FEDERAL COURT OF AUSTRALIA

Van Gorp v Davy [2016] FCA 1385

ORDERS

THE COURT ORDERS THAT:

1.    Registrar Tesoriero’s orders made on 6 July 2016 are set aside.

2.    Bankruptcy Notice BN 182236 issued on 29 June 2015 is set aside.

3.    The respondent pay the applicant an amount equal to the sum of the filing fees incurred by him in relation to his application to set aside Bankruptcy Notice BN 182236 and in relation to these proceedings.

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

REASONS FOR JUDGMENT

1    The applicant, Mr Van Gorp, and the respondent, Ms Davy, were married on 15 December 2001. There are two children of the marriage. Mr Van Gorp and Ms Davy separated in January 2005. Since then, there have been 10 years of litigation in the Family Court of Australia, there have been proceedings in the Local Court of New South Wales, a number of special leave applications have been made by Mr Van Gorp to the High Court of Australia and there are pending proceedings in the Supreme Court of New South Wales relating to the Local Court proceedings.

2    Mr Van Gorp applied for a review of Registrar Tesoriero’s orders made on 6 July 2016 dismissing his application to set aside Bankruptcy Notice BN 182236 and award costs as agreed or taxed in favour of Ms Davy. The application for review was filed on 26 July 2016.

Bankruptcy Notice

3    The Bankruptcy Notice was issued on 29 June 2015 at the request of Ms Davy. It was served on Mr Van Gorp on 21 October 2015. The amount claimed in the Bankruptcy Notice was $19,670.00, being the amount of a costs assessment order dated 9 October 2014 made against Mr Van Gorp in favour of Ms Davy in proceedings in the Family Court. A copy of the costs assessment order was attached to the Bankruptcy Notice.

Application to set aside Bankruptcy Notice

4    On 6 November 2015, Mr Van Gorp lodged an application to set aside the Bankruptcy Notice. In his supporting affidavit sworn on 6 November 2015, Mr Van Gorp says that he has a counter-claim exceeding the amount claimed in the Bankruptcy Notice.

5    The time for compliance with the Bankruptcy Notice was extended four times by Registrars of this Court; the final extension was until 6 July 2016. The extensions were granted so that Mr Van Gorp could pursue various proceedings.

Application for review of Registrar’s order made on 6 July 2016

6    On 26 July 2016, Mr Van Gorp lodged an “interim application” seeking orders:

    setting aside the Registrar’s decision to dismiss his application to set aside the Bankruptcy Notice and the order that he pay Ms Davy’s costs;

    setting aside the Bankruptcy Notice on the basis that he has a counterclaim against Ms Davy exceeding the amount claimed in the Bankruptcy Notice and he could not have set up that counter-claim in the proceeding in the Family Court in which the costs assessment order was obtained; and

    that Ms Davy pay Mr Van Gorp’s costs, or in the alternative, that each party pay their own costs, or in the alternative, that there be no order as to costs.

7    Although the “interim application” does not make specific reference to s 35A(5) of the Federal Court of Australia Act 1976 (Cth), Mr Van Gorp sought review of the exercise of power delegated to the Registrar under r 2.02(1) and Schedule 1 of the Federal Court (Bankruptcy) Rules 2016 (Cth) (Bankruptcy Rules). The application was made within the 21 days period specified in r 2.02(3). The hearing of the application on 14 October 2016 therefore proceeded on the basis that it was a hearing de novo of Mr Van Gorp’s application to set aside the Bankruptcy Notice and not an appeal from the Registrar’s decision.

Background

8    On 25 March 2014, the Full Court of the Family Court dismissed an appeal by Mr Van Gorp against an interim order made by Faulks DCJ on 4 July 2013 (which temporarily suspended final orders that had enabled him to spend time with the two children) and made an order that “within one (1) month of agreement or assessment as to quantum, the appellant father pay the costs of the respondent mother in relation to this appeal”. The costs assessment order was made as a result. The Full Court comprised Ainslie-Wallace, Ryan and Stevenson JJ. Mr Van Gorp sought special leave to appeal the Full Court’s decision in the High Court but it was refused.

9    It is Mr Van Gorp’s evidence that, although they entered into a Binding Financial Agreement under s 90B of the Family Law Act 1975 (Cth) dated 11 December 2001 “for the substantive purpose of keeping our finances separate”, in June 2003 as trustee of the Van Gorp Family Trust, he distributed income to Ms Davy in the sum of $47,742. Mr Van Gorp claims that this distribution was in effect a loan made at Ms Davy’s request and Ms Davy undertook to repay him. He submitted that, otherwise, the distribution would be inconsistent with the Binding Financial Agreement. Mr Van Gorp also claims to have paid income tax on behalf of Ms Davy totalling $20,668.90. The aggregate of these amounts is approximately $68,411.

10    On 7 June 2014 Mr Van Gorp filed a statement of claim in the Local Court seeking recovery from Ms Davy of $68,410 (first Local Court proceedings). However on 30 March 2015 he filed a notice of discontinuance. Mr Van Gorp says that he did this on the basis that both he and Ms Davy were encouraged by a Judge of the Family Court in February 2015 to “cease all litigation for the sake of the children”.

11    A copy of the transcript of the hearing of the first Local Court proceedings on 31 March 2015 is in evidence. It indicates that Mr Van Gorp appeared in person and Ms Davy was represented by Mr Daniel O’Sullivan of counsel. The transcript is as follows:

PLAINTIFF:    Your Honour, I am the plaintiff in matter number 1. Yesterday I filed a notice of discontinuance and we agreed to an order for costs on a solicitor/client basis yesterday.

O’SULLIVAN:    I need to have a discussion with the plaintiff. We note that r 12.1 requires either consent or with leave of the Court. The concern for the defendant is we were listed to go through to hearing today and if the matter is just simply discontinued then there is a concern that the matter can be reagitated at a later date so I will need to deal with that issue as well as the question of costs. Perhaps if we could stand the matter down. It will be resolved, your Honour.

MATTER STOOD IN LIST

We have some short minutes of order disposing of the matter, by consent. Hopefully my handwriting is legible.

HER HONOUR: You are happy with that, Mr Van Gorp?

