O'Shanassy v Wingecarribee Shire Council, in the matter of O'Shanassy

Federal Court of Australia|2018-09-07|Before: Mr P, Bromwich J

The application be dismissed.
The applicant pay the respondent's costs of and incidental to the proceeding. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BROMWICH J: 1 This is an application by Mr Paul Gerard O'Shanassy to set aside a bankruptcy notice that was served on him by the Wingecarribee Shire Council. The bankruptcy notice requires payment of a judgment debt of the District Court of New South Wales in the sum of $378,936.59. The Council obtained that judgment by registering a costs certificate under s 368(5) of the now repealed Legal Profession Act 2004 (NSW) (LPA). Mr O'Shanassy's grounds are: (a) that the judgment is beyond what is permitted by s 368(5) of the LPA and therefore invalid; (b) that the bankruptcy notice could reasonably mislead a debtor; and (c) that he has an offsetting claim, having commenced defamation proceedings seeking damages from the Council and related persons arising from things said at council meetings. 2 For the reasons that follow, Mr O'Shanassy's application must be dismissed with costs.

The application 11 Mr O'Shanassy seeks orders setting aside the bankruptcy notice. There is no question that his application was brought within the required time of 21 days, having been lodged on 22 December 2018 and accepted for filing on 28 December 2018. 12 Mr O'Shanassy's three grounds are that: (1) the judgment debt is invalid and could not support the issue of the bankruptcy notice; (2) the bankruptcy notice is misleading; and (3) he has an offsetting claim. 13 There is some force to a submission made by the Council that this Court should not entertain Mr O'Shanassy's first ground, in circumstances where the District Court has refused a separate application by Mr O'Shanassy for leave to appeal out of time from that judgment. That being said, I am prepared to assume, as was urged by Mr O'Shanassy, that this Court should test the validity of the judgment to ensure that there was a proper foundation for the issue of the bankruptcy notice. As will be seen, I have concluded that, even with the benefit of that assumption, Mr O'Shanassy's application must fail.

