Carson (by her litigation representative Jodi-Ann Michael) v Gabriele [2024] FCA 702 | Case summary

THE FACTS 6 The applicant is Ms Carson, who is elderly and suffers from dementia and anxiety. She is legally incapacitated. The solicitors commencing these proceedings did not apparently perceive this to create any difficulty. Ms Michael is Ms Carson's daughter and holds an enduring power of attorney in respect of her and is an enduring guardian. Ms Carson was the long-standing de facto spouse of Ms Gabriele's late father, Mr John Alvarez. 7 On 16 October 1985, Mr Alvarez and his first wife, Ms Pamela Alvarez, purchased 46 Bambil Crescent, Dapto, New South Wales as joint tenants (the Dapto property). 8 On 6 January 1997, following her divorce from Mr Alvarez, Ms Alvarez transferred her one-half share in the Dapto property to Mr Alvarez and Ms Carson as joint tenants. This transfer was registered incorrectly in the folio of the Torrens register. The folio incorrectly recorded that the entirety of the Dapto property was held by Ms Carson and Mr Alvarez as joint tenants. The folio should have recorded Mr Alvarez as owning a half share of the property as tenant in common. The folio should have recorded Mr Alvarez and Ms Carson as joint tenants of the other half share, as tenant in common with Mr Alvarez. 9 Ms Gabriele contends that the intentions of relevant persons at the time of Ms Alvarez's transfer was that half the Dapto property would go to Mr Alvarez's children of his first marriage, Ms Gabriele and her sisters, after he died. 10 Mr Alvarez died on 22 September 2014. Upon Mr Alvarez's death, the entirety of his estate passed to Ms Carson under his will. Mr Alvarez's estate comprised his interest in the Dapto property and the sum of $50,000 held in a joint bank account. A Notice of Death was registered on 17 October 2014, which had the effect of recording Ms Carson as the sole registered proprietor of the land. Ms Gabriele believes that "[Ms Carson] has always insisted that half of the estate would still go to my sisters and me, although [Ms Michael] stepped in and changed things later, relying strictly on [Mr Alvarez's] will". 11 On 21 October 2014, Rachel Stubbs and Associates wrote a letter to Ms Gabriele, which stated: [W]e are instructed that our client [Ms Carson] has received a lengthy email from you dated 6 October 2014 demanding that our client divide Mr Alvarez' estate 50% to you and your sisters ... A long email has also been sent to our client's son in law Perry Michael. We understand that you have also been telephoning the NSW Trustee and Guardian about this matter. Our client instructs that she feels both harassed and upset by these email letters and the verbal conversations, demanding that the estate be divided differently to that, as set out, in the testator's last will. 12 On 27 October 2014, Ms Gabriele raised with the Registrar-General the possibility that there had been an incorrect registration of a transfer. On 29 October 2014, the Registrar-General wrote to Ms Gabriele agreeing that there had been errors and stating that he proposed to correct them under s 12(1)(d) of the Real Property Act 1900 (NSW). The letter included: • The Notice of Death should have only affected the one-half share interest in the Land which Sandra Carson intended to hold as joint tenants with John Alvarez (deceased); leaving the remaining one-half share in the name of John Alvarez as tenant in common to be transmitted to his executor, administrator or beneficiary. Before I can alter the folio of the register for the land to correct the error, I am required to notify any person who may be affected by the alteration. I have sent a notification to Sandra Carson of my intention to alter the folio of the Torrens register for the Land so that it reflects the intention of the documents that have been lodged for registration. For the reasons set out in the preceding paragraphs, I intend to do this by recording Sandra Carson and John Alvarez as the registered proprietors of the Land, as tenants in common in equal shares. I intend on altering the register after one (1) month from the date of the Notice unless before the expiration of that time I serve me with, or written notice of, an Order of the Supreme Court of New South Wales preventing me from doing so. 13 The evidence does not disclose what occurred from late October 2014 until about two years later, in August 2016. Ms Gabriele's evidence included two reports from New South Wales Police. One of the reports related to events on 18 August 2016. The report indicated that Ms Carson contacted police "about issues she is having over a disputed will". She was recorded as being "very distressed". The police attended Ms Carson's home from 5:18pm to 5:45pm. The events related to Ms Gabriele. The report included: Reason No Action: NO FEARS FOR SAFETY. NO OFFENCES DETECTED. 14 The report also indicated that there would be no further investigation and that all reasonable inquiries were complete. 15 On 31 August 2016, Ms Carson made an enduring power of attorney appointing Ms Michael as her attorney and appointing Mr Perry Michael as a substitute attorney. The appointment was accepted by Ms Michael on 31 October 2016. It seems likely that it was also accepted by Mr Michael. Ms Michael was also appointed Ms Carson's enduring guardian on 31 August 2016. 16 Although these letters were not in evidence, it would seem from the available material that: (1) On 19 October 2016, Ms Carson's solicitors (Kells Lawyers) sent an email to Ms Gabriele in which they stated that Ms Carson had executed a will in which the Dapto property, or any replacement real estate, was to be sold and the proceeds divided half to Mr Alvarez's children and half to Ms Carson's children. The email noted that Ms Carson did not wish to have further contact with Ms Gabriele and her family, and that if Ms Gabriele continued to contact Ms Carson or caveat the Dapto property, police assistance would be sought, and the gift would be revoked. (2) In an undated letter in response, Ms Gabriele alleged that Ms Michael was seeking to prevent contact between Ms Carson and Ms Gabriele to prevent Ms Carson honouring her "moral obligation" to effect an agreement made with Mr Alvarez that, when the Dapto property was sold, 50% of the proceeds would be divided between the children of Mr Alvarez's first marriage. Ms Gabriele contended that Mr Alvarez drafted his will the way he did because the error in title prevented him from requiring the property to be sold with the proceeds divided 50% to Ms Carson and 50% to his daughters of his first marriage. 17 The second police report related to events on 3 November 2017. The report related to Ms Carson and Ms Gabriele. The report recorded that no fears were held by Ms Carson or the police, that there was no further action taken and that all reasonable inquiries were complete. The report also stated: [Ms Carson] suffers early onset dementia, but has been assessed and does not require further care. 18 On 18 December 2017, an application was brought in the Local Court for an apprehended domestic violence order (ADVO) protecting Ms Carson. An interim ADVO was made pending the hearing of the defended application. 19 On 22 March 2018, Ms Gabriele sought the removal of the interim order. She was unrepresented. Ms Carson was represented by Mr Lagopodis of Good Legal Lawyers. The application for removal of the interim order was unsuccessful. The Magistrate, in dealing with costs, explained to Ms Gabriele that Mr Lagopodis was likely to invoice Ms Carson for costs and inquired of Mr Lagopodis whether this was correct. Mr Lagopodis confirmed it was. The Magistrate observed that Mr Lagopodis acted for Ms Carson and listens to her, to which Ms Gabriele responded that he listens to Ms Carson's daughter, Ms Michael. The Magistrate observed that it was "a very serious thing to say" to suggest that Mr Lagopodis "is not acting on instructions" given that Mr Lagopodis was an officer of the Court. 20 The Local Court decided to allow $750 for the costs incurred in relation to Ms Gabriele's unsuccessful application. In her submissions and affidavit, Ms Gabriele emphasised the following part of the transcript: LAGAPODIS: I ask your Honour whether you might be able to make an order along with the costs order [for $750] that payment can be made to myself-- RESPONDENT: No I refuse, I refuse. LAGAPODIS: --within 28 days your Honour. HIS HONOUR: Well it is the general 28 days to pay. RESPONDENT: No you won't get anything from me. I can give my word that because it's just so wrong. HIS HONOUR: 28 to pay. 21 In oral submissions on this review, Mr Kernaghan explained that the order which was made on 22 March 2018 did in fact provide for payment to Mr Lagopodis and that this was altered on 7 June 2018. One of the judgments relied upon in the bankruptcy notice relevant to Ms Carson's creditor's petition is a judgment of the Local Court in favour of Ms Carson for $1,009, representing the sum of costs of $750, filing fees of $75 and solicitor's fees of $184. The relevant order was said to have been made on 7 June 2018 and entered on 8 August 2022. It was common ground that this related to the order for costs made on 22 March 2018. 