CATCHWORDS Bankrutpcy - application to set aside bankruptcy notice - final judgment or order - no formal judgment - certificate of taxation of costs relied on - Bankruptcy Act, 1966, s.40(3) (b) Re Cartwright [1975] 1 W.L.R. 573 - con. T.A. Field Pty. Ltd. v. Frigmobile of Australia Pty. Ltd. {1978] 2 N.S.W.L.R. 488 - con. John Dawson Wilmot v. William Patrick Buckley, Richard Ronald Hertzberg and Killarney Involvements Pty. Limited No. B3315 of 1984 Beaumont, J. 5 November 1984. Sydney. IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE Ne ee we AUSTRALIAN CAPITAL TERRITORY No. B3315 of 1984 Re: JOHN DAWSON WILMOT Applicant Ex parte: WILLIAM PATRICK BUCKLEY, RICHARD RONALD HERTZBERG and KILLARNEY INVOLVEMENTS PITY. LIMITED Respondents ORDER Judge making order: Beaumont, J. Date order made: 5 November 1984 Where made: Sydney THE COURT ORDERS: 1. That the bankruptcy notice herein dated 9 July 1984 be set aside. 2. That the respondents pay the applicant's costs of this application. IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE eee AUSTRALIAN CAPITAL TERRITORY No. B3315 of 1984 Re: JOHN DAWSON WILMOT Applicant Ex parte: WILLIAM PATRICK BUCKLEY, RICHARD RONALD HERTZBERG and KILLARNEY INVOLVEMENTS PTY. LIMITED Respondents CORAM: Beaumont, Jd. DATED: 5 November 1984. REASONS FOR JUDGMENT This is an application by a debtor to set aside a bankruptcy notice as bad both in substance and in form. The history of the matter commences with orders made by Rath, J. in the Equity Division of the Supreme Court of New South Wales on 19 July 1982. According to the copy of his Honour's notes (no other material was tenderei in evidence), on that day in a proceeding between the applicant as plaintiff and Spa-Flo JLeisure Products Pty. Limited and the respondents as defendants, his Honour gave an oral judgment and maie the following orders: "ORDER (1) that 2nd, 3rd and 4th defendants have leave to proceed under s. 230 of the Companies Act, 1965 in respect of paras. 1 and 3 of the notice of motion of 13/4/82. (2) that the proceedings be dismissed as set out in para. 1 of the notice of motion. (3) that the plaintiff pay the 2nd, 3rd and 4th defendants' costs of the motion. (4) that the costs of the liquidator in the motion be costs in the winding up of the lst defendant." Unfortunately, I do not know the terms of his Honour's oral judgment or the terms of the notice of motion referred to in the orders made by his Honour. However, I am able to infer that the principal equity proceeiings were dismissed without any hearing on the merits of those proceedings. By a certificate dated 31 January 1984 in the said proceedings, the taxing officer of the Equity Division of the Supreme Court of New South Wales, gave a certificate in the following terms: "I CERTIFY that pursuant to orier made 19th July, 1982 the Second, Third ani Fourth Defendants' costs as between party and party have been taxed and allowed at $1,575.55. These costs are payable by the Plaintiff." The bankruptcy notice now challenged is, so far as material, in the following terms: "TO: JOHN DAWSON WILMOT of 70 Permanent Avenue, Earlwood, Sales Representative WHEREAS: WILLIAM PATRICK BUCKLEY of 29 Killarney OUDrive, Killarney Heights, RICHARD RONALD HERTZBERG of 16 Wyomee Avenue, West Pymble and KILLARNEY INVOLVEMENTS PTY. LIMITED 11 Cedar St. Iugarno (hereinafter referred to as 'the judgment creditors') have claimed that the sum of $1,575.55 together with interest thereon at the rate of 14.5 per centum per annum from 31st January, 1984 which at the 21st February, 1984 amounts to $32.55 making a total of $1,608.10 is due by you to them under a Certificate of Taxation obtained by them against you in the Supreme Court of New South Wales dated the 31st January, 1984. THEREFORE TAKE NOTICE that within 14 days after service of this notice on you, excluding the day on which this notice is served on you, you are required — (A) to pay the sum of $1,608.10 so claimed by the judgment creditors to the judgment creditors - OR - (B) to secure the payment of the sum referred to in paragraph (A) to the satisfaction of the Federal Court of Australia of the judgment ereditors or compound the sum so 4. specified to the satisfaction of the judgment creditors. ..." The applicant seeks to challenge the notice on a number of grounds. In the first place, he submits that the notice is bad in that it does not show under what judgment or order the sum claimed is said to be due. Specifically, he says that, in the case of costs, the only effective judgment or order is the order of the Court itself not the certificate quantifying their amount. He relies, for this purpose, upon the decision of the English Court of appeal in In re Cartwright; Ex parte Cartwright and Anor. v. Barker [1975] 1 W.L.R. 573. There, a petitioning creditor founded proceedings in bankruptcy on the failure by two joint debtors to comply with a bankruptcy notice which specified the debt claimed as being "the amount due on a final judgment or order obtained by (the petitioning creditor) against you (the joint debtors) in the High Court of Justice dated 20 March 1974, whereon execution has not been stayed". In fact the amount claimed was the sum certified by the taxing master on 20 March 1974, as being the net amount of costs owing to the petitioning creditor under a judgment obtained by him against the debtors on 5 November 1970 in the High Court. It was held that the bankruptcy notice