Is the judgment debt invalid? 14 Mr O'Shanassy contends that the judgment debt is invalid on the basis that s 368(5) of the LPA does not authorise a departure from the process prescribed by the Criminal Procedure Act whereby costs are to be paid to the registrar. The burden of this argument is as follows: (1) section 257B of the Criminal Procedure Act does not empower the court to order payment to be made directly to the prosecutor, but only to the registrar of the court; (2) under s 368(5) of the LPA, a certificate of determination of costs is only taken to be a judgment upon it being filed in a court "having jurisdiction to order the payment of that money"; (3) for that reason, s 368(5) of the LPA does not confer on the District Court the jurisdiction to enter a judgment inconsistent with a superior court's order insofar as that order is specific as to the manner of determination and payment of the costs ordered; and (4) it therefore follows that the District Court did not have jurisdiction to make an order that Mr O'Shanassy pay the costs amount to the Council, as opposed to the registrar. 15 As may be seen, the critical issue is one of the construction of s 368(5) of the LPA. 16 Mr O'Shanassy makes three main points about the legislative context in support of his argument. I will record these submissions for completeness, noting that they bear only indirectly on the interpretation of s 368(5) of the LPA and cannot, of themselves, be determinative of the outcome. The first point is that r 7.5(1) of the Land and Environment Court Rules 2007 (NSW) makes it clear that "If the Court imposes a fine, the Court is to order the person on whom the fine is imposed to pay the fine to the Registrar". It was not contentious that costs are included as a "fine" for those purposes. The second point is that the provisions of the LPA concerning costs determinations do not provide for determination of "to whom" or "by whom" the costs are to be paid. In this regard, Mr O'Shanassy submits that the LPA does not authorise any departure from the process prescribed by the Criminal Procedure Act whereby costs are to be paid to the registrar. The final point is that an order for costs under the Criminal Procedure Act is a fine within the meaning of s 4(f) of the Fines Act 1996 (NSW). It is said that under the Fines Act, the registrar has a discretion as to the time period in which a costs order is to be paid and the way in which the order is enforced. Mr O'Shanassy submits that insistence upon payment to the registrar would have meant that he would be afforded the benefit of these procedures. 17 It may be accepted at the outset that the judgment in this case represents a departure from what is contemplated under the Criminal Procedure Act. The process contemplated by that Act, taken in isolation, is that costs will be paid to the registrar, for payment to the prosecution. Plainly enough, this is so that costs orders may be dealt with in accordance with the enforcement procedures under the Fines Act. 18 However, the real question that arises is whether, as a matter of statutory construction, s 368(5) of the LPA did not authorise the judgment in this case to require payment to the Council directly, as opposed to the registrar. As will be explained, I do not see any basis in the statute for reaching the conclusion that Parliament has imposed any such limitation or restriction. 19 Here, it must be borne in mind that s 368(5) of the LPA represents a distinct, elective pathway for the enforcement of costs, and may therefore involve a departure from the ordinary position under the Criminal Procedure Act. This is underscored by the observation that an important feature of s 368(5) is that the filing of a costs certificate supersedes the primary, unliquidated costs order, insofar as the certificate may be enforced as a judgment in its own right. That represents a significant modification to the operation of the Criminal Procedure Act in isolation. 20 In this case, the Council was faced with a choice. It could seek to enforce its costs by way of the procedures available under the Fines Act, or it could rely upon s 368(5) of the LPA to have its assessed costs registered as a judgment. In circumstances where the latter course could be taken in any competent court and was a matter for the Council, and not the registrar of the Land and Environment Court, the divergence in procedure and thus the form of the outcome was a natural consequence. While the schemes are intended to operate alongside each other, this does not mean that, without more, the procedural features of one scheme are to be construed as essential conditions governing the other. 21 In any event, three further points reinforce the conclusion that the judgment debt was not invalid under s 368(5) of the LPA. 22 First, I do not accept that requiring payment to be made directly to the Council meant that the judgment was inconsistent in substance with s 257B of the Criminal Procedure Act, especially having regard to the role of the transitional provisions by which the repealed provisions of the LPA remained applicable and relevantly modified the operation of the Criminal Procedure Act. Under s 257B, there can be no real doubt that it is the prosecution, and not the registrar, who is the party that is ultimately entitled to a costs order: see, for example, Klewer v Walton [2004] FCA 410; 2 ABC(NS) 344 at [12] (emphasis in the original): I do not accept this proposition for two reasons. First, the order that was actually made by the Magistrate of the Local Court, as recorded in the Certificate of Conviction annexed to the Bankruptcy Notice, is that the informant, Ms Klewer, is ordered to pay Mr Walton's professional costs of $10,504.00 within fourteen days. This is clearly an order directly in favour of Mr Walton. Secondly, the power to order that costs be paid to the registrar under s 213 of the Criminal Procedure Act, in my view, clearly constitutes the accused person against whom a matter is dismissed, and not the registrar, as the creditor who can bring proceedings in bankruptcy as a judgment creditor. Clearly, the registrar is not the judgment creditor. This provision only prescribes a procedure for the way in which payment is to be made. It does not support a claim that the accused person is not the relevant creditor. 23 In this regard, I reject Mr O'Shanassy's submission that Klewer v Walton should be distinguished on the basis that, in the present case, the registrar is no "mere conduit" and has "substantive" functions under the Fines Act. While I acknowledge that there are material differences in the provisions that applied in that case, I expressly adopt as apposite the observations made in the third last and penultimate sentences of the above quote: clearly, the registrar of the Land and Environment Court was not the judgment creditor. It is also equally clear that s 257B prescribed a procedure for the way in which payment was to be made, but did not purport to confer any entitlement on the registrar. The registrar was to be no more than a conduit for the receipt and passing on of costs paid into court. That was a formal requirement, but it had no bearing on the party to whom the costs were ultimately due. It cannot be regarded as an immutable means by which the debt obligation must be discharged in all circumstances. Thus, it cannot be said that the judgment debt in this case gave rise to any substantive inconsistency in terms of the Council's ultimate entitlement to be paid its costs, nor in terms of Mr O'Shanassy's obligation to pay those costs. This casts serious doubt on Mr O'Shanassy's argument that invalidity must follow. 24 Secondly, and fundamentally, Mr O'Shanassy's construction cannot be sustained at a textual level. He bases this construction on the requirement in s 368(5) of the LPA that a certificate be filed in a court "having jurisdiction to order the payment of that money" (emphasis added). Mr O'Shanassy submits that those terms impose limits on the relevant court, insofar as they suggest that a court's jurisdiction to register a costs certificate depends on there being consistency with the payment procedures that were provided for in the legislation giving rise to the foundational costs order. However, the terms of s 368(5) cannot be strained to bear that meaning. To the extent that the provision refers to a court "having jurisdiction to order the payment of that money", the only limitation that the legislature has identified is the jurisdictional limit of the relevant court. 25 Finally, and in any event, it must be borne in mind that s 368(5) of the LPA and s 257B of the Criminal Procedure Act are to be given a harmonious construction, so far as possible, to achieve the result which will best give effect to the purposes and language of the provisions in the two statutes: Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355 at [70]. Section 368(5) is clearly intended to provide a straightforward means for immediate enforcement of a costs amount once a party has had costs assessed. That is achieved by providing that a certificate is, upon filing and "with no further action", taken to be a judgment of the relevant court. The practical objects of the provision would be undermined by a construction that imposed technical limitations of the kind suggested by Mr O'Shanassy. 26 It follows that I do not accept Mr O'Shanassy's argument that the judgment debt is invalid. This ground must therefore fail.

