FEDERAL COURT OF AUSTRALIA

Maxwell-Smith v Donnelly [2011] FCA 523

THE COURT ORDERS THAT:

1.    Leave to appeal against the orders made by Nicholas J on 25 March 2011 be refused.

2.    The first respondent’s costs in the administration, under the Bankruptcy Act 1966 (Cth), of the estates of the applicants include the costs, charges, expenses and remuneration of and incidental to the application for leave to appeal filed on 11 April 2011.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

Introduction

1    This judgment deals with an application for leave to appeal against a judgment of a judge of this Court, Nicholas J. The history of the dispute, and resulting litigation, between Mr and Mrs Maxwell-Smith and their original creditor and later their trustee in bankruptcy is long, complicated and in many respects unfortunate. There are 18 judgments in this Court and one in the Federal Magistrates Court of Australia (“the FMCA”) dealing with the bankruptcy issues alone, as well as judgments elsewhere dealing with the underlying disputes.

2    Almost all of the contested issues in the litigation to date been decided adversely to the applicants. The dates of the decisions or judgments which have dealt with matters generally adversely to the applicants, may be summarised as follows:

The building dispute

    Consumer Claims Tribunal            5 September 1996

    NSW Supreme Court                13 November 1996

    Consumer Claims Tribunal            29 August 1997

    NSW Supreme Court                8 December 1998

    NSW Court of Appeal                7 April 1999

    High Court                    30 November 1999

The bankruptcy notice

    Federal Court (Allsop J)            25 January 2002

    Federal Court (Full Court)            31 May 2002

    FMCA                        22 April 2003

Federal Court (Moore J)            10 September 2003

Sequestration and annulment

    Federal Court (Moore J)            2 July 2004

    Federal Court (Moore J)            17 September 2004

Application for an inquiry into trustee’s conduct

    Federal Court (Wilcox J)            21 March 2005

    Federal Court (Full Court)            27 October 2006

    Federal Court (Allsop J)            8 June 2007

    Federal Court (Full Court)            23 November 2007

3    Following the effective and (as will be seen) final resolution of the substantive matters at issue between Mr and Mrs Maxwell-Smith and the other parties, it remained necessary for the trustee’s costs and remuneration to be assessed. That produced further disputation when those costs and remuneration were taxed by a Registrar of the Court. Nicholas J dealt with those matters in two judgments, on 14 May 2010 and 25 March 2011 respectively. His Honour’s examination of those issues is not complete. However, it is the orders made to accompany the judgment of 25 March 2011 which have provoked the application for leave to appeal.

4    Before I can deal with that issue, it will be necessary to take some time to recount the overall history of the litigation. Then I can return more directly to the subject of the present application.

The building dispute

5    Mr and Mrs Maxwell-Smith engaged S & E Hall Pty Ltd (“the creditor”) to construct a home at 8c Surf Circle, Tura Beach, New South Wales. By late May 1996 there was disagreement between the parties about their respective rights. Mr and Mrs Maxwell-Smith lodged a complaint with the New South Wales Department of Fair Trading and initiated proceedings in the New South Wales Consumer Claims Tribunal (“the Tribunal”). The Tribunal ordered Mr and Mrs Maxwell-Smith to pay $7,012.55 to the creditor. The Maxwell-Smiths challenged that order in the Administrative Law Division of the Supreme Court of New South Wales (“the Supreme Court”). On 13 November 1996 orders were made by consent referring the matter back to a differently constituted Tribunal for a re-hearing. The Tribunal, on 25 February 1998, ordered the Maxwell-Smiths to pay the creditor the sum of $6,745.55. The Maxwell-Smiths again took proceedings in the Supreme Court. On 8 December 1998 the summons in the Supreme Court was dismissed with an order that the Maxwell-Smiths pay costs.

6    That was not the end of that part of the litigation, as I shall shortly indicate. However, it was the costs ordered on 8 December 1998 that provided the basis for a bankruptcy notice served by the creditor on Mr and Mrs Maxwell-Smith. The costs of the creditor were assessed at $11,282.12. They were then the subject of a judgment in the Local Court (Civil Claims) in the sum of $13,757.94 which was made up of the assessed costs of $11,288.12 plus costs and interest. The unsatisfied Local Court judgment later provided the reason for the bankruptcy notice.

7    After the summons to the Supreme Court against the second decision of the Tribunal was dismissed with costs, Mr and Mrs Maxwell-Smith sought leave to appeal to the New South Wales Court of Appeal. In April 1999 leave was refused with costs. They then sought special leave to appeal to the High Court. On 30 November 1999 that application was dismissed with costs. At this point, it may be concluded that the opportunities to challenge the creditor’s claim, which had been upheld by the Tribunal, were exhausted. The Maxwell-Smiths were bound in law by the outcome of the litigation about that matter.

The bankruptcy notice

8    The bankruptcy notice was issued on 26 March 2001. As I said earlier, it claimed an unsatisfied debt of $13,757.94. Having regard to the subsequent history, the sum involved was a trifling one both in absolute terms and with respect to its impact upon the financial affairs of Mr and Mrs Maxwell-Smith. Evidently, they saw the matter differently, at least at that time, and they refused to accept any obligation to meet the judgment debt in that amount, or to comply with the bankruptcy notice. Mr and Mrs Maxwell-Smith instead made an application to set aside the bankruptcy notice. The application to this Court to set aside the bankruptcy notice contained a counterclaim seeking damages of $105,000 (and costs) against the creditor. The counterclaim was based upon alleged improprieties by the creditor and his solicitor in connection with the proceedings before the Tribunal. On 25 January 2002 Allsop J dismissed the counterclaim. He viewed the proceedings in this Court as an attempt to re-litigate the matters which had been dealt with by the Tribunal. As I have indicated, such a course was not legally open, however strongly Mr and Mrs Maxwell-Smith may have wished to adhere to their own view of the merits of the dispute with their creditor. Allsop J said that the claims against the creditor were “without substance, vexatious and oppressive and an abuse of process”. In addition to his dismissal of the counterclaim, Allsop J also dismissed the application to set aside the bankruptcy notice (Maxwell-Smith v S & E Hall Pty Ltd [2002] FCA 25).

9    There was an appeal. In a very short judgment the appeal was dismissed for the reason that Allsop J was “plainly correct” (Maxwell-Smith v S & E Hall Pty Ltd [2002] FCAFC 198).

