Beck Legal Pty Ltd v Shirreff [2010] FMCA 58 (8 February 2010)

Last Updated: 11 March 2010

FEDERAL MAGISTRATES COURT OF AUSTRALIA

BECK LEGAL PTY LTD v SHIRREFF

[2010] FMCA 58

BANKRUPTCY – Application for rehearing to set aside Sequestration Order made by Registrar.

Victorian Legal Profession Act 2004, s.3.4.26(3) Bankruptcy Act 1966, s.52(1) Federal Magistrate's Court (Bankruptcy) Rules 2006, r.4.06

Boglari v Coadys [2009] FCA 1398 Totev v Sfar [2008] FCAFC 35 Joosse v Deputy Commissioner of Taxation [2004] FCAFC 245

Applicant:

BECK LEGAL PTY LTD

Respondent:

AUSTIN DOUGLAS SHIRREFF

File Number:

MLG 634 of 2009

Judgment of:

Burchardt FM

Hearing dates:

14 September, 13 October, 2 November & 4 December 2009

Date of Last Submission:

22 December 2009

Delivered at:

Melbourne

Delivered on:

8 February 2010 & 3 March 2010

REPRESENTATION

Counsel for the Applicant:

Mr P. White

Solicitors for the Applicant:

Beck Legal Pty Ltd

The Respondent:

In person

Counsel for the Trustee:

Mr O’Brien

Solicitors for the Trustee:

Aitken Partners

ORDERS

(1) That further compliance with r.4.06 of the Bankruptcy Rules be dispensed with.
(2) The Sequestration Order made by Registrar Luxton on 30 July 2009 against the estate of AUSTIN DOUGLAS SHIRREFF be affirmed.
(3) The Application for Review of Mr Shirreff filed on 30 July 2009 be dismissed.
(4) The applicant’s costs of and incidental to the Petition be taxed pursuant to Order 62 of the Federal Court Rules and be paid in accordance with the statute.
(5) The supporting creditor’s costs of and incidental to the appearance today be taxed in accordance with Order 62 of the Federal Court Rules and be paid in accordance with the statute.
(6) The Court notes that the date of Act of Bankruptcy is 18 May 2009 and that David James Lofthouse has consented to act as Trustee pursuant to section 181A of the Bankruptcy Act 1966.

FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE

MLG 634 of 2009

BECK LEGAL PTY LTD

Applicant

And

AUSTIN DOUGLAS SHIRREFF

Respondent

REASONS FOR JUDGMENT

1. This is an application by Mr Shirreff for a review of the Sequestration Order made by Registrar Luxton on the original application of Beck Legal Pty Ltd on 30 July 2009. It is a hearing de novo.
2. Although it is not possible to truncate the matters in dispute, I can indicate that, for the reasons that follow, I think that a Sequestration Order and appropriate ancillary orders should be made.

