordering Mr Young to pay the respondents’ costs.

Orders

Orders of the court

1. The order made by the Registrar on 27 April 2016 be amended by adding order 8 as follows:

8. Pursuant to s 41(6A) of the Bankruptcy Act 1966 (Cth) and r 3.03 of the Federal Court (Bankruptcy) Rules 2005, the time for compliance by the applicant, with the requirements of the Bankruptcy Notice No. 189043, is extended up to and including the hearing of the application by a judge.

2. The application be dismissed.

3. The time for compliance with Bankruptcy Notice No. 189043 be extended, up to and including, 6 October 2016.

4. The applicant pay the respondent’s costs.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The amount sought in the notice was comprised of, first, $8,198.22, being principally the costs as assessed pursuant to an order of the Court of Appeal of the Supreme Court of New South Wales made on 28 March 2013: Young v Cooke [2013] NSWCA 79 that was given effect by a judgment of the Local Court of New South Wales given on 8 July 2015, and, secondly, interest of $448.85, being a total of $8647.07.Background The proceedings in the Court of Appeal involved an unsuccessful application by Mr Young for an extension of time in which to seek leave to appeal against the striking out of portions of a statement of claim that he had filed in the District Court of New South Wales against a number of defendants, including Mr and Mrs Cooke. Subsequently, in 2013, Mr Young took proceedings in the Local Court against Mr and Mrs Cooke, claiming damages for conversion or detinue in respect of a dog called Apache Jack. On 18 June 2015, Local Court Magistrate Bradd (Bradd LCM) found, first, that he was not satisfied, on the balance of probabilities, that the dog which Mr Young called, by among other names, Apache Jack, was the same dog, based on its appearance, as the dog which Mr and Mrs Cooke had in their possession the subject of Mr Young’s claim. Secondly, his Honour found that, in any event, because Mr and Mrs Cooke had purchased the dog, in respect of which Mr Young claimed, from the local council, pursuant to the provisions of the Companion Animals Act 1998 (NSW), s 69(2) and (3) of that Act provided that Mr Young had no cause of action against the purchaser (i.e. Mr and Mrs Cooke) but he retained a right of action to recover damages from the council in respect of the sale of that dog if he were able to establish that the council or person who effected the sale did not act in good faith or acted without reasonable care. Accordingly, his Honour found in favour of Mr and Mrs Cooke but allowed the parties to be heard as to costs. On 8 July 2015, Mr and Mrs Cooke filed the certificate of assessment of costs in the Local Court that they had been awarded two years beforehand by the Court of Appeal and, upon that filing, the costs certificate operated as a judgment or order of the Local Court. On 16 July 2015, Mr Young commenced proceedings by summons in the Supreme Court of New South Wales challenging the magistrate’s decision as raising a question of law under s 39 of the Local Court Act 2007 (NSW). On 18 December 2015, Bradd LCM heard argument and evidence concerning the award of costs and reserved his decision. On 15 March 2016, the official receiver issued the bankruptcy notice and, as I have said, it was served on 30 March 2016, the same day as Mr Young’s summons challenging the liability decision in the Local Court was heard by Garling J in the Supreme Court. His Honour reserved judgment. On 6 April 2016, Mr Young commenced these proceedings, seeking to set aside the bankruptcy notice. On that day, a registrar ordered that that application be stood over to 27 April 2016 and granted an extension of time within which Mr Young could comply with the terms of the bankruptcy notice, under s 41(6A) of the Bankruptcy Act, until the adjourned date.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Although Mr Young argued that the magistrate’s findings about Mr and Mrs Cooke’s credit and conduct in the costs judgment could support his claim that they lacked good faith and were in breach of their duty of care in negligence under the Civil Liability Act, in my opinion, his Honour was entitled to conclude that in respect of their purchase of the dog that they now own they were protected under s 69(3) of the Companion Animals Act.Conclusion For these reasons, I am of opinion that the application to set the bankruptcy notice aside should be dismissed with costs.

Ratio Decidendi

Legal Principle Established

In those circumstances, the Court had power to correct the record of the registrar’s order of 27 April 2016, which I did today, under the slip rule in the inherent jurisdiction, as well as pursuant to r 39.05(h) of the Federal Court Rules 2011: Ramsay Healthcare Australia Pty Limited v Compton [2016] FCAFC 125 per Rares, Gleeson and Markovic JJ.Consideration In a proceeding to set aside a bankruptcy notice under s 41(7) of the Bankruptcy Act, the Court does not determine the rights of the parties in relation to any supposed counter-claim, set-off or cross demand that a person in Mr Young’s position might seek to raise. Those rights have to be determined in separate proceedings. Rather, as Gleeson CJ, Gaudron, McHugh, Kirby and Callinan JJ said in Guss v Johnstone (2000) 171 ALR 598 at 606 [39]‑[40] the correct approach is as follows:[39]In Vogwell v Vogwell [(1939) 11 ABC 83 at 85] Latham CJ said, in relation to a corresponding provision:[T]he authorities show that the matter to which the court looks is this, – whether it is just that the claim should be determined before the bankruptcy proceedings are allowed to continue; in other words, whether it is a claim which it is proper and reasonable to litigate.[40]The state of satisfaction referred to in s 40(1)(g), and s 41(7), involves weighing up considerations as to the legal and factual merit of the claim relied upon by the debtor, and the justice of allowing the bankruptcy proceedings to go ahead or requiring them to await the determination of the claim. (emphasis added) Their Honours approved (171 ALR at 602 [14]) what Dixon CJ, McTiernan and Windeyer JJ had said earlier in Ebert v The Union Trustee Company of Australia Limited (1960) 104 CLR 346 at 350, concerning the standard of proof of the debtor’s claim, namely:Perhaps the standard may be expressed by saying that the debtor must show that he has a prima facie case, even if then and there he does not adduce the admissible evidence which would make out a prima facie case before a court trying the issues that are involved in his counter-claim, set-off or cross demand. The position in the Supreme Court at the present time is this. First, the proceedings on Mr Young’s amended summons that challenges the correctness of the 18 December 2015 decision has been stayed by force of the order of Harrison J that is the subject of Mr Young’s unparticularised notice of intention to appeal, and, secondly, the summons filed on 8 September 2016 seeks to raise a question about the status of the judgment debt the subject of the bankruptcy notice. Dealing with the second matter first, there is no sufficient legal or factual merit in that claim to warrant me being satisfied that it provides any basis on which to set aside, or extend the operation of, the bankruptcy notice. In my opinion, Bradd LCM did not seek to, and plainly had no jurisdiction to, alter the effect of the Local Court’s order of 8 July 2015 giving effect to the costs assessment of the order for costs made by the Court of Appeal on 28 March 2013. Rather, in my opinion, it is unarguable that the magistrate, in making his order of 2 May 2016 that there be no order as to costs, was exercising his jurisdiction to do so in, and only in, the proceedings that were before him, namely, the proceedings that Mr Young had brought against Mr and Mrs Cooke claiming damages for conversion or detinue of a dog. The magistrate had no jurisdiction to interfere with the operation of the Court of Appeal’s order, far less to, in effect, set it aside. Nor did he have before him any application to vary or stay the costs certificate which operated, upon its filing, as a judgment of the Local Court without any further judicial intervention.