was bad in that it did not show under what judgment or order the sum claimed was due and also because it did not, in accordance with the requirements of s.2 of the Bankruptcy Act, 1914, require the sum to be paid in accordance with the terms of the judgment or order; that in the case of costs the effective judgment was the order of the court itself, not the certificate quantifying their amount; and that the bankruptcy notice suffered from a defect which could not be cured by the exercise of the discretionary power to waive formal irregularities conferred by 8.147 of the Bankruptcy Act, 1914 (U.K.). It is convenient to consider this point in conjunction with the second ground relied upon by the applicant to attack this bankruptcy notice. He refers to Pt.52 r.9(2) of the Rules of Court of the Supreme Court of New South Wales which provides as follows: "Where- (a) proceedings are dismissed with costs; or (b) a motion is refused with costs- and the costs are not paid within 4 days after the signing of a certificate of taxation of the costs, a party to whom the costs are payable may enter judgment for the taxed costs." The applicant says that, although 1t was soren to the respondents to do 50, they made no attempt to seek the entry of judgment for the taxed costs as provided by Pt.52 r.9(2). (Reference should also be made to Pt.52 r.63 , by which it is provided that where the amount of any costs has been certified under that Part, the Court may, on a motion by a party, direct the entry of such judgment for the costs as the nature of the case requires.) In .A. Field Pty. Limited v. Frigmobile of Australia Pty. Limited [1978] 2 N.S.W.L.R. 488 1% was hela that, despite the provisions of Pt. 52 r.63, a motion for entry of judgment for costs is necessary only when legislation other than the Supreme Court Act, 1970 authorises taxation of costs in the Supreme Court. Master Allen (at p.492) held that it was implicit in an order that a party pay costs (in the amount thereafter ascertained by taxation) that the order is to take effect from the date when the costs are taxed. It is not necessary for the judge or master when making the order (or directing entry of the judgment containing the order) to use words to the effect "And I further order that the order that the defendant pay the plaintiff's costs take effect from the date of the ascertainment of the amount of those costs by taxation". That is implicit in the very nature of the order. He added: "... no further direction for entry of judgment is necessary, or, indeed, appropriate. It never has been the practice of the superior courts at law or in equity, either in this State or in 7. England, where a judgment given, or decree made, includes an order for payment of costs (as thereafter taxed), to enter two judgments or to pass and enter two decrees. The original judgment (or decree) ordered payment of costs (when taxed). When the certificate of taxation was issued it formed part of the record of the proceedings to be read with the judgment or decree. At law the convenient practice was adopted of noting the amount of the costs upon the judgment as originally entered. But this was not the entry of a new judgment. Do the Supreme Court Rules effect the innovation that a second judgment is required after costs are taxed? I think not. I do not overlook that Pt.52, which is the Part that deals with costs, contains r.63 which provides: 'Where the amount of any costs has been certified under this Part, the Court may, on motion by a party, direct the entry of such judgment for the costs as the nature of the case requires.'" The learned Master held that there is need for such a rule. Legislation other than the Supreme Court Act may authorize taxation of costs in the Supreme Court and provide that judgment may be enterei in the Supreme Court in respect of the costs so taxed. Thus, where a formal judgment expressing the order of dismissal has been drawn up, sealed and enterei, entry of a judgment for costs is not required: when the certificate of taxation has issued, upon the filing of an affidavit under Pt.44 r.7 of the Supreme Court Rules, a writ for levy 8. may issue for the amount of the taxed costs (see Ritchie's Supreme Court Procedure New South Wales at p.3124). But, in the present case, there 1s no evidence that a formal judgment has been drawn up. The circumstance that only the Judge's notes were tendered leads to the inference that, in all probability, that order has not been taken out. Although it be unnecessary to have two judgments entered, in the present case there is none. It may be, as the respondents submit, that Cartwright could be distinguished for present purposes because there, the notice wrongly suggestei in its terms that the certificate of taxation constituted the relevant judgment. That particular feature is not present here. Nonetheless, in my view, whilst not explicitly misleading, the notice is implicitly so. I think that, by describing the respondents as "Judgment crejitors" and referring to the amount claimed as due unider the certificate of taxation, the notice could be construed as suggesting, at least by implication, that the certificate of taxation was the source of the applicant's liability and that the certificate was a judgment. In my opinion, to convey that impression would be capable of misleading a debtor and the case would fall squarely within the reasoning in Cartwright. Alternatively, even if that impression