Croker v Commissioner of Taxation

REASONS FOR JUDGMENT 1 Mr Croker instituted proceedings against the Commissioner of Taxation of the Commonwealth of Australia ('the Commissioner') in the Supreme Court of NSW seeking damages for defamation. On 28 October 2003 Levine J summarily dismissed the proceedings and ordered Mr Croker to pay the Commissioner's costs. 2 On 23 July 2004 a costs assessor issued a certificate as to determination of costs pursuant to s 208J of the Legal Profession Act 1987 (NSW) ('the LPA'). The costs were assessed at $12,972.30. The certificate is, on the filing of the certificate in the office or registry of the Court having jurisdiction to order the payment of that amount of money, and with no further action, taken to be a judgment of that Court for the amount of the unpaid costs, and the rate of interest payable in respect of that amount of costs is the rate of interest in the Court in which the certificate is filed: LPAs 208J(3). 3 On 1 September 2004 the certificate was filed in the registry of the Local Court at Level 5, The Downing Centre, 143-147 Liverpool Street, Sydney. A back sheet which was attached to that certificate shows: 'Balance of debt: $12,972.30 Costs of registration: $ 63.00 … Total: $13,035.30' 4 On 22 September 2004 there was issued under the seal of the Local Court a document styled 'Certificate of Judgment' which stated that: '1. In this matter the plaintiff recovered judgment against the defendant on 01/09/2004 in the sum of $13,035.30.' That was certified to be: '… a true and correct copy of the entry of the abovementioned judgment in the records of this Court.' 5 On 29 October 2004 the Commissioner issued a bankruptcy notice against Mr Croker claiming that he owed the Commissioner a debt of $13,221.72. In the schedule to the bankruptcy notice the amount of the debt was shown as comprising: 'Amount of judgments or orders - $13,035.30 … interest accrued since the date of judgments or orders - $ 186.42 Total debt owing - $13,221.72' An interest calculation appended to the bankruptcy notice showed that interest was claimed pursuant to s 39(1) of the Local Courts (Civil Claims) Act 1970 (NSW) on the principal sum of $13,035.30 from 2 September 2004 to 29 October 2004 at the rate of nine per cent per annum totalling $186.42. 6 The bankruptcy notice was served on 9 November 2004. Thus the time for compliance with the notice expired on 30 November 2004. On 29 November 2004 Mr Croker filed an application to set aside the bankruptcy notice. In addition, the application sought an award of $1 million or other amount in 'compensatory, exemplary and notional damages'. The application does not disclose the basis on which those damages are claimed. Orders have been made from time to time extending the date for compliance with the bankruptcy notice. 7 On 21 December 2004 the Commissioner filed a notice of motion seeking orders that Mr Croker's application be struck out in whole or in part pursuant to Order 11 rule 16 of the Federal Court Rules ('the FCR') or alternatively that it be summarily dismissed pursuant to Order 20 rule 2 of the FCR and in the further alternative that Mr Croker should provide security for the Commissioner's costs of these proceedings pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth). 8 When the matter came on for hearing, I informed the parties that it seemed to me to be pointless to consider whether the application to set aside the bankruptcy notice should be struck out or summarily dismissed, when the application itself was before me for hearing. I indicated to the parties that I would proceed to determine that application, and that consideration of the Commissioner's notice of motion would be confined to the damages claim.