PLAINTIFF:    Yes, your Honour.

HER HONOUR: I MAKE ORDERS IN ACCORDANCE WITH THE ORDERS OF THE CONSENT ORDERS, PARAS 1 TO 2, AND THAT IS A VERDICT FOR THE DEFENDANT.

AND PLAINTIFF PAY THE COSTS ON A SOLICITOR/CLIENT BASIS AS AGREED OR ASSESSED.

12    Mr Van Gorp says that while the matter was stood down in the list, Ms Davy’s counsel took him aside and “disingenuously told me, a self-represented litigant, that my filed Notice of Discontinuance and agreement to pay costs could not proceed as a matter of law and that I could only discontinue my claim by consenting to orders he drafted for judgment in favour of his client and a costs order against me”. That account is disputed by both Mr Christopher Macphillamy (Ms Davy’s solicitor) and Mr O’Sullivan whose affidavits, sworn on 14 September 2016 and 7 September 2016 respectively, give evidence to the effect that Mr Van Gorp was shown the consent orders drafted by Mr O’Sullivan and was told that these were the terms on which Ms Davy would agree to the matter being concluded.

13    On 9 October 2015, Mr Van Gorp filed an application in the Family Court for leave to seek a review of the costs assessment order which was the basis of the Bankruptcy Notice and a stay of the order pending that review. On 15 October 2015, he filed a further application seeking an extension of time to file a notice of appeal against orders made by Cronin J on 27 February 2015. Justice Cronin had ordered that the parties’ two children live with Ms Davy and, in relation to contact with Mr Van Gorp, that he be permitted to speak to them on a nominated day each week and to send cards, letters and presents. An order was also made pursuant to s 118 of the Family Law Act which restrained Mr Van Gorp from commencing proceedings in relation to the children without first seeking leave from a judge of the Family Court. These applications were heard by Ainslie-Wallace J on 3 November 2015.

14    On 11 November 2015, Mr Van Gorp filed a statement of claim in the Local Court seeking payment of $68,411 from Ms Davy (second Local Court proceedings). On 25 February 2016, this application was struck out on the basis that the matter had been determined in the first Local Court proceedings and costs were awarded in favour of Ms Davy on an indemnity basis. Mr Van Gorp says that the Magistrate did this despite his assertion that he had been misled as to the law regarding his notice of discontinuance in the first Local Court proceedings.

15    On 24 February 2016, Ainslie-Wallace J dismissed the applications made on 9 and 15 October 2015 (see [13] above). On that day, Ainslie-Wallace J also refused Mr Van Gorp’s application to disqualify herself on the basis of her participation in the Full Court hearing which resulted in the orders made on 25 March 2014; Mr Van Gorp claimed that the conduct of the hearing gave rise to an apprehension of bias.

16    On 15 March 2016, Mr Van Gorp filed a summons in the Supreme Court of New South Wales (NSWSC proceedings) seeking leave to appeal both the consent orders made in the first Local Court proceedings and the strike out order made in the second Local Court proceedings. The strike out of the second Local Court proceedings was impugned on the basis that there was no abuse of process where the cause of action in the first Local Court proceedings had not been determined due to error by the Magistrate. Mr Van Gorp sought to set aside the consent orders in the first Local Court proceedings on the basis that the Magistrate had erred in law in making the consent orders because he failed to establish that as a self-represented plaintiff, Mr Van Gorp understood that his stated purpose of discontinuing the proceedings would be achieved by giving effect to a notice of discontinuance without the need to agree consent orders.

17    On 16 March 2016, Mr Van Gorp filed an application in the High Court for special leave to appeal the decision of Ainslie-Wallace J made on 24 February 2016 to dismiss his application for leave to seek a review of the costs assessment order and for an extension of time to appeal the orders of Cronin J made on 27 February 2015. In the special leave application Mr Van Gorp also alleges that Ainslie-Wallace J erred in law by refusing to recuse herself despite his claim of apprehended bias. Leave was refused in June 2016.

18    In his affidavit filed on 6 July 2016, Mr Van Gorp said:

(1)    On 18 April 2016, he made a complaint to the Attorney-General, Senator Brandis, about the conduct of the Family Court and on 4 May 2016 Senator Brandis’ office referred Mr Van Gorp to the Chief Justice of the Family Court; and

(2)    On 11 May 2016, he made a complaint to Chief Justice Bryant who indicated that she would deal with the matter the subject of Mr Van Gorp’s complaint once his proceedings in the Family Court were concluded. Mr Van Gorp says that the subject matter of those complaints included the proceedings that resulted in the costs assessment order.

19    On 8 September 2016, Mr Van Gorp attempted to file an application for a writ in the original jurisdiction of the High Court claiming damages against two Family Court justices and Ms Davy.

20    On 23 September 2016, Ryan J of the Family Court dismissed an application (filed on 25 August 2016) filed by Mr Van Gorp seeking a stay of the orders made by Ainslie-Wallace J on 24 February 2016 and awarded indemnity costs. As background, I note that Mr Van Gorp had sought the stay pending determination of the special leave application to the High Court in relation to the orders made on 24 February 2016. That special leave application had been dismissed before the hearing of the stay application before Ryan J, yet Mr Van Gorp persisted with it on amended grounds relating to his request to the Chief Justice of the Family Court that she recommend to the Governor General of Australia that two judges of the Family Court be removed. Mr Van Gorp also sought the stay pending finalisation of his action for damages in the High Court against the same judges (which he would soon file) and, on the motion of the One Nation Party, resolution by the Federal Parliament to abolish the Family Court and/or significantly amend the Family Court Act. As the special leave application had been refused (and there being no other right of appeal), Ryan J held that it would be an abuse of the court’s processes to grant a stay on the basis contended for.

Submissions

21    Mr Van Gorp filed written submissions on 4 October 2016. He elaborated on them at the hearing on 14 October 2016. In summary he says:

(1)    He has a valid counterclaim in the NSWSC proceedings which exceeds the amount of the costs assessment order which founded the act of bankruptcy. The NSWSC has allocated a hearing date of 2 February 2017.

(2)    His counterclaim could not have been set up in the Family Court proceedings in which the costs assessment order was obtained. That submission was not controversial.

