FEDERAL COURT OF AUSTRALIA

Hovan v Goycolea-Silva, in the matter of Hovan [2003] FCA 378

IN THE MATTER OF GEORGE LESLIE HOVAN

GEORGE LESLIE HOVAN v MARIA SOLEDAD GOYCOLEA-SILVA

N 7070 OF 2003

N 182 OF 2003

LINDGREN J

4 APRIL 2003

SYDNEY

IN THE MATTER OF GEORGE LESLIE HOVAN

THE COURT ORDERS THAT:

1.         The application be dismissed.

2.         The applicant pay the respondent’s costs.

3.         The respondent have liberty to apply on three days’ notice for orders that Michael Foley be jointly and severally liable with the applicant for the respondent’s costs and that the applicant’s costs ordered to be paid be on an indemnity basis.

4.         Orders 1, 2 and 3 be stayed for 21 days from today’s date.

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

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

THE COURT ORDERS THAT:

1.         The appeal be dismissed.

2.         The appellant pay the respondent’s costs.

3.         Orders 1 and 2 be stayed for 21 days from today’s date.

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

IN THE MATTER OF GEORGE LESLIE HOVAN

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

REASONS FOR JUDGMENT

1                     Both of these proceedings have their origin in proceeding  SZ1281 of 2002 in the Federal Magistrates Court of Australia.  That proceeding arose out of bankruptcy notice NN1964/02, issued by the Official Receiver on 28 August 2002 on the application of Maria Soledad Goycolea-Silva (“the creditor”) against George Leslie Hovan trading as Hovan and Co (“the debtor”). 

2                     The debtor applied to set aside the bankruptcy notice.  On 18 February 2003 the learned Federal Magistrate dismissed the application to set aside, although he extended the time for compliance with the bankruptcy notice to 28 February 2003 ([2003] FMCA 65).  The debtor failed to comply with the bankruptcy notice within that extended time.

3                     The bankruptcy notice recorded on its front page that the creditor claimed that the debtor owed her a debt of $21,140.89 as shown in the Schedule to the bankruptcy notice.

4                     The Schedule was as follows:

“ Schedule

5                     A note to the schedule stated that if legal costs were claimed a certificate of taxed or assessed costs in support of the amount claimed must be attached to the bankruptcy notice.

6                     A further note stated that if interest was claimed in the bankruptcy notice, details of the calculation of the amount of interest claimed were to be set out in a document attached to the notice stating the provision under which the interest was being claimed and the principal sum on which, the period for which, and the interest rate or rates at which, the interest was being claimed.

7                     There was attached to the bankruptcy notice a copy of a certified copy of the entry of judgment in the records of the Local Court at Byron Bay showing that the creditor had recovered judgment against the debtor on 27 July 1999 for $14,731.00.  The certified copy of the entry of judgment stated that 27 July 1999 was the date of registration in the Byron Bay Local Court of a Supreme Court certificate as to determination of costs.  Apparently the judgment was in respect of legal costs which had been paid by the creditor to the debtor for work done by the debtor as a solicitor.  The certified copy of entry of judgment also stated that interest was payable on the judgment debt at the rate prescribed for the purposes of subs 95(1) of the Supreme Court Act 1970 (NSW).  Finally, the certified copy of entry of judgment stated that the creditor had incurred costs of attempting to enforce the judgment recoverable against the debtor in the sum of $3,286.81 (and that this amount included interest).  It will be noted that this was not the amount claimed for costs in the table (set out in [4] above).

8                     The bankruptcy notice also had an interest calculation sheet annexed to it making it clear that interest was claimed for the period from 27 July 1999 to 27 August 2002 “pursuant to section 39A of the Local Court Act”.  The interest calculation was set out in a table on the interest calculation sheet and showed the total amount of $5,159.89 which appeared in the table (set out in [4] above).

9                     Before the learned Federal Magistrate, two points only were argued on behalf of the debtor.  The first was that the bankruptcy notice referred to a non-existent Act of the New South Wales Parliament, the "Local Court Act", when the reference should have been to the Local Courts (Civil Claims) Act 1970.  The debtor submitted that the disconformity was one which would cause confusion to him and constituted a failure to comply with the prescribed form of bankruptcy notice under subs 41(2) of the Bankruptcy Act 1966 (Cth) (“the Act”)  and reg 4.02 of the Bankruptcy Regulations.

10                  The learned Magistrate thought that the reference to the “Local Court Act” was merely a shorthand way of referring to the Local Courts (Civil Claims) Act 1970, and that the “misnomer” did not prevent substantial compliance with the prescribed form as permitted by s 25C of the Acts Interpretation Act 1901 (Cth).  His Honour also said he could not see how there could be any element of substantial injustice, so that s 306 of the Act would apply in relation to such an “irregularity”.  Finally, he observed that no evidence had been put to the effect that the debtor had been in fact misled.

11                  The second submission made before the Federal Magistrate was that there was a disconformity between the amount claimed for costs in the bankruptcy notice ($1,250) and the amount of costs referred to in the certified copy of entry of judgment ($3,286.81).  His Honour treated this as simply a claiming in the bankruptcy notice of a lesser amount than the full amount to which the creditor was entitled.  It is trite that a bankruptcy notice is not required to claim the full amount of a debt due.  His Honour thought that the notice made it clear that $1,250 and no more was being demanded in respect of legal costs. 

