FEDERAL COURT OF AUSTRALIA

Mulhern v Bank of Queensland [2015] FCA 44

THE COURT ORDERS THAT:

1.    The statement of claim be struck out in its entirety.

2.    Judgment be given for the defendant against each of the first and third to tenth plaintiffs.

3.    Judgment be given for the defendant against the second plaintiff in relation to the following parts of the proceeding:

(1)    all claims for relief arising out of orders made by the Supreme Court of Queensland;

(2)    all claims for relief arising out of the sequestration order made against the estate of the second plaintiff.

4.    Stay the proceedings brought by the second plaintiff until the conclusion of the second plaintiff’s bankruptcy or further order.

5.    Judgment for the defendant against the eleventh plaintiff in relation to:

(1)    all claims for relief arising out of orders made by the Supreme Court of Queensland;

(2)    his claim for damages for false imprisonment.

6.    Stay the proceedings brought by the eleventh plaintiff until the conclusion of the eleventh plaintiff’s bankruptcy or further order.

7.    Liberty to apply on three days’ notice.

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

REASONS FOR JUDGMENT

1    In this proceeding, brought against the Bank of Queensland (“Bank”), 11 plaintiffs claim relief including compensation of over $428 million, arising from the Bank’s conduct in dealing with Mr Mulhern (the eleventh plaintiff) and Mrs Mulhern (the second plaintiff) as well as five companies referred to as the Mulhern Group of companies. The five companies are Mulhern Constructions Pty Ltd (“Mulhern Constructions”), Dicey’s Gladstone Pty Ltd (“Dicey’s”), Celtic Pacific Properties Pty Ltd (“Celtic”); WAK Gladstone Pty Ltd (“WAK”); and Gladstone United Pty Ltd (“Gladstone”).

2    None of the members of the Mulhern Group of companies is a party to this proceeding: all have been de-registered following the appointment by the Bank of receivers and managers to the companies in May 2010.

3    By interlocutory application dated 12 September 2014, the Bank seeks summary judgment in its favour against the plaintiffs or, alternatively, that the plaintiffs’ statement of claim be struck out.

4    In support of its application, the Bank relies on the affidavit of its solicitor Benjamin Shaw sworn 20 October 2014.

5    The plaintiffs rely on the following affidavits:

(a)    Affidavit of Emer Mulhern sworn 22 or 23 October 2014;

(b)    Affidavit of Robert Franklin sworn 21 October 2014;

(c)    Affidavit of the plaintiffs’ solicitor, Douglas McClelland sworn 22 October 2014.

Plaintiffs

6    The plaintiffs comprise four individuals and seven corporate entities.

7    The individual plaintiffs are:

(a)    Mr Mulhern;

(b)    Mrs Mulhern;

(c)    Emer Mulhern, the daughter of Mr and Mrs Mulhern (“Ms Mulhern”);

(d)    Andrew Quinert, a real estate agent (“Mr Quinert”).

8    The corporate plaintiffs are:

(a)    Pinnacle Industries II LLC (“Pinnacle”);

(b)    Mulhern Builders Ltd IRE;

(c)    Celtic Pacific Contractors LLIC;

(d)    Emerald Hervey Bay Developments Pty Ltd (“Emerald”);

(e)    Toowong Prime Investments Pty Ltd (“Toowong Prime”);

(f)    Mulhern’s Properties Inc (“Mulhern’s Properties”); and

(g)    Cougan Corporation Pty Ltd (“Cougan Corporation”).

9    Each of Mr and Mrs Mulhern has been a bankrupt since before the commencement of the proceeding. At the hearing, Mr McClelland acknowledged that the status of Mr and Mrs Mulhern as bankrupts affected their standing to bring the proceeding: cf ss 58 and 116 Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”).

plaintiffs’ claims

Originating application

10    The originating application makes extensive claims for interlocutory relief, none of which is sought to be pursued.

11    As to the final relief claimed, the originating application refers to the statement of claim.

Statement of claim

12    In the statement of claim, the plaintiffs seek relief of the following kinds:

(1)    Declarations about the Bank’s conduct and the effect of that conduct;

(2)    Monetary relief under the Trade Practices Act 1974 (Cth) (“TPA”) or the Australian Securities and Investments Commission Act 2001 (Cth) (“ASIC Act”);

(3)    Damages for breach of contract;

(4)    Equitable compensation and/or damages referrable to various alleged losses and totalling $428,014,088.14.

