Joseph Michael Catalano v Commonwealth Bank of Australia [1997] FCA 649 (3 July 1997)

CATCHWORDS

BANKRUPTCY - Bankruptcy notice - Order for costs on interlocutory application - Further order for costs on later interlocutory application - Taxing of costs as one bill - Bankruptcy notice referring to final orders made on dates of two interlocutory orders and taxation - Validity.

Bankruptcy Act 1966 s40(1)(g)

Re Low; Ex parte Argentine Gold Fields Ltd [1891] 1 QB 147

Re Application for Issue of a Bankruptcy Notice; Ex parte Tinson (1946) 14 ABC 41

Re Wheeler [1982] 1 WLR 175

Re Stephenson; Ex parte Cintee Nominees Pty Ltd (1988) 18 FCR 375

Re Gardiner (unreported, 20 March 1991)

Re Walker; Ex parte Noble Einsiedel Pty Ltd (unreported, 16 April 1992)

Ebert v Untion Trustee Co (Aust) Ltd [1960] HCA 50; (1960) 104 CLR 346

JOSEPH MICHAEL CATALANO v COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124) VN 7231 of 1997

COURT: Sundberg J

PLACE: Melbourne

DATE: 3 July 1997

IN THE FEDERAL COURT OF AUSTRALIA )

EXERCISING FEDERAL JURISDICTION )

IN BANKRUPTCY ) No VN 7231 of 1997

BANKRUPTCY DISTRICT OF VICTORIA )

RE: JOSEPH MICHAEL CATALANO

EX PARTE: JOSEPH MICHAEL CATALANO

Judgment Debtor

COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)

Judgment Creditor

COURT: Sundberg J

DATE: 3 July 1997

PLACE: Melbourne

MINUTES OF ORDER

The Court orders that:

1. The application be dismissed.

2. The applicant pay the respondent's taxed costs of the application.

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

IN THE FEDERAL COURT OF AUSTRALIA )

EXERCISING FEDERAL JURISDICTION )

IN BANKRUPTCY ) No VN 7231 of 1997

BANKRUPTCY DISTRICT OF VICTORIA )

RE: JOSEPH MICHAEL CATALANO

EX PARTE: JOSEPH MICHAEL CATALANO

Judgment Debtor

COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)

Judgment Creditor

COURT: Sundberg J

DATE: 3 July 1997

PLACE: Melbourne

REASONS FOR JUDGMENT

SUNDBERG J:

Background

The respondent served a bankruptcy notice on the applicant which reads in part as follows:

Whereas Commonwealth Bank of Australia ... has claimed that the sum of $5036.50 is due by you to it under final Orders obtained by it against you in the Supreme Court of Victoria at Melbourne on 22 March 1996, 23 April 1996 and 19 July 1996, being final Orders the execution of which has not been stayed ....

The notice went on to require the applicant to pay the amount in question within fourteen days, or to secure the payment thereof or compound the sum to the respondent's satisfaction.

The applicant applies to set aside the bankruptcy notice on two grounds: that it is based on more than one judgment, and that he has a counter-claim, set-off or cross demand equal to or exceeding the amount specified in the notice which he could not have set up in the proceeding in which the judgments referred to in the notice were obtained.

The evidence

The costs claimed in the bankruptcy notice arose out of proceedings in the Supreme Court of Victoria in action No 6535 of 1995. On 22 March 1996 Master Evans ordered that unless the applicant filed and served an affidavit of documents and answers to interrogatories by 29 March, his defence be struck out. The applicant was ordered to pay the respondent's costs of the application. The applicant did not comply with the first part of the order, and on 23 April 1996 Master Wheeler struck out the defence and ordered the applicant to pay the respondent's costs.

The respondent caused a costs consultant to prepare a bill in taxable form. The bill was presented as one document drawn in two parts - Part A relating to the costs referable to Master Evans' order and Part B relating to those referable to Master Wheeler's order. The total bill was $6557.80. On 19 July 1996 Master Bruce taxed the costs and allowed them in sum of $5036.50. According to the costs consultant who prepared the bill and appeared before Master Bruce on the taxing, no objection was taken by the Master or the applicant (who appeared for himself before the Master) to the bill being taxed as one bill. According to the applicant, Master Bruce said that due to the manner in which the bill had been presented (ie as a composite bill), he was "precluded from taxing the bills separately and making separate orders on the taxation, thereby allocating the costs with respect to the separate orders made".