The Facts

3. It is clear from the materials filed by the parties that in early 2007,
   Mr Shirreff retained Beck Legal Pty Ltd (“Beck Legal”) to act on his behalf in the Supreme Court of Victoria.
4. From the material annexed to the affidavit of Mr Bowyer, the partner of Beck Legal who had conduct of Mr Shirreff’s proceeding, sworn on 30 October 2009 and not the subject of challenge in this respect, it is clear that on 5 April 2007 Mr Shirreff was sent a costs agreement and disclosure statement. Mr Shirreff apparently never signed that agreement, but it is clear from the fact that he paid sums of money to Beck Legal for fees from time to time, and indeed on his own material issued instructions to Beck Legal to act for him, that the costs agreement was accepted by other conduct (see s.3.4.26(3) of Victorian Legal Profession Act 2004).
5. Beck Legal sent Mr Shirreff a number of bills (exhibit CGB2 to
   Mr Bowyer’s affidavit) which set out in itemised form moneys owing to Beck Legal for the work that they had done.
6. It is clear that Mr Shirreff paid the sum of $2,000 by cheque, a further $5,000 by cash and a further $5,000 sent to Beck Legal by a third party on his behalf.
7. Beck Legal then issued proceedings in the Magistrates’ Court of Victoria at Bendigo, which ultimately gave rise to judgment from that Court on 5 March 2009 in the sum of $7,526.31 together with interest and costs.
8. Although it was not made clear in the affidavit originally filed verifying paragraph 4 of the Creditor’s Petition (affidavit of
   Ms Nicholson filed on 28 May 2009), that judgment followed antecedent proceedings. From an affidavit filed on 10 December 2009 by Mr Shirreff, it is apparent that on 28 November 2007 an order was made by the Bendigo Magistrates’ Court setting aside an earlier judgment dated 5 September 2007 in favour of Beck Legal. The matter was adjourned to a date to be fixed at the Bendigo Court.
9. From an affidavit filed in response to that material by Mr Bowyer on 17 December 2009, it appears that the applicant debtor (Mr Shirreff) was, on 28 November 2007, given 28 days to file a notice to defend. He failed to do so and according to Mr Bowyer’s affidavit, it was for that reason that on 5 March 2009 the respondent creditor was able to obtain default judgment on the basis that the applicant debtor failed to file a notice to defend within the 28 days granted.
10. It should be noted that Mr Bowyer was called to give evidence and was not challenged as to the accuracy of the assertions made in that affidavit.
11. Following the judgment on 5 March 2009, a Bankruptcy Notice was issued on 24 March 2009 and was served on Mr Shirreff on 27 April 2009.
12. Mr Shirreff did not satisfy the debt referred to in the Bankruptcy Notice and on 28 May 2009, a Creditor’s Petition was filed.
13. On 27 July 2009 Mr Shirreff filed a Notice of Opposition in which he relevantly stated as the grounds of his opposition “instituting proceedings to set aside the judgments in respect of which this Bankruptcy Notice”.
14. That notice, no doubt, is what gave rise to an affidavit of Ms Nicholson sworn on 29 July 2009 in which Ms Nicholson deposed that she had on that date searched the records of the Magistrates’ Court of Victoria and “found that as of that date the respondent debtor had made an application to the Magistrates’ Court at Bendigo to set aside the judgment obtained by the applicant creditor in proceeding number W02068533”. It is clear that that paragraph involved a typographical error by the omission of the word “not” because all parties have proceeded on the footing that Mr Shirreff has not in fact made any application to set aside the final judgment.
15. Despite the fact that the Petition, which was served on Mr Shirreff on
    3 July 2009, showed that the hearing of the Creditor’s Petition would be at 9.30 am on 30 July 2009, Mr Shirreff turned up at 10 o’clock, by which time of course orders had been made in his absence by the Registrar.
16. Mr Shirreff filed his application to review on the same day.
17. When the matter came before the Court on 14 September 2009, it became apparent that Mr Shirreff took issue with the facts underpinning the Petition, and I accordingly gave him until
    24 September 2009 to file any affidavit material detailing the grounds upon which he asserted that the Sequestration Order should be set aside.
18. Mr Shirreff duly filed his affidavit on 24 September. That affidavit confirms that Mr Shirreff engaged Beck Legal to get a Supreme Court injunction for him, and also confirmed that he never signed a retainer with Beck Legal. He also asserted that he never received a copy “of any such form”. That assertion is directly contradictory to the material filed by Mr Bowyer to which I have already referred.
19. Mr Shirreff went on to set out assertions as to moneys he had paid (which were largely correct, although he asserted the payment of $2,200 rather than $2,000, which I find was the sum actually paid). He complained, putting the matter perhaps slightly broadly, that he was dealt with in a demeaning way by Mr Bowyer and his staff, and that
    Mr Bowyer failed to handle negotiations on Mr Shirreff’s behalf effectively. He said that he was not happy with any of the work done for him by Beck Legal, but also did confirm (paragraph 22) that he had received a bill of costs for legal services from Beck Legal. He said that he felt grossly overcharged and that he wanted to dispute the bill. It is clear, however, from Mr Shirreff’s affidavit that he had never taken any of the steps indicated on the bills themselves to avail himself of any challenge to the bills of costs, for example, by taxation, or application to VCAT or the like.
20. It should also be noted that Mr Shirreff, who has at all times represented himself, did not make any assertion that he was solvent in his affidavit material.
21. On 30 October 2009, Mr Bowyer swore his affidavit, as I have earlier recited. As I have indicated, he set out documents that would appear to suggest on their face that judgment had been entered by the Court in the final judgment sum, and that Mr Shirreff had been told by an employee of Beck Legal on 12 July 2007 that he would be given until 16 July 2007 before proceedings would issue, noting that Mr Shirreff had undertaken to respond to Beck Legal by that date. It is clear that Mr Shirreff had not replied.
22. There had been a further hearing on 13 October 2009 which I adjourned until 2 November 2009, at which Mr Shirreff had asserted to the Court that he was arranging a line of credit to settle with his creditors. That oral assertion has not been advanced further in any way by Mr Shirreff since.
23. The matter continued on 2 November 2009, and was again adjourned to give Mr Shirreff further opportunity to file affidavit material. On
    2 December 2009, the Trustee in Bankruptcy, Mr Lofthouse, filed an affidavit. I note that it appears that Mr Shirreff owns a number of properties which are subject to valuations of $2.99 million and that, as best the Trustee is able presently to say, the total known liabilities of
    Mr Shirreff are in the sum of $2,140,740. That latter observation, however, must be qualified by the fact that Mr Shirreff has not completed a statement of affairs. Mr Shirreff has never unequivocally sworn that he is solvent. It is not possible to say what Mr Shirreff’s position is from the affidavit of the Trustee.
24. At the hearing on 4 December 2009, Mr Shirreff asserted that the judgment upon which the Bankruptcy Notice and, therefore, the Creditor’s Petition were based had been set aside. He had never made this assertion before. On 10 December 2009, he filed an affidavit annexing the extract from the Bendigo Magistrates’ Court to which I have already referred, and which has been the subject of Mr Bowyer’s reply, to which I have likewise referred.
25. It should be noted that all the adjournments that have been occasioned in this matter have happened because Mr Shirreff has not been able to prepare his case in a timely or efficient way. This criticism needs to be approached in the light of the fact that Mr Shirreff is not legally qualified and faces all the difficulties of self-representation. Indeed, those difficulties made the Court’s task all the more difficult also. Nonetheless, Mr Shirreff’s failure even to read the original Creditor’s Petition sufficiently carefully to see the correct time of the Court’s hearing is perhaps symptomatic of the way in which he has conducted matters.

