FEDERAL COURT OF AUSTRALIA

Young v Cooke [2016] FCA 1215

ORDERS

THE COURT ORDERS THAT:

1.    The order made by the Registrar on 27 April 2016 be amended by adding order 8 as follows:

8.    Pursuant to s 41(6A) of the Bankruptcy Act 1966 (Cth) and r 3.03 of the Federal Court (Bankruptcy) Rules 2005, the time for compliance by the applicant, with the requirements of the Bankruptcy Notice No. 189043, is extended up to and including the hearing of the application by a judge.

2.    The application be dismissed.

3.    The time for compliance with Bankruptcy Notice No. 189043 be extended, up to and including, 6 October 2016.

4.    The applicant pay the respondent’s costs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT)

RARES J:

1    Gary Young has applied to set aside a bankruptcy notice issued by the official receiver in bankruptcy on the application of Bill and Helena Cooke on 15 March 2016 (the bankruptcy proceedings). The parties live in Gundary, a rural part of New South Wales outside Goulburn. Mr Young said he was served with the bankruptcy notice on 30 March 2016 and has applied for it to be set aside on the basis that he has 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 of the subject of 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 within the meaning of s 40(1)(g) of the Bankruptcy Act 1966 (Cth).

2    The amount sought in the notice was comprised of, first, $8,198.22, being principally the costs as assessed pursuant to an order of the Court of Appeal of the Supreme Court of New South Wales made on 28 March 2013: Young v Cooke [2013] NSWCA 79 that was given effect by a judgment of the Local Court of New South Wales given on 8 July 2015, and, secondly, interest of $448.85, being a total of $8647.07.

Background

3    The proceedings in the Court of Appeal involved an unsuccessful application by Mr Young for an extension of time in which to seek leave to appeal against the striking out of portions of a statement of claim that he had filed in the District Court of New South Wales against a number of defendants, including Mr and Mrs Cooke.

4    Subsequently, in 2013, Mr Young took proceedings in the Local Court against Mr and Mrs Cooke, claiming damages for conversion or detinue in respect of a dog called Apache Jack. On 18 June 2015, Local Court Magistrate Bradd (Bradd LCM) found, first, that he was not satisfied, on the balance of probabilities, that the dog which Mr Young called, by among other names, Apache Jack, was the same dog, based on its appearance, as the dog which Mr and Mrs Cooke had in their possession the subject of Mr Young’s claim. Secondly, his Honour found that, in any event, because Mr and Mrs Cooke had purchased the dog, in respect of which Mr Young claimed, from the local council, pursuant to the provisions of the Companion Animals Act 1998 (NSW), s 69(2) and (3) of that Act provided that Mr Young had no cause of action against the purchaser (i.e. Mr and Mrs Cooke) but he retained a right of action to recover damages from the council in respect of the sale of that dog if he were able to establish that the council or person who effected the sale did not act in good faith or acted without reasonable care. Accordingly, his Honour found in favour of Mr and Mrs Cooke but allowed the parties to be heard as to costs.

5    On 8 July 2015, Mr and Mrs Cooke filed the certificate of assessment of costs in the Local Court that they had been awarded two years beforehand by the Court of Appeal and, upon that filing, the costs certificate operated as a judgment or order of the Local Court.

6    On 16 July 2015, Mr Young commenced proceedings by summons in the Supreme Court of New South Wales challenging the magistrate’s decision as raising a question of law under s 39 of the Local Court Act 2007 (NSW).

7    On 18 December 2015, Bradd LCM heard argument and evidence concerning the award of costs and reserved his decision.

8    On 15 March 2016, the official receiver issued the bankruptcy notice and, as I have said, it was served on 30 March 2016, the same day as Mr Young’s summons challenging the liability decision in the Local Court was heard by Garling J in the Supreme Court. His Honour reserved judgment.

9    On 6 April 2016, Mr Young commenced these proceedings, seeking to set aside the bankruptcy notice. On that day, a registrar ordered that that application be stood over to 27 April 2016 and granted an extension of time within which Mr Young could comply with the terms of the bankruptcy notice, under s 41(6A) of the Bankruptcy Act, until the adjourned date.

