FEDERAL COURT OF AUSTRALIA

Goldberg v Morrow [2005] FCA 1038

BANKRUPTCY – appeal – application to set aside bankruptcy notice refused by Federal Magistrate– whether copy of judgment attached to bankruptcy notice when served – whether any appeal pending– whether any counter-claim or set off exists.

APPEAL – denial of natural justice – sufficiency of evidence – finality of costs order.

Bankruptcy Act 1966 (Cth) ss 40(1)(g), 40(3)(b), 41(3)(b)

Federal Court of Australia Act 1976 (Cth) s 25(1A)

Supreme Court Act 1986 (Vic) s 3(5)

Supreme Court (General Civil Procedure) Rules 1996 (Vic) r 24.01, O 66

Goldberg v Morrow [2004] FCA 1490;(2004) 83 ALD 251 referred to

Re Briggs; Ex parte Briggs v Deputy Commissioner of Taxation (WA) (1986) 12 FCR 310 followed

Abigroup Ltd v Abignano (1992) 39 FCR 74 referred to

Re: Skinner’s and Smith’s Application (1982) 45 ALR 553 followed

Re: Gibbs; Ex parte Triscott (1996) 65 FCR 80 followed

Gibbs v Triscott [1996] FCA 895 referred to

DAVID GOLDBERG v DAVID MORROW

VID 845 of 2004

CRENNAN J

28 JULY 2005

MELBOURNE

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT CONSTITUTED BY FEDERAL MAGISTRATE PHIPPS

THE COURT ORDERS THAT:

1.      The appeal be dismissed. 

2.      The appellant pay the respondent’s costs of the appeal.

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

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT CONSTITUTED BY FEDERAL MAGISTRATE PHIPPS

REASONS FOR JUDGMENT

1                     This is an appeal from the decision of Phipps FM to dismiss the appellant’s application to set aside a bankruptcy notice served upon the appellant on 11 March 2004.  The Chief Justice has determined, pursuant to s 25(1A) of the Federal Court of Australia Act 1976 (Cth) that the appeal should be heard by a single judge.

2                     The bankruptcy notice required payment of a judgment debt of $3468.85.  The judgment debt relates to an order for costs made by Gillard J in the Supreme Court of Victoria (‘the Supreme Court’) on 24 July 2003.  The appellant, Mr Goldberg, and the respondent, Mr Morrow, have been involved in a number of legal proceedings in various courts since 2003.  The history of the relevant proceedings has been summarised by Weinberg J in Goldberg v Morrow [2004] FCA 1490 at [13] – [18], [22], [27] and [28].  I gratefully incorporate those paragraphs into these reasons for judgment. 

3                     The respondent sought a sequestration order upon a creditor’s petition filed on 30 June 2004.  Weinberg J heard an appeal against the sequestration order which was made by McInnis FM on 6 September 2004.  On 19 November 2004, Weinberg J dismissed that appeal and ordered the appellant to pay the respondent’s costs.  On 27 April 2005, the High Court refused an application for special leave to appeal against the decision of Weinberg J.  After the filing of the respondent’s creditor’s petition, the appellant filed the notice of appeal against the decision of Phipps FM on 5 July 2004.  Hence, the odd sequence in which the two bankruptcy appeals to this Court were heard.

4                     The parties are currently awaiting the determination of the following appeals and applications:

(i)                  appeal to the Court of Appeal of the Supreme Court of Victoria (‘the Court of Appeal’) against the decision of Nettle J (as he then was) made on 6 November 2003 (No. 5320 of 2003);

(ii)                application for special leave to appeal to the High Court against the decision of Phillips and Batt JJA made on 30 April 2004 (M97 of 2004); and

(iii)               application for special leave to appeal to the High Court against the decision of Chernov and Nettle JJA made on 1 July 2004 (M143 of 2004).

5                     There is no appeal on foot against the decision of Gillard J made on 24 July 2003 in which his Honour ordered David Goldberg to pay David Morrow’s costs, which were subsequently taxed by Master Bruce on 14 November 2003 in the sum of $3,468.85.  No stay of execution has been granted in respect of Gillard J’s order.

