AWU v Bowen

rteen day notice and recited: " WHEREAS THE LAW INSTITUTE OF VICTORIA of 470 Bourke Street, Melbourne, Victoria ("Judgment Creditor") has claimed that the sum of $14,571.88 and no more (which amount includes $3,688.08 interest calculated on the sum of $10,883.80 at the rate applicable pursuant to the Penalty Interest Rates Act 1983 (Vic) from 13 November 1992 to 17 August 1995) is the amount due by you under a final order for costs obtained by it against you in the Supreme Court of Victoria at Melbourne in proceeding no. 7865 of 1991 on 24 September 1991, which order was taxed by Master Bruce of the Supreme Court of Victoria by order dated 13 November 1992, being an order the execution of which have not been stayed: ..." In proceedings V7865 of 1991 in the Supreme Court of Victoria between the appellant and the Law Institute of Victoria as respondent, Brooking J made an order on 24 September 1991 that: " The appeal is dismissed with costs including reserved costs." Mr Komesaroff sought to appeal to the Full Court of the Supreme Court from that decision but his appeal was found to be incompetent and was struck out with costs. On 13 November 1992, Master Bruce in an order headed: " B E T W E E N: MORRIS KOMESAROFF Appellant

• and - LAW INSTITUTE OF VICTORIA and ROBERT JOHN CORNALL Respondents" said in the body of the order: " Taxation pursuant to the order of the Honourable Mr. Justice Brooking made 24 September 1991 and of the order of the Full Court made 10 March 1992. ... THE COURT ORDERS THAT: 1. The costs of the Respondent pursuant to the order of the Honourable Mr. Justice Brooking are taxed and allowed at $10,883.80. 2. The costs of the Respondent pursuant to the order of the Full Court are taxed and allowed at $3693.70." These matters are set out in some detail because Mr Komesaroff sought in his submissions to rely on an alleged disconformity between the judgment founding the bankruptcy notice and the bankruptcy notice itself. The Bankruptcy Notice 1986 of 1995 was served on 16 October 1995. On 26 October 1995 (within the time for compliance with the bankruptcy notice) the appellant filed an affidavit pursuant to s 41(7) of the Bankruptcy Act 1966, ('the Act'), to the effect that he had a cross demand which he could not set up in the proceeding in which the costs order was obtained, which exceeded the judgment debt. Mr Komesaroff in that affidavit claims that as the result of the refusal to issue him with a practising certificate: " ...I suffered loss and damage by reason of being unable to carry on practice as a solicitor. I claim that my loss of earnings in respect of the years 1991, 1992, 1993, 1994 and 1995 amounted to at least $200,000, which loss and damage I am seeking to recover from the Institute and Robert Cornall." In addition to the claim of a cross demand of the kind referred to in s 40(1)(g) of the Act, Mr Komesaroff in that affidavit swore: " ...I say that the present Bankruptcy Notice is invalid, and I set out and rely on the following matters:- (1)Tress, Cocks and Maddocks purporting to give and sign the Bankruptcy notice was not authorised or entitled to act for and on behalf of the Law Institute having regard to the provisions of the Legal Profession Practice Act and the rules and by-laws of the Institute. (2)That the notice is irregular, giving rise to substantial injustice. (3)The provisions of Rule 7 of the Bankruptcy Rules in relation to the application for issue of Bankruptcy Notice have not been complied with. (4)The first Bankruptcy Notice having been set aside by the Court finally determines the claim to apply for and have issued a notice in respect of the debt claimed in the first notice." The matter referred to in the fourth category relates to an earlier bankruptcy notice. No reliance was placed on this aspect by Mr Komesaroff on the appeal. It is not relevant for present purposes. In the proceedings before Olney J on 30 April 1996, it was not suggested on behalf of the Law Institute of Victoria ('the Institute') that the affidavit of Mr Komesaroff was not an affidavit of the kind required by s 41(7) of the Act: cf Re Brink; Ex parte The Commercial Banking Company of Sydney Ltd (1980) 30 ALR 433. One basis on which his Honour expressed his lack of satisfaction was his finding that: " The judgment debtor has not in this proceeding or in the proceedings heard and determined by Ashley J attempted to establish that he has even a prima facie case against the Institute. The mere assertion of the existence of a cross demand is not sufficient (re Brink; Ex parte Commercial Banking Company of Sydney Ltd (1980) 30 ALR 433 at 439; Eastick v ANZ Banking Group Ltd (1981) 53 FLR 91; re Racheha, Ex parte Altonious (1980) 40 FLR 423)." A further basis concerned the absence of evidence to support the quantum of the appellant's claim. His Honour referred to Mr Komesaroff's invitation to take judicial knowledge of the