FEDERAL COURT OF AUSTRALIA

Croker v Commonwealth of Australia; In the Matter of Croker [2010] FCA 1031

IN THE MATTER OF CLAYTON ROBERT CROKER

REASONS FOR JUDGMENT

1                                             The applicant has applied to the Court to set aside Bankruptcy Notice No NN2706 of 2010 (the Bankruptcy Notice) which was issued by the Official Receiver on 28 June 2010 and served upon the applicant on 2 July 2010.  In the Bankruptcy Notice, the total amount alleged to be owing by the applicant to the respondent was $51,705.61.  That amount is the total amount due under six separate costs orders relating to various proceedings in this Court, in the Federal Magistrates Court, in the Supreme Court of New South Wales and in the District Court of New South Wales.  The amount of each individual order for costs exceeds $2,000.00 in every case.  Section 41(1)(b) of the Bankruptcy Act 1966 (Cth) (the Act) authorises the issue of a bankruptcy notice if the applicant for the issue of such a notice is the beneficiary of two or more final judgments or orders that are of the kind discussed in s 40(1)(g) of the Act and, when taken together, are for an amount of at least $2,000.00.  In the present case, the costs orders are final orders that individually and in the aggregate exceed $2,000.00.  

2                                             After two directions hearings (one before a Registrar and one before me), the proceeding has been dealt with on the papers. 

3                                             All of the costs orders which have been aggregated in the Bankruptcy Notice were made in proceedings connected with a transaction entered into between the applicant and the respondent in 2003.  On 12 November 2003, the applicant purchased a set of cuff links from the High Court of Australia for the amount of $50.00.  Subsequent to this purchase, the applicant alleged that the cuff links became tarnished.  They were replaced.  The applicant was dissatisfied with the replacement cuff links because, in his view, they exhibited the same defects as had been found to exist in the original set of cuff links purchased by him.  These transactions between the applicant and the High Court spawned a plethora of litigation between the applicant and the respondent.  A summary of that litigation up to late 2007 is found in the judgment of Cowdroy J in Croker v Commonwealth of Australia [2008] FCA 452 at [2]–[35].  That summary is amplified in [2] of the Written Submissions filed on behalf of the respondent in this proceeding on 10 August 2010.  It is not necessary for present purposes to traverse in detail the prior litigation between the applicant and the respondent concerning the cuff links.  Nor is it necessary or appropriate to look behind the costs orders which constitute the debt said to be due by the applicant to the respondent. 

The Applicant’s Contentions

4                                             In support of his Application, the applicant advanced four broad contentions.  They were:

(a)                He has a counter-claim, set-off or cross demand equal to or exceeding the total amount claimed in the Bankruptcy Notice:

… being a counter-claim, set-off or cross demand that he could not have set up in the action or proceeding in which the judgment or order was obtained.

This contention relies upon ss 40(1)(g),  41(3)(a) and 41(7) of the Act;

(b)               The Bankruptcy Notice is defective because the respondent has not claimed interest on the debt claimed in the Bankruptcy Notice;

(c)                The Bankruptcy Notice is defective because the address shown for the creditor in the Notice is a post office box; and

(d)               The Bankruptcy Notice is defective because the respondent has failed to act as a Model Litigant in accordance with its own Model Litigant protocol.

The Evidence Before Me

5                                             The applicant filed and served two affidavits in support of his Application.  The first of these affidavits was sworn on 23 July 2010.  Paragraphs 7–13 of that affidavit are in the following terms:

7.         The issuing of the notice by the Respondent was preceded by a history of litigation between me and Respondent in regards to my claim for damages and costs for alleged contravention of the Trade Practises Act 1974 (Cth) sec 52 and 53. The litigation was instigated by me for the Respondent’s falsely representation that their goods were of a particular standard, quality, value, grade and composition, The Respondent in Croker v Commonwealth of Australia & Anor [2005] NSWSC 994 conceded that their goods were not of a merchantable quality.

8.         The application of Croker v Commonwealth of Australia for damages and costs against the Respondent to date has not been heard contra to the doctrine of due process, the right to be heard, in the administration of justice and public interest.

9.         A counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debts or sum payable under the final order is or should be still available to a aggrieved applicant.