22 The defended application for the ADVO was heard in the Local Court on 2 July 2018. One page of the transcript was in evidence. The transcript is of a part of the cross-examination of Ms Gabriele in which she appears to be challenged by Mr Lagopodis about the correct applicant in the proceeding. The Magistrate stated: "[o]n the papers it says it's by her guardian, Jodie Ann Michael. That's why I asked the question". Mr Lagopodis stated: If it becomes an issue I can introduce some evidence as to who made the application on behalf. 23 Mr Lagopodis then resumed cross-examination. The ADVO was ultimately granted. The Court was informed by Mr Kernaghan that costs were ordered against Ms Gabriele. One of the judgments relied upon in the bankruptcy notice is a judgment of the Local Court in favour of Ms Carson for $5,716.43 comprising costs of $4,950, plus interest and a filing fee. The Local Court judgment records this as having been made and entered on 27 July 2020. The Court was informed by Mr Kernaghan that this related to the contested ADVO hearing in the Local Court. It is unclear why this order was made two years after the hearing. 24 Ms Gabriele appealed to the District Court. The appeal was dismissed. One of the judgments relied upon in the bankruptcy notice is a judgment of the Local Court in favour of Ms Carson for $4,525.80 comprising a "claim amount" of $4,525.80. The Local Court judgment records this order as having been made on 31 May 2022 and entered on 19 January 2023. The Court was informed by Mr Kernaghan that this related to the District Court appeal. 25 Ms Gabriele did not agree and said that the amount related to an application made under the "slip rule" (being a reference to reg 36.17 of the UCPR) which, on Ms Gabriele's submission, should not have been made. 26 Ms Carson's condition seems to have deteriorated after a medical issue in December 2018. The material before the Court indicates that Ms Gabriele placed a caveat on the Dapto property, claiming an interest by virtue of intestacy and that, by a letter dated 13 December 2018, Good Legal sought removal of the caveat. It is likely that these events occurred because of a proposal to sell the Dapto Property and transition Ms Carson into an aged care facility. 27 Ms Gabriele commenced proceedings in the New South Wales Civil and Administrative Tribunal (NCAT) seeking to have Ms Michael removed as Ms Carson's attorney. By reasons dated 13 March 2019, NCAT summarily dismissed Ms Gabriele's application. NCAT concluded that the power of attorney instrument was valid on its face, that there was no evidence of inducement or undue influence when it was signed, and that Ms Gabriele's application was without substance or misconceived. NCAT dismissed the application under s 55 of the Civil and Administrative Tribunal Act 2013 (NSW). 28 In early 2019, the Dapto property was sold with most of the proceeds being applied to fund Ms Carson's $380,000 Refundable Accommodation Deposit (RAD) in her aged care home. The balance of the net proceeds (an amount probably less than $100,000) was to be used to fund Ms Carson's expenses. The available material suggests that the RAD will become available to be distributed via Ms Carson's estate. 29 On 27 May 2019, Ms Gabriele made a second application to NCAT to review the enduring power of attorney. The Tribunal appointed a separate representative for Ms Carson and granted leave for Mr and Ms Michael to be represented by Mr Lagopodis. 30 On 4 September 2019, NCAT concluded that Ms Gabriele did not have standing and therefore dismissed the application for want of jurisdiction. Mr Lagopodis made an application for costs and NCAT made directions for the filing of submissions in that respect. 31 On 19 December 2019, Ms Gabriele lodged a third application with NCAT, being an application to have NCAT's decision of 4 September 2019 set aside. 32 The third NCAT application was heard on 28 July 2020 and dismissed on 23 December 2020. Mr and Ms Michael were represented by Mr Lagopodis. Ms Carson was separately represented. Orders were made setting a timetable for any application for costs. 33 On 6 May 2021, NCAT ordered that Ms Gabriele pay Mr and Ms Michael's costs in relation to the third application, as agreed or assessed. At some earlier time not disclosed in the evidence, NCAT had made an order that Ms Gabriele pay Mr and Ms Michael's costs in relation to the second application. 34 Ms Gabriele was unrepresented in each of the Local Court, District Court and NCAT proceedings. 35 The fourth Local Court judgment the subject of the bankruptcy notice is a judgment in favour of Ms Carson against Ms Gabriele which states that the date of order was 29 August 2022, entered 20 January 2023. The judgment is in an amount of $1,900. Mr Kernaghan submitted that this related to enforcement of the earlier judgments and Ms Gabriele stated that this related to an examination notice. These statements might comprise different ways of referring to the same thing, in the sense that proceedings for examination might be labelled as related to enforcement. 36 On 20 December 2022, a statement of claim was issued out of the Local Court in the name of Ms Carson against Ms Gabriele. The proceeding was discontinued by consent on 18 January 2023. Mr Kernaghan submitted that this related to examination proceedings which Ms Gabriele was compelled to, but did not, attend. I have some doubt about this given the discontinuance was ordered by an assessor of the Local Court and what was discontinued was a "statement of claim". Ms Gabriele's evidence was that this was a proceeding initiated by Mr Neve in the name of Ms Carson which was considered by Assessor Harvey to be an abuse of process with the result that it was discontinued with Ms Gabriele's consent. This version of events is not inconsistent with the Local Court's email confirming the orders which were made. 37 Ms Carson's solicitors obtained a bankruptcy notice issued by the Official Receiver on 20 June 2023 in the sum of $15,019.11, representing the judgment debts totalling $13,151.23 and interest of $1,867.88. The bankruptcy notice required payment within 21 days. It specified that payment of the debt could be made to Mr Anthony Neve, identifying the address of Good Legal and providing Mr Neve's mobile number and a personal email address ending with "@neve.au". 38 Mr Neve sent a cover letter dated 20 June 2023, the bankruptcy notice and the relevant judgments by post to Ms Gabriele's residential address and by email to Ms Gabriele's email address on 20 June 2023. The cover letter dated 20 June 2023 included: If you do not comply with this Bankruptcy Notice, we will apply to the Court to have you declared bankrupt and will seek an order for you to pay the associated costs. If you wish to comply and settle the debt, please make a payment of $15,019.11, within 21 to the Good Legal Trust Account, and the matter will be closed. 39 The cover letter included the details of the Good Legal Trust Account for EFT payments. 40 Ms Gabriele accepted that she received the email, but noted that she did not consent to being served by email. Ms Gabriele also accepted that she received the documents by post but was not able to say when she received them. Service by email was effective without Ms Gabriele's consent - see: ss 9(1)(a), 9(2)(a), 9(4) and 9(5)(a) of the Electronic Transactions Act 1999 (Cth) (ET Act) and regs 102(1) and (3) of the Bankruptcy Regulations 2021 (Cth), which exclude the application of ss 9(1)(d) and 9(2)(d) of the ET Act. Ms Gabriele accepted that she received the email on 20 June 2023: see also s 14A(1)(a) of the ET Act. The bankruptcy notice was validly served on 20 June 2023. 