10    Nevertheless, another application was made to set aside the bankruptcy notice. That application was heard by the FMCA and dismissed (Maxwell-Smith v S & E Hall Pty Ltd [2003] FMCA 162). The learned Federal Magistrate said (at [11]):

11.    Mr and Mrs Maxwell-Smith have incurred substantial legal costs in the pursuit of justice as they see it. Perhaps they would have been better advised to meet the builder’s claim in the first instance. In any event, those legal costs have been incurred and have not been paid. I am satisfied that those costs were properly assessed following the decision of the New South Wales Supreme Court. Following the assessment of the costs and entering of judgment in the Local Court the costs became due and payable. In the circumstances, I am not satisfied that a basis has been advanced to set aside the bankruptcy notice and I will dismiss the application.

11    A further appeal was filed in this Court. It was dealt with by Moore J on 10 September 2003 (Maxwell-Smith v S & E Hall Pty Ltd [2003] FCA 953). His Honour decided that the appeal should be dismissed. However he thought it appropriate “to ascertain whether I should make an order requiring the parties to mediate”. His Honour said at [13]:

13    [T]he appellants presently appear to be heading down a path of further litigation in which liability for costs may arise which they have no capacity to manage or meet. Indeed that point may have already been reached. They also face the possibility of sequestration orders being made. The appellants informed me that their only significant asset was their retirement home (the building of which was the subject of the dispute before the Tribunal), they are pensioners and their income is thus limited. It would be unfortunate if some further attempt were not made to resolve all issues between the parties. However, it would probably not be productive to order mediation in this matter unless the parties agreed to engage in the process. It is for this reason I have made orders requesting the parties to advise whether they agree to mediation, and generally restricted the entry of these orders until this position is made clear.

12    There was no appeal available against the judgment of Moore J (sitting on appeal from the FMCA) (Federal Court of Australia Act 1976 (Cth) (“the FC Act”) s 24(1AAA) as then applying). No application was made for special leave to appeal to the High Court. At this point, therefore, there was no further avenue of challenge available to the bankruptcy notice, which represented an unassailable foundation for the presentation of a creditor’s petition, notwithstanding the tentative suggestion by Moore J that it may not be too late to attempt mediation. It will be noted that this suggestion was itself conditional upon acceptance by both parties that mediation should occur. That condition was not met.

Sequestration and annulment

13    The attempt to provide an avenue for the consensual resolution of what was becoming an intractable dispute was, regrettably, to lead to further unfortunate events which were later referred to by Moore J in a judgment given on 2 July 2004 (Maxwell-Smith v S & E Hall, in the matter of Maxwell-Smith [2004] FCA 840). His Honour there recorded that, after his earlier judgment, the creditor had advised that it was not willing to engage in mediation but Mr and Mrs Maxwell-Smith said that they were prepared to do so. However, in the meantime, a creditor’s petition based on the bankruptcy notice had been listed for a hearing before a Registrar. Mr Maxwell-Smith had requested that the hearing be delayed but the request had been dealt with equivocally in the Registry. The hearing, on 15 September 2003, went ahead. Mr and Mrs Maxwell-Smith did not appear. A sequestration order was made against the estates of Mr and Mrs Maxwell-Smith on that day. On 2 July 2004 Moore J concluded that Mr and Mrs Maxwell-Smith had been unwittingly denied natural justice. He annulled the bankruptcies. By this time, disputes had arisen between the Maxwell-Smiths and the trustee concerning his costs, charges and expenses, including his remuneration. Moore J ruled that the trustee was entitled to recover those amounts from the property of Mr and Mrs Maxwell-Smith. His Honour said (at [27]):

27    In this application, the applicants appear to challenge collaterally the costs, charges and expenses of the Trustee, including his remuneration. However, s 154(1)(b) creates a statutory entitlement or charge enforceable by the Trustee which I have no power to modify or alter. That section relevantly provides:

If the bankruptcy of a person (in this section called the former bankrupt) is annulled under this Division:

…

(b)    the Trustee may apply the property of the former bankrupt still vested in the Trustee in payment of the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the Trustee;…

    (emphasis original)

It may possibly be that, as a matter of construction, the reference to costs, charges and expenses as well as remuneration should be treated as amounts reasonably incurred in the administration of the estate. Such a construction might be apt because, arguably, the section is not intended to confer on the Trustee a right to apply the former bankrupt’s property for costs, charges and expenses arising from activities the Trustee should not have engaged in as part of the proper administration of the bankrupt’s estate. In the present case, having regard to the material before me, I am not satisfied that any aspect of the administration of the bankrupts’ estates could be characterised as conduct the Trustee should not have engaged in, including appearing in these proceedings represented by counsel. It will, of course, be open to the applicants to discuss with the Trustee, a scheme of the type raised by the Trustee’s counsel at the hearing, namely the creation of some type of security over their home to enable the satisfaction of amounts due to the Trustee. Consistent with authority, the Trustee is entitled to his costs of this application: Re Gollan: Ex parte Gollan (1992) 40 FCR 38.

14    Although the bankruptcies had been annulled, that did not affect the right of the trustee to remuneration, or to his costs, charges and expenses arising from the administration of Mr and Mrs Maxwell-Smiths’ estates. Recovery of those amounts was governed by the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”). Mr and Mrs Maxwell-Smith had no legitimate ground of resistance to the trustee’s rights in that regard, which were to be exercised against their estates, rather than them personally, unless the costs were improperly incurred.

15    Moore J, in his judgment on 2 July 2004 also referred to the original amounts owing to the creditor and said (at [28]):

Unless those debts are satisfied, one can reasonably expect the applicants will continue to be involved in further legal controversy, with the real prospect of incurring future legal costs.

16    All parties (the trustee, the creditor and Mr and Mrs Maxwell-Smith) sought costs of the proceedings before Moore J. All applications were refused and his Honour ordered that there be no costs of the annulment application or the application for costs (Maxwell-Smith v S & E Hall Pty Ltd, in the matter of Maxwell-Smith [2004] FCA 1214). At this point, notwithstanding the additional burden to which Mr and Mrs Maxwell-Smith had been exposed as a result of the misunderstanding at the time the sequestration order was made, an opportunity existed for yet further costs to be avoided.

The application for an inquiry

17    However, Mr and Mrs Maxwell-Smith were not prepared to let the matter rest. I am not concerned to criticise them for taking the matter further. That was a course open to them. But matters from this point must be seen in a context where there was no further challenge to the sequestration order available and no ground upon which to contest the fact that administration of Mr and Mrs Maxwell-Smiths’ estates had generated costs which the trustee was entitled to recover.