10.       That I have set aside three (3) bankruptcy notice’s as defective issued by a Commonwealth agency in past litigation, the cases being;

i.)         Croker v Federal Commissioner of Taxation [2002] FMCA SZ0168;

ii.)        Croker v Federal Commissioner of Taxation [2002] 50 ATR 617;

iii.)        Croker v Federal Commissioner of Taxation [2003] 52 ATR 226; and

(iv.)      Croker v Federal Commissioner of Taxation [2005] 58 ATR 327.

11.       The application to the Commonwealth of Australia agency is still on foot with agency and should be seen as 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.

12.       The application to the Commonwealth of Australia agency of Croker v State of New South Wales and Commonwealth of Australia in which damages are sought is still pending in the Supreme Court of New South Wales and should be seen as 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.

13.       The application to the Commonwealth of Australia agency of Croker v Secretary, Department of Education, Employment and Workplace Relations and Croker v Secretary, Department of Education, Employment and Workplace Relations and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs is pending and should be seen as 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.

I have reproduced these paragraphs exactly as they appear in the applicant’s affidavit without noting or correcting spelling and typographical errors.

6                                             By letter dated 29 July 2010, the solicitor for the respondent wrote to the applicant requesting that he provide particulars of the proceedings to which he made reference in paragraphs 12 and 13 of his affidavit sworn on 23 July 2010.  The terms of that letter were as follows:

Clayton Robert Croker v Commonwealth of Australia – Federal Court Proceeding No NSD 911 of 2010

1          We refer to your application of 23 July 2010 to have the bankruptcy notice served on you on 2 July 2010 set aside.

2          We appear for the respondent and enclose, by way of service, a notice of appearance which was filed today.

3          Paragraphs 12 and 13 of your affidavit of 23 July 2010 in support of your application refer to the following proceedings:

a)         Croker v State of New South Wales and Commonwealth of Australia

b)         Croker v Secretary, Department of Education, Employment and Workplace Relations

c)         Croker v Secretary, Department of Education, Employment and Workplace Relations and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

4          We would be grateful if you could advise, prior to the directions on 4 August 2010, in which court or tribunal each of these matters has been lodged and the relevant proceeding number for each. Could you please email your response to me at sonja.marsic@ags.gov.au and copy it to lici.inge@ags.gov.au.

7                                             The applicant has never responded to that letter.

8                                             In his second affidavit (which was sworn on 23 August 2010), the applicant made reference to and annexed a copy of a Statement of Claim and Application which he asserted were filed in this Court on 20 May 2008 and on 16 December 2008 respectively.  The documents to which he referred in his second affidavit do not bear any stamp indicating that they were, in fact, filed in this Court and the applicant did not connect the copy pleadings annexed to his affidavit to any of the Federal Court proceedings which he has instituted from time to time. 

9                                             The respondent filed two affidavits sworn by Silvana Rokov which proved the following facts:

(a)                As at 30 July 2010, no New South Wales Court of Appeal or Supreme Court civil cases involving the applicant were on foot;

(b)               On 22 July 2010, Fullerton J, a Judge of the Supreme Court of New South Wales, made the following orders in relation to the applicant:

1.         Order that, pursuant to section 8(7)(b) of the Vexatious Proceedings Act 2008 (NSW), Clayton Robert Croker is prohibited from instituting proceedings in New South Wales other than with leave of an appropriate court under that Act.

2.         Order that any legal proceedings instituted by Clayton Robert Croker in any court or tribunal in New South Wales before the date of this order are hereby stayed.

3.         Order that leave be granted to the plaintiff to enter the above orders forthwith.

(c)                As at 3 August 2010, the applicant was a party to two proceedings currently on foot in this Court.  One of those proceedings is the present Application.  The other is proceeding NSD 954 of 2010 in which the applicant is the applicant and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs is the respondent.  There were no other extant proceedings involving the applicant in this Court as at 3 August 2010;

(d)               As at 3 August 2010, there were no undetermined proceedings involving the applicant in the Federal Magistrates Court; and

(e)                At all times after the applicant first raised his complaints in respect of the cuff links purchased from the High Court, the respondent has endeavoured in a bona fide, reasonable and appropriate fashion to settle the applicant’s claim in respect of those cuff links.  The conduct of the respondent and its legal representatives in respect of the applicant’s claims has been entirely appropriate and in conformity with the respondent’s protocols concerning its obligation to behave as a Model Litigant.

