FEDERAL COURT OF AUSTRALIA

Cummings v Raeffaele [2000] FCA 675

BANKRUPTCY – bankruptcy notice – whether bankruptcy notice relies on more than one judgment debt – where Local Court of New South Wales dismissed, with costs, private prosecution brought by judgment debtor – where judgment debtor appealed to District Court of New South Wales against order to pay costs – where District Court confirmed costs order of Local Court and ordered judgment debtor to pay costs of appeal – where bankruptcy notice relies on orders of District Court confirming order of Local Court and ordering judgment debtor to pay costs of appeal

Bankruptcy Act 1966 (Cth) s 40(1)(g)

Justices Act 1902 (NSW) ss 122, 125, 131 (repealed)

Owners of Strata Plan No 5459 v Mason (1999) 91 FCR 92 applied

Commonwealth Bank of Australia v Horvath (1999) 161 ALR 441 applied

G P W Aussie Exports v Latin (1998) 85 FCR 324 applied

Catalano v Commonwealth Bank of Australia (Sundberg J, 3 July 1997, unreported) applied

Illawarra Credit Union Ltd v Olejniczak (26 May 1998, Beaumont J, unreported) not followed

Barendse v Comptroller-General of Customs (1996) 136 FLR 243 at 249-250 applied

Parker v Director of Public Prosecutions (1992) 28 NSWLR 282 at 291 applied

Builders Licensing Board v Sperway Constructions (Syd) Pty Ltd (1976) 135 CLR 616 at 620 applied

Re Wheeler [1982] 1 WLR 175 applied

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

Re Gardiner (Wilcox J, 20 March 1991, unreported) referred to

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

Anderson v Judges of the District Court of New South Wales (1992) 27 NSWLR 701 applied

MERVYN CUMMINGS v TINDARO RAEFFAELE (IN THE MATTER OF TINDARO RAEFFAELE)

N 7380 OF 2000

MOORE J

30 JUNE 2000

SYDNEY

THE COURT ORDERS THAT:

1.      A sequestration order be made against the estate of Tindaro Raeffaele.

2.      The applicant creditor’s costs (including reserved costs, if any) be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).

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

REASONS FOR JUDGMENT

1                     On 4 May 2000 a creditor’s petition was filed by Mervyn Cummings (“the judgment creditor”) seeking a sequestration order against the estate of Tindaro Raeffaele (“the judgment debtor”).  The act of bankruptcy relied on is that identified in s 40(1)(g) of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”), namely, a failure by the judgment debtor to comply with the requirements of a bankruptcy notice served on him on 8 April 2000.

2                     When the matter was before the Registrar on 20 June 2000, she was concerned that the bankruptcy notice might be based on more than one judgment debt and therefore be a nullity, and referred the matter to me as duty judge.  There is now a consistent line of authority in this Court that a bankruptcy notice is a nullity if it relies on more than one judgment debt: see most recently, Owners of Strata Plan No 5459 v Mason (1999) 91 FCR 92, Commonwealth Bank of Australia v Horvath (1999) 161 ALR 441 (“Horvath”), G P W Aussie Exports v Latin (1998) 85 FCR 324 (“G P W Aussie Exports”) and Catalano v Commonwealth Bank of Australia (Sundberg J, 3 July 1997, unreported) (“Catalano”).  While the decision of Beaumont J in Illawarra Credit Union Ltd v Olejniczak (26 May 1998, unreported) is to the contrary, the solicitor appearing for the judgment creditor did not suggest that I decline to follow this line of authority.  Rather, he simply raised the issue for my consideration.  The judgment debtor did not appear.

3                     In the schedule to the bankruptcy notice, the particulars of the judgment debt are as follows:

4                     A certificate of appeal issued by the Deputy Registrar of the New South Wales District Court Criminal Registry under s 178 of the Evidence Act 1995 (NSW) was attached to the bankruptcy notice.  The certificate read:

“CERTIFICATE OF APPEAL

Evidence Act 1995 Section 178

Name of appellant                              Tindaro Raeffaele

Name of respondent                           Mervyn Cummings

Details of Local Court hearing

Private prosecution for common assault brought by Tindaro Raeffaele as informant against Mervyn Cummings as defendant

Name of Local Court              Burwood

Name of Magistrate                P.M. Norton

Date of Local Court orders    30 September 1996

Orders of Local Court: Information and charge be dismissed.  Order Tindaro Raeffaele to pay costs of Mervyn Cummings in the sum of $1070.00.  Costs to be paid within 2 months.

