FEDERAL COURT OF AUSTRALIA

Sarkis v Moussa [2013] FCA 373

THE COURT ORDERS THAT:

1.    The appeal is dismissed.

2.    The appellant is to pay the first respondent’s costs of the appeal on an indemnity basis, such costs to be paid from the estate of the bankrupt.

3.    The appellant is to pay the second respondent’s costs of the appeal on the ordinary basis, such costs to be paid from the estate of the bankrupt.

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

REASONS FOR JUDGMENT

1    This is an appeal from the decision of Raphael FM (as he then was) delivered on 1 August 2012: Laba-Sarkis v Moussa [2012] FMCA 717. It is one of many related actions and the issues in the appeal require an appreciation of the history of the litigation.

2    At the outset I note that the Federal Circuit Court of Australia Amendment Act 2012 (Cth) came into effect at midnight on 11 April 2012. The Federal Magistrates Court now continues its existence as the Federal Circuit Court of Australia and a Federal Magistrate is now known as a judge of that Court. In preparing these reasons, I have retained the terminology of Federal Magistrate and Federal Magistrates Court for convenience and because that terminology was current both at the time the impugned decision was made and the appeal was heard.

Background

3    On 9 August 2010, O’Shane LCM in the Local Court of New South Wales gave judgment in favour of Mr Moussa for the sum of $53,136.50 plus interest. Magistrate O’Shane accepted the existence of an oral contract which was alleged by Mr Moussa but denied by Mr Sarkis.

4    Mr Sarkis then filed a summons in the Supreme Court of New South Wales seeking leave to appeal against the Magistrate’s judgment. Mr Sarkis disputed, amongst other things, the basis upon which O’Shane LCM assessed damages. On 30 September 2011 Latham J dismissed Mr Sarkis’ summons with costs: Toufic Laba Sarkis v Mahmoud Moussa [2011] NSWSC 1172. On 14 October 2011 Mr Sarkis filed a further summons seeking leave to appeal to the New South Wales Court of Appeal (Court of Appeal).

5    On 31 October 2011, a sequestration order was made against Mr Sarkis rendering him bankrupt on the basis of the judgment debt in favour of Mr Moussa. Trustees in bankruptcy were appointed (the second respondents in this proceeding). Registrar Morgan of the Federal Magistrates Court refused to stay the sequestration order against Mr Sarkis notwithstanding evidence that a summons seeking leave to appeal against Latham J’s decision had been filed. On 4 November 2011, Mr Sarkis applied to the Federal Magistrates Court for a review of Registrar Morgan’s decision and a stay of the sequestration order until his application for leave to appeal to the Court of Appeal had been determined.

6    On 14 November 2011, Mr Tibor Karolyi, a manager employed by the Trustees, sent an email to Mr Sarkis’ lawyer. The email acknowledges that Mr Moussa’s solicitors had provided the Trustees with a copy of Mr Sarkis’ summons seeking leave to appeal to the Court of Appeal. The Trustees asserted that an appeal was an asset of the bankrupt estate. The email then said:

Whilst the trustees have not been formally served with a Notice under s60 (2) of the Act, the Trustee is seeking the following information to assist them to obtain legal advice in respect of the appeal currently on foot:

1)     Copy of an advice from Counsel as to the prospect of success.

2)     Copies of all pleadings relating to the appeal.

3)    A bank cheque for $3,000 made payable to the “Bankrupt estate of Toufic Laba Sarkis to cover the Trustee’s anticipated legal expenses.

7    On 18 November 2011, Mr Sarkis and his then-Counsel held a teleconference with Mr Solomons, one of the Trustees. I accept that Mr Solomons indicated that, as an accountant, he questioned the calculation of the damages by O’Shane LCM and that Mr Sarkis’ Counsel indicated that an appeal may have some prospects of success, especially on the damages issue.

8    On 22 November 2011, Mr Sarkis’ application for review of Registrar Morgan’s decision of 31 October 2011 came before Raphael FM. Mr Sarkis withdrew this application, he says at the urging of the Trustees’ representatives.