10                                          Proceeding NSD 954 of 2010 is an appeal lodged by the applicant in respect of a decision of the Administrative Appeals Tribunal (the Tribunal) in which the Tribunal affirmed a decision of the Secretary, Department of Families, Housing, Community Services and Indigenous Affairs to disallow the applicant’s application for a pensioner education supplement.  The amount involved in that application is less than $2,000.00 in total.

11                                          The respondent’s evidence also demonstrated to my satisfaction that, even if the pleadings referred to in the applicant’s second affidavit had been filed in this Court at some stage, they related to proceedings which have now been concluded.

Consideration

12                                          In respect of his contention that he had a counter-claim, set-off or cross demand equal to or exceeding the amount claimed in the Bankruptcy Notice, the applicant referred to the claims which he made over the years concerning the cuff links which he had purchased from the High Court.  He also suggested that he had a claim in tort against the Commissioner of Taxation for “malicious prosecution” and “false swearing” and that he had a claim arising out of administrative decisions made by Centrelink in respect of claims made by him for a disability support pension.  These latter claims had been the subject of previous litigation in this Court.  These potential claims were not articulated or explained nor were they supported by any evidence or argument.  They do not satisfy the statutory criteria specified in s 40(1)(g) of the Act.  I shall not consider them further.  The applicant did not develop to any meaningful degree the remaining contentions which I have summarised at [4(b)]–[4(d)] above. 

Ground 1 – Counter-claim, Set-off or Cross Demand

13                                          In Glew v Harrowell (2003) 198 ALR 331 at [8]–[12] (pp 333–334), Lindgren J said:

8          In order to avoid committing the act of bankruptcy identified in para (g) of s 40(1) of the Act, Glew and Tresidder must satisfy the court that they have a counter-claim, set-off or cross-demand against Hunts of the kind described in that paragraph. What they must do in order to “satisfy the Court” for the purposes of s 40(1)(g) of the Act that they have the asserted counter-claim, set-off or cross-demand has been variously described. The descriptions do not necessarily purport to be comprehensive definitions. To state that a debtor in receipt of a bankruptcy notice must show X does not necessarily imply that he or she need not also show Y, or that he or she will not be defeated if the creditor shows Z.

9          There are authorities suggesting that Glew and Tresidder must satisfy me of the following interrelated and sometimes overlapping matters:

•           that they have a “prima facie case”, even if they do not adduce evidence which would be admissible on a final hearing making out that case: Ebert v Union Trustee Co of Australia Ltd (1960) 104 CLR 346 (Ebert) at 350; Re Brink; Ex parte Commercial Banking Co of Sydney Ltd (1980) 30 ALR 433 at 438–9; 44 FLR 135 at 141 (Brink); Gomez v State Bank of New South Wales Ltd [2002] FCAFC 101; BC200201643 at [17], [18];

•           that they have “a fair chance of success” or are “fairly entitled to litigate” the claim: Brink at ALR 438–9; FLR 141; Gould v Day [1999] FCA 1650; BC9907767 at [27], [28]; Re Capsanis; Capsanis v Owners — Strata Plan 11727 [2000] FCA 1262; BC200005275 at [11]; and

•           that they are advancing a “genuine” or “bona fide” claim: Re Capsanis; Capsanis v Owners — Strata Plan 11727 [2000] FCA 1262; BC200005275 at [11].

It may be that the first and second formulations are intended to cover the same ground. In Brink Lockhart J treated (at ALR 438–9; FLR 141) the reference to a “prima facie case” in Ebert as a reference to “a fair chance of success”.

10        In Brink Lockhart J said (at ALR 438–9; FLR 141) that the court is not required to “undertake a preliminary trial of the counter-claim, set-off or cross demand”. But, clearly, the application of the criteria above requires the court to make some kind of preliminary assessment, though obviously not to determine the counter-claim, set-off or cross-demand finally. And in Guss v Johnstone (2000) 171 ALR 598, Gleeson CJ, Gaudron, McHugh, Kirby and Callinan JJ stated (at 606):

[40]      The state of satisfaction referred to in s 40(1)(g), and s 41(7), involves weighing up considerations as to the legal and factual merit of the claim relied upon by the debtor, and the justice of allowing the bankruptcy proceedings to go ahead or requiring them to await the determination of the claim.