41 On 25 June 2023, Ms Gabriele sent an email to various email addresses at Good Legal, but identifying that the email was for Mr Lagopodis. The email included: You would be aware that Mr Neve has initiated Involuntary Bankruptcy proceedings against me. Attached is a letter to Jodi-Ann Michael and I am requesting you as one of her legal representatives to pass this on to her for reply as I do not have any in trust in Mr Neve to do so. You may also be aware that legal action initiated by Mr Neve on 20 December 2022 and heard earlier this year was deemed an abuse of process and Mr Neve was asked to withdraw his application with my permission. I will be responding to Mr Neve's Involuntary Bankruptcy application and I will be lodging an application to apply for the judgement orders to be set aside due to several procedural irregularities, and contacting the Federal Court to seek leave until that matter is finalised. I will be represented in these matters to ensure I receive an unbiased hearing. This matter has escalated out of control and the associated procedural irregularities have resulted in considerable damage. I have no choice other than to defend the misrepresentation of Sandra and the gross miscarriage of justice that has occurred directly resulting from the false and vexatious application made by Jodi-Anne Michael against me. 42 The letter to Ms Michael referred to in that email was dated 26 June 2023 and was in the following terms: Dear Jodi-Anne, I am writing this to you as I have received notification of an Involuntary Bankruptcy application currently before the Federal Court from your solicitor Mr Anthony Neve. I will be responding to Mr Neve's Involuntary Bankruptcy application in a few weeks and contacting the Federal Court to seek an extension of time after my solicitor lodges an application to set aside the judgement orders due to several procedural irregularities. I will be represented in this matter to ensure I receive an unbiased hearing. I am asking you to be honest in your response to this letter as my solicitor will be cross examining you under oath. It is unfortunate that you chose to take an adversarial path in your representation of your mother Sandra, and you need to ask yourself honestly if Sandra would agree to you taking the actions you have over the last five years. This has had an enormous impact on me and my life and I will not rest and will continue to fight until this injustice is resolved and unfortunately it will be both of us who are paying are price in more ways than one. I would like confirmation from you that you or your husband Perry Michael instructed Mr Neve to initiate the Bankruptcy action. Could you also please confirm if you instructed Mr Neve to take action against me by lodging an application in the Wollongong Local Court on 20 December 2022, which was heard in February this year resulting in Mr Neve being told he would need to withdraw the action as it was deemed an abuse of process. 43 In cross-examination, Ms Michael accepted that she received this letter, but stated that she "did not wish to engage" with Ms Gabriele. 44 On 6 July 2023 at 8:24am, Ms Gabriele sent an email to Mr Lagopodis stating: Can you please confirm that Good Legal (Anthony Neve) has been instructed by Sandra Beverley Carson / Jodi-Anne Michael to lodge the application to the Federal Court for Involuntary Bankruptcy proceedings. 45 On 6 July 2023 at 6:13pm, Ms Gabriele sent an email to Mr Lagopodis stating: As the Principal of Good Legal and a representative of Sandra Beverley Carson, attached is a copy of my draft application to the Federal Court in response to the Bankruptcy Notice that was lodged by Mr Neve on 20 June 2023. I only have a few days left to respond to the notice and I require urgent confirmation as to whether Mr Neve has been instructed by Jodi Ann Michael to initiate the Involuntary Bankruptcy Notice BN260441 (attached) as Mr Neve has previously acted without instruction and he is using a personal email address for this matter. 46 On 6 July 2023 at 6:23pm, Ms Gabriele sent an email to Mr Neve stating: Attached is a draft of my application to the Federal Court in response to your Letter of 20 June 2023 and enclosed Bankruptcy Notice BN260441. I will be lodging all documents on Monday with the courts and require from you confirmation that you submitted the Bankruptcy Notice with authorised instruction from Jodi Anne Michael, as I sent correspondence to Jodi Anne Michael via Danny Lagopodis of Good Legal and have not received a reply. 47 On 9 July 2023, Ms Gabriele sent an email to Mr Lagopodis and Mr Neve stating: I have not received a response from your office from Jodi Anne Michael confirming that she has provided you with authority and instruction to initiate bankruptcy proceeding against me. Re email of 25 June 2023. Mr Lagopodis of Good Legal has not confirmed that Good Legal (Anthony Neve) has been instructed by Sandra Beverley Carson / Jodi-Anne Michael to lodge the application to the Federal Court for Involuntary Bankruptcy proceedings. Re email 06 July 2023. Mr Neve, I have also requested confirmation from you that you are acting under the instruction of Jodi Anne Michael, re email sent 06 July 2023 to which I have not received a response. Attached are my final application and affidavit I will be lodging with the Federal Court tomorrow (Monday 10 July). I will be represented in this matter and put you on notice that I will seek an order for associated costs. 48 The application attached to the email included assertions about procedural irregularities in the way in which the costs orders in the Local Court had been obtained. 49 On 11 July 2023, Ms Gabriele sent an email to Mr Neve stating: Due to a change in my personal circumstances I would like to meet with you asap, preferably today to discuss the payment of judgement orders. I can meet with you at the Wollongong at [sic] Local Court. 50 Ms Gabriele stated that she made a phone call to Good Legal on 11 July 2023 and spoke to Ms Amy Lagopodis who confirmed that the email had been received by Mr Neve and that Mr Neve would contact her. Ms Gabriele stated that Ms Lagopodis stated: Yes Kim we've received your emails. Mr Neve will be in contact with you to discuss the case and arrange payment. 51 Ms Gabriele stated: 14. I requested Mr Neve to meet with me at the Wollongong Court House as: a. I did not trust him and this was neutral and safe space for myself. b. I wanted to make payment directly into Sandra's bank account. c. I wanted to discuss a possible payment plan. 15. Mr Neve ignored all attempts by me to make payment and to confirm that he was operating under instruction from Jodi Ann Michael. 52 Ms Gabriele stated that she was firmly of the view that Ms Carson was not able to give instructions to commence the bankruptcy proceedings because she lacked the capacity to do so. She stated at [9]: I had sought confirmation from [Ms Carson's] purported legal representatives, which was unanswered as to the bona fides of the Notice and how Mrs Carson had authorised the issue of the Bankruptcy Notice. However, I had decided that it was preferable to put the matter behind me and sought to meet Mr Neve to pay by in person by tender rather than transferring money into his trust account. 53 She stated at [24]: The reason I wanted to meet in person is because I wanted to ensure that everything was above board, the Notice was made on proper instructions, the solicitors were acting on instructions and it was actually [Ms Carson] driving the claim, as opposed to Jodi-Ann Michael (as discussed further below). I was suspicious and cautious and did not simply want to transfer money without making enquiries. I explained this to Ms Lag[o]podis in words to like effect as I have stated within this paragraph when I spoke to her on 11 July 2023. 54 It is not in dispute that Mr Neve did not respond to Ms Gabriele until his letter of 1 September 2023. Indeed, Mr Neve's evidence was that he "refused" to meet. He stated in one of his affidavits: 6. At some point, I received a message from Kim Gabriele that she was not going to file the appeal and wanted to meet with me in person to discuss the debt. 7. I refuse to meet with Kim Gabriele because of behavioural issues she displayed at the Wollongong Local Court during a previous legal matter. 55 The time for compliance with the requirements of the bankruptcy notice expired on 11 July 2023. Ms Gabriele did not comply with the requirements of the notice. If s 40(1)(g) of the Act otherwise applied, there would have been an act of a bankruptcy on 12 July 2023 by reason of the failure to comply. 56 On 23 August 2023, Ms Carson commenced bankruptcy proceedings by filing a creditor's petition. On 1 September 2023, Mr Neve sent a letter to Ms Gabriele referring to the creditor's petition and various affidavits and noting that the matter was listed at 9:30am on 10 October 2023. The letter included: Should you intend to settle the outstanding debt without our client proceeding with the bankruptcy application, it will be necessary for you to remit the entire sum ($18,188.23) by the 10th of October 2023. This amount encompasses the principal debt, accumulated interest to 1 September 2023, and additional legal expenses incurred to commence the bankruptcy proceedings. We advise that should you make an application for the dismissal of our petition, and you are unsuccessful, we can seek at a minimum an additional $2,573 in legal costs. The financial details are as follows: Debt Owed with Interest: › Total Judgment Debts: $13,152.23 › Total Interest: $1,936 › Total Amount Due: $15,088.23 Bankruptcy Professional Fees: › $2,990 (short form amount) › Process Service Fees: $110 Therefore, the overall settlement sum required by the 1st of September 2023, is $18,188.23. Please be advised that our client will not entertain a payment plan. 57 On 4 October 2023, an amount of $15,019.11 was deposited into the Good Legal Trust Account. On 6 October 2023, Good Legal sent a letter to Ms Gabriele which included: We are writing regarding a payment we received in the Good Legal Trust Account on 4 October 2023. This payment amounted to $15,019.11 and was referenced as 3854. In response to your email dated 5 October 2023, confirming this payment, we wish to clarify our position. You owe Sandra Carson the following: • $470 for the fee associated with obtaining the Bankruptcy Notice. • $131 allowable for the process server's fee. • $325.24 in additional interest accrued from the date of the Bankruptcy Notice. • $2,990, which represents the Short Form Order of Costs for the application of a sequestration order. OR; • $2,573 if the petition is dismissed. The total outstanding debt amounts to $3,916.24. Or $3499.24 if you resolve the matter prior to Tuesday and our application can be dismissed! If you pay the above outstanding amounts the matter will be finalised and closed. We will seek further appearance costs (minimum of $770) if you do not pay this and continue with the proposed minute of order that you sent to the court on the 5 October 2023. We are of the firm view that the court cannot grant what you are requesting. 