9    On 2 December 2011, Mr Moussa’s lawyers wrote to the Trustees notifying them of Mr Sarkis’ application for leave to appeal to the Court of Appeal and asking the Trustees, for the purposes of s 60(2) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act), to indicate in writing their intention to prosecute or discontinue those proceedings within 28 days.

10    On 20 December 2011, the Trustees replied to the solicitors for Mr Moussa noting that they “[did] not propose to prosecute the bankrupt’s application for leave to appeal” and advising that they would not appear at the next return date of the summons on 6 February 2012.

11    The Trustees say that they sent a letter to Mr Sarkis on the same day, advising him that he had been made bankrupt on 31 October 2011 and that they had been appointed as trustees of his bankrupt estate. It also advised him of the correspondence with the solicitors for Mr Moussa in relation to an election pursuant to s 60 of the Bankruptcy Act and their decision not to prosecute the leave application. They said (errors in the original):

The grounds for the Trustee deciding not to continue with your Summons for Leave to Appeal are:–

1.    An appeal must be on a question of law, not a question of fact.

2.    The dispute appears only to be on questions of fact.

3.    The Local Court Magistrates determines the objective facts having heard the oral evidence of both parties. At paragraphs 35 and 36 of the Latham J judgment, he quotes from her judgment.    

4    Your issue appears to be factual only.

5    Leave to appeal is unlikely as there is no point of law and the claim is less than $100,000. There is no automatic right of appeal.

6    The Local Court and Latham J in the Supreme Court have both found against you and it is unlikely the New South Wales Court of Appeal will find for you.    

Mr Sarkis says he did not receive this letter.

12    On 9 March 2012, Mr Sarkis filed an application in the Federal Magistrates Court seeking (1) an order pursuant to section 178 of the Bankruptcy Act that Mr Sarkis may exercise the right of appeal in the Court of Appeal proceedings and (2) further or alternatively an order staying the sequestration order made by Registrar Morgan on 31 October 2011 pending the determination of the Court of Appeal proceeding. This application was adjourned on 19 March, 3 May, and 8 June. In June 2012, the application was amended to abandon the order seeking a review of the decision of Registrar Morgan and to instead read:

1.    Order pursuant to s 178 Bankruptcy Act 1966 that the Applicant may exercise the right of appeal in the Court of Appeal proceedings no: 2010/292546.

2A     Further or alternatively to order 1, an order reviewing the decision of the Respondent’s Trustee made on or about 20 December 2011 that the “do not propose to prosecute the bankrupt’s application for leave to appeal” in the Supreme Court of NSW Court of Appeal proceedings No:2010/292546 and/or an order having the effect of maintaining or reinstating the said application for leave to appeal.

2B    The Applicant have leave to discontinue the proceedings against the First Respondent [Mr Moussa] with no order as to costs.

3    Such further or other orders as the court sees fit.

4    Costs.

13    On 13 March 2012, Mr Moussa filed a notice of motion in the Court of Appeal seeking dismissal of Mr Sarkis’ summons for leave to appeal. The basis of the notice of motion was that the proceeding had been abandoned by reason of the operation of s 60(3) of the Bankruptcy Act or effectively discontinued by the Trustees’ election to “not prosecute” the application.

14    On 14 May 2012, Beazley JA (as her Honour then was), dismissed Mr Sarkis’ summons for leave to appeal against the decision of Latham J with costs: Sarkis v Moussa [2012] NSWCA 136. Beazley JA did not deal with the merits of the proposed appeal.

15    On 1 August 2012, when the application for a review of the Trustees’ decision not to prosecute Mr Sarkis’ appeal came on for hearing, Raphael FM refused an application by Mr Sarkis to again adjourn the application pending the determination by the Court of Appeal (constituted by three judges) of an application for review of Beazley JA’s decision. Raphael FM proceeded to hear Mr Sarkis’ application to review the Trustees’ decision and then dismissed Mr Sarkis’ application with costs.

16    On 20 August 2012, Mr Sarkis filed a notice of appeal from the decision of Raphael FM in which he seeks orders that the Federal Magistrate’s decision be quashed.