Decision of Phipps FM

6                     In the application to set aside the bankruptcy notice the appellant essentially relied on three grounds.  The first ground was a claim that a copy of the order that Gillard J made on 24 July 2003 was not attached to the bankruptcy notice.  Phipps FM rejected the appellant’s evidence to that effect, preferring and accepting the evidence of the respondent’s solicitor and the process server that a copy of the order of Gillard J had been attached to the bankruptcy notice and served on the appellant.  As the appellant did not allege that there were any other defects in the bankruptcy notice, his Honour held that the first ground of the application before him was not made out.

7                     The second ground of the application before Phipps FM was that the appellant had an appeal pending before the Court of Appeal and an application for special leave to appeal to the High Court.  Phipps FM considered applications to other courts which were identified by the appellant.  However, as there was no appeal process on foot against the costs order of Gillard J and no stay of execution in respect of the costs order, Phipps FM held that there was no ground for setting aside the bankruptcy notice based on the possibility of some further proceeding arising out of the judgment itself.

8                     The third ground of the application before Phipps FM was that the appellant had a set-off or counter-claim against the creditor in respect of matters which were the subject matter of the proceeding in the Supreme Court.  The statement of claim in that proceeding was struck out by Nettle J and Phipps FM held that there was no set-off or counter-claim against the judgment debt which could not have been made in the Supreme Court proceeding.

9                     Accordingly, Phipps FM held that none of the grounds of the application had been made out and dismissed the application.  Phipps FM also ordered that the applicant pay the respondent’s costs of the application.

The appeal to this court

10                  On 5 July 2004 the appellant filed a notice of appeal to the Federal Court against the whole of the judgment of Phipps FM.  The grounds of appeal were that:

‘(A)      The Appellant was denied Natural Justice by the order made where there was no evidence before the Court which could lead to such findings against the Appellant under the Rule of Law.

(B)       His Honour Magistrate PHIPPS has failed in his duty to act fairly and in the sense of according procedural fairness in making his order against the Appellant.  The Appellant’s rights were destroyed, defeated and prejudiced by this order.

(C)       How any reasonable Magistrate could come to the conclusion that the Appellant was not entitled for an order to set aside a bankruptcy notice under the evidence before him and the fact that the legal action before the Supreme Court of Victoria (No. 5230 of 2003) has not been concluded and there is also currently an application to the High Court of Australia (No. M97 of 2004).

(D)       How any reasonable Magistrate can impose impermissible disability and discrimination by exercise of the Judicial Act on the Appellant by making his order, when the evidence before him is clear that there is no final order for the costs for the Supreme Court’s proceedings before him.’

11                  The appellant’s notice of appeal was supported by his affidavit sworn on 5 July 2004.  The appellant deposes that the bankruptcy notice did not have attached to it a copy of the costs order made by Gillard J and that he has ‘a bona fide claim exceeding the amount of’ the costs order of Gillard J.  However, he did not particularise this alleged claim. 

12                  In his affidavit the appellant also alleges the involvement of ASIO in his court proceedings.  In particular, he states that he believes that the cases he has brought have been heard and determined according to the rules of ASIO, not the rule of law, and that the order made by Gillard J was obtained by fraud in collusion with ASIO.  No proper particulars or evidence of the alleged fraud were provided.  The appellant repeated these assertions in oral submissions.

13                  The appellant also alleges that he is ‘currently engaged’ in a legal action against the respondent.  He refers to the extant appeals and applications noted in paragraph 4 above. To the extent that he mentioned other possible appeals and applications from the bar table there was no evidence before me of other appeals and applications.  It should, however, be noted that the appellant suggested he will seek to re‑agitate the costs order made by Gillard J if and when a substantive appeal in respect of the litigation is heard by the Court of Appeal.  Pursuant to the orders of Nettle J of 6 November 2003 judgment has in fact been entered for the defendant pursuant to r 24.01 of the Supreme Court (General Civil Procedure) Rules 1996 (Vic) (‘the Supreme Court Rules’).

14                  The appellant appeared on his own behalf before me.  In oral submissions, the appellant indicated that the complaint in ground (A) encompasses a complaint that Phipps FM should not have made the orders he did, bearing in mind a series of complaints which the appellant ventilated before him.  These included complaints about collusion tainting the orders obtained before Gillard J and more generally about ASIO’s involvement in the proceeding before Gillard J.  The appellant stated that ground (B) was advanced because Phipps FM told him that a bankruptcy notice could not be based on a costs order alone.  Ground (C) was based on extant appeals and applications referred to in paragraph 4 above and ground (D) encompassed a claim that no final order, as referred to in ss 40 (1)(g) and (3)(b) of the Bankruptcy Act 1996 (Cth) (‘the Act’), had been made for costs in the proceeding in the Supreme Court.