Background to the proceeding

13    On 3 February 2010, a sequestration order was made against Mr Mulhern’s estate following litigation concerning Mr Mulhern’s business interests. Mr Mulhern did not consent to the sequestration order and has made numerous application to have his bankruptcy annulled or discharged: see Mulhern v Pearce (No 2) [2014] FCA 805.

14    On 6 May 2010, in Pearce v Mulhern [2010] FCA 446, a judge of this Court made declarations, on the application of Mr Mulhern’s trustees in bankruptcy and in the absence of the respondents including Mrs Mulhern and the members of the Mulhern Group of companies, as to the ownership of the various companies. The declarations included that, as at the date of Mr Mulhern’s bankruptcy:

(a)    Mr Mulhern was the registered holder of all of the issued share capital in Mulhern Constructions and Dicey’s;

(b)    Mr Mulhern was the registered holder of one half of the issued share capital in Celtic;

(c)    Celtic was the registered holder of all of the issued share capital of WAK;

(d)    Mulhern Constructions was the registered holder of all of the issued share capital of Gladstone; and

(e)    All of the issued share capital in each of Mulhern Constructions and Dicey’s and one half of the issued share capital in Celtic vested in the trustee of Mr Mulhern’s bankrupt estate.

15    It is a source of complaint by some or all of the plaintiffs in this proceeding that these declarations were made in the respondents’ absence (although precisely how they are each adversely affected by the declarations is not clear). In particular, some or all of the plaintiffs contend that Mrs Mulhern, rather than Mr Mulhern, was the beneficial owner of each member of the Mulhern Group of companies until her bankruptcy on 30 August 2012. However, there was no appeal from the decision in Pearce v Mulhern [2010] FCA 446.

16    On 25 May 2010, having appointed receivers and managers to the companies comprising the Mulhern Group, the Bank obtained freezing orders from the Supreme Court of Queensland (“Supreme Court”) in respect of about $450,000 in a bank account in Mrs Mulhern’s name to have effect until 2 June 2010 (“freezing orders”). On 2 June 2010, the orders were varied and continued pending determination of the ownership of the funds.

17    The plaintiffs allege that the Bank was not entitled to appoint the receivers and managers, and was not entitled to the freezing orders.

18    On 8 April 2011, Mrs Mulhern applied to the Supreme Court for a discharge or alternatively variation of the freezing orders. In support of her application, Mrs Mulhern swore an affidavit dated 7 April 2011. Mrs Mulhern’s affidavit refers to ten loan facilities granted by the Bank during the period between January 2007 and May 2010 to:

(a)    Mulhern Constructions (four facilities);

(b)    Celtic (two facilities);

(c)    Gladstone;

(d)    WAK;

(e)    Dicey’s (two facilities).

19    According to Mrs Mulhern’s affidavit the total value of the facilities was $57.3 million. Her evidence was that the maximum balance owing to the Bank as at 19 May 2010 (presumably by the five entities listed above) was $51,284,500 plus interest. She also says:

110. On 11 October 2010 the Chief Justice, in proceeding number 9831 of 2010, found that the [Bank’s] floating charge over the assets of Mulhern Constructions Pty Ltd chrystallised [sic] on 24 May 2010 upon the appointment of receivers and managers.

20    The judgment of the Chief Justice to which Mrs Mulhern referred appears to be Dodrill v Bank of Queensland [2010] QSC 371.

21    On 27 April 2011, Mrs Mulhern’s application was dismissed.

22    On 9 August 2011, a judge of this Court ordered that a warrant be issued pursuant to s 78(1)(f) of the Bankruptcy Act for Mr Mulhern’s arrest: Pearce v Mulhern [2011] FCA 930. On 8 January 2012, Mr Mulhern was arrested by the Australian Federal Police at Sydney airport. After Mr Mulhern was granted bail by a New South Wales magistrate, a further warrant for his arrest was issued by another judge of this Court: Pearce v Mulhern (No 2) [2012] FCA 7. There was a further hearing concerning Mr Mulhern’s detention: Pearce v Mulhern (No 3) [2012] FCA 16, and in early February 2012, an application by Mr Mulhern for the return of his passports was refused: Pearce v Mulhern (No 4) [2012] FCA 54. Mr Mulhern is aggrieved by his arrests and that he has been unable to leave Australia as a result of his bankruptcy.

23    On 3 April 2012, a Brian Murray filed an application in the Supreme Court, supported by Mrs Mulhern, for an order that he be paid $198,200 from the funds the subject of the freezing orders. In her supporting affidavit, Mrs Mulhern said that she was the sole director and “100% beneficial owner of the Mulhern Group of Companies Australia, which has been unlawfully seized and controlled by [the Bank] since the 24th of May 2010”.

24    On 27 April 2012, Mrs Mulhern made an application for relief including a declaration that the freezing orders obtained on 26 May 2010 and “scandalously” amended on 2 June 2010 were an abuse of process and a declaration that “the oppressive orders be discharged for non-compliance”. She also sought a declaration that the appointment of receivers to the “Mulhern Group of Companies” on 24 May 2010 was invalid. It seems that this application was dealt with by the Supreme Court on 9 May 2012, and was rejected, although there are no materials before this Court explaining precisely what happened.

25    Also on 9 May 2012, the Supreme Court gave judgment in favour of the Mulhern Group of companies and the Bank against Mrs Mulhern for the moneys the subject of the freezing orders: Mulhern Constructions v Mulhern [2012] QSC 120. Douglas J said, relevantly:

[13] There were some other matters argued for the defendant by her husband, whom I gave leave to appear for her. He had a grievance that the Bank of Queensland had appointed receivers when, from his point of view, the value of its interest in his and his wife’s companies’ funds was exceeded by the value of the companies’ assets. That grievance did not assist me in respect of the issues that were litigated between the plaintiffs and Mrs Mulhern. There was other evidence that the companies were in arrears in respect of their obligations under their loans. Mr Mulhern argued that the companies were not in arrears but the evidence does not support that. The evidence in respect of those matters is summarised in paragraph 76 of Mr Porter’s submissions.

…

[16]… the defendant has not satisfied me that she has a real prospect of defending the claim. Although there is a superficial complexity to some of the facts, viewed simply they amount to Mrs Mulhern taking the amount of $479,466 from the first to fifth plaintiffs in circumstances where the bank’s charge had crystallised in respect of the money she took from the first and second plaintiffs and where she had no entitlement to take any money from the second to fifth plaintiffs as she has no real prospect of showing that she was owed money by them before receivers were appointed to those companies, or at any stage. In doing so she breached her fiduciary duties as a director of those companies in circumstances where they and the bank are entitled to trace those funds into her possession in the bank account into which she transferred the money and from there to the monies paid into this court.

26    On 15 May 2012, Mrs Mulhern appealed from the decision of Douglas J. One of the grounds of appeal was that the primary judge had erred in finding that the Bank was entitled to appoint receivers.

27    On 24 May 2012, Mrs Mulhern filed an application in the Queensland Court of Appeal seeking an order that the funds the subject of the freezing orders be paid to her. In her written submissions to the Court of Appeal, Mrs Mulhern complained about “irregular service” of the originating application and referred to the freezing orders as “ex parte orders …obtained and granted contrary to law and…obtained and maintained to date as an outrageous abuse of process”. That application was refused on 7 June 2012.

28    On 12 June 2012, Mrs Mulhern filed a further application in the Supreme Court for orders that included a declaration that the freezing orders were “illegally obtained, in absolute breach of the law, … an abuse of process on an acknowledged and recognized resident of the State of New York in the United States of America”.

29    According to Mr Shaw’s uncontested affidavit, Mrs Mulhern’s application was dismissed by Martin J on 19 June 2012. His Honour also made an order in the following terms:

Pursuant to rule 389A of the Uniform Civil Procedure Rules 1999 (Qld), [Mrs Mulhern] not file any further application in relation to the proceedings numbered 5472 of 2010 (the Proceedings) including an appeal or application for leave to appeal in relation to the Proceedings, without first obtaining leave of the Court.

30    On 17 August 2012, Mrs Mulhern’s appeal was dismissed after she failed to give security for costs of the appeal as previously ordered.

31    On 30 August 2012, the Bank obtained a sequestration order against the estate of Mrs Mulhern. Mrs Mulhern sought to have the sequestration order set aside. On 9 November 2012, the application was adjourned to enable Mrs Mulhern to adduce evidence that might have disclosed grounds for dismissing the creditor’s petition: Mulhern v Bank of Queensland Ltd [2012] FMCA 1124. After Mrs Mulhern’s evidence was considered, her application was dismissed: Mulhern v Bank of Queensland Ltd [2012] FMCA 1266. Burnett FM set out the following facts concerning the freezing orders:

[8] [Mrs Mulhern] had been, at least since January 2009, the sole director and shareholder of the five companies which make up the Mulhern Group. At least two of those companies were vehicles by which the Mulherns developed and expanded a Gladstone shopping centre between 1996 and 2010, when the respondent creditor appointed receivers.