18    The next step taken by Mr and Mrs Maxwell-Smith was to apply for an inquiry into the conduct of the trustee, Mr Donnelly and into the bankruptcies which had persisted, before their annulment, for about 10 months. Mr Donnelly prepared accounts setting out the amount claimed by him for remuneration and expenses, including amounts paid or payable by way of legal costs. The total amount of the costs claimed by the trustee exceeded $92,000. Mr and Mrs Maxwell-Smith challenged the amounts claimed and the trustee’s conduct generally. The application for an inquiry into the trustee’s conduct was dealt with by Wilcox J in a judgment delivered on 21 March 2005 (Maxwell Smith v Donnelly [2005] FCA 332). His Honour was not persuaded that a case had been made out of inappropriate conduct on the part of the trustee. His Honour said (at [22]–[24]):

22    The situation confronting Mr and Mrs Maxwell-Smith is most unfortunate. In saying that, I have in mind both the unsatisfactory Tribunal decision and the circumstances that led Moore J to annul the bankruptcy orders made against the applicants. Nonetheless, unless Mr Donnelly can be shown to have acted improperly in some way, or to have incurred unnecessary expense, or to be charging an unnecessary or excessive amount, he is entitled to his remuneration and to reimbursement of his expenses.

23    I see no basis for ordering an inquiry into Mr Donnelly’s administration of the former bankrupts’ estates. There has been full discussion today about each of the complaints made by Mrs Maxwell-Smith. There is no point in a fuller inquiry in relation to them.

24    As I say, the appropriate course now is for a detailed account of costs to be prepared and taxed. I hope it will then be possible for some arrangement to be made whereby that amount is paid out, perhaps by the former bankrupts obtaining a loan secured over the Tura Beach property. It would be a further misfortune if their unwillingness or inability to do this led to their home, or the Jindabyne property, being sold up. I hope that, even at this late stage, cooperation and commonsense will prevail.

19    His Honour’s addition to the list of judicial reminders about the potential consequences of further litigation had no greater effect than the earlier ones. Mr and Mrs Maxwell-Smith decided to appeal Wilcox J’s judgment. It became necessary for an extension of time to be granted. An order permitting them to file and serve a notice of appeal was made by Hely J on 8 June 2005.

20    Before the appeal was heard it became necessary for Mr and Mrs Maxwell-Smith to apply to the Court to set aside a further bankruptcy notice which had been issued against them by the creditor. In order to understand the way in which this came about it is necessary to go back in history for a short time. On 26 October 2000 the creditor had obtained a certificate of the taxed costs in the High Court. The amount allowed was $5,528.27. Five and a half years later the Official Receiver issued a bankruptcy notice on the application of the creditor based on that certificate. On 3 July 2006 Jacobson J set aside that bankruptcy notice as an abuse of process (Maxwell-Smith v S & E Hall Pty Limited, in the matter of Maxwell-Smith (2006) 233 ALR 81; [2006] FCA 825) as he was satisfied that the “purpose in issuing the bankruptcy notice was to put pressure on Mrs Maxwell-Smith to pay the debt rather than to genuinely invoke the Court’s bankruptcy jurisdiction” (at [45]).

21    Meanwhile, the appeal against the orders made by Wilcox J on 21 March 2005 had been heard and on 27 October 2006 the appeal was allowed in part (Maxwell-Smith v Donnelly [2006] FCAFC 150). It is plain from the terms of the appeal judgment that there were matters advanced in support of the appeal which had not been the subject of complaint before Wilcox J. With one exception, the Full Court did not uphold the challenges to the decision made by Wilcox J. With respect to the matters which were not raised before Wilcox J, although those matters were identified by the Full Court it was felt inappropriate to deal with them. The Full Court said, in that respect (at [55]):

55    One complexity in this appeal is that the appellants were not represented before Wilcox J and provided his Honour with a large volume of material, but did not identify with clarity and precision in one document only, what conduct of the trustee the appellants criticised or challenged for the purposes of seeking an inquiry. It is apparent from the transcript of the proceedings before Wilcox J, that his Honour patiently and carefully sought to elicit from Mrs Maxwell-Smith what was the conduct about which the appellants made complaint. It is that conduct which his Honour discussed in his reasons for judgment. In the absence of the identification of further conduct of the trustee which might compel a conclusion that there should be an inquiry in relation to that conduct, we do not think it is appropriate to consider in this appeal the conduct relied on by Mr Brennan [who appeared pro bono for Mr and Mrs Maxwell-Smith] in his submissions which was not relied on below. This conclusion is fortified by the appellants making no application to amend either the originating process or the notice of appeal. Any such application would have enabled us to focus on whether raising additional matters was fair to all parties and appropriate in all the circumstances.

22    It was suggested in material filed in the present application for leave to appeal that some matters upon which Mr and Mrs Maxwell-Smith relied to suggest evidence of misconduct on the part of the trustee only became known to them in 2006 and 2007, after Wilcox J had dealt with the application for an inquiry. These matters were made known to counsel then appearing pro bono for Mr and Mrs Maxwell-Smith. Some matters were raised before the Full Court, and put aside as I have indicated. Nonetheless, those and other matters were available to be raised in the next stage of litigation, which is referred to hereunder.

23    The exception to the general conclusion that Wilcox J had not made any error, concerned a complaint made by Mrs Maxwell-Smith that she was prevented from departing on a cruise with her disabled grandson because Mr Donnelly had not given her permission to leave the country. The Full Court referred to that matter at [56] as follows:

56    The one matter which was discussed by his Honour which warrants further consideration, is the attempt of Mrs Maxwell-Smith to commence a cruise with her grandson on 20 May 2004. It is appropriate to set out precisely what his Honour said about this matter (at [16] to [18]):

Finally, Mrs Maxwell-Smith feels extremely strongly about the fact that the trustee failed to give permission for her to depart, with her disabled grandchild, on an overseas cruise on 20 May 2004.

Apparently, Mrs Maxwell Smith intended to speak to the trustee about this matter on 18 May. Although she saw Mr Donnelly on that day, she omitted to do so. She saw him again on 19 May, but again failed to raise the matter with him. She then apparently assumed there would not be a problem, because of something said to her by Ms Gallucci. So she presented herself and her grandson to the ship on 20 May but was denied entry. Despite an attempt by the captain of the ship to resolve the matter, Mrs Maxwell-Smith eventually had to be excluded from the ship because of the fact that she was on a Portwatch list maintained by the Australian Federal Police.

I understand the embarrassment and anguish of Mrs Maxwell-Smith over this matter. Perhaps it could have been better handled by Mr Donnelly, but I have to say it seems to me the fault lay at least as much on the side of Mrs Maxwell-Smith, as on the trustee. She ought to have taken up the matter with Mr Donnelly well before the cruise was due to depart. In any event, this particular complaint has no financial aspect. There would be no point in having an inquiry in relation to that matter.

