FEDERAL COURT OF AUSTRALIA
O’Neill v Piscopo (No 3) [2012] FCA 1036
IN THE FEDERAL COURT OF AUSTRALIA | |
| Appellant | |
AND: | First Respondent TERRY HILL Second Respondent |
DATE OF ORDER: | |
WHERE MADE: |
THE COURT ORDERS THAT:
1. Leave to appeal be refused.
2. The appeal be dismissed.
3. The parties file submissions as to costs in accordance with a timetable to be settled by the Docket Judge.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
QUEENSLAND DISTRICT REGISTRY | |
GENERAL DIVISION | NSD 52 of 2011 |
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA |
BETWEEN: | MICHAEL O'NEILL Appellant
|
AND: | SAMUEL PISCOPO First Respondent TERRY HILL Second Respondent
|
JUDGE: | COLLIER J |
DATE: | 19 SEPTEMBER 2012 |
PLACE: | BRISBANE |
REASONS FOR JUDGMENT
1 The second respondent, Mr Terry Hill, is a bankrupt. He is married to Ms Elena Rose, who was a party to the proceeding before his Honour below, but is not a party to this appeal.
2 The trustee of Mr Hill’s estate is the first respondent, Mr Samuel Piscopo. It appears that a major source of funding the costs of Mr Piscopo in administering Mr Hill’s estate is a third party, Mr David James. It is common ground that there is a high level of animosity between Mr Hill on the one hand, and Mr James and his solicitor Mr David Brooks on the other.
3 The appellant, Mr O’Neill, is the solicitor for Mr Hill, and a creditor in Mr Hill’s bankruptcy. It appears that Mr O’Neill is a minor creditor, as the material before me indicates that the debt admitted in respect of Mr O’Neill is in the amount of $4,437.43 in an estate of 20 creditors with admitted debts exceeding $1 million.
4 Mr O’Neill is a partner of NOT Lawyers in Sydney. At relevant times Mr Michael O’Neill and his firm represented Mr Hill and Ms Rose. It does not appear to be in dispute that Mr O’Neill is also a friend of Mr Hill, and historically has been a business associate of Mr Hill (Hill v James [2004] NSWSC 55 at [151]).
5 Before me is an appeal from the judgment of a Federal Magistrate, in which his Honour dismissed the appellant’s third further amended interim application (“application”) before him. In that application the appellant had sought orders:
discharging the Examination Summonses issued at the request of the first respondent; and
removing the first respondent as the Trustee in bankruptcy of the second respondent, Mr Hill, pursuant to s 179(1) of the Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”).
6 In a notice of appeal filed 27 January 2011 the appellant sought the following orders:
1. To the extent necessary, the Court grant leave to appeal pursuant to Section 24(1)A (sic) of the Federal Court of Australia Act 1976;
2. The orders numbered 1, 2 and 3 made on 14 December 2010 by the (sic) Lloyd Jones FM be set aside;
3. The Examination Summonses issued by the Federal Magistrates Court of Australia to:
• Terry Donald Hill dated 4 April 2008
• Elena Rose dated 4 April 2008
• Michael O’Neill dated 4 April 2008
• Nicholas Eddy dated 4 April 2008
be discharged
4. Pursuant to Section 179(1) of the Bankruptcy Act 1966 the Court:
a. Find that an inquiry into the conduct of the First Respondent as trustee in bankruptcy of Terry Donald Hill is warranted;
b. Remove the First Respondent from that office; and
c. Make any such further order as it thinks proper, including appointing the Official Trustee in Bankruptcy in the First Respondent’s stead.
5. The First Respondent pay the Appellant’s costs of the appeal and the proceedings be (sic) before Lloyd Jones FM.
7 On 28 June 2011 however in O'Neill v Piscopo [2011] FCA 773 Emmett J made orders including:
1. Leave to appeal from the order dismissing the application to discharge the examination summonses be refused.
2. By 12 noon on 29 June 2011, the appellant file a proposed amended notice of appeal setting out any supplementary grounds of appeal from the order dismissing the application under s 179 of the Bankruptcy Act 1966 (Cth).
8 On 30 June 2011 Emmett J made the following further orders:
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. …
9 On 13 July 2011 a Further Supplementary Notice of Appeal (“supplementary notice”) was filed, in which the appellant stated that he was appealing from that part of the judgment in which the Federal Magistrate below had dismissed the appellant’s application pursuant to s 179 of the Bankruptcy Act to inquire into the conduct of Mr Piscopo in relation to the bankruptcy of Mr Hill, and to remove Mr Piscopo from the office of trustee of Mr Hill’s bankrupt estate.
10 Before me, Mr Marshall for the appellant explained that the appellant was in fact relying on the supplementary notice (transcript 4 August 2011 p 35 ll 9-10), and the appellant no longer took issue with the orders of the Federal Magistrate concerning the examination summonses. While no formal application or order was made in respect of substitution of the original notice of appeal by the supplementary notice, the appeal before me was conducted on the basis that the appellant relied on the supplementary notice filed 13 July 2011, rather than the original notice of appeal filed 27 January 2011.
11 The lengthy grounds of appeal upon which the appellant relied pursuant to the supplementary notice are set out later in this judgment. Before me, the appellant also seeks, to the extent necessary, leave to appeal from the judgment of his Honour below.
12 In my view leave to appeal (to the extent necessary) ought be refused, and the appeal ought be dismissed, for reasons to which I now turn.
Background
13 Prior to February 2002, Mr Hill controlled a number of companies known as the Hill Wine Group, which had an annual turnover of approximately $50 million. The business of the group was conducted across New South Wales and South Australia, and included ownership of vineyards, a wine distribution business, and a warehouse.
14 Corporations related to Mr Hill included:
Hill International Wines NZ Ltd, which was controlled by Mr Hill;
BDT Holdings Pty Ltd, which was controlled by Ms Rose;
Vintage Wine & Spirits Australia Pty Ltd, which was controlled by Ms Rose;
Rosehill Wine Corporation Pty Ltd, which was controlled by Ms Rose.
15 On or around 11 February 2002 administrators were appointed to the Hill Wine Group pursuant to Pt 5.3A of the Corporations Act 2001 (Cth). A deed of company arrangement was proposed in respect of the group but rejected by creditors on 22 April 2002, and the administrators were appointed as liquidators of the group on that date.
16 After the Hill Wine Group went into liquidation, Mr Hill engaged in discussions with Mr David James in respect of a business deal involving the acquisition of the wine distribution business of the Hill Wine Group from the liquidators. Mr James has established interests in the wine industry in Australia and overseas, including through corporate vehicles. One of those corporate vehicles is James Estate Wines Pty Limited.
Litigation in Supreme Court of New South Wales
17 The sequence of events following the initial discussions between Mr Hill and Mr James, and the ensuing litigation, were explained in the judgment of Bergin J in her judgment in Hill v James [2004] NSWSC 55 and the subsequent decision of the Court of Appeal in James v Hill [2004] NSWCA 301.
18 As her Honour at first instance in Hill v James [2004] NSWSC 55 observed at [1]:
This litigation arises out of the liquidation of the Hill Wine Group of companies (the Group) in 2002 and the attempted purchase back of some of the assets of the Group by the plaintiff, Terry Donald Hill in conjunction with the first defendant, David Anthony James. The evidence establishes a level of commercial skulduggery that each of these vignerons pursued as if it were their normal or usual way of doing business. Unfortunately a member of the legal profession, the third defendant, was also involved in this trickery.
19 The third defendant to whom her Honour referred was Mr David Brooks.
20 The facts before her Honour included the following:
Mr Hill and Mr James had entered an agreement whereby Mr James had agreed that Mr Hill would purchase a wine distribution business from him at the same price that he (Mr James) had purchased it from the liquidators of the Hill Wine Group.
Mr Hill then entered into negotiations with a third party to sell to it 45% of the wine distribution business in order to secure funds to complete the purchase from Mr James, but failed to disclose to the third party the fact that he (Mr Hill) was only buying the business for $10.3 million. Mr Hill represented to the third party that the business was worth $24 million.
Mr James became aware that Mr Hill stook to profit if the third party purchased 45% of the wine distribution business.
Mr James then negotiated with the liquidators to buy the wine distribution business for only $6.9 million. Mr James went to considerable efforts to conceal from Mr Hill the true price at which Mr James purchased the wine distribution business from the liquidators.
Without the knowledge of Mr Hill, Mr James and his solicitor Mr Brooks changed the amounts in draft asset sale contracts with the liquidators before those contracts were sent to Mr Hill for his approval.
21 Her Honour found that:
[175] … (T)he defendant [Mr James] breached fundamental terms of the contract by which the plaintiff [Mr Hill] was firstly entitled to approve the terms of the contract between the defendant and the liquidators and, secondly, was only required to pay the purchase price agreed by the defendant with the liquidator for the acquisition of the wine business plus 10% of the purchase price for which the defendant agreed to purchase the distribution business.
22 Her Honour also found that Mr James and Mr Brooks had intentionally misled Mr Hill into believing that Mr James had purchased the wine distribution business from the liquidators for $10.3 million (rather than the actual price of $6.9 million) and that Mr Hill had relied upon the representation (at [241]).
23 Finally, in relation to a claim by Mr Hill in the tort of deceit, her Honour found that Mr Hill had established the essential elements of the tort against both Mr James (at [264] and Mr Brooks (at [275]), and awarded exemplary damages in favour of Mr Hill against both Mr James and Mr Brooks (at [286]).
24 Her Honour ordered that there be judgment against Messrs James and Brooks in the amount of $315,000 plus interest. Her Honour also ordered that Mr Hill was entitled to relief against forfeiture of the relevant deposit of $942,500.
25 Mr James and Mr Brooks appealed her Honour’s decision to the Court of Appeal. The appeal was allowed in part, in that the Court of Appeal set aside her Honour’s order concerning forfeiture of deposit. Otherwise the orders of Bergin J were affirmed.
26 I note, that, as a result of this litigation, Mr Brooks’ practising certificate as a legal practitioner was cancelled.
Personal Insolvency Agreement of Mr Hill
27 On 25 August 2005 Mr Hill filed a Personal Insolvency Agreement in respect of which Mr Peter Rodgers was appointed administrator. On 27 September 2005 an application to set aside the Personal Insolvency Agreement was filed in this Court, and a further amended application filed on 5 April 2006. The application also sought orders including that a sequestration order be made against Mr Hill’s estate, and that Mr Piscopo be appointed Mr Hill’s trustee in bankruptcy.
28 The second applicant to the applications filed 27 September 2005 and 5 April 2006 was James Estate Wines Pty Ltd, a company associated with Mr David James.
29 Mr Hill’s Personal Insolvency Agreement was set aside on 4 July 2006 pursuant to orders of Rares J. At the same time a sequestration order was made against Mr Hill’s estate and Mr Piscopo was appointed Mr Hill’s trustee in bankruptcy.
Subsequent litigation
30 There then followed considerable, and complex, litigation involving Mr Hill’s bankrupt estate, including the following:
In 2007 the Federal Magistrates Court dismissed Mr Hill’s application for the return of his passport to allow him to travel to London on business and to visit friends (Hill v Piscopo) [2007] FMCA 814).
In 2008 the Federal Magistrates Court ordered that Mr Hill’s passport be returned to allow him to travel to attend a friend’s wedding in New Zealand (Hill v Piscopo [2008] FMCA 574).
On 13 February 2008 Mr Piscopo applied to the Federal Magistrates Court for the issue of four summonses in regards to Mr Hill’s estate, naming Mr Hill as a relevant person to give evidence and produce documents, and Ms Rose, Mr O’Neill and Mr Eddy as examinable persons to give evidence and produce documents. Examination summonses were issued on 4 April 2008 pursuant to s 81 of the Bankruptcy Act. (It is these examination summonses which were the subject of the application before his Honour in this proceeding below.)
On 4 June 2008 Mr Hill filed subpoenas issued to Mr Piscopo and others, seeking (in paragraph 3 of the subpoena) documents recording communications between Mr Piscopo and Mr David James, Mr David Brooks, Mr Hill and Ms Rose. On 13 June 2008 Mr Piscopo filed an interim application seeking to have paragraph 3 of the subpoena set aside. That application was dismissed (Piscopo v Hill [2008] FMCA 1266).
Subpoenas were issued on 18 June 2008 to a number of third parties including Westpac Banking Corporation on the application of Mr Piscopo.
The application before his Honour below was filed by Ms Rose and Mr O’Neill on 9 October 2008. Ms Rose and Mr Hill sought the following interim orders:
1. The examination summonses issued to:
- Terry Donald Hill dated 4 April 2008
- Elema Rose dated 4 April 2008
- Michael O’Neill dated 4 April 2008
- Nicholas Eddy dated 4 April 2008
be discharged.
