FEDERAL COURT OF AUSTRALIA Valassis v Bernard [2002] FCAFC 232 DENIS VALASSIS V ERIC BERNARD N245 of 2002 HELY, STONE & JACOBSON JJ 13 AUGUST 2002 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 245 of 2002 On appeal from a judge of the Federal Court of Australia BETWEEN: DENNIS VALASSIS APPELLANT AND: ERIC BERNARD RESPONDENT JUDGE: HELY, STONE & JACOBSON JJ DATE OF ORDER: 13 AUGUST 2002 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The appeal be dismissed. 2. The appellant pay the respondent's costs in the proceedings. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 245 of 2002 On appeal from a judge of the Federal Court of Australia BETWEEN: DENNIS VALASSIS APPELLANT AND: ERIC BERNARD RESPONDENT JUDGE: HELY, STONE & JACOBSON JJ DATE: 13 AUGUST 2002 PLACE: SYDNEY REASONS FOR JUDGMENT HELY J: 1 I agree with the reasons of Jacobson J set out below. STONE J: 2 I have had the opportunity of reading the reasons for judgment of Jacobson J. I agree with his Honour's reasons and with the orders he proposes. JACOBSON J: 3 On 12 March 2002, Emmett J ordered the appellant ("the debtor") to pay the costs of a creditor's petition filed by the respondent ("the creditor") on 18 June 2001. 4 The debtor appeals against the costs order. He is entitled to do so as of right because the order constitutes a final judgment; s 24 of the Federal Court of Australia Act 1976 (Cth)("the Act"); see also Lombok Pty Limited v Supetina Pty Limited (l987) 14 FCR 226 at 247 ("Lombok") per Pincus J. 5 By contrast with the position in this Court, appeals against costs orders in the Supreme Court of New South Wales lie only with leave; Supreme Court Act 1970 (NSW), s 101(1)(c). The requirement of leave operates as a filter of work, thereby promoting the efficiency of the Court by limiting the full hearing of appeals to those which raise questions of principle; Coulter v The Queen (1987) 164 CLR 350 at 359 per Deane & Gaudron JJ. 6 There is much to be said for the proposition that the Actshould be amended to require leave conformably with the applicable legislative provision in New South Wales. In a case such as the present, the costs incurred by the parties in conducting a full appeal may well outweigh the amount due under the costs order which is the subject of the appeal. 7 In any event, although the appeal is as of right, the order made by Emmett J was an exercise of his Honour's discretion to award costs; s 43(2) of the Act; see also Lombok at 247; and see Hughes v Western Australian Cricket Association (1986) ATPR 40-748 at 48,136 per Toohey J. Accordingly the appeal must fail unless the appellant can establish that his Honour's discretion miscarried within the well-known principles stated in House v The King (1936) 55 CLR 499 at 504-505. 8 The facts are fully stated in the judgment of Emmett J. However, there is some utility in setting them out here so that the whole of my reasoning and the matters which I have taken into account can be found in this judgment. 9 On 27 October 2000, the creditor obtained a judgment for $7,410.52 against the debtor in the local court at the Downing Centre. The documents in the appeal book did not include the court process which gave rise to the judgment. His Honour referred to a dispute between the creditor and the debtor in the Residential Tenancy Tribunal. It appears that the judgment debt arose by way of enforcement in the local court of costs orders obtained against the debtor in respect of unsuccessful appeals against orders made by the Tribunal. 10 However, it is not material how the judgment debt came about. This is because the judgment debt was verified in par 2 of the creditor's affidavit of 15 June 2001 and it was admitted in par 2(a) of the debtor's affidavit of 10 July 2001. 11 In that paragraph of his affidavit, the debtor not only admitted the judgment; he also admitted that it was unpaid as at 10 July 2001, more than three weeks after the filing of the petition. The reasons given by the debtor in his affidavit for non-payment of the debt were not referred to in his Honour's judgment. There was no need for him to do so. 12 Prior to 25 January 2001, the creditor served a bankruptcy notice on the debtor. The debtor applied to this Court to set aside the bankruptcy notice. The matter was listed before Beaumont J on 10 April 2001. His Honour ordered that:- "Upon the judgment debtor on or before 19 April paying to the solicitors for the judgment creditor the sum of $7,519.95 (to be held by those solicitors in a trust account to abide the further order of the Court), the time for compliance with the bankruptcy notice is extended up to and including 12 June 2001." 13 Beaumont J stood the matter over before himself to 12 June 2001. The sum of $7,519.95 comprised the judgment debt of $7,419.52 and $109.43 for interest up to 15 December 2000. 