10    On 13 April 2016, Garling J published his reserved decision and made a number of orders. In giving his reasons, Garling J said that (Young v Cooke [2016] NSWSC 408 at [59]):

… at least on the material referred to in the judgment of the Local Court [of 18 June 2015] and in the exhibits provided to this Court, that the plaintiff has a very difficult argument confronting him.

11    As appears from his Honour’s judgment, it seems clear there was at least some evidence on which Bradd LCM had based his findings as to the identity of the dog. Garling J noted that Mr Young wished to assert that the evidence before Bradd LCM was, obviously, unreliable. Garling J pointed out that he did not have a transcript of the proceedings before the magistrate, the pleadings or all of the exhibits, and that Mr Young “faces a very difficult argument”. However, his Honour was not persuaded that, at that stage of the proceedings, it was appropriate summarily to dismiss them.

12    His Honour struck out Mr Young’s summons and refused Mr Young’s application to amend that summons in the form of the document he had placed before his Honour. His Honour also dismissed Mr and Mrs Cooke’s application for summary judgment. He ordered that Mr Young could seek leave to file an amended summons by way of a notice of motion that he had to file on or before 23 May 2016 together with such affidavits in support as he wished to rely on, and that these be served by 30 May 2016. Garling J made any such motion returnable before the common law registrar on 6 June 2016.

13    On 27 April 2016, another registrar stood the bankruptcy proceedings over for three months to 24 August 2016. She made orders for the filing of evidence by Mr Young by 25 May 2016, by Mr and Mrs Cooke by 22 June 2016 and by Mr Young in reply on 13 July 2016. The registrar ordered that a short outline of submissions be filed by each of the parties, Mr Young by 27 July 2016 and Mr and Mrs Cooke by 19 August 2016. However, the registrar on 27 April 2016 overlooked the necessity for making a further order under s 41(6A) to extend the time for compliance with the bankruptcy notice.

14    On 2 May 2016, Bradd LCM published his reasons in respect of the application for costs. He made an order that there be no order for costs in the proceedings, notwithstanding the success of Mr and Mrs Cooke in defending them. His Honour noted in those reasons that, during his closing address at the trial, Mr Young had sought damages of $78,750. His Honour said that, in the statement of claim in the District Court, that, ultimately, came in some form before the Court of Appeal, Mr Young had claimed that the dog had a value between $400 and $500 and he also claimed general, aggravated and exemplary damages. In his Local Court statement of claim, Mr Young alleged a value for the dog at between $3,000 and $5,000 and sought an unspecified sum for general and aggravated damages. His Honour noted that, in his affidavit of 12 May 2013, Mr Young had stated that the dog was valued at between $3,000 and $5,000 and eventually would have been valued at $15,000. His Honour made a number of findings about the evidence given by Mr and Mrs Cooke, including finding that they were unreliable witnesses. He found that Mr and Mrs Cooke had seen Mr Young’s dog in May 2008 and that when they had found a dog in September 2008, being the dog the subject of the proceedings, they would have known at that time that Mr Young owned a similar dog. His Honour found that Mr and Mrs Cooke:

… acted in bad faith when they seized the dog, by not telling Mr Young that they had seized a dog that was similar to the dog they had seen with Mr Young. Mr and Mrs Cooke have encouraged litigation by their words and actions and they have prolonged litigation by giving evidence that is probably false and caused Mr Young to extensively cross-examine both Mr and Mrs Cooke and call additional witnesses to give evidence. (emphasis added)

15    In the event, on 6 June 2016, Mr Young obtained leave from the common law registrar to file an amended summons pursuant to the orders made by Garling J. That summons raised two questions of law in appeal as of right under s 39(1) of the Local Court Act 2007 (NSW). That section provided that a party to proceedings before the Local Court who was dissatisfied with a judgment or order could appeal to the Supreme Court but only on a question of law. The amended summons set out two questions of law, namely, whether Bradd LCM had, first, made an error of law “when he used tainted evidence amounting to no evidence at all to decide the identity of the dog the subject of this action” and, secondly, by failing to consider and fully particularise and declare Mr Young’s rights with respect to the Civil Liability Act 2002 (NSW) in his findings of both 18 June 2015 and those of 2 May 2016.

