FEDERAL COURT OF AUSTRALIA

HWY Rent Pty Ltd v HWY Rentals (in liq) (No 2) [2014] FCA 449

THE COURT NOTES THAT:

1.    On 7 April 2014, the Court ordered that the application for an extension of time within which to appeal made on 13 November 2013 be dismissed by consent.

THE COURT ORDERS THAT:

2.    The applicants pay the costs of the first and second respondent on an indemnity basis.

3.    On or before 15 May 2014 the respondents are to file and serve written submissions on whether the Court should make orders pursuant to s 37AO(1)(b) of the Federal Court of Australia Act 1976 (Cth) to the effect that:

“1.    HWY Rent Pty Ltd (ACN 148 031 270) must not institute any proceedings in the Court against any of Michael John Morris Smith or HWY Rentals Pty Limited (in liquidation) (ACN 109 796 901) without leave of the Court.

2.     Patricia Anne Jarvie:

(a)    must not institute any proceedings in the Court against any of Michael John Morris Smith or HWY Rentals Pty Limited (in liquidation) (ACN 109 796 901) without leave of the Court;

(b)    must serve all documents in the creditor’s petition (NSD 2191 of 2013) upon the solicitors for Michael John Morris Smith and HWY Rentals Pty Limited by post or email;

(c)    must not serve any documents in the creditor’s petition (NSD 2191 of 2013) upon Michael John Morris Smith by hand or by leaving them at his residence or business address.”

4.    On or before 22 May 2014, Patricia Anne Jarvie and HWY Rent Pty Limited are to file and serve any submissions in response.

5.    There be no order as to the costs of the Deputy Commissioner of Taxation.

6.    The Deputy District Registrar of the Court is to forward a copy of the court file in proceeding NSD 2326 of 2013 to the Office of the Commonwealth Director of Public Prosecutions.

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

THE COURT NOTES THAT:

1.    On 7 April 2014, the Court ordered that Bankruptcy Notice BN 168856 issued to Michael John Morris Smith be set aside.

THE COURT ORDERS THAT:

2.    The respondent pay the costs of the applicant on an indemnity basis.

3.    Pursuant to s 37AO of the Federal Court of Australia Act 1976 (Cth), Russell Alan Jarvie:

(a)    must not institute any proceeding in the Court against any of Michael John Morris Smith or HWY Rentals Pty Ltd (in liq) without leave of the Court; and

(b)    must not otherwise institute any proceedings in the Court without leave of the Court.

4.    On or before 15 May 2014 the respondents are to file and serve written submissions on whether the Court should of its own motion make orders pursuant to s 37AO of the Federal Court of Australia Act 1976 (Cth) to the effect that:

“Russell Alan Jarvie must not serve any document in these or any other proceedings in the Court on Michael John Morris Smith or HWY Rentals by hand personally upon Michael John Morris Smith or by leaving it at the home or office address of Michael John Morris Smith.”

5.    On or before 22 May 2014, Russell Alan Jarvie is to file and serve any submissions in response.

6.    The Deputy District Registrar of the Court is to forward a copy of the court file in proceeding NSD 216 of 2014 to the Office of the Commonwealth Director of Public Prosecutions

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

REASONS FOR JUDGMENT

TABLE OF CONTENTS

1.    OVERVIEW

1    The issues between the parties arise in the context of two principal proceedings.

2    The first proceeding, NSD 2326 of 2013, concerns an application for an extension of time within which to appeal orders made against Mr Russell Alan Jarvie, Mrs Patricia Anne Jarvie and HWY Rent Pty Ltd (ACN 148 031 270) (HWY (No. 2)) on the application of the liquidator, Mr Michael John Morris Smith, and HWY Rentals Pty Ltd (in liquidation) (ACN 109 796 901) (HWY (No. 1)) in relation to the transfer of assets from HWY (No. 1) to HWY (No. 2). I made orders dismissing the application for an extension of time by consent when it came before me for hearing on 7 April 2014.

3    The second proceeding, NSD 216 of 2014, concerns an application to set aside a bankruptcy notice issued at the request of Mr Jarvie against Mr Smith. I made orders at the hearing setting aside that bankruptcy notice when it came before me on 7 April 2014, with my reasons to be published at a later date. Those reasons are contained in the body of this judgment.

4    I also reserved judgment on the following applications:

a)    an application by Mr Smith and HWY (No. 1) for indemnity costs in NSD 2326 of 2013;

b)    applications by Mr Smith in NSD 216 of 2014 for:

i.    an order for indemnity costs; and

ii.    an order restraining Mr Russell Alan Jarvie from instituting any further proceedings without leave of the Court.

2.    ISSUES AND SUMMARY OF CONCLUSIONS

5    As explained above, the first proceeding NSD 2326 of 2013 concerns an application for an extension of time within which to appeal filed on 13 November 2013 against orders made on 8 August 2013 in Deputy Commissioner of Taxation v HWY Rentals Pty Ltd (proceeding NSD 892 of 2012). By those proceedings, the Liquidator, Mr Michael Smith, sought to recover the property comprised in the first respondent’s private car rental business, HWY (No. 1), which operated in North Richmond, New South Wales. That property had been transferred to the first applicant, HWY (No. 2), prior to HWY (No. 1) going into liquidation on 3 October 2012.

6    The trial judge made orders awarding equitable compensation to HWY (No. 1) for breaches of fiduciary duty by Mr Jarvie, Mrs Jarvie who is Mr Jarvie’s mother, and HWY (No. 2), and requiring payment of amounts for director’s insolvent trading by Mr and Mrs Jarvie.

7    While the application for an extension of time within which to appeal from those orders originally also sought leave to appeal, all parties were agreed that leave to appeal was not required and that the appropriate course was to treat the application for leave to appeal as an application for an extension of time. Orders were made by consent to that effect on 12 December 2013. The Deputy Commissioner of Taxation (the Commissioner) was also granted leave to appear on the application for an extension of time for the reason that, if the extension were granted, orders were sought to require an officer of the Australian Taxation Office to review issues pertaining to orders made on 3 October 2012 with the former accountant for HWY (No. 1).

8    Orders were also made by me in the matter of a creditor’s petition instituted against Mrs Jarvie in proceeding NSD 2191 of 2013 in order to preserve certain of Mrs Jarvie’s assets, including her home in North Ryde, New South Wales, pending determination of the application for an extension of time within which to appeal. The creditor’s petition arises from failed attempts to enforce the orders made by the trial judge in NSD 892 of 2012. That petition is currently listed to be heard by a Registrar.

9    Mr and Mrs Jarvie abandoned their application for an extension of time at the start of the hearing of that application on 7 April 2014 before me and orders were made by consent dismissing the application. However, I reserved the question of whether or not an order should be made for indemnity costs for which the respondents contended. While Mr Jarvie and Mrs Jarvie indicated at the hearing that they would consent to an order for indemnity costs, I did not consider that it would be appropriate for the Court to make such an order by consent, particularly where the parties are unrepresented (as I explained at the hearing). For the reasons which I set out below, I consider that an order for indemnity costs is warranted against Mr Jarvie, Mrs Jarvie and HWY (No. 2) of which Mr Jarvie is sole shareholder and director.

10    In this regard, I should mention at the outset that the application for indemnity costs was based, among other things, upon allegations of forged documents and other serious misconduct. In making findings on those matters, including in determining whether adverse inferences should be drawn from uncontested primary facts, I have kept firmly in mind that s 140 of the Evidence Act 1995 (Cth) (Evidence Act) requires the Court to take into account such matters as the gravity of the matters alleged in determining whether those matters have been proved on the balance of probabilities. This reflects the well-established rule at common law in Briginshaw v Briginshaw (1938) 60 CLR 336 pursuant to which other considerations, such as the inherent unlikelihood of an occurrence of a given description, should also be taken into account: at 362 (Dixon J). Thus, as Mason CJ, Brennan, Deane and Gaudron JJ stated in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170 at 170-171 prior to the enactment of s 140 of the Evidence Act but in words equally applicable to that provision:

“The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary ‘where so serious a matter as fraud is to be found’. Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct.”

11    The second proceeding, NSD 216 of 2014, is an application to set aside a bankruptcy notice issued on a default judgment obtained by Mr Jarvie against Mr Smith in the Local Court of New South Wales which has since been set aside. Formal orders were not made for this application to be heard and determined together with the application for an extension of time. However, the parties were agreeable to that occurring by reason of the overlap between the issues in the proceedings. Orders were also made by consent that evidence in each of these matters would be evidence in the other proceedings. In this regard, particular reliance is placed by Mr Smith upon Mr Jarvie’s conduct in the application for an extension of time in support of the orders sought in the bankruptcy proceedings to restrain Mr Jarvie from instituting proceedings in the future without leave of the Court, as well as his conduct in allegedly obtaining a default judgment in the Local Court of New South Wales by fraud against Mr Smith, in requesting the issue of a bankruptcy notice against Mr Smith on the basis of the default judgment, and in repeatedly serving the bankruptcy notice upon Mr Smith by leaving it at his home after that judgment had been stayed. Again, I have approached the making of findings as to these allegations with the care and caution required by s 140 of the Evidence Act and established authority.

12    I made orders at the hearing of this proceeding on 7 April 2014 setting the bankruptcy notice aside with the reasons to be published later. I am also satisfied that indemnity costs should be awarded against Mr Jarvie in proceeding NSD 216 of 2014 on the basis that I explain below.

13    Furthermore, while Mr Smith and HWY (No. 1) also sought an order under ss 30 and 50 of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) which would have the effect of precluding Mr Jarvie from instituting proceedings in any Court in Australia without leave of this Court, I do not consider that this Court has power to make an order of such breadth. Further and in any event, I do not consider that those powers could be exercised to protect the property of Mr Jarvie where Mr Smith was the person against whom the bankruptcy notice was issued and to which the proceedings relate. However, I consider that it is appropriate for an order to be made pursuant to s 37AO of the Federal Court of Australia Act 1976 (Cth) (FCA Act) restraining Mr Jarvie from commencing any proceeding in this Court without leave, for which Mr Smith also contended, given the extreme and repetitive nature of the abuses of court processes in which Mr Jarvie engaged.

14    The Court is also entitled of its own initiative to make a vexatious proceedings order in relation to a person under s 37AO(3) of the FCA Act provided that the preconditions to the making of such an order are met, including that the persons against whom the order may be made be given an opportunity to be heard. While not raised at the hearing but subject to hearing from the parties concerned, it is my preliminary view that the Court ought to make further vexatious proceedings orders against Mr Jarvie dealing with service of documents, and against Mrs Jarvie and HWY (No. 2) under s 37AO(1)(b).