fact that a solicitor would earn more than the amount owing to the Institute if he practised for the periods indicated. Against this, His Honour noted that in 1991, Mr Komesaroff was unable to obtain a practising certificate. He withdrew his application for a practising certificate in 1992 and he did not apply for a certificate in either 1993, 1994 or 1995. In the light of this material, his Honour concluded: " Given these facts the mere assertion contained in the judgment debtor's affidavit does not provide even a prima facie basis for his alleged cross demand." In the reasons for judgment given on 8 May 1996, Olney J said: " In the affidavit filed pursuant to s 41(7) of the Bankruptcy Act the judgment debtor sought to raise a number of other issues said to affect the validity to the bankruptcy notice but these matters were either not pressed or were abandoned in the course of argument. In the circumstances, no reference has been made to them in these reasons." The appellant disputes the accuracy of this statement, contending that while there was no express argument concerning the validity of the bankruptcy notice, they were not abandoned. The appellant sought to rely on these matters on the appeal. The proceedings and orders on 23 May 1996 concerned an application by the Institute filed on 20 May 1996: " That the time for compliance by the Judgment Debtor with the Bankruptcy Notice No VN001986 of 1995 dated 24 August, 1995 be extended." On 23 May 1996, having recited the history of the matter, his Honour said: " The debtor did not file a formal application pursuant to Rule 10 of the Bankruptcy Rules but, nevertheless, the filing of the affidavit was treated as an application for the purposes of that rule, and for the purpose of the debtor's application to set aside the bankruptcy notice on the grounds of invalidity. No application was made prior to the current application for an extension of time for compliance with the bankruptcy notice." In the reasons for judgment of 23 May 1996, his Honour said: " On 30 April 1996 the question in relation to the debtor's claimed cross demand was argued in full. The other issues raised in the original affidavit relating to invalidity were either not pressed or were abandoned in the course of the hearing. Judgment was reserved and on 8 May 1996 I gave judgment and published reasons for my conclusion that I was not satisfied that the debtor had such a set-off, counter-claim or cross demand as is referred to in s 40(1)(g) of the Bankruptcy Act." His Honour continued: " The effect of my decision was that the deemed extension of time pursuant to s 41(7) did not apply, and accordingly the debtor committed an act of bankruptcy upon the expiration of 14 days from the service of the bankruptcy notice namely 30 October 1995." Because in his Honour's view an act of bankruptcy had been committed on 30 October 1995 and that act had ceased by effluxion of time to be an available act of bankruptcy for the purpose of presenting a bankruptcy petition, his Honour invited counsel for the creditor and Mr Komesaroff (who appeared both at first instance and on this appeal for himself) to make further submissions in writing. The creditor's written submissions asserted a power in the court, pursuant to s 41(6A) of the Act, to order the time for compliance with the bankruptcy notice to be extended, and an order to that effect was sought. A subsequent application to that effect was filed. Mr Komesaroff opposed the extension of time on the ground that the court at this stage of the proceeding had no jurisdiction to make such an order. On 23 May 1996, his Honour concluded that one of the preconditions of the court's power to extend time under s 41(6)A of the Act existed, that being the application by Mr Komesaroff to set aside the bankruptcy notice. His Honour concluded that: " ...the justice of the case demands that the time for compliance be extended, first, to give the debtor an opportunity to comply and, second, to ensure that if an act of bankruptcy is committed it will be an available act should the creditor elect to proceed with a petition. Accordingly, I propose to order that the time for complying with the bankruptcy notice be extended until 24 May 1996." The notice of appeal dated 29 May 1996 indicated that Mr Komesaroff appealed: " ...from the whole of the decisions of Mr Justice Olney given on 8 May, 1996 and 23 May, 1996." The grounds of the appeal are: " (1)That the learned judge wrongly held on the 8th May, 1996 that the Court was not satisfied that the judgment debtor (the appellant) had a set-off counter claim or cross demand as is referred to in Section 40 (1) (g) of the Bankruptcy Act, 1966 for or in respect of the bankruptcy notice given by the respondent. (2)That the learned judge wrongly held on the 8th May, 1996 that the appellant had not complied with the requirements of the bankruptcy notice. (3)That the learned