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
…
41(7) Where, before the expiration of the time fixed for compliance with the requirements of a 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 It is well settled that the debtor must present prima facie evidence of the truth of the counter claim and show a reasonable chance of success. The claims may include claims for damages for tort, including negligence and defamation, and for breach of contract. The debtor says that his verified statement of claim now filed in the Common Law Division of the Supreme Court provides this evidence. It is therefore necessary to examine this pleading which was issued against Mr Freedman only.
29 The debtor first claims that Mr Freedman charged for work done in October/November 1993 in relation to his wife's wrongful death but did not tell the debtor what the work was. Second, he did not investigate the investigations of the Coroner. Third, he did not commence action against the police and doctors for the debtor's detention in the Nepean Hospital under the Mental Health Act and wrongly charged for work done in this period. Fourth, the debtor claims that Mr Freedman inadequately or incompetently conducted the appeal to the Court of Appeal from the decision of Justice Brownie. Fifth, Mr Freedman is alleged to have threatened the debtor to try to induce him to drop his efforts to pursue the so-called killers of his wife. Sixth, he did not carry out the debtor's instructions or acted contrary to instructions on a number of matters, including a failure to report police misconduct. Seventh, he untruthfully informed the police that he apprehended violence by the debtor to a person who the debtor alleges was responsible for killing his wife, as a result of which the debtor was arrested by police on 1 May 1998.
30 The debtor also claims breaches of statutory duty in that Mr Freedman did not comply with section 193(1) of the Legal Profession Act and regulation 22A(1)(h) of Regulation No. 173 of 1995. Section 193(1) is headed "Form of Bill of Costs" and states:
(1) The regulations may make provision for or with respect to the form of, and particulars to be included in, bills of costs.
(2) A bill of costs may be described as a memorandum of fees or in any other way authorised by the regulations.
31 Regulation 22A(1)(h), which falls under "Division 1 - Bill of costs" and under the heading "Particulars in bill of costs", sets out, for the purposes of section 193(1), particulars that are to be included in a bill of costs. The debtor does not identify Mr Freedman's contraventions of these provisions.
32 The debtor next asserted that Mr Freedman failed to take adequate care for the protection of the debtor's interests under what he called "the Practice Rules and the Advocacy Rules Act No. 561 of 1995". These are the Legal Profession Act 1987 - Rules (NSW) and have the subheading "Revised Professional Conduct and Practice Rules" made by the Council of the Law Society of New South Wales pursuant to its power under section 57B of the Legal Profession Act. The rules apply principally to legal practitioners practising as solicitors, or as barristers and solicitors. The rules headed "Advocacy Rules" have specific application to advocates. Their introduction states that:
The rules incorporate, with appropriate amendments applicable to the practice of solicitors in New South Wales, the National Model Rules of Professional Conduct and Practice approved in principle by the Law Council of Australia.
33 The debtor does not state which rules were contravened by Mr Freedman and in what way or ways he failed to protect the debtor's interests. But he claims exemplary damages of $1 million and an order for the specific performance by Mr Freedman of his legal duties and undertakings to investigate the killing of the debtor's wife. I am not sure whether the $1 million is additional to or in substitution for the $50 million previously claimed.
34 The pleading can thus be seen as making a series of allegations against Mr Freedman but, just as was held by Masters Macready and McLaughlin when dealing with the earlier claims, the material facts have not been pleaded as required by the Rules of Court. Moreover, no evidence has been presented in the affidavits to support the allegations. For example, nothing has been alleged to establish in what way Mr Freedman was in breach of his duty of care in the Court of Appeal proceedings. It is not enough to say "he did not mention the murder of my wife", if that is what is alleged; it must be shown how the murder (or any other subject referred to), if it occurred, was relevant to the proceedings and could have influenced their outcome. It is not enough to say "he did not do what I told or asked him to do in a letter"; it must be shown that whatever he did not do was part of his retainer, was possible, and would have advanced the debtor's interests. It is obvious that if more was done, more costs would have been incurred. A solicitor is under a duty not to spend the client's money on useless or unhelpful pursuits.
35 The second prerequisite for applications of this kind is that the counter claim could not have been set up in the action or proceedings in which the judgment was obtained. In other words, the debtor must have had a prior chance to litigate his claims against Mr Freedman. If there was an opportunity to do so and it was not taken, the proviso is not activated. In this case, there was a Local Court judgment in March 1997 after grounds of defence filed by the debtor were struck out. There was no appeal from that judgment but the Local Court was asked to set aside the judgment a year later. That application was dismissed with costs. There was no appeal from the dismissal. Those facts are relevant to the debtor's bona fides and the genuineness of his belief in the allegations he now makes. But that Local Court judgment is not the result of the relevant proceeding because the debt claimed in the bankruptcy is the amount certified by the Costs Assessor in October 1996 and registered in February 1998.
36 Clearly, a combination of sections 208(1) and 208A(1) of the Legal Profession Act provided the debtor with the opportunity to raise with the Assessor the negligence and breaches of contract and of statutory duty alleged against Mr Freedman. One item of set off was obviously raised because the Assessor determined that he was to be given a credit for $11,000 already paid. He could also have made the allegations he now makes on appeal from the Assessor's determination, at least in the form that the Assessor erred in law by not considering them as mandated by section 208A(1) and, if considered and rejected, by not giving reasons for their rejection. In fact he did not raise them until a bankruptcy notice was issued. The earlier equity proceedings show that until the bankruptcy notice, the debtor was holding people other than Mr Freedman responsible for his plight and his losses even if he expressed the causes of action somewhat differently.
37 In my opinion, the verified statement of claim and the affidavits in support of the application do not establish that the debtor has a counter claim against Mr Freedman exceeding the debt claimed, nor has it been proved that he was prevented by law from setting up within the framework of the application for the assessment of costs the claims there made.
38 The application to set aside the bankruptcy notice is dismissed. The debtor will pay the creditors' costs. The time for compliance with the bankruptcy notice is extended to 4 pm on Friday 9 July 1999.
I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marcus Einfeld AO.