Scott v NIMLAW Pty Ltd

Record of oral reasons delivered on 15 November 2023 6 The applicant, Dr Susan Jane Scott, has commenced an application in this Court for orders setting aside a bankruptcy notice, served upon her by the respondent, NIMLAW Pty Ltd on 27 July 2023. The originating application was lodged on 8 August 2023. 7 The bankruptcy notice states that Dr Scott owes to NIMLAW a debt in the amount of $20,446.82. The debt forming the subject matter of the bankruptcy notice has its history in a retainer between Dr Scott and a legal practice operated by a company, formerly named Minicozzi Lawyers. I will refer to that entity as the Firm. Dr Scott has made submissions about the proper identity of the debtor. 8 It appears to be undisputed that Dr Scott engaged the Firm to perform legal services in connection with disputes that she had with other entities and persons concerning the treatment of her now deceased mother and the management of her deceased estate. That is perhaps an overly simplistic description of the subject matter of the legal services provided because, on the basis of submissions made before this Court today, it appears that Dr Scott has for many years now been engaged in legal proceedings relating to the treatment of her mother and aspects of her financial affairs and her health. Nothing I am about to say should be understood as diminishing the importance of those matters to Dr Scott. 9 The legal services performed by the Firm were the subject of invoices issued to Dr Scott. It appears to be undisputed that Dr Scott subsequently entered into deeds with the Firm, which recorded arrangements for the payment of the invoices. 10 Ultimately, NIMLAW commenced proceedings in the Magistrates Court of South Australia, being an action in debt with respect to the fees alleged to be owing under the deeds or, at least, part of it. Those proceedings became the subject of a judgment of the District Court of South Australia on 27 April 2023: Nimlaw Pty Ltd v Scott [2023] SADC 42 (Slattery J). 11 Section 43 of the Bankruptcy Act 1966 (Cth) confers jurisdiction on this Court to make sequestration orders. Section 43(1) relevantly provides that: (1) Subject to this Act, where: (a) a debtor has committed an act of bankruptcy; and ... the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor. 12 Section 40 of the Act is titled "Acts of Bankruptcy". Section 40(1) relevantly provides that: (1) A debtor commits an act of bankruptcy in each of the following cases: … (g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not: (i) where the notice was served in Australia-within the time fixed for compliance with the notice; or ... comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained. 13 The time for compliance on the face of the bankruptcy notice was three weeks from the date of service. However s 41(7) of the Act provides: Where, before the expiration of the time fixed for compliance with a bankruptcy notice, the debtor has applied to the Court for an order setting aside the bankruptcy notice on the ground that the debtor has such a counter-claim, set-off or cross demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter-claim, set-off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied. 14 The originating application refers to s 40(1)(g) and s 41(7). It also refers to s 41(6A)(b), which refers to extensions of time to comply with a bankruptcy notice in circumstances where there are proceedings commenced to set aside the judgment upon which a judgment debt is based. 15 There has been, before the expiration of the time fixed for compliance with the bankruptcy notice, an application made to this Court for an order setting it aside. It follows, that the time for compliance is deemed to have been extended until and including the day on which the Court determines whether it is so satisfied as to whether Dr Scott has a counter-claim, set-off or cross demand of the kind that is referred to in s 40(1)(g). More specifically, the Court must be satisfied that Dr Scott has, in respect of the judgment debt on which the bankruptcy notice is founded, a counter-claim, set-off or cross demand that she could not have set up in the action or proceeding in which the judgment or order was obtained. The proceeding in which the judgment or order was obtained is the proceeding in which the Firm sued for the debt that is now referred to in the bankruptcy notice. 16 Critically, at the commencement of her oral submissions, Dr Scott confirmed that she did not take issue with the quality of the legal work that the Firm had performed pursuant to the retainers. She acknowledged that the deeds were binding upon her. 17 Dr Scott nonetheless submits that she has a counter-claim defence or set-off within the meaning of s 40(1)(g) on at least four bases. 18 First, she alleges that NIMLAW is not a company to which she owes a debt. In that respect, she made submissions about the sale of the business previously operated by the Firm with which she originally dealt. I accept that a submission of that kind may form the basis of a defence to an action in debt brought by a debtor. However, I am not satisfied that it is a defence that could not have been set up in the action or proceeding in which the judgment was obtained. It does not constitute a defence, counter-claim or set-off within the particular meaning of s 40(1)(g). For present purposes it matters not whether the defence was in fact raised or, if raised, whether the judge in the debt action provided the correct answer to the question. 