[9] By May 2010 the Mulherns were under pressure from the creditor to pay down debts of the Mulhern Group which the bank asserted were in default. Investigating accountants had been appointed and a deadline was given (19 May 2010) to provide evidence of a sale contract for the Gladstone Shopping Centre. Plainly, none was produced. On 19 May 2010, that is, shortly before the appointment of receivers, Ms Mulhern withdrew a sum of $479,466.00 from the bank’s accounts belonging to the five Mulhern Group companies and transferred those funds into her personal account.

[10] When receivers were appointed on 24 May 2010 these withdrawals were immediately apparent to them. They promptly applied to the Supreme Court of Queensland the following day for Mareva [Mareva Compania Naviera SA v International Bulk Carriers SA (The Mareva) [1980] 1 All ER 213] orders freezing the funds in Ms Mulhern’s account and then commenced recovery proceedings. Those proceedings were commenced by the Bank of Queensland (the creditor) and the receivers on various grounds arising out of the rights associated with the company charges held by the bank over the assets of the Mulhern Group.

[11] The debtor applied to set aside or vary the Mareva orders. She attended that matter in person and was cross-examined on that occasion. The application was dismissed with costs, which gave rise to the costs order the subject of the Bankruptcy Notice.

32    Mrs Mulhern did not appeal from Burnett FM’s decision.

33    On 18 December 2012, Mulhern’s Properties commenced proceedings in this Court against the Bank claiming $84.5 million. On 3 May 2013, the statement of claim in those proceedings was struck out: Mulhern’s Properties Inc v Bank of Queensland [2013] FCA 401. By the statement of claim, Mulhern’s Properties alleged that it was a shareholder in the Mulhern Group of companies, with such shares being held on trust for it by Mrs Mulhern. The pleading included the following allegations of potential relevance to this proceeding:

8. On 19 May 2010 an unconditional offer was made to the [Bank] to pay out the Mulhern Group loans with the [Bank] in full. In breach of the duties owed by the [Bank] this offer was not accepted.

9. A dispute developed between the Mulhern Group & the [Bank] in relation to the interest the [Bank] was charging the Mulhern Group.

…

13. The [Bank] was in breach of its contractual obligations with the Mulhern Group by charging a rate of interest over & above the agreed rates as stated on 15 March 2007. This overcharging affected the Mulhern Group from at least June 2007 onwards.

34    On 25 September 2013, Mrs Mulhern commenced proceedings in this Court seeking an annulment of her bankruptcy. Those proceedings were dismissed as an abuse of process: Mulhern v Bank of Queensland Ltd [2014] FCA 26. In particular, the Court found that Mrs Mulhern was seeking to relitigate issues that had been resolved adversely to her in the two 2012 decisions of the Federal Magistrates Court.

Facts and matters pleaded in the statement of claim

35    The statement of claim does not identify which relief is sought by which plaintiffs, but it is obvious that certain claims are referrable only to one or more of them. For example, there are claims for damages for “lost opportunity” referrable to only particular corporate plaintiffs. There is a claim for damages of $60 million for “loss of consortium” (it is not clear whether it is made by Mr Mulhern, Mrs Mulhern or both of them) and a claim for damages of $200 million for Mr Mulhern’s alleged false imprisonment.

36    The following matters, of potential relevance to the relief sought, are pleaded as background facts and matters:

(1)    In June 2005, the Bank recognised Mr and Mrs Mulhern’s equitable interest in the Mulhern Group of companies and their further Australian personal net worth (paragraph 3);

(2)    The Mulhern Group of companies had loan facilities with the Bank of up to $53 million for a term of four years expiring on 29 May 2010 (“pre-existing facilities”) (paragraph 4);

(3)    In November 2006, the Bank confirmed that the Mulhern Group of companies had an aggregate market value of $81 million against a debt to the Bank of $46 million (paragraph 5);

(4)    In May 2007, Mr and Mrs Mulhern and their children returned to the United States of America, where Mr Mulhern was granted permanent residency (paragraph 6);

(5)    In July 2006 there was a meeting between a Joseph Dodrill and officers of the Bank, referred to as the Dodrill meeting (paragraph 7);