The Law

26. I am quite satisfied that the final judgment is still extant and validly based the Bankruptcy Notice and Creditor’s Petition. The question that then arises is whether the Court should go behind that judgment, bearing in mind that it was apparently entered without any full or final hearing on the merits of the claim.
27. The Court as presently constituted has had the recent benefit of a decision of Gray J sitting as the Full Court of the Federal Court in Boglari v Coadys [2009] FCA 1398 in which the Court sets out in the clearest terms the basis of the Court’s powers and upon which they should be exercised.
28. There is no question, for these purposes, of any default in compliance with the various formalities required by s.52(1) of the Bankruptcy Act 1966 (“the Act”). It is clear there has been verification of the matters stated in the Petition, service of the Petition, and the fact that the debts relied upon are still owing. In view of the problems identified in the case of Totev v Sfar [2008] FCAFC 35, I will dispense with further compliance with r.4.06 of the Federal Magistrate's Court (Bankruptcy) Rules 2006.
29. Those matters having been complied with, the Court is entitled to make a Sequestration Order against a debtor and in this case, I am not satisfied, in the light of the materials, that Mr Shirreff is indeed able to pay his debts. The question is, therefore, whether “that for other sufficient cause a Sequestration Order ought not to be made”.
30. Where, as here, the Court is being asked to go behind a judgment, the following observations of the Full Court in Joosse v Deputy Commissioner of Taxation [2004] FCAFC 245 at [3], quoted by Gray J in Boglari at [12], are of guidance:
    • “The court can go behind a judgment to determine whether it is founded on a real debt because a sequestration order should not be made on the petition of a person who is not a real creditor. The court has discretion whether or not to go behind a judgment. The discretion is of a limited kind. In Wren v Mahony [1972] HCA 5; (1972) 126 CLR 212, Barwick CJ, with whom Windeyer and Owen JJ agreed, said (at 224 to 225) that:
      • (t) The Court’s discretion ... is discretion to accept the judgment as satisfactory proof of [the petitioning creditor’s] debt. That discretion is not well exercised where substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner.”
31. In Boglari at [13], Gray J drew attention to the fact that the Court will be more ready to find that there is a substantial reason for questioning whether a judgment is based on actual debt when that judgment has been given by default.