19 The next submission, as I understand it, is that the debt forming the subject matter of the bankruptcy notice is one that is secured in the sense that there are caveats lodged on Dr Scott's property in respect of it. The lodging of a caveat, in and of itself, does not demonstrate that the Firm may exercise the rights of a secured creditor. Much would depend on the existence and terms of any underlying security that the caveat may be there to protect. In any event, the submission that a debt is secured is no answer to a demand for payment. Even if I am wrong about that, the circumstance that there may exist a security interest in relation to the debt does not constitute a defence, counter-claim or set-off that could not have been set up in the action or proceeding in which the judgment or order was obtained; that is, in the proceeding in the District Court of South Australia. 20 The third submission was to the effect that circumstances exist that give rise to a promissory estoppel such that she was not presently obliged to pay the debts. The principles of promissory estoppel may well form the basis of a counter-claim, set-off, cross demand or defence in answer to a claim founded in debt. However, once again, I am not satisfied that a defence of that kind could not have been set up in the action or proceeding in which the judgment or order was obtained. 21 Fourthly, Dr Scott's oral and written submissions primarily focused on a series of injustices that she alleges have occurred in her dealings with the justice system more generally, and especially in her pursuit of justice with respect to wrongs that she alleges have been committed in connection with her mother's treatment, her mother's death, and the administration of her mother's deceased estate. 22 That sense of grievance is a genuine one and occupied much of the time of the hearing before the Court. When I say it is a genuine one, it is one that I understand Dr Scott to hold bona fide and to be pursuing on the basis of her understanding of the operation of the law. However, the grievances to which Dr Scott refers are not grievances that affect the private rights and obligations as between her and the Firm. It is not being shown, for example, that the retainer was subject to any clause that the debts would not be due and payable until Dr Scott was finally vindicated in the pursuit of her rights in actions relating to her mother. They do not give rise to a counter-claim, set-off, cross demand or defence vis-à-vis Dr Scott and the Firm in relation to the debt stated on the bankruptcy notice. 23 For the purposes of s 41(7) of the Act I am not satisfied that Dr Scott as the debtor has the counter-claim, set-off or cross demand of the kind referred to in s 40(1)(g). She has not satisfied me that the bankruptcy notice should be set aside on that basis. 24 Accordingly, I dismiss the originating application.

Events following pronouncement of orders 25 In the course of giving oral reasons I explained to Dr Scott that the Court's task was to apply the provisions of the Act and that it did not have a broad discretion to set aside a bankruptcy notice. 26 As I mentioned at the commencement of these written reasons, after pronouncement of the orders (and before they were entered) Dr Scott complained that the order dismissing the originating application was affected by error including because she had made an application to set aside the order giving rise to the judgment debt. 27 Rule 39.04 of the Federal Court Rules 2011 (Cth) confers a discretion on the Court to vary or set aside an order before it is entered. In light of the matter raised by Dr Scott after the oral orders were pronounced, I have given consideration to the exercise of that discretion. It is appropriate to do so because Dr Scott's originating application raised an issue under s 41(6A) of the Act and the oral reasons did not disclose the Court's conclusion in respect of it. 28 On the material before me, I am not satisfied that there is presently a proceeding on foot by which Dr Scott seeks to have the judgement of the District Court set aside. Her oral submissions were to the effect that she had exhausted her remedies in the Supreme Court of South Australia. She submitted that the jurisdiction of the High Court of Australia should not be confined to matters that the High Court determined to be of sufficient importance. She explained that she had subsequently attempted to commence a proceeding in this Court, presumably relating to the District Court judgment, and complained that those attempts had been unsuccessful. She further submitted that a judgment in connection with that issue was wrongly decided: see Scott v Judicial Registrar Ditton [2023] FCA 947. She said that she had complained to the Chief Justice about that outcome. 29 The materials do not support a finding that there exists any pending application to set aside the judgment upon which the bankruptcy notice is founded. Accordingly, there exists no basis for this Court to exercise the discretion conferred under s 41(6A) of the Act to extend the time for compliance with the bankruptcy notice. It follows that there is no basis for recalling the order dismissing the originating application under r 39.04. 30 The order will now be entered. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Charlesworth.