17    On 30 October 2012, the Court of Appeal (constituted by three judges) dismissed Mr Sarkis’ application for review of Beazley JA’s decision: Sarkis v Moussa [2012] NSWCA 357.

18    When the matter was called on for hearing on 8 March 2013 in this Court, Mr Sarkis appeared unrepresented and having filed written submissions of 1 page on the morning of the hearing. Contrary to directions made by Registrar Morgan in case-managing the appeal, Mr Sarkis did not file and serve Appeal Book Part C (Part C), for which he apologised. This prejudiced the orderly conduct of the hearing, causing some confusion in the presentation of Mr Sarkis’ oral submissions and delay in the hearing. Mr Moussa and the Trustees were represented by Counsel and they assisted the Court with written and oral submissions. They did not oppose proceeding without Part C. The Federal Magistrate’s file was before me.

The Supreme Court Affidavit

19    Mr Sarkis sought to rely upon an affidavit sworn by him on 9 March 2013 in Supreme Court proceeding 2010/292546 (Supreme Court Affidavit). The Supreme Court Affidavit was one of the documents in the list settled by Registrar Morgan in consultation with the parties which should have been included in Part C. According to Counsel for Mr Moussa (who appeared in the Federal Magistrates Court) the Supreme Court Affidavit was not read on the application before the Federal Magistrate. It was, nevertheless, filed in the proceeding in the Federal Magistrates Court. When Mr Sarkis sought to rely on the Supreme Court Affidavit at the hearing of the appeal, Counsel for the Trustees (who had not appeared in the Federal Magistrates Court) objected to Mr Sarkis’ attempt to rely on “fresh evidence”. Counsel for Mr Moussa said he thought the contents of the Supreme Court Affidavit were unlikely to cause material prejudice but he wished to reserve Mr Moussa’s position until it was clear what Mr Sarkis would seek to make of the evidence.

20    I have included some reference to the contents of the Supreme Court Affidavit in these reasons but I have made no resultant factual findings. A substantial part of the contents of the Supreme Court Affidavit replicates material in other affidavits filed by Mr Sarkis in the Federal Magistrates Court proceeding. I have not based my decision on any evidence contained solely in the Supreme Court Affidavit.

Ground 1 - adjournment

21    In essence, the first ground of Mr Sarkis’ appeal is that the Federal Magistrate erred in not allowing an adjournment until the application to review Beazley JA’s decision had been heard by the Court of Appeal constituted by three judges, which he said was expected to occur in early 2013.

22    The Federal Magistrate correctly observed at paragraph [6] of his reasons that if Mr Sarkis was successful in his application for review of the Trustees’ decision, there would be no need for him to proceed with his application to set aside the decision of Beazley JA. Critically, the matter had already been adjourned on three earlier occasions.

23    Mr Sarkis says that the Federal Magistrate refused the adjournment because of his deference to the opinion of Beazley JA with the result that the Federal Magistrate thought Mr Sarkis’ likelihood of success on the appeal was small. This claim is based on a mischaracterisation of the Federal Magistrate’s reasons. The Federal Magistrate’s opinion of Beazley JA’s understanding of bankruptcy law and practice was but one of the considerations which the Federal Magistrate took into account. Further, the Federal Magistrate did not err in opining at paragraph [24] that:

… There is nothing in her Honour’s judgment that would indicate to me that it was clearly wrong. And even if it was, the proper course of action to take is to appeal that decision and not to come back to this court.

24    The decision to refuse the adjournment was a matter of practice and procedure in respect of which an appellate court should be hesitant to interfere. In Adam P Brown Male Fashions Proprietary Limited v Philip Morris Incorporated (1981) 148 CLR 170 at 177, Gibbs CJ, Aickin, Wilson and Brennan JJ referred with approval to the decision of Jordan CJ in In re the Will of F B Gilbert (deceased) (1946) 46 SR (NSW) 318 at 323:

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

25    I decline to interfere with the Federal Magistrate’s exercise of discretion to refuse the adjournment. Given that success on the substantive application before him would have removed the need to prosecute the application to review Beazley JA’s decision, proceeding to hear the substantive application was an appropriate and expeditious course. Further, it would be futile now to uphold this ground of appeal in view of the fact that the Court of Appeal (constituted by 3 judges) has already heard and dismissed Mr Sarkis’ application for review of Beazley JA’s decision. I accordingly reject Ground 1 of the notice of appeal.