Is the bankruptcy notice misleading? 27 It is necessary to consider whether the bankruptcy notice should be set aside on the ground that it could "reasonably mislead a debtor as to what is necessary to comply with the notice": see Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 at 79-80 and the cases there cited. Under s 306(1) of the Bankruptcy Act 1966 (Cth), formal defects or irregularities will not render the bankruptcy notice a nullity if, in the final analysis, they are not capable of misleading the debtor or otherwise causing substantial injustice: Crowl at 81. 28 The question of whether the bankruptcy notice is capable of misleading a debtor is not determined in a vacuum. Rather, the Court may have regard to facts extraneous to the notice itself, including the surrounding circumstances from the perspective of the actual debtor served with the notice: Fuller v Alford [2017] FCA 782; 252 FCR 168 at [64]. This is significant in this case to the extent that Mr O'Shanassy invites the Court to find that a real basis for confusion arises as between the bankruptcy notice and the antecedent orders of the Land and Environment Court, such that he is left in doubt as to what he is required to do to comply with the bankruptcy notice so as to meet his debt obligation following the costs order made by the Land and Environment Court. 29 Mr O'Shanassy argues that the bankruptcy notice is misleading because: (1) if he were to pay the judgment debt to the Council as required by the bankruptcy notice, he would be in breach of the orders of the Land and Environment Court; and (2) if he were to pay the judgment debt to the registrar as required by the orders of the Land and Environment Court, he would be in danger of committing an act of bankruptcy. I do not accept that a debtor in the position of Mr O'Shanassy could reasonably be misled in either respect. 30 In relation to (1), I do not consider that payment directly to the Council would involve a breach of the orders of the Land and Environment Court. Nor do I accept that a reasonable debtor in the position of Mr O'Shanassy would think so, particularly given that those orders themselves do not refer expressly to payment to the registrar, and only do so indirectly to the extent that s 257B of the Criminal Procedure Act is identified as the basis for the order. While those orders undoubtedly form the basis for Mr O'Shanassy's liability for costs, the ensuing costs certificate is enforceable for the liquidated debt as a judgment in its own right. In any event, the bankruptcy notice makes it plain enough that payment is to be made to the Council. 31 In relation to (2), I do not accept that, once served with the bankruptcy notice and the annexed judgment, a reasonable debtor in the position of Mr O'Shanassy would think that he or she was required to make payment to the registrar of the Land and Environment Court and to no one else. The clearly expressed requirement in the bankruptcy notice is to make payment to the Council. Moreover, it is difficult to see that any confusion would arise from the orders of the Land and Environment Court themselves, given the terms of the subsequent costs certificate, which is taken to be a liquidated judgment debt in its own right. The potential to mislead is, upon careful consideration, illusory. It follows that this ground must also fail.

