FEDERAL COURT OF AUSTRALIA Macatangay v State of New South Wales [2015] FCA 495 Citation: Macatangay v State of New South Wales [2015] FCA 495 Parties: MIGUELA ALVAREZ MACATANGAY v STATE OF NEW SOUTH WALES File number(s): NSD 52 of 2015 Judge(s): JAGOT J Date of judgment: 25 May 2015 Catchwords: BANKRUPTCY – application to set aside bankruptcy notice – power of Court to go behind judgment Legislation: Bankruptcy Act 1966 (Cth) ss 40(1)(g), 41(1)(a) Legal Profession Act 2004 (NSW) ss 368, 369, 373, 384, 385 Uniform Civil Procedure Rules 2005 (NSW) rr 36.10, 36.15, 36.16 Cases cited: Emerson v Wreckair Pty Ltd (1992) 33 FCR 581 Macatangay v State of New South Wales (No 2) [2009] NSWCA 272 Date of hearing: 30 April 2015 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 20 Solicitor for the Applicant: Mr JP Capsanis of JP Capsanis & Co Solicitors Counsel for the Respondent: Mr MK Minehan Solicitor for the Respondent: Hicksons Lawyers IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 52 of 2015 BETWEEN: MIGUELA ALVAREZ MACATANGAY Applicant AND: STATE OF NEW SOUTH WALES Respondent JUDGE: JAGOT J DATE OF ORDER: 25 May 2015 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The applicant's application to set aside Bankruptcy Notice No. 177313 be dismissed. 2. The applicant pay the respondent's costs of the application, as agreed or taxed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 52 of 2015 BETWEEN: MIGUELA ALVAREZ MACATANGAY Applicant AND: STATE OF NEW SOUTH WALES Respondent JUDGE: JAGOT J DATE: 25 may 2015 PLACE: SYDNEY REASONS FOR JUDGMENT Background 1 This is an application to set aside Bankruptcy Notice No. 177313 (the bankruptcy notice) which was issued against the applicant on 11 December 2014. The bankruptcy notice was served on the applicant on 5 January 2015. The bankruptcy notice was issued pursuant to s 41(1)(a) of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act), which provides that: (1) An Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained against a debtor: (a) a final judgment or final order that: (i) is of the kind described in paragraph 40(1)(g); and (ii) is for an amount of at least $5,000… 2 Relevantly, s 40(1)(g) of the Bankruptcy Act states that: (1) A debtor commits an act of bankruptcy in each of the following cases: … (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 specified in the notice; 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 or she 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 or she could not have set up in the action or proceeding in which the judgment or order was obtained… 3 In this case, the bankruptcy notice was based on a judgment debt of $73,055.97 obtained by the respondent against the applicant in the Supreme Court of New South Wales (the Supreme Court) on 22 July 2011. The bankruptcy notice was for the total amount of $96,052.39, comprising the sum of the original judgment debt and interest on this debt of $22,996.42. 4 The judgment debt arose from the filing of cost assessor's certificates in the Supreme Court pursuant to r 36.10 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). Filed cost assessment certificates are taken to be a judgment of the Court for the amount of unpaid costs under ss 368(5) and 369(7) of the Legal Profession Act 2004 (NSW) (LPA). In this case, the cost assessment was based on a number of costs orders made against the applicant in various earlier proceedings in the Supreme Court and New South Wales Court of Appeal (the Court of Appeal) (the earlier proceedings). 5 The earlier proceedings have a long and complicated procedural history. The genesis of the proceedings was summarised by Allsop P, Tobias JA and Handley AJA in Macatangay v State of New South Wales (No 2) [2009] NSWCA 272 at [19] – [20] as follows: [19] On 4 September 2002 the plaintiff commenced unfair dismissal proceedings in the Commission [the Industrial Relations Commission] under s 84(1) of the Industrial Relations Act 1996 (NSW). They were listed for hearing before Commissioner Macdonald on 24 March 2003, but on 21 March he was told the case had been settled. The plaintiff repudiated the settlement and on 12 June 2003 the Department applied by motion to enforce it by having the proceedings dismissed. Commissioner Macdonald made that order on 25 June 2004 on the basis that the case had been settled. On 28 February 2005 a Full Bench of the Commission dismissed the plaintiff's appeal from the Commissioner's orders. [20] The terms of settlement included an agreement by the plaintiff to resign from her employment, and her undertaking not to seek employment with the Department as a schoolteacher which left her free to seek employment with TAFE. The settlement was to be recorded in a Deed of Release which was never