grounds 2, 3, 5 and 6 – section 178 of the bankruptcy act and ancillary matters in the judgment

26    Grounds 2, 3, 5 and 6 of Mr Sarkis’ notice of appeal read (errors in the original):

2    His Honour Raphael FM ignored the serious errors in Magistrate O’Shane’s judgment particularly as regards the Damages awarded and even Her Honour of the Supreme Court raised the question of what happened to the remaining furniture. His Honour Raphael was aware that the application before him had been filed within 60 days as required once the Trustees had elected not to proceed.

3    His Honour Raphael FM also failed to acknowledge that I personally met with the Trustees and discussed the prospect of success and that I had sufficient funds to pay to run proceedings.

…

5    His Honour FM Raphael had before him a Submission that it was acknowledged in argument before Latham J in the Supreme Court that there was no evidence as to whether Mr Moussa has suffered any loss and that the judgment of Magistrate O’Shane was made in error, namely that damages in contract, if any, are compensatory no penal. (See recent case of Precision Coating Services Pty Ltd & Anor v Building Equipment Services Pty Ltd {2012} NSWSC 550 on this damages point.

6    His Honour Raphael FM in his oral judgment on 1 August 2012 erred in law when he referred to an alleged joint venture, mentioning that the Respondent Mr Moussa was to receive money from my sibling in Lebanon and during the cross examination of Mr Moussa he even did not know the name of my siblings and failed to substantiate any agreement that my siblings will give him any money on my behalf as such had never been agreed upon.

These grounds, collectively, address the substance of Mr Sarkis’ application before the Federal Magistrate.

27    The substantive application before the Federal Magistrate was an application for review of a decision by the Trustees to not prosecute Mr Sarkis’ application for leave to appeal from Latham J’s decision (proposed order 2A referred to in paragraph [12] above). The application to the Federal Magistrate was made under s 178 of the Bankruptcy Act which provides:

178 Appeal to Court against trustee’s decision etc.

(1)     If the bankrupt, a creditor or any other person is affected by an act, omission or decision of the trustee, he or she may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable.

(2)     The application must be made not later than 60 days after the day on which the person became aware of the trustee’s act, omission or decision.

28    There was no dispute about Mr Sarkis’ standing to make an application under s 178.

Timing

29    The Federal Magistrate determined that Mr Sarkis’ application under s 178 was not made within the 60 day period mandated by subsection (2) and found it unnecessary to determine whether an application for extension of time could properly be made: see paragraph [20]. At paragraph [17] of his reasons the Federal Magistrate observed that the Trustees made their election on 20 December 2011 or, alternatively, were deemed to have abandoned Mr Sarkis’ application to the Court of Appeal on 31 December 2011. While this may be a correct statement of the dates on which the Trustees in fact made their decision, or failing that, they are taken to have abandoned the action under s 60(3), s 178(2) requires the 60 day period be calculated from the “day on which the person became aware of the trustee’s act, omission or decision”.

30    Tibor Karolyi, an employee of the Trustees, at paragraph [12] of his affidavit of 15 March 2012, refers to a conversation that took place on 27 January 2012 with Mr Sarkis concerning the failure of Mr Sarkis to provide information relating to the prospects of success of the leave application to the Court of Appeal. Mr Karolyi says that during that conversation, Mr Sarkis stated that he did not remember having received a letter. At paragraph [13] Mr Karolyi says that, following the conversation that day, he sent an email to Mr Sarkis in which he attached a copy of the letter which is in the following terms (errors in the original):

I refer to our telephone conversation this afternoon. Please find enclosed a copy of the Trustee’s letter dated 20 December 2011, original of which was previously sent to you, informing you that the Trustees will not continue with your summons for leave to appeal and the Trustee’s reasons.

The attachments line of the email says “s60(2) election - letter to bankrupt - 20.12.11.pdf”. The contents of the letter said to be attached are set out at paragraph [11] above.

