Background
CharterLaw Legal Pty Limited (CLL) sought a sequestration order against Paul Michales based on his alleged failure to comply with a bankruptcy notice for $107,654.53. The amount comprised two Local Court of New South Wales judgment debts arising from registered costs assessment certificates for legal work CLL had performed for Michales and his company.
Michales opposed the creditor’s petition, contending that CLL lacked capacity to recover costs because it had ceased trading as a law practice on 30 June 2024. He issued one notice seeking practising certificates and professional-indemnity insurance records, and three further notices seeking documents intended to show that CLL’s work had been incompetent.
The Court’s Holding
Perram J set aside all four notices to produce. The first notice was not relevant to Michales’ pleaded opposition: CLL admitted that it ceased trading as a law practice on 30 June 2024, and the requested documents would not advance that contention. Any possible allegation that CLL had been unlawfully practising while acting for Michales between February 2020 and April 2023 was not pleaded.
The three remaining notices were also set aside. Michales had not pleaded that CLL’s fees were not due because its work was incompetent. Further, he had raised the competency allegations in the costs assessment and review processes, so that issue had been determined and merged in the judgments. While the Federal Court may in an appropriate bankruptcy case go behind a judgment debt, the proper course for an asserted defect in the costs certificates was to seek to set them aside in the New South Wales District or Supreme Court. CLL received its costs of the interlocutory application; its other requested relief was dismissed.
Key Takeaways
- A notice to produce must be relevant to an issue presently raised in the proceeding.
- A party cannot use production notices to pursue an unpleaded case.
- Challenges to matters resolved through costs assessment processes ordinarily must be pursued through the appropriate challenge to the resulting costs certificates or judgments.
Why It Matters
The decision illustrates the limits on interlocutory document-production processes in a creditor’s petition. Even where a debtor seeks to challenge the substance of a judgment debt, the challenge must be tied to a live issue and cannot be used to reopen matters already determined through the underlying costs assessment process.