Federal Court of Australia

Shaw v The Official Trustee in Bankruptcy Vic 1697/14/1 of Australian Financial Security Authority [2020] FCAFC 136

ORDERS

THE COURT ORDERS THAT:

1.    The application for leave to appeal from the orders of the primary judge is refused.

2.    The applicant will pay the respondents’ costs of and incidental to the appeal.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(Revised from transcript)

THE COURT:

1    These reasons for judgment were delivered ex tempore at the hearing on 4 August 2020 and accompany the orders set out above.

2    The appellant seeks leave to appeal the interlocutory judgment of the primary judge given on 26 September 2019 where the primary judge ordered, pursuant to r 24.15 of the Federal Court Rules 2011 (Cth), that each of the following subpoenas be wholly set aside, namely:

(1)    the subpoena issued on 20 August 2019 and directed to Mr H Lanzer (the Lanzer Subpoena);

(2)    the subpoena issued on 28 August 2019 and directed to Mr M Buxton (the M Buxton Subpoena); and

(3)    the subpoena issued on 28 August 2019 and directed to Mr A Buxton (the A Buxton Subpoena).

3    The primary judge ordered that the appellant pay the costs of and incidental to the interlocutory applications dated 9 and 10 September 2019 to set aside the abovementioned subpoenas.

4    The appellant is self-represented and seeks leave to appeal from the interlocutory judgment on the following grounds:

(1)    The reasons for judgment are inadequate.

(2)    The Court failed to take into account relevant considerations, evidence and submissions.

(3)    The appellant was denied procedural fairness.

(4)    The three set aside applications were invoked for an illegitimate purpose and themselves should be set aside as an abuse of process.

5    The appellant has been involved in long running litigation, over multiple proceedings for over two decades which originated from a real estate transaction.

6    The genesis for that long running litigation was as follows. On 12 April 2000, the appellant entered into a contract to purchase an apartment from Yarranova Pty Ltd (Yarranova). In late 2000, Yarranova assigned to NewQuay Stage No. 2 Pty Ltd (NewQuay) the benefit of its interest under the contract.

7    On 1 December 2003, the appellant commenced proceedings in the Supreme Court of Victoria seeking specific performance of the contract. Yarranova and NewQuay counterclaimed for the removal of a caveat. In Shaw v Yarranova Pty Ltd [2006] VSC 45, Bell J concluded as follows at [94] to [97]:

Mr Shaw refused to complete the [relevant] contract of sale because, he alleged, the apartment was not built in accordance with the plans and specifications in the contract of sale and had defects. In his view, both the contract of sale and the separate construction contract were major domestic building contracts covered by the Domestic Building Contracts Act. By reason of the operation of that Act, if the contract of sale was a major domestic building contract, NewQuay could not demand final payment in the circumstances alleged by Mr Shaw.

When Mr Shaw refused to complete, NewQuay served a notice of rescission on him. As Mr Shaw continued to refuse, Yarranova and NewQuay treated the contract of sale as at an end and Mr Shaw’s deposit as forfeited. They say he lost the apartment and his deposit. On the companies’ case, where an apartment is sold by a developer upon the basis that it is to be constructed under a separate major domestic building contract with a registered builder, the contract of sale is not itself a contract of that kind and therefore NewQuay was not prohibited from insisting that Mr Shaw make the final payment. Unless the alleged defects are major, and in this case they were not, the aggrieved buyer has to make the final payment, complete the contract and take action about the alleged defects later.

There was a threshold point in the case, which was whether the contract of sale was a “major domestic building contract” under the Domestic Building Contracts Act. This was set down for hearing as a preliminary question.

The preliminary question will be answered in favour of Yarranova and NewQuay. As the contract of sale was not a “major domestic building contract” under the Domestic Building Contracts Act, Mr Shaw had no right to refuse to make the final payment. NewQuay was within its rights when it rescinded the contract and took the deposit. There were steps that Mr Shaw could have taken to have his complaints dealt with, but he had to complete the contract first.

8    The appellant was ordered to pay Yarranova and NewQuay’s (together, the Subsidiaries) costs.

9    On 15 December 2006, the appellant appealed Bell J’s decision in Shaw v Yarranova Pty Ltd [2006] VSC 45. The appeal was dismissed by the Victorian Court of Appeal in Shaw v Yarranova Pty Ltd [2006] VSCA 291; 15 VR 289 (per Warren CJ and Eames and Neave JJA).

10    The relevant history of what then ensued was conveniently set out in Shaw v Yarranova Pty Ltd [2011] VSCA 55 (per Redlich and Mandie JJA) and in Yarranova Pty Ltd v Shaw (No 2) [2014] FCA 616 (Shaw (No 2)) (per Gordon J), which we summarise as follows.

11    On 20 April 2007, the Court of Appeal made orders for an inquiry to be undertaken by a Master of the Supreme Court for the assessment of damages sustained by the Subsidiaries by reason of the appellant’s maintenance of the caveat.

12    On 7 March 2008, a Master of the Supreme Court ordered the appellant to pay damages assessed at $60,389.57 and the Subsidiaries’ costs of the proceedings (see Shaw v Yarranova Pty Ltd [2010] VSC 567 and Shaw (No 2) at [13]). The appellant appealed the orders of the Master.

13    On 27 March 2008, the appellant entered into a settlement agreement with Yarranova and NewQuay to compromise the damages assessment, freezing order applications and the original judgment debt.

14    On 2 June 2008, Judd J found the appellant to be in breach of the settlement agreement (see Shaw v Yarranova Pty Ltd [2010] VSC 567; Shaw (No 2) at [18]). On 1 August 2008, the appellant’s application for leave to appeal against the orders of Judd J was dismissed with costs (Shaw (No 2) at [18]).

15    Between 7 March 2008 and 3 September 2009, orders were made in favour of the Subsidiaries in a series of taxation proceedings quantifying the amounts payable by the appellant to the Subsidiaries pursuant to the various costs orders. Subsequently, the appellant made several applications for review of those costs assessments.

16    On 27 April 2010, Wood AJ affirmed the quantification of the costs orders (Shaw v Yarranova Pty Ltd [2010] VSC 567 at [2] and Shaw (No 2) at [22]).

17    On 13 December 2010, the appellant’s application to review the costs assessments was dismissed (see Shaw v Yarranova Pty Ltd [2010] VSC 567).

18    On 18 February 2011, the Court of Appeal dismissed the appellant’s application for leave to appeal in relation to the costs assessments. Reasons for these orders were published on 3 March 2011 (see Shaw v Yarranova Pty Ltd [2011] VSCA 55).

19    On 14 December 2012, the Subsidiaries served a bankruptcy notice on the appellant for failing to pay a debt of $388,880.16 due to the Subsidiaries on account of unpaid costs orders (Bankruptcy Notice).

20    On 25 October 2013, Judge Burchardt dismissed the appellant’s application to set aside the Bankruptcy Notice: see Shaw v Yarranova Pty Ltd [2013] FCCA 1627.

21    On 20 December 2013, the Subsidiaries filed a creditor’s petition against the appellant.

22    On 28 May 2014, Bromberg J dismissed the appellant’s appeal from the decision of Judge Burchardt to dismiss the appellant’s application to set aside the Bankruptcy Notice: Shaw v Yarranova Pty Ltd [2014] FCA 557.

23    On 11 June 2014, Gordon J made a sequestration order against the appellant: Shaw (No 2).

24    On 15 February 2016, Pagone J dismissed the appellant’s application to annul the sequestration order: Shaw v Yarranova Pty Ltd [2016] FCA 88.

25    On 30 May 2017, a Full Court of this Court (comprising North, Perry and Charlesworth JJ) dismissed the appellant’s appeal from the decision of Pagone J which dismissed the appellant’s application to annul the sequestration order: Shaw v Yarranova Pty Ltd [2017] FCAFC 88.

26    On 24 July 2019, the appellant applied under s 104(1) of the Bankruptcy Act 1966 (Cth) (Act) for review of a decision that the Trustee in Bankruptcy of his estate made under s 102(1) of the Act (s 104 Application). The decision was to the effect of partially admitting a proof of debt advanced in the bankruptcy by two of the appellant’s creditors (or purported creditors), namely Yarranova and NewQuay.

27    By the s 104 Application, the appellant applies to the Court to contest the Trustee’s decision in respect of the proof of debt of Yarranova and NewQuay. The appellant also sought interlocutory injunctive relief directed at a related decision of the Official Trustee to sell a property that forms part of the appellant’s estate.

28    On 28 August 2019, the appellant was granted leave to issue the three subpoenas addressed to the second and third respondents, Mr Andrew Buxton and Mr Michael Buxton, and the fourth respondent, Mr Henry Lanzer. Each of the subpoenas required the addressee to produce to the Court certain categories of documents and to attend to give evidence at the hearing. As the primary judge observed at [32], the subpoenas were “directed to advancing Mr Shaw’s contention that the court ought to go behind the Costs Orders because, in truth and reality, Yarranova and [NewQuay] were not owed any of the costs to which those orders pertain”.

29    The orders of the primary judge setting aside each of the three subpoenas are dated 13 September 2019. The primary judge’s reasons for decision are dated 26 September 2019.

Appellant’s submissions

30    The appellant, by his written submissions filed 13 July and 30 July 2020, and reply submissions to the second, third and fourth respondents’ submissions filed 30 July and 31 July 2020, made, in broad terms, the following submissions.

Grounds 1 and 2

31    The appellant submits in respect of grounds 1 and 2 that the primary judge acted on a wrong principle and failed to properly establish which issues in the s 104 Application have been litigated to finality. The applicant submits that the reasons of the primary judge do not identify with the required precision the evidence or issues in dispute in the proceedings which give rise to the abuse of process or which particular judgments apply to which particular issues.

32    The appellant submits that the requirements for making a finding of an abuse of process were not made out and that it is not possible to determine a path of reasoning in the primary judge’s reasons for judgment.

33    The appellant submits that the nature of the “review” undertaken for the purposes of s 104 of the Act is a “review” not confined to the correctness or otherwise of the trustee’s decision. The appellant contended that the relevant “review” is in the nature of a rehearing.

34    In this way, the appellant submits that this Court on appeal can go behind the judgment that was the foundation for the judgment debt which in turn was relied upon in the bankruptcy notice and the subsequent sequestration order.

Ground 3

35    By ground 3, the appellant submits that the primary judge denied him procedural fairness in determining that the subpoenas were an abuse of process in circumstances where the primary judge did not examine evidence and hear submissions with regard to the substantive issues to be determined between the parties in the proceeding.

36    The appellant further submits that the primary judge denied the appellant procedural fairness. The appellant contends that the primary judge made up his mind at the start of the hearing and apparently accepted the respondent’s submissions and affidavits without question.

37    The appellant submits that the primary judge erred in failing to consider the appellant’s submission as to whether creditors had acted unconscionably and whether that might constitute sufficient grounds to allow the subpoenas or for the Official Trustee to go behind the judgments or the Official Trustee to vary its decision in respect of the proofs of debt.

Ground 4

38    The appellant by ground 4 submits that the three applications to set aside the subpoenas were invoked for an illegitimate purpose, without a proper or reasonable basis, and themselves constituted an abuse of process. The essence of the appellant’s complaint appears to be that each of the recipients of the subpoenas refused to engage with the appellant to discover why the appellant had issued the subpoenas. The appellant submits that the recipients of the subpoenas cannot have had a proper or reasonable basis to issue the application to set aside the subpoenas in circumstances where they had not sought to engage with the appellant to try and resolve issues prior to commencing the applications to set aside the subpoenas.

Submissions of Henry Lanzer

39    The Lanzer Subpoena was issued in respect of the appellant’s application under s 104 of the Act against the first respondent, the Official Trustee in Bankruptcy VIC 1697/14/1 (Official Trustee). It required Mr Lanzer to produce certain documents and to give evidence.

40    Mr Lanzer submits that leave is required to appeal the primary judge’s decision to set aside the subpoenas. Mr Lanzer submits that the facts of this appeal are distinguishable from Eisele v Commonwealth of Australia [2018] FCA 15 (Eisele), where Moshinsky J held (at [63]) that leave to appeal a decision to set aside subpoenas was not required in the circumstances of that case. (In that case, the appeal had been framed as a challenge to the final order of the Federal Circuit Court, with the challenge to the subpoena decisions, made at trial, merely being a ground of appeal.) It is said that case was therefore distinguishable from this matter where the appeal had been framed (in part) as a direct challenge to interlocutory decisions, as well as a challenge to the final substantive decision (as was the position in Jackson v Health Services Unit [2015] FCAFC 18; 318 ALR 585 per Jessup, Griffith and White JJ at [54] (Jackson)). Mr Lanzer submits that the present case is distinguishable from Eisele and broadly analogous to Jackson.

41    In this case, the appellant has filed an application for leave to appeal, specifically and directly to appeal the subpoena orders. The appellant has also filed a separate appeal in respect of the s 104 application (being proceeding VID1098 of 2019). As a consequence, Mr Lanzer submits that leave to appeal is required in respect of the appeal against the subpoena orders.

Grounds 1 and 2

42    Mr Lanzer submits in respect of grounds 1 and 2 that there is insufficient identification of matters raised in this proceeding which give rise to an abuse of process, and which of those matters were determined finally in earlier proceedings.

43    Mr Lanzer submits that the primary judge correctly identified that the subpoena involved two forms of an abuse of process. First, “fishing” and, second, seeking documents for the purposes of relitigating the question of whether the costs orders were the product of fraud, collusion, a miscarriage of justice or circumstances otherwise warranting the Court going behind those orders. Mr Lanzer submits that the appellant’s attempt to relitigate the costs orders constitutes an abuse of process as those matters had been finally determined by previous Court orders.

44    Mr Lanzer submits that the primary judge’s reasons at [43]-[46] provide a cogent basis for the conclusion which the primary judge reached that the issue of the subpoena to Mr Lanzer was “wholly exploratory”. Mr Lanzer also submits that the suggestion that Mr Lanzer can provide any useful evidence is implausible. It is said that, at the hearing before the primary judge, the appellant accepted that it was “probably true” that Mr Lanzer was not involved in the proceedings against the appellant and did not have relevant documents.

45    Mr Lanzer submits that there is no appellable error demonstrated in the primary judge’s reasons for setting aside the subpoenas.

Ground 3

46    Insofar as the appellant complains about procedural fairness before the primary judge, Mr Lanzer submits that the appellant’s submissions are misconceived. Mr Lanzer says it is wrong for the appellant to suggest that the primary judge did not rule on objections to affidavits raised by the appellant. It is said that the primary judge in fact upheld numerous of the appellant’s objections, the appellant did not seek an adjournment in respect of Mr Lanzer’s application to set aside the subpoena, and the appellant did not identify any basis for why it was appropriate for the appellant to be given leave to cross-examine in an interlocutory application. In any event, Mr Lanzer submits that the appellant was given ample opportunity to present his argument in support of the subpoena.

Ground 4

47    Insofar as the appellant by ground 4 in this appeal alleges that Mr Lanzer’s application to set aside the subpoena was an abuse of process, Mr Lanzer submits that the appellant should not be permitted to do so now as he did not make that submission to the primary judge.

Submissions on behalf of Michael and Andrew Buxton

48    The M Buxton Subpoena and the A Buxton Subpoena required the second and third respondents, Michael and Andrew Buxton (the Buxtons), to produce documents and give evidence.

49    The Buxtons oppose the appellant’s application for leave to appeal against the interlocutory decision of the primary judge. The Buxtons submit that leave to appeal is required from the interlocutory decision of the primary judge. The Buxtons submit that this Court on appeal should be cautious about granting leave to appeal on matters of practice and procedure.

50    The Buxtons submit that the appellant’s grounds of appeal and submissions seek to appeal against the primary judge’s exercise of one or more discretionary matters and in particular the question of whether the Court ought “look behind” the relevant costs orders and the Court’s power to set aside a subpoena under r 24.15 of the Federal Court Rules 2011 (Cth).