2. The subpoenas issued on 18 June 2008 to:
- the proper officer of Westpac Banking Corporation;
- the proper officer of Provident Capital Limited;
- the Secretary of R. L. Kremnizer & Co;
- the proper officer of Bovis Lend Lease Limited;
- the Secretary of Wine-Ark Pty Ltd;
- the proper officer of GE Morttgage (sic) Solutions Ltd
be set aside
3. Pursuant to section 179(1) of the Bankruptcy Act 1966 the Court:
(a) inquire into the conduct of the Respondent in relation to the bankruptcy of Terry Donald Hill;
(b) remove the Respondent from that office; and
(c) make any such further order as it thinks proper;
4. The Respondent pay the Applicants’ costs of and incidental to this Interim Application on an indemnity basis
5. Such further or other orders as the Court deems fit
(Tracking in original.)
On 19 December 2008 Foster J dismissed proceedings commenced by Mr Piscopo to have NOT Lawyers prevented from acting in proceedings involving Mr Hill’s bankrupt estate: Piscopo v NOT Lawyers [2008] FCA 1907.
Amended Particulars of Respondent’s Abuse of Process were filed in support of the application on 19 December 2008 and included the following:
A. The examination proceedings and the trusteeship generally are:
1. being used to oppress and harass Terry Hill (‘Mr Hill’) and his wife, Elena Rose (‘Ms Rose’), his lawyer, Michael O’Neill (‘Mr O’Neill’) and his former lawyer , Nicholas Eddy (‘Mr Eddy’);
2. being used to further a vendetta by David James (‘Mr James’) and David Brooks (‘Mr Brooks’) against Mr Hill and Mr O’Neill;
3. being used to obtain documents and other information from Messrs Hill, O’Neill and Eddy and Ms Rose and under a subpoena from corporations related to Mr Hill and Ms Rose, financiers, accountants of and contractors to such corporations so supply same to Mr James and Mr Brooks, so as to enable Mr James and Mr Brooks or both of them to:
a. gain confidential information;
b. gain a commercial advantage;
c. commercially disadvantage Ms Rose’s interest;
4. in substance a delegation to Messrs James and Brooks of the conduct of litigation or steps in litigation involving the trustee and the bankrupt’s estate;
5. affected by material inroads on the trustees independence caused by Messrs James and Brooks
B. The examination proceedings and the trusteeship generally are:
1. a product of the trustee being overborne by his sponsors, Messrs James and Brooks
C. As an officer of the Court, a bankruptcy trustee and an applicant for exparte orders, the trustee has, by relying on his affidavit sworn 4 December 2007 to found the issue of the 4 examination summonses herein:
1. materially mislead the Court:
Further particulars
a. as to the facts and matters stated in paragraph 3(m) of that affidavit. The trustee failed to disclose that Helen Walker advised in writing that she had mistakenly written that the shareholding in Nominee Shareholdings Ltd was held in trust for the bankrupt and instead advised that the shareholding was held for Ms Rose;
b. (withdrawn)
c. As to the facts and matters alleged in paragraph 4 of the affidavit by failing to disclose the written report made by the bankrupt’s solicitors to the trustee dated 3 May 2007.
2. included the allegation or suggestions that were either unfounded or only founded on assertions made to him by Mr Brooks, such allegations being made in:
a. paragraph 3(g), as to repayment;
b. paragraph 3(o), as to ‘significantly’ more value;
c. paragraph 3(u) as to BDT Holdings making loans “… through trust distributions.”
The application filed by Ms Rose and Mr O’Neill was heard, and dismissed, by his Honour below. The learned Federal Magistrate noted that after his judgment had been completed and edited, the solicitors representing Mr Piscopo advised the Court that, as a result of a global settlement of all proceedings and claims involving Ms Rose and Mr Piscopo, consent orders disposing of the proceedings as far as concerned the claims between Ms Rose and Mr Piscopo were forwarded to the Court, and therefore no orders were made in respect of Ms Rose. It is this decision which is the subject of appeal in this proceeding.
Decision of his Honour
31 The decision of his Honour the subject of this appeal is lengthy and detailed. His Honour summarised the genesis of the tensions between the parties in the following terms:
41. It is submitted that the problem lies in the relationship between David James and David Brooks on the one hand, and Mr Piscopo on the other. Mr James and his employee, Mr Brooks, sponsor Mr Piscopo. Neither are creditors to Mr Hill, however there were proceedings taken by Mr Hill against Messrs Brooks and James. Mr Hill also joined some companies associated with Mr James to those proceedings, being Bearing Traders Pty Ltd (Second Defendant), Liquor National Pty Limited (Fourth Defendant) and Wine National Pty Ltd (Fifth Defendant). Those companies were not separately represented in the proceedings. As Mr Hill did not have any success against any of those companies, Her Honour Bergin J made costs orders against Mr Hill in favour of those companies. Those costs have not been assessed. Hill v James [2004] NSWSC 55 per Bergin J.
42. The relationship was affected by a Deed of Release, entered into by Mr James and Mr Rogers, a former trustee of Mr Hill, on 19 April 2006 (Vol.1, tab 14). The deed reports bind any trustee of Mr Hill’s estate by limiting the way the trustee can deal with any assets or any litigation. The deed was entered into after Her Honour Bergin J had delivered her judgment. In the midst of proceedings being taken by Mr Hill against Mr James, Mr Hill had difficulties with creditors of his own. in his failed business, and had appointed Mr Rogers as his Part X trustee. Mr Rogers then took over the conduct of the enforcement. Mr James purchased a debt of a liquidator of one of Mr Hill’s companies. Mr Hill was asserting creditor status for that reason. Mr James had also commenced three sets of proceedings against Mr Hill.
43. The Deed of Release granted a release for Mr James and Mr Hill. Mr James paid $350,000.00 for the release. The Deed was to provide a resolution of all the proceedings. A Creditor’s Petition against Mr James was to be settled. The significant clause of this deed stated:
a. 6.1 In the event the Federal Court, in the personal insolvency agreement proceedings, orders that the P/A be set aside, then a Sequestration Order is made against the estate of Hill, Rogers will pay the trustee in bankruptcy the balance of any of the settlement sum, and James shall have a right to purchase from the trustee any asset in bankruptcy of Hill that the trustee decides to dispose of on the terms set out in this clause.
44. The Deed gives Mr James a right to acquire any asset recovered and in turn recoup costs that he might have expended in either sponsoring recovery or take the asset himself. In clause 6.3, Mr Rogers does not warrant that this clause is binding on any Trustee in Bankruptcy appointed to the estate of Mr Hill.
45. The applicant’s argument advanced is that the apparent aim of the sponsorship is to harass Mr Hill and his wife Elena Rose. Examples of this harassment are as follows:
a. Mr James’ application to upset Mr Hill’s Personal Insolvency Agreement (rightly or wrongly) following the circumstances where Mr James owed Mr Hill a judgment debt for fraud and costs which were subject to a Creditor’s Petition instigated by Mr Hill, and had launched a raft of proceedings, eg. defamation, injurious falsehood and set-aside (as a counter-attack) (Vol.1, tab 6). Mr James’ application to upset the Personal Insolvency Agreement was made more successful by the Deed of Release of 19 April 2006.
b. Evidence points to Mr Brooks having an early involvement in Mr Piscopo’s administration of the bankruptcy, being as early as only a fortnight after Mr Piscopo’s appointment. That collaboration between Messrs Brooks and Piscopo has been regular ever since.
c. In March 2008, Mr Hill made his third passport application to Mr Piscopo as Mr Hill wanted to travel to New Zealand for a week to attend a wedding. Mr Piscopo rejected the application. The application was granted by His Honour, Federal Magistrate Driver. At the hearing, Mr Piscopo was represented by senior and junior counsel being paid for by Mr James. It is submitted that this is an indicator of the extent of the inconvenience.
d. A Warrant for Search and Seizure was executed on 20 November 2008 by Mr Piscopo, an I.T. expert and six Federal Police at the residence of Mr Hill and his wife. Evidence shows that Mr Brooks was involved in the preparation for the Application for the Search and Seizure Warrant and Mr James’ in-house I.T. Manager was actually named in the warrant with Mr Piscopo in circumstances where there was a major overlap between the documents sought in other proceedings being pursued by Mr Piscopo and the documents sought in the warrant.
e. An unsuccessful attempt was made to remove NOT Lawyers from representing any party opposing Mr Piscopo in regard to Mr Hill’s estate. This was the Federal Court proceedings in Piscopo v NOT Lawyers [2008] FCA 1907 per Foster J where His Honour dismissed the application and ordered that Mr Piscopo pay the Respondent’s costs, of and incidental to the proceedings (as taxed or agreed) on a party-party basis up to an including 4 December 2008 and on an indemnity basis from 5 December 2008.
f. There was an attempt to suppress BDT Holdings’ right as the major creditor to convene a meeting of creditors. Mr Piscopo refused to hold a meeting of creditors and refused to acknowledge BDT Holdings’s proof of debt resulting in the BDT Holding Pty Ltd v Samuel Piscopo & Ors, Federal Court proceedings NSD 528 of 2008. It is submitted that the aim for the sponsors appear to cause Mr Hill to be “locked in” to his bankruptcy.
g. The scope of the documents required by the examination summons far exceeds those required for the examinable affairs. It would appear to include documents that would be of interest to the sponsors. It is submitted that the sponsors acquired Mr Hill’s old business and have intentions for expansion.
h. Subpoenas have been issued in various proceedings by Mr Piscopo in order to obtain documents, eg. Subpoenas to Theodore Rose Reich & Associates.
i. Mr Piscopo swore his 4 December 2007 affidavit to obtain ex parte orders without disclosing his knowledge of a letter from a New Zealand liquidator that contradicted the evidence he gave about the beneficial ownership of some New Zealand shares.
46. Mr Marshall contends that the motive of Messrs James and Brooks is revenge. The judgment of Her Honour Bergin J in Hill v James (supra) is damning of their conduct.
32 His Honour considered, at length, the basis upon which Mr Hill and Ms Rose brought the application.
Examination summonses
33 His Honour carefully considered the submissions made by the parties in relation to the application to have the examination summonses set aside (at [90]-[116]). His Honour then turned to the sequence of events following the filing of an application for summons by Mr Piscopo (at [118]-[128]). His Honour observed:
[136] The Application to set-aside the examination summons as pleaded, is based upon the allegation as to whether or not there can be a finding that the examination summons were issued for the ulterior collateral purposes to oppress, harass, or further a vendetta or obtain documents for an improper purpose for supplying the same to Messrs James and Brooks. I accept the submission made by Mr Dubler that there is no allegation that Mr Piscopo lacked the proper or reasonable basis for the issue of the examination summons or that the Court, in its discretion, should decline to issue such summonses. The Applicant’s case stands or falls on the allegation that there was a collateral purpose and it is for that reason that the summons were issued. In effect, Mr Piscopo’s predominant purpose was not to have any examination summons proceed in order to obtain documents going to the examinable affairs or answers going to examinable affairs of Mr Hill.
34 His Honour referred to a number of authorities including Maxwell/Smith v Donnelly [2006] FCAFC 150 and (at [138]-[139]) accepted the principle that, although it has a discretion, the Court will not ordinarily initiate an enquiry under s 179 of the Bankruptcy Act unless it is satisfied that a proper case for an enquiry has been demonstrated.
35 His Honour noted that Counsel for the applicants had advanced eight separate issues as demonstrating that Mr Piscopo was significantly influenced in the administration of Mr Hill’s estate by the actions of Messrs Brooks and James (at [142]).
36 On behalf of Mr Piscopo, Counsel submitted that, unlike in Commonwealth v Sheahan [2004] FCA 1301 where the Court had ordered that examination summonses and orders for production of documents be discharged, in this case:
a. there was no pre-existing relationship between Mr Piscopo and Mr James;
b. there was no other relevant litigation being pursued by Mr James on his own;
c. there was no evidence in any documentation that the examination summonses are being pursued by Mr Piscopo for some purely tactical advantage personal to Mr James;
d. far from Mr Piscopo providing documents and transcript from the examination summons to Mr James, Mr Piscopo is quite willing to give an undertaking not to do so;
e. Mr James’ role as a funder of a bankruptcy was put in place prior to Mr Piscopo’s involvement and it has never been the subject of any attempt to keep it secret from Mr Piscopo; and
f. the cause of action against Mr Hill (as his cross examination has amply demonstrated) are viable and appear to have very good prospects of success and an examination is well and truly called for. (at [149]).
37 His Honour continued at [150]:
150. Mr Dubler contends that the evidentiary foundation for this allegation (which has to be established to a Briginshaw standard, applied by Emmett J in Sheahan’s case at [89] comes down to two issues:
a. Mr Jones (sic) under his deed is funding the staff of Mr Piscopo and Mr Jones to assist in Mr Piscopo’s administration tasks to save costs; and
b. the very serious (but unfounded allegation) that Mr Piscopo has in the past launched proceedings which are an abuse of process.
38 His Honour considered in detail principles discussed in Sheahan and concluded among other things that, to the extent that the examination summons concerned New Zealand transactions, the complaint of the applicants was that the request was too broad and too large in volume, and no attempt had been made to single out any particular item and demonstrate to the Court that the question was outside the scope that could be legitimately requested in examination summons. His Honour was not satisfied that the evidence before the Court supported a claim that the examinations summonses were initiated predominantly to oppress and harass the applicants, or further a vendetta against Mr Hill, or obtain documents or other information to supply to Mr James (at [158]).