15    Finally, while in closing submissions Mr Jarvie made an admission of a potentially self-incriminatory nature, I have relied on the evidence in making findings on the matter to which the admission related. I have taken this approach because it seemed the fairest way to proceed in circumstances where Mr Jarvie was unrepresented and made the admission before being warned about the privilege against self-incrimination, and any admission by him would not in any event have relieved the Court from considering the evidence as Mrs Jarvie was neither present in court when the admissions were made nor bound by them. Nor did I understand HWY (No. 1) or Mr Smith to rely upon the admission in these proceedings.

3.    THE APPLICATION FOR INDEMNITY COSTS IN THE PROCEEDINGS SEEKING AN EXTENSION OF TIME WITHIN WHICH TO APPEAL (NSD 2326 OF 2013)

3.1    Conduct of the proceedings

16    This litigation has an unusual and complicated history. As such, it is necessary to set out the manner in which the proceedings were conducted in some detail as as to determine whether to make an order for indemnity costs.

3.1.1    The parties

17    HWY (No. 1) was registered as a company limited by shares in New South Wales on 29 June 2004. The company’s registered office and principal place of business was 72 Bells Line of Road North Richmond, NSW 2754. HWY (No. 1) carried on a car and truck rental business and was the registered owner of a fleet of more than 50 motor vehicles.

18    The second applicant, Mr Jarvie, has been a director of HWY (No. 1) since 7 February 2012. He was also the sole Director and Company Secretary from 29 June 2004 until 24 August 2006 when he was declared bankrupt. His bankruptcy was annulled in July 2010. He became a director of HWY (No. 1) again on 7 February 2012.

19    The third applicant is Mr Jarvie’s mother, Mrs Patricia Anne Jarvie, born on 25 February 1937. She was a director of HWY (No. 1) for the period 29 November 2006 to 7 February 2012 and therefore for much of the period that Mr Jarvie was bankrupt. The assets of HWY (No. 1) were transferred to HWY (No. 2) during this period. Throughout this period, Mr Jarvie was the sole shareholder of HWY (No. 1).

20    The first applicant, HWY (No. 2), was registered as a company limited by shares in the State of New South Wales on 30 December 2010. The company’s registered office and principal place of business is 78 Bells Line of Road North Richmond, NSW 2754. Mr Jarvie has been the sole director, company secretary and sole shareholder of HWY (No. 2) since the company was established.

21    The Commissioner issued a Creditor’s Statutory Demand for payment of a debt to HWY (No. 1) on 10 May 2012 for the sum of $131,288.27. In reliance on that demand, an application was subsequently made on 26 June 2012 by the Commissioner under s 459P of the Corporations Act 2001 (Cth) (Corporations Act) for the winding up of HWY (No. 1) on the ground of insolvency.

22    On 3 October 2012, the District Registrar of this Court ordered that HWY (No. 1) be wound up and appointed the second respondent, Mr Michael John Morris Smith, as liquidator.

3.1.2    The proceedings at first instance

23    Shortly thereafter, on 20 November 2012 HWY (No. 1) and Mr Smith filed an interlocutory application seeking a declaration that a large number of motor vehicles, a telephone number and all intellectual property, including the name ‘HWY Rentals Pty Ltd’, is the property of HWY (No. 1) to the exclusion of HWY (No. 2) and Mr Jarvie. In the alternative, the application sought a declaration that any transfer of business to HWY (No. 2) or to Mr Jarvie be declared a voidable transaction pursuant to ss 588FB, 588FDA or 588FE of the Corporations Act, and an order that the assets be reconveyed to HWY (No. 1).

24    On 14 December 2012, this Court made mandatory injunctive orders against Mr Jarvie in NSD 892 of 2012 for delivery up of the motor vehicles that were the property of HWY (No. 1). Those orders have never been complied with despite the injunction having been served on Mr Jarvie and him having acknowledged receipt of the injunction by facsimile sent to Mr Smith’s office. Attempts by Mr Smith to serve Federal Court documents on Mr Jarvie relating to his contempt of the Court’s injunction have been unsuccessful.

25    There was no appearance by Mr Jarvie, Mrs Jarvie or HWY (No. 2) at the trial before the primary judge on 8 August 2013. Evidence was led and submissions were made by counsel for Mr Smith and HWY (No. 1) in support of the relief sought. The evidence included evidence of Mr and Mrs Jarvie having repeatedly endeavoured to avoid service of documents which the trial judge apparently accepted. The trial judge made the orders sought ex parte upon being satisfied that the respondents had been served with notice within sufficient time of the trial and that the causes of action on which Mr Smith and HWY (No. 1) relied were made out for the reasons explained in their written and oral submissions. No further reasons were given or separately published. By final orders, the trial judge:

a)    declared that Mr and Mrs Jarvie had acted in breach of their fiduciary duties to HWY (No. 1) in transferring the property to HWY (No. 2), and that HWY (No. 2) received the benefit of the transfer knowing of the breach;

b)    required payment of equitable compensation by the Jarvies and HWY (No. 2) in the sum of $232,800;

c)    declared the transfer to be an uncommercial transaction within s 588FB of the Corporations Act and required payment of the benefit received by HWY (No. 2) in the sum of $232,800 to HWY (No. 1) pursuant to s 588FF of the Corporations Act (with any payment of equitable compensation to be offset against the liability to pay the benefit);

d)    declared that Mr and Mrs Jarvie contravened s 588G(2) by failing to prevent HWY (No. 1) from incurring debts due to the Commissioner totalling, in the case of Mrs Jarvie, $127,543.60 over the period 30 November 2007 to 7 February 2012, and, in the case of Mr Jarvie, $9,642.72 over the period 7 February 2012 to 3 October 2012;

e)    declared that Mr Smith was entitled to recover as a debt due to HWY (No. 1) the loss or damage suffered by the Commissioner, being the debts incurred by HWY (No. 1); and

f)    ordered that Mr and Mrs Jarvie pay HWY (No. 1) the sums of $127,543.60 and $9,642.72 respectively.

26    In addition, the orders required that Mr Jarvie and HWY (No. 2) pay the applicants’ costs of the proceedings to be assessed up to 8 February 2013, and that Mr Jarvie, HWY (No. 2) and Mrs Jarvie pay the applicants’ costs thereafter. Those costs were subsequently assessed by the Registrar in fixed sums on 23 August 2013, with Mr Jarvie and HWY (No. 2) to pay costs of $29,034.60 to Mr Smith and HWY (No. 1), and Mr and Mrs Jarvie and HWY (No. 2) to pay $69,254.10 to Mr Smith and HWY (No. 1). At the time of the hearing before me, neither the costs orders nor the judgment debt had been paid.

27    In this regard, Mr Jarvie was served with a bankruptcy notice on 4 March 2014 claiming the amounts due under the final orders made on 8 August 2013, together with costs as assessed. However, I am not seized of any proceedings arising from that bankruptcy notice save insofar that reliance is sought to be placed by Mr Smith and HWY (No. 1) upon the issue of the bankruptcy notice in support of the orders sought against Mr Jarvie in NSD 216 of 2014 under ss 30 and 50 of the Bankruptcy Act, which I deal with later in my reasons.

3.1.3    The application for an extension of time

28    Time to appeal against the orders of the primary judge made on 8 August 2013 expired 21 days later on 29 August 2013: r 36.03, Federal Court Rules 2011 (Cth) (FCA Rules).

29    On 26 September 2013, Mrs Jarvie was served with a bankruptcy notice issued at the request of HWY (No. 1) claiming $429,597.70 against her, being the total of the judgment debt and assessed costs. Orders were subsequently made on 3 December 2013 by Justice Rares on the creditor’s petition sought against Mrs Jarvie in NSD 2191 of 2013 providing that, up to and including 13 December 2013, pursuant to section 50(1) of the Bankruptcy Act the receiver would take control of the land at North Ryde, New South Wales, where Mrs Jarvie resides. The orders also provided that she could continue to occupy the land and was to deliver the certificates of title for the Ryde Land and other land to the receiver within three days. These orders were extended by me on 20 December 2013 until further order of the Court.

30    An application for an extension of time within which to appeal the orders made on 8 August 2013 was made on 13 November 2013. The application was signed by Mr Jarvie alone although Mrs Jarvie and HWY (No. 2) were also named as applicants. As I explained at [7] above, that application was initially made as an application for leave to appeal and for an extension of time within which to appeal. However, the parties and the Court agreed that leave was in fact not required in this case. Accordingly, I made consent orders to enable that application to proceed only as one for an extension of time.

31    The grounds identified in the application for an extension of time centred on allegedly improper service of documents, and an allegation that parties were added to the proceedings with no relevance to the original matter. The draft notice of appeal attached to the application sought orders setting aside the orders made on 8 and 23 August 2013, that HWY (No. 2) and Mrs Jarvie be removed from the matter, to add a person as a respondent said to be “the officer in charge of the [Business Activity Statement] question from 2007 to 2009”, to conduct a review of the process server’s licence, and to require an officer of the ATO to review the issues relating to the orders made on 3 October 2012.

32    The application was accompanied by three affidavits. Each of those affidavits was ostensibly sworn before the Registrar of the Richmond Local Court. Two were ostensibly sworn on 8 November 2013 by Mr Jarvie, one on his own behalf and the other by Mr Jarvie on behalf of HWY (No. 2). The third affidavit accompanying the application was supposedly sworn by Mrs Jarvie on 8 October 2013. Subsequently, Mr and Mrs Jarvie and HWY (No. 2) filed three further purported affidavits dated 17 February 2014, the first of which was supposedly sworn by Mr Jarvie on behalf of HWY (No. 2) and the others, by Mr and Mrs Jarvie.

33    However, the unchallenged evidence of the Registrar in her affidavit sworn on 20 March 2014 establishes that each of these are false instruments on which her signature as witness was forged, matters which became evident to the liquidator only in early February 2014 as I later explain. In particular, I accept the Registrar’s evidence that.

a)    the signatures on the documents were not her signature and that she had not seen any of the documents before preparing her affidavit in these proceedings sworn on 20 March 2014;

b)    the Registrar’s middle name was misspelt even though her J.P registration number appeared, which she would not have left uncorrected if she had in fact witnessed and signed the document;

c)    Mr and Mrs Jarvie were known to her:

i.    she had conversed with them on a number of occasions at the Richmond Local Court and had witnessed their signatures on legal documents in the past;

ii.    in the case of Mr Jarvie, she had witnessed Mr Jarvie’s signature on more than twenty occasions pertaining to Local Court civil proceedings where he was provided with a sealed copy of the signed document to keep for his own records;

d)    she had not seen Mr Jarvie or had any dealings with him since 19 July 2013 when she saw him in the street, aside from seeing Mr Jarvie outside the car and truck business on 10 March 2014; and

e)    she had not had any dealings with Mrs Jarvie since 19 July 2013 when Mrs Jarvie had attended at the Richmond Local Court to file a Notice of Motion for a Garnishee Order on behalf of Mr Jarvie or seen her since that time aside from the occasion when she saw Mrs Jarvie mowing the nature strip on 7 February 2014.

34    Furthermore, the fact that the signatures were forged on affidavits purportedly sworn by Mr and Mrs Jarvie, and on which they sought to rely in the proceedings, leads me to infer that both Mr and Mrs Jarvie were aware of, and complicit in, the forging of the signatures on those documents, irrespective of who in fact forged the Registrar’s signatures. I am reinforced in this view by the fact that it was clearly open to either of them to lead evidence to the contrary. Furthermore, for the reasons given at [63] below, Mr Jarvie at the least had copies of documents on which details such as the Registrar’s name and JP number appeared and were therefore known to him.

3.1.4    The first adjournment of the hearing of the application for an extension of time

35    The application for an extension of time within which to appeal was initially listed for hearing before me on 12 December 2013, together with the creditor’s petition. Timetabling orders had earlier been made for the filing of submissions and any further evidence on which the parties sought to rely.

36    Mr Jarvie, Mrs Jarvie and HWY (No. 2) appeared in person and made an oral application part of the way through the hearing for an adjournment in order, it was said, to engage legal representation. In submissions in support of the application, it was said that Mrs Jarvie had engaged solicitors and paid for them upfront, but they had withdrawn their services.

37    There was no prior notice of the adjournment application and no evidence was led in support of it. However, HWY (No. 1) and Mr Smith very fairly did not oppose the adjournment given the importance of the applicants receiving legal advice provided that the status quo was preserved and that assurances were given by Mr and Mrs Jarvie that they would seek to retain solicitors in good faith. As to the latter, the Court also went to considerable lengths at the hearing to stress to Mr and Mrs Jarvie the importance of obtaining legal representation, in particular for (but not limited to) Mrs Jarvie against whom the creditor’s petition had issued and who stood potentially to lose her home. Counsel for the respondents also correctly submitted that HWY (No. 2) could not appear without legal representation unless the Court in the exercise of its discretion granted leave to depart from the general limitation in r 4.01(2) of the FCA Rules: see Cytel Pty Ltd v Peoplebank Recruitment Pty Ltd [2006] FCA 985 at [6] (Bennett J); Silkearl Pty Ltd v Ainsworth Game Technology Ltd [2006] FCA 949 (Allsop J, as his Honour then was). Thus, the notations to the orders adjourning the hearing of the application for an extension of time stated, with the agreement of Mr and Mrs Jarvie, that:

“7.     Russell Alan Jarvie, Patricia Anne Jarvie and HWY Rent Pty Ltd are to use their best endeavours to retain a solicitor or solicitors to act for them in these proceedings before 20 December 2013 and to have any such solicitor appear (by himself, herself or by counsel) before the court on 20 December 2013.

8.     The adjournment of these proceedings until 20 December 2013 on the application by the applicant is ordered upon the applicants having assured the Court that they will seek to retain solicitors in good faith.”

38    Notwithstanding the basis upon which the adjournment was granted and the assurances given by Mr and Mrs Jarvie, no legal representative appeared for Mr or Mrs Jarvie or HYW (No. 2) before me at any time subsequently. Nor was any notice of acting or address for service filed to indicate that legal representatives had been appointed for any of Mr Jarvie, Mrs Jarvie or HWY (No. 2). However, the Court was advised in an email from Mrs Jarvie on 28 March 2014 that a solicitor had been appointed and that counsel had been engaged to act and noted that those legal representatives were apparently not available to attend on the date listed for the hearing of the matter before me. Despite an email being sent from the Court on the same date to the legal representative identified by Mrs Jarvie requesting that he file a notice of acting as a matter of urgency, no such notice was ever filed. That legal practitioner eventually confirmed to the Court, albeit after some considerable delay on the practitioner’s behalf, that he did not act for Mrs Jarvie and would not be representing any of the parties in this proceeding.

3.1.5    The failure to appear at the directions hearing on 7 February 2014

39    The application for an extension of time was called on for directions on 7 February 2014 in order to determine whether the date for the hearing of the application could be brought forward so as to facilitate the hearing of the appeal in the August Full Court sittings in the event that an extension of time within which to appeal was granted. There was no appearance by or on behalf of any of the applicants. However, Mr Jarvie caused an email to be sent to the Court on the morning of the directions hearing resisting any change to the trial date. Further, while he said that he had not spoken to his mother before the email was sent, Mr Jarvie advised in the email that:

a)    he was in south-west Queensland;

b)    HWY (No. 2) has no representation as it is not operating; and

c)    his mother, Mrs Jarvie, “will not be attending court today as she is in Tasmania being cared for by her Aunty. She flew to Tasmania on the 26th December 2013 and we were not expecting her back [sic] until birthday on 25th February 2014”.

40    However, contrary to the last of these statements, the Registrar of the Richmond Local Court gave evidence that she saw Mrs Jarvie on 7 February 2014 in the morning as she drove past the car and truck hire premises in North Richmond. She said that she saw Mrs Jarvie mowing the nature strip at the front of the premises with a motorised lawn mower which she was pushing.

41    In this regard, I do not accept the submission by Mr Jarvie that, having seen Mrs Jarvie in Court, I should find that she was too frail to be pushing a lawn mower. It was clearly open to Mr and Mrs Jarvie to have called evidence to contradict the evidence of the Registrar, yet her evidence was ultimately unchallenged. Mrs Jarvie was known to the Registrar, as I have already found. The Registrar’s evidence also placed Mrs Jarvie at the location of the car and truck business formerly owned by her son’s company. That being so, I accept the Registrar’s evidence as reliable and credible and find that Mr Jarvie falsely claimed that Mrs Jarvie was interstate on 7 February 2014 in an endeavour to mislead the Court.

3.1.6    The notice to produce and the subpoena

42    It is Mr Smith’s evidence that at some time between 3.45pm on 10 March 2014 and 7.00am on 11 March 2014, Mr Jarvie left a notice to produce signed by him on behalf of HWY (No. 2) and dated 17 February 2014 (the Notice to Produce) in an unstamped envelope in the letterbox at Mr Smith’s home. The notice was not served on the solicitors acting for Mr Smith in the case. By the Notice to Produce, HWY (No. 2) sought copies of all correspondence with “the applicant” [sic], filed documents (including those relating to service on the applicant) and orders in relation to the applicant, and Court Books 1 and 2 in the proceedings. The documents sought were produced in due course to the Court and I made orders on 14 March 2014 granting access to the parties to inspect and copy the documents produced in accordance with the Notice to Produce.

43    Subsequently, at some time between 9.15pm on 25 March 2014 and 7.00am on 26 March 2014, Mr Jarvie left a document purporting to be a subpoena to produce documents on the front porch of Mr Smith’s home. The document stated that it had been issued at Mr Jarvie’s request and was directed to Mr Smith. However, the subpoena had not been issued by the Court and sought the same documents as those which had been produced already to the Court in accordance with the Notice to Produce, save that it also sought a copy of telephone records between October 2012 and March 2014 logging calls to HWY (No. 2), Mr Jarvie and Mrs Jarvie seeking recovery of the vehicles. Mr Smith gave evidence that there were no further documents to be provided in answer to the additional item as there had been no such calls made by him or his staff.

44    I consider in all of the circumstances that Mr Jarvie intended to harass and intimidate Mr Smith by leaving documents at his home and doing so, at least in one instance, apparently overnight. I am reinforced in my view that this was Mr Jarvie’s intended purpose by reason of the fact that the documents filed in the proceedings on behalf of Mr Smith disclosed that solicitors were engaged to act for him and that those documents recorded his address for service as being that of the law firm. I am satisfied that it would not have been easy for Mr Jarvie to find Mr Smith’s residential address and that Mr Smith did not know how Mr Jarvie had obtained his address. Mr Smith’s residential address is not included on the electoral roll, in telephone directories or other public documents and he deposes to taking great care to protect his address from public documents. Mr Jarvie’s conduct shows, therefore, deliberateness and planning that supports the inference that he intended to intimidate and harass Mr Smith.

45    An application for leave to issue the subpoena made on 26 March 2014 was made returnable before me on the date of the hearing but was ultimately determined in view of the application for an extension of time being abandoned at the hearing.

3.1.7    The hearing of the application for an extension of time and indemnity costs on 7 April 2014

46    The hearing of the application for an extension of time on 1 April 2014 was adjourned until 7 April 2014 following applications made by Mrs Jarvie and Mr Jarvie for an adjournment.

47    First, Mrs Jarvie emailed my Associate on 28 March 2014 requesting a stay of the proceedings listed for 1 April 2014. The principal reason proffered by Mrs Jarvie as to why the stay was sought was that her “solicitor… and the barrister he has engaged are not available on the 1st April 2014 as they are tied up in court with another ongoing matter.” Mrs Jarvie also claimed in her email that her legal representative had informed her that “30% of the documents” in the proceeding, including “key components” of the documentation provided by counsel for Mr Smith, were missing. Shortly after receiving Mrs Jarvie’s email, my Associate wrote to the legal practitioner identified by Mrs Jarvie, copying both Mrs Jarvie and Mr Jarvie into the correspondence, and advised that if such an application were to be made then it should be filed and supported by affidavit. I directed that Mrs Jarvie (or any other party) be afforded an opportunity to file and serve any application for an adjournment by midday on 31 March 2014 to be considered at the hearing before me on 1 April 2014.

48    At the time that the hearing commenced on 1 April 2014, no such application had been filed nor any response or acknowledgement received from Mrs Jarvie’s supposed legal representative. However, I note that Mr Jarvie attempted to file a number of affidavits and an application after the Registry had closed late on the afternoon of 31 March 2014. On the basis that Mr Jarvie was out of time and in light of the concerns that had already been raised with the Court regarding the authenticity of documentation previously filed by Mr Jarvie in these proceedings, I refused those documents for filing and directed that Mr Jarvie seek leave the following day to file those documents in Court. In the end, no such leave was sought.

