Re Harrison P.L. v Ex parte Morgans Solicitors [1995] FCA 144

CATCHWORDS

Bankruptcy - Rule 10 reference - whether the Court is satisfied that the debtor has a counter-claim, set-off or cross demand equal to or exceeding the amount payable under a final order - subject matter of the alleged counter-claim and set-off already litigated and decided between the parties in other courts - not appropriate to go behind the judgment Matter No. SN 682 of 1994 PETER LINDEN HARRISON Ex Parte MORGANS - SOLICITORS VON DOUSSA J ADELAIDE 8 MARCH 1995

IN THE FEDERAL COURT OF AUSTRALIA ) ) SOUTH AUSTRALIA DISTRICT REGISTRY) ) GENERAL DIVISION ) No. SN 682 of 1994 ) BANKRUPTCY DISTRICT OF THE STATE ) ) OF SOUTH AUSTRALIA )

Re: PETER LINDEN HARRISON Debtor Ex Parte: MORGANS - SOLICITORS Creditor MINUTES OF ORDER JUDGE MAKING ORDER : VON DOUSSA J WHERE MADE : ADELAIDE DATE OF ORDER : 8 MARCH 1995 THE COURT DECLARES THAT: 1. It is not satisfied that the debtor has a counter-claim, set-off or cross demand of the kind referred to in s.40(1)(g) of the Bankruptcy Act 1966 (Cth). AND THE COURT ORDERS THAT: 2. The time for compliance with the bankruptcy notice be extended to Wednesday 22 March 1995.

Note: Settlement and entry of order is dealt with in Bankruptcy Rule 124.

IN THE FEDERAL COURT OF AUSTRALIA ) ) SOUTH AUSTRALIA DISTRICT REGISTRY) ) GENERAL DIVISION ) No. SN 682 of 1994 ) BANKRUPTCY DISTRICT OF THE STATE ) ) OF SOUTH AUSTRALIA )