Relationship Mr Hill/Mr James
39 His Honour then turned to the more controversial claim that Messrs Brooks and James were motivated by revenge against Mr Hill, particularly in light of the decision of Bergin J, and the fact that subsequent to her Honour’s decision Mr Brooks’ practising certificate as a legal practitioner had been cancelled (although the Federal Magistrate noted that later Mr Brooks had been employed by Mr James developing legal strategies and drafting documents for filing in Court concerning Mr Hill and his bankrupt estate: at [161]).
40 In substance, his Honour noted the appellant’s claim that the high level of animosity between Mr James and Mr Brooks on the one hand, and Mr Hill on the other, had infected the approach of Mr Piscopo in administering Mr Hill’s bankrupt estate. His Honour continued:
164. Mr James employs Mr Brooks and is apparently prepared to allow Mr Brooks time during his employment to advise Mr Piscopo and prepare documents for court cases involving Mr Piscopo. Mr James, by his companies, has agreed to indemnify Mr Piscopo and pay legal expenses. This is admitted by Mr Piscopo in his most recent affidavit which was not read, (that appears in tendered parts Exhibit 5 para.146 and through email traffic, Vol.7, tab 51 p.1860).
165. Mr Marshall contends that Messrs Brooks and James are people who are available to be called by Mr Piscopo and therefore are able to be the subject of any available Jones v Dunkel inference. The inference available is that the evidence that either Mr Brooks or Mr James could have given, would not assist Mr Piscopo’s case and would not be favourable to it. In terms of motivation, the Court is invited to find by the Jones v Dunkel inference that Messrs Brooks and James’ motivation is not to act bona fide, but rather they are motivated by desires of revenge and commercial advantage and to cause commercial disadvantage to Ms Rose.
166. Mr Marshall submits that it must be inferred that Mr Piscopo is not oblivious to the ill-will of Messrs Brooks and James. He has been supplied with copies of Her Honour Bergin J’s judgment and the decision of Her Honour Bell JA through these proceedings in June 2008. A trustee in Mr Piscopo’s position ought be on guard as to the motivation of such sponsors. Accepting such sponsor’s money in order to prosecute a specific recovery action is one thing, however accepting the money to sponsor the defence of passport applications involving the travel to New Zealand for one week for a wedding, is another. The latter being inspired by pure spite and the will to create inconvenience, disruption and harassment of the bankrupt and his wife.
167. Mr Piscopo has worked closely with Mr Brooks from the beginning of his trusteeship. Since that time, there has been a large volume of email traffic between Messrs Brooks and Piscopo (Vol. 2, tab 15).
168. The method employed by Messrs Brooks and James to exercise their influence over the trusteeship is that Mr Brooks was consulted on or devise legal strategy, to draft applications, pleadings and affidavits, notices to produce, subpoenas, examination summons and applications. Mr James procured the payment of legal costs for approved orders or defences (exhibit 5, paras.146 and 165). The work of the solicitor on the record is minimal. Over $78,000.00 has been expended by Mr James to the beginning of 2009 (Vol.7, tab 51, pp.1819, 1860, 1922, 1995, 2004 and 2006).
169. Mr Piscopo swore affidavits in various proceedings, where the text of the affidavit stands alone, beginning with the name of the opponent, with his address, occupation and oath, followed by the text of the affidavit. The coversheet also bears the same introduction, but refers to “see attached” and bears the name of Anthony Foate as having prepared the document. The Court is invited to infer from the email traffic and the style of the documents that one person has prepared the body of the affidavit, and another person has prepared the front cover. It should be inferred that it is Mr Brooks who prepared the body of the material.
41 counsel for Mr Piscopo challenged the claim that Mr James’ purpose in funding was to oppress and harass, and/or “further a vendetta” against Mr Hill and Ms Rose or obtain documents for his business. His Honour noted:
170. … Mr Dubler refers to three issues in support of this challenge.
a. In response to the applicant’s submission that it is not commercial to pay $73,847 of the trustee’s legal costs, Mr Dubler argues that this submission overlooks the fact that the first passport application case was successful with costs so Mr James did not lose. The submission also ignores that the potential recovery actions including: shares in New Zealand which yield an annual dividend over NZ100,000; a debt of over $600,000 from the related entity BDT Holdings Pty Ltd; claims against BDT’s subsidiaries; and valuable wines in storage. Mr Dubler argues that Mr James has good prospects of recovering all of his costs plus his $100,000 trust rights to purchase the assets themselves which may be of particular interest to him.
b. In Mr Marshall’s opening he lists nine examples of the alleged harassment. It is submitted that these items cannot prove that “the aim of the sponsorship is to harass”.
c. Even if Mr James’ motive may include ill will towards Mr Hill, that will not amount to an abuse of process if Mr James has one of his purposes of which the litigation was intended for.
171. Mr Dubler argues that the enquiry must focus on Mr Piscopo’s purpose, not the result: Re Excel Finance Corporation Ltd; Worthley v England (1994) 62 FCR 69 at 90D. Further, confidential information can be dealt with by an appropriate order or undertaking. Mr Piscopo has indicated that he has no intention to provide commercially sensitive information to Messrs James or Brooks obtained during the examination summons or as a result of the examination summons.
172. Mr Dubler contends that Mr James’ purpose is irrelevant. Whatever may be the motives of Mr James for funding there is nothing to suggest that Mr Piscopo’s prominent purpose is not to pursue the examination summons for a legitimate purpose. Mr Piscopo states that his purpose “is to obtain information in respect of a number of complicated transactions involving Mr Hill and associated entities so as to assist in the potential recoveries.
173. Mr Dubler submits that Mr Piscopo denies he is involved in any personal vendetta (email from Piscopo to Melissa Small; 29 March 2008 – Vol.6, tab 50, 1768). Mr Piscopo instructs his solicitor, Mr Foate “we have to send NOT Lawyers a letter making it blatant that there is no conspiracy in favour of David James. I find that offensive and I want them told as such. I have no interest in any legal action bid to get to the bottom of Terry Hill’s examinable affairs” (email from Piscopo to Anthony Foate; May 15 2008 – Vol. 7 p.1927).
174. Mr Dubler argues that although the allegation is made that Mr Piscopo has delegated the conduct of litigation to Messrs James and Brooks and that he had become their “tool”, “puppet” or is being “overborne” by them, there is no evidence to support this. Contrary to this allegation, the evidence shows that Mr Piscopo is in control and approves all steps taken in the litigation. Mr Piscopo made it clear to his solicitor, Mr Foate, that “ultimately I take advice from you and I call the shots after taking the advice” (Vol 6, tab 50, p1811). Mr Foate in reply states: “nothing can be done until it is considered and approved by you”. This was accepted by Mr James in any further recovery action funded by him, subject only to a proposal that the opinion of senior counsel, be sought in the case of disagreement (Vol 6, tab 50, p1676 – 1677).
175. Mr Dubler indicates that the other significant issue is that Mr Piscopo has always retained his own solicitor, chosen by him, to advise him which has included, amongst others, Bartier Perry, Mr Foate and currently Mr Kekatos, none of whom have been the subject of criticism. In respect of litigation involving BDT, Mr Piscopo stated to his solicitor that he “wants to play it with a straight bat and not get involved in unnecessary litigation” (Vol 6, tab 51, p1889). Mr James has provided funds to Mr Piscopo and Mr Brooks has assisted in tasks in the litigation as this saves costs as Mr Brooks’ services are supplied by Mr James. Mr Dubler submits that there is no error in this approach, nor can it lead to any allegation of misconduct. There can be no grounds for criticism of Mr Piscopo for the fact that whether or not he undertakes tasks, particularly litigation, is influenced by whether or not Mr James funds those contemplated actions.
42 His Honour referred (at [176]-[180]) to principles relevant to funders of litigation emerging from such cases as Apple Computer Australia Pty Ltd v Wiley [2003] NSWSC 719 and Campbell’s Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 ALR 58, including:
The acceptance by the trustee of assistance from the litigation funder in attending to tasks required in litigation, or listening to the views of the litigation funder, do not constitute misconduct by the trustee.
Courts have taken a realistic attitude to the problem of funding the administration of insolvent estates.
43 Importantly at [185] his Honour observed:
185. I accept that the relationship between Mr Hill and Mr James is highly acrimonious and that it is a result of a number of soured business dealings and associated litigation. Neither of them could claim that they were the innocent party and their early dealings appear to be a sophisticated plan to deceive others. This plan of deceit backfired on both of them due to their own willingness to participate to mislead and deceive others. They have subsequently turned on each other in revenge. Mr Piscopo was drawn into this environment with his appointment as trustee after the removal of Mr Rogers, who was appointed under the original Personal Insolvency Agreement. The Court appointed Lawlor and Partners with Mr Dibley. When Mr Dibley left the employment of Lawlors and Partners, the trusteeship was transferred to Mr Piscopo. It is not in dispute that Mr Piscopo inherited this situation and that a funding agreement was in place which included the services of one of Mr James’ employees and Mr Brooks. As mentioned elsewhere in this judgment Mr Brooks had a long and intimate relationship with the parties long before Mr Piscopo’s appointment. The argument being advanced by Mr Marshall is that Mr Piscopo immediately came within the influence and control of Mr James and effectively became a puppet to pursue Mr James’ objectives of revenge, together with the pursuit of information in order to take control of various companies previously operated by Mr Hill and Ms Rose.
186. The issue in respect to the appropriateness of funding of a remunerated trustee is addressed above and has not been raised as an issue between the parties. What is in dispute is whether these funding arrangements have resulted in Mr Piscopo breaching any of his duties in his role as a trustee in bankruptcy. This includes his fiduciary duty to the creditors and the bankrupt, his duty as an officer of the Court, his duty to act independently in the exercise of his role and not to delegate his responsibilities. Elsewhere in this judgment are references to statements made by Mr Piscopo indicating that he is the decision maker in respect of the course that his trusteeship will take. The only variation to this position is the concession made that where there is a contentious point between Mr Piscopo and Mr James as funder, the decision will be referred to a senior member of the bar for advice and that advice will be followed.
187. The issue that has been vigorously pursued by Mr Marshall is the role of Mr Brooks as researcher, collator of materials, grafter of documents and advisor on strategy. The informality of this relationship exposes the process to some criticism. This is emphasised by the informal language adopted in email traffic between the respective partners. Unfortunately, this is a by-product of modern technology and the growing informality of business practice. However, I do not believe that the contents of this material supports the view that Mr Piscopo has delegated any of his responsibilities or breached any fiduciary duty to the creditors and the bankrupt. I believe it has become abundantly clear to Mr Piscopo that the lack of formality when dealing with Mr Foate and Brooks, has resulted in his decision to retain Mr Jim Kekatos of Proctors & Associates in the place of Mr Anthony Foate of Catalyst Legal.
188. A further aspect of this alleged controlling of Mr Piscopo by Mr James is the evidence given to this Court by Mr Piscopo on 30 September 2008 when asked to identify Mr James and whether he was located in the Court at the time of that evidence. Mr Piscopo indicated that he in fact had not met Mr James although he had been appointed trustee of Mr Hill’s estate for two years previously and the only contact that he had with Mr James was via his employee Mr Brooks.
189. On the material before the Court I am not satisfied that Mr James through his employee Mr Brooks, are controlling or dictating Mr Piscopo’s behaviour in his administration as trustee of the estate of Mr Hill.
Wrongful privilege claims
44 In relation to Mr Piscopo’s application to set aside subpoenas served on him, partly because he claimed privilege in relation to 509 pages of the documents sought, his Honour noted that the documents the subject of the privilege claim were produced and were reviewed by a Registrar of the Court. His Honour noted that the Registrar disallowed claims for privilege in respect of 358 pages, however the subpoenaed respondents (including Mr Piscopo) then appealed to the Federal Magistrates Court and 68 of those 358 pages were found to be properly subject to legal professional privilege.
45 His Honour concluded, in summary, that while the broad ambit of the claim of legal professional privilege by Mr Piscopo and others appeared inspired by the desire to curb costs, and warranted severe criticism, the approach was not adopted by Mr Piscopo to harass or oppress Mr Hill and Ms Rose (at [197]).
Passport applications
46 His Honour then turned to Mr Piscopo’s opposition of an application by Mr Hill in March 2008 to attend the wedding of a friend in New Zealand, which opposition was funded (including the provision of senior and junior counsel) by Mr James. His Honour noted Mr Hill applied to Driver FM to review the decision of Mr Piscopo to refuse to return his passport to allow the travel, and was successful (Hill v Piscopo [2008] FMCA 574).
47 His Honour noted further that Mr Hill had been permitted by Mr Piscopo to travel overseas in August 2006 to attend to the business of Ms Rose, but that Mr Piscopo had rejected an application for further overseas travel in May 2007 and that decision had been affirmed by Smith FM (Hill v Piscopo [2007] FMCA 814).
48 Counsel for Mr Hill directed his Honour’s attention to communications between Mr Piscopo and Mr Brooks in relation to Mr Hill’s travel proposals.