(3)    He had attempted to file an initiating process in the original jurisdiction of the High Court on 8 September 2016, however the registry did not accept it for filing. When he returned on 4 October 2016 the documents were still in the wrong form but the Registrar told him that he would give the documents to a Justice of the High Court to determine whether they should be accepted for filing. Mr Van Gorp tendered an affidavit sworn by him on 4 October 2016 in support of his show cause application in the High Court. It indicates that the claim to the High Court is “in consequence of bias and actions by the judges outside the performance of their judicial duties, in concert with Kate Louise Davy, to attempt to pervert the course of justice in my parenting proceedings in the Family Court”. The claim is for damages for legal costs incurred and “the pain and suffering caused by being denied a meaningful relationship with my children since 2005, totalling $2.5 million, and such other orders as the Court considers appropriate pursuant to section 32 of the Judiciary Act in particular the setting aside of the Family Court orders that were aided directly or indirectly by the conduct that is the subject of this claim”. Since the hearing Mr Van Gorp has advised that on 14 October 2016, Justice Gageler directed the High Court’s Registrar not to issue the proposed proceedings without leave of a Judge of the High Court. On 31 October 2016, Mr Van Gorp filed an application for leave to issue the proceedings.

(4)    His evidence is sufficient to satisfy the Court that he has a prima facie case for counter-claims and his claims are proper and reasonable to litigate before the relevant Courts and that it is just that his claims should be determined by the relevant courts before the bankruptcy proceedings are allowed to continue.

22    Mr Van Gorp denied that the debt he claimed from Ms Davy in the first and second Local Court proceedings was made outside relevant limitation periods, as claimed by Ms Davy. He says his claim is based on two deeds, the Binding Family Agreement signed in December 2001 and the Van Gorp Family Trust Deed. He also denies that there is a lack of mutuality between the capacities in which he is entitled to that claim and the costs assessment order. He says the distribution to Ms Davy made by him as trustee of the Van Gorp Family Trust was a distribution, but he is owed a debt because he caused the distribution to be made at Ms Davy’s request and she agreed to pay him back: he says the transaction was “legally the same as if I had instructed my bank to pay money to Ms Davy by way of me making a loan to her”.

23    Mr Van Gorp made an oral application for an extension of time for compliance with the Bankruptcy Notice under s 41(6A) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) having regard to the decision of the High Court (Gleeson CJ, Gaudron, McHugh, Kirby and Callinan JJ) in Guss v Johnstone (2000) 171 ALR 598; [2000] HCA 26 at [58] and submitted that the application was not otiose having regard to Guss v Johnstone at [63].

24    Mr Parish, counsel for Ms Davy, filed written submissions on 11 October 2016 which he relied on at the hearing. In summary they are:

(1)    The review application is otiose because Mr Van Gorp committed an act of bankruptcy following the Registrar’s dismissal of his application to set aside the Bankruptcy Notice. This is because the Registrar did not make an order further extending time for compliance with the Bankruptcy Notice nor did he stay his order dismissing the application to set aside the Bankruptcy Notice. The time for compliance expired on 6 July 2016.

(2)    The alleged counterclaim must exist or be effective at the time of the hearing of the application to set aside the Bankruptcy Notice: Guss v Johnstone at [43] and Mr Van Gorp cannot satisfy that requirement. Consent orders made in the first Local Court proceedings finally disposed of the claim and are regarded as a judicial determination of those issues: see Harris v Caladine (1991) 172 CLR 84 at p 101 per Brennan J. The rule of res judicata is that, generally speaking, no proceeding can be maintained on a cause of action upon which judgment has been entered. The cause of action merges in the judgment, in the sense that it no longer has an existence independent of the judgment: Gibbs v Kinna [1999] 2 VR 19; [1998] VSCA 52 at [21] per Kenny JA. Notwithstanding the application for leave to appeal in the NSWSC proceedings, without a stay of the consent orders in the first Local Court proceedings, the alleged counterclaim cannot be effective at the time of the hearing of the review application because it was extinguished in the verdict for Ms Davy.

(3)    In any event, s 63 of the Limitation Act 1969 (NSW) extinguishes any right Mr Van Gorp might have had to claim a debt incurred in June 2003 (which debt is denied) and the alleged counterclaim is not in the same right so there is no mutuality.

(4)    Even if the Court were to find that the alleged counterclaim exists and is effective, it could not be satisfied on the available evidence that Mr Van Gorp has a “prima facie case” with a “fair chance of success” in the NSWSC proceedings or that the claim advanced is “genuine” or “bona fide” by reference to legal and factual merits. That is, the Court could not be satisfied that there is sufficient substance to the counterclaim asserted to make it one which Mr Van Gorp should, in justice, be permitted to have heard and determined rather than be forced to comply with the Bankruptcy Notice or commit an act of bankruptcy: see Re Glew; Glew v Harrowell of Hunt & Hunt Lawyers (2003) 198 ALR 331; [2003] FCA 373 at [9]-[12] per Lindgren J and Dekkan v Evans [2008] FCA 1004 at [52]-[53] per Jacobson J.

(5)    There is no evidence that Mr Van Gorp’s proposed action for damages in the original jurisdiction of the High Court was in fact filed.

25    At the hearing on 14 October 2016, I invited written submissions from the parties on a number of questions. Written submissions were filed by both parties and I will address them in so far as is necessary in the course of my reasons.

Statutory provisions

26    Section 40 of the Bankruptcy Act relevantly provides:

40    Acts of bankruptcy

(1)    A debtor commits an act of bankruptcy in each of the following cases:

…

(g)    if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:

(i)    where the notice was served in Australia — within the time specified in the notice; or

(ii)    where the notice was served elsewhere — within the time fixed for the purpose by the order giving leave to effect the service;

comply with the requirements of the notice or satisfy the Court that he or she 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, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained;

…

(3)    For the purposes of paragraph (1)(g):

…

(b)    a judgment or order that is enforceable as, or in the same manner as, a final judgment obtained in an action shall be deemed to be a final judgment so obtained and the proceedings in which, or in consequence of which, the judgment or order was obtained shall be deemed to be the action in which it was obtained;

(c)    [repealed]

(d)    a person who is for the time being entitled to enforce a final judgment or final order for the payment of money shall be deemed to be a creditor who has obtained a final judgment or final order;

…

(f)    an order made after the commencement of this paragraph under the Family Law Act 1975 for the payment by a person of arrears of maintenance for another person shall be deemed to be a final order against the first-mentioned person obtained by the other person.