Does Mr O'Shanassy have an offsetting claim? 32 Mr O'Shanassy also seeks to establish an offsetting claim, however styled, within the terms of s 40(1)(g) of the Bankruptcy Act, which refers to a "counter-claim, set-off or cross demand". To this end, he must show the existence of a claim in a sum equal to or exceeding the amount of the judgment debt that has sufficient substance to warrant setting aside the bankruptcy notice: see Croker v Commonwealth [2011] FCAFC 25; 9 ABC(NS) 44 at [10] and [25]. Given the quantum of the judgment debt in this case, this argument was, understandably, only faintly advanced. 33 The offsetting claim upon which Mr O'Shanassy relies is based upon a proceeding he has brought for defamation. It is brought against the Council and four other defendants who are said to be either councillors or employees of the Council. Clearly enough, it is not a claim that could have been brought in the Land and Environment Court proceedings. The existence of the claim is supported in evidence by Mr O'Shanassy's notice of motion and an amended statement of claim. As set out in the pleading, Mr O'Shanassy complains of two matters. Broadly speaking, the first concerns representations made at a Council meeting about Mr O'Shanassy's compliance with road laws, while the second concerns representations that Mr O'Shanassy has been dishonest in making miniscule repayments of his debt to the Council, in circumstances where he is evidently wealthy and owns expensive cars. By way of damages, Mr O'Shanassy claims loss of earnings as a solicitor as a result of being defamed, a claim that will be difficult to make out and even more difficult to quantify. 34 Issues of quantum aside, the difficulty that Mr O'Shanassy faces in proving that his claim is viable is that a statement of claim is not evidence of anything more than the existence of the asserted claim: see Bhagat v Global Custodians Ltd [2002] FCA 223; sub nom Bhagat v Global Custodians Ltd [2002] FCAFC 51 at [52]-[53]; see also Massih v Esber [2008] FCA 1452; 250 ALR 648 at 651-2 [18]. As such, Mr O'Shanassy has failed to satisfy me that his claim in defamation is of substance, let alone that the likely quantum of any award he would obtain if successful would meet or exceed the amount that he is required to pay to comply with the bankruptcy notice. 35 It is not necessary to explore the requirement that the cross-claim be mutual and in the same interest: see Stec v Orfanos [1999] FCA 457 at [24]. That may have been a particular problem for Mr O'Shanassy to meet in this case given the presence of the other defendants to his defamation action and the difficult issues of attribution and vicarious liability that may arise. However, it is sufficient for present purposes that I cannot be satisfied that the claim is one of substance or that any award of damages that Mr O'Shanassy might be able to secure would be significant enough to offset the judgment debt in this case to any substantial degree, let alone meet it in quantum. It follows that this ground must also fail.

Conclusion 36 Mr O'Shanassy's application must be dismissed with costs. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bromwich.

Legal Profession Act 2004(NSW)ss 368(5), 369

Criminal Procedure Act 1986(NSW)ss 257B, 257G

Bankruptcy Act 1966(Cth)ss 306(1), 40(1)(g)

Fines Act 1996(NSW)s 4(f)

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