12                  The learned Magistrate extended the time for compliance with the bankruptcy notice until 28 February 2003 and ordered the debtor to pay the creditor’s costs.

13                  Proceeding N 182 of 2003 (“the appeal proceeding”) was commenced by the filing of a notice of appeal by the debtor on 4 March 2003.  The notice of appeal set out the following grounds:

“2.       His Honour erred in not finding that the errors contained in the Bankruptcy Notice NN 1964/02 were such that the Appellant was mislead  [sic].

3.         His Honour erred in holding that the errors and discrepancies contained in the Bankruptcy Notice NN 1964/02 were of such a minor nature that they could be cured pursuant to the provisions of Section 306 of the Bankruptcy Act 1966.

4.         His Honour erred in not setting aside Bankruptcy Notice NN 1964/02.”

14                  On 6 March 2003 Emmett J had before him in the appeal proceeding an application for extension of time for compliance with the bankruptcy notice, the application being made under subs 41(6A) of the Act ([2003] FCA 234).  The application for extension was based on the pendency of the appeal and also on a then proposed application by the debtor to this Court to set aside the bankruptcy notice.  His Honour observed (at [3]) that the history of the matter “did not do any credit” to the debtor, who was, as his Honour noted, previously a solicitor of the Supreme Court of New South Wales.  After setting out the background, Emmett J dismissed the application for extension of time. 

15                  On 7 March 2003 the debtor filed the application which commenced proceeding N 7070 of 2003, by which the debtor again sought an order setting aside the bankruptcy notice.  That relief was, of course, the very relief which he had previously sought in Federal Magistrates Court proceeding SZ1281 of 2002.

16                  The fresh application to set aside the bankruptcy notice came before Emmett J on 7 March 2003 when his Honour ordered that the proceeding be listed before me at 9.30 am on 20 March 2003, when the appeal proceeding, which had been randomly allocated to my docket, was to be before me.  His Honour also made directions for the filing of affidavits.  The creditor had indicated an intention to file a notice of motion for summary dismissal of the application to set aside the bankruptcy notice under O 20, r 2 of the Federal Court Rules. 

17                  Both proceedings were before me on 20 March 2003.  The creditor complained that the notice of appeal was uninformative and I directed the appellant to file and serve any amended notice of appeal by Wednesday, 26 March 2003 and stood the appeal proceeding over for directions on 28 March 2003 at 9.00 am. 

18                  In the other proceeding, the application to set aside the bankruptcy notice, I directed the creditor to file and serve any notice of motion for summary dismissal by Monday 24 March, returnable on Friday 28 March 2003 at 9.00 am, reserving the costs of the day.

19                  On 25 March, Mr Foley, solicitor for the debtor, having appeared for the debtor in both proceedings on 20 March, contacted the Court to say that he would not be able to file an amended notice of appeal by 26 March because he was ill.  On 27 March he contacted the Court to say that he would not be able to attend the hearings on 28 March for the same reasons.  On 28 March I stood both proceedings over to today, having made it clear to Mr A Kumar of counsel, who appeared as agent for Mr Foley, that I would expect the proceedings to be ready for hearing today.

20                  Late this morning the Court received a notice of motion prepared by Mr Foley seeking a further adjournment with two supporting affidavits.

21                  Mr Kumar has again appeared this afternoon, instructed by Mr Foley, but without any knowledge of the background to the matter.  Mr Foley has sworn an affidavit in support of the application for adjournment to the effect that he is still ill in hospital and that his file is lost.  Mr Kumar has not been briefed with Mr Foley’s file, and had not, prior to this afternoon’s hearing, inspected the court file.  I adjourned for half an hour to give Mr Kumar an opportunity to familiarise himself with both court files.  During that time he would not have been in a position to prepare any significant arguments in relation to the merits of either case, and the main purpose of giving him the opportunity of reading the files was to enable him to understand the documents which are before the Court.

22                  I reject Mr Kumar’s application on behalf of the debtor for a further adjournment.  The evidence in support of the application for an adjournment is not persuasive.  There is no evidence that Mr Foley could not have instructed another person in a timely way to represent the debtor.  Likewise, the arguments to be put could have been prepared over the last few days by inspection of the court files, in the absence of Mr Foley’s own file.

23                  I indicated to the parties that I would proceed with the hearing and would stay for a period any orders I might make if they were adverse to the debtor.

24                  In relation to the appeal, Mr Kumar has been able to do no more than to reassert the arguments which were put before the learned Federal Magistrate.  I think that his Honour was correct not to be persuaded by those arguments generally for the reasons which he gave.  Accordingly, the appeal should be dismissed with costs.  I emphasise that I am dealing merely with the arguments which were put to the Federal Magistrate.

25                  In relation to the setting aside proceeding, I uphold the creditor’s submission that on the basis of issue estoppel or to the extent that arguments were not put before the learned Federal Magistrate, the principle recognised in Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589, that application should be summarily dismissed with costs.

26                  In the application to set aside, counsel for the creditor seeks an order that Mr Foley, as the solicitor for the creditor, pay the costs, but I would not make that order in the absence of Mr Foley and without hearing argument from him.  In the setting aside proceeding, the creditor will have liberty to apply on three days’ notice for orders that Mr Foley be jointly and severally liable with the debtor for the creditor’s costs, and that the creditor’s costs ordered to be paid be on the indemnity basis.

Associate:

Dated:              1 May 2003

In proceeding N 7070 of 2003

In proceeding N 182 of 2003