Consideration

32. Applying these principles to the facts of this case, the following matters, in my view, are relevant:

(a) There is no doubt that Mr Shirreff feels discontented with the way in which he perceives he was treated by Beck Legal during the time when they clearly acted for him in 2007;

(b) notwithstanding this, it seems clear that having been instructed to act in the Supreme Court of Victoria, Beck Legal did in fact obtain injunctive relief for Mr Shirreff, albeit that it did not have the desired effect;

(c) there is no doubt that Beck Legal sent detailed bills to
Mr Shirreff which clearly itemised the work done and moreover, made clear to Mr Shirreff the basis on which he could challenge those bills should he so desire;

(d) the fact that Mr Shirreff did not sign any costs agreement does not prohibit Beck Legal from recovering reasonable fees in light of the terms of the Victorian Legal Profession Act 2004;

(e) I am satisfied that Beck Legal has indeed given proper credit to Mr Shirreff for all moneys that he paid to them;

(f) the bills of Beck Legal do not seem to me on their face to show any exaggeration or overcharging for a proceeding of the nature that Mr Shirreff was involved in;

(g) Mr Bowyer’s evidence was given, in my view, in a straightforward and believable way and accorded with the available contemporaneous documentation. I accept his evidence and reject the challenges to it made by Mr Sherriff. To the extent that Mr Bowyer’s evidence may have contained any inaccuracies, they were not the subject of material challenge; and

(h) Mr Shirreff has not at any stage asserted that he is solvent and able to pay his bills other than a glancing reference to a possible line of credit at one hearing before the Court which he has never sought, despite a number of opportunities, either to put on affidavit or otherwise to detail. His affairs are not, for the reasons given in paragraph 23, able to be established from the Trustee’s material.

33. Bearing in mind all the relevant considerations, the most important of which I attempted to detail above, it does not seem appropriate to me to exercise my discretion to go behind the final judgment. In any event, I am satisfied that Mr Shirreff does indeed, and has at all relevant times, owed Beck Legal the sum for which judgment was entered.
34. The Court has the discretion to make or not make a Sequestration Order, and in my view in the circumstances of this case, it is entirely appropriate that such an order be made.

Conclusion

35. For the above reasons, I will make a Sequestration Order in respect of Mr Shirreff’s estate, together with the appropriate ancillary orders to give effect to this ruling. I have prepared draft orders and will give the parties an opportunity to be heard as to their form.

Addendum

1. On 8 February 2010, I handed down my Reasons for Judgment and Draft Orders. I gave the parties seven (7) days in which to file written submissions as to whether the Draft Orders were appropriate.
2. The submissions filed by the Trustee, supported by Beck Legal Pty Ltd, seek only that I add an additional clause noting that the Trustee has agreed to act. Although I think it is unnecessary I have made that notation.
3. Having considered the matter further, I have of my own motion decided to vary the Draft Orders. After further consideration of matters arising from the case of Totev v Sfar [2008] FCAFC 35 I have decided that the preferable course is to affirm the decision of the Registrar and to dismiss the Application for Review.
4. In his submissions to the Court Mr Shirreff has purported to offer to take up what he himself describes as an offer allegedly made to him by the Court as to payment out of the debt which has given rise to this proceeding.
5. I suspect that this correspondence has its origin in an exchange that took place on 2 November 2009 at P-2 – P-3. In response to a suggestion by Mr Shirreff that he make some sort of payment into Court, which I declined, I said:
   • “It is always open to a person who is the subject of a petition to discharge the debt and all the associated costs.”
6. I went on to say:
   • “But that is a matter for you. All I am hearing is your application for a re-hearing on the Sequestration Order application from the Creditor’s Petition.”
7. That passage, while it highlights the dangers of offering even the most basic of advice to unrepresented litigants, was not an offer from the Court to Mr Shirreff and could not in the circumstances have reasonably been taken to be one.
8. On reading the transcript I noted the number of times that I have all but implored Mr Shirreff obtain legal advice. It remains very much in his interest to do so.

I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of Burchardt FM

Associate: Ms B. Evans

Date: 8 February 2010