31    In his affidavit of 9 March 2012, at paragraphs [16] and [18], Mr Sarkis says that he first saw a copy of the Trustees’ election letter when a copy of the letter was given to his Counsel at a directions hearing before a judge of the Court of Appeal on 20 February 2012. A similar statement was also made in the Supreme Court Affidavit.

32    Neither of the respondents has sought to rely in this appeal on an argument that Mr Sarkis should be deemed to have received the Trustees’ letter of 20 December 2011 at some time before 27 January 2012 based on a presumption created by s 160 of the Evidence Act 1995 (Cth). If the first day on which Mr Sarkis came to know of the Trustees’ election was 27 January 2012 (when Mr Karolyi sent the email) or 20 February 2012 (when Mr Sarkis claims the letter was given to his Counsel), the application to the Federal Magistrates Court made on 9 March 2012 was within the 60 day period set out in s 178(2). However, I do not need to determine whether the Federal Magistrate was incorrect to observe that the application before him was out of time because even if it were within time, Mr Sarkis has failed to show that it is just and equitable for the Court to intervene.

Nature of a s 178 review

33    The scope of the operation of s 178 is usefully summarised by Madgwick J in Healey v Prentice (No 2) [2000] FCA 1598:

Section 178 of the Act

20     The Court is given a very broad supervisory role. The only constraint is that it must be made to appear to the Court that it is just and equitable to make some proposed order. While, for historical reasons, it is well settled that such a broad review jurisdiction in insolvency matters falls within the judicial power of the Commonwealth, in truth, the Court's role has aspects not unlike those more commonly found in administrative reviews. The Court is, after all, reviewing administrative actions of a trustee.

21     It would be enough to excite the court to intervene if it be shown that the impugned conduct of the trustee was incorrect or that other conduct was, or on the material before the Court would be, preferable and that justice and equity require the Court's intervention. An applicant no doubt carries the onus of establishing this. It is plain that the Court should not be too ready to intervene for fear of making the role and work of a trustee unmanageable. That the judge who hears a review application might have acted differently from the way a trustee did is not to the point. The question is whether it is just and equitable that the Court should afterwards intervene in some fashion.

22     This view I think is in accord with what RD Nicholson J said in Bethune v Newman (1996) 19 ACSR 99 and of the approach of Lee J in Re Wheeler; ex parte Wheeler v Halse (1994) 54 FCR 166 at 170.

The Full Court accepted a similar statement of principles in Frost v Sheahan (Trustee) [2009] FCAFC 20 at [8].

34    There are two things in these observations which are relevant here. First, the applicant for relief under s 178 bears the onus of establishing that the situation is such that justice and equity demands that the Court intervene. Second, the Court should exercise restraint in engaging in any intervention. Necessarily, the “appeal” provided for by s 178 invites a consideration of the appropriateness of the trustee’s conduct. In cases like this, where a trustee’s act, omission or decision is said to be pursuant to a statutory function, the proper principles for exercising that statutory function need to be considered.

35    The precise function in question here is a trustee’s discretion to elect to prosecute or discontinue an action provided for by s 60 of the Bankruptcy Act. That section provides, relevantly:

60    Stay of legal proceedings

…

(2)      An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.

(3)      If the trustee does not make such an election within 28 days after notice of the action is served upon him or her by a defendant or other party to the action, he or she shall be deemed to have abandoned the action.

…

(5)      In this section, action means any civil proceeding, whether at law or in equity.

36    In the Federal Magistrate’s assessment, the Trustees’ decision required a consideration of the prospects of the appeal succeeding and the likely costs of the proceedings weighed against the capacity of Mr Sarkis to fund them properly: at paragraph [22]. The Trustees correctly submit that these were appropriate considerations: see Freeman v National Australia Bank Limited [2004] FCAFC 318 at [31] and Haskins v The Official Trustee in Bankruptcy (as Trustee of the Bankrupt Estate of Haskins and anor) (unreported, Sundberg J, 10 April 1996). Mr Sarkis, similarly, took no issue with this approach in his grounds of appeal or in oral submissions.