judge's consequential orders given on the 8th May, 1996 were wrong in Law and should be set aside. (4)That the learned judge on the 23rd May, 1996 wrongly purported to extend the date for compliance with the bankruptcy notice to the 24th May, 1996 which order is null and of no effect." The Act then relevantly provided: " 40(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 fixed by the Registrar by whom the notice was issued; 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 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 could not have set up in the action or proceeding in which the judgment or order was obtained; ..." Section 41(6A) of the Act provided: " Where, before the expiration of the time fixed by the Court or the Registrar for compliance with the requirements of a bankruptcy notice: (a)proceedings to set aside the judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or (b)an application to set aside the bankruptcy notice has been filed with the Registrar; the Court may, subject to subsection (6C), extend the time for compliance with the bankruptcy notice." Section 41(7) of the Act then provided: " Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has filed with the Registrar an affidavit to the effect that he 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." The bankruptcy notice No 1986 of 1995 contained the following: " NOTE: If you have a counterclaim, set-off or cross demand equal to or exceeding the sum specified in paragraph (a) of this notice, being a counterclaim, set-off or cross demand that you could not have set up in the proceeding in which the judgment was obtained, you may, under sub-section (7) of section 41 of the Bankruptcy Act 1966, within the period set out above, file an affidavit to that effect giving details of the counterclaim set-off or cross demand, as the case requires, and the reasons why you were unable to set up the counterclaim, set-off or cross demand and, if you do so, the time for complying with the requirements of this notice shall be deemed to have been extended until the Court determines whether it is satisfied that you have such a counterclaim, set-off or cross demand." Here the condition referred to in the subsection 41(7) of the Act was met, with the consequence that the time for compliance was extended by force of the Act itself, until and including 8 May 1996. It is to be noted that s 41(7) was amended by amendments which came into force by Act No 44 of 1996 Sch 1, Pt 1 (118) on 16 December 1996. The words "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" have been substituted for the words "the debtor has filed with the Registrar an affidavit to the effect that he has such a counter-claim, set-off or cross demand" in the earlier version. Section 306(1) of the Act provides: " 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 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." Rule 195(2) provides: " Where the provisions of these Rules have not been complied with in relation to a proceeding - (a)the proceeding may be set aside, either wholly or in part, as irregular, or may be amended or otherwise dealt with in such manner and upon such terms as the Court thinks fit; or (b)the Court may, upon such terms as the Court thinks fit, relieve a party from the consequences of non-compliance with these Rules." There were four issues identified by Mr Komesaroff in his submissions to the court on the appeal. The first was that the bankruptcy notice did not accord with the judgment that was given. The second was that there was never any "application" by him to set aside the bankruptcy notice; in his affidavit filed under s 41 of the Act, Mr Komesaroff claimed that the bankruptcy notice did not comply with the provisions of the Act and was, as a consequence, null and void. Associated with this second issue was the argument that the bankruptcy notice was a nullity and not a matter to be set aside as an irregularity and that the application should not have been characterised as an application to set aside the bankruptcy notice. The third issue raised by Mr Komesaroff was that the court, having expressed its conclusion on 8 May 1996 that it was not satisfied as to a counter-claim, set-off or cross demand, had no power on 23 May 1996 to extend the time for compliance with that bankruptcy notice, that time having expired on 8 May 1996. The fourth issue canvassed in submissions by Mr Komesaroff was that if there was power in the court to extend the time for compliance with the bankruptcy notice, there was a denial of "natural justice" in the extension of time to 24 May 1996, because that did not give any reasonable time to the judgment debtor to comply with the terms of the notice and was not a fair and reasonable exercise of the power to extend time. In addition to these matters, Mr Komesaroff was asked: " Are there any further grounds that you want to argue?" to which he replied: