Croker v Commissioner of Taxation

Federal Court of Australia|2002-09-18|Before: Kirby JJ, Moore J

1 This is an application by Mr Clayton Robert Croker ("the debtor") to set aside a bankruptcy notice served on him by the Commissioner of Taxation ("the Commissioner") on 25 June 2002. The application is brought under the Bankruptcy Act 1966 (Cth) ("the Act"). The notice was issued by the Commissioner to recover costs the debtor was ordered to pay in proceedings he brought in the High Court.

Background 2 The present application is preceded by a history of litigation between the debtor and the Commissioner. The debtor brought proceedings in the Residential Tenancies Tribunal. He was unsuccessful. The debtor challenged the determination of the Tribunal in the Supreme Court of New South Wales. In those proceedings the debtor sought the production of documents by a subpoena directed to the Commissioner. The Commissioner successfully resisted the production of the documents and the subpoena was set aside. Costs were awarded against the debtor. He sought leave to appeal to the Court of Appeal over the setting aside of the subpoena. Again he was unsuccessful and again he was ordered to pay the Commissioner's costs. 3 The debtor then sought special leave to appeal in the High Court. That application was heard by Gummow and Kirby JJ on 17 March 2000 who refused leave and ordered the debtor to pay the Commissioner's costs. On 28 August 2000 a bill of costs was filed on behalf of the Commissioner in the High Court. The taxation was dealt with on 29 March 2001 and the costs were taxed at $5781.98. On 24 April 2001, a certificate of taxation was issued assessing costs at $5781.98. 4 On 18 May 2001, according to an affidavit sworn by a solicitor acting for the Commissioner, the "certificate of taxation" was registered as a civil judgment in the Local Court at the Downing Centre in Sydney, in proceedings numbered 5908 of 2001. The certificate of judgment issued by the Local Court identifies the judgment debt as $5837.98. The difference of $56 between the taxed costs and the certificate of judgment issued by the Local Court was, as explained by the solicitor appearing for the Commissioner in these proceedings, the registration fee paid by the Commissioner to register the High Court judgment as a judgment of the Local Court. The solicitor appearing for the Commissioner said it was appropriate to claim this fee having regard to s 107 of the Service and Execution of Process Act 1992 (Cth), and add it to the taxed costs. 5 The certificate of judgment states: Local Courts (Civil Claims) Act, 1970 CERTIFICATE OF JUDGMENT (Pt 26 r. 7.) Issued from the Local Court at: LEVEL 5 THE DOWNING CENTRE 143-147 LIVERPOOL STREET SYDNEY 2000 in the State of New South Wales Telephone no: 9287 7923 File no: 5908/01 Judgment Creditor: COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Ref: 00025627 Judgment Debtor: CLAYTON ROBERT CROKER 1. In this matter the plaintiff recovered judgment against the defendant on 18/05/2001 In the sum of $5,837.98 2. I am informed by the judgment creditor that $0.00 has been paid in respect of the judgment debt. 3. Interest is payable on the judgment debt at the rate PRESCRIBED FOR THE PURPOSES OF SECTION 95(1) OF THE SUPREME COURT ACT, 1970. 4. … CERTIFICATE I CERTIFY THAT THE ABOVE IS A TRUE AND CORRECT COPY OF THE ENTRY OF THE ABOVEMENTIONED JUDGMENT IN THE RECORDS OF THIS COURT. Dated: 20/06/2001 6 On 18 June 2002, the bankruptcy notice presently in dispute was issued by the Official Receiver. The notice recites that the debtor owes the Commissioner a total debt of $6,467.37. As noted earlier the bankruptcy notice was served on the debtor on 25 June 2002. 7 The Schedule attached to the bankruptcy notice is as follows: Column 1 Column 2 1. Amount of judgment or order $5,837.98 plus 2. Legal costs if ordered to be paid and a specific amount was not included in the judgement or order $0.00 plus 3. If claimed in this Bankruptcy Notice, interest accrued since the date of judgment or order (See Note 2, below) $629.39 4. Subtotal $6,467.37 less 5. Payments made and/or credits allowed since date of judgment or order $0.00 6. Total debt owing $6,467.37

On 8 July 2002, the applicant filed the present application to set aside the bankruptcy notice.

Statutory framework 8 It is convenient, at this point, to refer briefly to the statutory provisions which are relevant to the application. The bankruptcy notice was issued pursuant to s 41 of the Act, and in a form prescribed by Rule 4.02 of the Bankruptcy Regulations 1996 (Cth). The application presently before the Court is made under ss 30 and 41(6A) of the Act. The nature of the jurisdiction was described by Kenny J in Biritz v National Australia Bank Ltd (2001) 187 ALR 757 at 761: The Court has jurisdiction to set aside a bankruptcy notice by virtue of s 30(1) of the Act, where such an order is necessary for the purposes of carrying out or giving effect to the Act in a particular case: see Olivieri v Stafford (1989) 24 FCR 413 at 430 per Gummow J. Further, the express power in s 41 of the Act to extend time for compliance with the requirements of a bankruptcy notice has been said to carry with it the power to set aside the notice itself: see Re Sterling; Ex parte Esanda Ltd (1980) 30 ALR 77 at 83, referred to in Re Briggs; Ex parte Briggs v Deputy Commissioner of Taxation (WA) (1986) 12 FCR 310 at 311-312; Re Hutchins; Ex parte Wall (unreported, Federal Court of Australia, Spender J, 6 May 1998) and Wenkart v Abignano [1999] FCA 354 at [22]. 9 Mention should also be made of the manner in which costs are taxed in the High Court. Order 71 of the High Court Rules 1952 governs the taxation and assessment of costs. Order 71 r 19 enables a Registrar to tax costs unless otherwise directed by the Court or a Justice. There are a number of provisions for review of taxation within the High Court Rules, however none of these appear to have been pursued by the debtor. The certificate issued by the taxing officer is final. Order 71 r 89 (3) provides: "89(3)The certificate or allocatur of the taxing officer is final and conclusive as to all matters which have not been objected to in accordance with these Rules." The finality of a certificate was considered recently by Kirby J in Sanders v Snell (No. 2) (2000) 174 ALR 53. Order 43A r 2 provides that every award of costs under a judgment of the High Court carries interest at the rate prescribed for the relevant Supreme Court. 10 Reference should also be made to be legislative provisions concerning the execution of a judgment of the High Court. Section 77M of the Judiciary Act 1903 (Cth) provides: "(1) Subject to the Rules of Court, a person in whose favour a judgment of the High Court is given is entitled to the same remedies for the enforcement of the judgment in a State or Territory, by execution or otherwise, against the person, or against the property of the person, against whom the judgment is given, as are allowed in like cases by the laws of that State or Territory to persons in whose favour a judgment of the Supreme Court of that State or Territory is given. (2) This section does not affect the operation of any provision made by or under any other Act or by the Rules of Court for the execution and enforcement of judgments of the High Court." Execution of High Court judgments is also governed by Order 45 of the High Court Rules. Relevantly, O 45 r 3 provides: "An order of the Court or a Justice in a proceeding may be enforced against all persons bound by the order in the same manner as a judgment to the same effect." 11 Reference also should be made to Part 6 of the Service and Execution of Process Act and specifically, ss 104 and 105. It was by reference to these provisions that the Commissioner registered the High Court judgment in the Local Court. Section 105(1) provides a judgment may be registered in an "appropriate court" other than the place of rendition. Section 105(6) defines the expression "appropriate court". It states: "In this section: appropriate court, in relation to a State other than the place of rendition of a judgment, means: (a) if the court of rendition is the Supreme Court of the place of rendition - the Supreme Court of the first-mentioned State; or (b) in any other case: (i) the court of the first-mentioned State (including, if applicable, the Supreme Court of that State) in or by which relief as given by the judgment could have been given; or (ii) if there is more than one such court - the court of more limited jurisdiction; or (iii) if there is no such court - the Supreme Court of the first-mentioned State." What is a State is addressed by s 5 which provides: "(1) For the purposes of this Act (other than section 125), each Territory (other than a Territory that, under subsection 7(2), is taken to be part of a State or another Territory) is to be regarded as a State. (2) …" Thus the Australian Capital Territory is to be treated as a State for the purposes of relevant provisions of the Service and Execution of Process Act.

Discussion 12 It is convenient to start with a consideration of the procedure followed by the Commissioner to secure a judgment in the Local Court against the debtor in the sum of $5837.98. The Service and Execution of Process Act does not specifically address the enforcement of High Court judgments. The course adopted in registering the certificate of taxation, as the process was described in an affidavit filed on behalf of the Commissioner, in the Local Court was explained by the Commissioner's solicitor in these proceedings in the following way. First, it was a common practice to register a costs certificate or, more accurately, the judgment arising from a costs order in the High Court, as a judgment in the Local Court for the purposes of enforcement. This appears to be so. It was justified in these proceedings on the basis that s 14 of the High Court of Australia Act 1979 (Cth) provided that the Australian Capital Territory was the seat of the High Court. Thus, it was submitted, the High Court could be treated as a Territory Court for the purposes of the Service and Execution of Process Act. Having regard to the terms of s 105, a costs order could be registered in the Local Court and enforced as a judgment of that court. 13 It is true that at one point in its history, the High Court could exercise broad original jurisdiction in the Australian Capital Territory: see The Federal Capital Commission v Laristan and Investment Co Pty Ltd (1929) 42 CLR 582, as a result of the operation of the Seat of Government Acceptance Act 1909 (Cth): see also Pitcher v Federal Capital Commission (1928) 41 CLR 385 at 390. At present the nature and extent of the High Court's subsisting original jurisdiction in the Australian Capital Territory and the source of Parliament's power to confer that jurisdiction is an issue of some complexity: see, for example, Spratt v Hermes (1965) 114 CLR 226 and later discussion of that case in Spinks v Prentice (1998) 87 FCR 89 and see also O'Neill v Mann (2000) 101 FCR 160. However the Service and Execution of Process Act was enacted to facilitate the service and execution throughout the Commonwealth of the process and the judgments of the courts of the States: see s 51(xxiv) of the Constitution and McGlew v New South Wales Malting Co Ltd (1918) 25 CLR 416. I have little doubt that it was not intended to provide a mechanism for the enforcement of judgments of the High Court by a process of registration in a State Court. 14 Rather, since 1903 there has been a legislative scheme for the enforcement of judgments of the High Court now reflected in s 77M of the Judiciary Act: see s 26(b) of the High Court Procedure Act 1903 (Cth) and Lysaght Bros & Co Ltd v Falk (No 2) (1905) 2 CLR 443. It appears to me that if the course followed in registering the costs order (which, by operation of O 45 r 3 of the High Court Rules, can be enforced as a judgment) was open, it would be because s 77M or the High Court Rules authorised that approach. A provision in very similar terms to s 77M is found in s 53 of the Federal Court of Australia Act 1976 (Cth). However it is tolerably clear that such provisions bring into play in relation to judgments of the High Court or the Federal Court, in any particular State or Territory, the laws of that State or Territory concerning enforcement of judgments of the Territory or State Supreme Court. Illustrations of the operation of s 53 (or its limits) can be found in Re Basile; Ex parte Ancich (1985) 8 FCR 287; Guthrie v Robertson (1987) 13 FCR 336; Tubby Trout Pty Ltd v Sailbay Pty Ltd (1996) 63 FCR 530 and Franklins Ltd v The Reject Shop (Aust) Pty Ltd [1999] FCA 1190. Section 77M does not authorise the process of registering a costs order which was followed by the Commissioner in the present matter. Nor, as far as I can ascertain, do the High Court Rules. 15 However the Commissioner submitted that even if the manner in which the judgment in the Local Court was obtained was legally flawed, it is open to the Court as a matter of discretion not to go behind the judgment. Even if the judgment on which the bankruptcy notice was immediately based, the Local Court judgment, was obtained by an inappropriate procedure, it does not necessarily mean that it cannot found a bankruptcy notice if there is a genuine debt owing. In Re King; Ex parte Gallagher Ryan & Maloney v King (1994) 54 FCR 493, an application was made by a judgment debtor to set aside a creditor's petition on the basis of non-compliance with statutory procedures governing the recovery of costs by solicitors from clients and specifically, s 61 of the Supreme Court Act 1986 (Vic). Northrop J said (at 495-497): "In my opinion, and in the absence of reference to authority, it seems that a non-compliance with s 61 merely makes a claim for costs unenforceable. Non-compliance does not go to the validity of the claim. … …in my opinion, the non-compliance by the judgment creditor with the provisions of s 61 of the Supreme Court Act does not affect the validity of the judgment. The debt is owed. There is evidence of its existence. It is sufficient to support the bankruptcy notice and the making of the sequestration order." 16 A similar issue was considered by Drummond J in Amos v Brisbane TV Ltd (2000) 100 FCR 82 at 88-99. In that matter, it was alleged that the correct procedure in relation to the relevant Supreme Court Rules had not been followed. Drummond J said: "It was said that the bankruptcy notice is bad because the certificate of taxation does not comply with O 91 r 116 the Supreme Court Rules in that the certificate contains alterations which have not been initialled by the taxing officer. There is no doubt that the judgment on which the notice is founded, constituted by the order for costs and the certificate of taxation based on the agreement of Mr Amos and the creditor as to the quantum of those costs, is in respect of a debt truly owing by Mr Amos. This defect in the certificate is not sufficient to deprive it of its effectiveness to quantify the amount of Mr Amos' liability that was imposed by the judge's order that he pay the creditor's costs of his action. Mr Amos does not dispute the accuracy of the information in the certificate; he also swears that a photocopy of the certificate of taxation annexed to the bankruptcy notice is 'a true office copy of the certificate of taxation'. … When the question is whether there is a judgment sufficient for the purposes of s 40(1)(g) the Bankruptcy Act 1966 (Cth), the Bankruptcy Court is not concerned with technicalities, eg, with whether it has been obtained in accordance with the procedural requirements of the court which pronounced it, or whether it has been given in the wrong form: Re Skaff; Ex parte Farrow Mortgage Services Pty Ltd (1993) 41 FCR 331 at 336 and Re Ferguson; Ex parte EN Thorne & Co Pty Ltd (1969) 14 FLR 311 at 320 and cf McIntosh v Shashoua (1931) 46 CLR 494 at 520. It was also said that in breach of Supreme Court O 91 the certificate of taxation was issued before the fees payable in the Registry of that Court for the taxation were not paid provides another ground for holding that there is no such judgment sufficient to support the notice. The relevant rule may be O 94 r 2 and item 22 of Sch 3, rather than O 91. But for the same reasons that non-compliance with O 91 r 116(2) does not invalidate the notice, non-compliance with this other rule cannot have that effect either." [Emphasis added] 17 Nothing in the material in this matter would suggest that the debtor is not liable to pay $5781.98 in compliance with the costs order made by the High Court and interest on that sum: see O 43A r 2. There is a genuine debt in relation to that sum. The debtor is obliged to pay it, apart from any obligation under the Local Court (Civil Claims) Act 1970 (NSW), because it is an enforceable order made by the High Court. 18 However the amount claimed in the bankruptcy notice exceeded the costs by $56, being the amount payable for the registration of the certificate of taxation in the Local Court and interest on that sum. While it is a very small proportion of the total amount and even, in a sense, a trifling amount, it represents an amount the debtor would only be liable to pay the Commissioner because of the procedure adopted of registering the High Court costs order. That is because, by operation of s 107 of the Service and Execution of Process Act, reasonable costs of lodging the judgment for registration are recoverable by way of enforcement of the judgment as registered. 19 Ultimately, however, the fact that the demand in the bankruptcy notice reflected an amount that the debtor may well not have to pay if the judgment as registered with the Local Court was set aside (but only as a judgment of that Court) does not, in my opinion, warrant an order setting aside the bankruptcy notice. As a Full Court said in Emerson v Wreckair Pty Ltd (1992) 33 FCR 581 at 588: "There is … no requirement for the issue of a bankruptcy notice that the creditor have a judgment for any minimum amount. Nor is there a requirement that a creditor who petitions for a sequestration order based upon an act of bankruptcy of the kind for which s 40(1)(g) of the Bankruptcy Act provides rely, wholly or at all, upon the debt upon which the bankruptcy notice was founded. It would, therefore, seem appropriate that upon an application to a court exercising jurisdiction in bankruptcy to set aside a bankruptcy notice, the court should not go behind a judgment where the grounds upon which the judgment is challenged are such that, if accepted, they would only support a finding that the amount of the debt be reduced and will not support a finding that there was in truth no debt at all." See also Re Seghabi; ex parte GIO General Ltd (1994) 52 FCR 296 and Biritz v National Australia Bank Ltd (2001) 187 ALR 757 and on appeal in (2002) 189 ALR 707. 20 What the debtor is seeking to do is, to use the words of the Full Court in Emerson v Wreckair Pty Ltd, prevent the judgment creditor, the Commissioner, from having recourse to the provisions of the Act. In my opinion, the bankruptcy notice should not be set aside because the demand included the $56 registration fee and interest on that amount, nor, as earlier discussed, should it be set aside because the judgment in the Local Court was obtained by an inappropriate procedure. 21 It is necessary to deal with one further matter. During the hearing, the debtor raised the possibly of a counter-claim, set off or cross-demand, based on alleged breaches of the Financial Management and Accountability Act 1997 (Cth). However, this Act appears to relate solely to the proper use and management of public money, public property and other Commonwealth resources, and apparently contains no provisions which directly or indirectly create a cause of action resulting in compensation payable to individuals for maladministration or defective administration. In any event, even if such a cause of action was available, the debtor has not presented any cogent evidence indicating that he has suffered a detriment as a result of any conduct on the part of the Commissioner nor that there has been conduct which might constitute maladministration or defective administration. 22 Accordingly I dismiss, with costs, the application of the debtor to set aside the bankruptcy notice. A mediation conference held on 30 August 2002 by a Registrar of this Court to resolve this matter did not bear fruit. I certify that the preceding twenty two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore.

Associate: Dated: 18 September 2002 The Applicant appeared in person.

Solicitor for the Respondent: Australian Government Solicitor

Date of Judgment: 18 September 2002

Bankruptcy Act 1966(Cth)ss 30, 40(1)(g), 41(6A)

Local Court (Civil Claims) Act 1970(NSW)

Financial Management and Accountability Act 1997(Cth)

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