49    On 1 April 2014 Mr Jarvie contacted the Court Registry at approximately 9.40am to notify the Court that he would be running late by reason of his mother having been taken to hospital that morning. She was discharged on the same day. I have not drawn any adverse inferences from these circumstances. However, on the basis of Mrs Jarvie’s alleged medical circumstances and her absence at the hearing on 1 April 2014, I stood the matter down until 7 April 2014 and made an order that either Mrs Jarvie or a medical practitioner file an affidavit by noon on 4 April 2014 explaining her reasons for not appearing on 1 April 2014.

50    At the start of the resumed hearing on 7 April 2014, Mr and Mrs Jarvie each appeared. Mr Jarvie told the Court that “I don’t see the point of going ahead with that [i.e. the hearing of the application for an extension of time], your Honour. We’re not represented. We weren’t supplied, and my mother wasn’t supplied with enough documents so she could be represented. We’ve had contact with [a solicitor] and my mother had been going there for 50 years. He wasn’t worth – didn’t – couldn’t give her a way forward.” Mr Jarvie proceeded to state that he and his mother intended to discontinue their application. I granted a short adjournment in order to enable Mr and Mrs Jarvie to consider whether this was truly the course that they wished to adopt. Upon the Court resuming, Mr and Mrs Jarvie each confirmed that they did not wish to pursue the application for an extension of time within which to appeal. I explained to Mr and Mrs Jarvie that, if they abandoned the application, that would be the end of those proceedings and the orders of the primary judge would stand unchallenged. HWY (No. 2) did not appear and was taken as not opposing the course adopted by Mr and Mrs Jarvie. Accordingly, I made orders dismissing the application by consent.

51    In this regard, I do not accept as true the statement by Mr Jarvie that solicitors could not be engaged because the applicants were not supplied with enough documents. The applicants had ample time within which to instruct a solicitor, and there is no evidence which suggests that the applicants took any steps to instruct a solicitor despite their assurances to the Court upon being granted the adjournment in December 2013. Furthermore, all of the documents filed by the respondents, court orders, correspondence and the like had been provided in answer to the notice to produce in respect of which orders had been made granting access, to all parties.

52    Counsel for HWY (No. 1) and Mr Smith opened on its applications for indemnity costs and to set aside the bankruptcy notice. In the course of the opening, counsel explained the serious findings that HWY (No. 1) and Mr Smith asked this Court to make in support of those orders, including:

a)    that the witness’ signature on the affidavits sought to be relied upon by Mr and Mrs Jarvie in the application for an extension of time and the Local Court proceedings had been forged;

b)    that the Registrar had seen Mrs Jarvie outside her home when the email from Mr Jarvie to the Court had stated that she was in Tasmania; and

c)    that Mr Jarvie had obtained the default judgment in the Local Court by fraud.

53    Furthermore, the allegations relied upon by HWY (No. 1) and Mr Smith had clearly and fairly been set out in the written submissions filed and served by them prior to the hearing.

54    During the course of Mr Smith and HWY (No. 1) tendering evidence in support of the applications for indemnity costs and to set aside the bankruptcy notice, Mrs Jarvie indicated that she wished to be excused from continuing to attend the hearing. Mr Jarvie also said that he and his mother did not care if the application for indemnity costs were allowed. However, I indicated that I was not prepared to make an order for indemnity costs without evidence, particularly in circumstances where the parties against whom the costs were sought were unrepresented. This was a course with which counsel for HWY (No. 1) and Mr Smith concurred. I urged Mrs Jarvie to remain so that she would hear the evidence and be able to respond to it, if she so wished, while explaining that there was no compulsion on her to do so. Mrs Jarvie decided not to remain. However, Mr Jarvie remained for the whole of the hearing and participated in it, including by raising an objection to certain evidence sought to be tendered, leading evidence said to establish that he was overseas between 21-28 February 2014, and making short submissions in closing.

3.2    Principles governing the award of indemnity costs

55    The Court has a broad discretion to order costs under s 43 of the Federal Court of Australia Act 1976 (Cth) (the FCA Act). That discretion is not to be read down otherwise than in accordance with accepted principle. Nonetheless, a successful party is in general entitled to an order for its costs on a party and party basis only. That ordinary rule as to costs may be departed from so as to award costs on an indemnity basis where the justice of the particular case so requires or where there is some special or unusual feature of the case justifying a departure from the ordinary rule: Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233 (Sheppard J).

56    The purpose of such an award of costs is explained by Gray J (with whom Carr and Goldberg JJ agreed ) in Hamod v New South Wales (2002) 188 ALR 659 at 665:

“Indemnity costs are not designed to punish a party for persisting with a case that turns out to fail. They are not awarded as a means of deterring litigants from putting forward arguments that might be attended by uncertainty. Rather, they serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs.”

57    While the categories of cases in which such an award may be made are not closed, cases in which such an order may be warranted include those where there is evidence of misconduct that causes loss of time to the Court and other parties, or the proceedings are instituted in disregard of known facts or clearly established law. “The question”, as Sheppard J said in Colgate-Palmolive Company at 234, “must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.”

3.3    Should an award of indemnity costs be made against any of the applicants?

58    In the circumstances, I am satisfied that an award of indemnity costs is warranted against each of Mr Jarvie, Mrs Jarvie and HWY (No. 2) on the basis that it was unreasonable for them to have subjected HWY (No. 1) and Mr Smith to the expenditure of costs in responding to the application for an extension of time. In my view, the applicants never held a genuine intention to prosecute the proceedings and the proceedings were brought and conducted for ulterior and improper purposes, including to harass Mr Smith and as part of a strategy of delaying compliance with the orders made at first instance. In my view, this is apparent in particular from the following matters.

a)    Each of the affidavits purportedly sworn by Mr Jarvie on his own behalf and on behalf of HWY (No. 2) and by Mrs Jarvie ostensibly in support of the application, were forged. Both Mr and Mrs Jarvie were aware of, and complicit in, the forging of the signatures, irrespective of who created the forgery. There was no genuinely sworn evidence sought to be placed before the Court.

b)    There was no evidence of any genuine attempt to engage solicitors, notwithstanding the assurances given to the Court on the matter being adjourned after commencement of the trial on their application in order to engage solicitors.

c)    The alleged inability to instruct solicitors and the reasons given for it by Mr Jarvie formed part of a misguided strategy of delaying the hearing of the application for an extension of time.

d)    The Court was deliberately misled by Mr Jarvie as to the reasons why his mother purportedly could not attend the hearing on 7 February 2014 which would seem to be part of a misguided strategy to avoid the hearing date being brought forward.

e)    By the subpoena left at Mr Smith’s residence, Mr Jarvie sought substantially the same documents as those already produced to the Court to which access had been granted.

f)    Documents were served at Mr Smith’s residential address, on at least one instance overnight, and not upon his solicitors, including a subpoena which had not in fact been issued by the Court, the purpose of that conduct being to harass and intimidate Mr Smith.

g)    When it was clear that the application for an extension of time would be heard and no further adjournments given, the application was abandoned.

59    While there was no evidence of Mrs Jarvie’s involvement or complicity in the steps set out in (d), (e) and (f) above, she was involved in the other steps or at the very least permitted them to be taken. That is more than sufficient in my view to warrant the making of the order for indemnity costs against her also. In this regard I note that counsel for HWY (No. 1) and Mr Smith very properly drew the Court’s attention to the fact that the signature on the affidavit of Mrs Jarvie apparently sworn on 4 April 2014 deposing as to the reasons for her non-attendance at Court on 1 April 2014, differs from the signature that appears on her affidavits where the witness’ signature was forged. However, Mrs Jarvie apparently intended to rely upon those affidavits up until the time at which the application for an extension of time was abandoned on 7 April 2014. Furthermore, notwithstanding the fact that she knew that the authenticity of those documents was challenged on the ground that the witness’ signature was forged, and was aware of the seriousness of those allegations against her, she neither distanced herself from the affidavits nor led any evidence to suggest that she had not signed them. In those circumstances, I cannot reach any conclusions based upon the discrepancies between the signatures. Regarding HWY (No. 2), Mr Jarvie is the company’s sole director and shareholder. As such, Mr Jarvie is properly described as the moving mind of the company. Furthermore, in his capacity as a company director, he filed evidence on which the witness’ signature had been forged. In the circumstances, therefore, the manner in which Mr Jarvie has conducted these proceedings and his purposes in so doing must be taken to apply equally to explain the Company’s participation in the litigation and its purposes.

4.    THE APPLICATION TO SET ASIDE THE BANKRUPTCY NOTICE AGAINST MR SMITH (NSD 216 OF 2014)

4.1    The circumstances in which the bankruptcy notice was issued and sought to be served

60    The fraudulent conduct which led to the issue of the bankruptcy notice against the Liquidator, Mr Smith, occurred in parallel with the proceedings seeking an extension of time. For the reasons which I explain, the issue and purported service of the bankruptcy notice were also intended to harass and intimidate Mr Smith.

61    On 5 December 2013, Mr Jarvie filed a statement of claim against Mr Smith in the Local Court of New South Wales at Parramatta in proceeding 2013/00366659. In the statement of claim, Mr Jarvie claimed a total of $8,520.00 (plus filing fees) said to be owing in fees for the storage of a piece of equipment to be recovered by Mr Smith as liquidator of HWY (No. 1) and awaiting collection since 2 October 2012 when Mr Smith was appointed as liquidator. The allegations of fact stated in the statement of claim were purportedly verified by an affidavit of Mr Jarvie. Neither the pleadings nor the affidavit made mention of the mandatory injunctive orders made on 14 December 2012 against Mr Jarvie for delivery up of the motor vehicles that were the property of HWY (No. 1) which have never been complied with. Nor did the pleadings or affidavit make any mention of the final orders made in this Court on 8 August 2013 which, among other things, relevantly declared that Mr Jarvie had acted in breach of his fiduciary and statutory duties in transferring the assets of HWY (No. 1) to HWY (No. 2).

62    Mr Jarvie obtained a default judgment on 15 January 2014 against Mr Smith for the claimed amount together with his costs and interest based upon an ‘affidavit’ purportedly sworn by Mr Jarvie which falsely deposed that he had served the statement of claim on Mr Smith by hand on 9 December 2013 and the affidavit verifying the statement of claim. In this regard, I accept Mr Smith’s unchallenged evidence that he has never met Mr Jarvie or spoken with him and that at no time did Mr Jarvie serve the statement of claim upon him. The first time that Mr Smith saw the statement of claim was on 4 February 2014 in the circumstances I explain below. Furthermore, the Registrar’s signature as witness had, once more, been forged on the purported affidavits. This was clearly established by the Registrar’s unchallenged evidence to that effect. In particular, I accept the Registrar’s evidence that:

a)    the signatures on the documents were not her signature;

b)    her middle name was misspelt and the address of Richmond Court was incorrectly recorded, matters which she would have corrected;

c)    she would not have witnessed the affidavit verifying the contents of the statement of claim as it is not required to be filed with claims lodged in the Local Court jurisdiction and she always removes that page from the relevant form; and

d)    she had not seen Mr Jarvie since 19 July 2013.