24    The Full Court decided that there should be an inquiry concerning the conduct of the trustee with respect to those events. The Full Court concluded on the following note (at [65]):

65    Because we have not expressed disagreement with the conclusions of Wilcox J on matters other than the appellants’ contention relating to Mrs Maxwell-Smith’s travel, it should not be assumed that we accept every comment his Honour made about the trustee’s conduct or that, by implication, the fees, costs and disbursements presently charged by the trustee should be accepted in any taxation without careful consideration. We doubt, for example, that the trustee is entitled to payment for convening and attending a creditors’ meeting after the bankruptcies were annulled. However these are matters for consideration during any taxation.

25    The Full Court decided (at [66]) that there should be no costs awarded to either party of the appeal, or of the proceedings before Wilcox J.

26    The inquiry which was directed by the Full Court was conducted by Allsop J who, in a judgment delivered on 8 June 2007 (Maxwell-Smith v Donnelly (in the matter of Inge and Eugene Maxwell-Smith) [2007] FCA 894), concluded that there was no basis for criticism of the conduct of Mr Donnelly. Allsop J dealt in detail with the background to the complaint made about Mrs Maxwell-Smith’s desire to travel outside Australia with her grandson. It is evident that the trustee’s administration was not without difficulty, occasioned in part by the sense of grievance which Mr and Mrs Maxwell-Smith felt. In his detailed discussion of the factual circumstances concerning Mrs Maxwell-Smith’s attempt to leave Australia relying upon her passport (which should have been but had not been surrendered to her trustee as required by s 77 of the Bankruptcy Act Allsop J did not, in material respects, accept the version of events which had been advanced to Wilcox J by Mrs Maxwell-Smith. His Honour said (at [45]–[47]):

45    But, as the facts reveal here, Mr Donnelly was never really called upon to make a decision on an application by the bankrupt to travel. To say that that is what occurred on 20 May 2004 misunderstands and misconceives the position Mr Donnelly found himself in. He was called upon, without notice, in circumstances where he is entitled to say that the matter came as a surprise to him, to consider a conversation with a Federal Police Officer (who had been sent to the wharf to prevent Mrs Maxwell-Smith travelling) about allowing Mrs Maxwell-Smith to travel in circumstances where what Mr Donnelly knew was set out in [44] of his statement and in circumstances where it was not, nor could be understood as being, a request by the bankrupt herself.

46    Given the irregularity of the behaviour, the failure of the Maxwell-Smiths to give any notice whatsoever that Mrs Maxwell-Smith would be travelling, despite the apparent clear opportunity of the previous days, given the failure to attend the s 81 examination, whatever might be the explanation for that, given the taking out of the warrants whatever might be the status of those and the circumstances of lack of notice and surprise in which Mr Donnelly found himself, his decision was not one, in my view, that is open to the kind of criticism that is made of it. In particular, I think what is said in [47] of Mr Donnelly’s statement is legitimate.

47    The kinds of consideration discussed by Deane J in Re Tyndall presuppose a request, otherwise regular, to travel. The circumstances here were highly irregular. As I have said, there was no application by Mrs Maxwell-Smith. She had given no notice. She could be seen as having possibly committed an offence in failing to deliver her passport and to have acted in an attempt to board the ship. In all the circumstances identified by Mr Donnelly in [42] to [47] of his statement, I think it is a misunderstanding of the position to say that he breached his obligation as a trustee by failing to only turn his mind to the question of the due administration of the estate.

and (at [49]–[50]):

49    In my view, in all the circumstances, there was no miscarriage of discretion of the kind posited in address, there was no abuse of power, there was no act of mala fides, Mr Donnelly’s actions in all the circumstances that he was placed in by others is not the subject of legitimate criticism. Of course he could have said, yes, it is all right for you to go, but he did not. If there is any responsibility for the most unfortunate events of 20 May 2004, they rest with others and not with Mr Donnelly or Mrs Gallucci. They should have been warned and told that overseas travel was desired. I have already expressed my view that I am prepared to accept Mrs Maxwell-Smith’s evidence as honest as to why she thought she did not have to, but from Mr Donnelly’s position, to attempt to criticise him in the serious way that has been done, in circumstances where he was given no notice whatsoever of the travel and in the other circumstances that I have described is, I think, somewhat unfair.

50    If Mr Donnelly had been given adequate notice for the decision, if the nature of the family trip had been explained to him, I have little doubt that with appropriate conditions of the kind imposed by Moore J in July, he would have consented to the travel.

27    In two subsequent judgments, delivered respectively on 6 July 2007 and 6 August 2007 (Maxwell-Smith v Donnelly (in the matter of Inge and Eugene Maxwell-Smith) [2007] FCA 1005 and Maxwell-Smith v Donnelly (in the matter of Inge and Eugene Maxwell-Smith) [2007] FCA 1097), Allsop J dealt with further issues concerning the costs of the proceedings before him to make it clear (applying Pantzer v Wenkart (2006) 153 FCR 466) that the trustee was entitled to all his costs, including remuneration. Mr and Mrs Maxwell-Smith appealed the costs order. The appeal was dismissed with costs (Maxwell-Smith v Donnelly [2007] FCAFC 180). One contention advanced in that appeal by Mr and Mrs Maxwell-Smith, which is important to note for present purposes, was that the trustee was not entitled to claim, out of their estates, any expenses incurred after the annulment of the bankruptcies. The Full Court (like Allsop J) regarded that contention to have been authoritatively rejected in Pantzer v Wenkart (at [43]–[44]) as the trustee had been drawn into litigation by Mr and Mrs Maxwell-Smith after the annulment of the bankruptcies. An application for special leave to appeal to the High Court was dismissed on 15 May 2008 ([2008] HCASL 238).

28    At this point there was no further legitimate avenue available to raise allegations of misconduct against the trustee in connection with the administration of Mr and Mrs Maxwell-Smiths’ estates. Moreover, the proceedings in which those allegations had been made were ones which had been initiated by Mr and Mrs Maxwell-Smith and were ones to which the trustee was entitled, and in a practical sense obliged, to respond. Those proceedings had, finally, been decisively concluded against Mr and Mrs Maxwell-Smith. The proceedings to which I have referred had inevitably delayed finalisation of the trustee’s administration. Mr and Mrs Maxwell-Smiths’ property was still, legally, held by the trustee. Except to the extent that costs had been withheld (as they were in connection with the proceedings before Wilcox J and the consequent appeal) the trustee was, subject only to taxation, entitled to recover costs properly incurred in responding to the proceedings initiated against him by Mr and Mrs Maxwell-Smith. Again, those rights were exercisable against their estates, rather than against them personally.

Taxation of the trustee’s costs

29    The next important episode concerned the trustee’s formal claims for his costs, charges and expenses incurred in the administration of Mr and Mrs Maxwell-Smiths’ estates. Those costs, charges and expenses were sought pursuant to an order made by Moore J on 8 June 2007 (the same day as Allsop J disposed of the substance of the inquiry into Mr Donnelly’s conduct). The order made by Moore J was made with the consent of Mr and Mrs Maxwell-Smith. It was in the following terms:

The costs, charges and expenses of the administration of the former bankrupt estate of Eugene and Inge Maxwell-Smith, including the remuneration and expenses of the trustee, be taxed by a Registrar of the Court in accordance with Part 8 Division 4 of the Bankruptcy Regulations.