37     Accepting these to be the relevant principles, there is no basis to take issue with the Trustees’ decision and the reasons expressed in their letter to Mr Sarkis of 20 December 2012, which are set out at paragraph [11] above.

38    The Trustees sought a written advice from Counsel for Mr Sarkis as an indication of prospects on 14 November 2011. No such advice was provided before 20 December 2012. In Ground 3, Mr Sarkis complains that the Federal Magistrate “failed to acknowledge that [Mr Sarkis] personally met with the Trustees and discussed the prospect of success and that [Mr Sarkis] had sufficient funds to pay to run proceedings”. This matter was acknowledged – at least insofar as the discussion as to prospects was concerned – and I concur with the Federal Magistrate’s view at paragraph [22] that the conversation between Mr Sarkis’ Counsel and one of the Trustees (referred to in [6] above) is “a long way from an opinion of counsel or of solicitors which would indicate the basis of the appeal and some understanding of why it was likely to succeed”.

39    Mr Sarkis provided to the Court a copy of the submissions of his Counsel which were given to the Federal Magistrate on 19 March 2012 in support of one of his applications for an adjournment. Mr Sarkis suggests that this provides an assessment of his prospects of success in the Court of Appeal. I do not consider those submissions an adequate basis on which the Trustees could be expected to assess the merits of Mr Sarkis’ application to the Court of Appeal or any appeal of O’Shane LCM’s decision. Similarly, it would be imprudent of the Trustees to make an election to prosecute the leave application based solely on the verbal expressions of opinion in the teleconference held on 18 November 2011 or the one page written submission to the Federal Magistrate which dealt with a number of issues. The Trustees may reasonably expect a more fulsome analysis of the basis of the leave application. This would presumably include an analysis of the decisions of O’Shane LCM and Latham J and the strengths and weaknesses of Mr Sarkis’ case, enabling a realistic evaluation of prospects of success. Furthermore, the written submission was provided well after the election was made; they were not available to the Trustees in making the decision. There is nothing in them which suggests that it would have been just or equitable for the Federal Magistrate to have intervened.

40    As to Mr Sarkis’ capacity to fund the leave application, the Federal Magistrate took the view that he had insufficient evidence about Mr Sarkis’ assets and income. Mr Sarkis complains that the Federal Magistrate should have told him of this issue and allowed him time to provide better evidence. However, the application was Mr Sarkis’ and it was for him to provide the necessary evidence to prosecute his claim. It was not enough for him to make oral assurances to the Trustees or read an affidavit with a simple assertion of the value of his assets or make submissions in argument before the Federal Magistrate about his or his wife’s capacity to provide funds. No assessment was provided of the likely cost of prosecuting the leave application (and if that application was successful, the appeal), or of the scope of any costs order which might be made against the estate if either the leave application or appeal was unsuccessful. More substantial evidence was required. It is not reasonable to require a Trustee to accept this sort of risk to the bankrupt estate or (if it proves inadequate) the Trustee’s own resources without better information than had been provided by Mr Sarkis. Further, as Mr Sarkis was represented by Counsel before the Federal Magistrate, it cannot be said that the Federal Magistrate was under any greater obligation to assist him to understand the issues involved.

41     Grounds 2, 5 and 6 of Mr Sarkis’ application to this Court also go to the issue of the prospects of success of any ultimate appeal to the Court of Appeal if Beazley JA’s decision was set aside and leave to appeal was granted:

•    Ground 2 complains that the Federal Magistrate “ignored the serious errors in Magistrate O’Shane’s judgment”. Mr Sarkis relies in particular on the manner in which the quantum of damages was determined. The Federal Magistrate considered this matter at paragraph [21] of his reasons and noted that the best case scenario for Mr Sarkis on appeal to the Supreme Court was a remittal to O’Shane LCM for a re-assessment of damages. It is therefore not correct to suggest that the Federal Magistrate “ignored” any “serious errors”. The so-called “serious errors” were brought to his attention and factored in his reasoning.