The cross claim relied on by the applicant was based on an order made by Master Evans on 6 November 1996 that the respondent pay the applicant's costs of an interlocutory application in the same action. The applicant estimates that his costs and disbursements will amount to approximately $3000, though he has not yet rendered a detailed account. He also says that he has lodged a counter-claim in that action which he believes will exceed the respondent's claim. He says his counter-claim has "substantial merit", and that the respondent had applied for summary judgment which application was dismissed by a Master and on appeal by a Judge. One of the respondent's solicitors has expressed the opinion that the taxed costs referable to the order of 6 November 1996 would not exceed $1000.

More than one judgment or order

Under s40(1)(g), as it stood at the relevant time, a debtor commits an act of bankruptcy

if a creditor who has obtained against the debtor a final judgment or final order ... has served on the debtor ... a bankruptcy notice under this Act and the debtor does not ... comply with the requirements of the notice or satisfy the Court 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 ....

In Re Low; Ex parte Argentine Gold Fields Ltd [1891] 1 QB 147 the company had obtained judgments against Low in two separate actions. It sought the issue of a bankruptcy notice which included both judgments. The Registrar refused to issue such a notice, and his refusal was upheld by the Court of Appeal. Speaking of s4(1)(g) of the Bankruptcy Act 1883 Lord Esher MR, with whom Lopes and Kay LJJ agreed, said at 148:

In the section itself one debt only is spoken of, and the rule and the form of notice carry out the same idea. That this was intentional appears from a comparison with s6, sub-s(1)(a), where in a case where two or more creditors may join in an act this is expressed in terms. The power to join two or more judgment debts in one notice could equally have been expressed, and, as it is not, I think it must have been meant that only one judgment debt should be the subject of each bankruptcy notice.

Low founds the proposition that two or more judgment debts cannot be included in the same bankruptcy notice. Low was followed by Clyne J in Re Application for Issue of a Bankruptcy Notice; Ex parte Tinson (1946) 14 ABC 41. The notice there was based on two orders for costs made in previous proceedings between the parties: the first for the costs relating to the issue of a writ of habeas corpus, and the second for the costs of an unsuccessful appeal against the issue of the writ. The creditor's solicitors carried in a bill of costs covering both orders. The bill was taxed and the costs allowed at [sterling]131 18s 9d, and according to the certificate of taxation this sum was the proper amount to be paid "as the said orders directed". Clyne J said:

It cannot, I think, be disputed that the costs to which Tinson became entitled were costs ordered to be paid by two orders, ... and though these costs were the subject of one taxation they became payable only in accordance with the terms of these two orders.

In Re Wheeler [1982] 1 WLR 175 the judge in earlier proceedings had given judgment in the action for the plaintiffs with costs to be taxed. He also disposed of three procedure summonses, and in the case of each ordered the defendants to pay the plaintiffs' taxed costs. The judgment creditors' solicitors had a composite bill of costs prepared covering the costs of the action and of the summonses. The taxing master taxed parts of the bill and issued an interim certificate. No costs were paid, and the judgment creditors served a bankruptcy notice on the debtor requiring him to pay $20,000 "being the amount due in respect of part of the costs ordered to be paid by you on four final orders of Foster J ... each dated December 18, 1979, as evidenced by the interim certificate of Master Matthews dated October 24, 1980". The debtor did not comply with the demand, a petition was presented, and a receiving order was made. The Divisional Court in Bankruptcy allowed the debtor's appeal on the ground that the bankruptcy notice referred to more than one final order, relying on Low's case. The creditors successfully appealed to the Court of Appeal. Lawton LJ, with whom Brightman and Fox LJJ agreed, said at 181-182:

... what had happened in In re Low ... was that there had been two separate actions and judgment had been given in each. In this case there was one action with a number of interlocutory orders made in that action. So it was a very different situation altogether from that with which the court was concerned in In re Low ....

[Counsel for the creditors] submitted that what had happened in this case was that the four orders made by Foster J arising out of one action had been channelled into one order requiring the payment by the debtor and Mr Argent of the sum of [sterling]20,000; that, as a result of that channelling into the interim certificate, there was in the end only one final order, which was for the payment of the sum of [sterling]20,000; and that as the bankruptcy notice made it clear what was the origin of the debt upon which the bankruptcy notice was based, there was compliance with the provisions of both section 1(1)(g) and section 2.

The debtor, on the other hand, submitted that, on the face of the bankruptcy notice, there were four orders and that it followed, having regard to the decision of this court in In re Low ..., the bankruptcy notice was bad. For the reasons I have already stated, in my judgment, those four orders were channelled into the interim certificate so as to constitute one order.

His Lordship had earlier said (at 179) that the sum the subject of the taxing Master's interim certificate was "one sum relating to one debt arising out of the judgment in the action and the orders on the procedure summonses". He also said that the preparation of a composite bill of costs, covering not only the costs of the action but the costs of the summonses, was a "sensible course ... because clearly all the procedure summons were steps in the action".

In Re Stephenson; Ex parte Cintee Nominees Pty Ltd (1988) 18 FCR 375 a bankruptcy notice claimed a sum due under "final orders obtained ... against you in the Heidelberg Magistrates' Court on 29th day of April 1987 and the 26th day of May 1987". Jenkinson J, applying Low, held the notice bad. He distinguished Wheeler on the ground that there was no indication that anything in the nature of the channelling of several orders into one order had effected a conjunction of the two orders.

In Re Gardiner (Federal Court, unreported, 20 March 1991) Wilcox J, applying Low, held bad a notice which demanded payment of a sum of money due "under final judgments obtained by the judgment creditors against you in the Supreme Court of New South Wales ... for costs which were taxed on 1 August 1989 and 10 July 1989 pursuant to the judgments granted on 4 June 1986 and 22 May 1989". His Honour distinguished Wheeler on the ground, amongst others, that "there was no act, either of the Court or of the parties, which could answer the description of 'channelling' one order into another". In Re Walker; Ex parte Noble Einsiedel Pty Ltd (Federal Court, unreported, 16 April 1992) Northrop J approved Wheeler.

Nothing in the cases decided since Wheeler has cast any doubt on it, and I think it is a sensible decision. Mr Pirrie, for the applicant, submitted that Wheeler is distinguishable from the present case in that the costs orders in Wheeler were made after the final disposition of the action, whereas the action in the present case is still on foot. But Wheeler was not decided upon that basis. The basis upon which it was decided was that several orders in one action had been channelled into one order by the interim certificate of taxation. That is what happened here. Master Bruce's order channelled the two costs orders into one.

It may be that Tinson, which was not referred to in argument, can be distinguished from Wheeler and the present case on the ground that the composite taxed bill in Tinson related to costs at first instance and then on appeal, rather than costs of different interlocutory proceedings in the one action. But in any event, no "channelling" argument was addressed to the Court in Tinson, and the application was ex parte. I prefer the more recent decision in Wheeler, where the issue of channelling was fully ventilated.

Cross demand

The applicant has not satisfied me that he has a counter-claim, set-off or cross demand equal to or exceeding the amount specified in the notice. In order to make out a counter-claim, set-off or cross demand a debtor must show he has a prima facie case, even if he does not then and there adduce the admissible evidence which would make out such a case before a court trying the issues that are involved: Ebert v Untion Trustee Co (Aust) Ltd [1960] HCA 50; (1960) 104 CLR 346 at 350. The applicant has disclosed no facts relating to his counter-claim. He has not even exhibited the pleading. The Supreme Court file was not before me. It is not sufficient to depose to a belief that a counter-claim, the details of which have not been revealed, has "substantial merit" and will exceed the respondent's claim. The fact that the respondent has unsuccessfully applied for summary judgment does not demonstrate that the applicant's counter-claim is a good one.

I accept the respondent's solicitor's evidence that the costs due to the applicant under the order of 6 November 1996 would be taxed at no more than $1000. The applicant's estimate of $3000 is not of taxed costs, but of costs actually incurred. But even on that estimate, the applicant would owe the respondent more than $1500. Cf s44(1).

Conclusion

The two grounds on which the applicant claims to have the bankruptcy notice set aside having failed, the application is dismissed with costs.

I certify that this and the preceding seven pages are a true copy of the reasons for judgment of the Honourable Justice Sundberg

..................................................................

Associate

3 July 1997

Counsel for the Applicant: M Pirrie

Solicitors for the Applicant: Masons

Counsel for the Respondent: G Carroll

Solicitor for the Respondent: Australian Government Solicitor

Date of Hearing: 23 June 1997

Place of Hearing: Melbourne

Date of Judgment: 3 July 1997