…

27    Section 41of the Bankruptcy Act relevantly provides:

41    Bankruptcy notices

(1)    An Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained against a debtor:

(a)    a final judgment or final order that:

(i)    is of the kind described in paragraph 40(1)(g); and

(ii)    is for an amount of at least $5,000; or

…

(2)    The notice must be in accordance with the form prescribed by the regulations.

(3)    A bankruptcy notice shall not be issued in relation to a debtor:

(a)    except on the application of a creditor who has obtained against the debtor a final judgment or final order within the meaning of paragraph 40(1)(g) …;

(b)    if, at the time of the application for the issue of the bankruptcy notice, execution of a judgment or order to which it relates has been stayed; or

…

(6A)    Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice:

(a)    proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or

(b)    an application has been made to the Court to set aside the bankruptcy notice;

the Court may, subject to subsection (6C), extend the time for compliance with the bankruptcy notice.

(6B)    [repealed]

(6C)    Where:

(a)    a debtor applies to the Court for an extension of time for complying with a bankruptcy notice on the ground that proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; and

(b)    the Court is of the opinion that the proceedings to set aside the judgment or order:

(i)    have not been instituted bona fide; or

(ii)    are not being prosecuted with due diligence;

the Court shall not extend the time for compliance with the bankruptcy notice.

(7)    Where, before the expiration of the time fixed for compliance with the requirements of the bankruptcy notice, the debtor has applied to the Court for an order setting aside the bankruptcy notice on the ground that the debtor has such a counter-claim, set-off or cross demand as is referred to in paragraph 40(1)(g) and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter-claim, set-off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied.

28    Section 306 of the Bankruptcy Act relevantly provides:

306    Formal defect not to invalidate proceedings

(1)    Proceedings under this Act are not invalidated by a formal defect or an irregularity, unless the court before which the objection on that ground is made is of the opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court.

…

29    Section 35A of the Federal Court Act provides:

35A    Powers of Registrars

(1)    Subject to subsection (2), the following powers of the Court may, if the Court or a Judge so directs, be exercised by a Registrar:

(a)    the power to dispense with the service of any process of the Court;

(b)    the power to make orders in relation to substituted service;

(c)    the power to make orders in relation to discovery, inspection and production of documents in the possession, power or custody of a party to proceedings in the Court or of any other person;

(d)    the power to make orders in relation to interrogatories;

(e)    the power, in proceedings in the Court, to make an order adjourning the hearing of the proceedings;

(f)    the power to make an order as to costs;

(g)    the power to make an order exempting a party to proceedings in the Court from compliance with a provision of the Rules of Court;

(h)    a power of the Court prescribed by Rules of Court.

(2)    A Registrar shall not exercise the powers referred to in paragraph (1)(f) except in relation to costs of or in connection with an application heard by a Registrar.

(3)    The provisions of this Act and the Rules of Court that relate to the exercise by the Court of a power that is, by virtue of subsection (1), exercisable by a Registrar apply in relation to an exercise of the power by a Registrar under this section as if references in those provisions to the Court were references to the Registrar.

(4)    Notwithstanding any other provision of this Act and any provision of the Public Service Act 1999 or of any other law, a Registrar is not subject to the direction or control of any person or body in relation to the manner in which he or she exercises powers pursuant to subsection (1).

(5)    A party to proceedings in which a Registrar has exercised any of the powers of the Court under subsection (1) may, within the time prescribed by the Rules of Court, or within any further time allowed in accordance with the Rules of Court, apply to the Court to review that exercise of power.

(6)    The Court may, on application under subsection (5) or of its own motion, review an exercise of power by a Registrar pursuant to this section and may make such order or orders as it thinks fit with respect to the matter with respect to which the power was exercised.

(7)    Where an application for the exercise of a power referred to in subsection (1) is being heard by a Registrar and:

(a)    the Registrar considers that it is not appropriate for the application to be determined by a Registrar acting under this section; or

(b)    an application is made to the Registrar to arrange for the first‑mentioned application to be determined by the Court;

he or she shall not hear, or continue to hear, the application and shall make appropriate arrangements for the application to be heard by the Court.

(8)    In this section, Registrar means the Chief Executive Officer, a Registrar, a District Registrar or a Deputy District Registrar of the Court.

30    Rule 2.02 of the Bankruptcy Rules relevantly provides:

2.02    Exercise of powers by Registrars

(1)    For the purposes of paragraph 35A(1)(h) of the Act, a power of the Court under a provision of the Bankruptcy Act referred to in Schedule 1 is prescribed.

(2)    An application under paragraph 35A(7)(b) of the Act may be made orally to a Registrar at the time that that Registrar is hearing the application for the exercise of a power referred to in subsection 35A(1) of the Act.

(3)    Subject to any direction by the Court to the contrary, an application under subsection 35A(5) of the Act for review of the exercise of a power of the Court by a Registrar must be made by filing an interim application in accordance with Form B3 within 21 days after the day on which the power was exercised.

Note:    For additional rules relating to the review of a decision by a Registrar to make a sequestration order, see rule 7.05.

31    Item 1 of Schedule 1 of the Bankruptcy Rules confers power on a Registrar to exercise powers under s 30(1) of the Bankruptcy Act to set aside a bankruptcy notice and item 4 confers power to extend time for compliance with a bankruptcy notice under s 41(6A).

Consideration

32    It is difficult to accept Ms Davy’s submission that there is no utility in the Court considering Mr Van Gorp’s application for review of the Registrar’s decision made on 6 July 2016 because he has already committed an act of bankruptcy having failed to apply for or be granted a stay of the Registrar’s order or an extension of time for compliance with the Bankruptcy Notice.