Ground 1

51    The Buxtons submit in respect of ground 1 that the primary judge’s reasons sufficiently disclose the primary judge’s path of reasoning and there is no demonstrated appellable error. The Buxtons submit that is so given the primary judge’s reasons:

(1)    clearly state the relevant basis upon which a court might set aside subpoenas;

(2)    explained the circumstances in which a court may look behind a judgment;

(3)    considered the appellant’s arguments;

(4)    gave the appellant ample opportunity to elaborate on his submissions at the hearing; and

(5)    then correctly identified the subpoenas as being nothing more than “hope or suspicion” and “wholly exploratory”.

52    The Buxtons submit that the primary judge identified the appellant’s failure to demonstrate “fraud, collusion or miscarriage of justice” or “other sufficient queries” to go behind the costs orders. The Buxtons also submit that the primary judge was correct to find that the subpoenas were “as clear an example of fishing as might be imagined”.

Ground 2

53    The Buxtons submit that ground 2, as articulated by the appellant, appears to relate to issues as to whether the Court should exercise its discretion to “go behind” the costs orders and that the appellant’s contentions that the “indemnity principle” in respect of costs should be reargued. The Buxtons submit that the appellant has previously asked courts to “go behind” these judgments on multiple occasions to no avail. The Buxtons submit that the appellant has not demonstrated any miscarriage by the primary judge of the exercise of his discretion and that accordingly there is no appellable error demonstrated in the reasons of the primary judge.

Ground 3

54    The Buxtons submit in respect of ground 3 that there was no denial of procedural fairness by the primary judge. The Buxtons contended that the appellant was given numerous opportunities to present his case before the primary judge including by filing lengthy affidavits and by filing written submissions at the trial, and the appellant was invited by the primary judge to address the Court on matters which he had not had the opportunity to include in his written submissions. The Buxtons submit there is simply no basis for submitting that the primary judge denied procedural fairness in the circumstances of this case.

Ground 4

55    The Buxtons submit that the appellant should not be permitted to raise ground 4 – which the Buxtons submit is to the effect that the applications to set aside the subpoenas were issued for an illegitimate purpose – given that submission was not made before the primary judge.

Consideration

56    We are satisfied that leave is required to appeal the primary judge’s decision to set aside the subpoenas given the appeal is a direct challenge to this interlocutory decision and is not merely part of the grounds of appeal to challenge a final substantive decision: Jackson at [54].

57    The applicable principles as to when leave is required are well settled and were recently restated by the Full Court of this Court in Nationwide News Pty Ltd v Rush [2018] FCAFC 70 per Lee J at [2]-[6] (Allsop CJ and Rares J agreeing), as follows:

(1)    The starting point is that, in exercising the power to grant leave, regard must be had to the statutory charge in s 37M(3) of the Federal Court of Australia Act 1976 (Cth) that the power must be exercised or carried out in the way that best promotes the overarching purpose, being the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible.

(2)    Consistent with the facilitation of a just resolution, an applicant must show that:

(a)    in all the circumstances, the decision to be appealed is attended with sufficient doubt to warrant its reconsideration on appeal; and

(b)    supposing the decision to be wrong, substantial injustice would result if leave were refused. The sufficiency of the doubt in respect of the decision to be appealed and the question of substantial injustice bear upon each other so that a degree of doubt which is sufficient in one case may be different from that required in another. The considerations are cumulative such that leave ought not be granted unless each limb is made out: Décor Preparation Pty Ltd v Dart Industries Inc [1991] FCA 655; 33 FCR 397 at 398-399 per Sheppard, Burchett and Heerey JJ.

(3)    Additionally, and consistent with the facilitation of a quick, inexpensive and efficient resolution, we note the principle which emerged from the warning of Jordan CJ in Re The Will of F.B. Gilbert (Deceased) (1946) 46 SR (NSW) 318 at 323, that, if a tight rein is not kept upon the interference with orders of judges at first instance in the exercise of discretion on a point of practice and procedure, the result would be “disastrous to the proper administration of justice”.

(4)    Even if it was reasonably arguable that the primary judge’s discretion miscarried, that would not, in of itself, be a sufficient basis to grant leave.

58    In our view, the primary judge’s decision is not attended with sufficient doubt to warrant its reconsideration on appeal.

