Pacer v Star Kitchens Pty Limited [2006] FCA 610

FEDERAL COURT OF AUSTRALIA

Pacer v Star Kitchens Pty Limited [2006] FCA 610

BANKRUPTCY – application to set aside bankruptcy notice – complex history of disputation including proceedings in Local Court – pending decision in Local Court – proceedings adjourned generally with liberty to restore

Bankruptcy Act 1966 (Cth)

Adams v Lambert [2006] HCA 10 (Full High Court 4 April 2006) cited FRANK PACER v STAR KITCHENS PTY LIMITED NSD 1623 OF 2005 CONTI J 25 MAY 2006 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NSD 1623 OF 2005

BETWEEN: FRANK PACER

APPLICANT

AND: STAR KITCHENS PTY LIMITED

RESPONDENT

JUDGE: CONTI J

DATE OF ORDER: 25 MAY 2006

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. Proceedings be adjourned generally with liberty to either party to restore on seven days notice. 2. Costs of the proceedings be reserved. 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 NSD 1623 OF 2005

BETWEEN: FRANK PACER

APPLICANT

AND: STAR KITCHENS PTY LIMITED

RESPONDENT

JUDGE: CONTI J

DATE: 25 MAY 2006

PLACE: SYDNEY

REASONS FOR JUDGMENT

Background to the present application 1 The present proceedings were commenced by the applicant Mr Frank Pacer on 8 September 2005 by way of application to set aside Bankruptcy Notice No. NN3123 of 2005 ('the bankruptcy notice'), which had been served upon him by the respondent Star Kitchens Pty Limited ('Star Kitchens') on 29 August 2005. On 8 September 2005, a registrar of the Federal Court made orders extending the time for compliance with that notice pursuant to s 41(6A) of the Bankruptcy Act 1966 (Cth) ('the Act'). 2 The genesis of the protracted disputations that have taken place between Mr Pacer and Star Kitchens was the retention by Mr Pacer of Star Kitchens in 1999 for the purpose of the delivery and installation of several kitchens into a property development project being undertaken in Drummoyne in the State of New South Wales, in relation to which project he appears to have been a contractor. On 13 August 2002, Star Kitchens initiated proceedings against Mr Pacer in the Local Court of Sutherland in the State of New South Wales (proceedings no. 15173 of 2002) for liquidated sums for work done and materials provided by Star Kitchens to Mr Pacer in connection with that aspect of the Drummoyne development, for which Star Kitchens had not yet been paid. On 7 October 2003, Mr Pacer filed a notice of motion seeking leave to file a cross-claim against Star Kitchens. That application for leave was apparently refused by the Local Court on 23 October 2003. The final hearing of the Local Court proceedings subsequently took place on 27 October and 5 December 2003. 3 The tenor of Mr Pacer's amended defence to Star Kitchen's claim in the Local Court was that he had never personally entered into any contract with Star Kitchens for the provision of work or materials. It was Mr Pacer's contention that he was employed by a since deregistered company Freeport Morgan & Associates Pty Ltd ('FMA'), whereby he provided project management services to FMA in respect of the Drummoyne development, inferentially a company under his control, whether de facto or de jure. Mr Pacer claimed that it was FMA that had entered into a contract with Star Kitchens in relation to the delivery and installation of kitchens into the Drummoyne development. The cross-claim which Mr Pacer sought to file in the Local Court pleaded that Mr Pacer had lost fees and bonuses under his project management agreement with FMA, and further that he had incurred out-of-pocket costs because he was required to fund the rectification work necessitated by defects in Star Kitchen's work. The loss of those fees and bonuses was further alleged to have arisen because Star Kitchens had failed to comply with their delivery and installation obligations within the times specified by their agreement with FMA. 4 On 8 April 2004 Magistrate Elms upheld Star Kitchen's claim against Mr Pacer ('the Local Court judgment'). In the course of his reasons for judgment, the Magistrate made the following findings concerning the relationship between Mr Pacer and FMA: 'The defendant [Mr Pacer] provided not one shred of evidence to corroborate any alleged project manager relationship with the company Freeport-Morgan & Associates Pty Ltd, and the evidence is all to the contrary that there was in fact any such relationship… Contrary to his [Mr Pacer's] assertions, I have no doubt that the plaintiff [Star Kitchens] at all times knew the identity of the correct defendant, and that was Mr Pacer himself. I am unable to accept the defendant as a witness of truth…' 5 On 7 May 2004, Mr Pacer filed a summons in the Supreme Court of New South Wales seeking leave to appeal against that Local Court judgment (proceedings No. 030032 of 2004). 6 On 12 November 2004, Mr Pacer commenced proceedings no. 12463 of 2004 against Star Kitchens in the Downing Centre Local Court. In those proceedings Mr Pacer sought liquidated damages from Star Kitchens on grounds similar to those foreshadowed in his earlier cross-claim, which he had been unable to file owing to the Magistrate's decision to refuse the grant of leave. I will discuss those further Local Court proceedings in more detail shortly, since their existence bears significantly upon the issues arising in Mr Pacer's application to set aside the abovementioned bankruptcy notice. 