63    Further, given that the affidavits purported to have been sworn by Mr Jarvie and his reliance upon them in the Local Court proceedings, I infer that Mr Jarvie deliberately forged the Registrar’s signature on the affidavit himself or was responsible for it having been forged. I am reinforced in my view that this is the only appropriate inference to draw in all of the circumstances by the fact that Mr Jarvie had sworn documents in the past before the Registrar and been provided with copies of those documents. As such, Mr Jarvie had access to such details as the JP registration number, which was correctly stated on the affidavits, and the Registrar’s name.

64    A bankruptcy notice was issued on 20 January 2014 against Mr Smith at Mr Jarvie’s request based upon the fraudulently obtained default judgment.

65    Mr Smith was first alerted to these events upon being advised on Friday 31 January and Sunday 2 February 2014 that certain transactions on his credit card had been declined because of an adverse credit listing against his name. Further inquiries made on Monday 3 February 2014 by Mr Smith’s legal representatives disclosed the existence of the proceedings against him in the Parramatta Local Court. On 4 February 2014, a staff member of Mr Smith’s office on Mr Smith’s instructions obtained a copy of the statement of claim in the Local Court proceedings, the notice of motion for default judgment and the affidavit of service of Mr Jarvie in support.

66    Mr Smith applied forthwith to have the default judgment entered on 15 January 2014 set aside. A defence was filed by Mr Smith on 4 February denying the allegations including any liability for storage costs and pleading that any such costs were the result of Mr Jarvie’s failure to comply with the injunction granted on 14 December 2012. An interim stay was ordered by the Registrar of the Penrith Local Court on 7 February 2014 on the enforcement of the default judgment.

67    Mr Jarvie subsequently attempted to serve the bankruptcy notice on Mr Smith by leaving three copies at Mr Smith’s home on 20 February 2014 in envelopes addressed to Mr Smith and a further copy on 21 February 2014. No judgment or order was attached to any of the copies of the bankruptcy notices purportedly served on Mr Jarvie. Enquiries made by Mr Smith established that the bankruptcy notice had been issued by the Australian Financial Security Authority on the basis of the default judgment.

68    In the evening of 27 February 2014, Mr Smith found a stamped envelope in his letterbox at his home containing an unsealed notice of motion in the Local Court proceedings seeking orders setting aside the default judgment together with the affidavit of Mr Jarvie purportedly sworn on 21 February 2014.

69    Final orders were made on 28 February 2014 by the Local Court at Parramatta setting aside the default judgment, together with orders that the proceedings be permanently stayed pursuant to s 67 of the Civil Procedure Act 2005 (NSW). The Court also ordered that the Registrar be directed to send a copy of the file to the Director of Public Prosecutions (DPP) together with a copy of the orders, and that Mr Smith and the DPP have leave to use the affidavits filed in the Local Court proceedings for the purposes of any prosecution or civil proceedings in which the parties included Russell Jarvie, Patricia Jarvie, HWY (No. 1) or HWY (No. 2).

70    On 26 March 2014, the Registrar of the Local Court at Parramatta made orders that he “refused to accept for filing [Mr Jarvie’s] Notice of Motion [dated 10 March 2014]” and “alleged fraudulently attested affidavit in support, purportedly sworn on 10 March 2014”. The Registrar also directed that those orders, together with the documents subject to the earlier order, were to be forwarded to the DPP and the Police, and that, in order to preserve the evidence alleged to be the fraudulently attested affidavits and other documents on the Local Court file, Mr Jarvie be precluded from being granted access to the original Parramatta Local Court file without the prior written consent of a Magistrate.

71    It was Mr Smith’s evidence in the proceedings before me that he did not agree at any time to pay Mr Jarvie to store vehicles or equipment on his behalf. That evidence was unchallenged by Mr Jarvie. It is also consistent with the fact that Mr Jarvie obtained the judgment without serving the proceedings on Mr Smith and thereby deprived Mr Smith of any opportunity to answer the claims prior to Mr Jarvie obtaining judgment in default which Mr Jarvie then sought to recover through the bankruptcy notice. In the circumstances, the evidence strongly supports the submission by Mr Smith and HWY (No. 1), which I accept, that the Local Court claim was based upon deliberately false allegations that a debt was owed by Mr Smith to Mr Jarvie. The circumstances are aggravated by the fact that Mr Jarvie seems to have planned the claim for some time in advance of instituting proceedings in the Local Court. For example, a month earlier, in Mr Jarvie’s affidavit dated 8 November 2013 filed in the application for an extension of time on which the Registrar’s signature was forged, Mr Jarvie stated that he had vehicles on his property awaiting collection by the liquidator that were accruing daily storage fees.

4.2    Reasons for setting aside the bankruptcy notice

72    Against these findings, my reasons for setting aside the bankruptcy notice are as follows.

73    First, the issue of the notice was part of a systematic abuse of process with service of the purported “notice” being the final act in the fraud. For this reason the notice must be set aside.

74    The categories of abuse of process are not closed. However, certain categories are well-established. As Justice McHugh observed in Rogers v R (1994) 181 CLR 251 at 286:

“…abuses of procedure usually fall into one of three categories: (1) the court’s procedures are invoked for an illegitimate purpose; (2) the use of the court’s procedures is unjustifiably oppressive to one of the parties; or (3) the use of the court’s procedures would bring the administration of justice into disrepute. Many, perhaps the majority of, cases of abuse of procedure arise from the institution of proceedings. But any procedural step in the course of proceedings that have been properly instituted is capable of being an abuse of the court’s process. In Walton v. Gardiner, Mason CJ, Deane and Dawson JJ said that the jurisdiction to stay proceedings that are an abuse of process ‘extends to all those cases in which the processes and procedures of the court, which exist to administer justice with fairness and impartiality, may be converted into instruments of injustice or unfairness’.”

75    In the present case, the abuses of procedure represented by the institution and conduct of the bankruptcy proceedings cover the three categories identified by Justice McHugh and are at the most serious end of the spectrum of abuse of process. As such, the bankruptcy notice must be set aside on this ground, quite apart from the defects in the notice to which I refer to below. In short:

a)    the proceedings were founded upon false allegations that a debt was owing to Mr Jarvie for storage of vehicles that he was ordered to deliver up by this Court on 14 December 2012;

b)    the statement of claim in the proceedings was purportedly verified by an affidavit of Mr Jarvie on which the signature of a Local Court Registrar had been forged;

c)    the Local Court Registrar’s signature as a witness was forged on an affidavit of service of Mr Jarvie which falsely deposed that Mr Smith had been served with the proceedings;

d)    the false affidavit of service was filed in support of an application for default judgment, together with a false affidavit of debt on which the Local Court Registrar’s signature as a witness was forged; 

e)    the bankruptcy notice against Mr Smith was issued on the basis of the default judgment that had been fraudulently obtained at Mr Jarvie’s request;

f)    copies of the bankruptcy notice were purportedly served on Mr Smith personally at his home on a number of occasions notwithstanding that the default judgment was the subject of an interim stay at the time of purported service and that Mr Smith had engaged legal representation which would have been clear from the defence and other documents earlier filed on Mr Smith’s behalf by his legal representatives.

76    Furthermore, given these circumstances and the absence of any challenge to the evidence of Mr Smith and HWY (No. 1), I consider that the only fair and reasonable inference available is that Mr Jarvie intended to harass, oppress and intimidate Mr Smith as liquidator of HWY (No. 1) by the institution and prosecution of the proceedings in the Local Court, by requesting the issue of the bankruptcy notice against Mr Smith, and by leaving copies of the bankruptcy notice at Mr Smith’s home. There is no suggestion of any proper purpose that was intended to be achieved by this conduct; nor is this a case where it could be inferred that there was an inadvertent failure to observe proper court processes.

77    Secondly, and in any event, by virtue of s 41(2) of the Bankruptcy Act and reg 4.02(1) of the Bankruptcy Regulations 1996 (Cth), a bankruptcy notice must comply with Form 1 of Schedule 1 to the Regulations. That form requires, relevantly, that a copy of the judgment or order upon which the creditor relies is attached to the notice and, therefore, that a copy of the judgment or order is attached to the notice which is served on the debtor. The failure to attach a copy of the default judgment or orders was not in my view “a formal defect or an irregularity” which, by virtue of s 306(1) of the Bankruptcy Act, does not operate to invalidate unless the court considers that substantial injustice has been caused by the defect or irregularity which cannot be remedied by court order. Rather, as Kenny J held in American Express International Inc v Held (1999) 87 FCR 583 at 586 [14], the purpose of the requirement that the judgment or order be attached to the notice:

“…is to identify for the debtor the judgment or order upon which the notices founded: cf Commonwealth Bank of Australia v Horvath (Junior) [1999] FCA 128. In a case such as this, the identification of the relevant judgment or order is an essential element in establishing an adequate foundation for the bankruptcy notice which, in turn, is an essential element in establishing a sufficient foundation for the debtor’s bankruptcy.”

78    Thirdly, the bankruptcy notice should be set aside because the default judgment founding the bankruptcy notice was set aside by the Local Court on 28 February 2014 within the time for compliance with the bankruptcy notice as extended by order of this Court on 26 February 2014. Frankly, in any event it would be a grave injustice to allow the bankruptcy notice issued against Mr Smith using fraudulent means and upon relance of an abuse of an Australian court’s process to stand.

79    Fourthly, the notice was served while subject to the interim stay of execution granted on 7 February 2014, which stay endured until the default judgment was set aside on 28 February 2014. Service after the grant of the interim stay was invalid and could not found an act of bankruptcy under s 40(1)(g) of the Bankruptcy Act. That section provides that an act of bankruptcy is committed where the creditor, who has obtained against the debtor a final judgment “the execution of which has not been stayed”, has served a bankruptcy notice which has not been complied with subject to any set-off or counterclaim. As Gibbs J (as his Honour then was) stated in Re Moss; Ex parte Tour Finance Ltd (1968) 13 FLR 101 at 103-104, the words “the execution of which has not been stayed” in s 40(1)(g) of the Bankruptcy Act:

“…speak as at the time when the notice is served and refer to a stay of execution which has continued in force up to the time of the service of the notice. Similarly, s 41(3)(b), which provides that a bankruptcy notice shall not be issued if at the time of the application for its issue execution of the judgment or order to which it relates has been stayed, refers to a stay in force as at the time of the application. The effect of these provisions is that if at the time of the issue or the service of the notice the execution of the judgment on which the notice is founded has been stayed, and the stay is still in force, so that at the time the creditor is not entitled immediately to issue execution on the judgment, the notice will be bad.”

