FEDERAL COURT OF AUSTRALIA

O’Neill v Piscopo (No 2) [2011] FCA 774

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

THE COURT ORDERS THAT:

1.    The appellant file a further draft supplementary notice of appeal no later than 12 July 2011.

2.    The question of whether leave to appeal should be granted in respect of the refusal to make an order under s 179 of the Bankruptcy Act 1966 (Cth) be stood over to the hearing of the appeal on 4 August 2011.

3.    The question of any amendment to the proposed grounds of appeal be determined by the appeal judge.

4.    The appellant pay the first respondent’s costs of today.

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.

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

REASONS FOR JUDGMENT

1    The first respondent seeks summary dismissal of this proceeding as incompetent, or, alternatively, on the basis that the grounds of appeal do not disclose a reasonably arguable case. After argument on 28 June 2011, for the reasons that I then gave (see O’Neill v Piscopo [2011] FCA 773), I directed the prospective appellant, Mr O’Neill, to file a draft supplementary notice of appeal. That was filed. However, I do not regard the document as satisfactorily describing separate and specific grounds upon which an appellate court could conclude that there was error on the part of the Federal Magistrates Court in failing to direct an inquiry under s 179 of the Bankruptcy Act 1966 (Cth).

2    The argument today has served some purpose in clarifying, to some extent, the contentions to be advanced on behalf Mr O’Neill. As I understand the contentions, they are twofold. First, the appellant seeks to challenge the conclusion reached by the primary judge (see [189]) that Mr Piscopo’s behaviour in his administration as trustee of the estate of Mr Hill is not controlled or dictated by Mr James through his employee, Mr Brooks. That is one of the complaints that was made at first instance before the Federal Magistrates Court (see [89]).

3    Secondly, and as I now apprehend it, independently of the broad contention I have just outlined, Mr O’Neill complains that Mr Piscopo has been guilty of inappropriate conduct for a trustee in bankruptcy by reason of four matters. The first is the alleged failure to disclose to the Federal Magistrates Court, on the application for the examination summonses, the existence of a letter from the liquidator of a New Zealand company indicating that the shares in that company were the property of the bankrupt’s wife and not the bankrupt. The primary judge appears to have concluded that the Court would not have been misled in issuing the examination summonses by the omission of that one document from a vast volume of material. Secondly, Mr O’Neill says that Mr Piscopo made a wrongful claim for legal professional privilege in respect of a series of documents. There was no allegation made at the commencement of the proceeding before the Federal Magistrates Court that the claim for privilege was made deliberately in the knowledge that it was wrongfully made. However, in the course of final addresses, the Federal Magistrates Court was invited to draw an inference to that effect, and to conclude that the claim for privilege was not made inadvertently or by mistake.

4    The third ground of alleged inappropriate conduct is that Mr Piscopo effectively permitted a proceeding in the Federal Court to be conducted in his name by Messrs James and Brooks, making him a party to a personal attack on Mr O’Neill for their benefit. In the Federal Court, Foster J concluded that more evidence would be required before he would accept that the proceeding had been brought for an ulterior or extraneous purpose. If there was no more evidence before the Federal Magistrates Court than there was before Foster J, there would not seem to be any substance in the third complaint.

5    The fourth complaint as to inappropriate conduct is that Messrs James and Brooks designed to exact revenge on Mr O’Neill and Mr Hill, and did so by, among other things, funding Mr Piscopo and making legal strategies and court documents for him. That appears to be tied up with the first general complaint, and casts doubt on the question of whether or not there are two separate prongs to the attack by Mr O’Neill on the conclusions of the Federal Magistrates Court.

6    The four specific complaints that I have described are expanded upon in subsequent grounds in the draft supplementary notice of appeal. In particular, complaint is made about the failure of the Federal Magistrates Court to draw adverse inferences against Mr Piscopo on the basis that he did not give evidence. Reference is made to the well-known decision of the High Court in Jones v Dunkel (1959) 101 CLR 298, which effectively says that where an adverse inference is capable of being drawn, then the Court should feel more comfortable in drawing that inference if a witness who could have rebutted the inference chooses the well of the court rather than the witness box. That raises the question of comments made by the primary judge (see [75]), in which his Honour records that he indicated to the parties that he would proceed to hear the evidence without making a formal direction to split the hearing into two sections. His Honour said that he required more detailed submissions and evidence to enable him to make a decision whether the claim against Mr Piscopo, namely that he had failed in his administration, could be established. His Honour indicated that, if the evidence were to establish such a failure, he would then formally split the proceeding into two stages and afford Mr Piscopo the opportunity to defend his position. Mr O’Neill, through his counsel, had submitted that treating the matter as a two-stage process was inappropriate, since the first stage had already been completed by way of affidavit. There seems to be a question as to the extent to which his Honour articulated to the parties the observations made at [75] of his reasons.

7    It is inappropriate, in the proceeding presently before me, to inquire into those matters. However, if it was made clear that Mr Piscopo would be given the opportunity of answering complaints, assuming that his Honour found that complaints had been made out on a prima facie basis, it is clear that there was no possible application of the Jones v Dunkel principle. In any event, Jones v Dunkel inferences cannot be drawn in order to fill gaps in the evidence. As I have said, they can do no more than strengthen an adverse inference that might otherwise be available.

8    Another complaint in the draft supplementary notice of appeal concerns an observation made by the primary judge about evidence given by Mr Piscopo on 30 September 2008 in subpoena hearing. Mr O’Neill contends that that observation is inconsistent with a ruling, referred to in the primary judge’s reasons at [25], that that evidence was not to be accepted as evidence in the hearing of the application to discharge the examination summonses and to inquire into the conduct of Mr Piscopo.

9    A final matter referred to in the draft supplementary notice of appeal concerns an alleged breach of an undertaking given to the Full Court of the Federal Court on 20 March 2009. It is difficult to see where that leads, in the sense that it appears to be a complaint against senior counsel who appeared for Mr Piscopo. The ground does not assert that there was a breach of the undertaking on instructions from Mr Piscopo. The fact that his counsel breached an undertaking – if that indeed be the case, and I make no observation about that one way or the other – cannot be a complaint against Mr Piscopo, unless it is asserted that senior counsel gave and breached the undertaking on Mr Piscopo’s instructions.

10    All in all, I am not satisfied that the draft supplementary notice of appeal should go forward. I am disposed to conclude that leave to appeal is necessary, on the basis that the application under s 179 is something that has not been finally precluded by the determination of the Federal Magistrates Court. That is to say, it would still be open to a creditor, or Mr Hill, to make a further application for an inquiry to be conducted and for Mr Piscopo’s removal.

11    Nevertheless, if there is a substantive complaint about the conduct of a trustee, and if it is clear that there was arguable error on the part of the Federal Magistrate in rejecting an application for an inquiry, it may well be appropriate that leave to appeal be given so that those matters can be explored and ventilated. However, as I have said, I am not satisfied that the present draft supplementary notice of appeal is in a satisfactory form for that to be done. I therefore propose to direct that Mr O’Neill file a further draft supplementary notice of appeal no later than 12 July 2011. I propose to stand over to the hearing of the appeal, which has been fixed for 4 August 2011, the question of whether leave to appeal should be granted in respect of the refusal to make an order under section 179. I also propose to direct that the question of amendment of the proposed grounds of appeal be determined by the appeal judge. Finally, I consider that it is appropriate to order that the applicant today, Mr O’Neill, pay the costs of today.

Associate:

Dated:    11 July 2011