7 Mr Pacer's application for leave to appeal to the Supreme Court of New South Wales against the Local Court judgment was dismissed by Rothman J on 22 June 2005 with costs. At the time the bankruptcy notice was originally filed, those costs had not been assessed. In his subsequent affidavit sworn 7 September 2005 and filed in support of his application to set aside the bankruptcy notice, Mr Pacer deposed that on 12 August 2005, he had attended the registry of the Downing Centre Local Court, whereupon he attempted to file an application to satisfy the Local Court judgment by instalments. Mr Pacer asserted that he was informed by the filing clerk that no such application could be made, since the judgment had not yet been formally entered. It appears to be common ground between the parties that the Local Court judgment in favour of Star Kitchens was subsequently entered four days later on 16 August 2005, the certificate of judgment recording a judgment debt of $27,354.32. Curiously however, that certificate of judgment, which was annexed to the bankruptcy notice, stated that the judgment was entered on 8 April 2004, being the date of delivery of judgment, whereas the certificate of judgment is dated 16 August 2005. There is no apparent evidence to indicate that Mr Pacer was served with that certificate of judgment, or had it otherwise brought to his attention by Star Kitchens, for what that might ultimately matter. 8 Star Kitchens then filed the bankruptcy notice on 24 August 2005 and personally caused the same to be served (as stated above) upon Mr Pacer on 29 August 2005. The bankruptcy notice served on Mr Pacer referred to an amount outstanding of $30,733.51; that amount comprised the abovementioned sum of $27,354.32 recorded on the certificate of Local Court judgment as well as an amount claimed in respect of interest accrued since the date of judgment. The calculation of that interest was explained in note 2 as follows: 'Judgment was entered against Frank Pacer in the Downing Centre Local Court on 8 April 2004 for the sum of $27,354.32, plus interest to Judgment date… Interest on the Judgment debt is being claimed for the period from 9 April 2004 to 22 August 2005…' It is apparent from the Magistrate's reasons for judgment that the amount awarded on 8 April 2004 by way of quantum meruit was actually $19,820 plus costs, rather than $27,354.32. The costs order made against Mr Pacer in the Local Court proceeding initiated by Star Kitchens had not been assessed as at the time of filing the notice, and therefore the costs the subject of that order must have formed no part of the $27,354.32 judgment debt. In that regard it seems likely that the figure of $27,354.32 recorded in the certificate of judgment, which was of course issued on 16 August 2005, incorporated the interest outstanding on the $19,820 judgment, calculated from 12 May 2000 to 16 August 2005, as ordered by the Magistrate. In those circumstances the bankruptcy notice would seem to have overstated the amount outstanding, insofar as it purported to levy interest upon the difference between $27,354.32 and $19,820 during the period from 8 April 2004 to 16 August 2005. That is not however fatal to the notice: see s 41(5) of the Act and Adams v Lambert [2006] HCA 10 (Full High Court 4 April 2006). 9 Before addressing the submissions made by the parties in respect of the application to set aside the judgment, it is appropriate to describe in more detail Mr Pacer's subsequent applications in the Local Court. On 12 August 2005, following upon the Supreme Court's dismissal of his appeal from the Local Court judgment, Mr Pacer filed an amended statement of liquidated claim in proceedings no. 12463 of 2004, which he had commenced in the Downing Centre Local Court against Star Kitchens on 12 November 2004 as I have earlier recorded. Also on 12 August 2005, Mr Pacer filed a notice of motion for a stay of the original Local Court judgment until the determination of those new proceedings. On 18 August 2005, Star Kitchens filed a notice of motion seeking to have Mr Pacer's statement of claim struck out, pursuant either to Part 13 rule 4 of the Uniform Civil Procedure Rules, as being frivolous or vexatious or an abuse of the process of the Court, or pursuant to Part 14 rule 28 as an abuse of process of the Court. Star Kitchen's notice of motion of 18 August 2005 sought in the alternative an order for security for costs and a stay until such security was provided. 10 On 10 October 2005 a Magistrate dismissed Star Kitchen's application for summary dismissal. The Magistrate ordered that a stay of the original Local Court judgment should be granted, subject to Mr Pacer paying the abovementioned amount of $27,354.32 into Court as well as an amount necessary to cover the assessed costs of the original Local Court proceedings which had been successfully prosecuted by Star Kitchens, and also the costs of the proceedings in the Supreme Court. The costs of the original Local Court proceedings were assessed and recorded as $17,490.89 in a certificate of judgment dated 14 October 2005. On the same day a certificate of judgment also issued out of the Local Court which recorded Star Kitchen's assessed costs of the Supreme Court proceedings as $9,168.36. 11 On 1 November 2005, Mr Pacer filed an application in the Local Court seeking leave to pay the Local Court judgment debt and costs by instalments. That application was refused by a registrar of the Local Court on 3 November 2005. Moreover on 17 November 2005, a magistrate ordered that the stay of execution upon the original Local Court judgment be lifted, since Mr Pacer had failed to pay any money into court. The Magistrate also ordered the registrar to reconsider Mr Pacer's application to repay the judgment debt by instalments. I was informed by counsel for Mr Pacer that an order was made by the Local Court on 13 December 2005 to the effect that the debt be paid by instalments, pending the hearing of Mr Pacer's action against Star Kitchens. The instalment regime was that the debt be paid by an instalment of $2000 on 31 January 2006, with monthly payments of $1500 to be made thereafter until the Local Court hearing scheduled to commence on 10 May 2006.