15                  It was submitted on behalf of the respondent that all of the grounds set out in the notice of appeal were without merit. 

16                  In relation to ground (A), the respondent submitted that the appellant was given ample opportunity during the Federal Magistrates Court hearing to put his case to the Court.  There is nothing in the appellant’s affidavit in support of this appeal which substantiates allegations of denial of natural justice.  I listened carefully to the appellant’s oral submissions and they also did not substantiate this ground.  The transcript revealed that Phipps FM heard evidence from witnesses and in his judgment preferred the evidence led on behalf of the respondent to the appellant’s evidence. This course was open and does not constitute a denial of natural justice.  

17                  In relation to ground (B), the respondent submitted that there is nothing in the transcript of the proceeding before the Federal Magistrates Court or the appellant’s affidavit to support this ground.  The appellant’s oral submissions did not substantiate this ground either.  The transcript reveals Phipps FM gave the appellant every opportunity to put his case, allowing him to make opening submissions, to give evidence on oath, to cross examine the respondent’s witnesses and to make final submissions.  Phipps FM adjourned the matter for some 10 days to allow the appellant to read and digest written material provided to him.  The transcript also shows there is no substance in the appellant’s allegation that Phipps FM informed him that a bankruptcy notice could not be based on a costs order alone. 

18                  Similarly, the respondent argued that there was no substance in ground (C). On the evidence before him, Phipps FM was satisfied that the bankruptcy notice had no defects, that there was no appeal process on foot against the costs order of Gillard J and, importantly, no stay of execution in respect of the costs order.  His Honour was entitled to dismiss the application despite other appeals and applications.  It is well settled that the grounds upon which a bankruptcy notice may be set aside must relate to the form and content of the notice itself, service of the notice, the existence of the debt upon which the judgment and, in turn, the notice is based and any cross demand which the debtor may have against the creditor for a comparable amount: Re Briggs; Ex parte Briggs v Deputy Commissioner of Taxation (WA) (1986) 12 FCR 310 at 311-312 (Toohey J).

19                  As to ground (D), the respondent submitted that the costs order of Gillard J is clearly a final order.  It is also well settled that a costs order can be treated as a final order for the purposes of a bankruptcy notice (see ss 40(1)(g) and (3)(b) and 41(3)(b) of the Act; for a consideration of the relevant history of s 40(1)(g) see Abigroup Ltd v Abignano (1992) 39 FCR 74 at 80-81 (Lockhart, Morling and Gummow JJ).  See also Re Skinner’s and Smith’s Application (1982) 45 ALR 553 at 555 (per Fitzgerald) and Re: Gibbs; Ex parte Triscott (1996) 65 FCR 80 at 92 (Drummond J).  An appeal from this decision was dismissed: Gibbs v Triscott [1996] FCA 895 (Ryan, Whitlam and Kiefel JJ).  The order made by Gillard J finally disposed of the matter with which it dealt, even though it did not dispose of the action or the proceeding in which it was made.  In accordance with the Supreme Court Rules the order is able to be enforced by execution, there being no stay in place (see s 3(5) of the Supreme Court Act 1986 (Vic) and Supreme Court Rules O 66).

20                  I am satisfied there was no denial of natural justice or failure to accord procedural fairness in the hearing before Phipps FM.  On the contrary, his Honour was scrupulous to ensure the appellant had a proper opportunity to lead evidence and address him on any matters relevant to the orders sought.  The orders were made after a proper consideration of evidence, submissions and applicable principles.  Accordingly, grounds (A) and (B) are not made out.

21                  I am also satisfied that the appeals and applications in respect of which the parties are awaiting determinations did not preclude the magistrate from treating the costs order made by Gillard J as a final order for the purposes of the Act.  Accordingly, grounds (C) and (D) are not made out.

Conclusion

22                  The appeal should be dismissed.  The appellant will pay the respondent’s costs.

Associate:

Dated:              28 July 2005