49 His Honour examined in detail findings of the Court in these decisions, and noted at [201] the following submission of counsel for Mr Piscopo:
Mr Dubler indicated that the Applicant’s claim that the passport application was not bona fide because it was without reasonable grounds. The first application for access to the passport was granted without litigation on condition that Mr Hill cooperate and provide a solicitor’s account of the New Zealand shares. It took eight months for Mr Hill to provide this information. The second passport application to refuse access was upheld and costs ordered against Mr Hill. Mr Dubler submits that the record shows and it was agreed by Federal Magistrate Driver that Mr Piscopo did not act unreasonably in the third passport application because in his view there was a lack of cooperation and such that allowing Mr Hill to go to New Zealand one could not reasonably take the view would not have assisted the situation. Just because one has a different view from that of the Judge does not mean that there was a lack of bona fides.
50 His Honour also observed as follows:
204. In an email from Terry Hill to Samuel Piscopo dated Thursday, 12 July 2007; 5:20 pm the following details appear:
... You know the circumstances for the request to return my passport to travel to Canada in September 2006. The reasons were extensively detailed not only b[y] me but also NOT Lawyers. Your comments have prompted my memory that you demanded that my wife pay to your firms bank account in the name of Lawler Partners Client Holding account the sum of $5000.00 (this amount was electronically transferred to BSB 062 099 1032 1695) on Friday 08/09/2007, three days before I was scheduled to leave or you would not release my passport. Due to the urgency of the need for the travel my wife had little choice but to comply with your demand.
51 After extensive examination of previous judgments concerning applications by Mr Hill for his passport, his Honour concluded:
212. Both parties in these proceedings have demonstrated severe acrimony towards each other and can be seen by the tone and nature of the correspondence between them. On the issue of passport this is evidenced in the email exchange dated 12 July 2007.
213. I am of the view that in light of the correspondence passing between the partners on this particular issue, Mr Piscopo was reacting to the failure of Mr Hill to provide material until a situation such as access to his passport became relevant. Initially Mr Piscopo was granting access on a request basis, however with the deterioration of the relationship, Mr Piscopo ceased to respond to the request. I do not accept that the denial of access supports the view that Mr Piscopo embarked on this course for other than the objective of progressing the administration of the trusteeship.
BDT Holdings Pty Ltd proceeding
52 His Honour noted, in summary, that:
BDT Holdings Pty Ltd (“BDT”) was a company directed and owned by Ms Rose;
BDT claimed to be a creditor in Mr Hill’s bankruptcy in the amount of $4.8 million;
If Mr Piscopo had accepted the claim of BDT, it would represent approximately four-fifths of claims admitted in Mr Hill’s bankruptcy;
Mr Piscopo had rejected BDT’s claim;
BDT commenced proceedings in the Federal Court challenging Mr Piscopo’s rejection of BDT’s proof of debt, and Mr Piscopo’s failure to hold a meeting of creditors upon the requisition of BDT. Mr Piscopo’s opposition to the Federal Court proceedings was funded by Mr James;
Mr Piscopo filed a cross-claim substantially expanding the matter in dispute and adding additional parties, including a claim that property in Rose Hill Vintage Australia and the Organic Wine Corporation vested in him by reason of Mr Hill’s alleged derivation of benefits of each of those businesses.
At the time of the hearing before his Honour the decision of the Federal Court had been reserved.
53 In conclusion, his Honour said:
221. As indicated earlier, these proceedings are before the Federal Court and are yet to be resolved. However, on the material available the costs claim that has been mounted by Mr Piscopo is clearly motivated and pursued as a legitimate function of his trusteeship of the bankrupt estate of Mr Hill. Mr Piscopo has obtained sufficient material to prompt him to pursue these lines of investigation in the correct administration of his trusteeship. The argument that these proceedings are another example of actions taken by Mr Piscopo to harass and oppress, cure a vendetta or obtain information exclusively for Messrs Brooks and James is not supported by the material before this Court or the pleadings filed in the Federal Court. The bulk of the material available strongly supports the view that the actions taken by Mr Piscopo in the BDT Holdings proceedings, are being undertaken as part of his duties to all of the creditors of the estate of the bankrupt Mr Hill. I do not find any actions of Mr Piscopo in his participation in the BDT Holdings proceedings to support the view that he should be removed as trustee.
Deed of Release dated 19 April 2006
54 In summary, it appears that:
Mr Hill had filed a creditor’s petition against Mr James in respect of a debt of $397,547.30 following the litigation in the Supreme Court of New South Wales;
Messrs James and Brooks, and three other defendants, were the beneficiaries of a costs order for costs thrown away by vacation of a hearing date in the Supreme Court of New South Wales in the sum of $79,953.83;
Mr Rodgers, who had originally been the administrator of Mr Hill’s Personal Insolvency Agreement, was substituted as the petitioning creditor in respect of Mr Hill’s claim against Mr James;
Without seeking the approval of creditors, or Ms Rose who was funding and indemnifying Mr Rodgers, Mr Rodgers entered a Deed of Release with Mr James. The terms of the Deed of Release included payment by Mr James of $350,000 to Mr Rodgers, and provision to Mr James of a “first right of refusal” subject to a discount of $100,000 and to recoup other costs of any assets covered in Mr Hill’s bankruptcy.
55 Counsel for Mr Hill submitted, in summary, that the fact that Mr Piscopo had not investigated this Deed of Release was a matter which went to Mr Piscopo’s lack of independence, because it would have endangered the funding stream in existence from Mr James and Mr Brooks.
56 His Honour found that no evidence had been placed before the Court that supported the inference that Mr Hill was oppressed by the existence of the Deed of Release, or that Mr Hill had taken any steps to have it voided. His Honour was not satisfied that the existence of the Deed of Release or the failure by Mr Piscopo to pursue any form of investigation demonstrated that he had failed in the execution of his responsibility as trustee which would warrant his removal.
Application by Mr Piscopo to have NOT Lawyers removed
57 As his Honour below noted, in Piscopo v NOT Lawyers [2008] FCA 1907 Foster J made consent orders following resolution of the proceedings between the parties, which included dismissal of the application brought by Mr Piscopo. In that application Mr Piscopo had sought an order restraining NOT lawyers from acting in any proceedings to which Mr Piscopo in his capacity as trustee of Mr Hill’s estate was a party:
… on the basis that a NOT Lawyers-employed solicitor “thoroughly reviewed” documents which contain confidential information of the applicant of which she had no right to review. Accordingly, it would be against good conscience for NOT Lawyers to act. Further, the interest of justice would be best served restraining NOT Lawyers from acting. More so, as the employed the (sic) solicitor did or ought to have known that she had no right to review the documents.
58 Comments of Foster J in delivering judgment were brief, and are useful to set out in full:
1 At the conclusion of argument, I indicated to Counsel for the applicant that I was minded to accept the undertakings now being offered by Ms Cole and by the respondents as constituting a satisfactory solution to the unfortunate sequence of events which led to the applicant instituting the current proceedings.
2 Counsel for the applicant then informed me that he did not require any Reasons for Judgment if that was the course which I intended to adopt. Counsel for the respondents and Ms Cole took the same position.
3 Undertakings to the Court were then offered by Ms Cole and by the respondents. These undertakings were accepted by me. I then ordered the proceedings otherwise be dismissed.
4 Counsel for the respondents then sought an order for costs against the applicant. In particular, she sought an order that the applicant pay the respondents’ costs of and incidental to the proceedings on an indemnity basis from the inception of the proceedings or, alternatively, from 4 December 2008.
5 Counsel for the applicant accepts that the applicant must pay the respondents’ costs of and incidental to the proceedings but submits that he should be ordered to do so only on the usual basis, that is to say, on a party/party basis.
6 Counsel for the respondents submitted that the proceedings were always doomed to fail because there was no principle that required the clients for whom she appears, or indeed, Ms Cole, to go further than the undertakings which had been offered prior to the commencement of the proceedings. She also submitted that, in the result, the applicant had failed to obtain any relief in addition to the relief embodied in the undertakings which were offered before the proceedings were commenced.
7 Counsel for the respondents also pointed to some evidence to the effect that related proceedings are being funded by two gentlemen, Mr Brooks and Mr James as material that suggests that the proceedings have been brought for an ulterior purpose. She submitted that, for this additional reason, indemnity costs based upon the principle in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd [1988] FCA 202; (1988) 81 ALR 397 should be ordered and should be ordered in respect of the whole proceedings.
8 It seems to me that more evidence would be required if I were to accept that these proceedings had been brought for an ulterior or extraneous purpose. I am not prepared to order indemnity costs on this basis. However, in my view, the proceedings could have, and should have, been resolved before today along the lines of the solution which was ultimately imposed by me earlier today. That solution had, in substance, been offered by the respondents on 4 December 2008. Indeed, much of what was offered on 4 December 2008 had been previously offered.
9 In those circumstances, I am of the view that the respondents are entitled to indemnity costs as and from 5 December 2008.
10 Therefore, the orders of the Court will be that the applicant is to pay the respondents’ costs of and incidental to the proceedings (as taxed or agreed) on a party/party basis up to and including 4 December 2008 and thereafter on an indemnity basis.
59 Before the Federal Magistrate in this proceeding, counsel for Mr Hill contended, inter alia, that Mr Piscopo was manipulated into running a case not for the benefit of the Hill estate, but for the benefit of Mr James and Mr Brooks.
60 His Honour analysed in detail the history of the proceeding before Foster J and the affidavit evidence before the Court, and then turned to relevant authorities including the decision of Foster J, and Daniels Corporations International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49 in which the High Court examined principles of legal professional privilege. His Honour continued:
245. The documents in question had been granted privilege in reviews carried out by Registrar Hannigan and His Honour Federal Magistrate Scarlett and there is no dispute in respect of those rulings. Unfortunately, some error has occurred in the handling of those documents resulting in the privileged documents being placed in an envelope bearing the label “non-privileged documents” and the non-privileged documents being incorrectly placed in the envelope carrying the label “privileged documents”. When the legal assistant from NOT Lawyers collected the envelope from the Registry, the envelope handed over carried the wrong documents. The subsequent sequence of events is explained above. Mr Piscopo with Mr Foate’s assistance, had every right to take whatever steps were required to protect the group of documents that had been granted privilege. Due to the passage of time before the error was identified, two copies of those documents had been made and the documents had been electronically scanned by NOT Lawyers.
246. In the circumstances it was quite appropriate that proceedings were commenced to prevent the further distribution and access to those documents and this was done by commencing proceedings in the Federal Court as described above. I note the comments of His Honour Foster J who indicated the matter could have been settled earlier in the proceedings and cost orders had been made to reflect that failure. In light of the acrimonious positions between the parties and the very apparent failure to concede any point it was inevitable that the proceedings be maintained until the hearing before His Honour Foster J.
247. I have formed the view that the proceedings were initiated to pursue a legitimate and appropriate course to maintain privilege over documents in a sequence of litigation between the parties. I am not satisfied that a claim that this step was initiated to either inconvenience or harass the bankrupt, his wife or his legal advisors.
Warrants for search and seizure
61 His Honour noted that a warrant for seizure of the property connected with Mr Hill was issued pursuant to s 130 of the Bankruptcy Act on 14 November 2008 on the application of Mr Piscopo. After reviewing the relevant proceedings and evidence however his Honour concluded as follows:
255. The affidavit filed in support of that application for the warrant is also in evidence (Vol. 98, tab 58, p.2107-3117). After reviewing the contents of the email traffic and the affidavit, I am satisfied that the claim that the issue of the warrant was initiated to cause inconvenience to Mr Hill and his wife to satisfy the desires of Messrs Brooks and James, cannot be sustained. Rather the evidence strongly supports the view that the issue of the warrants were initiated by Mr Piscopo in order to pursue the recovery of assets or information leading to this objective.
His Honour’s conclusion
62 In conclusion, his Honour made the following specific observations concerning the removal of Mr Piscopo as trustee:
256. The authorities in respect to the removal of a trustee are canvassed above and the conduct of any such enquiry is usually conducted as a two stage process. Importantly the Court must be satisfied it is appropriate to order an enquiry. I indicated to the parties after their respective opening addresses that I required more detailed submissions supported by evidence before I could make a decision to formally split the hearing into a two stage hearing. Mr Marshall, on behalf of the applicant, advanced eight arguments in support of their claim that Mr Piscopo should be removed. On the material before the Court, I am not satisfied that the eight issues are sufficient to establish that an enquiry is required. It is also open to the Court to determine the matter without following the two stage process: Re Challen; Ex parte Brown v Bendeich (unreported, Fed Ct of Aust, Beaumont J, 23 April 1996) per Beaumont J; Doolan v Dare (supra) per Spender J at [47]-[48].
257. I particularly note the decision on Re Alafaci; Registrar of Bankruptcy v Hardwick (supra) per Riley J where His Honour stated:
o ...it seems to me that in such a case there is a preliminary question to be decided by the court – namely on the grounds and facts put before it, has a case been made for inquiry into the trustee’s conduct? If the answer is “yes” the next question is – what is the scope of the inquiry?