14 The debtor did not pay the sum of $7,519.95 by 19 April 2001. The matter again came before Beaumont J on that date. His Honour extended the date for payment to 26 April 2001. Payment was made into the solicitors' trust account by that date. 15 When the matter came before Beaumont J on 12 June 2001, the debtor did not appear. This notwithstanding that he was present on 10 April when the petition was adjourned to 12 June. Beaumont J dismissed the application to set aside the bankruptcy notice and ordered the debtor to pay the costs of the application. 16 In an affidavit sworn 15 January 2002, Ms Margaret Olsen, solicitor for the creditor, deposed to a conversation with the debtor which she said took place on 12 June 2001 after her appearance before Beaumont J on that date. Ms Olsen said that the debtor phoned her and she asked him whether he would let her have access to the funds in her trust account. Her affidavit stated that the debtor refused and that she replied: "Fine, I'll get instructions to issue a creditor's petition." 17 Ms Olsen made a contemporaneous file note of the conversation which corroborated the terms of the conversation to which she deposed. As Emmett J noted, it was not until 12 March 2002 when the matter came before him that the debtor disputed the conversation. 18 According to the debtor's oral evidence given on 12 March 2002, there were two conversations between the debtor and Ms Olsen on 12 June 2001. The transcript is as follows: "You have told me that you want to give me a different version of a conversation that you had with Ms Margaret Olsen on 12 June 2001. Tell me what happened in that conversation? Mr Valassis do you recall the conversation of 12 June 2001?---Yes, your Honour.… Can you tell me what happened? What was said?---Before nine o'clock in the morning, I did telephone a solicitor of the applicant Margaret Olsen and I said to her I am very sick today, I will be unable to come into the court and I have no one else to appear in the court, please inform the court my situation and if you please I would appreciate to adjourn the day of hearing. She replied with a laugh and she said to me I am not your solicitor, if you want to say anything you speak with your solicitor. This was the conversation this particular day and later on I did telephone again to tell me what happened in the morning on 12 June and she repeat I am not your solicitor, I can't tell you nothing about it. Is that all your recollection of the conversation of 12 June? --- Yes, that is all the conversation we have twice --- Is there any other evidence that you want to give that you say is relevant to the question that I have to decide? --- No other conversation we have this particular day. Ms Olsen do you want to cross-examine Mr Valassis? Ms Olsen: No, your Honour." 19 On 10 July 2001, the debtor filed a notice of intention to oppose the creditor's petition and a supporting affidavit. I referred to this affidavit earlier. It set out the history of the debtor's dispute with the creditor including appearances in the Residential Tenancies Tribunal, the Supreme Court of New South Wales, the Court of Appeal of New South Wales and the High Court of Australia. 20 The notice of intention to oppose the petition listed three grounds: first, that the debtor had assets of $2,000,000; second, that he was more than 71 years old and had several health problems and, third, that the creditor's legal representative owed to the debtor and to the Court a duty to act honestly and with candour and that she failed to do so. 21 The first two matters had no bearing on the issue of who should bear the costs of the petition. The third matter contained a very serious allegation of professional misconduct. It was not referred to in his affidavit of 10 July 2001. It is not clear whether the allegation related to the conversation which, according to the debtor, took place with Ms Olsen on 10 July 2001. If it did, then his Honour dealt with it by preferring the evidence of Ms Olsen. If it did not, the allegation was unsupported by any evidence whatsoever. 22 The first return date of the petition was 16 July 2001. On that date, the debtor appeared and signed an authority for the creditor's solicitor to withdraw from the trust account the sum of $7,519.95. The petition was adjourned to 20 August 2001 and a direction was given to the debtor to file and serve any affidavit on which he relied by 6 August 2001. 23 The Registrar before whom the matter was listed on 16 July made a note on the file, the effect of which was that the debtor had paid the money into the creditor's solicitors' trust account and that he had given authority on that date for it to be paid to the creditor but that he should not be required to pay the costs of the petition. 24 On 20 August 2001, the petition was adjourned to 3 September. On that date, the debtor did not appear and the Registrar ordered that the petition be dismissed with the debtor to pay the creditor's costs. 25 On 21 September 2001, the debtor filed a notice of motion to set aside the Registrar's costs order. Branson J heard the motion and set aside the costs order pursuant to O 35 r 7(2)(a) upon the basis that the debtor was not present when the costs order was made. Her Honour returned the matter to the Registrar to deal with costs. 