16    On 20 July 2016, the Supreme Court proceedings came before Harrison J. On that occasion, a pro bono barrister, who had accepted instructions the night before, appeared on behalf of Mr Young. However, at that point, the pro bono counsel was in a position to, and had been briefed to, only apply for an adjournment before his Honour. The proceedings were before his Honour on Mr and Mrs Cooke’s application for an order for security for costs. Harrison J said, and I agree, that the proceedings had “a long and somewhat unfortunate history”. In the end, his Honour determined that Mr Young would be granted his adjournment so that he could obtain appropriate legal assistance, but that he should be ordered to pay the costs occasioned by the adjournment, which his Honour assessed as $3,500 and ordered that that sum be payable forthwith. His Honour ordered that the proceedings be stayed pending payment by Mr Young of the $3,500 to Mr and Mrs Cooke.

17    On 18 August 2016, Mr Young filed a notice of intention to appeal to the Court of Appeal from Harrison J’s order.

18    On 24 August 2016, a registrar allocated the bankruptcy proceedings to a judge for hearing. The register ordered that the parties could not rely on any further evidence without leave of the Court. The registrar, no doubt, did so conscious that the only evidence that had been filed, pursuant to the orders of 27 April 2016, was an affidavit of the solicitor for Mr and Mrs Cooke on 29 June 2016, a week later than the time limited by the registrar’s order of 27 April 2016 and that they had also filed their submissions on 18 August 2016. Mr Young had filed nothing until he filed a lengthy affidavit sworn on 19 August 2016, together with detailed submissions.

19    The last part of the forensic saga that I have recited, apart from the hearing today, was a summons that Mr Young filed in the Supreme Court on 8 September 2016, in which he sought orders that, in effect, would confirm, that the order made by Bradd LCM on 2 May 2016, that there be no order as to costs, included, in some way, the Local Court’s order of 8 July 2015 giving effect to the cost certificate of the assessment of Mr and Mrs Cooke’s costs in the Court of Appeal. That summons is returnable before the Supreme Court on 19 September 2016.

Mr Young’s submissions

20    Mr Young argued that he had a good claim in the Supreme Court for seeking to have the Local Court’s decision that there be no order as to costs on liability set aside and, as a consequence, of obtaining, at a further hearing, a significant award of damages in the order of $78,000 for the loss of his dog. During the course of argument, when I raised with Mr Young the fact that there was no evidence before me demonstrating that the dog had any value, he sought to tender an affidavit of 2 April 2014 by his partner, Sonia Camilleri, that he said was in evidence before Bradd LCM. I rejected that tender on the basis that, first, Ms Camilleri had said that the most she could value the dog at was $4,000, secondly, she did not appear to be a person who had qualified herself as an expert capable of giving opinions of the value of dogs and, thirdly, the evidence was late and outside the orders made by the registrar on 24 August 2016.

21    Mr Young argued that the dog was a working dog and that the magistrate’s decision, that it was similar but not the same dog, as that of Mr and Mrs Cooke, was based on his Honour’s mistaken appreciation of photographs of the dog tendered by him and Mr and Mrs Cooke, on which his Honour made findings.

22    Mr Young also argued that Mr and Mrs Cooke must have appreciated that, at the time at which they caused the council to attend at their property and collect the dog that they ultimately purchased, that dog was at least similar in appearance to the dog that they had seen some months earlier with Mr Young when he came to collect some horses that had roamed onto their property. Mr Young contended that Mr and Mrs Cooke should have told the council officer of that fact. Mr Young argued that their failure to do so amounted to negligence within the meaning of the Civil Liability Act and that it also amounted to a lack of good faith so that Mr and Mrs Cooke could not escape liability on the basis found by the magistrate.

23    He also argued, as his most recent summons in the Supreme Court contends, that because Bradd LCM had before him evidence of the 8 July 2015 order, giving effect to the costs certificate made in the Local Court, his Honour’s order that there be no order for costs somehow comprehended the 8 July 2015 order and had rendered it unable to be relied on in the bankruptcy notice or otherwise. He argued that he should be allowed to litigate his bona fide claims in the Supreme Court before being required to comply with the bankruptcy notice.