58 Mr Neve swore an "affidavit of final debt" dated 5 October 2023. This identified that the fee levied and paid to the Australia Financial Security Authority for obtaining the bankruptcy notice was $470. It identified that there was no filing fee for lodging the creditor's petition. It identified that a process server charged a fee of $150. It identified that interest to 10 October 2023 was $2,193.12 and that interest in the amount of $325.24 was therefore outstanding ($1867.88 was paid on 4 October 2023). The affidavit identified other costs said to be allowable under Schedule 3 of the Federal Court Rules 2011 (Cth), described as costs that "at a minimum Kim Gabriele continues to owe Sandra Carson" including for personal service $131 and a short form amount of $2,990 that may be claimed on the making of a sequestration order. 59 The proceedings were first before the Registrar on 10 October 2023. Ms Gabriele stated that she had paid the amount stated in the bankruptcy notice in full and stated that she wanted the matter to be dismissed. Mr Kernaghan (who at this point appeared as agent for Good Legal) stated that Ms Carson wanted payment of an amount $2,573, comprising legal costs, and interest in the amount of $304.67. The Registrar summarised Ms Carson's position by saying to Ms Gabriele that "there's some legal costs that are still outstanding before they will agree to dismiss it". Leaving aside the omission of a reference to interest, that was an accurate account of the submissions which had been made. Mr Kernaghan did not suggest otherwise. 60 Later in the hearing, the Registrar stated: If this matter is to be finalised today, [Mr Kernaghan] has instructions, at the moment - is that there's still outstanding amounts in the amount of $2,573 that will need to be paid before there's a dismissal of the petition. Whether you agree that's owing or not, it's a matter between you and, whether it's Mr Kernaghan or his instructors. If there is no agreement to the petition being dismissed, I will need to program it to hear why you say it should be dismissed and why [Ms Carson] says that it should continue. 61 Again, Mr Kernaghan did not suggest to the Registrar that this inaccurately described his position. Ms Carson was only agreeable to the creditor's petition being dismissed if Ms Gabriele first paid outstanding amounts, which on that day were claimed at $2,573. 62 It is relevant to observe that, during the hearing, Ms Gabriele raised her view that she did not owe money to Ms Carson, that Ms Carson would not agree that money was owed to her, and that Ms Carson was being used as a "shield". 63 Ms Gabriele repeatedly referred to the fact that she had tried to meet to resolve payment on 11 July 2023. Ms Gabriele also stated that, if the proceedings were not dismissed, this would mean that Good Legal would continue to ask for more and more costs. 64 In his written submission filed on 17 June 2024 for this s 35A(6) review, Mr Kernaghan set out parts of Ms Gabriele's submission (in italics) about what had occurred on 10 October 2023 and then made his response. In relation to Ms Gabriele's submission about abuse of process, his submissions included: i. "On first mention 10 October 2023, the respondent requested Registrar Morgan to dismiss the application as the debt had been paid in full including interest, but the creditor elected to pursue the matter to hearing. Payment of the judgment debt was accepted on 04 October 2023 and despite this pressed the proceedings unnecessarily only to withdraw the application on the day of hearing 29 February 2024." - this is regrettably false. On the first mention, the Court was informed that the only issue was the costs; otherwise, the case had been finalised. The evidence put forth by [Ms Carson] shows the extensive efforts to resolve this issue precisely. [Ms Gabriele's] submissions are false and should be rejected. 65 Contrary to these submissions, there was nothing "false" about Ms Gabriele's submission. At the hearing she stated: "I'm requesting that the - I paid the judgment orders in full, with interest, and I am requesting that the matter be dismissed". On the other hand, Mr Kernaghan's submission is incorrect. The Registrar was not told that the only issue was costs, and the Registrar was not informed that, apart from that issue, "the case had been finalised". To the contrary, it was clearly conveyed to the Registrar that Ms Carson would not agree to the proceedings being dismissed until she had been paid the legal costs which Ms Carson had incurred (or the short form amount of those costs) and interest. I understood this ultimately to be accepted by Mr Kernaghan during oral submissions. This position is confirmed by later events and remained the position until 21 February 2024, shortly before the hearing before the Registrar. 66 On 23 October 2023, Mr Neve sent a letter to Ms Gabriele referring to the hearing on 10 October 2023 and including a further settlement offer. This included: 8. Reasonableness of Our Offer: While you have made some inroads to settle your debt, the fact is you have no legal defence against the bankruptcy proceedings. Notwithstanding our strong legal position, we still extended fair and reasonable settlement offers. 9. It is important for us to explain to you that there is/was no advantage for us in refraining from bankrupting you. Given your established history of non-compliance with court-ordered costs, your personal acknowledgment of being impecunious, it would serve our client's best interest to proceed with bankruptcy. This action would enable a Trustee to manage your financial affairs for an extended period potentially resulting in our client recouping all the money you owe her without having to go to court again. 10. Furthermore, bankruptcy would also potentially inhibit you from initiating or continuing any legal proceedings. This would serve to protect our client from further vexatious litigation on your part. We remind you that you have appealed every decision you did not like, adding further costs to our clients' legal bills. You have also commenced more than four failed NCAT legal proceedings against our client and her daughter. Despite all of these considerations, our client generously agreed to forgo bankruptcy proceedings if you agreed to a judgment and then settled the outstanding amounts, an offer which you chose to decline - we hereby formally withdraw that offer. Outstanding Amounts and Costs 9. Debt Breakdown as of 4 October 2023: Your recent payment covered costs up to 21 June 2023 but did not account for additional legal costs and interest accrued thereafter. A detailed breakdown of the amounts is provided below: • Total Debt: $13,151.23 (Paid) • Interest Owed (4/10/23): $2,172.55 (Partially Paid) • Outstanding Amount: $304.67 in accrued interest. Additional Costs: • Bankruptcy Notice: $470 • Process Server: $150 • Legal Costs: $9,604.36 10. Settlement Offer: Again, we remind you that we offered to settle for short form schedule rates of $2,573, despite the additional costs incurred. We now intend to seek costs on an indemnity basis, totalling $12,411 as of 23 October 2023. Final Offer on a without prejudice basis and Next Steps 11. Final Settlement Offer: Despite your egregious behaviour towards our client, we are instructed to offer to settle the total debt for an additional payment of $6,000 within 14 days of this letter. 12. Consequences of Non-Acceptance: Should you decline this offer; we will proceed with bankruptcy proceedings and seek additional legal costs for any extra work necessitated by your actions. Including reviewing the additional documents you have filed and replying to them. We will rely upon this letter when seeking indemnity costs as fair warning of our intentions. 13. Payment Requirements: We are not permitted to enter a payment plan. Additional Points … 16. We urge you to consider the gravity of your situation carefully. Bankruptcy is a serious matter that carries long-lasting financial and legal consequences. Our client has shown considerable leniency by offering multiple opportunities for settlement, all of which you have declined. 17. It is our final attempt to resolve this matter amicably by offering a last settlement option. We emphasise that we have no desire to proceed with bankruptcy; however, the lack of cooperation and payment leaves us with little choice but to protect our client's interests vigorously. 