FEDERAL COURT OF AUSTRALIA Rimac v Costa, in the matter of Rimac [2003] FCA 916 BANKRUPTCY – appeal from decision of Federal Magistrate dismissing application to set aside bankruptcy notice – application for interlocutory relief Rimac v Costa [2001] NSWSC 938 cited Rimac v Costa [2003] FMCA 251 cited MIRKO RIMAC v PLACIDO COSTA N757 OF 2003 EMMETT J 24 JUNE 2003 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N757 OF 2003 BETWEEN: MIRKO RIMAC APPLICANT AND: PLACIDO COSTA RESPONDENT JUDGE: EMMETT J DATE OF ORDER: 24 JUNE 2003 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. the application for interlocutory relief in support of any appeal pursuant to the notice of motion filed on 24 June 2003 be dismissed; 2. the applicant pay the respondent's costs. 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 N757 OF 2003 BETWEEN: MIRKO RIMAC APPLICANT AND: PLACIDO COSTA RESPONDENT JUDGE: EMMETT J DATE: 24 JUNE 2003 PLACE: SYDNEY REASONS FOR JUDGMENT 1 Yesterday, an application was made orally by counsel acting on behalf of Mirko Rimac ('the Debtor'), who was the applicant in a proceeding brought in the Federal Magistrates Court. The respondent in that application was Placido Costa ('the Creditor'). The Debtor apparently sought an order setting aside bankruptcy notice NN2349 of 2002 dated 5 December 2002 ('the bankruptcy notice'). Driver FM dismissed that application on 23 June 2003 following a hearing on 22 April 2003: see Rimac v Costa [2003] FMCA 251. 2 The judgment debt upon which the bankruptcy notice was based is a judgment entered in the Supreme Court of New South Wales in proceeding SC1972 of 1998 against the Debtor and his father, Nenad Rimac. The judgment was entered pursuant to an order for costs made against the Debtor by Santow J on 16 October 2001: see Rimac v Costa [2001] NSWSC 938. Santow J observed that, prima facie, the Debtor, with his father, should be ordered to pay the Creditor's costs up to and including the date of the Debtor's withdrawal from the proceeding, namely 9 October 2001. However, because the Debtor was not present to put any matters to the contrary, his Honour made orders having that result but deferred them from operation for seven days to give him the opportunity to be heard. The orders his Honour made were, relevantly, as follows: '1. The Plaintiff's proceedings should be dismissed with costs on the basis that the First and Second Plaintiffs should be liable for the said costs, in the case of the Second Plaintiff up to and including 9 October 2001 but not thereafter. 2. So far only as the Second Plaintiff is concerned, the order in paragraph 1 shall not take effect until the expiry of 23 October 2001, with liberty to apply in the meantime on reasonable notice.' 3 No application was made by the Debtor, although, on 25 October 2001, the time was extended until 5 November 2001. On that day, an affidavit was presented in which the Debtor deposed as to his lack of interest or role in the proceedings leading to the costs order. However, that affidavit was apparently not used because no application was filed. Proceedings were then taken to assess the costs which Santow J had ordered to be paid. Those proceedings resulted in a judgment of the Supreme Court on 4 October 2002 requiring the Debtor and his father to pay the Creditor's costs in the sum of $116,517.23, and also the Debtor's father to pay the Creditor's costs in the sum of $15,132.71. The orders were entered on the same day. 4 The bankruptcy notice attached a copy of the orders and claimed the sum of $69,133.46. That sum was calculated in the following manner: Column 1 Column 2 1. Amount of judgment or order $131,649.94 … less 5. Payments made and/or credits allowed since date of judgment or order $62,516.48 6. Total debt owing $69,133.46 5 Clearly, the amount of the judgment shown is wrong so far as the Debtor is concerned. There may well be a question as to the validity of the bankruptcy notice and there may well have been grounds for its being set aside. However, the application that was made to the Federal Magistrates Court was headed 'Application Debtor has a Counterclaim, Set-Off or Cross-Demand'. The document itself was then called 'Details of Claim'. The orders sought were: '1. That the Applicant has a counter-claim, set-off or cross-demand of the kind referred to in section 40(1)(g)(ii) of the Bankruptcy Act 1966 (Cth). 2. That the bankruptcy notice issued on 5 December 2002 and served on the Applicant on 13 December 2002 be set aside on the grounds that the judgment relied upon by the Respondent is not a final judgment against the Applicant. 3. That the Respondent pay the costs of and incidental to this application. 4. Such further or other orders as in the circumstance deemed appropriate.' 6 No ground relating to a defect in the bankruptcy notice was raised, although that question was the subject of a letter dated 17 February 2003 written to the Creditor's solicitors. In that letter, the Debtor's solicitor said: 'Further, the amount claimed $69,133.46 may not be the correct sum as it appears this is the sum of all the costs orders including $15,132.71 orders against Nenad Rimac. The correct addition and subtraction leaves a balance of $54,000.75.' 7 That matter, however, was not ventilated in the hearing before the Magistrate. The only questions ventilated before the Magistrate were whether or not the Debtor had a counter-claim, set-off or cross-demand and whether the judgment of the Supreme Court was a final judgment. 8 No notice of appeal has been filed in respect of the order of the Magistrate dismissing the application. In the course of oral argument, counsel for the Debtor indicated that there were two grounds: first, that the judgment of the Supreme Court was not a final order and, secondly, that the Magistrate had erroneously rejected an affidavit of the Debtor of 21 May 2003. 9 The matter was brought on urgently yesterday afternoon, when I adjourned the matter to 10.15 am today. After further argument this morning, I adjourned the matter until 2.15 pm to enable grounds of appeal to be formulated so that I could form a view as to whether or not there were any prospects of success on the appeal, a question that I would have to determine before granting any interlocutory relief. 10 In the course of argument, I pointed out that I had very substantial reservations as to whether any interlocutory relief was necessary or whether interlocutory relief of the nature sought was possible. Specifically, I pointed out that the appeal, if successful, would have the consequence that the bankruptcy notice would be set aside. If the bankruptcy notice were set aside, then there would be no act of bankruptcy. On the other hand, if the appeal failed, there would be no basis for deferring the time at which there was an act of bankruptcy, namely the failure to comply that occurred yesterday. 11 When the matter was called on again at 2.15 pm, the solicitor for the Debtor indicated that he no longer wished to pursue the application for interlocutory relief. Counsel for the Creditor therefore asked for the costs of yesterday and today in relation to the application. In the circumstances, I see no reason at all to deny the Creditor the costs of the application which was brought on notice. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 29 August 2003 Counsel for the Applicant: M S Abdul-Karim Solicitor for the Applicant: John McEnroe & Company Counsel for the Respondent: P A Conway Solicitor for the Respondent: Oliveri Solicitors Date of Hearing: 23, 24 June 2003 Date of Judgment: 24 June 2003