Extension of time for compliance with the bankruptcy notice

24    When the hearing began today, I was satisfied that on 27 April 2016 the registrar clearly overlooked the need to make an order under s 41(6A) of the Bankruptcy Act extending the time for Mr Young to comply with it by reason of an accidental slip or omission either on her part or on that of Mr Young, who throughout the litany of proceedings has, with one exception, appeared for himself. Had the registrar’s attention been drawn to the necessity under s 41(6A) to make a further order for an extension of time, I am satisfied that she would have ordered an extension of time up to and including the time of the hearing of the application.

25    In those circumstances, the Court had power to correct the record of the registrar’s order of 27 April 2016, which I did today, under the slip rule in the inherent jurisdiction, as well as pursuant to r 39.05(h) of the Federal Court Rules 2011: Ramsay Healthcare Australia Pty Limited v Compton [2016] FCAFC 125 per Rares, Gleeson and Markovic JJ.

Consideration

26    In a proceeding to set aside a bankruptcy notice under s 41(7) of the Bankruptcy Act, the Court does not determine the rights of the parties in relation to any supposed counter-claim, set-off or cross demand that a person in Mr Young’s position might seek to raise. Those rights have to be determined in separate proceedings. Rather, as Gleeson CJ, Gaudron, McHugh, Kirby and Callinan JJ said in Guss v Johnstone (2000) 171 ALR 598 at 606 [39]-[40] the correct approach is as follows:

[39]    In Vogwell v Vogwell [(1939) 11 ABC 83 at 85] Latham CJ said, in relation to a corresponding provision:

[T]he authorities show that the matter to which the court looks is this, – whether it is just that the claim should be determined before the bankruptcy proceedings are allowed to continue; in other words, whether it is a claim which it is proper and reasonable to litigate.

[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. (emphasis added)

27    Their Honours approved (171 ALR at 602 [14]) what Dixon CJ, McTiernan and Windeyer JJ had said earlier in Ebert v The Union Trustee Company of Australia Limited (1960) 104 CLR 346 at 350, concerning the standard of proof of the debtor’s claim, namely:

Perhaps the standard may be expressed by saying that the debtor must show that he has a prima facie case, even if then and there he does not adduce the admissible evidence which would make out a prima facie case before a court trying the issues that are involved in his counter-claim, set-off or cross demand.

28    The position in the Supreme Court at the present time is this. First, the proceedings on Mr Young’s amended summons that challenges the correctness of the 18 December 2015 decision has been stayed by force of the order of Harrison J that is the subject of Mr Young’s unparticularised notice of intention to appeal, and, secondly, the summons filed on 8 September 2016 seeks to raise a question about the status of the judgment debt the subject of the bankruptcy notice.

29    Dealing with the second matter first, there is no sufficient legal or factual merit in that claim to warrant me being satisfied that it provides any basis on which to set aside, or extend the operation of, the bankruptcy notice. In my opinion, Bradd LCM did not seek to, and plainly had no jurisdiction to, alter the effect of the Local Court’s order of 8 July 2015 giving effect to the costs assessment of the order for costs made by the Court of Appeal on 28 March 2013. Rather, in my opinion, it is unarguable that the magistrate, in making his order of 2 May 2016 that there be no order as to costs, was exercising his jurisdiction to do so in, and only in, the proceedings that were before him, namely, the proceedings that Mr Young had brought against Mr and Mrs Cooke claiming damages for conversion or detinue of a dog. The magistrate had no jurisdiction to interfere with the operation of the Court of Appeal’s order, far less to, in effect, set it aside. Nor did he have before him any application to vary or stay the costs certificate which operated, upon its filing, as a judgment of the Local Court without any further judicial intervention.

30    Next, I am not satisfied that there is sufficient legal or factual merit in Mr Young’s unadjudicated, but currently stayed, application before the Supreme Court to appeal on questions of law that make it proper and reasonable to allow that to be litigated before the bankruptcy notice is required to be answered.