18. We urge you to make the additional payment of $6,000 within the 14-day period outlined in this letter. Failure to do so will not only result in the pressing of the bankruptcy proceedings but will also increase the legal costs you will be required to pay. As outlined, the total costs could exceed $12,411. 19. Should you choose to ignore this final offer and the cautions contained within this letter, we will have no alternative but to proceed as described. This is your final warning. 20. We advise you to seek legal advice to fully understand the implications of your current actions. We trust you will give this matter the serious consideration it deserves. 67 The proceedings were next before the Court on 23 November 2023. Mr Kernaghan appeared for Ms Carson. By this time, Mr Kernaghan appears to have been employed by (or at least practising with) Good Legal, as opposed to appearing as that firm's agent. Ms Gabriele appeared by telephone. Ms Gabriele stated that referring to the case as "Carson v Kim Gabriele" was a lie and that Ms Carson would be horrified if she knew what was going on. Ms Gabriele again referred to the fact that she had paid the judgment debt and wanted the case dismissed. She referred to the fact that she had received increasing offers to settle by paying the legal costs of Good Legal. She stated that those costs were not judgment orders and that they were "just payments that kept piling up". Mr Kernaghan stated: The issue that remains is that the interest components of the orders have never been paid satisfactorily, and the payment in full is required by the petitioner, Ms Carson. That hasn't occurred. And Miss Gabriele has been advised of the nuances of the various types of payments that comprise these proceedings as well as the jeopardy that, each time the matter proceeds, further rounds of costs are incurred. It's a matter that will just simply have to proceed as a hearing in due course, [Registrar]. 68 The Registrar listed the matter for hearing on 12 December 2023. 69 On 23 November 2023, Ms Gabriele sent an email to Mr Neve and others at Good Legal indicating that she would seek an order for costs on an indemnity basis on 12 December 2023 and that she would then be represented. Mr Neve responded by a letter dated 24 November 2023 which included: 1. Please advise the name and contact details of your legal representative. … 6. Out of an abundance of caution and in the interests of clearly identifying the issue for your benefit and the information of any legal representative you intend to appoint, or have appointed, we wish to make clear that by failing to meet your court-ordered liabilities to our Client, our Client [sic] has been required to incur legal and related costs so as to enforce those orders against you. Whilst it is true that you have paid an amount of money, you did so out of time of the bankruptcy notice and thereby committed an act of bankruptcy. 7. Furthermore, you refused to accept the petition for bankruptcy and when approached to settle the matter with the offer that we would withdraw our petition if you made final and full payment, you elected to proceed with your position, incurring additional and considerable costs for our Client, including for the amount of work that has been undertaken to the present date. Those are costs of these proceedings that are not to be paid by our Client but by you. Persisting further the way that you have to date only results in further incurring of costs to our Client, which as indicated clearly in both writing and as you told the Court today, will result in a claim for indemnity costs against you. 8. On a without-prejudice basis, we inform you that as at the time of writing this letter, we propose to seek from you an amount of $12,863.22 being the indemnity costs. Please understand that further costs will be incurred prior to and at the hearing. We are instructed to offer that we will settle the matter and not proceed with bankruptcy if you pay an amount of $9,004.25 representing a 30% discount on the costs incurred by our client. 70 On 25 November 2023, Ms Gabriele sent an email to Good Legal attaching a letter dated 25 November 2023 to Ms Michael. The letter stated: I am writing to you to appeal to your better judgement in requesting you to withdraw the involuntary bankruptcy application you have applied for against me. I have paid in full, judgment orders to Sandra plus interest to the total of $15,019.11 on the 05 October 2023 to Mr Neve of Good Legal. In June on receiving the Involuntary Bankruptcy Petition Order, I contacted your solicitor Mr Neve requesting him to meet at Wollongong Court House to arrange payment and he ignored my request. I don't understand why you would have directed Mr Neve to ignore me in wanting to make payment in June and instead directing him to proceed with lodging a Creditor Petition for Bankruptcy against me. It serves no purpose and only creates unnecessary costs and could only be deemed as vexatious. I will be represented at the hearing on 12 December, and it is certain that one of us will be liable for legal costs of the other party costs. Mr Neve has informed me that he will be seeking costs in excess of $12,500 and if my solicitor fees are similar, possibly more, then costs will be in excess of $30,000 and if the court goes behind the orders and the matter is transferred to the Supreme court, costs will increase even further placing us both at risk and the solicitors will be the only winners. My father would be sickened by what has occurred as he has done so much and always been so generous towards your family, and I know Sandra would be absolutely horrified if she knew that you and your solicitor are using her name to place me into involuntary bankruptcy and the devastating consequences this action is having on my entire family. I know your mother would not approve of this. I urge you to withdraw the application as I have paid full judgement orders plus interest and Federal Court Registrar Morgan made it clear on first mention that he is only interested in the judgment orders being paid and they have. 71 Ms Michael accepted in cross-examination that she received this letter but that she "did not wish to engage" with Ms Gabriele. She said at the hearing: MS GABRIELE: On 26 November 2023, did you receive the letter I sent via your solicitor appealing to your better judgement to withdraw the action as judgment orders had been paid in full? Did you - - -?---Yes, but I did not wish to engage with you. So you read the letter - - -?---Yes. - - - but you wanted to proceed?---I did not - with how things have gone over the years, I definitely did not wish to engage with you. 72 Ms Carson filed submissions on 6 December 2023 (due 1 December 2023), signed by Mr Neve, stating that Ms Carson was seeking a sequestration order and that: …should the court refrain from making a sequestration order against the [Ms Gabriele], [Ms Carson] will have no viable prospects of enforcing any currently owed debts or any judgment arising from these proceedings in favour of [Ms Carson], particularly those that fall below the bankruptcy threshold. 73 On 12 December 2023, a solicitor - Mr Green - appeared for Ms Gabriele and indicated that he had only recently been retained. Mr Kernaghan appeared for Ms Carson. The Registrar granted leave for Ms Gabriele to file and serve further affidavits and written submissions. Mr Green observed that there was still an application for a sequestration order such that the issues would include whether the interest on the judgment debt had been paid and costs. Mr Kernaghan did not suggest that this was incorrect. The further hearing of the petition was adjourned until 29 February 2024 to suit the availability of Mr Neve and Ms Gabriele's legal representatives. 74 Ms Gabriele provided evidence in an affidavit dated 24 January 2024 that clearly established she was solvent. On 24 January 2024, Ms Gabriele filed written submissions signed by Ms B K Nolan of Counsel and which contained an annexure comprising an "amended grounds of opposition". 75 On 29 January 2024, an Amended Notice stating grounds of opposition was filed. This provided: 1. The proceedings have been unlawfully commenced and are a nullity as there is no act of bankruptcy upon which they can be predicated. a. [Ms Carson] was not in a position to issue execution on the judgments the subject of the bankruptcy notice at the time the bankruptcy notice was issued, and she was therefore not a creditor of the kind referred to in s 40(1)(g) of the Bankruptcy Act 1966 (Cth). b. The bankruptcy notice was issued and the creditor's petition was purportedly presented on the instructions of Jodi Ann [Michael] pursuant to the grant of an enduring power of attorney and importantly, enduring guardianship for the "Applicant", Ms Carson. The grant of enduring guardianship can only apply when Ms Carson became mentally incapable of managing her own affairs and giving proper instructions, which she had become as at the time the bankruptcy notice's issue, and she remains so incapacitated. c. Section 9 of the Powers of Attorney Act 2003 (NSW) authorises Ms [Michael] authority to do on behalf of Ms Carson anything that Ms Carson may lawfully authorise an attorney to do. d. Ms [Michael] is not authorised to enforce the judgment debt except on a grant of leave by the Court under Uniform Civil Procedure Rule 2005 (NSW) r. 39.1. Therefore, the bankruptcy notice is invalid on the grounds that the judgments underlying them are subject to a stay. e. Further, Ms [Michael] cannot authorise the presentation of a creditor's petition because under rule 9.61 of the Federal Court Rules 2011 (Cth) Ms Carson may only commence proceedings by her litigation representative. 