80    While obiter, this construction was applied by Evatt J in Re Di Giacomo; Ex parte Boral Steel Ltd (1983) 68 FLR 106 at 109 to hold that a bankruptcy notice could not found the act of bankruptcy where an instalment order operated as a stay of enforcement of the judgment on the date of service of the bankruptcy notice.

81    It follows that the bankruptcy notices served upon Mr Smith were, in any event, nullities as none of them attached a copy of the judgment relied upon to found the notice.

82    Finally, particularly given my findings at [75] and [76], this is manifestly a case in which it is appropriate that an order be made for indemnity costs against Mr Jarvie in the proceedings to set aside the bankruptcy notice applying the principles to which I earlier referred at [55]-[57].

5.    THE APPLICATION FOR ORDERS PRECLUDING MR JARVIE FROM INSTITUTING PROCEEDINGS WITHOUT LEAVE IN PROCEEDINGS NSD 216 OF 2014

5.1    Preliminary

83    Orders are also sought by Mr Smith in the proceedings to set aside the bankruptcy notice (NSD 216 of 2014) to restrain Mr Jarvie from commencing proceedings without leave of the Court. In particular, counsel sought orders in the following terms:

“5. Pursuant to rule 6.02 of the Federal Court of Australia Rules, the respondent, Russell Alan Jarvie, must not start or continue any proceeding in the Court against any person without the leave of the Court.

6.     Pursuant to sections 30 and 50 of the Bankruptcy Act 1966 the respondent be restrained until the end of 31 December 2015 or until further order, including a sequestration order made against the respondent, whichever first occurs, from commencing or continuing any civil proceedings against anyone.”

84    The orders are sought on the basis that that Court should find that Mr Jarvie:

a)    invoked Court procedures for an illegitimate purpose;

b)    used court procedures to be unjustifiably oppressive to Mr Smith; and

c)    brought the administration of justice into disrepute.

85    It is further submitted by Mr Smith and HWY (No. 1) that the orders sought under the Bankruptcy Act are warranted in order to protect and conserve Mr Jarvie’s property for the benefit of his creditors pending the making of a sequestration order against him on the ground that the debtor’s property is diminished and adversely affected by the accumulation of adverse orders for the payment of legal costs by the debtor to those unsuccessfully sued by him in civil actions.

86    In this regard, notwithstanding that such an order was not opposed by Mr Jarvie if limited to any court in New South Wales for a period of eighteen months, I deemed it appropriate to consider whether the orders should be made at all. First, there was a real question of whether power existed to make the orders sought under ss 30 or 50 of the Bankruptcy Act. Secondly, before the Court’s discretion to make an order under s 37AO of the FCA Act is enlivened, the Court must be satisfied that the preconditions to the exercise of the power are met. Thirdly, the orders sought have implications beyond the particular parties to these proceedings, not being limited to proceedings inter se, and are intended to protect the Court’s processes against abuse in the public interest and not merely the interests of the particular parties. Fourthly and related to this, the terms of the orders must be appropriate in all of the circumstances. Fifthly, Mr Jarvie did not consent to orders in the terms proposed by Mr Smith and HWY (No. 1), but sought to limit the orders to courts in New South Wales and to a set period. Lastly, as articulated by him, Mr Jarvie is not represented, and his motives in not opposing the orders are questionable and apparently based upon a misunderstanding of the effect of such orders being made by consent.

87    As to the last of these matters, at the close of the hearing on 7 April 2014, the following exchange took place between the Court and Mr Jarvie:

“HER HONOUR: So are there submissions then that you would wish to make?

MR JARVIE: Yes. I will accept if your Honour would want to make vexatious litigant orders against me for any court in New South Wales for a period of 18 months. I know that the Federal Court – by listening to the submissions – is going to find it difficult to make a ruling that someone else will rely on on another matter, or that Mr Marshall is trying to rely on. But I have no issue with accepting those orders if your Honour would make those.

HER HONOUR: Well, I appreciate your frankness on that issue, Mr Jarvie. Again, I think this is an order of such a nature that I have to be satisfied, first of all that I have the power to make the orders that Mr Marshall is asking me to make, and, secondly, that in the circumstances the court ought to be making an protective order of that kind. It’s a serious order because ordinarily the courts are open to all to be able to come and litigate their claims. So it is a very exceptional and unusual stand for the court to effectively close its doors to somebody and require them to seek leave before they institute proceedings. So while I appreciate that you’re not opposing the making of the order, equally I still feel that it’s incumbent on the liquidator to persuade me that that’s an appropriate order to be made, and he has made his submissions on that issue.

MR JARVIE: Yes, your Honour. The issue that I see in it is that for maybe an equity order – so like a de facto equity order that I have to come forward then to the Federal Court to make a submission that I would like to issue a summons for equity for my de facto. I don’t see any other litigation that I need to proceed with in any court for a period of several years.

HER HONOUR: Well, thank you for that, Mr Jarvie. I will take into account the fact that the order is not opposed, notwithstanding the fact that it’s an important matter that I be satisfied for myself is appropriate to be made. It’s a matter also, I think, of public interest to maintain the courts as an open place to all litigants, and that’s one of the factors I think I take into account in making an order of this kind. Now, I may still make the order, or one of the orders that I’m being urged to make, but I do have to think about whether that’s appropriate.

MR JARVIE: Well, I thought that by not opposing it that someone else mightn’t use it in a different matter in the future, you know, so that then everyone manipulates the court on a matter that - - -

HER HONOUR: But I hope no one manipulates the court.

MR JARVIE: Well, they use a matter – they’re trying to use a matter now to suggest that I become a vexatious litigant on the border of something else, and then if mine becomes along that border then someone else’s becomes on that border, and I don’t – so by opposing – not opposing it, I just don’t want to see – I want to see someone else have that opportunity to fight that where I’m not opposing to fight the matter.” (Emphasis added)

88    While the submissions are in general very difficult to decipher, the words that are highlighted in bold in this passage from the transcript seem to indicate that Mr Jarvie had intended to “consent” to orders restraining him from instituting further proceedings because he thought that would mean that the making of the order could not be used in other proceedings against him. Quite apart from questions as to the propriety of that purpose, Mr Jarvie’s understanding is misguided. Section  37AO(6) of the FCA Act expressly enables the Court to have regard to orders made by any Australian court or tribunal in determining whether to make a vexatious proceedings order pursuant to subsection 37AO(1). Similar provision is made in the other jurisdictions which have enacted the model law on vexatious proceedings orders: see further below.

5.2    Should an order be made under ss 30 and 50 of the Bankruptcy Act restraining Mr Jarvie from instituting proceedings “in any court”?

89    Section 30(1) of the Bankruptcy Act provides that:

The Court:

(a)    has full power to decide all questions, whether or law or of fact, in any case of bankruptcy or any matter under Part IX, X or XI coming within the cognizance of the Court; and

(b)    may make such orders (including declaratory orders and order granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter.

90    Parts IX, X or XI are not relevantly applicable. The power apparently relied upon is to decide all questions “in any case of bankruptcy” and to make such orders as are necessary.

91    Section 50 of the Bankruptcy Act provides that:

(1)    At any time after a bankruptcy notice is issued, or a creditor’s petition is presented, in relation to a debtor, but before the debtor becomes a bankrupt, the Court may:

(a)     direct the Official Trustee or a specified registered trustee to take control of the debtor’s property; and

(b) make any other orders in relation to the property.

(1A)    The Court may give a direction or make an order only if:

(a)    a creditor has applied for the Court to make a direction; and

(b)    the Court is satisfied that it is in the interests of the creditors to do so; and

(c)    the debtor has not complied with the bankruptcy notice.

92    The difficulty, however, with the submissions of Mr Smith and HWY (No. 1) is that proceedings NSD 216 of 2014 arise out of the bankruptcy notice issued at Mr Jarvie’s request against Mr Smith as the alleged debtor. They do not enliven any power under ss 30 and 50 of the Bankruptcy Act to make orders against Mr Jarvie as a person subject to a different bankruptcy notice. Thus, while there is evidence of a bankruptcy notice having been served on Mr Jarvie on 4 March 2014, I am not currently seized of any proceedings arising from that bankruptcy notice. I do not consider that it is open to this Court in proceedings on a bankruptcy notice issued against person A to make orders arising from a bankruptcy notice issued against person B, let alone where such orders have not, as here, been pleaded.

93    Further and in any event, I do not consider that the Court has power under ss 30 and 50 of the Bankruptcy Act to make orders which would have the effect of precluding Mr Jarvie from instituting proceedings in any court in Australia without leave of this Court, including State courts. While the powers conferred by ss 30 and 50 are broad, counsel for Mr Smith and HWY (No 1) could not refer me to any authority in support of the submission that this Court had power to make an order in such terms.

94    In the circumstances, therefore, I note that any constitutional issue as to the power of the Court to make such an order which might otherwise have arisen is moot.

5.3    Should a vexatious proceedings order be made under s 37AO of the Federal Court of Australia Act?

95    However, I do consider in all of the circumstances that it is appropriate for a vexatious proceedings order to be made under s 37AO of the FCA Act restraining Mr Jarvie from instituting proceedings in this Court against Mr Smith or HWY (No. 1) without leave of the Court. In the alternative, even if I were wrong in my view that the criteria for the exercise of the Court’s discretion under s 37AO is met, I would make an order in the same terms to protect the processes of this Court given the findings to which I refer at [108] below: see Ferdinands v Chief of Army [2013] FCAFC 103.

5.3.1    Power to make a vexatious proceedings order

96    While the proposed orders framed by Mr Smith and HWY (No. 1) initially sought to invoke rule 6.02 of the FCA Rules, that rule ceased to be a source of power to make such an order following amendments made by the Federal Court Amendment Rules 2013 (No 1) (Cth). Rule 6.02 now provides for the issue by the Registrar of a certificate consequential upon the Court having made a vexatious proceedings order against a person under s 37AO of Part VAAA of the Federal Court of Australia Act 1976 (Cth).