258. As I indicated above, I am not satisfied that an inquiry is warranted. In coming to that conclusion, on the evaluation of the eight arguments advanced, I was conscious of the decisions in Boensch v Pascoe (supra) together with Re Bibosos Pty Ltd (supra) per Young J at 734; Fuller v Wiley (supra) per Heerey, RD Nicholson and Finn JJ in determining whether an inquiry was warranted.
259. The other factor that influenced my decision was the authority of Boensch v Pascoe (supra) per Buchanan J at [92]-[95] where His Honour stated:
o A bankrupt should not be allowed, by an assiduous pattern of resistance to the trustee of his estate, to guarantee and then rely upon a suggested reason for removal thereby created...It is clearly an insufficient ground for removal of a trustee that a bankrupt resists the proper administration of his estate, as set out to frustrate a trustee in the proper performance of his duties.
260. On the material before the Court, there is evidence of the lack of cooperation being demonstrated by Mr Hill and that the trustee in a number of situations has been forced to initiate procedures to force the bankrupt to provide material. This view is supported by the refusal to provide information in respect to the operation of the New Zealand companies associated with Mr Hill or Mr Rose. One incident of this is the delay of eight months to provide documentation that was agreed between the parties at the time of one of the passport applications.
261. A further consideration that has influenced my decision is the authority found in Trkulja v Monton (2005) 3 ABC (NS) 110 where His Honour states at [62]:
o It is plain that there is considerable antagonism on the part of the applicant towards the respondent. I do not think that there is any ground for removing the respondent as trustee. I have little doubt that the applicant would be antagonistic towards anyone who pursued him vigorously in respect of possible undisclosed assets. On the evidence I have heard, the respondent has done nothing that a competent and willing trustee would not have done.
262. I note Mr Hill’s evidence under cross-examination that he was willing to cooperate with anyone as a trustee other than Mr Piscopo . However, I am not willing to accept that this statement alone would justify the removal of Mr Piscopo.
263. For these reasons I dismiss the application to undertake a full examination order under the provisions of s.179 of the Act.
Grounds of appeal
63 As I have already noted in this judgment the appellant relies upon the grounds of appeal and seeks the orders set out in the supplementary notice of appeal filed 13 July 2011. The grounds of appeal in the supplementary notice are extensive and detailed, so much so that they also bear the characteristics of supporting submissions. It is appropriate to set them out in full:
A. In the event that the decision of the Federal Magistrate not to conduct an inquiry into Mr Piscopo’s trusteeship of the bankrupt estate of Terry hill, the Applicant, under s.179 of the Bankruptcy Act 1966 (“the Act”) is an interlocutory decision (and the appeal on the grounds below is not brought as of right), leave be granted to the Applicant to bring the present appeal on the grounds below.
B. For the following reasons, the Federal Magistrate failed to properly exercise his discretion to decide whether to conduct an inquiry under s.179 of the Act:
1. In determining he could not be satisfied that Messrs James and Brooks were controlling or dictating Mr Piscopo’s behaviour in the administration of his trusteeship ([189] of the Federal Magistrate’s judgment), the Federal Magistrate failed to consider or, in the alternative, failed to give adequate weight to the following materially relevant matters:
a. when Mr Hill made a request to Mr Piscopo in August 2006 to have his passport for overseas travel, Mr Piscopo consulted Mr Brooks before acceding to Mr Hill’s request;
b. when Mr Hill made a request to Mr Piscopo in May 2007 to have his passport for overseas travel, Mr Piscopo again contacted Mr Brooks, before, on this occasion, rejecting Mr Hill’s request;
c. when Mr Hill made a request to Mr Piscopo in March 2008 to have his passport to make a one week trip to New Zealand to attend a wedding, Mr Piscopo once again contacted Mr Brooks, before, on this occasion, rejecting Mr Hill’s request and giving no relevant reason for that rejection;
d. when Mr Hill in March 2008 made an application to the Federal Federal Magistrate’s Court for an order that Mr Piscopo provide him with his passport for the New Zealand trip, Mr Piscopo consulted with Mr Brooks about the content of the affidavit he should swear to oppose Mr Hill’s application;
e. Mr James funded Mr Piscopo’s defence of Mr Hill’s application in March 2008 for an order that Mr Piscopo return his passport so he could make a one week trip to New Zealand, such funding covering the work of senior and junior counsel;
f. Mr James funded Mr Piscopo’s defence of an application for an order that Mr Piscopo provide his passport in circumstances where Mr Piscopo knew and later conceded that the proposed travel to New Zealand in March 2008 would not hamper the administration of Mr Hill’s estate;
g. Mr James funded Mr Piscopo’s defence of Mr Hill’s application for an order that Mr Piscopo provide his passport in circumstances where there was no commercial benefit in Mr James doing so;
h. the matters in 1(a) to (g), both separately and cumulatively, and together with unchallenged evidence put before the Federal Magistrate, are substantial grounds for believing that Mr Piscopo:
i. did not act independently of Mr Brooks or Mr James in respect of his conduct regarding the August 2006, May 2007 and March 2008 passport applications;
ii. did not have an independent mind in exercising his powers as Mr Hill’s Trustee and was overborne by Mr James and Mr Brooks.
2. In determining that he could not be satisfied Messrs James and Brooks were controlling or dictating Mr Piscopo’s behaviour in the administration of his trusteeship ([189] of the Federal Magistrate’s judgment), the Federal Magistrate failed to consider or, in the alternative, give adequate weight to the following materially relevant matters:
a. Prior to Mr Hill becoming bankrupt, he had filed a creditor’s petition in respect of Mr James for a net total of $397,547.30;
b. Prior to Mr Hill becoming a bankrupt, Mr Brooks, James and three other defendants in proceedings before Bergin J of the Supreme Court of New South Wales became the beneficiaries of a costs order for which Mr Hill was liable;
c. Mr Piscopo’s predecessor in his trusteeship, a Mr Rodgers, was, on becoming trustee of Mr Hill’s estate, substituted for Mr Hill as Mr James’ petitioning creditor;
d. In becoming Mr James’ petitioning creditor, Mr Rodgers had a funding agreement with an indemnity from Ms Rose (Mr Hill’s wife);
e. On 19 April 2006, Mr Rodgers entered into a Deed of Release with Mr James:
f. According to the terms of that Deed:
i. Mr James and Mr Rodgers mutually released each other in return for Mr James paying $350,000 to Mr Rodgers;
ii. Mr James has a ‘right of first refusal’ (subject to a ‘discount’ of $100,000) on any asset recovered by Mr Hill’s bankruptcy.
g. There was no similar release given by Mr James’ companies for the costs order;
h. Mr Rodgers deed not seek the approval of Mr Hill or Ms Rose for entry into the Deed of Release;
i. There is no evidence that Mr Rodgers called a meeting of creditors of Mr Hill before entering into the Deed of Release, nor is there any evidence he approached the Court for trustee’s directions;
j. The terms and circumstances of the Deed of Release are extraordinary, its effect is unclear, and under normal circumstances it might reasonably be the subject of an investigation by Mr Piscopo;
k. There was a reasonable likelihood that an investigation into the Deed of Release by Mr Piscopo would endanger the funding stream that Mr Brooks and Mr James provide, including in respect of the proceedings below;
l. In the circumstances set out above, Mr Piscopo is knowledgably in a position of conflict, that being a conflict between the source of his funding and the proper exercise of his duties;
m. Each of the above matters, and the fact that Mr Piscopo chooses to remain in a position of conflict, are, both separately and cumulatively, and together with other unchallenged evidence before the Federal Magistrate, substantial grounds for believing that Mr Piscopo’s trusteeship is not sufficiently independent of Mr Brooks and Mr James.
3. The Federal Magistrate failed to consider or give relevant weight to the following materially relevant consideration: whether the facts set out at Ground 2(a)-(k), both cumulatively and together with other unchallenged evidence before the Federal Magistrate, provided substantial grounds for believing that Mr Piscopo erred in his trusteeship because it was conducted under conditions of a conflict of interest.
4. In determining that he could not be satisfied Messrs James and Brooks were controlling or dictating Mr Piscopo’s behaviour in the administration of his trusteeship ([189] of the Federal Magistrate’s judgment), the Federal Magistrate failed to consider or, in the alternative, give adequate weight to the following materially relevant matters:
a. In making an ex parte application for examination summonses in relation to Mr Hill’s bankruptcy under s.81 of the Bankruptcy Act, Mr Piscopo failed to disclose to the Federal Magistrate’s Court that Helen Walker, a New Zealand liquidator, had told him that certain New Zealand shares held by her nominee company were not property of the Mr Hill’s bankrupt estate;
b. In failing to disclose Ms Walker’s advice, Mr Piscopo failed to disclose material adverse facts; and
c. Mr Piscopo knowingly failed to make that disclosure.
5. The Federal Magistrate failed to consider or give relevant weight to the question of whether the matters set out at Grounds 4(a)-(c), both cumulatively and together with other unchallenged evidence, provided substantial grounds for believing that Mr Piscopo:
a. acted contrary to the standard of conduct expected of an officer of the Court; and
b. therefore erred in his trusteeship
by failing to make the relevant material disclosure.
6. In the alternative to Grounds 4 and 5, the Federal Magistrate not only failed to consider or, in the alternative, give adequate weight to, the matters referred to in Grounds 4(a), but also failed to consider or decide whether:
a. The non-disclosure referred to in Ground 4 was relevantly a material non-disclosure; or that
b. Mr Piscopo knowingly failed to make the disclosure.
7. The Federal Magistrate:
a. Failed to consider whether he should draw a Jones v Dunkel inference against Mr Piscopo regarding his failure to give evidence about his failure to disclose the adverse material facts described in Ground 4; or in the alternative
b. Refused to draw a Jones v Dunkel inference against Mr Piscopo about those matters.
8. The Federal Magistrate:
a. Failed to consider whether he should draw a Jones v Dunkell inference regarding Mr Piscopo’s failure to give evidence about his reasons for, and the circumstances of, his claim for privilege over 290 pages of non-privileged documents that were the subject of a subpoena issued in the proceedings below; or in the alternative
b. Refused to draw a Jones v Dunkell inference against Mr Piscopo about those matters.
9. In determining he could not be satisfied that Messrs James and Brooks were controlling ot dictating Mr Piscopo’s behaviour in the administration of his trusteeship ([189] of the Federal Magistrate’s judgment), the Federal Magistrate failed to consider or, in the alternative, give adequate weight to the following materially relevant matters: that during Federal Court proceedings brought by Mr Piscopo to prevent NOT Lawyers from acting for anyone opposed to Mr Piscopo in relation to the bankruptcy of Mr Hill, counsel for Mr Piscopo submitted:
a. Over relevance objections of Mr Hill’s counsel that evidence should be admitted about the conduct of Mr O’Neill (managing partner of NOT Lawyers) in prior court proceedings that had been commenced by Mr Hill against Messrs James and Brooks and which had nothing to do with Mr Piscopo; and
b. Mr O’Neill should be prevented from acting in proceedings opposed to Mr Piscopo because of Mr O’Neill’s conduct in those prior proceedings.
10. The Federal Magistrate:
a. Failed to consider whether he should draw a Jones v Dunkell inference against Mr Piscopo regarding his failure to give evidence about who had instructed his counsel in the proceedings before Justice Foster to make the submissions and press for admission of the evidence referred to in Ground 9;
b. Refused to draw a Jones v Dunkell inference against Mr Piscopo about those matters.
11. Correction of the Federal Magistrate’s judgment on the Grounds above requires a determination by the Full Court that there are substantial grounds for believing that Mr Piscopo:
a. did not act independently and did not have an independent mind in exercising his powers as Mr Hill’s Trustee and was overborne by Mr James and Mr Brooks, and therefore erred in his trusteeship; and
b. was otherwise in breach of his trusteeship.
12. The Federal Magistrate erred in:
a. Permitting the Respondent to ask ([85]), and compelling Mr Hill to answer, questions that were in breach of the Respondent’s undertaking to Jacobson J sitting as the Full Court of the Federal Court not to ask questions in the proceedings before the Federal Magistrate that would amount to a ‘dress-rehearsal’ of the examination summons issued to Mr Hill on application of Mr Piscopo, thereby admitting for consideration extraneous material;
b. Giving reasons that are not adequate because they do not permit the parties or the Full Federal Court in this Appeal to determine whether, or to what extent, his Honour’s decision is based on answers to questions posed in breach of the Respondent’s undertaking and therefore on extraneous material;
c. Giving reasons that are not adequate because they do not permit the parties or the Full Federal Court in this Appeal to determine whether justice has been done by the Federal Magistrate, that is, to determine whether or not the Federal Magistrate’s decision is based on the extraneous material.
13. The Federal Magistrate erred in taking into account irrelevant material (at [184] and [188] and [189]), namely testimony given by the first respondent on 30 September 2008 in pre-hearing subpoena examinations, that being material the Court had ordered (by consent) should not form a basis of the Federal Magistrate’s reasons.