Details of District Court appeal

Appeal against above costs order brought by Tindaro Raeffaele as appellant, with Mervyn Cummings as respondent.

Name of District Court           Sydney District Court

Name of Judge                        B.C. M. Wall QC

Date Appeal heard                  11 June 1997

Orders of District Court:

Appeal dismissed.  Decision of Magistrate with regard to costs confirmed.  Allow two months from today to pay these costs.  Tindaro Raeffaele to pay Mervyn Cummings’ costs of the appeal to the District Court.  Note: Mervyn Cummings to have costs of appeal assessed by a cost assessor.

Further orders of District Court

Regarding assessment of costs of appeal ordered 11 June 1997

Name of District Court           Sydney District Court

Name of Judge                        B.C. M. Wall QC

Date Appeal heard                  6 July 1998

Orders of District Court regarding costs of appeal: Note court informed that cost assessor had no jurisdiction to assess costs.  Accordingly His Honour assessed the costs of the appeal ordered on 11 June 1997 in the amount of $1263.00”

5                     It can be seen from the certificate that there are three relevant orders:

(i)                  the costs order of Magistrate Norton of 30 September 1996 in respect of the costs of the trial in the amount of $1070.00;

(ii)                the order of Judge Wall of 11 June 1997 confirming the costs order of Magistrate Norton, though varying the time in which the costs were to be paid, namely to be paid within two months of 11 June 1997; and

(iii)               the costs order of Judge Wall of 11 June 1997 in respect of the costs of the appeal (assessed by his Honour on 6 July 1998 in the amount of $1263.00).

6                     Before considering the effect of these orders, it is necessary to set out the statutory framework governing their making.

7                     The power of a Magistrate to order costs is conferred by s 81 of the Justices Act 1902 (NSW) ) (“the Justices Act”) (expressed to apply to Justices, but extended to Magistrates by s 16 of the Justices Act), which relevantly provides:

“(1) The Justice … may … adjudge … in the case of an order of dismissal, that the prosecutor or complainant shall pay to the clerk of the court, to be by him paid to the defendant (or, if the prosecutor or complainant so elects, directly to the defendant) such costs as to such Justice … seem just and reasonable.

(2) The amount so allowed for costs shall in all cases be specified in the … order.”

8                     I note that the words in parentheses in subs (1) were inserted by the Courts Legislation Amendment Act 1996 (NSW), which was assented to on 2 December 1996, after Magistrate Norton’s order.  However, as will become clear from my reasons, that does not affect my conclusion.

9                     The judgment debtor’s right of appeal to the District Court against the costs order in the Local Court arose under s 122 (now repealed) of the Justices Act.  That section relevantly provided:

“(1) … every person who has, by order of a Justice or Justices, been adjudged to pay any costs of a defendant … may appeal to the District Court against such … order …”

10                  The powers of the District Court on appeal were conferred by s 125 (now repealed), which relevantly provided:

“(1) The Court hearing any appeal under this Division shall determine the matter of every such appeal, …, and may by its order confirm, quash, set aside, vary, increase, or reduce, the …, order, … appealed against, or make such other order in the matter, and as to costs to be paid by either party, …, as to the Court seems just; and may in and by any such order, exercise any power which the Justice or Justices who made the conviction or order might have exercised, and any order so made shall have the same effect and shall be enforced in the same manner as if it had been made by such Justice or Justices.”

11                  Also of relevance is s 131 (now repealed), which provided for the recovery of the costs of an appeal:

“(1) Where the Court orders either party to pay costs the order shall:

(a)   direct that the costs be paid to the Clerk of the Local Court where the matter which is the subject of the appeal or the application for leave to appeal was originally heard and be so paid at that Court,

(b)   state a time within which the costs shall be paid.

…”

12                  The conclusion I have reached is that orders (ii) and (iii) are the orders which create the debt claimed by the judgment creditor and constitute a judgment for the purposes of s 40(1)(g) of the Bankruptcy Act.

13                  An appeal to the District Court under s 122 of the Justices Act was by way of hearing de novo:  Barendse v Comptroller-General of Customs (1996) 136 FLR 243 at 249-250 (“Barendse”), Parker v Director of Public Prosecutions (1992) 28 NSWLR 282 at 291, Builders Licensing Board v Sperway Constructions (Syd) Pty Ltd (1976) 135 CLR 616 at 620.  In the present case, the certificate discloses that the appeal was limited to the issue of costs, but does not otherwise indicate how the appeal was conducted.  However, that the appeal was limited to that issue would not change the nature of the appeal as a hearing de novo.  As the New South Wales Court of Criminal Appeal said in Barendse (supra, at FLR 250):

“… we do not agree with the appellant’s submission that the nature of the appeal under s 122 … can be altered by a direction of the trial judge or an agreement or understanding, express or implied, between the parties.  Indeed, to put the matter that way mis-states the matter.  The question is not whether the nature of the appeal changes but whether … the judge hearing the appeal is constrained in the findings which can be made.  That question admits of an easy answer, where, for example, the parties … limit the issues argued on the appeal.”