is not conveyed by the notice, it is still invalid because it fails to identify the final judgment or order upon which 1t is based. That was the order made on 19 July 1982 and this order is not mentioned in the notice. (An argument that s.40(3)(b) of the Act could apply here shouli be rejected for reasons given later.) It follows, in my view, that it is not a case of merely formal defect to which s.306 of the Act could apply (cf. Re Wimborne; Ex parte The Tebtor (1979) 24 A.I.R. 494). The notice is bad on these grounis alone. But, even if I were wrong on this point, there is another difficulty confronting the respondents which, I think, is fatal in any event. The applicant further submits that the certificate of taxation is not a "final judgment or final order" within the meaning of s.40(1)(g) of the Bankruptcy Act, 1966 ("the Act"). In In re Riddell; Ex parte Earl of Strathmore (1888) 20 Q.B.D. 509, in an action in the Chancery Division, the defendant obtained an order for the dismissal of the action for want of prosecution and the payment of costs by the plaintiff. The plaintiff served a bankruptcy notice for the taxed amount of the costs. The notice was held to be invalid. It was held that, in the absence of any hearing on the substantive merits of the elaim, the order was the equivalent of a nonsuit and was thus not a "final juigment" within the meaning of s.4(1)(g) of the Bankruptcy Act, 1883 (U.K.). Lord Esher, M.R. said (at p.516): 10. "In my opinion the question is, not only was the claim determined, but was it finally determined? It can only have been finally determined if between the two parties to the action it cannot be raised again." In In re Ravasio; Ex parte Leonard Norman Pty. Limited (1965) 5 F.L.R. 373 it was held that an order made by the Federal Bankruptcy Court on the dismissal of the creditor's petition for a sequestration order, that the person against whom the petition was presented pay the petitioning creditor's costs, was not a final order within the meaning of s.52(j) of the Bankruptcy Act, 1924. Clyne, J. held (at p.374) that a judgment is a final judgment when it determines some question between litigants in an action by which a previously existing liability of a defendant to a plaintiff is established, and 1n which the defendant has had the opportunity of setting up a counterclaim, set-off or cross demand. In his opinion, these characteristics were also the characteristics of a final order. Since there was no relevant antecedent claim by the petitioner prior to the making of the order for costs, the petition was dismissed. By Pt.40 r.8(1) of the Supreme Court Rules, where the Court makes an order for the dismissal of proceedings, the order for dismissal shall not, subject to any terms and conditions on which the order for dismissal 1s made, prevent the plaintiff or claimant from bringing fresh proceejiings or 11. claiming the same relief in fresh proceedings. In the present case, no special term or condition was imposed upon the dismissal of the principal proceedings. It follows that there was no "final" adjudication of the claim or claims made in those proceedings. However, the authorities relied upon by the applicant to which reference has been made must now be read subject to the provisions of s.40(3)(b) of the Act: "(b) a judgment or order that 1s enforceable as, or in the same manner as, a final judgment obtained in an action shall be deemed to be a final judgment so obtained and the proceedings in which, or in consequence of which, the judgment or order was obtained shall be deemed to be the action in which it was obtained;". This benefit of this provision may have been available to the respondents in certain circumstances. Thus, if the respondent had caused a formal juigment expressing the orders made by Rath, J. on 2 July 1982 to be drawn up, sealed and entered, then, subject to filing an affidavit under Pt.44 r.7, they could have levied execution against the applicant (see T.A. Field Pty. Limited v. Frigmobile of Australia Pty. lLimitei, supra. That would have enabled the respondents to rely upon s.40(3)(b) of the Act upon the footing that the order for costs should be treated as if it were a separate juigment. It would have 12. been deemed to be a final judgment and thus available to be relied upon as such provided first, the judgment of 19 July 1982 had been entered; secondly, the costs had been taxed; and thirdly, as Cartwright shows, the notice accurately described the source of the applicant's liability (cf. Re David; Ex parte Iahood (1979) 36 F.1.R. 433; Halsbury's Laws of England, 4th Ed. Vol.3 p.164, para.259). But, as has been said, I must anfer that the respondents have never entered any judgment. In the result, the provisions of Pt.52 r.9(2) of the Supreme Court Rules and thus the purport of s.40(3)(b) of the Act cannot assist the respondents. Without the benefit of that deeming provision, in the absence of any hearing on the merits, it follows that there is no final judgment or order for the purposes of s.40(1)(g). For this reason also, the notice is pad and should be set aside. I propose to make the following orders: 1. That the bankruptcy notice herein dated 9 July 1984 be set aside. 2. That the respondents pay the applicant's costs of this application. | certify that this and the // preceding pages are a true copy of the reasons for judgment herein of The Honourable Mr Justice Beaumont. frstrecd (Cota ey Associate