signed. Commissioner Macdonald and the Full Bench considered Masters v Cameron [1954] HCA 72; 91 CLR 353 and held that the settlement was binding although the parties agreed that it would be formalised in a Deed. 6 Following the decisions of Commissioner Macdonald and the Full Bench of the Industrial Relations Commission (the IRC), the applicant commenced proceedings in the Supreme Court in March 2005 claiming damages for negligence against the respondent. In February 2007, Grove J dismissed these proceedings. The applicant then initiated a series of proceedings seeking, in effect, to have the decision of Grove J overturned. In total, the applicant filed nine applications or appeals to this effect in the Court of Appeal and made four special leave applications to the High Court of Australia, all of which were unsuccessful. Further, in 2012 the Court of Appeal made orders against the applicant of its own motion under s 8(7) of the Vexatious Proceedings Act 2008 (NSW), staying all these proceedings and prohibiting the applicant from instituting any further proceedings in New South Wales relating to any claims or complaints made by her in these proceedings. 7 As a result of the various unsuccessful proceedings initiated by the applicant, a number of costs orders were made against her in both the Supreme Court and the Court of Appeal. As noted, the judgment debt on which the bankruptcy notice is based arises from a costs assessment relating to these costs orders, which was registered in the Supreme Court. The applicant's argument 8 The applicant submitted that this Court should "go behind" not only the judgment debt but also the original judgment of Commissioner Macdonald in the IRC. Specifically, the applicant submitted that this Court should exercise a discretion to "go behind the decisions in the Commission as to whether it was correct to find there was a binding settlement agreement as found in the Commission" [sic]. In her written submissions, the applicant submitted that there was "proof of fraud, collusion and mistake in the judgment that founded the Bankruptcy Notice". However, this allegation of fraud was not pressed by the applicant's legal representative at the hearing, despite the applicant's legal representative being put on notice by the Court and counsel for the respondent that, if sought to be relied upon, oral submissions in support needed to be put. Instead, at the hearing the applicant's legal representative submitted that there were six bases supporting the exercise of a discretionary power to "go behind" the original judgment in the IRC. The six bases were: (1) The original proceedings in the IRC were not "fully contested", in the sense that the applicant was unrepresented at that hearing whilst the respondent was equipped with the full resources of the State. (2) But for the original decision in the IRC, there would not have followed subsequent proceedings which founded the costs orders. (3) There was no hearing on the merits before Commissioner Macdonald, as the case was resolved on the basis of a settlement which the applicant disputed. (4) Certain communications between the Department and the applicant on 20 and 21 March 2003 disclose terms of settlement additional to the Department's offer. The IRC, wrongly, either did not give weight to or failed to consider these additional terms. (5) The letter of offer of 20 March 2003 conveys an intention that the agreement will be embodied in a deed and the deed will constitute the agreement. As the deed was not executed, there was no agreement. Commissioner Macdonald was therefore wrong to find an agreement. The decision thus constituted a miscarriage of justice and was unfair. (6) Had the matter settled, the proceedings would have been discontinued, rather than been dismissed. This too evidences an intention to settle in a particular way and supports the submission that Commissioner Macdonald's decision was wrong, constituted a miscarriage of justice and was unfair. 9 It was not disputed that the applicant did not apply for review or appeal against the decision of the costs assessor pursuant to ss 373, 384 and 385 of the LPA. Further, it is common ground that the applicant did not apply to have the judgment arising from the costs assessment set aside pursuant to rr 36.15 and 36.16 of the UCPR. Discussion 10 While the parties acknowledged that the Court may set aside a bankruptcy notice because of the circumstances giving rise to a judgment debt in appropriate circumstances, neither could point to any authority which would empower the Court to undertake the exercise sought by the applicant. While the existence of this power was not conceded by the respondent, the hearing proceeded on the basis of a common assumption that, if appropriate discretionary circumstances were established, the Court would have power to set aside the bankruptcy notice. 