14. The Federal Magistrate erred in stating at [75] that he had told the parties after lunch on 19 March 2009 that if the evidence did establish a failure on behalf of Mr Piscopo (in relation to their administration), he would formally split the proceedings into the 2 stage approach and “provide Mr Piscopo the opportunity to defend his position”, where he had in fact said “I think in the circumstances we should proceed as we have been up to this application. But I may have to express a different view if at the end of whatever hearing we have, I am not in a position to make that. So for the moment, we will proceed on the basis that we will not split into two sections.”
15. The length of the period for which the Federal Magistrate reserved judgement (a period of 1 year, 8 months and 18 days) has the following consequences:
a. This Court should be more easily satisfied than otherwise that his Honour made the errors set out above:
b. This Court should find that the integrity and quality of his Honour’s reasoning was adversely affected by the length of his Honour’s delay;
c. The delay’s adverse effect was such as to require that his Honour’s Orders be set aside.
16. Each of Grounds, both separately and cumulatively, requires that the Federal Magistrate’s Orders be set aside and that this Court undertake an inquiry under s.179 of the Act.
64 In the supplementary notice the appellant sought the following orders:
1. That Orders 2 and 3 of the Magistrate’s decision made on 14 December 2010 be set aside;
2. Instead, an order be made that pursuant to section 179 of the Bankruptcy Act 1966 (Cth) that the Court inquire into the conduct of the First Respondent in relation to the bankruptcy of the Second Respondent;
3. Further, an order pursuant to section 179 of the Bankruptcy Act 1966 (Cth) that the First Respondent be removed from his office as the trustee in bankruptcy of the Second Respondent, and that the Official Trustee in Bankruptcy be appointed in his stead;
4. The First Respondent pay the Appellant’s costs of the proceeding below and of this appeal.
Consideration
Interlocutory or final judgment?
65 It is common ground between the parties that a threshold issue for determination of this proceeding is whether the appellant requires the leave of this Court to appeal from the decision of his Honour below. The key question in this respect is whether his Honour’s decision is final or interlocutory – leave to appeal is required in respect of interlocutory decisions (s 24(1A) Federal Court of Australia Act 1976 (Cth)). In circumstances where leave is required, the discretion of the Court to grant leave to appeal is generally guided by:
whether, in all the circumstances, the decision is attended with sufficient doubt to warrant its being reconsidered; and
whether substantial injustice would result if leave were refused, supposing the decision to be wrong.
(Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-399)
66 These guiding principles can be compared with the case the appellant is required to make to be successful in the appeal against his Honour. As Kenny J observed in Abeyesinghe v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 1558:
An appeal from a judgment of the Federal Magistrates Court is not an appeal by way of a hearing de novo, nor is it an appeal in the strict sense: cf Farrington v Deputy Commissioner of Taxation [2002] FCA 1013 at [4] per Kenny J and Low v Commonwealth of Australia [2001] FCA 702 at [3] per Marshall J. Such an appeal is conducted as a re-hearing. On an appeal by way of re-hearing, the powers of an appellate court are exercisable only if the appellant can demonstrate that, having regard to the evidence before the appellate court, the judgment under appeal is a consequence of some legal, factual or discretionary error: see Allesch v Maunz [2000] HCA 40; (2000) 203 CLR 172, at 178-9 per Gaudron, McHugh, Gummow and Hayne JJ; Minister for Immigration and Multicultural and Indigenous Affairs v Jia [2001] HCA 17; (2001) 205 CLR 507, at 533 per Gleeson CJ and Gummow J; and Coal & Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; (2000) 203 CLR 194 at 203 per Gleeson CJ, Gaudron and Hayne JJ.
(cf Gordon J in SZOCE v Minister for Immigration & Citizenship [2011] FCA 133)
67 Counsel for Mr O’Neill submitted that the proceedings before his Honour must be regarded as final because, in summary:
the Federal Magistrate made his orders after a hearing on the merits that finally determined the rights of the parties in respect of the subject matter of the action;
more particularly, Mr O’Neill’s rights regarding the examination summons were finally determined, as was an application to dismiss Mr Piscopo from office;
The judgment of his Honour would act as a bar to future proceedings by way of res judicata or issue estoppel.
68 In my view however the judgment below was interlocutory. As explained by Taylor J in Hall v Nominal Defendant (1966) 117 CLR 423 at 439-440:
A great deal has been said concerning the distinction between final and interlocutory orders but it has, in the main, been the practice of courts to confine themselves to a consideration of the character of the particular order in question in each case. Indeed, in In re Page; Hill v. Fladgate Cozens-Hardy M.R. commenced his judgment by saying: “I have no intention of attempting the task of defining exhaustively or accurately the meaning of an interlocutory order. I leave that to others. The only point we have to decide here is whether the order in this particular case is an order which must be appealed against within the time limited for appeals from interlocutory orders”. “Others” have, however, not, in general, attempted the task which the Master of Rolls declined to undertake. However, at an earlier stage Lord Alverstone C.J., when called upon to say whether a particular order was interlocutory or final said: “It seems to me that the real test for determining this question ought to be this: Does the judgment or order, as made, finally dispose of the rights of the parties? If it does, then I think it ought to be treated. as a final order; but if it does not, it is then, in my opinion, an interlocutory order”: Bozson v. Altrincham Urban District Council. Much the same test has been proposed on other occasions and, if I may say so with respect, it provides a broad test which is unexceptionable. So an order made in the course of an action or suit which does not conclude the rights of the parties inter se, although it may, of course, conclude the fate of the particular application in which it is made, is interlocutory only. On this basis an order staying proceedings against one of several defendants on the ground that they are scandalous, vexatious and an abuse of the process of the Court has been treated as interlocutory: Hind v. Marquis of Hartington. The same view was taken of an order striking out a plaintiff’s statement of claim on the ground that it disclosed no reasonable cause of action: Jones v. Insole and of an order dismissing an action as frivolous and vexatious in In re Page. In Manley Estates Ltd. v. Benedek there were successive applications to extend time under a provision similar to that in question here, whilst Atwood v. Chichester shows that an order dismissing an application to set aside a default judgment did not constitute a bar to a subsequent application of the same character.
(Footnotes omitted.)
69 In this case there does not appear to be any doubt that, while his Honour’s orders may have concluded the fate of Mr O’Neill’s application before the learned Federal Magistrate, the orders of his Honour did not conclude the rights of the parties to make a fresh application for an inquiry or the removal of Mr Piscopo as trustee of Mr Hill’s bankrupt estate. I am satisfied that this is a clear case of an interlocutory judgment, from which leave to appeal is required pursuant to s 24(1A). Indeed, it appears that Emmett J took a similar view in relation to the appellant’s original case concerning the examination summonses in that his Honour refused leave to appeal against that part of the decision of the Federal Magistrate (and, indeed, no issue is taken by the appellant in relation to the disposition of that aspect of the original appeal).
70 In this case, given the complex nature of the grounds of appeal, it is not surprising that Emmett J ordered that the question whether leave to appeal was necessary, so far as concerned the inquiry and removal issues (and, if it was, whether such leave ought be given), was to be heard together with the appeal. The merits of the substantive arguments put by the appellant on appeal are relevant, both in respect of the application for leave to appeal and the determination of the ultimate appeal itself. In this light, in my view it is both appropriate and efficient to first consider the merits of the appellant’s case. I will then to the issue of leave to appeal, in particular whether substantial injustice would be caused to the appellant should leave to appeal be refused.
Section 179 Bankruptcy Act
71 In the application the subject of the judgment from which the appeal has been brought the appellant sought both an inquiry into the conduct of Mr Piscopo and the removal of Mr Piscopo as the trustee in bankruptcy of Mr Hill, pursuant to s 179(1) of the Bankruptcy Act. This section provides:
(1) The Court may, on the application of the Inspector-General, a creditor or the bankrupt, inquire into the conduct of a trustee in relation to a bankruptcy and may do one or both of the following:
(a) remove the trustee from office; and
(b) make such order as it thinks proper.
72 In Ferella v Official Trustee in Bankruptcy (No 2) [2011] FCA 619 Yates J explained the nature of the Court’s discretion conferred by s 179(1), and relevant guiding principles as to the exercise of the discretion. As Yates J explained in Ferella, trustees in bankruptcy are properly to be regarded as officers of the Court and are subject to the general control of the Court (at [12]). The Court has a broad discretion to make orders under s 179, including an inquiry into the conduct of the trustee. It is clear that the standards required of trustees in bankruptcy are high, and that they are subject to duties both under the relevant legislation and the general law in relation to the administration of the estate. However the Courts also recognise that the discretion under s 179 to order an inquiry is tempered by a number of considerations, including the requirement that the applicant for the order demonstrate substantial grounds for believing that the trustee erred in the administration or has engaged in misconduct. As Yates J observed, it follows that trustees acting honestly, with ordinary prudence and within the limits of their trust, are not liable for mere errors of judgment (at [15]).
73 I also note, as a further consideration, the fact that the appointment of a trustee in bankruptcy can itself be the source of considerable angst and hostility, not only from the bankrupt, but from third parties whose sympathies may lie with the bankrupt. It follows that the Court should be mindful of the well-established policy in bankruptcy legislation that the court should not unduly interfere with the day-to-day administration of a bankrupt’s estate by a trustee (Ferella at [16]).
Summary of grounds of appeal
74 In written submissions counsel for Mr O’Neill summarises the grounds of appeal going, overall, to demonstrating the errors that the Federal Magistrate made in:
(a) finding that he was not satisfied that Mr Piscopo was being controlled and dictated to by Mr James and Mr Brooks; and
(b) not finding that Mr Piscopo failed to meet the ethical standards of an officer of the Court;
such that, if the Court were to correct his Honour’s errors, it would be satisfied that there are substantial grounds for believing that Mr Piscopo, during the course of his trusteeship, allowed himself to be controlled in this manner, and in any case failed to meet the ethical and professional standards required of him.
75 In written submissions both parties then addressed the grounds of appeal in the following categories:
grounds 15 and 13 – delay in giving judgment/reliance on inadmissible evidence;
ground 1 – failure to consider or give adequate weight to matters regarding passport applications;
grounds 2 and 3 – failure to consider or give adequate weight to the deed of release;
grounds 4-7 and 14 – failure to consider matters relating to the material non-disclosure in the examination summons application;
ground 8 – Jones v Dunkel (1959) 101 CLR 298 inference to be drawn from wrongful claim of privilege over 290 documents;
grounds 9 and 10 – instructions in the NOT Lawyers proceedings;
grounds 12 and 13 – impermissible reliance on matters contrary to orders.
76 It is convenient to adopt a similar methodology and consider the grounds of appeal in the manner addressed by the parties in submissions.
Grounds 15 and 13 – delay in giving judgment/reliance on inadmissible evidence
77 The appellant submits, in summary, that:
the Federal Magistrate reserved his judgment for over 20 months between 26 March 2009 and 14 December 2010;
the passage of time clearly affected the quality of his Honour’s reasons (cf comments of Hunt AJA in Monie v Commonwealth (2005) 63 NSWLR 729 at [44]);
the Federal Magistrate clearly had no recourse to the transcript;
his Honour relied expressly on evidence which was inadmissible (in particular, at [184], [188] and [189] of his Honour’s judgment).
78 The relevant paragraphs of his Honour’s judgment to which the appellant refers as reliant upon inadmissible evidence are as follows:
184. I note in passing, the evidence given by Mr Piscopo during the scheduled final hearing of Elena Rose’s Further Amended Interim Application to set-aside the Examination Summonses on the 30 September 2008, when Mr Piscopo was giving sworn testimony, the following exchange occurred:
o Mr Marshall: Is Mr Brooks in the room – the courtroom?
o Mr Piscopo: Yes, he is.
o Mr Marshall: Can I ask that Mr Brooks leave the courtroom because he’s going to be examined.
o Federal Magistrate: Yes Mr Brooks.
o Mr Marshall: Is Mr Foate in the courtroom?
o Mr Piscopo: I can’t see him, no.
o Mr Marshall: No, alright Mr James, is he in the courtroom?
o Mr Piscopo: I’ve never met Mr James.
o (T 30/10/2008 p.16-17)
….
188. A further aspect of this alleged controlling of Mr Piscopo by Mr James is the evidence given to this Court by Mr Piscopo on 30 September 2008 when asked to identify Mr James and whether he was located in the Court at the time of that evidence. Mr Piscopo indicated that he in fact had not met Mr James although he had been appointed trustee of Mr Hill’s estate for two years previously and the only contact that he had with Mr James was via his employee Mr Brooks.
189. On the material before the Court I am not satisfied that Mr James through his employee Mr Brooks, are controlling or dictating Mr Piscopo’s behaviour in his administration as trustee of the estate of Mr Hill.
79 In my view grounds 15 and 13 are not substantiated. I take this view because:
As the appellant concedes, his Honour held additional hearings on 12 December 2009, 15 February 2010 and 12 March 2010. Counsel for Mr Piscopo submits that these additional hearings were held because the parties requested his Honour to re-open the case. To that extent any delays in the delivery of judgment by his Honour are explainable, and to some extent are referable to the actions of the parties.