97    Following amendments to the FCA Act by the Access to Justice (Federal Jurisdiction) Amendment Act 2012 (Cth) (the Amending Act) with effect from 11 June 2013, the Court has power under Part VAAA to make orders described as “vexatious proceedings orders”: see further Ferdinands v Chief of Army [2013] FCAFC 103 at [10] (Allsop CJ (with whom the other members of the Court agreed)). The Amending Act established a consistent scheme for all four federal courts. It gives effect to a model law developed by the Standing Committee of Attorneys-General on vexatious proceedings which has also been implemented to date in Queensland, New South Wales and the Northern Territory in substantially the same terms.

98    In common with the position under these State laws, Part VAAA does not limit or otherwise affect the powers that the Court has apart from Part VAAA to deal with vexatious proceedings: s 37AN of the FCA Act. Thus the Court retains its implied power to protect its own processes against abuse, as the Full Court found in Ferdinands.

99    A vexatious proceedings order may be made under s 37AO(1) of the FCA Act if the Court is satisfied that:

(a)    a person has frequently instituted or conducted vexatious proceedings in Australian courts or tribunals; or

(b)    a person, acting in concert with another person who is subject to a vexatious proceedings order or who is covered by paragraph (a), has instituted or conducted a vexatious proceeding in an Australian court or tribunal.

100    A vexatious proceedings order may include “an order prohibiting the person from instituting proceedings, or proceedings of a particular type, in the Court” and any other order that the Court considers appropriate in relation to the person: s 37AO(2), FCA Act. Importantly, however, such orders are made to protect the public and the Court, and not to impose punishment for litigious misconduct: Official Trustee in Bankruptcy v Gargan (No 2) [2009] FCA 398 at [3] (Perram J), cited with approval in Attorney-General (NSW) v Gargan [2010] NSWSC 1192 at [8] (Davies J); Attorney-General (NSW) v Chan [2011] NSWSC 1315 (Chan) at [35] (Adamson J). Furthermore, as Finn J observed in Kowalski v MMAL Staff Superannuation Fund Pty Ltd (2007) 242 ALR 370 at 380, such an order “will not lightly be made because of its serious impact on the right of access to the courts of this country”.

5.3.2    Standing to apply for the vexatious proceedings order

101    Under s 37AO(3), the Court may, relevantly, make a vexatious proceedings order on its own initiative or on the application of “a person against whom another person has instituted or conducted a vexatious proceeding”. For the reasons which I give below, Mr Smith and HWY (No. 1) are plainly persons against whom Mr Jarvie has instituted and conducted vexatious proceedings. As such, they have standing under s 37AO to seek such an order.

5.3.3    What are the “proceedings” to which regard may be had in applying the criteria in s 37AO(1)?

102    The term “proceeding” is defined in s 4 of the FCA Act to mean “a proceeding in a court, whether between parties or not, and includes an incidental proceeding in the course of, or in connexion with, a proceeding, and also includes an appeal”. This means, as Adamson J pointed out in Chan at [34], [67] and [70], that the Court may have regard to baseless applications or appeals or repeated oral applications with no proper basis. It follows, relevantly, that the application for an extension of time within which to appeal, being an incidental proceeding in connexion with a proceeding, constitutes a “proceeding”, as would the oral application for an adjournment and for the issue of a subpoena. As a result, I am entitled to take into account the manner in which each of those proceedings was instituted and conducted in determining whether the criteria in s 37AO(1)(a) are met.

103    Furthermore, the word “institute” as defined in s 37AM(1)(a) includes “for civil proceedings – the taking of a step or the making of an application that may be necessary before proceedings can be started against a party”. A creditor may petition the Court to make a sequestration order against the estate of the debtor upon a debtor having committed an act of bankruptcy: s 43(1), Bankruptcy Act. Under s 40(1)(g) of the Bankruptcy Act, a person commits an act of bankruptcy where the creditor, who has obtained a final judgment against the debtor, has served on the debtor a bankruptcy notice which has not been complied within the specified timeframe. While, therefore, a bankruptcy notice served within Australia is issued by an Official Receiver on the creditor’s application under s 41(1) and not on application to the Court, it follows in my view that the request for a bankruptcy notice constitutes that taking of a step necessary before proceedings in a court may be started against the debtor by way of a creditor’s petition. As such, the request by Mr Jarvie of the Official Receiver to issue the bankruptcy notice to Mr Smith based on the fraudulently obtained judgment is properly characterised as the institution of proceedings for the purposes of s 37AO(1)(a).

104    Finally, in determining whether the criteria in s 37AO(1) are satisfied, I am not limited to considering the decisions of the Federal Court but may have regard to “proceedings instituted (or attempted to be instituted) or conducted in any Australian court or tribunal”. As such, I may also take into account the proceedings instituted by Mr Jarvie in the Local Court of NSW and the subsequent motion by him to the Local Court after the default judgment was set aside.

5.3.4    Were the proceedings in this Court instituted or conducted by Mr Jarvie vexatious?

105    Section 37AM(1) of the FCA Act inclusively defines “vexatious proceeding” to include:

(a)        a proceeding that is an abuse of the process of a court or tribunal; and

(b)    a proceeding instituted in a court or tribunal to harass or annoy, to cause delay or detriment, or for another wrongful purpose; and

(c)    a proceeding instituted or pursued in a court or tribunal without reasonable ground; and

(d)    a proceeding conducted in a court or tribunal in a way so as to harass or annoy, cause delay or detriment, or achieve another wrongful purpose.

106    As Adamson J pointed out in Chan at [33] with respect to the equivalent provision in the Vexatious Proceedings Act (NSW):

“These categories are not discrete, since each of the sub-paragraphs (b)-(d) could properly be regarded as an abuse of process of a court or tribunal. Furthermore, the difference between sub-paragraph (b), which connotes a subjective intention on the part of the Defendant, and sub-paragraph (d), which does not, and is concerned with effect and consequence, rather than motive or design, relieves the Court of the obligation of determining whether the respondent to such an application intends the consequences of his or her actions, or does not.”

107    As earlier mentioned, this includes relevantly proceedings instituted (or attempted to be instituted) or conducted in any Australian court, as well as orders made by any Australian court, and the person’s overall conduct in proceedings conducted in any Australian court or tribunal (including the person’s compliance with orders made by that court or tribunal): s 37AO(6), FCA Act.

108    The findings which I have made about the manifest and systematic abuses of the Court’s processes in the manner in which proceeding NSD 2326 of 2013 was instituted and conducted make it clear that the proceedings constitute vexatious proceedings as defined in subs (a) to (d) inclusive of s 37AM of the FCA Act: see paragraphs [23]-[59] above and especially at [58]-[59]. In so finding, I am not only satisfied that the application for an extension of time was not instituted or prosecuted in good faith but for an improper purpose. I also consider that the application for an adjournment made on 12 December 2013 and the application for the Court to issue the subpoena were sought for improper purposes, the former to delay and the latter to harass and intimidate Mr Smith. I have also taken into account Mr Jarvie’s conduct in not complying with the mandatory injunctive orders made on 14 December 2012 in proceeding NSD 892 of 2012 for delivery up of the motor vehicles that were the property of HWY (No. 1) and his failure to comply with the final orders made on 8 August 2013 for which no stay is in place. These matters, together with the forged signatures of the Registrar as witness upon the affidavits filed in the proceedings and the email from Mr Jarvie misleading the Court as to the reasons for Mrs Jarvie’s inability to attend the directions hearing on 7 February 2014, place the proceedings as a whole at the extreme end of the spectrum of proceedings that qualify as vexatious.

109    The same must be said of the institution and conduct of the proceedings that led to the fraudulently obtained default judgment against Mr Smith in the Local Court, and the issue and manner of service of the bankruptcy notice against Mr Smith. I am reinforced in my views by the terms of the orders made by the Local Court in setting aside the default judgment and staying the proceedings and in subsequently refusing the motion individually referring the file to the DPP by its orders made on 28 February 2014 and 26 March 2014: see further paragraphs [69]-[70] above. In this regard, as Adamson J said in Chan at [39]:

“While the Court needs to form its own view about each piece of litigation relied on… the Court is entitled to have regard to the result of the proceedings, and where appropriate, the findings of, and views expressed by, the various judicial officers who dealt with them: Wilson at [22]; Attorney General v Croker [2010] NSWSC 942 at [125]; Attorney General v Gargan at [7].”

5.3.5    Were vexatious proceedings instituted or conducted by Mr Jarvie “frequently”?

110    Notwithstanding the seriousness of these matters, the power in s 37AO(1)(a) is enlivened only if it can be said that Mr Jarvie instituted or conducted vexatious proceedings “frequently”. As Davies J explained in Attorney-General (NSW) v Wilson [2010] NSWSC 1008 at [11]:

“It would not be sufficient, therefore, to point to the fact that a litigant had instituted even a number of vexatious proceedings. If the adverb ‘frequently’ could not be used in connection with the sum of them, no order can be made under s 8. That is a significant matter because it is a serious thing to deprive litigants of their access to the courts, a right which might be thought to be an inherent right for persons living in a democratic society under the rule of law – see in that regard In Re Boaler [1915] 1 KB 21 at 34 and Re De W Kennedy (Finance) Pty Ltd v Ley (unreported – Supreme Court NSW, Holland J – 29 March 1978).”

111    Without detracting from the seriousness of the consequences of such an order, the use of the term “frequently” nonetheless imports a lesser test than that imposed by the predecessor provision in rule 6.02 which required that vexatious proceedings have been conducted “habitually and persistently”. That test had been said to imply “more than great frequency”, the word “[h]abitually suggest[ing] that the institution of such proceedings occurs as a matter of course, or almost automatically, when the appropriate conditions (whatever they may be) exist; ‘persistently’ suggest[ing] determination, and continuing in the face of difficulty or opposition, with a degree of stubbornness”: Attorney-General v Wentworth (1988) 14 NSWLR 481 at 492 Roden J.

112    The term “frequently” is a relative term and “must be looked at in the context of the litigation being considered”: Attorney General (NSW) v Gargen [2010] NSWSC 1192 at [7] (Davies J); see also Attorney General (NSW) v Wilson [2010] NSWSC 1008 at [12]; Jones v Cusack (1992) 109 ALR 313 (Jones) at 315 (Toohey J), and Chan at [37]. Thus, the Court may find that a person has instituted or conducted vexatious proceedings “frequently” even though the number of proceedings may be quite small, such as where the proceedings are an attempt to re-litigate an issue determined against the person: Fuller v Toms [2013] FCA 1422 (Fuller) at [77] (Barker J).

113    Thus in Fuller, for example, the applicant against whom a vexatious proceedings order under s 37AO was made had commenced five separate proceedings over a period of approximately five years. Having regard to the circumstances and the conduct of those various proceedings, Barker J was satisfied that the applicant had “frequently” instituted and conducted proceedings of the type contemplated by s 37AO notwithstanding that “the number of proceedings may be considered small”. Similarly, in Jones, in determining whether the applicant had “frequently” instituted proceeding for the purposes of former O 63, r 6(1) of the High Court Rules, Toohey J held that the five proceedings initiated by the applicant during a six year period “readily answer[ed] that description”.

114    In short, there being no numerical threshold prescribed by Part VAAA itself, the question of whether an applicant has “frequently” instituted or conducted vexatious proceedings for the purposes of s 37AO must be answered in the circumstances of the particular case.

115    Within a period of less than 12 months, Mr Jarvie has instituted and conducted the following proceedings which I have found to constitute abuses of process for the reasons earlier given:

1.    the application in NSD 2326 of 2013 by Mr Jarvie, together with Mrs Jarvie and HWY (No. 2), for an extension of time within which to appeal to this Court, being instituted and pursued for an improper purpose and based on false evidence;

2.    the oral application for an adjournment in NSD 2326 of 2013 on 12 December 2013, being for an improper purpose of delay;

3.    the application for leave to issue the subpoena in NSD 2326 of 2013, being for an improper purpose as the bulk of the documents had already been provided and access granted;

4.    the institution of Case 2013/00366659 in the Local Court of NSW, being based upon fraudulent allegations and false evidence;

5.    the application for a default judgment in the Local Court proceedings fraudulently obtained by Mr Jarvie against Mr Smith; and

6.    the request for the Official Receiver to issue the bankruptcy notice against Mr Smith on the basis of the fraudulently obtained default judgment.

116    In the circumstances, I am satisfied that Mr Jarvie has “frequently” instituted and conducted vexatious proceedings given the number of such proceedings, the fact that the proceedings in question occurred within so short a period of time, the fact that they reveal a pattern of behaviour intended to intimidate or harass Mr Smith or for other improper purposes, and the serious and deliberate nature of the abuses of court processes in which Mr Jarvie has been involved in these proceedings.

117    HWY (No. 1) and Mr Smith also relied upon evidence that suggested that other proceedings may have been instituted or conducted by Mr Jarvie in a vexatious manner. However, I do not consider that the evidence was of sufficient weight to establish such serious allegations. The bare evidence of the Registrar that during 2013 she had seen other affidavits apparently signed by Mr Jarvie on which the signature of another Justice of the Peace was said to have been forged is insufficient to persuade me that Mr Jarvie had forged the signature of other Justices of the Peace on other documents in other proceedings. Nor does the Registrar’s bare evidence that it had come to her attention that her signature had been forged on other documents filed in civil claims proceedings commenced by Mr Jarvie at the Parramatta Local Court satisfy me that I should make a finding to that effect. In so finding, I imply no criticism of the Registrar. The question is simply one of the sufficiency of the evidence to establish the matters alleged, bearing in mind the gravity of the allegations as required by s 140 of the Evidence Act.

5.3.6    Should the discretion be exercised so as to make a vexatious proceedings order against Mr Jarvie and in what terms?

118    It follows from my findings above that I am satisfied that the criteria in s 37AO(1)(a) have been met and that my discretion to make a vexatious proceedings order is enlivened.

119    Factors relevant to the exercise of discretion to make such an order were discussed by Perram J in Official Trustee in Bankruptcy v Gargen (No. 2) [2009] FCA 398 at [12] in a passage cited with approval in Attorney General (NSW) v Gargan [2010] NSWSC 1192 at [8] and Chan at [40]:

“[O]nce it is concluded that the Court’s power to prevent a litigant from commencing or pursuing proceedings has been enlivened, the considerations germane to the exercise of that power are unconfined. However, the factors which will be relevant are informed by the protective purpose which the order serves. Where a litigant displays insight into their previous litigious history this will, no doubt, be relevant for it will suggest – although not determine – a diminution in the risk posed to the public. On the other hand, the manner in which a litigant conducts herself [or himself] in her [or his] affairs generally is also capable of throwing light on whether the commencement of further vexatious proceedings is likely. Those general affairs include the litigant’s defence to the proceedings by which the order restraining him is sought. Because of the protective nature of the jurisdiction it is also relevant to know the extent of the damage and inconvenience the litigant’s forays into the courts have caused, pecuniary or otherwise.”

120    The proceedings in question here manifestly did not involve merely a lack of judgment. The calculated conduct of Mr Jarvie in instituting, conducting and then seeking to enforce the fraudulently obtained default judgment from the Local Court in order to harass and intimidate Mr Smith is particularly troubling, as is the repeated pattern of the filing of false documents and service of documents at Mr Smith’s residence rather than upon his solicitors. There has been a complete failure to comply with court orders to deliver up the vehicles made on 14 December 2012 and the orders made in August 2013 which were not the subject of a stay. Moreover, Mr Jarvie sought to mislead the Court in his email in order to achieve his own purposes. In the circumstances, Mr Jarvie’s apology made in closing submissions (which was non-specific in any event) cannot be given any weight. It cannot be inferred with any confidence that Mr Jarvie would not again abuse the Court’s processes in order to achieve his own ends if no vexatious proceedings order were made.

121    On the evidence before me, therefore, I have no doubt that it is appropriate and necessary in order to protect the integrity of the Court’s processes and Mr Smith that orders are made restraining Mr Jarvie from instituting or prosecuting any further proceedings against Mr Smith or HWY (No. 1) without leave of the Court. The extreme nature of the abuses of court processes and their repetitiveness also persuades me that the orders ought to extend generally to require leave before Mr Jarvie institutes any further proceedings in this Court.

5.3.7    The flyer

122    Finally, a lingering issue remains to be addressed. Mr Smith also sought to rely in support of the vexatious proceedings order upon a copy of a flyer titled “Be AWARE of this MAN” which he found at his home address on the morning of 22 March 2014 against a fence near his home. At about the same time, Mr Smith discovered two additional copies of the same flyer on the footpath near his front gate and front fence. The flyer contained a photograph of Mr Smith, identified him by his full name and disclosed his address. The specific contents of the flyer do not warrant repeating here but suffice it to say that its contents and the imputations made in the flyer against Mr Smith were understandably described by Mr Smith’s legal representatives as “shocking”.

123    At the hearing before me, on the basis of a letter from Patricia Jarvie faxed to the Registrar of the Federal Court on 30 July 2013 which contained similar allegations against Mr Smith, counsel for Mr Smith invited me to infer that the flyer was produced by either or both of Mr and Mrs Jarvie and was left by one or both of them near Mr Smith’s home.

124    Notwithstanding that I accept Mr Smith’s evidence about the flyers, the evidence is insufficient for me to be able to make any findings or properly draw any inferences as to the provenance of the flyers in question. Accordingly, I have not had any regard to the flyers or to their content in reaching the view that an order should be made against Mr Jarvie under s 37AO of the FCA Act or otherwise.

5.3.8    Has there been an opportunity to be heard as required by s 37AO(4) of the FCA Act?

125    Finally, s 37AO(4) of the FCA Act provides that:

“The Court must not make a vexatious proceedings order in relation to a person without hearing the person or giving the person an opportunity of being heard.”

126    As such, s 37AO(4) makes it a jurisdictional precondition to the making of an order that the person has been given an opportunity to be heard. In this regard, it is important to stress that procedural fairness is generally satisfied by according a litigant the opportunity to be heard. It does not require that the person take up the opportunity to be heard: see, eg, Fletcher International Exports Pty Ltd v Lott [2010] NSWCA 63 at [42] (Giles JA, with whom the Court agreed).

127    I am satisfied that Mr Jarvie has been given an opportunity to be heard as to the terms of the orders restraining him from instituting proceedings in this Court, as is apparent from my earlier description of the proceedings at [50]-[54] above. In addition, in inviting submissions from Mr Jarvie in closing address, I specifically drew his attention again to the seriousness of the allegations made by Mr Smith and HWY (No. 1).

5.4    Further vexatious proceedings orders raised on the initiation of the Court on which the parties are to be given an opportunity to be heard

128    In my view, consideration ought also to be given to whether orders should be made in matter NSD 2191 of 2013 restraining Mr Jarvie from serving or attempting to serve documents on Mr Smith at his residence or business address in connection with any proceedings in this Court and limiting him to the service of documents by post to Mr Smith’s legal representatives. However, as vexatious proceedings orders to this effect have not previously been sought, I will afford the parties the opportunity to be heard on whether they should be made.

129    Furthermore, in view of my findings as to the conduct of Mrs Jarvie and HWY (No. 2) as applicants in the application for an extension of time within which to appeal (Mr Jarvie being regarded as the moving mind of the company), I have decided to raise of my own initiative under s 37AO of the FCA Act the question of whether a vexatious proceedings order ought to be made against Mrs Jarvie and HWY (No. 2) under s 37AO(1)(b) so as:

a)    to restrain Mrs Jarvie and HWY (No. 2) from instituting any proceedings against Mr Smith and HWY (No. 1) in this Court without leave of the Court; and

b)    to require that Mrs Jarvie serve all documents in the creditor’s petition (NSD 2191 of 2013) upon the solicitors for Mr Smith and HWY (No. 1) by post or email; and

c)    to restrain Mrs Jarvie from serving any documents in the creditor’s petition upon Mr Smith by hand or by leaving them at his residence or business address.

130    In this regard, I note that s 37AO(1)(b) of the FCA Act permits orders to be made against a person who acts in concert with another person who is subject to a vexatious proceedings order or has instituted or conducted a vexatious proceeding in an Australian Court. I further note that the Court may make such an order of its own initiative under s 37AO(3).

131    However, as Mrs Jarvie and HWY (No. 2) has not had the opportunity to be heard on this issue, albeit that the latter acts solely through Mr Jarvie, I have also made orders affording Mrs Jarvie and the company that opportunity in accordance with s 37AO(4), together with the respondents.

6.    Conclusion

132    For the reasons set out above, I consider that indemnity costs should be awarded against Mr Jarvie, Mrs Jarvie and HWY (No. 2) in the application for an extension of time within which to appeal. I also set aside the bankruptcy notice against Mr Smith in NSD 216 of 2014 at the hearing on 7 April 2014 for the reasons given here, and have reached the conclusion that indemnity costs should also be awarded against Mr Jarvie in those proceedings. I further consider that vexatious proceedings orders should be made against Mr Jarvie under s 37AO of the FCA Act. I will also afford an opportunity to Mr Jarvie in those proceedings and Mrs Jarvie and HWY (No. 2) in NSD 2326 of 2013 to make written submissions on whether further orders should be made against each of them under s 37AO of the FCA Act.

Associate:

Dated:    8 May 2014