Re: PETER LINDEN HARRISON Debtor Ex Parte: MORGANS - SOLICITORS Creditor

REASONS FOR JUDGMENT Coram: von Doussa J: Place: Adelaide Date : 8 March 1995 This is a reference to the Court pursuant to r.10 of the Bankruptcy Rules for the Court to determine whether the debtor has a counter-claim, set-off or cross demand which fulfils the requirements of s.40(1)(g) of the Bankruptcy Act 1966 (Cth). The bankruptcy notice was issued on 12 October 1994 and was served on 17 October 1994. It sought payment of the sum of $4,416.47 as money due under an allocatur for costs which had been taxed and allowed under an order made in the Supreme Court of South Australia against the debtor on 6 September 1994. The debtor filed an affidavit as required by s.41(7) on 27 October 1994 alleging that he had such a counter-claim, set-off or cross demand. The provisions of s.40(1)(g) require a debtor upon the service of a bankruptcy notice to comply with it by payment of the debt claimed or by satisfying the Court that the debtor 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 could not have been set up in the action or proceeding in which the judgment or order was obtained. In the present case the relevant order was the allocatur sealed on 6 September 1994. The order for costs against the debtor had been made on the dismissal of an appeal by him against an unfavourable judgment in the Magistrates Court of Adelaide. Further reference will be made to the Magistrates Court action shortly. It was not open to the debtor to set up the counter-claim, set-off or cross demand on which he seeks to rely in opposition to the order for costs on the appeal. The question that must therefore be decided is whether on the information that has been put before this Court by the debtor he has a counter-claim, set-off or cross demand which equals or exceeds the amount of the debt claimed in the bankruptcy notice, namely the $4,416.47. By way of brief background the creditor, Morgans, who are solicitors, acted for the debtor from late 1988 until on or about 23 August 1990 in relation to an application for special leave to appeal to the High Court of Australia against a judgment of the Full Court of the Supreme Court of South Australia. In that time the debtor paid to Morgans the sum of $8,283.05 on account of costs. Morgans had themselves removed from the High Court record as the solicitors for the debtor by order of Brennan J made in chambers on 23 August 1990. In 1991 Morgans issued proceedings in the Magistrates Court of Adelaide to recover from the debtor the sum of $1,526.28 which they claimed to be additional costs due to them for the work which they had performed for the debtor over and above the amount of $8,283.03. The debtor responded to that claim by filing a counter-claim against the solicitors, initially for $33,283.03 but that sum was later reduced to $30,000 to bring the counter-claim within the limits of the jurisdiction of the Magistrates Court. That counter-claim had two parts. One was a claim for repayment of the sum of $8,283.03 being the moneys paid by way of costs to Morgans during the period when they were acting for the debtor. The balance, initially $25,000 but later reduced by the necessary amount to bring the total claim within the jurisdiction, was for damages for negligence by Morgans in their conduct of the matter for the debtor. The counter-claim read that the relevant head of damage was: "$25,000 being for loss of the defendant's professional time and expenses sustained in instructing, correspondence, conferences and in applications brought by the plaintiff against the defendant in the High Court of Australia for the plaintiff's release from the Court record." In answer to the bankruptcy notice, the affidavit filed by the debtor in this Court again seeks to raise by way of counter-claim the matters which had been raised in the Magistrates Court, namely, the claim for damages for negligence, and the claim for a refund of the $8,283.03; furthermore it also seeks to raise by way of set-off the sum of $8,283.03. I deal first with the counter-claim aspect of the affidavit filed in answer to the bankruptcy notice. The debtor has this morning expanded at length on his affidavit and has tendered a number of exhibits that highlight events which occurred in the course of long and no doubt very stressful and troublesome proceedings involving a Mr Egan who sued the South Australian Railways Commissioner over a contract in the 1960s: see The South Australian Railways Commissioner v Egan (1973) 130 CLR 506, and related proceedings. I do not propose to rehearse the full details of those matters which form the background to the circumstances which brought Morgans to act for the debtor. What is relevant to these proceedings is that the very issues which the applicant now seeks to establish before this Court were the subject of the counter-claim in the Magistrates Court. At the hearing in the Magistrates Court, the learned magistrate, Mr Hiskey SM, on 19 February 1993 delivered detailed reasons why in law the counter-claim in both its aspects should be dismissed as untenable. Against that decision the debtor appealed to the Supreme Court of South Australia in proceedings numbered 741 of 1993. The appeal came on before Olsson J on 12 May 1994. On that day his Honour delivered reasons for dismissing that appeal. There was no appeal from that decision. Accordingly the subject matter of the alleged counter-claim which is raised in this Court has been the topic of consideration in the Magistrates Court and also on appeal in the Supreme Court of South Australia. In my opinion it is not appropriate for this Court to go behind those judgments. The matter has already been fully argued between the parties. It has been decided by judicial decision and an appeal against that judicial decision has been refused. There is no reason to doubt the correctness of those decisions. Finality in litigation is a most important consideration. It is important in this case that the decisions of the Magistrates Court and the Supreme Court of South Australia be accorded full force and effect. By virtue of those decisions there is no entitlement of the debtor against the creditors for the claims that he seeks to raise by way of counter-claim. There remains the alleged set-off which is raised by paragraph 35 of the debtor's affidavit. That paragraph reads: "I say that the Bankruptcy Notice number SN682 of 1994 served on me on 17th day of October 1994 for the sum of $4416.47 is defective and therefore inapplicable in that it did not take into account the right of a Debtor under the order of Judge Kelly dated the 24th day of November 1993 to apply to the Court for the taxation of costs in Action No A20 of 1988 as a set-off to that sum and where the Creditor had received payments in the sum of $8283.09 (sic) in purported performance of Action No A20 of 1988 in the High Court of Australia." Apparently what happened after Mr Hiskey SM delivered his reasons for dismissing the debtor's counter-claim in the Magistrates Court is that the debtor sought to have Morgans' costs taxed as between solicitor and client pursuant to the provisions of the Legal Practitioners Act 1981 (SA). That matter came on before his Honour Judge Kelly sitting as a master of the Supreme Court. On 24 November 1993 his Honour made the following order and delivered reasons therefor as follows: "This is an application by Mr Harrison for the taxation of legal costs concerning three legal practitioners. There is currently an appeal on foot against a decision of a Magistrate whereby he dismissed Mr Harrison's counter-claim relating to at least some of these costs. If Mr Harrison is wholly successful on the appeal then it may appear that no costs at all are payable and he may be entitled to a refund. On the other hand if he loses he may well be entitled to call upon the solicitors to justify their costs by way of a bill and have them taxed. In my opinion the first step must be the disposal of the appeal and when that has been established Mr Harrison may then again seek taxation under section 42 if he be unsuccessful. I therefore adjourn this matter sine die." Insofar as the information before this Court discloses the position, the application has not been brought on for further hearing before Judge Kelly. No taxation of the solicitor and client costs as between Morgans and the debtor has occurred. In my opinion the fact that there has been no taxation of costs gives no ground to invalidate the bankruptcy notice. Under the order of Judge Kelly the onus remained upon the debtor to bring the matter on for hearing in the event that the appeal failed. That it seems has not happened. That is the reason that there has been no taxation. It is not immediately apparent from the papers that upon a taxation there would be any refund to the debtor. It will be remembered that Morgans' claim was that their overall costs exceeded the amount paid by $1,526.28. However, it cannot be ruled out that there may be some amount due to the debtor upon a taxation and account between him and Morgans. However, that possibility does not assist the debtor in this Court. On this application the onus is upon the debtor to establish that he has a set-off which equals or exceeds the amount claimed. Absent the taxation it is not possible for him to establish that, and accordingly he fails to make out the matters required under s.40(1)(g) of the Bankruptcy Act. In my opinion, the Court should declare that it is not satisfied that the debtor has a counter-claim, set-off or cross demand that meets the requirements of s.40(1)(g) of the Bankruptcy Act. There will be an order accordingly. I will extend the time for compliance with the bankruptcy notice to Wednesday 22 March 1995. I certify that this and the 6 preceding pages are a true copy of the Reasons for Judgment of Justice von Doussa Associate: Dated: The debtor Mr Harrison appeared in person Counsel for the judgment creditor: Ms A Bosboom Solicitor for the judgment creditor: Morgans Date of hearing : 8 March 1995