11 In Emerson v Wreckair Pty Ltd (1992) 33 FCR 581 (Emerson) at 587–8, the Full Court said: It is not open to doubt that a court exercising jurisdiction in bankruptcy may, in an appropriate case, "go behind" a judgment and inquire whether it was founded on a real debt: Corney v Brien (supra); Wren v Mahoney (1972) 126 CLR 212; Olivieri v Stafford (supra), per Beaumont J (at 422-423). … In the present case, there had been a full hearing before the District Court at which the appellants and the respondent appeared and were legally represented. All the issues were carefully examined and judicially determined. This is not a case, like many of the cases in this area of law, where judgment was entered in default of appearance or defence. There may be circumstances which justify, in a particular case, a review of the proceedings in another court which, after a hearing, have resulted in the entry of judgment against a debtor: see Wilkinson v Osborne (1915) 21 CLR 89. For example, if an allegation is made that a judgment has been obtained by fraud, it may be proper for a court exercising jurisdiction in bankruptcy to go behind the judgment to ascertain whether there is a real debt. 12 The Full Court concluded that: … there is nothing in the facts of the present case that would have warranted this Court embarking on what would have amounted to a re-trial of the issues that had been determined after a contested hearing and which were the subject of an appeal to the Supreme Court of Queensland. That Court, not this Court, was the appropriate forum in which to review the correctness of the District Court judgment. 13 Consistent with the reasoning of the Full Court in Emerson the present application must fail for five reasons (assuming, for this purpose, there is power to set aside the bankruptcy notice on the bases for which the applicant contends). 14 First, the mere fact that the applicant was unrepresented during the IRC hearing does not mean that the hearing was unfair or involved a miscarriage of justice. There is nothing in the IRC's reasons to suggest any unfairness by reason of this fact. To the extent it was put, the resources available to the respondent during the IRC hearing are simply immaterial. 15 Second, it was the applicant's choice to litigate in the Supreme Court and the Court of Appeal after her appeal to the Full Bench of the IRC was dismissed. She was unsuccessful in her many proceedings and the making of costs orders against her was the result of her own conduct. 16 Third, insofar as arguments were put to the effect that the IRC's decision was wrong, the applicant exercised the appellate rights that were available to her and failed. This proceeding is nothing more than another attempt to appeal the IRC's decision more than 10 years after the event. Further, as was stated in Macatangay v State of New South Wales (No 2) [2009] NSWCA 272: [23] Whatever the limits of the Commission's jurisdiction in unfair dismissal cases may be, it had jurisdiction to decide whether such proceedings have been settled. Decisions of the Commission within jurisdiction are final and can give rise to res judicata estoppels. This principle is well established. … [25] The Industrial Relations Commission decided that this settlement was binding after hearing evidence and legal argument. Its decision, affirmed on appeal, that the settlement was binding created an estoppel binding on the parties and properly recognised by Grove J and this Court. 17 Fourth, the fact that the applicant's claim in the IRC was not determined on its merits was an inevitable consequence of what was found to be the settlement of the proceedings. 18 Fifth, and as noted, the proceedings which gave rise to the costs order are not themselves impugned in any way. All that is said is that these proceedings were the result of the fact that the applicant failed before the IRC. Yet it was the applicant's decision alone to take those further proceedings. Moreover, those proceedings also took place many years ago. The applicant, it cannot be doubted, exhausted every possible avenue for appeal in respect of her lack of success. Similarly to the IRC proceedings, the present matter is simply an attempt by the applicant to avoid the consequences of her own decisions. 19 For these reasons, the present application is devoid of merit. Nothing would justify undertaking the course of action which the applicant proposes. Indeed, to do so would be contrary to the interests of justice. It would undermine the critical principle of finality of litigation. 20 The application should be dismissed with costs. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. Associate: Dated: 20 May 2015