•    Ground 5 is in the same vein as Ground 2 in that it complains about a failure by the Federal Magistrate to consider the errors in O’Shane LCM’s judgment that were said to be admitted before Latham J in the first appeal. This matter was addressed in paragraph [21] and was considered. Ground 6 complains about a supposed error of law by the Federal Magistrate in referring to an alleged “joint venture” and the suggestion that Mr Moussa would receive money from Mr Sarkis’ brother in Lebanon in his reasons for decision. These were not findings of fact but statements based on decisions made by O’Shane LCM and Latham J which were immaterial to the issues before the Federal Magistrate and do not amount to any error of law.

42    Although I have some reservations about the fact that the Trustees apparently did not inform Mr Sarkis of Mr Moussa’s notification to the Trustees for the purposes of s 60(2) before they made their decision (a matter not argued before the Federal Magistrate or in the appeal), I can discern no error in the way the Federal Magistrate determined the substantive application. While the Federal Magistrate’s assessment as to whether the application was made within time may have been flawed, the application was not determined on that basis. Mr Sarkis has failed to discharge his onus to demonstrate that justice and equity demand the Court’s intervention under s 178. Accordingly each of Grounds 2, 3, 5 and 6 must fail.

Ground 4 - continuation of leave to appeal

43    Ground 4 is as follows (errors in the original):

I strongly ask that the Honourable Federal Court accept my application as I continue to believe that I have the right not only to recover some justice but to win this review because I filed a Summons seeking leave to appeal to the Court of Appeal within time and precisely on 14 October 2011. The sequestration order which was made against me on 31 October 2011 under the Bankruptcy Act should not have been made because of the ongoing application for leave to appeal. I submit that I should be allowed to proceed with my application for leave to appeal in the light that the trustees abandonment was in error and should not have occurred.

44    This reads as a submission and an attempt by Mr Sarkis to impugn the sequestration order made against him in 2011. In November 2011, Mr Sarkis abandoned the request for a review of Registrar Morgan’s decision. He also later abandoned his application for the second order (seeking review of Registrar Morgan’s decision) in the application to the Federal Magistrates Court made on 9 March 2012. It raises no error in the Federal Magistrate’s reasons which were wholly unconcerned with the sequestration order. Insofar as this ground also, by implication, impugns the Trustees’ decision to abandon Mr Sarkis’ application for leave to appeal Latham J’s decision, these reasons have already dealt with the issue.

45    There is one final, perhaps related, matter. In the final paragraph of their submissions, Counsel for the Trustees notes (errors in the original, footnote omitted):

There is one final difficulty in the way of this appeal although it was not touched upon in the proceeding before the Federal Magistrate. By the time the matter was before the court below the proceedings to which the election related had been dismissed as a result of the orders of Justice Beazley. Although an abandonment of an action which is brought about by the operation of s60 of the Bankruptcy Act may not destroy the underlying cause of action, the proceedings will have been brought to an end. Even more so is that the case where those proceedings have actually been dismissed. The appellant has never explained how an order under section 178 could operate to revive those proceedings in the NSW Court of Appeal.

46    The footnote to the submission goes on to say that this difficulty was referred to but not ruled upon in the observations of this Court in Freeman v National Australia Bank at [27]:

No argument appears to have been directed to the primary judge as to whether the Court may, by means of an order made under s 178 of the Act, effectively override a deemed abandonment of proceedings under s 60(3). Nor was this issue the subject of any detailed submissions before us. We therefore express no opinion upon that question, as it is not necessary for us to do so in order to resolve the present application.

This point is one on which I too did not hear detailed argument.

47    The power conferred by s 178 enables the Court to make whatever order it thinks just and equitable in the circumstances. This Court would be competent to reverse a decision of a trustee in bankruptcy to discontinue an appeal in a State court by requiring the trustee to take steps to initiate proceedings in that court where it was just and equitable to do so. However, it is difficult to see that such an order would be made where the action is out of time, let alone dismissed, and it is unclear on what basis leave to proceed might theoretically be granted by that State court. It is unlikely that the Federal Court could require or direct a State court to entertain such an action: see John Weeks Pty Ltd v Foodland Associated Ltd (1986) 12 FCR 1 at 5 per Toohey J. Similarly the Federal Court would have no power to direct the Court of Appeal to entertain the leave application from Mr Sarkis himself, as he seems to suggest in the last sentence of Ground 4. While such a suggestion might, in some circumstances, have been regarded as simply ill-informed, it is difficult to see it as anything other than vexatious in circumstances where Beazley JA has dismissed his application for leave and the Court of Appeal has dismissed his application to review that decision.