59    The primary judge correctly identified the subpoenas as a fishing exercise at [43]-[46] where the primary judge provided a cogent basis for the conclusion that the subpoenas were “wholly exploratory”. The appellant has not demonstrated any error of the kind required by House v The King [1936] HCA 40; 55 CLR 499.

60    The primary judge correctly identified that the subpoenas had been issued for the impermissible purpose of relitigating the previous decisions of the Supreme Court of Victoria and of this Court which his Honour set out in detail at [5]-[18] of the primary judgment.

61    The s 104 Application is the appellant’s fifth attempt, including previous unsuccessful appeals, to persuade this Court, in the exercise of its bankruptcy jurisdiction, to go behind the previous costs orders. The primary judge correctly identified the problem for the appellant at [45] of his Honour’s reasons, as follows:

45.    The facts to which Mr Shaw points are established by the evidence (and, in any event, are not materially challenged). The problem for him now, as it has always been, is that none of them individually is, and no two or more of them in combination are, sufficient to amount to “fraud, collusion or miscarriage of justice” or “other sufficient cause” of the kind that might warrant an exercise of the court’s discretion to go behind the Costs Orders. Mr Shaw has no proper basis for his contention that the Costs Orders are unreliable or were irregularly obtained such that the court should venture behind them. In reality, he has nothing more than a bald hope or suspicion that they are or were; a hope or suspicion that he wished to investigate by means of the court’s coercive subpoena process.

46.    The subpoenas were, then, wholly exploratory. Again intending no disrespect, Mr Shaw has no idea whether Yarranova and Newquay were liable for the legal fees to which the Costs Orders relate. He has no idea as to the nature of the arrangements—formal or otherwise, express or implicit—that existed as between Yarranova and Newquay, their lawyers and the related entity that paid their lawyers. He complains that nobody has ever properly explained to him (or to this or any other court) what those arrangements were. Let it be assumed that Mr Shaw is right about that: in the absence of some basis for suspecting something untoward, those arrangements are not of concern to Mr Shaw or the court. The court will not default to a position of suspicion; particularly not in light of what, on its face, appears to be an entirely unremarkable example of one entity in a group performing a treasury-type function for others. It most certainly will not do so in circumstances where Mr Shaw has agitated and lost precisely the same contention on as many occasions as he has, both in this court and in the Victorian Supreme Court.

62    An appeal by way of rehearing requires demonstration of error: see Branir Pty Ltd v Owston Nominees (No. 2) Pty Ltd [2001] FCA 1835; 117 FCR 424 at 435 [22] per Allsop J, as the Chief Justice then was (Drummond and Mansfield JJ agreeing). Moreover, what is required is a demonstration of error in the orders made by the primary judge and not the reasons given for those orders. There is no sufficient doubt as to the correctness of the primary judge’s orders.

63    Finally, no substantial injustice would result if leave to appeal were refused. This is principally because the appellant has been afforded numerous opportunities in different courts to challenge the costs orders and on each occasion has been unsuccessful. The issue of the subpoenas by the appellant represents, as the primary judge correctly found, a further attempt by the appellant to relitigate previous costs orders.

64    It follows that neither limb of Décor has been made out and the application for leave to appeal from the orders of the primary judge should be dismissed with costs.

65    Finally, at the completion of the hearing of this matter on 4 August 2020, the appellant raised, for the first time, the existence of a revised draft notice of appeal, apparently sent to and received by the Federal Court of Australia’s registry, but not filed, on 7 October 2019. No mention was made of it by any of the parties during the course of their oral submissions, and no leave was sought by the appellant to rely upon it.

66    In any event, before making final orders, the Court adjourned to consider this document which was titled “Revised Draft Notice of Appeal”. After that adjournment, and having considered this document, the Court is of the opinion that the document titled “Revised Draft Notice of Appeal” does not contain any ground not addressed in substance by the parties or in these reasons.

67    Accordingly, leave to appeal the interlocutory orders of the primary judge is refused. The applicant will pay the respondent’s costs of and incidental to the appeal.

Associate:    

Dated:        19 August 2020

SCHEDULE OF PARTIES