Eterovic, B. v Pavlovic, J. [1995] FCA 344

IN THE FEDERAL COURT OF AUSTRALIA BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA GENERAL DIVISION No VN 579/95

Re: BLAZENKO ETEROVIC Judgment Debtor Ex parte: JOZO PAVLOVIC Judgment Creditor

Coram: Olney J Place: Melbourne Date: 29 May 1995 MINUTE OF ORDER THE COURT ORDERS THAT: 1. The judgment debtor's application to set aside the bankruptcy notice issued herein on 20 March 1995 be dismissed. 2. The judgment creditor's costs of and incidental to the application be taxed and paid by the judgment debtor and in the event that a sequestration order is made upon a petition founded on the act of bankruptcy committed by the judgment debtor in relation to the bankruptcy notice, such costs are to be treated as, and have the same priority as, the costs of the petitioning creditor. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA GENERAL DIVISION No VN 579/95

Re: BLAZENKO ETEROVIC Judgment Debtor Ex parte: JOZO PAVLOVIC Judgment Creditor

Coram: Olney J Place: Melbourne Date: 29 May 1995 REASONS FOR DECISION On 20 March 1995 the judgment creditor caused a bankruptcy notice to be issued against the judgment debtor claiming that the sum of $27,875 was due to him by the judgment debtor under a final judgment obtained in the County Court of Victoria at Geelong on 20 February 1991 (the County Court judgment). The time fixed for compliance with the bankruptcy notice was 14 days after service of the notice on the judgment debtor. Personal service was effected on 21 March 1995. On 4 April 1995 the judgment debtor filed an affidavit sworn on 3 April 1995 acknowledging the judgment debt and the fact that he had not paid same. The affidavit asserted the following facts: On 21 December 1993 the judgment debtor commenced proceedings in the Supreme Court of Victoria (the Supreme Court proceedings) against 6 defendants (including the judgment creditor) seeking declaratory, injunctive and other relief. The matter was heard on 6, 7 and 8 March 1995. On 22 March 1995 Southwell J gave judgment for the plaintiff (the judgment debtor) and ordered that his costs be taxed and paid by 4 of the 6 defendants (including the judgment creditor). In paragraphs 8-11 of the affidavit the judgment debtor deposed as follows: 8. I am advised by my solicitors, Messrs Galbally & O'Bryan, and believe that a Bill of Costs is currently being drawn in taxable form to enable my costs to be taxed. I am further advised by my solicitors and believe that they have assessed my costs to be in the range of $25,000.00 - $30,000.00 and subject to my costs being taxed, this figure would accurately represent the Judgement (sic) Creditor's several liability to me. I have been further advised by my solicitors and believe the drawing of the Bill of Costs will be completed within the next fourteen (14) days and will then immediately be submitted to taxation. 9. Upon my costs being taxed, the sum of money that the Judgement (sic) Creditor is liable to pay to me will be ascertainable. 10. I am advised by my solicitors and believe the taxed sum the Judgement (sic) Creditor will be liable to pay me will most likely fully set-off the sum now being claimed by the Judgement (sic) Creditor in this action. 11. I submit I have a valid set-off against the Judgement (sic) Creditor's claim made herein save that at the time of swearing this my Affidavit its (sic) not ascertainable but is anticipated to be in the vicinity of $25,000.00 - $30,000.00. The set-off could not have been raised in Proceeding 268 of 1989 in which the Judgement (sic) Creditor obtained a Judgement (sic) against me. On the day before the judgment debtor's affidavit was filed, an affidavit sworn that day by his solicitor Andrew Peter O'Bryan was filed in which reference was made to the Supreme Court proceedings and the order for costs. The affidavit continued: 5. I have instructed costs consultants to draw a Bill of Costs in Taxable Form with respect to the Judgement (sic) Debtor's claimable costs and anticipate being in receipt of this Bill within the next fourteen (14) days. I estimate the Judgement (sic) Debtor's claimable costs to be paid by the Fourth Defendant and his co-Defendants will be in the range of $25,000.00 - $30,000.00 given the volume of work carried out in the proceeding. Counsel's fees alone will be in the range of $13,000.00 - $14,000.00. 6. I further say that immediately the Judgement (sic) Debtor's costs consultants complete the Bill of Costs in Taxable Form, it will be submitted to taxation. Although no application was filed seeking any orders upon the filing of the judgment debtor's affidavit on 4 April 1995 the Registrar set the matter down for hearing on 19 April 1995. In accordance with the common practice the Court has treated the filing of an affidavit as if it were an application to set aside the bankruptcy notice notwithstanding that the requirements of rule 10 of the Bankruptcy Rules have not been observed. The matter was initially adjourned and finally came on for hearing on 10 May 1995 when 2 further affidavits were filed, one sworn by the judgment creditor's solicitor, the other by the judgment debtor's solicitor. The affidavit of the judgment creditor's solicitor referred to the County Court judgment in which judgments for separate specified sums were obtained by each of three plaintiffs including the judgment creditor. The defendants in that action were ordered to pay the plaintiffs' costs which were later taxed in the sum of $15,763.85. It appears that the plaintiffs' costs were taxed as a single bill with no apportionment of entitlement between the plaintiffs. Although it is said that the costs were unpaid at the date of the issue of the bankruptcy notice this fact is of no relevance in the present proceeding as the judgment creditor did not rely on any outstanding judgment for costs when he made application for the bankruptcy notice. The affidavit of the judgment debtor's solicitor filed on 10 May 1995 stated that a bill of costs in the Supreme Court proceeding had been drawn in the sum of $29,059.60 and that same would proceed to taxation on 8 June 1995. Section 40(1)(g) of the Bankruptcy Act provides that an act of bankruptcy is committed by a debtor 40(1)(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 by the Registrar by whom the notice was issued; or (ii) where the notice was served elsewhere - within the time fixed for the purpose by the order giving leave to effect the service; comply with the requirements of the notice or satisfy the Court that he 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 could not have set up in the action or proceeding in which the judgment or order was obtained;