Is the bankruptcy notice valid? 9 In Mr Croker's contention the bankruptcy notice is invalid as it overstates the quantum of his debt to the Commissioner in the sum of $63 and in a further sum being the proportion of the interest claimed which is referable to the inclusion of the $63 in the amount of the judgment or order. 10 Mr Croker's contention that the amount of the debt as claimed in the bankruptcy notice is overstated should be accepted. That is because s 208J(3) of the LPA specifies the consequences of filing a certificate in the Local Court, namely that the certificate is taken to be a judgment of that Court for the amount of the unpaid costs, ie a judgment for $12,972.30. Mr Melrose, the solicitor for the Commissioner, was unable to point to any legislative or regulatory provision which would authorise entry of judgment in the sum of $13,035.30. My attention was not directed to any provision equivalent to s 107(1)(a) of the Service & Execution of Process Act (Cth) which, in cases to which it applies (and the present is not such a case) allows recovery of the costs and expenses incidental to the lodging of a copy of the judgment in an appropriate Court of a State other than the place of rendition. 11 The Local Court has issued a certificate said to be under the Local Courts (Civil Claims) Act 1970 (Pt 26 r 7) that the records of the Local Court contain an entry to the effect that the plaintiff recovered judgment against the defendant on 1 September 2004. The Local Courts (Civil Claims) Act does not contain a Part 26 rule 7 and Mr Melrose was unable to refer me to any statutory or regulatory provision which authorised the issue of the certificate of judgment. 12 There have been cases such as Bhattacharya v Berger [1999] FCA 883 (on appeal [1999] FCA 1302) where the Court has proceeded on the assumption that the costs of registration of a certificate in the Local Court were properly added to the amount of the certified costs, but my attention has not been directed to any case in which the issue has been squarely argued or decided. 13 In Croker v Federal Commissioner of Taxation (2003) 52 ADR 226 the Full Court said of a certificate such as the present (at 230): 'The purported "registration" of such a certificate as a judgment by the registrar of the Local Court is a mere clerical entry in the records of that court. It is not an order pronounced or a judgment given by a superior court of record.' 14 When a certificate is filed with the Local Court, the Local Court does not adjudicate upon anything. The records of the Local Court either correctly reflect the operation of s 208J(3) of the LPA in the circumstances of the case or they do not. If they do not, then the issue of a 'certificate of judgment' which incorrectly reflects the operation of s 208J(3) is devoid of any legal effect. 15 Mr Melrose conceded that Mr Croker had given notice to the Commissioner in accordance with the provisions of s 41(5) of the Bankruptcy Act 1966 (Cth) ('the Bankruptcy Act'), but submitted that the bankruptcy notice should not be set aside because it was not likely to mislead, as Mr Croker was aware of the error. However, in Walsh v Deputy Federal Commissioner of Taxation (1984) 156 CLR 337 Gibbs CJ (with whom the other members of the Court agreed) said (at 339): 'There is no doubt that a bankruptcy notice will be invalid if the sum specified in the notice as the amount due to the creditor exceeds the amount for which the creditor is entitled to issue execution, provided that the debtor gives timely notice under s. 41(5) of the Bankruptcy Act 1966 (Cth), as amended, that he disputes the validity of the notice on that ground.' 16 Mr Melrose relied upon the decision of the Full Court in Seovic Civil Engineering Pty Ltd v Groeneveld (1999) 87 FCR 120 ('Seovic') as establishing that an overstatement of the amount due by the debtor will only lead to the avoidance of the bankruptcy notice if the overstatement could reasonably mislead the debtor. Whilst the authors of Australian Bankruptcy Law and Practice assert (at [41.5.05]) that 'suggestions' to that effect are to be found in the Full Court's decision in Seovic, a reading of the judgment does not support that proposition. Seovic does suggest that in order to comply with s 41(5), the debtor must provide sufficient information in the s 41(5) notice to enable the creditor to identify what is said to be thealleged misstatement (at 129). In the light of that requirement, a conclusion that Mr Croker cannot set aside the bankruptcy notice because he knew of the error which it contains would be decidedly odd. 17 Mr Melrose put an alternative submission that leave to amend the bankruptcy notice to correct any errors which it was found to contain should be granted. He relied upon s 33(1)(b) of the Bankruptcy Act as the source of power, but was unable to refer me to any decided case in which leave had been granted to correct an error in a bankruptcy notice as to the amount of the judgment debt. 18 Seovic indicates that the object of a notice under s 41(5) is to provide the creditor the opportunity of considering, for example, whether the bankruptcy notice should be withdrawn, and a fresh notice correcting the misstatement issued, thereby avoiding unnecessary and wasteful litigation. The Commissioner chose not to adopt that course here, and no reason has been shown why leave to amend the bankruptcy notice should be given after that litigation. Any amendment of the amount claimed in the bankruptcy notice might be productive of unfairness to Mr Croker unless there was also an amendment of the date for compliance, but no offer to amend the notice in that respect was proffered. It is open to the Commissioner to issue a fresh notice, and it has not been shown that justice to the Commissioner requires that the existing notice be amended by the correction of the amount claimed.

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