11        Plainly, in order to “satisfy” the court for the purposes of s 40(1)(g), the debtor is not required to prove, as on a final hearing, the asserted entitlement to recover from the creditor. Accordingly, evidence tendered on an application to set aside is to be tested for admissibility, not as if the proceeding were one in which the debtor's claim was being finally determined, but by reference to the question whether the court should be satisfied that the debtor has a claim deserving to be finally determined.

12        Perhaps little more can usefully be said than that a debtor must satisfy the court that there is sufficient substance to the counter-claim, set-off or cross-demand asserted to make it one which the debtor should, in justice, be permitted to have heard and determined in the usual way, rather than be forced to comply with the bankruptcy notice by payment or to commit an act of bankruptcy.

14                                          His Honour’s exposition of the relevant principles has been subsequently applied in many cases in this Court.  I propose to apply his Honour’s observations in determining the present application.  

15                                          Rule 3.02 of the Federal Court (Bankruptcy) Rules 2005 (the Bankruptcy Rules) sets out the requirements for an application to set aside a bankruptcy notice.  That rule provides:

3.02     Setting aside bankruptcy notice (Bankruptcy Act s 41 (6A), (6C) and (7))

(1)        An application to set aside a bankruptcy notice must be accompanied by:

(a)        a copy of the bankruptcy notice; and

(b)        an affidavit stating:

(i)         the grounds in support of the application; and

(ii)        the date when the bankruptcy notice was served on the applicant; and

(c)        a copy of any application to set aside the judgment or order in relation to which the bankruptcy notice was issued and any material in support of that application.

(2)        If the application is based on the ground that the debtor has a counter-claim, set-off or cross demand mentioned in paragraph 40 (1) (g) of the Bankruptcy Act, the affidavit must also state:

(a)        the full details of the counter-claim, set-off or cross demand; and

(b)        the amount of the counter-claim, set-off or cross demand and the amount by which it exceeds the amount claimed in the bankruptcy notice; and

(c)        why the counter-claim, set-off or cross demand was not raised in the proceeding that resulted in the judgment or order in relation to which the bankruptcy notice was issued.

(3)        The application and supporting documents must be served on the respondent creditor within 3 days after the application is filed.

16                                          The evidence required of an applicant who seeks to set aside a bankruptcy notice must do more than merely assert the existence of a counter-claim, set-off or cross demand.  That evidence must demonstrate that:

(a)                The relevant counter-claim, set-off or cross demand is for a sum equal to or exceeding the amount of the claimed judgment debt (Capsanis v Owners—Strata Plan 11727 [2000] FCA 1262 at [11] per Hely J); and

(b)               There is sufficient substance in the counter-claim, set-off or cross demand to make it one which the debtor should, in justice, be permitted to have heard and determined.

17                                          The applicant has declined to identify the proceedings to which he referred in pars 8, 9, 11, 12 and 13 of his first affidavit.  His failure to identify the proceedings relied upon is made all the more serious in light of the letter from the lawyers for the respondent to the applicant dated 29 July 2010 to which I have referred at [6] above.  The applicant has also failed to comply with Rule 3.02.

18                                          The respondent has demonstrated that, as at the present time, the only two proceedings involving the applicant and the respondent or one of its agencies which are extant in any of the courts covered by its searches are the present proceeding and proceeding NSD 954 of 2010.  In proceeding NSD 954 of 2010, the only respondent is the Secretary, Department of Families, Housing, Community Services and Indigenous Affairs.  In that matter, the applicant does not claim money from the Secretary:  He seeks judicial review of an administrative decision.  Strictly speaking, the Secretary is not the same entity as the respondent in the present Application.  However, even if I were to regard the Secretary as sufficiently related to the respondent in the present proceeding for the purposes of s 40(1)(g) of the Act and if I were also to ignore the fact that the applicant does not claim a sum of money in proceeding NSD 954 of 2010, the amount at stake in proceeding NSD 954 of 2010 is less than $2,000.00.  That amount does not qualify as a counter-claim, set-off or cross demand in an amount equal to or exceeding the amount of the debt upon which the Bankruptcy Notice is founded (as to which see ss 40(1)(g), 41(3) and 41(7) of the Act). 