33    First, in Guss v Johnstone, the High Court found:

(1)    at [58]: what is said to be the ineluctable nature of an act of bankruptcy is qualified by the consideration that time for compliance with a bankruptcy notice may be extended even after the time has expired, provided the conditions of s 41(6A) are otherwise satisfied: see Streimer v Tamas (1981) 37 ALR 211; and

(2)    at [63]: the Court was unable to accept that whenever, in a proceeding under s 40(1)(g) and s 41(7), a judge at first instance has determined that he or she is not satisfied of the matter referred to in s 41(7), and has declined to interfere with the process initiated by a creditor, no appellate reversal of that decision, whether by the Full Court or by the High Court, can alter the consequences of the decision. In a proper case it would be within the power of the Full Court to set aside the declaration made by the primary judge. The consequences for proceedings and events that had occurred in the meantime would vary with the circumstances, but they could include the same consequences as flowed from the order in Streimer v Tamas, where the statutory power to extend time for compliance with a bankruptcy notice, given by s 41(6A), was exercised after an act of bankruptcy had been committed.

34    Second, Ms Davy’s contention calls into question whether the “constitutional imperative” that the exercise of delegated powers by a Registrar be subject to review by a judge of the Court can be satisfied if no review is available because an act of bankruptcy has already occurred. For a delegation of power to a registrar to be valid, the powers and functions of the registrar must be subject to review by a judge on questions of both fact and law. If the review of the exercise of the power by the registrar is by way of hearing de novo, the delegation will be valid (Harris v Caladine at p 95 per Mason CJ and Deane J). Nothing less than a hearing de novo would be sufficient. That is to say, there must be a complete rehearing of the facts and the law as they exist when the judge reviews the order made by the registrar; otherwise, the registrar, and not the judges of the Court, would be exercising the original jurisdiction of the Court: see Totev v Sfar (2008) 167 FCR 193; [2008] FCAFC 35 at [10] per Emmett J and at [91]-[92] per Cowdroy J.

35    These authorities lead me to the view that it is necessary for me to consider de novo Mr Van Gorp’s application to set aside the Bankruptcy Notice. If I were to be satisfied 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 judgment or final order, I would be in a position to extend time for compliance with the Bankruptcy Notice under s 41(6A) and to set aside both the Registrar’s decision made on 6 July 2016 and the Bankruptcy Notice.

36    It is convenient to state at this point that I am not satisfied that at the time of the hearing of his application for review Mr Van Gorp had a counter-claim, set-off or cross demand of the kind required by s 40(1)(g) nor would I consider it appropriate to extend time for compliance with the Bankruptcy Notice under s 41(6A). None of Mr Van Gorp’s proposed claims has sufficient substance to require that, in justice, Mr Van Gorp be permitted to have it heard and determined rather than be forced to comply with the Bankruptcy Notice or commit an act of bankruptcy. I have formed this view because:

(1)    I am not satisfied that Mr Van Gorp’s application in the NSWSC proceedings has a “fair chance of success”. In light of Mr O’Sullivan’s statement to the Magistrate before the brief adjournment in the first Local Court proceedings and the evidence of Messrs Macphillamy and O’Sullivan, it is difficult to see that Mr Van Gorp has any prospect of success in his claim to have been misled by them into agreeing to the consent orders. I am not satisfied that Mr Van Gorp has any basis for his contention regarding what the Magistrate should have advised him in the first Local Court proceedings having regard to the transcript of the proceedings and the fact that his claim to be owed money by Ms Day was statute barred. Section 63 of the Limitation Act extinguishes any right Mr Van Gorp might have had in 2014 to claim a debt incurred in June 2003. In my view, Mr Van Gorp’s claim that the limitation period is extended because of the existence of the Van Gorp Family Trust Deed and the Binding Financial Agreement has no prospect of success. The Binding Financial Agreement is irrelevant since it deals with entitlement to assets if the marriage then contemplated were to fail and would not prevent a distribution from the Van Gorp Family Trust to Ms Davy. The fact that Mr Van Gorp claims that the loan to Ms Davy was made by way of Mr Van Gorp exercising his powers as trustee of the Van Gorp Family Trust to effect a distribution to Ms Davy as a discretionary object of the Trust has no impact on the limitation period in respect of a debt of the kind alleged. Having said that, Ms Davy’s argument that the alleged counterclaim is not in the same right appears untenable since Mr Van Gorp has always claimed that the payment to Ms Davy was a distribution from the Trust, not a loan from the Trust, and the Trust’s accounts reflect that. Mr Van Gorp has never claimed that he was owed money as trustee of the Van Gorp Family Trust.

(2)    Mr Van Gorp requires leave to commence his proposed action in the original jurisdiction of the High Court and at the date of these reasons it does not appear to have been granted. Even if leave were given by the High Court it appears to be a novel claim and insofar as it touches on Ms Davy, it is difficult to see an evidential basis for the damages claim.

37    The third basis for rejecting Ms Davy’s submission that the review application has no utility is that a bankruptcy notice is a nullity if it fails to meet a requirement made essential by the Bankruptcy Act, or if it could reasonably mislead a debtor as to what is necessary to comply with the notice: see Kleinwort Benson Australia Limited v Crowl (1988) 165 CLR 71 at 79-80 per Mason CJ and Wilson, Brennan, Gaudron JJ. That authority was not disturbed by the High Court (differently constituted) in Adams v Lambert (2006) 228 CLR 409; [2006] HCA 10.

38    Section 41(1) requires that a bankruptcy notice be issued on the application of a creditor who has obtained one or more “final judgments” or “final orders” that is or are of a kind described in s 40(1)(g) and they alone or together are for an amount of at least $5,000. On this basis, at the hearing on 14 October 2016, I invited written submissions from the parties on the following questions:

(1)    Is the costs assessment order a “final judgment” or “final order” within the meaning of ss 40(1)(g) and 41(1)(a) of the Bankruptcy Act?

(2)    If not, does the Bankruptcy Notice meet the requirements of s 41(2) of the Bankruptcy Act and reg 4.02 and Form 1 of Schedule 1 to the Bankruptcy Regulations 1996 (Cth)?

39    Order 2 made by the Full Court of the Family Court in the judgment handed down on 25 March 2014 was:

Within one (1) month of agreement or assessment as to quantum, the appellant father shall pay the costs of the respondent mother in relation to this appeal.