31    As Mr Young pointed out, Bradd LCM’s reasons of 2 May 2016 involved some unfavourable factual findings against Mr and Mrs Cooke and about their behaviour in the course of their conduct of the litigation. However, it is important to appreciate that his Honour did not in any way seek to qualify his earlier decision of 18 December 2015 that, although the dogs were similar, they were not the same dog.

32    I note that in his decision of 18 December 2015, in addition to making comparisons about the appearance of the dog in the photographs, Bradd LCM supplemented his findings by holding that Mr Young had not produced any documents relating to his purchase of the dog, despite the fact that he said he had obtained the dog from breeders in Goulburn. His Honour found that breeders had an obligation, under regulations made pursuant to s 8 of the Companion Animals Act, to microchip animals within 12 weeks of birth. His Honour found that, since the legislation required breeders to insert microchips into dogs, it was likely that Apache Jack would have had a microchip and the evidence before him was that the dog, owned by Mr and Mrs Cooke, did not have a microchip at the time they found him.

33    There has been delay by Mr Young in pursuing both his rights in this application, by his late filing of evidence, and in the Supreme Court proceedings. He has not put any evidence before me of an inability to pay the $3,500 ordered by Harrison J or of any application to his Honour to vary his order on the basis of his circumstances. Mr Young did inform me that he was a pensioner, but that does not mean that he is without any resources to meet the costs order.

34    I think a fair reading of Bradd LCM’s reasons of 2 May 2016 was that his Honour considered that this fight about the ownership and conduct of the parties with respect to the dog or dogs was a very unfortunate one and that both parties had engaged in conduct that one would have hoped neighbours would not display. That is neither here nor there for the purposes of my decision, but it is clear that these parties are fighting over an issue when it would be better if they sat back and thought about whether they should continue this war of litigation on many fronts.

35    Be that as it may, I agree with what Garling J said, that Mr Young’s application in the Supreme Court to challenge the magistrate’s order of 18 December 2015 has very difficult hurdles to meet. It is not apparent that there is any jurisdictional error or error on the face of the record of the Local Court, at least so far as that record is before me in the shape of Bradd LCM’s reasons for judgment, assuming those reasons are part of the Local Court’s record.

36    While I have no doubt that Mr Young feels a sense of grievance with the decision of 18 December 2015, I am not satisfied that his claim for review of that decision has sufficient legal or factual merit: Guss 171 ALR at 606 [39]-[40]. Were Mr Young to be successful in the Supreme Court application, the consequence would be that the matter would be remitted to the Local Court, quite probably to be heard by a different magistrate, having regard to Bradd LCM’s findings about credibility of both parties. In my opinion the likelihood of such a result is not sufficiently supported by legal and factual material before me in support of Mr Young’s claim. I am mindful that Bradd LCM subsequently made significant factual and critical findings against Mr and Mrs Cooke in his costs judgment of 2 May 2016.

37    However, ultimately, his Honour did not rely on questions of Mr and Mrs Cooke’s credit in coming to his decision about the lack of identity between Mr Young’s dog and that owned by Mr and Mrs Cooke. Rather, his Honour appears to have decided the matter on the basis of what he regarded as objective material, namely, first, the lack of a microchip in the dog which Mr and Mrs Cooke had found on their property that they then gave to the council and later purchased from it (as indicating that it was not the dog that Mr Young claimed to have purchased form a breeder), and, secondly, the similarity of, but lack of precise identity between, the two dogs together with his Honour’s finding that Mr and Mrs Cooke could not be held liable under the Companion Animals Act.

38    Although Mr Young argued that the magistrate’s findings about Mr and Mrs Cooke’s credit and conduct in the costs judgment could support his claim that they lacked good faith and were in breach of their duty of care in negligence under the Civil Liability Act, in my opinion, his Honour was entitled to conclude that in respect of their purchase of the dog that they now own they were protected under s 69(3) of the Companion Animals Act.

Conclusion

39    For these reasons, I am of opinion that the application to set the bankruptcy notice aside should be dismissed with costs.

Associate:

Dated:    12 October 2016