30    It is not disputed that power to make such an order is provided by s 30 of the Bankruptcy Act, although normally review of a trustee’s remuneration would be carried out under the direction of the Inspector-General in Bankruptcy, subject to an appeal to this Court (see Bankruptcy Act ss 162, 167; Bankruptcy Regulations 1996 (Cth) Division 4). Taxation of the trustee’s costs, charges, expenses and remuneration was carried out by a Registrar of the Court. Three certificates of taxation were provided. The trustee then sought orders to enforce the certificates of taxation. The orders sought included an order that Mr and Mrs Maxwell-Smith give vacant possession of their home (to allow it to be sold by the trustee). The trustee’s notice of motion was dealt with by Nicholas J. To this point, two judgments have dealt with the trustee’s notice of motion to enforce the certificates of taxation: (Maxwell-Smith v Donnelly [2010] FCA 474 and Maxwell-Smith v Donnelly (No 2) [2011] FCA 259). The second of those judgments was accompanied by the orders which Mr and Mrs Maxwell-Smith now wish to appeal.

31    In the first judgment, Nicholas J gave express consideration to the jurisdictional foundation for the proceedings before him (at [21]–[32]) and concluded that, despite the unconventional procedures to which the parties had consented in 2004, the Court had ample power to review the certificates of taxation, enforce them and, if necessary, to disallow improper, unreasonable or unnecessary charges. No party has challenged those conclusions.

32    In the first judgment, delivered on 14 May 2010, his Honour recorded (at [6]):

Mr Donnelly filed 7 separate bills of costs which were taxed by a Registrar. The total amount claimed in these bills came to $435,254.16. On 6 April 2009 the Registrar delivered a decision allowing an amount of $392,482.72 and on the same date the Registrar signed 3 separate certificates of taxation.

33    His Honour referred to the amounts certified (which involved both trustee remuneration and disbursements and also solicitor charges and disbursements), in the following way (at [7]):

7    The picture painted by these numbers is alarming. The building dispute which culminated in Mr and Mrs Maxwell-Smiths’ bankruptcies concerned a sum that was but a tiny fraction of the amount now claimed by the trustee. Moreover, most of the amount claimed by the trustee relates to remuneration earned and disbursements incurred after Mr and Mrs Maxwell-Smiths’ bankruptcies were annulled. Mrs Maxwell-Smith contends, among other things, that these costs are the consequence of waste and recklessness by the trustee. Mr Donnelly, on the other hand, contends that his costs are the consequence of the querulous and uncooperative behaviour of Mr and Mrs Maxwell-Smith.

34    In the present proceedings, counsel for the trustee was at pains to emphasise that most of the costs were incurred after the annulment of the bankruptcies and as a result of the ongoing litigation (including appeals) initiated by Mr and Mrs Maxwell-Smith, which had eventually been decisively concluded against them. That contention must be accepted. It is apparent from a table set out at [6] of the judgment of Nicholas J of 14 May 2010 that the great bulk of the costs initially allowed by the Registrar were incurred between 1 August 2004 and 31 October 2007 (when the applicants were pursuing their proposal for an inquiry into the trustee’s conduct) and that the significant bulk of those costs and expenses were legal costs to which the trustee became liable (over 70% of the amounts originally allowed by the Registrar on taxation).

35    As a result of his review, Nicholas J was satisfied that the trustee was “entitled to a total amount that is considerably less than what was allowed by the Registrar”. There were three areas in which the trustee had claimed costs (which the Registrar had substantially allowed) which Nicholas J concluded required further attention. Those three areas concerned the costs of the proceedings before Wilcox J and the resulting appeal, solicitor’s costs incurred by the trustee where the solicitor had charged a premium or “uplift fee” and remuneration, costs and expenses for the conduct of public examinations.

36    Nicholas J was persuaded that the amounts allowed by the Registrar on taxation should be substantially reduced. His Honour concluded that the trustee should not have been allowed his costs (including legal costs) of the application before Wilcox J and the costs of the appeal against the orders made by Wilcox J, although the trustee was entitled to claim his own remuneration with respect to those matters. His Honour also concluded that the trustee’s solicitors were not entitled to charge the trustee a premium or uplift fee under the first and third of three costs agreements and the trustee’s costs were not allowable to that extent. His Honour also concluded that claims for remuneration, costs and expenses associated with public examinations in the period after 1 March 2004 should not have been allowed. The consequent reduction, as will be seen, was very substantial. The matter was referred back to the Registrar to further review the bills of costs in the light of the reasons which his Honour gave.

37    The trustee then attempted to appeal against two aspects of the conclusions of Nicholas J that he should not be allowed particular elements of the costs, charges and expenses claimed by him. Leave to appeal was refused (Donnelly v Maxwell-Smith [2010] FCAFC 154). On this occasion the Full Court reinforced the direction of the earlier Full Court in 2006 that no party should have legal costs of the appeal against the order made by Wilcox J or of the proceedings before Wilcox J. The Full Court also upheld conclusions by Nicholas J in his first judgment that the trustee should not have the costs of work done in relation to public examinations of Mr and Mrs Maxwell-Smith after 1 March 2004. There was no challenge to the conclusion reached by Nicholas J on the question of the solicitor’s claim for a premium or “up-lift fee”. The trustee was ordered to pay costs of the appeal at his own expense. The result, therefore, of the proceedings before Nicholas J, and the Full Court, with respect to those matters was substantially favourable to Mr and Mrs Maxwell-Smith. But, nevertheless, there remained to be finally quantified the substantial costs which Nicholas J concluded the trustee was entitled to recover under the Bankruptcy Act.

38    Apart from the trustee’s notice of motion seeking to enforce the certificates of taxation given by the Registrar, Mr and Mrs Maxwell-Smith had also filed a notice of motion which, in its amended form, sought the following orders:

1.    Declare that S & E Hall Pty Ltd, the one and only creditor to the estate of the Applicants Eugene & Inge Maxwell-Smith, was aware that the Tribunal’s Order in 1997 was flawed, and that he abused the legal process by issuing Bankruptcy Notices knowing that the estate was well and truly solvent and that he collaborated with the Trustee and informed him about the solvency.

2.    Order that the Creditor pay compensation to the Applicants for the harm caused through his abuse of the legal process.

3.    Order that the taxation was dealt with unsatisfactorily and that the Certificates of taxation numbered 1 to 3 in NSD 198/2004 filed on 6 April ‘09 will be dismissed, as the Taxation Officer ignored important evidence.