(6)    The purpose of the Dodrill meeting was “to conspire as to how the [Bank] could gain control of the Mulhern Groups [sic] assets by causing a default of the Mulhern Group’s banking facilities and agreements by effecting a default of the various personal guarantees executed in favour of [the Bank] by Mr and Mrs Mulhern” (paragraph 8);

(7)    By mid-October 2007, the Bank had provided a further funding facility to one of the companies in the Mulhern Group of $3.2 million (paragraph 9);

(8)    In October 2007, Joseph and John Dodrill commenced oppression proceedings against the Irish Restaurant and Bar Company Pty Ltd to which proceedings Mr Mulhern subsequently became a defendant (“oppression proceedings”) (paragraph 10);

(9)    In November 2007, an “anonymous intermediary” telephoned Mr Ganim of Hopgood Ganim lawyers and informed him that Mr Mulhern would be arrested and charged with fraud the next time he arrived in Australia and that the Dodrills would take $2 million to “resolve the dispute” (paragraph 11);

(10)    In January 2009, orders were made in the oppression proceedings concerning disclosure by Mr Mulhern and Mulhern’s Properties. Following non-compliance with the orders, the defendants’ solicitors withdrew from the proceedings leaving the Mulherns without legal representation for the remainder of the oppression proceedings (paragraph 12);

(11)    In October 2009, orders were made in the oppression proceedings. One of the Mulhern Group of companies (Mulhern Constructions) and Mr Mulhern were ordered to purchase certain shares in two companies for a particular price and the Dodrills were required to deliver instruments of transfer of the shares. Costs orders were made against Mulhern Constructions and Mr Mulhern. The Dodrills did not deliver the instruments of transfer (paragraphs 13 and 14);

(12)    There was a sale of a property at 3 Sherwood Rd Toowong by Mulhern Constructions, forced by Bankwest and, in September 2010, the surplus funds were paid into the trust account of the Dodrills’ solicitors pursuant to an order of the Supreme Court of Queensland made on 11 October 2010 (paragraph 15);

(13)    The Queensland Court of Appeal reversed the decision concerning payment of the surplus funds. As a result, the Bank became the beneficiary of the surplus funds “notwithstanding that [the Bank’s] interest had been fully extinguished by release of Mortgage on or about 30 August 2009” (paragraph 16);

(14)    As a result of the Dodrills’ action, Mr Mulhern was wrongfully made to default on the Bank’s loan facilities (paragraph 17) (the default or defaults are not specified in the pleading);

(15)    In January 2010, Mrs Mulhern personally paid down the pre-existing facilities by $6,715,500, thereby “reducing the borrowings of the Mulhern Group to $50,284,500” (paragraph 18).

Breach of contract claim

37    Paragraphs 19 to 28 of the statement of claim plead the following matters:

(1)    A letter of offer dated 15 March 2007 from the Bank to Mr Mulhern and Mulhern Constructions for a loan of $5 million for the purpose of “assisting with the funding of residential development in New York”;

(2)    Acceptance of the offer by Mr Mulhern on behalf of WAK;

(3)    By agreement Mulhern Constructions was substituted as borrower “for the purposes of stamp duty”;

(4)    The agreement was made on 2 April 2007. Parties to the $5 million loan facility agreement included Mulhern Constructions, WAK, “the Sixth Plaintiff CPP and the Seventh Plaintiff GUP” as borrowers. The facility was guaranteed by Mr and Mrs Mulhern;

(5)    Alternatively, if any of WAK, “CPP” or “GUP” was not a party to the loan agreement, then Mulhern Constructions acted as agent for those companies in entering into the $5 million loan facility agreement;

(6)    The Bank was entitled to charge interest at a certain rate on moneys loaned under the $5 million loan facility and the pre-existing facilities;

(7)    The Bank charged a rate of interest in excess of that which it was entitled to charge from 15 March 2007 until 12 April 2010.

(8)    By reason of the alleged breach of contract, the Mulhern Group of companies suffered loss.

(9)    In further breach, the Bank wrongfully issued certain notices of demand for interest at rates to which it was not entitled.