I am not persuaded that the quality of his Honour’s reasons was affected by any delay in delivery of judgment, as claimed by the appellant. Rather, in my view his Honour undertook a difficult and complex task, involving significant animosity and an historical absence of co-operation between the parties, thoughtfully and with clarity.
While the appellant complains that his Honour had regard to comments of Mr Piscopo having “never met Mr James”, which evidence his Honour subsequently said (with consent) would not be relied on:
it does not appear to be in dispute that the relevant transcript in which the evidence to which his Honour refers – that is, the transcript of proceedings in SYG344 of 2008 on 30 September 2008, in particular pages 16-17 – was tendered as evidence in the proceedings before his Honour by the appellant, who now appears to be resiling from that action;
it does not appear to be controversial that, in fact, Mr Piscopo had not met Mr James at the relevant time.
I am unable to identify any prejudice to the appellant from his Honour’s reference to this evidence.
Ground 1 – failure to consider or give adequate weight to matters regarding passport applications
80 The appellant’s complaint in ground 1 can be summarised as follows:
The appellant takes issue with the manner in which the Federal Magistrate structured his reasons – namely “in general to recite, practically in full and often word-for-word, each party’s written argument … generally followed by lengthy and uninterrupted excerpts from relevant documents”.
Accordingly, his Honour’s approach to Mr O’Neill’s concerns is formulaic, without application of a genuine reasoning process.
Specific – as well as “real and conscientious” – consideration should have been given by the Federal Magistrate to the matters in question in relation to Mr Hill’s passport applications.
The facts reprised by his Honour provide a substantial basis for believing that Mr Piscopo was being controlled by, or was otherwise not conducting his trusteeship, independently of Mr James and Mr Brooks.
81 In my view this ground is entirely without merit.
82 The appellant complains of the approach taken by the Federal Magistrate in reciting each party’s argument. In fact, this stylistic approach is a completely appropriate manner of summarising the party’s submissions. I am in no way persuaded that, in so doing, his Honour failed to give real and conscientious consideration to the matters at hand. Indeed, it is the obligation of his Honour to provide adequate reasons for his decision (cf Waterways Authority v Fitzgibbon [2005] HCA 57; (2005) 221 ALR 402 at [86]) and no criticism can be levelled at his Honour for faithfully incorporating into his reasoning process the language used by the parties in articulating their arguments.
83 His Honour’s judgment demonstrates a proper consideration of the issues pressed by the appellant in relation to the decision of Mr Piscopo to oppose the return of Mr Hill’s passport. His Honour clearly noted the history of co-operation (or apparent lack thereof) by Mr Hill with Mr Piscopo, and the basis upon which Mr Piscopo had subsequently refused Mr Hill access to his passport.
84 In respect of this ground of appeal the appellant presses the claim that Mr Piscopo has not been vigilant in reading the decision of Bergin J in Hill v James [2004] NSWSC 55.
85 It is clear that His Honour had close regard to the Supreme Court decision, as well as relevant authorities supporting the proposition concerning third party funding, and the need for the trustee (or liquidator in corporate insolvencies) to remain independent in his or her administration of the insolvent estate. The prospect that the funding creditor may wish ill of the bankrupt does not automatically mean that the trustee is the puppet of the funding creditor, or that the trustee is acting otherwise than in accordance with the interests of the creditors as a whole. Clearly in relation to the issue of the withholding of the passport his Honour was persuaded that Mr Piscopo was motivated by reasons other than an alleged conspiracy of harassment and oppression directed by Mr James and Mr Brooks. I am unable to identify any flaw in his Honour’s reasoning in consideration of the trustee’s actions.
86 Finally, I consider the fact that Mr Piscopo had accepted the suggestion of Mr Brooks that senior counsel be engaged in the litigation concerning the return of the passport in no way constitutes “control” or “direction” of Mr Piscopo by Mr Brooks. The Federal Magistrate rejected this proposition – in my view a perfectly reasonable conclusion for his Honour to draw.
Grounds 2 and 3 – failure to consider or give adequate weight to the Deed of Release
87 In respect of the Deed of Release between Mr Rodgers and Mr James, the appellant claims the Federal Magistrate below failed to address the issues raised by the appellant in submissions. In particular, the appellant submits that issues pertaining to Mr Hill’s Personal Insolvency Agreement and Mr Hill’s putative right to void the Deed of Release are irrelevant to the points raised by the appellant before his Honour, and that the actions of Mr Piscopo demonstrated a lack of independence and a position of conflict.
88 In my view this ground of appeal has no substance. The Federal Magistrate considered the position advanced by the appellant, but in the judgment recounted the history associated with the Deed of Release, including that it had not been challenged by Mr Hill as the party – arguably – potentially adversely affected.
89 I note in particular comments of his Honour at [41]-[45] and [222]-[228]. I am not persuaded that the Federal Magistrate either failed to consider or gave inadequate weight to issues relevant to the Deed of Release as claimed by the appellant. His Honour’s comments are thoughtful, and I find no flaw in them.
Grounds 4-7 and 14 – failure to consider matters relating to the material non-disclosure in the examination summons application
90 Proper understanding of, in particular, grounds 4-7 requires recitation of the following material facts before the Court at the time of the issue of the examination summonses:
the bankrupt had held shares in a New Zealand company (Hill International Wines NZ Ltd);
Hill International Wines NZ Ltd had held shares in a second company, Vintage Wines & Spirits Ltd;
there was then a company restructure of Hill International Wines NZ Ltd whereby Mr Hill’s New Zealand accountant, Ms Helen Walker, became liquidator under a voluntary liquidation of the company; and
Ms Walker advised that she held the shares in Vintage Wines & Spirits Ltd on trust for Mr Hill.
91 Importantly, on 18 December 2006 Ms Walker wrote to Mr Piscopo, stating (materially) as follows:
…
In our correspondence to Peter Rodgers on 26 April 2006, we stated that the shares in Vintage Wines & Spirits Limited were transferred to the beneficial shareholders of Hill International Wines (NZ) Limited. In our correspondence we also stated that the beneficial shareholder of Hill International Wines (NZ) Limited was Terry Donald Hill.
This statement was incorrect.
We would like to confirm that the beneficial shareholder of Hill International Wines (NZ) Limited was Elena Rose. Accordingly the 30,000 shares in Vintage Wines and Spirits Limited, held by Nominee Shareholdings Limited, are held in trust for Elena Rose, being the beneficial shareholder of Hill International Wines (NZ) Limited.
92 In the application for the examination summonses filed 13 February 2008, the letter from Ms Walker to Mr Piscopo was not included in the documentation before the Court.
93 The trustee submits that the letter written by Ms Walker was a letter written solely on the instructions of Mr Hill and Ms Rose and without personal knowledge of Ms Walker. Counsel for Mr Piscopo directed my attention to correspondence between NOT Lawyers and Ms Walker, which was before his Honour below. I note in particular a letter from Ms Walker dated 4 December 2006 in which she indicates that the beneficial interest in the New Zealand shares was assigned (as distinct from being transferred outright) from Mr Hill to Ms Rose on 1 June 2002, and that “until recently” she had not been privy to the share assignment by Mr Hill to Ms Rose.
94 At [36] of the judgment below his Honour said:
36. It is alleged that there was a material omission in Mr Piscopo’s affidavit. The allegation is that Mr Piscopo swore an affidavit (4 December 2007) in which he deposed to the existence of some shares in New Zealand that were formerly held for the benefit of Mr Hill, and that, he alleged, still were for the benefit of Mr Hill, as advised by the liquidator in New Zealand (Ms Helen Walker). Mr Marshall submits that what Mr Piscopo neglected to put before the Court was the information that he received in a letter from the same liquidator, advising that she had made a mistake and, in fact, the shares concerned were not held for Mr Hill but were held for his wife (Ms Rose). It is noted that these shares feature significantly in these proceedings as they appear to be the major asset that Mr Piscopo is trying to recover.
95 Before his Honour the appellant submitted that Mr Piscopo did not explain his omission to inform the Court of the information he had received from Ms Walker, and that the omission was explicable in one of three ways:
the omission was not misleading;
the omission was due to inadvertence;
the omission was deliberate. The appellant submitted that, in light of the principles in Jones v Dunkel, this was the proper inference for his Honour to draw, and is of particular concern because Mr Piscopo has been a solicitor for 22 years.
96 Before this Court the appellant submits, in summary:
His Honour’s treatment of the appellant’s arguments at [143]-[155] was superficial and incomplete, as well as “uncertain and unclear”.
If his Honour had addressed the issue properly he would have concluded that the non-disclosure in question was a substantial reason for believing that Mr Piscopo had acted contrary to the standards expected of a trustee.
It is well-established that when a party makes an ex parte application to the Court, a person swearing an affidavit in support of such an application is under a duty of full, frank and candid disclosure. The letter from Ms Walker was plainly relevant to the consideration of whether the examination summonses should be issued, in that Ms Walker clearly advised that the shares in question were not held for Mr Hill but for Ms Rose.
The shares the subject of the letter from Ms Walker were valuable, yielding annual dividends of $100,000.
Mr Piscopo cannot escape a Jones v Dunkel inference in respect of his failure to disclose the adverse material facts in his examination summons application.
His Honour’s statement at [75] of the judgment is inaccurate, and in any event there is no authority to support the proposition that it is improper to draw a Jones v Dunkel inference against a respondent trustee prior to the Court commencing an inquiry.
97 In these grounds of appeal the appellant makes serious claims concerning the conduct of Mr Piscopo, as well as the failure of the Federal Magistrate to consider those claims.
98 In my view grounds of appeal 4-7 are not substantiated. While perhaps his Honour could have elaborated his reasons for rejecting the appellant’s claims concerning the non-disclosure of Ms Walker’s letter by Mr Piscopo in seeking the examination summonses in February 2008, in my view the reasons of his Honour are clear and the conclusion reached by his Honour was correct.
99 First, I agree with the submission of Counsel for Mr Piscopo that no logical connection can be drawn in ground 4 between:
on the one hand, the alleged failure of his Honour to give adequate weight to the non-disclosure of Ms Walker’s letter; and
on the other hand, the claim that Mr James and Mr Brooks were controlling or dictating Mr Piscopo’s behaviour in the administration of the trusteeship.
100 Second, I consider it clear from his Honour’s reasons, particularly at [154]-[158], that his Honour adopted the submissions of Mr Dubler for Mr Piscopo. In particular, his Honour said:
[154] … In this regard it is important to recognise that the application was merely for an examination summons to investigate the rights of ownership over the New Zealand shares. In assessing whether the Court was misled by this omission the following should be considered
a. The New Zealand shares were only part of many transactions that were being investigated.
b. A disclosure of the New Zealand trustee’s letter would have come with the following additional disclosures:
i. the trustee was speaking without personal knowledge of the facts;
ii. the trustee was speaking without prior knowledge of the alleged documents signed years previously;
iii. the documents relied upon by the bankrupt are inherently unreliable and suspicious;
iv. the trustee was speaking only based on recent instructions from the bankrupt solicitors that her alleged beneficiary was Ms Rose and not Mr Hill himself; and
v. the trustee’s letter is, in fact, devoid of any probative weight and even if there has been a transfer of the beneficial interest from Mr Hill to Ms Rose, this is still liable to be set aside and is properly examinable by the trustee.
The argument advanced is that the Court would not be misled in issuing the examination summons by the alleged omission of one document against a vast volume of documents. This is particularly so, given the well known principle that the law does not “require voluminous materials or elaborative reasons to be placed before it by the trustee before issuing a summons”: Re Cside; ex parte Andrew [1979] FCA 87; (1979) 39 FLR 387 per Lockhart J at [395].
101 I note that his Honour continued later:
158. The approach adopted in respect of the examination summonses was that they were initiated predominantly to “oppress and harass”, “to further a vendetta”, or “to obtain documents or other information to supply the same to Mr James”. I am not satisfied that the evidence before the Court supports the claim in respect of the first two issues. The third issue can effectively be prevented by the issue of appropriate orders in respect of information supplied and to the transcript recorded during the examination. On the material available to the Court, I am satisfied of the reasons for Mr Piscopo’s concern which include: the ownership; and transfer in ownership in various companies located in New Zealand and other overseas countries. Similar concerns are apparent in respect to various aspects of trading in companies now associated with Ms Rose and previously associated with Mr Hill. No attempt has been made to identify any individual aspect of the requested information in any of the summonses issued to Mr Hill or the other three examinable persons. The only statement made was that the request was too broad and too large in volume. No attempt has been made to single out any particular item and demonstrate to the Court that the question is outside of the scope that may be legitimately requested in examination summons. The authorities are clear that the jurisdiction to stop otherwise legitimate procedures on the grounds that they have been instituted and maintained for an improper purpose need to be kept within clear lineated boundaries.
102 Indeed by any measure it appears that the state of affairs – namely, one in which the possibility of a voidable transaction arises – provides a basis for examination and exploration of the beneficial ownership of the shares in Vintage Wines & Spirits Ltd, sufficient to support the issue of the examination summonses. His Honour noted “Mr Piscopo’s concerns” in relation to the beneficial ownership of these shares. Given the information before Mr Piscopo (including that the relevant transaction had occurred at an earlier time, and apparently had not been notified to the advising accountant who subsequently became the company’s liquidator) those concerns are not surprising.