19                                          Although not raised before me, the applicant indicated to the Registrar on the return of the present Application that he had in mind making a claim against the Commissioner of Taxation for a discretionary compensation payment.  The evidence before me did not establish that such a claim has, in fact, been made.  Such a claim was not advanced before me in support of Ground 1.  No details of the claim have been provided.  Such a claim is probably not within the kind of counter-claim, set-off or cross demand contemplated by s 40(1)(g) of the Act, in any event.  It must be ignored for present purposes.

20                                          In my view, the applicant has failed to make out Ground 1.  He has not satisfied me that he has a counter-claim, set-off or cross demand equal to or exceeding the amount claimed in the Bankruptcy Notice, being a counter-claim, set-off or cross demand that he could not have set up in the action or proceeding in which the costs orders upon which the Bankruptcy Notice is founded were made.

Ground 2 – Failure to Claim Interest

21                                          It is true that the respondent has not claimed interest in the Bankruptcy Notice.  There is no obligation on the respondent to do so.  A judgment creditor is free to refrain from making any reference to interest in a bankruptcy notice (Re Mullavey; Ex parte Australia and New Zealand Banking Group Limited (1977) 32 FLR 1 at 9–10; Re Wong; Ex parte Kitson (1979) 38 FLR 207 at 216).  

22                                          Ground 2 fails.

Ground 3 – The Post Office Box Issue

23                                          The address for service shown in the Bankruptcy Notice is that of the respondent’s lawyers.  The address of the creditor is shown as a post office box.

24                                          Insofar as payment of the judgment debt is concerned, the Bankruptcy Notice required the applicant to pay to the respondent the amount of the debt referred to in the Bankruptcy Notice within 21 days after service of that Notice upon him.  The Bankruptcy Notice stipulated that payment of the debt could be made to the respondent at the offices of its lawyers in Sydney.  It did not require that the judgment debt be paid by using the mechanism for payment which was stipulated in par 4 of the Bankruptcy Notice.  That method of payment was a permitted (but not mandatory) method.  Payment may have been made otherwise than by the method described in par 4 of the Bankruptcy Notice.  The Bankruptcy Notice was in accordance with Form 1 prescribed by the Regulations and thus complied with s 41(2) of the Act. 

25                                          The issue of substance raised by Ground 3 is whether the Bankruptcy Notice was apt to mislead the applicant in relation to what was required by the Bankruptcy Notice should he wish to pay the debt relied upon in the Notice.  In my view, the Bankruptcy Notice was not apt to mislead and did not, in fact, mislead the applicant as far as the method and place of payment was concerned.  The applicant never intended to pay the amount claimed in the Bankruptcy Notice, in any event. 

26                                          Ground 3 also fails.

Ground 4 – The Model Litigant Issue

27                                          It is not clear to me how the applicant puts this contention nor whether it was intended to be separate from the assertion that the Bankruptcy Notice was defective because the respondent had declined to claim interest on the judgment debts.  The Model Litigant protocols are found in the Legal Services Directions 2005 issued by the Attorney-General under s 55ZF(1) of the Judiciary Act 1903 (Cth) (the Judiciary Act).  Those Directions are not enforceable by the applicant (s 55ZG(2) of the Judiciary Act) and the issue of non-compliance with those Directions may not be raised in any proceeding except by, or on behalf of, the Commonwealth (s 55ZG(3)).  Par 4.3 of the relevant Directions provides that, in the ordinary case, enforcing costs orders in favour of the Commonwealth is acting in accordance with legal principle and practice.  However, even if non-compliance with the Model Litigant protocols were theoretically available to the applicant as a ground to support a counter-claim by him against the respondent, the applicant has fallen well short of establishing such a ground on the facts of the present case.  The respondent has acted entirely appropriately at all relevant times.  It has not failed to act as a Model Litigant.

28                                          I reject this ground.

Conclusions

29                                          The applicant has failed to make out any case that the Bankruptcy Notice should be set aside.  His Application must be dismissed with costs.  There will be orders accordingly.

Associate:

Dated:         22 September 2010