2. The creditor's petition proceeding is an abuse of process. Particulars (1) Further and in the alternative, the creditor's (unauthorised) representative, Mr Neve, solicitor, refused to permit [Ms Gabriele] an opportunity to meet and pay the asserted debt on 11 July 2023, which was relevantly the 21st day permitted by the Bankruptcy Notice. (2) [Ms Gabriele's] tender of $15,019.11 was accepted on 4 October 2023 such that the debt or debts on which the petitioning creditor relies are not still owing: cf. s 52(1)(c) of the Bankruptcy Act. 3. [Ms Gabriele] is able to pay her debts. 76 On 29 January 2024, Ms Gabriele's solicitor, Mr Green, wrote to Mr Neve serving the amended notice, the affidavit of Ms Gabriele dated 24 January 2024 and an outline of written submissions. The letter also contained an offer to resolve the proceedings. This included: OPEN OFFER TO RESOLVE PROCEEDINGS As will be apparent from our client's Written Submissions, we are instructed to seek to have the creditor's petition set aside, with our client's costs being paid on an indemnity basis. On the grounds set out in the Amended Notice of Opposition, and as supported by our Written Submissions, our client is confident she will succeed in setting aside the creditor's petition on the following grounds: 1. The proceedings were improperly commenced as the Bankruptcy Notice is invalid; 2. The creditors petition is an abuse of process; and 3. Our client is solvent. It is uncontroversial that [Ms Carson] is without legal capacity to commence these proceedings, and that the bankruptcy proceedings, commenced by way of Bankruptcy Notice, were purportedly commenced pursuant to instructions received from Ms Jodi Ann [Michael] in her capacity, as Attorney and Enduring Guardian. For the reasons we have set out in our Written Submissions in some considerable detail, which is evidently well supported by long-standing authority, this course was not open. Instead, so that [Ms Carson] could be properly protected from the costs consequences of the proceedings, Ms [Michael] was required to comply with the requirements of both the Uniform Civil Procedure Rules and the Federal Court Rules to ensure standing to enforce the judgments. Putting aside the numerous other procedural irregularities in the Bankruptcy Notice and Creditor's Petition, this procedural irregularity is serious, and, in our opinion, one which falls squarely at the feet Ms [Michael's] legal advisors, namely, your firm. In addition, it is plain from the body of material filed in these proceedings that [Ms Carson], certainly, holds no concerns for the solvency our client but, Ms [Michael] and or your firm are impermissibly using the proceeding to collect legal fees, merely asserted, and not proved. This is an abuse of the process of bankruptcy proceedings and a matter which ought to be well known to legal practitioners practising in insolvency. Our client has been put to expense of meeting an invalid bankruptcy proceeding, in circumstances where it it [sic] was unreasonable for her to have subjected to the expenditure of cost. … Notwithstanding the above reasoning and the strength of our client's position, our client has instructed us that she is prepared to take a commercial approach and to resolve the proceedings on the following basis: 1. The creditor's petition is dismissed; and 2. [Ms Gabriele's] costs be paid in the amount of $15,000.00 by Good Legal Pty Ltd. … We contend that as the serious irregularities for which we contend fall squarely at the feet of experienced legal practitioners, who are pursing proceedings so that their own costs be paid, (indeed after failing to allow our client to make tender of the judgment monies within the time prescribed by an invalid bankruptcy notice), that the costs should be paid by your firm. The above offer will remain open until 5:00pm on 9 February 2024 after which point it will irrevocably lapse … 77 On 8 February 2024, Good Legal rejected Ms Gabriele's offer and made an offer to resolve the proceedings on the basis that the creditor's petition be dismissed and the parties bear their own costs. That offer was stated to expire at 12:00pm on 16 February 2024. The offer was forwarded to Ms Gabriele by her solicitors at 2:45pm on 16 February 2024, after the offer had expired. 78 Ms Carson filed written submissions on 21 February 2024 (AS2), signed by Mr Kernaghan. This included at [5]: The Petitioner does not dispute that the Debtor paid the debt on 4 October 2023 - outside the time to comply with the Bankruptcy Notice and in all circumstances late. The Petitioner seeks leave to withdraw the petition (Section 47(2)) but seeks an order for her costs as agreed or assessed. 79 This submission marked a significant shift on the part of Ms Carson. 80 Ms Carson's formal position until this time was not to agree to the proceedings being dismissed until interest and costs had been paid. Unless that occurred, her position was that a sequestration order should be made. 81 The petition was heard by the Registrar on 29 February 2024. Mr Kernaghan appeared for Ms Carson. Ms Nolan appeared for Ms Gabriele. In opening, Mr Kernaghan stated: The position today for the petitioner is that outlined in paragraph 5 [of AS2], and particularly the last sentence of paragraph 5. In short, as we apprehend it, there are three aspects to today. The first is that the petitioner's position remains the same that it has always been before this court, which is that the debt has been paid, and so to the extent that that is the position, it is the petitioner's desire that the sequestration application be discontinued. The only issue outstanding is the issue of costs, and so the application is made on those terms as set out there. 82 Contrary to the submission made, the petitioner's position had not "remain[ed] the same as it always it had been before the Court". 83 Mr Kernaghan also sought an order for the appointment of a litigation representative "to the extent that an order is required", stating: There is a secondary issue that has arisen since [Ms Gabriele] has been represented, and that issue has been addressed, but the second issue is the appointment of a litigation representative, and to that end, Registrar, the petitioner has filed the affidavit of Ms Jodie-Ann [sic] Michael to address that matter, and to the extent that it's not suitable or desirable for the court to waive the requirement for a litigation representative in the circumstances of a case where the application is sought to be discontinued, then we would seek that order to the extent that an order is required. 84 Although it is not entirely clear from the transcript it seems that Ms Nolan, who appeared for Ms Gabriele, adopted a position that the petition would or should have been dismissed and that costs should follow the event, but that she did not oppose a discontinuance provided costs were awarded in Ms Gabriele's favour. 85 In any event, the hearing was argued on the basis that the real issue was who would pay costs "on this discontinuance". Ms Gabriele's position as to why costs should be awarded in her favour were that the proceedings were hopeless from the outset and an abuse of process and that Ms Gabriele was able to pay her debts. 86 On 27 March 2024, the Registrar delivered ex tempore reasons at the conclusion of which he stated that the Court granted leave for the creditor's petition to be withdrawn and that Ms Carson was entitled to costs in an amount which he proposed to fix. The Registrar ordered Ms Carson to file and serve an affidavit by 4 April 2024 setting out the disbursements claimed, noting that the Court would issue final orders after the affidavit was received. On 4 April 2024, the Registrar made the following orders: THE COURT ORDERS THAT: 1. Leave be granted for the creditors petition filed on 24 August 2023 to be withdrawn pursuant to s 47(2) of the Bankruptcy Act 1966 (Cth). 2. The Amended Notice stating grounds of opposition to the application, interim application or petition filed on 29 January 2024 be dismissed. 3. The respondent pay the applicant's costs of and in relation to these proceedings fixed in the amount of $7,205.01. 4. A copy of this order be provided by the applicant to the official receiver in Sydney within 2 days. 87 No orders were made by the Registrar in relation to the appointment of Ms Michael as Ms Carson's litigation representative. 88 As noted earlier, Ms Gabriele sought a review of the Registrar's decision.