40    The costs assessment order, which was signed and dated 9 October 2014 and issued by a costs assessment registrar under the seal of the Family Court, stated:

Pursuant to Rule 19.31 it is ordered that the amount payable by Sean Cornelius VAN GORP Costs Respondent, to Kate Louise DAVY the Costs Applicant is $19,670.00.

41    The Bankruptcy Notice was relevantly completed as follows:

1.    Amount as per the attached final judgment/s or final order/s (note A)    $19,670

2.    Add legal costs (note B)                        $0.00

42    Note A is not relevant for present purposes. Note B provides:

Where legal costs are being claimed (and a specific amount was not included in the judgment/s or order/s), a certificate of taxed or assessed costs in support of the amount claimed is attached.

43    The judgment delivered by the Full Court of the Family Court on 25 March 2014 was not attached to the Bankruptcy Notice but the costs assessment order was.

44    Ms Davy accepted that a valid bankruptcy notice must be founded on a “final order” or “final judgement” the execution of which has not been stayed. She also accepted that Franks v Warringah Council (2003) 131 FCR 287; [2003] FCA 1047 at [24] per Branson J is authority for the proposition that the status of an order or certificate will depend on the statutory instrument governing the order or certificate. She contended that the relevant statutory instrument for the costs assessment order is the Family Law Rules 2004 (Cth) and submitted that the costs assessment order is a final order. She relied on the explanation of the relevant Family Law Rules set out in the judgment of Ainslie-Wallace J delivered on 24 February 2016 at [24]-[32]:

[24]    On 25 March 2014 the father’s appeal against orders of Faulks DCJ was dismissed and he was ordered to pay the mother’s costs of and incidental to the appeal. Those costs were ordered to be agreed or, failing agreement, to be assessed.

[25]    On 9 October 2014 pursuant to Rule 19.31 of the Rules the costs were assessed by a Registrar to be $19,670.00.

[26]    The father neither sought to review the Registrar’s order nor sought a stay of the operation of her order prior to filing the instant application on 9 October 2015 in which he seeks:

1.    That the Applicant is granted leave to apply to review the Registrar’s order dated 9/10/14

2.    That the Registrar’s order be stayed pending the outcome of the review.

[27]    Part 19.6 of the Rules and following provide for the process of assessing costs. The Rules require that the party seeking the costs is to provide an itemised assessment of the costs sought on the other party. Where a party disputes the claimed costs it is necessary to file a notice disputing the costs which is to be served on the party claiming the costs (Rule 19.23).

[28]    The process of assessment of the claimed costs lies in Rule 19.26 which provides that on receipt of an itemised costs account and a notice disputing the account, the Registrar must, inter alia, fix a date for a preliminary assessment. At the preliminary assessment the Registrar must, in the absence of the parties, make a calculation of the amount of the costs which, if the costs were to be assessed, would likely be the cost order made (Rule 19.29).

[29]    Rule 19.30 provides:

Objection to preliminary assessment amount

(1)    A party may object to the preliminary assessment amount by:

(a)    giving written notice of the objection to the Registrar and the other party; and

(b)    paying into court a sum equal to 5% of the total amount claimed in the itemised costs account as security for the cost of any assessment of the account;

within 21 days after receiving written notice of the preliminary assessment amount.

…

[30]    Rule 19.31 provides:

If no objection to preliminary assessment

If:

(a)    a Registrar does not receive a notice of objection under paragraph 19.30(1)(a); and

(b)    an amount as security for costs is not paid under paragraph 19.30(1)(b);

the Registrar may make a costs assessment order for the amount of the preliminary assessment amount.

[31]    Clearly then, the Registrar’s preliminary assessment was not subject to a notice of objection pursuant to the Rules and thus the order was made pursuant to Rule 19.31.

[32]    A costs assessment order may be set aside following an application made by the person who is liable to pay within 14 days after receiving the costs assessment order (Rule 19.38(2)). The order may be set aside in accordance with the provisions of Part 19.8, which provides for the process of review of such an order. A party may apply for a review of the Registrar’s decision, which must be heard by a judge (Rule 19.56). It seems that no application was made to a judge for a review of the Registrar’s decision.

45    Ms Davy submitted that it is clear that the Family Law Rules contain no requirement for perfection of a costs assessment order by filing or registration. She submitted that the Family Law Rules closely resemble the costs order considered in Stec v Orfanos [1999] FCA 457.

46    While it is true that there is no requirement in the Family Law Rules for a costs assessment order to be registered or filed, I do not accept the submission that the Family Law Rules have the same effect as the relevant South Australian provisions considered in Stec v Orfanos. The Court (Beaumont, Branson and Sundberg JJ) in that case said at [18]:

[18]    The next claim is that the Notice was invalid because the allocatur was not a final order. An allocatur ("it is allowed") is the certificate of taxation of the allowance of costs by the taxing officer. Mr Stec's submissions do not disclose why he says that the allocatur is not a final judgment or final order. R101.18(1) of the Rules of the Supreme Court of South Australia provides that upon the completion of a taxation of costs a taxing officer or the Registrar may sign an allocatur. Subr(2) provides that when duly signed in accordance with subr(1) and sealed by the Court, an allocatur has the effect of, and is enforceable in the same manner as, a judgment of the Court for the amount of the allocatur. The allocatur determined in a final manner Mr Stec's liability for costs. It is thus a final judgment or final order for the purposes of s 41(3) of the Act.

47    Ms Davy relied on s 40(3)(b) of the Bankruptcy Act. She submitted that s 40(3)(b) has the effect that the costs assessment order should be deemed a “final judgment” or “final order” because the sealed and signed order for the payment of money by the Registrar is enforceable in the same manner as if it were a final money judgment. Ms Davy did not explain the basis for that contention under the Family Law Act or the Family Law Rules. Although it is true that the costs assessment order is signed and issued under the seal of the Family Court, Ms Davy has not drawn my attention to any provision of the Family Law Rules, or the Family Law Act, which provides that the costs assessment order has the effect of, and is enforceable in the same manner as, a judgment of the Family Court. Indeed, no submissions were made as to how a costs assessment order of the Family Court might be enforced. In McMillan v McMillan [2016] FamCA 387, Tree J explained the enforcement regime under Chapter 20 of the Family Law Rules in relation to enforcement of costs orders at [34]-[35]:

[34]    Chapter 20 of the Family Law Rules deals with the enforcement of financial orders and obligations. By Rule 20.01(2)(f) an obligation to pay money includes an order for costs. Rule 20.05 provides that an obligation to pay money may be enforced by, amongst other things, an order for seizure and sale or real property under an Enforcement Warrant. Rule 20.07 provides that “the court may make an order … (c) for enforcement (see Rule 20.05)” which might suggest that an Enforcement Warrant would only issue after an application for an enforcement order has been made and granted. However, somewhat curiously, Part 20.3 of the Rules, which deals with Enforcement Warrants, provides by Rule 20.16(1):

A payee may, without notice to the payer, ask a Family Court to issue an Enforcement Warrant by filing:

(a)     An affidavit; and

(b)    The Enforcement Warrant sought and a copy of it for service.

[35]    That, at least to my mind, makes it plain that an Enforcement Warrant may issue without a formal application for enforcement needing to be filed, and an order for the issue of an Enforcement Warrant made. I am fortified in that construction by a comparison of, on the one hand, rule 20.32(1), which deals with third party debt notices in a similar manner to rule 20.16 with, on the other hand, rule 20.42(1) which in the context of sequestration order, specifically provides that “a payee may apply to the court for an Enforcement Order appointing a sequestrator of the property of a payer by filing an Application in a Case … ” together with rule 20.46(1), which employs like language in relation to the appointment of a receiver, and rule 20.53 which provides similarly in the context of other enforcement mechanisms.

48    All but one of the orders under consideration in that case were made by judges. One order was made by a Registrar but there is no indication that it was a costs assessment order. For the reasons that follow, in my view, the costs order which could be enforced in the manner described by Tree J is order 2 made by the Full Court of the Family Court on 25 March 2014, not the costs assessment order. I have not been taken to anything which demonstrates that the costs assessment order is enforceable in the same way as a “final judgment” or “final order” as would be required to satisfy s 40(3)(b).

49    Rule 19.31 to which Ms Davy referred simply authorises the Registrar to make the costs assessment order. The Dictionary to the Family Law Rules defines a “final order” to mean “the order of the court that finally decides a case commenced on an Initiating Application (Family Law)” and a “costs assessment order” to mean “an order made by a Registrar fixing the total amount payable for costs (see rules 19.31 and 19.32)”. Section 37A(1)(j) of the Family Law Act empowers the Judges of the Family Court to make Rules of Court which delegate to Registrars the power to make costs orders under s 117 of that Act. However, pursuant to s 37A(6), “a Registrar shall not exercise the power except in relation to costs of or in connection with an application heard by a Registrar”. This scheme leads me to the view that the costs assessment order on which Ms Davy relies is in nature of a taxation certificate, not a final order.

50    Further, the language used in the costs assessment order is language of certification as to the amount payable by Mr Van Gorp to Ms Davy, in conformity with r 19.31. It does not say when the amount is payable. Order 2 made by the Full Court of the Family Court on 25 March 2014 imposes the obligation to pay the amount in the costs assessment order one month after it is made. The making of a cost assessment order was a ministerial function which quantified the Full Court’s order as to costs but does not have the necessary character of a final order.

51    This view of the costs assessment order is consistent with the reasoning of Finkelstein J in Scott v Charitopoulos (2008) 174 FCR 9; [2008] FCA 1914 at [6]-[7] and Commonwealth Bank of Australia v Horvath (Junior) (1999) 161 ALR 441; [1999] FCA 143 at [7]. It must be so, having regard to s 37A(6) of the Family Law Act. I note that, despite his reasoning in Scott v Charitopoulos at [6]-[7], Finkelstein J considered himself bound by a decision of a judge of the Supreme Court of Victoria who had found that an order of a taxing master in the Supreme Court of Victoria is a final order. See also Winn v Blueprint Instant Printing Pty Ltd (2011) 193 FCR 41; [2011] FCA 293 at [13]-[21] per Ryan J. No similar decision has been brought to my attention in relation to costs assessment orders.

52    I must therefore conclude that the Bankruptcy Notice was defective because the orders made by the Full Court of the Family Court on 25 March 2014 were not attached to it.

53    It does not necessarily follow that that such a deficiency in the Bankruptcy Notice is capable of being cured by the application of s 306(1) of the Bankruptcy Act as a “formal defect or irregularity”.

54    I have no doubt that Mr Van Gorp was not misled as to what he had to do to comply with the Bankruptcy Notice by reason of the fact that only the costs assessment order was attached to the Bankruptcy Notice. He made no submission that he was misled and he took steps to have the costs assessment order reviewed. I am satisfied that no injustice would flow from the application of s 306(1).

55    Following the approach taken by the High Court in Adams v Lambert, it might be thought that s 306(1) could be relied on to cure a defect in the Bankruptcy Notice arising from the failure to attach the “final judgment” or “final order”, where (as here) there is in fact (1) a final judgment which has not been stayed establishing the liability for costs; (2) the debt is owed to a “creditor” within the meaning of s 40(3)(d); and (3) enforcement of the “final judgment” or “final order” has not been stayed. On any view, these are all “requirements” of s 40(1)(g). Further, the costs assessment order was accurate as to the amount payable and the debtor does not claim to be misled as to what he had to do to comply with the Bankruptcy Notice; it is difficult to see how anyone would have been misled since more than one month had passed since the date of the costs assessment order. It is difficult to see that Mr Van Gorp would be better informed if the Family Court Rules expressly provided that a costs assessment order “has the effect of, and is enforceable in the same manner as, a judgment of the Court”; the only difference would be that on the authority of Stec v Orfanos the costs assessment order would be a final order. However I am not at liberty to take that approach.

56    In Curtis v Singtel Optus Pty Ltd (2014) 225 FCR 458; [2014] FCAFC 144 (Curtis) the Full Court (Mansfield, Gleeson and Beach JJ) observed at [35] and [40] that:

[35]    There are many authorities that refer to the importance of attaching a copy of the final judgment or order at the time of service (see for example Thompson v Metham [1999] FCA 935 at [26] per Katz J; Commonwealth Bank of Australia v Horvath (1999) 161 ALR 441 at [12]–[14] per Finkelstein J; Re Scerri (1998) 82 FCR 146 at 149 per Beaumont J and American Express International Inc v Held (1999) 87 FCR 583 at [14] per Kenny J). …

    …

[40]    Third, the earlier form of notice under the previous regulations originally required details of the judgment to be stipulated on the face of the notice. This was altered to the present requirement to deal with the identification by way of attachment. Now there is little doubt that the previous stipulation was mandatory. We do not glean any legislative intention at the time of the change in form to diminish the significance of the identification of the final judgment or order at the time of the issue of the bankruptcy notice. Lee J in Australian Steel Co (Operations) Pty Ltd v Lewis (2000) 109 FCR 33 (Australian Steel Company) at [51]–[69] discussed such changes and queried whether the copy judgment needed to be attached at the time of issue, but he left the matter open (see at [72]–[75]). Lee and Gyles JJ were in dissent, although the High Court in Adams v Lambert ultimately preferred their approach, but on other aspects not relevant to this precise question.

57    Although it was not strictly necessary to express a view on the application of s 306(1) in Curtis, the Court went on to say at [59]-[67]:

[59]    In our view, and contrary to the respondents’ submissions and the view of the primary judge, if the copy judgment was not attached to the bankruptcy notice at the time of issue and there had not been substantial compliance, then the bankruptcy notice would be a nullity. The defect or irregularity would not be cured by s 306(1).

[60]    What is a “formal defect or irregularity“ in a bankruptcy notice for the purpose of s 306(1)?

[61]    A defect is substantive and not formal if the defect is such that the bankruptcy notice fails to meet a requirement made essential by the Act (Kleinwort at 79 per Mason CJ and Wilson, Brennan and Gaudron JJ). In such a case, the notice is a nullity.

[62]    What is a requirement made essential by the Act? In order to determine that question, one needs to consider the legislative purpose of the Act generally, the purpose of the provisions relating to bankruptcy notices, the purpose of the particular requirement and whether it was the legislative purpose that failure to comply with such a requirement should necessarily invalidate the bankruptcy notice. Further, one needs to evaluate the significance or importance of the defect in the circumstances of the case (Adams v Lambert at [26]–[29]).

[63]    Generally, it seems to us that the attaching of a copy of the judgment or order to the bankruptcy notice at the time of issue is essential. We have set out the significance of the judgment as a foundation for the issue of the notice and the significance of the judgment debt being properly identified (see [31]–[34]). Further, the authorities referred to at [35] demonstrate such a requirement to be essential at the time of service. Equally, we would consider that the requirement is essential at the time of issue, for that is when validity needs to be assessed. Not to have the copy judgment so attached at the time of issue entails that the foundation for the notice and the basis for the administrative act of issue has not been properly identified. Moreover, the notice on its face would be incomplete and uncertain in an essential respect.

[64]    There is another reason why s 306(1) does not apply.

[65]    A defect is substantive and not formal if the defect is reasonably capable of misleading the debtor (Kleinwort at 79 per Mason CJ and Wilson, Brennan and Gaudron JJ). In our view, not to attach a copy of the final judgment or order at the time of issue is reasonably capable of misleading the debtor. Validity in this respect is to be determined at the time of issue, not just at the time of service. The fact that the debtor may not have been actually misled, because it was in fact attached at the time of service, but not at the time of issue, is not to the point.

[66]    At the time of issue, without the attachment, a reader, let alone the debtor, could not know from the face of the notice what the basis of the debt was, the basis of the administrative act of issue by the Official Receiver or the steps that the debtor could take as identified in paras 4 and 5 on the second page of the notice. By having the identity of the debt and, as a consequence, the subject matter of the notice open, uncertainty is created about the basis of the notice and the steps that might be taken in terms of necessary steps to set aside the judgment or to set up a counterclaim that could not have been set up in the action leading to the judgment; something which is uncertain is capable of misleading (cf Kleinwort at 80).

[67]    For the above reasons, if there was a defect in not attaching a copy of the judgment to the bankruptcy notice and there was not substantial compliance as envisaged by reg 4.02(3), then such a defect would not be cured by s 306(1).

58    I must therefore act on the basis that the Bankruptcy Notice is a nullity.

Disposition

59    I will set aside the orders made on 6 July 2016 dismissing Mr Van Gorp’s application to set aside the Bankruptcy Notice and the order that he pay Ms Davy’s costs of that application. I will also set aside the Bankruptcy Notice.

Costs

60    Mr Van Gorp claimed costs. He was an unrepresented litigant in the review proceedings and in the proceedings before the Registrar. He is not a legal practitioner. No order for costs for his time may be made notwithstanding that he has been successful in this review. In Australian Super Pty Ltd v Woodward (2009) 262 ALR 402; [2009] FCAFC 168 the Full Court observed at [60]–[61]:

[60]    A court has no power to award costs in favour of an unrepresented litigant. In Cachia v Hanes (1994) 179 CLR 403; 120 ALR 385 per Mason CJ, Brennan, Deane, Dawson and McHugh JJ held (at CLR 409; ALR 387) that the costs provided for in the New South Wales Supreme Court Rules:

… do not include time spent by a litigant who is not a lawyer in preparing and conducting his case. They are confined to money paid or liabilities incurred for professional legal services. It is only in that sense that the Rules speak of “costs”.

[61]    The same rationale can be applied to the award of costs in the Federal Court of Australia.

61    However, as the Full Court observed in George v Fletcher (Trustee) (No 2) [2010] FCAFC 71 at [17], there is nothing in Cachia v Hanes (1994) 179 CLR 403; [1994] HCA 14 that would preclude a claim for filing fees. I consider it appropriate that Mr Van Gorp be entitled to recover his filing fees in relation to his application to set aside the Bankruptcy Notice and in relation to this review and will make an order accordingly. In light of the fact that Mr Van Gorp was wholly unsuccessful in relation to his claim to have a counter-claim, set-off or cross demand of a kind which would justify setting aside the Bankruptcy Notice, and it was to that issue that his submissions were addressed, I do not think it appropriate that he be awarded any other out of pocket expenses.

Associate:

Dated:    22 November 2016