(Emphasis added)

14                  Section 125(1) required the District Court to “determine” the “matter” of the appeal and empowered the Court, “by its order, [to] confirm, quash, set aside, vary, increase, or reduce, the … order … appealed against”.  It appears from the wording of the certificate that Judge Wall was exercising this power when his Honour made order (ii).  That is to say, his Honour was himself determining the issue of the costs of the trial in the Local Court.  In my opinion, order (ii), by which his Honour determined that issue, took effect as a fresh order in respect of the costs of the trial.  The certificate refers to order (ii) as having “confirmed” Magistrate Norton’s decision on costs, which is an order conformable with the language of s 125(1).  Moreover, Judge Wall imposed a fresh time limit of two months for the payment of the costs of the trial.

15                  As mentioned at the beginning of this judgment, there are a number of recent authorities addressing the validity of a bankruptcy notice and whether the notice was based on one or two judgments.  This issue has arisen, on several occasions, in the context of a number of orders having been made that a party pay the costs of another party to litigation.

16                  In Re Wheeler [1982] 1 WLR 175 and Catalano (supra), bankruptcy notices were held valid where it was found that several costs orders had been “channelled” into one order by a common certificate of taxation.  The possibility that several orders can be “channelled” into one order which may found a valid bankruptcy appeared to be left open in Re Stephenson; Ex parte Cintee Nominees Pty Ltd (1988) 18 FCR 375 (“Stephenson”) and Re Gardiner (Wilcox J, 20 March 1991, unreported), and was affirmed in Re Walker; Ex parte Noble Einsiedel Pty Ltd (Northrop J, 16 April 1992, unreported).  In Horvath (supra), Finkelstein J accepted (at 445) that “channelling” was an accurate description of what happened in Re Wheeler, but disagreed with the notion that a certificate of taxation can have the effect of reconstituting several costs orders into one order for the purposes of a bankruptcy notice.  However, his Honour noted the need for uniformity of decision-making by judges at first instance administering bankruptcy laws, and indicated that he would not therefore depart from the line of authority founded by Re Wheeler.

17                  In the present case, orders (ii) and (iii) were made, at the same time, by the District Court when determining the sole issue on appeal.  However, order (ii), while in form a costs order, was the order dealing with the subject matter of the appeal.  That is, it dealt with whether the informant, the judgment debtor, should have been ordered to pay the costs of the proceedings below.  Order (iii) was an order of the type regularly made in proceedings as an order ancillary to the principal substantive relief granted in the proceedings.  Thus order (ii) disposed of the appeal and order (iii) was the ancillary costs order.  Together they constituted the orders disposing of the appeal, and together they constituted, in my opinion, the final judgment in the appeal.  They constituted a final judgment for the purposes of s 40(1)(g) of the Bankruptcy Act.

18                  Moreover, in Anderson v Judges of the District Court of New South Wales (1992) 27 NSWLR 701, Kirby P said of s 125(1) (at 712):

“Section 125 of the Justices Act contemplates that the relief provided in the District Court on an appeal pursuant to s 122 will be made by a single “order” of the District Court.  Section 125(1) twice repeats the contemplation that the appeal is determined “by its order” or “in and by any such order”.  It therefore contemplates that the determination of the District Court will take the form of a single order in which the various forms of relief contemplated by the subsection will be included.  I do not consider that this is an appropriate case to apply the provisions of the Interpretation Act 1987 by which the singular may include the plural.  The phrase in s 125 is clear.  It is repeated.”

19                  His Honour’s comments are apt to apply to the present case and refer to provisions which provide specific legislative support for the more general view earlier expressed.

20                  I should add that the delay between the making of order (iii) on 11 June 1997 and the assessment of the costs of the appeal on 6 July 1998 does not render it not part of the final judgment.  The assessment merely had the effect of quantifying the costs payable under order (iii) – it did not take effect as a fresh order: see Re Walker; Ex parte Noble Einsiedel Pty Ltd (supra).

21                  I am otherwise satisfied that a sequestration order should be made and I so order.

Associate:

Dated:              30 June 2000