COSTS 116 The Court's power to make an order for costs is discretionary - see: s 43 of the FCA Act. The power must be exercised judicially, not arbitrarily or capriciously or on grounds unconnected with the litigation, having regard to relevant principle and the justice of the case in all the circumstances: Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v Mukiza [2022] FCAFC 105 at [4]. An order for costs is intended "to compensate the successful party against the expense to which that party has been put by reason of the legal proceedings": Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [25]. 117 I accept that, by her email of 11 July 2023, Ms Gabriele attempted to meet at the Wollongong Local Court on 11 July 2023 to discuss payment of the amounts being claimed. Ms Gabriele also telephoned Good Legal on 11 July 2023 and spoke with Ms Amy Lagopodis. According to Ms Gabriele, Ms Lagopodis acknowledged receipt of Ms Gabriele's emails and stated that Mr Neve would be in contact with her to discuss the case and arrange payment. Ms Gabriele was not cross-examined; Ms Gabriele's account of this conversation was not contradicted and Mr Neve's evidence was consistent with Ms Gabriele's account. 118 Mr Neve acknowledged in his affidavit that he "refused" to meet Ms Gabriele. That refusal was not communicated to Ms Gabriele. He stated that he refused to meet with Ms Gabriele based on alleged "behavioural issues she displayed at the Wollongong Local Court during a previous legal matter". The "behavioural issues" were not identified. Not only was the refusal not communicated, but what was conveyed to Ms Gabriele by Ms Lagopodis was that Mr Neve would be in contact with her to arrange payment. 119 In AS2, Mr Kernaghan submitted that "[t]he relevance of the assertion that there was some attempt to meet on 11 July 2023 … and that Mr Neve declined this attempt is unclear". It was also submitted that Ms Gabriele's contention "presupposes an obligation on the part of Mr Neve [of Good Legal] where there was none". It was contended that Ms Gabriele's submission concerning her attempt to meet was irrelevant. 120 There may not have been an "obligation" on the part of Mr Neve to meet with Ms Gabriele, but the FCA Act does impose obligations on parties' lawyers relevant to the way in which they conduct proceedings and negotiations for settlement. The "overarching purpose of civil practice and procedure provisions" is described in ss 37M(1) and (2) in the following way: 37M The overarching purpose of civil practice and procedure provisions (1) The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes: (a) according to law; and (b) as quickly, inexpensively and efficiently as possible. (2) Without limiting the generality of subsection (1), the overarching purpose includes the following objectives: (a) the just determination of all proceedings before the Court; (b) the efficient use of the judicial and administrative resources available for the purposes of the Court; (c) the efficient disposal of the Court's overall caseload; (d) the disposal of all proceedings in a timely manner; (e) the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute. 121 Section 37N(1) and (2) provide: 37N Parties to act consistently with the overarching purpose (1) The parties to a civil proceeding before the Court must conduct the proceeding (including negotiations for settlement of the dispute to which the proceeding relates) in a way that is consistent with the overarching purpose. (2) A party's lawyer must, in the conduct of a civil proceeding before the Court (including negotiations for settlement) on the party's behalf: (a) take account of the duty imposed on the party by subsection (1); and (b) assist the party to comply with the duty. 122 The discretion under s 43 to order costs is affected by s 37N(4) which provides a mandatory consideration in considering the exercise of the discretion in circumstances where ss 37N(1) or (2) apply. Section 37N(4) provides: (4) In exercising the discretion to award costs in a civil proceeding, the Court or a Judge must take account of any failure to comply with the duty imposed by subsection (1) or (2). 123 The discretion is also affected by s 37M(1) and (2), because the civil practice and procedure provisions must be interpreted and applied in "the way that best promotes the overarching purpose": s 37M(3). Section 43 is a "civil practice and procedure provision": s 37M(4)(b). Section 37M(2)(e) provides that one of the objectives of the overarching purpose is the "resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute". 124 In oral submissions, Mr Kernaghan submitted that: (a) it could be inferred that Mr Neve did not meet with Ms Gabriele because he thought it would be of no utility; (b) a solicitor is under an obligation to keep costs to a minimum and "ringing or emailing or following up on further correspondence that has already substantively been provided is repetitious"; and (c) Ms Gabriele had sent an email on 9 July 2023 stating that she intended to commence proceedings and obtain legal representation and that Mr Neve was entitled to rely upon this, presumably meaning that the Court should infer that Mr Neve did not respond to Ms Gabriele because he thought she had legal representation. 125 As to these submissions: (a) Mr Neve could have given that evidence and did not. He stated that he refused to meet Ms Gabriele "because of behavioural issues she displayed at the Wollongong Local Court during a previous legal matter". (b) Ms Gabriele's request to meet to arrange payment was the first occasion on which she had sought to make payment and she explained that her position had changed. Responding would not have been repetitious and refusing to respond was unlikely to have the effect of keeping costs to a minimum. Indeed, assessed by reference to the facts as at that point in time, it was more likely to have kept costs to a minimum. (c) Ms Gabriele had never had legal representation in the past. Ms Gabriele's statement on 9 July 2023 was about future events: "I will be lodging [the application and affidavit] with the Federal Court" and "I will be represented". Mr Neve's evidence was "I received a message from Kim Gabriele that she was not going to file the appeal and wanted to meet with me in person to discuss the debt". It is not sensible on this evidence to infer that Mr Neve refused to meet because he thought Ms Gabriele was, or soon would be, represented. 126 Mr Kernaghan also submitted that Ms Gabriele could have paid on 11 July 2023 and did not because she did not want to. I accept that Ms Gabriele could have paid, having been given all information necessary to make a funds transfer. I accept that Ms Gabriele wanted to meet with Good Legal before making payment because she was concerned about various matters as explained in her emails sent before 11 July 2023. 127 In particular, Ms Gabriele was concerned about whether Ms Michael had given instructions for service of the bankruptcy notice. She asked this question of Good Legal and by a letter to Ms Michael which she sought to have conveyed to Ms Michael. A part of the context for Ms Gabriele's concerns lay in past events. Mr Lagopodis had confirmed that he was acting on Ms Carson's instructions during the Local Court hearing on 22 March 2018, but probably not on 2 July 2018, at least directly. There may well be reasons for all of this, but the point is that Ms Gabriele had concerns which were objectively reasonable. 128 I consider it unlikely that Ms Gabriele would have paid the amount identified in the bankruptcy notice on 11 July 2023. Ms Gabriele's evidence included that she wanted to discuss a possible payment plan and that she wanted to make payment directly into Ms Carson's account. Given the evidently difficult nature of the interactions between Mr Neve and Ms Gabriele, it is unlikely that a meeting would have resulted in a payment on 11 July 2023. 129 I accept that Ms Gabriele was likely to have been difficult to deal with and that there had been past events which resulted in difficult interactions. Nevertheless, I do not think it was reasonable not to respond in a timely manner to Ms Gabriele's request to meet on 11 July 2023. If there had been a timely response to Ms Gabriele's request to arrange payment, whether or not by way of a meeting, payment or an arrangement for payment may have been reached. If Ms Gabriele had made an arrangement to pay the relevant amount quickly, it is likely that the creditor's petition would not have been filed. 