4.    Order that the Trustee’s costs, charges and expenses be waived due to the misleading, alleged fraudulent and unprofessional conduct of the Trustee and that the titles of the Jindabyne and Tura Beach properties are transferred back to the owners.

5.    Order that compensation be paid by the Trustee, due of his misconduct and that a written apology to the Maxwell-Smith’s family is published in the Merimbula News.

6.    If the Court is unable to deal with the alleged denial of justice in the Federal Court and the abuse of the legal process by the creditor and the trustee, the Applicants move the Court to grant leave for the Federal Senate to conduct the Inquiry.

39    In his judgment of 14 May 2010, Nicholas J struck out paragraphs 1 and 2 (for reasons which he explained at [10]–[12]) and dismissed the balance of the notice of motion. There was no application made for leave to appeal against dismissal of the notice of motion filed by Mr and Mrs Maxwell-Smith.

The orders now challenged

40    On 25 March 2011 Nicholas J delivered a second judgment. Following his Honour’s earlier judgment, the Registrar had provided a report dated 5 November 2010. The Registrar had revised the total of all bills down from $392,482.72 to $273,717.41 (a further reduction of $118,765.31 – i.e. a total reduction of $161,536.75 from the amounts claimed by the trustee). The total reduction was, therefore, about 37%. Nicholas J recorded (at [4]):

4    The parties were given the opportunity to raise any issue they had with the Registrar’s report. Neither the trustee nor Mrs Maxwell-Smith raised any such issue.

41    His Honour recorded that Mr and Mrs Maxwell-Smith had attempted to file a further application under s 179(1) of the Bankruptcy Act seeking $750,000 in compensation from the trustee and suspending his entitlement to costs, charges and expenses. His Honour allowed that application to be filed in court on 2 February 2011 but, in light of the earlier procedural history, including his Honour’s earlier judgment, Nicholas J concluded that all but one aspect of the application should be dismissed pursuant to Order 20 rule 5 of the Federal Court Rules because the claims (save in that one respect) were unjustifiably vexatious and oppressive and an abuse of process. The exception to that conclusion concerned a refusal by the trustee to return title deeds to a property in Jindabyne. His Honour left that issue on foot and made orders requiring the provision of further particulars in support of the claim.

42    The orders which were made on 25 March 2011, for the reasons given in the judgment published on that day, were as follows:

THE COURT DECLARES THAT:

1.    The sum of the entitlements of Maxwell Christopher Donnelly (the Trustee) to remuneration, costs and expenses of his administration of the former bankrupt estates of Eugene Maxwell-Smith and Inge Maxwell-Smith (the Applicants) for the period 16 September 2003 to 21 May 2008 is $273,717.41.

THE COURT ORDERS THAT:

2.    The Applicants give vacant possession of the property known as 8B Surf Circle, Tura Beach, New South Wales (the Tura Beach Property) to the Trustee, or his duly authorised servants or agents, within 60 days of the date of this order.

3.    The trustee file and serve an affidavit within 21 days of today specifying his estimate of such other amount as the Applicants might reasonably be required to pay on account of any additional remuneration, costs and expenses incurred in the administration of the Applicants’ former bankrupt estates to which the Trustee may be found to be entitled including any additional remuneration, costs and expenses referable to the proposed sale of the Tura Beach Property.

4.    The Trustee file and serve an affidavit within 28 days of today:

(a)    exhibiting a copy of any valuation obtained by him of the Tura Beach Property;

(b)    outlining the steps which he proposes to take in relation to the marketing and promotion of the Tura Beach Property.

5.    There be no order as to costs of the taxation before the Registrar.

6.    The Trustee’s costs in the administration of the former bankrupts’ estates include eighty-five percent (85%) of the Trustee’s costs, charges and expenses of and incidental to the notices of motion filed 5 May 2009 (including as amended on 16 October 2009) and 20 August 2009.

7.    Each party have liberty to apply on 5 days notice for the purposes referred to in paras 13, 15 and 16 of the reasons for judgment delivered today.

8.    The application filed in Court on 2 February 2011 (the 2 February 2011 application) be dismissed in so far as it claims relief under s 179 of the Bankruptcy Act 1966 (Cth) in relation to the matters raised in paragraphs 1 – 5 (inclusive) and paragraphs 7 and 8 on pages 2 and 3.

9.    The 2 February 2011 application, in so far as it claims relief under s 179 of the Act in relation to the matter raised in paragraph 6 on page 2, be stood over for directions to a date to be fixed.

10.    The Applicants file and serve within 14 days a statement of particulars that specifies:

(a)    the details of the requests referred to in para 6 of the 2 February 2011 application (including whether those requests were written or oral or partly written and partly oral);

(b)    the details of the refusals referred to in para 6 of the 2 February 2011 application (including whether those refusals were written or oral or partly written and partly oral); and

(c)    the reasons why such refusals are alleged to have been unreasonable.

THE COURT DIRECTS THAT:

11.    A Registrar of the Court tax any further costs, charges and expenses of the Trustee incurred in administering the former bankrupt estates of the Applicants, including the costs specified in Order 6 above, as if it were a taxation in accordance with Part 8, Division 4 of the Bankruptcy Regulations 1966 (Cth).

43    Nicholas J contemplated that it might be possible for some arrangement to be made between the trustee and Mr and Mrs Maxwell-Smith which might avoid the need for their home to be sold. Accordingly, he discussed a basis upon which a stay of the order for possession (order 2) might be granted if satisfactory arrangements were made. His Honour said (at [15]):

15    I propose to grant Mr and Mrs Maxwell-Smith liberty to apply for the purpose of applying for a stay of the order for possession in the event that they are able to arrange a payment to the trustee in the amount of $273,717.41 together with such other amount as they might reasonably be required to pay on account of the trustee’s additional remuneration, costs and expenses which are yet to be taxed. But there are two things I should say to Mr and Mrs Maxwell-Smith about this. First, I would need to be satisfied by evidence that they were willing and able to make such a payment before granting a stay of the order for possession. Secondly, they need to understand that if they want to avail themselves of the opportunity to reach an agreement with the trustee, they will need to move quickly.

44    The reasons why (except in respect of paragraph 6) the application filed on 2 February 2011 was dismissed were given at [27]–[39]. It is mainly, although not exclusively, to that matter which the present application for leave to appeal is directed. There is some overlap with the general question of costs because Mr and Mrs Maxwell-Smith contend, first, that costs should not be assessed until there is an inquiry into the trustee’s conduct and, secondly, that such an inquiry will have the result that he is disentitled to many claimed costs, as well as being required to pay compensation.