103 Third, scrutiny of the application for the examination summonses indicates that they were sought to allow the trustee to investigate various transactions, including transactions associated with the two New Zealand companies. I accept the submission of the trustee that the alleged assignment of the beneficial interest in the shares from Mr Hill to Ms Rose warranted investigation by Mr Piscopo, indeed, as I have already indicated, particularly in light of the statements by Ms Walker suggesting that she had no personal knowledge of the actual transaction.
104 Fourth, in Karounos v Official Trustee (1988) 19 FCR 330 at 335 the Full Court summarised principles relevant to the issue of summonses under s 81 of the Bankruptcy Act, including:
[11] … the power is exercised in the interests of creditors, and those interests should not be defeated by an unduly technical or restrictive approach to the use of the power. The procedure is basically designed to establish what assets the bankrupt had, what has happened to those assets, and whether action should be begun (or continued) to recover them.
105 Further, as Lockhart J explained in Re Csidei; ex parte Andrew (1979) 39 FLR 387 at p 394:
I do not suggest that the court should require voluminous material or elaborate statements or reasons to be placed before it by the trustee before issuing a summons. The path of a trustee in performing his duties under the Act is difficult enough and must not be impeded; but the very nature and breadth of the inquisitorial power conferred by s. 81 requires the exercise by the court or Registrar of considerable care before it is invoked. Each case must be determined on its merits …
106 In that light, while prima facie Ms Walker’s letter is relevant, I am satisfied that his Honour was correct in determining that the non-disclosure of the letter was not material to the decision of the Court to issue the examination summonses. Indeed counsel for Mr Piscopo submitted that it is fanciful to suggest that the court was misled into issuing the examination summons by the omission of Ms Walker’s letter, particularly given that this asset was only one of a number being investigated by Mr Piscopo. I agree.
107 Fifth, while his Honour Emmett J was not required in O'Neill v Piscopo [2011] FCA 773 and O’Neill v Piscopo (No 2) [2011] FCA 774 to consider in detail the merits of the parties’ cases concerning the examination summonses, it is nonetheless instructive to note that in O'Neill v Piscopo [2011] FCA 773 his Honour ordered that leave to appeal from the order of the Federal Magistrate below dismissing the application to discharge the examination summonses be refused.
108 Sixth, it is difficult to see how the failure by Mr Piscopo to give evidence in relation to his non-disclosure of Ms Walker’s letter permits the Court to draw a Jones v Dunkel inference, given that:
the non-disclosure of the letter has never been in dispute;
Mr Piscopo has consistently submitted that the non-disclosure of the letter was not material to the application for the examination summonses; and
the occasion for Mr Piscopo to give evidence in relation to this issue is not clear.
109 Finally I am unable to identify the relevance of the claim in ground 14, or why that claim warrants the orders sought by the appellant.
Ground 8 – Jones v Dunkel inference to be drawn from wrongful claim of privilege over 290 pages
110 The appellant’s primary complaint in relation to Mr Piscopo’s ultimately unsuccessful claim of privilege in respect of 290 pages can be summarised as follows:
In submissions to his Honour the appellant had noted that none of the subpoenaed parties had come forward to explain the wrongful privilege claim of over 290 pages, and why many of the privilege claims were obviously incorrect.
His Honour gave no consideration to the Jones v Dunkel inference in question, nor to the effect such inference might have had on the exercise of his discretion.
As Mr O’Neill submitted before his Honour below, proper inferences to be drawn are that either Mr Piscopo wrongly claimed privilege over hundreds of documents, or in fact that he improperly delegated that task to Mr Brooks. In either case an inquiry under s 179 should take place.
111 In my view this ground of appeal is not substantiated.
112 The submissions of the appellant assume that the Court’s ruling against a claim of privilege by the trustee in respect of subpoenaed documents constituted a breach of duty by Mr Piscopo. This assumption is misconceived. A litigant is entitled to rely on claims of legal professional privilege where appropriate. A claim of privilege can be tested by the Court, and the claim disallowed in appropriate circumstances. Costs consequences can, for example, flow in circumstances where the Court considers that privilege has been improperly claimed.
113 During all relevant proceedings it appears that while Mr Piscopo may have had assistance from Mr Brooks, he has also been represented by counsel and an independent solicitor. To suggest that the fact that Mr Piscopo has undoubtedly received advice from Counsel and a solicitor in respect of claims of legal professional privilege should be disregarded by the Court in favour of a hypothetical control of Mr Piscopo by Mr James and Mr Brooks is, in my view, fanciful. To suggest that, as a result of the claim of legal professional privilege, an inquiry should be ordered in respect of Mr Piscopo’s conduct is equally fanciful. The conclusion of the Federal Magistrate in finding that no Jones v Dunkel inferences should be drawn is, in my view, correct.
Grounds 9 and 10 – instructions in the NOT Lawyers proceedings
114 The appellant claims, in substance, that:
Evidence of Mr Piscopo’s solicitor in the NOT Lawyers proceedings (the subject of the judgment by Foster J in Piscopo v NOT Lawyers [2008] FCA 1907) concerned Mr O’Neill’s alleged conduct in proceedings between Mr Hill, Mr James and Mr Brooks.
It is clear that the only relevance of that conduct was in relation to the wish of Mr Piscopo to further some interest or vengeful motive of Mr James and Mr Brooks.
This is particularly clear from the following submission of counsel for Mr Piscopo during the proceedings before Foster J, namely in relation to relevance of particular evidence in an affidavit of Mr Anthony Foate, the solicitor for Mr Piscopo:
It is relevant because when it comes to determining what – where the interest of justice lies, your Honour can look at past conduct of Mr O’Neill, who is the managing partner of NOT Lawyers. His past conduct indicates that he acted whilst in conflict, because he was a material witness, and then pretended to have Mr Eddy act while he still continued to act behind the scenes …
The Federal Magistrate did not properly consider Mr O’Neill’s submissions.
In the alternative, Mr Piscopo’s refusal to give evidence that might explain why his counsel made the particular submission before Foster J should appropriately give rise to a Jones v Dunkel inference.
115 In my view this ground of appeal is unsubstantiated. His Honour at [246]-[247] said:
246. In the circumstances it was quite appropriate that proceedings were commenced to prevent the further distribution and access to [documents the subject of privilege] and this was done by commencing proceedings in the Federal court as described above. I note the comments of His Honour Foster J who indicated the matter could have been settled earlier in the proceedings and cost orders had been made to reflect that failure. In light of the acrimonious positions between the parties and the very apparent failure to concede any point it was inevitable that the proceedings be maintained until the hearing before His Honour Foster J.
247. I have formed the view that the proceedings were initiated to pursue a legitimate and appropriate course to maintain privilege over documents in a sequence of litigation between the parties. I am not satisfied that a claim that this step was initiated to either inconvenience or harass the bankrupt, his wife or his legal advisors.
116 In my view this is plainly correct. I am unable to infer any sinister undertone to the submission to which Mr O’Neill refers. Indeed, it is also clear from the judgment of Foster J that his Honour was not persuaded of any ulterior motive in the commencement of the relevant proceeding by Mr Piscopo. I understand that a relevant issue before Foster J in the proceedings seeking the removal of NOT Lawyers was Mr O’Neill’s credit in circumstances where his office had had access to privileged documents of Mr Piscopo. To that extent, Counsel’s submission concerning Mr O’Neill’s role in an earlier case in the sequence of litigation between Mr Hill and Mr James and Mr Brooks appeared relevant to his Honour below, and I am not persuaded that his Honour was wrong.
117 Further, it appears that, to the extent that these grounds of appeal relate to the submission of Counsel for Mr Piscopo before Foster J, the appellant is also claiming that Mr Piscopo’s Counsel was party to the alleged endeavours of Mr Piscopo to further the vengeful motives of Mr James and Mr Brooks. In my view, this is fanciful.
Grounds 12 and 13 – impermissible reliance on matters contrary to orders
118 In summary the appellant claims:
Over the objections of counsel for Mr O’Neill, the Federal Magistrate in the hearing below allowed Mr Piscopo’s counsel to ask questions of Mr Hill which were relevant only to Mr Hill’s examinable affairs and were thus a “dress rehearsal” for the examination summonses that Mr Hill sought to set aside.
Jacobson J on appeal dismissed Mr O’Neill’s application for leave to appeal on the conditions that there would be no cross-examination amounting to a dress rehearsal of the disputed examination summons and that Counsel give an undertaking to that effect (which undertaking was given).
Questions were subsequently asked in the proceedings before his Honour in breach of the undertaking given by Counsel for Mr Piscopo to Jacobson J. When objections were made to those questions before his Honour, his Honour – wrongly – allowed the impermissible questions, and subsequently relied on Mr Hill’s answers.
Further, so significant was the error in admitting the impermissible evidence that there is no need for Mr O’Neill to demonstrate with precision how the evidence was ultimately used.
119 The first point to note is that it appears no direct action was taken by either Mr O’Neill nor Mr Hill in respect of the alleged breach of the undertaking given to the Federal Court. The only complaint is on appeal from the decision of his Honour below in respect of his Honour’s refusal to order an inquiry into the conduct of Mr Piscopo or order his removal from office.
120 Second, I accept the submission of the trustee that the undertaking given by Counsel to the Federal Court did not mean that any question which was relevant and admissible to the application being heard by his Honour could not be asked simply because it related to the examinable affairs of Mr Hill. The application before his Honour, brought by Mr O’Neill, also sought the discharge of the examination summonses issued at the request of Mr Piscopo. I am not persuaded that questions put in respect of this issue during the course of broader trial constituted a “dress rehearsal” of an examination as claimed by the appellant.
121 Third, in any event, while the Federal Magistrate found against the appellant in respect of the discharge of the examination summonses, even if his Honour’s decision was based in part on the answers given by Mr Hill to impermissible questions:
leave to appeal against the Federal Magistrate’s decision refusing the discharge of those summonses has already been refused by this Court; and
no resulting injustice has been demonstrated by the appellant so as to substantiate the appeal against his Honour’s decision.
122 These grounds of appeal are not substantiated.
Leave to appeal from the decision of the Federal Magistrate
123 In finding that the grounds of appeal of the appellant are not substantiated, it follows that, in terms of the application for leave to appeal, I am not satisfied that his Honour’s decision to refuse an inquiry and decline to remove Mr Piscopo from his position as trustee of the bankrupt estate of Mr Hill was attended with sufficient doubt to warrant it being reconsidered.
124 In any event, as I have already observed it is not in dispute that Mr O’Neill is a minor creditor in the amount of $4,437.43 in an estate of 20 creditors with admitted debts exceeding $1 million. No other creditor was a party to this proceeding. The relationship between Mr O’Neill and the bankrupt is a close one, as noted in previous decisions in this and other courts. Contrary to submissions made by Counsel for Mr O'Neill, the authorities support the proposition that the issue before the Court in consideration of whether leave to appeal ought be granted is whether substantial injustice would be caused to the applicant for leave: Wright Rubber Products Pty Ltd v Bayer AG [2010] FCAFC 85 at [49], Hogan v Australian Crime Commission [2009] FCAFC 71 at [56], Metso Minerals (Australia) Ltd v Kalra [2009] FCAFC 57 at [14]. I am not persuaded that, even were the decision below attended with sufficient doubt to warrant reconsideration, substantial injustice to Mr O’Neill would result if leave were refused.
125 It follows that, to the extent that leave to appeal is required, it is refused.
Conclusion
126 In written submissions the appellant stated:
58. Should the Full Court find even one of the above grounds made out, that would be sufficient to set aside the orders made below and to conduct an inquiry (Grounds 11 and 16).
(Emphasis in original.)
127 I am not satisfied that even one of the grounds of appeal has been made out. I am in no way persuaded by the submissions of the appellant that the trustee in bankruptcy is the puppet of vengeful former associates of the bankrupt, and should be removed or should be the subject of an inquiry pursuant to s 179 of the Bankruptcy Act. Indeed, a more realistic inference capable of being drawn from not only this proceeding but the lengthy list of other proceedings associated with Mr Hill’s bankruptcy is that the appellant – who is an admitted friend of the bankrupt – appears unable to accept the propositions that:
Mr Piscopo may be motivated in his decisions by reasons other than the (quite separate) animosity between Mr Hill and Mr James/Mr Brooks;
it is legitimate for a trustee in bankruptcy to be funded by a third party, even one who bears animus towards the bankrupt; and
any hostility of the funder does not automatically infect the actions or views of the trustee in bankruptcy.
128 The appropriate order is to dismiss the appeal. As a general proposition costs follow the event, and in the circumstances there is no reason why the appellant should not pay the costs of the first respondent in this proceeding. I note, however, that the first respondent has sought an order that the appellant pay Mr Piscopo’s costs on an indemnity basis, from at least 30 June 2011. In my view it is appropriate to seek submissions from the parties prior to making a costs order.
I certify that the preceding one hundred and twenty-eight (128) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier. |
Associate:
