FEDERAL COURT OF AUSTRALIA

Garrett v Macks [2014] FCA 1259

THE COURT ORDERS THAT:

1.    The application be dismissed with costs.

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

REASONS FOR JUDGMENT

1    The applicant, Mr Andrew Garrett, commenced this proceeding by a fast track application filed on 5 June 2014. He sought orders that the surplus of his bankrupt estate be paid to him by the respondent who was his trustee in bankruptcy. Mr Garrett also sought orders that Mr Macks provide him with documents relating to the estate including legal advice and a series of interlocutory orders relating to his estate. A further interlocutory application was filed on 12 August 2014. It sought discovery orders and an order that evidence “adduced” in two other proceedings (VID 425 of 2014 and VID 248 of 2014) be “adduced” as evidence in the present proceeding.

2    By interlocutory application filed on 19 September 2014 Mr Macks sought orders for summary judgment pursuant to s 31A(2) of the Federal Court of Australia Act 1976 (Cth) (“the Act”) and Rule 26.01 of the Federal Court Rules 2011 (“the Rules”).

3    The various interlocutory applications were listed for hearing on 3 October 2014. On 1 October 2014 Mr Garrett filed another interlocutory application in which he sought an adjournment of the hearing “to enable Commercial and General Law to file a Notice of Acting and properly brief counsel to act for [him].” The application also sought leave for Mr Garrett to issue a subpoena and an order that Mr Macks comply with a notice to produce.

4    On 3 October 2014 Mr Garrett appeared in person and asked for an adjournment in order to instruct his newly appointed solicitors. An adjournment was granted until 24 October 2014.

5    Commercial and General Law filed a Notice of Acting on behalf of Mr Garrett on 9 October 2014.

6    On 24 October 2014 Mr M Smith, of counsel, appeared and asked for further time to consider the issues arising in relation to the application and to provide advice to Mr Garrett. I directed that Mr Macks file and serve written submissions in support of his summary judgment application on or before 7 November 2014 and that Mr Garrett file and serve answering submissions on or before 19 November 2014. The directions hearing was adjourned until this morning.

7    On 17 November 2014, two days before Mr Garrett’s submissions were due, Mr Garrett filed electronically a document entitled “Notice of Appearance”. In it Mr Garrett advised that Commercial and General Law had filed a Notice of Ceasing to Act. No such notice had been filed prior to 17 November 2014. Such a notice was only filed on 20 November 2014 and then only after my Associate had advised Commercial and General of the contents of Mr Garrett’s notice of appearance.

8    Mr Garrett appeared in person at this morning’s hearing.

9    Mr Macks’ application was supported by an affidavit in which he confirmed that he had acted as the trustee of Mr Garrett’s bankrupt estate. His role had, however, been concluded some five years ago when Mr Garrett was discharged from bankruptcy. He outlined the major steps which he had taken in relation to the administration of the estate. He also outlined extensive litigation that ensued in this Court and the South Australian Supreme Court relating to Mr Garrett’s affairs. It is sufficient to record that the litigation related, in part, to the bankrupt estate of Mr Garrett.

10    The litigation was brought to an end by a settlement agreement which was entered into in March 2009. The parties to the settlement included Mr Garrett and Mr Macks (both personally and in his capacity as trustee for the bankrupt estate of Mr Garrett). Both Mr Garrett and Mr Macks were legally represented during the negotiations which led to the settlement.

11    The agreement provided for Mr Macks to pay or cause to be paid to Mr Garrett certain monies and for Mr Macks to make or cause to be made other payments to entities (including the Australian Taxation Office) on Mr Garrett’s behalf. Mr Macks also agreed to release Mr Garrett’s passport to him.

12    The settlement agreement contained a release clause pursuant to which Mr Garrett unconditionally released Mr Macks in all matters arising from the litigation and the administration by Mr Macks of the bankrupt estate. Mr Macks granted a reciprocal release to Mr Garrett. Mr Garrett also covenanted not to make any further claims against Mr Macks which arose directly or indirectly out of or related to Mr Macks’ administration of Mr Garrett’s estate.

13    Mr Macks complied with his obligations under the agreement.

14    Mr Garrett opposed Mr Macks’ application but declined to present argument in opposition. He sought a further adjournment. He asserted that the debt which led to his original bankruptcy did not exist at the time that the trustee was appointed and that the trustee was improperly appointed. Mr Garrett said he wanted a 12 week adjournment in order to examine documents and further retain solicitors.

15    He presented no evidence to support the need for such a delay. He relied on the decisions of the High Court in State of Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146 and Cirillo v Citicorp [2001] SASC 349, a decision of the Full Court of the Supreme Court of South Australia. He contended that those decisions supported his application for an adjournment, in that they stressed the need for a litigant to be accorded natural justice in the judicial process, particularly where delay may not give rise to any detriment on the part of the respondent.

16    There is a narrow issue to be determined in dealing with Mr Macks’ summary judgment application. I do not accept that it is necessary for Mr Garrett, or those from whom he might wish to seek advice, to have any further time with a view to preparing to deal with this narrow application. Certainly, there is no need for large numbers of documents to be examined.

17    The point is whether or not the release contained in the agreement provides Mr Macks with a complete defence to the application presently made. Mr Garrett has had ample time to prepare to deal with that point. No further adjournment is warranted. The respondent has already been overly taxed by this proceeding and should not be taxed further.

18    Section 31A(2) of the Act provides that the Court may give judgment for one party against another if one of the parties is defending the proceeding and the Court is satisfied that the other party has “no reasonable prospect of successfully prosecuting the proceeding …”. By s 31A(3) a proceeding not need be hopeless or bound to fail for it to have no reasonable prospect of success.

19    Rule 26.01(1) provides that a party may apply to the Court for an order that summary judgment be given against another party because the applicant has no reasonable prospect of successfully prosecuting the proceeding, because the proceeding is frivolous or vexatious or because the proceeding is an abuse of process of the Court.

20    The powers conferred on the Court by these provisions are exercised with caution. In Spencer v The Commonwealth (2010) 241 CLR 118 at 141, Hayne, Crennan, Kiefel and Bell JJ said that:

“58    How then should the expression ‘no reasonable prospect’ be understood? No paraphrase of the expression can be adopted as a sufficient explanation of its operation, let alone definition of its content. Nor can the expression usefully be understood by the creation of some antinomy intended to capture most or all of the cases in which it cannot be said that there is ‘no reasonable prospect’. The judicial creation of a lexicon of words or phrases intended to capture the operation of a particular statutory phrase like ‘no reasonable prospect’ is to be avoided. Consideration of the difficulties that bedevilled the proviso to common form criminal appeal statutes, as a result of judicial glossing of the relevant statutory expression, provides the clearest example of the dangers that attend any such attempt.

59    In many cases where a plaintiff has no reasonable prospect of prosecuting a proceeding, the proceeding could be described (with or without the addition of intensifying epithets like ‘clearly’, ‘manifestly’ or ‘obviously’) as ‘frivolous’, ‘untenable’, ‘groundless’ or ‘faulty’. But none of those expressions (alone or in combination) should be understood as providing a sufficient chart of the metes and bounds of the power given by s 31A. Nor can the content of the word ‘reasonable’, in the phrase ‘no reasonable prospect’, be sufficiently, let alone completely, illuminated by drawing some contrast with what would be a ‘frivolous’, ‘untenable’, ‘groundless’ or ‘faulty’ claim.

60    Rather, full weight must be given to the expression as a whole. The Federal Court may exercise power under s 31A if, and only if, satisfied that there is ‘no reasonable prospect’ of success. Of course, it may readily be accepted that the power to dismiss an action summarily is not to be exercised lightly. But the elucidation of what amounts to ‘no reasonable prospect’ can best proceed in the same way as content has been given, through a succession of decided cases, to other generally expressed statutory phrases, such as the phrase ‘just and equitable’ when it is used to identify a ground for winding up a company. At this point in the development of the understanding of the expression and its application, it is sufficient, but important, to emphasise that the evident legislative purpose revealed by the text of the provision will be defeated if its application is read as confined to cases of a kind which fell within earlier, different, procedural regimes.” (Footnotes omitted).

21    Mr Macks submitted that the terms of the deed provided him with a defence to the proceeding. The releases in the deed, he contended, amounted to an accord and satisfaction, the effect of which was to extinguish any cause of action and, therefore, any entitlement to relief which Mr Garrett may otherwise have had.

22    Mr Macks also submitted that the releases in the deed gave rise to an estoppel and that any attempt to prosecute the proceeding amounted to an abuse of process.

23    An accord and satisfaction which discharges a cause of action provides a complete defence to any subsequent attempt to sue on the particular allegations which support the cause of action. In McDermott v Black (1940) 63 CLR 161 at 183-4, Dixon J explained that:

“The essence of accord and satisfaction is the acceptance by the plaintiff of something in place of his cause of action. What he takes is a matter depending on his own consent or agreement. It may be a promise or contract or it may be the act or thing promised. But, whatever it is, until it is provided and accepted the cause of action remains alive and unimpaired. The accord is the agreement or consent to accept the satisfaction. Until the satisfaction is given the accord remains executory and cannot bar the claim.”

24    Mr Macks deposed (and I accept) that he satisfied all of his obligations under the agreement. There was, therefore, an accord on Mr Garrett’s part to accept the promises made by Mr Macks in place of any cause of action he may have had arising from the defined factual substratum. Mr Macks provided the necessary satisfaction. Any cause of action which Mr Garrett may have had in relation to the administration of his estate was extinguished and may not be revived.

25    Given the existence of the complete defence of accord and satisfaction Mr Garrett has no reasonable prospect of successfully prosecuting his application: cf Rucinski v Monash University [2012] FCA 362 at [34].

26    Mr Macks’ defensive position is further strengthened by Mr Garrett’s covenant not to make any additional claims against him relating to his administration of Mr Garrett’s estate.

27    In my view this is a clear case to which s 31A(2) of the Act and rule 26.01(1) of the Rules apply. It should not be allowed to proceed any further. It should be summarily dismissed.

Associate:

Dated:    21 November 2014