130 In my view, refusing to meet and not responding to Ms Gabriele's request, was conduct inconsistent with the overarching purpose - see, in particular s 37M(1), (2)(e); s 37N(1). I take this into account in exercising the discretion under s 43: s 37N(4). 131 Notwithstanding all of this, the fact is that Ms Gabriele could have, and did not, make the payment within 21 days and this is an important factor in considering the appropriate costs orders. 132 The creditor's petition was filed on 23 August 2023. It was served under cover of Mr Neve's letter dated 1 September 2023. Ms Gabriele (or her husband) paid the amount of $15,019.11 on 4 October 2023. 133 The first hearing was on 10 October 2023 at which Ms Gabriele sought dismissal of the petition. As I have mentioned earlier, I reject the submission that, from that time, Ms Carson "has only ever sought leave to withdraw the petition … and seek an order for her costs as agreed or in the ordinary way". As at 10 October 2023, Ms Carson's position was that she would not agree to the petition being dismissed unless Ms Gabriele paid interest of $304.67 and an amount in respect of the costs which Ms Carson had incurred. 134 In his letter of 23 October 2023, Mr Neve offered to settle if Ms Gabriele paid an additional $6,000 within 14 days. The letter stated that, if the offer was declined "we will proceed with bankruptcy proceedings and seek additional legal costs for any extra work necessitated by your actions". The letter stated that one of the advantages of bankruptcy for their client was that "bankruptcy would also potentially inhibit you from initiating or continuing any legal proceedings" and that "[t]his would serve to protect our client from further vexatious litigation on your part". 135 At the hearing on 23 November 2023, Mr Kernaghan confirmed to the Court that "[t]he issue that remains is that the interest components of the orders [$304.67] have never been paid satisfactorily, and the payment in full is required by the petitioner, Ms Carson". 136 On 24 November 2023, Mr Neve was still seeking payment of costs as a condition of agreeing not to "proceed with bankruptcy". This time the amount was $9,004.25 "representing a 30% discount [on indemnity cost of $12,863.22] on the costs incurred by our client". There was no claim for interest. At this point, the proceedings were being continued in order to secure payment of 70% of the incurred legal costs before agreeing to a withdrawal or dismissal of the petition. 137 The submissions filed for Ms Carson on 6 December 2023, signed by Mr Neve, sought a sequestration order against Ms Gabriele's estate and stated that "should the court refrain from making a sequestration order against [Ms Gabriele], [Ms Carson] will have no viable prospects of enforcing any currently owed debts or any judgment arising from these proceedings in favour of [Ms Carson], particularly those that fall below the bankruptcy threshold". The reference to "any judgment arising from these proceedings" was a reference to the claim for legal costs which might comprise a debt if a costs order were ultimately made. In other words, a sequestration order was being sought in order to facilitate recovery of claimed interest and a future costs order in Ms Carson's favour. This is consistent with the position which had been adopted since the first hearing on 10 October 2023. 138 Whilst it is legitimate for a creditor to proceed in bankruptcy for the purpose of recovering a debt, bankruptcy legislation is not enacted as a form of execution for debts or to facilitate the collection of debts from a solvent debtor who refuses to pay - see: Culleton v Balwyn Nominees Pty Ltd [2017] FCAFC 8; 343 ALR 632 at [40]-[45]. Less still is it enacted to facilitate recovery in relation to a future potential costs order in favour of a petitioning creditor. Bankruptcy is concerned with solvency. There is a public interest aspect to bankruptcy proceedings. A sequestration order alters the legal rights and obligations of a person in serious and lasting ways. 139 From 10 October 2023 until 21 February 2024, Good Legal was not formally seeking to withdraw the petition and seeking an order for costs as agreed or in the ordinary way. It was seeking a sequestration order in order to recover claimed interest and to secure payment of the costs Ms Carson had incurred in the proceedings. If Good Legal had secured payment of the costs it was demanding, it would no doubt have agreed to the proceedings being dismissed with no order as to costs. 140 Ms Gabriele retained solicitors and counsel in late November or early December 2023 at a time when Good Legal was seeking a sequestration order in order to secure payment of Ms Carson's legal costs in bringing the petition. Ms Carson formally pursued a sequestration order until 21 February 2024 in order to try and recover the legal costs in bringing the creditor's petition. 141 Given that Ms Carson was still seeking a sequestration order, Ms Gabriele filed an affidavit about solvency on 24 January 2024. 142 On 29 January 2024, Ms Gabriele's solicitor, Mr Green, wrote to Mr Neve serving the amended notice, the affidavit of Ms Gabriele dated 24 January 2024 and an outline of written submissions. The letter contended that Good Legal was "impermissibly using the proceeding to collect legal fees, merely asserted, and not proved" and stated that "[t]his is an abuse of the process of bankruptcy proceedings". 143 On 8 February 2024, Good Legal offered to resolve the proceedings on the basis that the creditor's petition be dismissed and the parties bear their own costs. That offer was stated to expire at 12.00pm on 16 February 2024. By this time, Ms Gabriele had incurred significant legal costs in defending against a sequestration order and establishing solvency. It was also received by her after it expired, through no fault of Good Legal. 144 The first time that Good Legal confirmed that it would not seek a sequestration order was in its written submissions of 21 February 2024, filed for the purposes of the hearing before the Registrar on 29 February 2024. Before that time, the only occasion on which Good Legal stated it would not proceed with bankruptcy was: (a) if Ms Gabriele paid incurred costs first; or (b) on 8 February 2024, if there was no order as to costs. 145 Mr Kernaghan submitted that account should also be taken of the fact that Ms Gabriele required three people for cross-examination in the hearing before the Registrar, two of whom were professionals, namely Mr Lagopodis and Mr Neve. I infer that this was a decision of counsel for Ms Gabriele. It is not uncommon for views to change about whether cross-examination is necessary. It rarely sounds in costs, but I have taken the matter into account as part of the relevant circumstances. It was also submitted that account should be taken of the fact that Ms Gabriele required Ms Michael for cross-examination on this s 35A(6) review and that she was asked questions of "no substantive relevance". Ms Gabriele asked questions of relevance, albeit she strayed into submission and argument. She did not do so any more than one would expect of someone who is unrepresented. The cross-examination was not lengthy and it did not materially add to the length of hearing which was completed in half a day. 146 The only legal costs incurred by Ms Gabriele are those paid to her solicitors and counsel who were retained sometime in late November or early December at a time when Good Legal was continuing with its application for a sequestration order. The involvement of legal representatives ended at some stage after the hearing before the Registrar. 147 Taking all of these matters into account, and taking into account considerations of proportionality, there should be an order that the applicant pay Ms Gabriele's costs. Whilst I have considered whether those costs should be paid on an indemnity basis, or whether they should be paid on a scale basis, I have ultimately concluded that they should be paid on a party and party basis.

Carson (by her litigation representative Jodi-Ann Michael) v Gabriele

At a glance

Court

Decision date

Before

Source

Judgment (15 paragraphs)

Parties

Legislation Cited (14)

Cases Cited (10)