Conclusion

48    Mr Sarkis submitted that even if, because of the most recent decision of the Court of Appeal, some of the matters addressed in the grounds may not now have any practical relevance (for instance, the complaint in relation to the failure of the Federal Magistrate to grant an adjournment pending that decision) he seeks vindication of his reputation, and of his right to continue the leave application.

49    Although Mr Sarkis has appealed in many venues for recognition of the justice of his cause and the wrongs that he perceives to have been done to him, at each step he has sought to maintain control of his litigation rather than cooperating with the Trustees. The scheme of the Bankruptcy Act is to put control of a bankrupt’s litigation into the hands of the trustee in bankruptcy so that the return to creditors can be maximised and not diminished by litigation over which the trustee has no control. It appears that Mr Sarkis could not accept that. While recognising the great emotional and financial difficulty that many people experience upon becoming bankrupt, and the general rights of citizens to approach the courts, the path Mr Sarkis has taken is ultimately unproductive and costly in time, effort and money not only to himself but to others as well. Had Mr Sarkis put even a small proportion of the time and effort that he has put into approaching courts to satisfying the reasonable demands of the Trustees, his path in the Court of Appeal may well have been much smoother (though it is far from clear that he would have experienced any greater success). The Trustees’ requests for information and a relatively small amount of money were reasonable and appropriate to the exercise of their duties and discretions. I fully endorse the comments of the Federal Magistrate at paragraph [23] of his reasons.

Orders sought by Mr Sarkis

50    For the reasons given above I decline to make the order sought by Mr Sarkis that the Federal Magistrate’s decision be quashed.

51    The second order that Mr Sarkis sought was that the matter be heard by three judges. It is not clear whether this was intended to achieve an order compelling the Court of Appeal, constituted by three judges, to hear an appeal. If it was, this Court would not be competent to make such an order. If it was a request that the appeal from the Federal Magistrate’s decision be heard by a full court of the Federal Court, the decision has been made administratively that the appeal be heard by a single judge and notice was given to that effect. Accordingly this order must also be declined.

Costs

52    The usual order is that costs follow the event and accordingly Mr Sarkis should pay the costs of the Trustees and Mr Moussa in this matter. However, Mr Moussa has sought an award of indemnity costs on the basis that he, as the petitioning creditor, is not a proper party to this proceeding and that this was raised with Mr Sarkis before the hearing of the matter in the Federal Magistrates Court. Mr Sarkis sought an order from the Federal Magistrate that that proceeding be discontinued as against Mr Moussa with no order as to costs. The Federal Magistrate declined to make that order and awarded costs in Mr Moussa’s favour: see paragraph [25] of the Federal Magistrate’s reasons. Mr Moussa argues that as he was, by Mr Sarkis choice, a party to the proceeding and Mr Sarkis made written and oral submissions imputing to him malign motives in seeking to enforce the judgment debt by way of a bankruptcy notice, he has been put to the cost of appearing and making submissions.

53    In light of the comments of the Federal Magistrate in paragraph [25] of his reasons I am satisfied that Mr Sarkis was in a position to understand both that Mr Moussa, as a petitioning creditor, was not an appropriate party to this proceeding and that he should have discontinued the proceeding against Mr Moussa. He should also have known that the consequence of discontinuance would be that he was obliged to pay Mr Moussa’s costs. Following the reasoning of Kenny J in Ogawa v University of Melbourne (No 2) [2004] FCA 1275 at [40]-[42] and the cases there cited, I consider that this is an appropriate case for the award of indemnity costs.

54    I will make orders dismissing the appeal and requiring Mr Sarkis to pay Mr Moussa’s costs of the appeal on an indemnity basis and the Trustees’ costs of the appeal on the ordinary basis, such costs to be paid from the estate of the bankrupt.

Associate:

Dated:    24 April 2013