Leave to appeal

45    I may now come directly to the matter which is the subject of the present judgment. Mr and Mrs Maxwell-Smith have sought leave to appeal against the most recent judgment of Nicholas J delivered on 25 March 2011. The application for leave to appeal was not accompanied by any draft notice of appeal. The result was that it was not immediately clear exactly which orders, made by Nicholas J on 25 March 2011, the applicants wished to challenge. The position was clarified to some extent in various documents filed by Mrs Maxwell-Smith and further clarified by answers to questions during the hearing of the present application.

46    The application for leave to appeal was accompanied by an affidavit sworn by Mrs Maxwell-Smith. That affidavit contains a series of assertions/arguments many of which rehearse previous grievances and claims which have been dealt with by various judges of the Court. It is possible to discern from that affidavit an intention to challenge at least order 8 made by Nicholas J on 25 March 2011 (dismissing the bulk of the application filed on 2 February 2011). It appears to be the case also that Mrs Maxwell-Smith desires to take some issue with the way in which Nicholas J dealt with the question of the trustee’s costs, charges and expenses but that was initially not readily apparent, especially in light of his Honour’s observation (recorded above) that no issue had been taken with the Registrar’s report dated 5 November 2010.

47    In a further affidavit filed on 28 April 2011, Mrs Maxwell-Smith made it clear that she desired to contend that the trustee’s conduct should have been considered in the taxation proceedings. She alleged:

In the taxation, the unprofessional conduct of Trustee MC Donnelly should have been considered. He created huge administration costs, knowing right from the beginning that our estate was well and truly solvent and he colluded with the creditor’s law firm to the detriment of the debtors for whom he had responsibilities under the Bankruptcy Regulations 1996. The worst violation of duties was handing the court three times a deliberate false document in an attempt to hide his misconduct.

48    These allegations were made in support also of her complaint about dismissal of the bulk of the application which had sought a further inquiry under s 179 of the Bankruptcy Act.

49    A further “Sworn Statement on Leave to Appeal” was filed by Mrs Maxwell-Smith on 3 May 2011. It complains further about the trustee’s charges, recites earlier history and concludes in the following way:

35.    To avoid another miscarriage of justice, I request this Court, that leave to appeal is granted, “It is submitted that an inquiry may have the utility of certain orders being made restraining Mr Donnelly from seeking some or all of his legal costs, and to account for the losses his conduct has caused. There is also a public interest in trustees in Bankruptcy being seen to be open to scrutiny”.

50    Mrs Maxwell-Smith’s responses to my enquiries at the hearing of the present application seemed to suggest that the applicants wish to have leave to appeal against orders 1, 2, 3 (because it will generate further costs), 4 (because it will generate further costs), 6 and 8 which were made on 25 March 2011. For the purpose of further discussion I may concentrate on orders 1, 2, 6 and 8 which are the orders giving enforceable rights, imposing enforceable obligations or denying claims made, in a substantively final way. Orders 3 and 4 are procedural and impose no obligations on Mr and Mrs Maxwell-Smith. Leave for them to appeal against those orders could not possibly be justified in the present case. The next question to be addressed is whether leave to appeal against orders 1, 2, 6 and 8 is required, or whether there is an appeal as of right.

51    Order 8 (the order for dismissal of the bulk of the application filed on 2 February 2011) may be dealt with immediately. It was, on the authorities, an interlocutory order (see Re Luck (2003) 78 ALJR 177 at [9]). Leave to appeal is therefore required. The position concerning orders 1, 2 and 6 is less clear in the sense that the orders are definite and substantively final (even if subject to the possibility of a stay in the case of order 2) in their intended effect. Nevertheless, in my view, they are not (any of them) final orders in the sense that they finally dispose of a claim for relief or a cause of action. They are each only a step on the way to a final outcome. Each of the costs orders is an interim one. None finally disposes of even the question of the trustee’s outstanding entitlements. Order 2 is also clearly intended to be the subject of further attention and, at the time the application for leave to appeal was filed and heard, was subject to the possibility it might never come into operative effect.

52    Each of the orders, however, is (if and when operative in the case of order 2) substantively final in its effect, in the sense that each imposes actual practical obligations, denies existing rights or refuses claims made.

53    Under s 25(2) of the FC Act an application for leave to appeal to the Court must be heard and determined by a single judge unless:

(e) a Judge directs that the application be heard and determined by a Full Court;

54    It has been consistently held in this Court that there is no appeal from an order of a judge granting or refusing leave to appeal against an interlocutory judgment (see Reid v Nairn (1985) 60 ALR 419; Thomas Borthwick & Sons (Pacific Holdings) Ltd v Trade Practices Commission (1988) 18 FCR 424; Wati v Minister for Immigration and Multicultural Affairs (1997) 78 FCR 543; Kristoffersen v Department of Employment, Workplace Relations and Small Business [2002] FCAFC 269; Hamod v New South Wales (2002) 188 ALR 659 (at [14]–[15]); Dart v Norwich Union Life Australia Limited [2005] FCA 327 (at [32]–[34]); Bahonko v Sterjov [2007] FCA 1717 (at [54]–[55])). An application for leave to appeal, therefore, must be assessed, in part, having regard to the potential consequences for an unsuccessful applicant for such leave. Tests have been developed to accommodate that issue and I shall refer to them shortly.

55    There is another matter to be taken into account. Section 24(1E) of the FC Act provides as follows:

(1E)    The fact that there has been, or can be, no appeal from an interlocutory judgment of the Court in a proceeding does not prevent:

(a)    a party from founding an appeal from a final judgment in the proceeding on the interlocutory judgment; or

(b)    the Court from taking account of the interlocutory judgment in determining an appeal from a final judgment in the proceeding.

56    Apart from the challenges which Mr and Mrs Maxwell-Smith desire to make to the orders so far made by Nicholas J it seems very likely, having regard to the past history of the matter, that there will be further challenges which arise once further orders are made dealing with the balance of proceedings before his Honour. Theoretically, a point should be reached in any proceedings where it may be said that a final order has been made. That point has not yet been reached, in the present case, for the reasons I have given. The prospect of speculating about when that might happen is an unattractive one. At one point I was attracted to the idea of attempting to find a way in which at least one opportunity would be presented for the applicants to ventilate all their outstanding grievances before a Full Court, to the extent that it was (if at all) legitimately open to them to do so. A way of permitting that possibility to arise would have been to refer the present application for leave to appeal to a Full Court under s 25(2)(e) of the FC Act. If that was done it might be possible to organise synchronised attention to the present, and perhaps future, challenges. On reflection I have decided that such a well-intended approach would be unfair to the trustee and, in fact, prejudicial to the interests of Mr and Mrs Maxwell-Smith. I shall explain why.

57    The tests to be applied in determining whether leave to appeal should be granted from an interlocutory decision were adopted in this Court in Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 (“Decor”) from the test in Niemann v Electronic Industries Ltd [1978] VR 431. The headnote to the report of Decor distils the tests in the following way:

The tests to be satisfied are whether the decision at first instance was attended with sufficient doubt to warrant it being reconsidered and whether substantial injustice would result if leave were refused, supposing the decision at first instance was wrong. Nevertheless, there may be circumstances in which the tests are not appropriate for application by a court; for example leave is more readily granted where substantive rights, rather than points of practice, are at issue.

58    In Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (2000) 104 FCR 564 (“Johnson Tiles”) French J (with whom Beaumont J and Finkelstein J each agreed) said (at [42]–[43]):

42.    The application of the leave requirement should not involve the expenditure of significant intellectual energy on the distinction between final and interlocutory judgments. Admittedly that is a question “productive of much difficulty” — Carr v Finance Corporation of Australia Ltd (No 1) (1981) 147 CLR 246 at 248 (Gibbs CJ). But the policy of the provision is plain enough. The time and resources of the Court and the parties should not lightly be taken up with appeals about decisions in connection with proceedings which do not finally determine the rights of the parties. In broad terms, of course, a judgment is treated as final if it finally disposes of the rights of the parties. Otherwise it is an interlocutory order — Hall v Nominal Defendant (1966) 117 CLR 23 at 439-440 (Taylor J, Owen J agreeing) and 443 (Windeyer J); Licul v Corney (1976) 180 CLR 213 at 225 (Gibbs J, Stephen, Jacobs and Mason JJ agreeing). Under that rubric there has been much taxonomic debate. But the policy supports a general principle, applicable with or without a statutory leave requirement, to the exercise of appellate jurisdiction, including that of the Federal Court even before the enactment of s 24(1A). The principle was expressed by the High Court in Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177 in terms that: “ ... appellate courts exercise particular caution in reviewing decisions pertaining to practice and procedure.” The policy supporting the principle was clearly stated by Jordan CJ in Re Will of Gilbert (1946) 46 SR(NSW) 318 at 323, and repeated with approval by the High Court in the Philip Morris case at 177:

“... there is a material difference between an exercise of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights. In the former class of case, if a tight rein were not kept upon interference with the orders of judges of first instance, the result would be disastrous to the proper administration of justice. The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretions in interlocutory applications from a judge in Chambers to a Court of Appeal.”

43.     Artificial distinctions may be drawn because of the requirement that the Court looks to the legal rather than the practical effect of the order in question — Carr at 248 (Gibbs CJ) 256 (Mason J). But such artificiality as may arise can be overcome by a sensible exercise of the discretion to grant leave informed by the underlying policy of that requirement. Interlocutory orders cover a spectrum from those concerned solely with the mechanics of case management and pre-trial preparation to those which may, for one reason or another, have a significant impact upon the scope and outcome of the proceedings. If the order, the subject of the application for leave to appeal, is concerned with the mechanics of the pre-trial process then the scales are likely to be weighted against the grant of leave. However if while interlocutory in legal effect it has the practical operation of finally determining the rights of the parties “a prima facie case exists for granting leave to appeal” — Ex parte Bucknell (1936) 56 CLR 221 at 225; Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 400; Minogue v Williams [2000] FCA 125 at [18]. If a proceeding is dismissed because it is frivolous or vexatious or because no reasonable cause of action is disclosed the decision is treated as interlocutory. However leave will usually be granted in such a case if there is any doubt about the decision at first instance — Little v Victoria [1998] 4 VR 596 at 598-600 and 601 (Callaway JA, Buchanan JA agreeing).

59    As is apparent from these passages, the burden of the discussion was on the circumstances when it would be appropriate to grant leave to appeal against a decision which was not final in form. Leave to appeal was granted in Johnson Tiles. Johnson Tiles assists the applicants in the present case, so far as it goes. However, it does not remove the need, in the case of an interlocutory order, to show an arguable case of error. Nor does it remove the need (which may be closely related to the first aspect in some cases) to show that substantial injustice would occur if leave to appeal is not granted in a particular case. In Davis v Insolvency and Trustee Service Australia (No 2) (2011) 190 FCR 437 a Full Court (Keane CJ, Besanko and Perram JJ) said (at [10]):

To obtain a grant of leave to appeal [the applicant] had to prove substantial injustice would ensue were leave not to be granted. That was a requirement directly flowing from Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 which is a rudimentary aspect of appellate practise.

60    Despite my initial attraction to the idea of ensuring that Mr and Mrs Maxwell-Smith had one further (perhaps last) opportunity to ventilate their grievances before a Full Court, I have decided, on reflection, that such a course cannot be justified and that it would not, in any event, be in their own interests if such a step was taken.

61    As I have endeavoured to explain, at each stage of the history of this litigation a point has been reached where no further avenue of challenge remained open to Mr and Mrs Maxwell-Smith and where any endeavour to persist in a challenge would almost inevitably invite rejection as vexatious and an abuse of process. That point was reached with respect to each of: the dispute with the creditor; the validity of the bankruptcy notice; the effectiveness of the sequestration order; the entitlement of the trustee under the Bankruptcy Act to costs, expenses and remuneration with respect to the administration of Mr and Mrs Maxwell-Smiths’ estates; and allegations of misconduct on the part of the trustee during the course of his administration. Each of those matters has been dealt with to finality. None, in my view, is open to further litigation in this Court.

62    It was inescapable that Nicholas J would reject the bulk of the application filed in court on 2 February 2011, which again sought a review of the trustee’s conduct in relation to matters which had earlier been addressed. In my view, in the light of the history I have recounted, there is no prospect that a Full Court would be persuaded, on an appeal against order 8, to allow Mr and Mrs Maxwell-Smith to re-open the issue of Mr Donnelly’s conduct by way of inquiry under s 179 of the Bankruptcy Act. Any challenge to the certificate of costs (in its greatly reduced amount) also depends on allegations concerning the trustee’s conduct. There is no other argument available to Mr and Mrs Maxwell-Smith, nor suggested by them, which would independently sustain an appeal against the costs orders, or the conditional order for possession (orders 1, 2 and 6).

63    The only result of granting leave to appeal (on any issue) would be, therefore, that the trustee would incur further costs which he would be entitled to recover from Mr and Mrs Maxwell-Smiths’ property, to their distinct and further disadvantage. Reference of the application for leave to appeal to a Full Court would merely defer the inevitable, and also expose both the trustee and Mr and Mrs Maxwell-Smith to unnecessary costs.

64    As a result, leave to appeal should be refused. There is no basis in principle upon which to refuse to allow the trustee his costs of the application for leave to appeal.

Associate:

Dated:    19 May 2011