26 The matter was stood over on a number of occasions until it eventually came on for hearing before Emmett J. His Honour came to the view that it was not unreasonable for the petition to be filed and, accordingly, that it was appropriate for the debtor to pay the costs. 27 His Honour's reasons included the following findings: "I consider that it is more likely than not that there was a discussion along the lines deposed to by Ms Olsen to the effect that on 12 June 2001 she informed the debtor that, in the absence of an authority for the payment out of the money that had been paid in pursuant to Beaumont J's order, a creditor's petition would be filed." 28 It was open to his Honour to accept the evidence upon which this finding was made notwithstanding the absence of cross-examination of either Ms Olsen or the debtor; Ellis v Wallsend District Hospital (1989) 17 NSWLR 553 at 587-588 per Samuels JA. 29 Indeed, in my view, his Honour was correct in making the finding. As his Honour said, it was significant that there was no response to Ms Olsen's affidavit of 15 January 2002 until oral evidence was given on 12 March before Emmett J. 30 Thus, as his Honour said in the concluding paragraph of his judgment:- "In the circumstances, it was not unreasonable for the petition to have been filed. An act of bankruptcy had occurred. It was not until the first return of the petition that the amount of the debt was paid pursuant to the authority that was then given. At the time when the petition was filed, the debt was still unpaid, notwithstanding that there was a fund held in the creditor's trust account." 31 In my opinion, there is no error of principle in the exercise of his Honour's discretion to order the debtor to pay the costs. A recalcitrant debtor who does not pay the amount of a judgment debt until after the filing of a petition of which he had ample notice cannot complain about the making of a costs order against him. 32 Nothing in the debtor's oral or written submissions demonstrated error. His Honour did not act upon a wrong principle. Nor did he allow extraneous or irrelevant matters to affect him. He did not take into account immaterial considerations; see House v The King (supra) at 505. 33 Moreover, there was nothing in the notice of appeal which amounted to a reviewable error. There were six grounds stated. The debtor dealt with some of them in his oral submissions. The first was that his Honour was in error in refusing to transfer the matter to Beaumont J. This was a matter for Emmett J to determine in the exercise of his discretion upon a matter of practice and procedure. 34 The second ground stated by the debtor was that his Honour failed to provide the debtor with an equal opportunity to present his case. I regard this statement as entirely without merit. It is not supported by my review of the transcript. Nor was there any evidence pointed to which could make out such a serious allegation. Rather, the transcript recorded that his Honour told the debtor that he could tender and produce whatever evidence he liked and, if it was admissible, his Honour would receive it; AB at p.61, lines 2-3. 35 The third ground was that his Honour "disadvantaged" the debtor. This seems to be a repetition of the second ground. If it is not, then I do not understand it to amount to a ground of appeal. 36 The fourth ground as stated was that his Honour misread the debtor's medical certificate. A number of medical certificates are to be found in the appeal book and annexed to the debtor's written submissions. He referred to them in his oral submissions. None of the medical certificates had any bearing upon the issue determined by his Honour. 37 The fifth ground that was that Ms Olsen "failed to act honestly and with untruthful documents and evidence misled the courts." As I have said previously, this is a most serious allegation. To the extent that it is alleged to be supported by the debtor's version of the conversation which took place on 12 June 2001, his Honour was entitled to prefer the evidence of Ms Olsen. If it is contended that there are other facts or matters, which support the allegation, the debtor has pointed to no such evidence. 38 In his oral address, the debtor said that he was not aware that he had to sign an authorisation for the solicitors to have access to the funds in their trust account. Even if he was unaware of this until 16 July 2001 when he signed the authority, his refusal to let Ms Olsen have access to the funds on 12 June 2001 is a sufficient indication of the debtor's attitude prior to the filing of the petition. 39 The last ground of appeal was that the petition filed on 18 June 2001 was null, void and frivolous. For the reasons appearing in his Honour's judgment, this ground of appeal was not made out. 40 Accordingly, the order I would make is that the appeal is dismissed with costs. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Hely, Stone & Jacobson. Associate: Dated: 13 August 2002 Counsel for the Appellant The appellant appeared for himself. Counsel for the Respondent: Ms M Sneddon Solicitors for the Respondent: Gray & Perkins Date of Hearing: 13 August 2002 Date of Judgment: 13 August 2002