Misleading or deceptive conduct/unconscionable conduct

38    Paragraphs 29 to 35 of the statement of claim allege:

(1)    Representations by the Bank to Mr Mulhern on behalf of the Mulhern Group in March 2007 that a particular interest rate would apply to the pre-existing facilities;

(2)    In reliance on the representations, (in April 2007) the Mulhern Group entered into the $5 million loan facility agreement;

(3)    The Bank did not conform to its representation as to the applicable interest rate;

(4)    This conduct was misleading or deceptive because the Bank knew or ought to have known that the representations were untrue;

(5)    Further, the Bank engaged in unconscionable conduct in breach of s 51AC of the TPA and or s 12CB of the ASIC Act by relying on the terms of the formal loan documentation for the $5 million loan facility agreement where those terms conflicted with the representations.

Estoppel

39    Although there some obvious anomalies in this section of the statement of claim, the main allegations in paragraphs 36 to 41 are:

(1)    The Mulhern Group did not attempt to locate alternative sources of finance with which to finance the proposed New York residential development;

(2)    In the premises, the Bank is estopped from denying that it was required to charge the interest rate referred to in the representations;

(3)    By reason of the matters aforesaid, each of the Mulhern Group of companies and Mr and Mrs Mulhern as guarantors suffered loss and damage.

Wrongful demand and appointment of receivers

40    The pleaded facts are:

(1)    In August 2008, the Bank informed the Mulhern Group of companies of its intention to raise its interest rate margin;

(2)    The proposed increase was in breach of the previous representation about the applicable interest rate;

(3)    On 29 August 2008, in breach of the representation, the Bank treated non-payment of interest demanded as a default under the $5 million facility agreement and the pre-existing facilities and caused demands to be issued to the Mulhern Group of companies demanding repayment of all loans, and to the guarantors;

(4)    On 16 September 2008, the Bank made further demands and issued notices of exercise of sale under the Property Law Act in relation to properties owned by the Mulhern Group of companies;

(5)    In April 2009, the Bank caused a fresh demand to be made upon the Mulhern Group of companies which included a claim for interest calculated at an impermissibly high rate;

(6)    The Mulhern Group of companies denied the validity of the demands, and maintained that the interest had been calculated at an impermissibly high rate;

(7)    The dispute as to the correct interest rate was still ongoing as at 12 April 2010.

(8)    Between March 2010 and 19 May 2010, there were negotiations between the Mulhern Group of companies and the Bank about the repayment to the Bank of the pre-existing facilities (which were due to expire). During those negotiations, the Bank represented that it would continue to negotiate with Mrs Mulhern in good faith until the negotiations were concluded (“good faith representation”) (paragraph 51);

(9)    On 19 May 2010, Mrs Mulhern submitted a good faith offer for repayment of the pre-existing facilities. The offer was open for two days. The Bank did not respond to the offer;

(10)    In breach of the good faith representation, on 21 May 2010, the Bank appointed receivers to the Mulhern Group of companies (and, perhaps some other unidentified companies) (paragraphs 56 and 57);

(11)    The Bank engaged in unconscionable conduct in breach of s 51AC of the TPA and or s 12CB of the ASIC Act by appointing the receivers and managers by reason that Mrs Mulhern was continuing to negotiate in good faith with the Bank and the Bank did not give any or any proper notice of its intention to break off negotiations or to call up its loans (paragraph 58).

Second estoppel

41    The pleaded facts are:

(1)    On 29 August 2008, the Bank treated non-payment of interest demanded as a default under the $5 million facility agreement and the pre-existing facilities and caused demands to be issued to the Mulhern Group of companies demanding repayment of all loans, and to the guarantors;

(2)    Reliance by the Mulhern Group of companies on the good faith representation;

(3)    The Mulhern Group of companies suffered detriment in that it did not attempt to locate alternative sources of finance to repay the Bank and it would not have instructed its solicitors to cease threatening legal action against the Bank if the good faith representation had not been made, by reason of which each of the Mulhern Group of companies suffered loss and damage.

42    The particulars to paragraph 66 of the statement of claim appear to allege losses suffered by various of Mrs Mulhern, Ms Mulhern and the Mulhern Group of companies. They are:

a.    Seizure of the [sic] Mrs Mulhern’s equity in the [Australian members of the Mulhern Group of companies ‘MGAC’] on and from 24 May 2010. (‘Damages Crystallization Date’):

b.    The prior equitable interest of the First Plaintiff in the MGAC as at the date of the appointment of Receivers and Managers in the sum of $30,000,000.00 (Thirty Million AUD) an amount acknowledged by [the Bank] from June 2005, with the 29 May 2006 registration of the [Bank’s] mortgages on the MGAC’s Gladstone Property Assets.

c.    Repayment of monies seized by the wrongfully appointed receivers, appointed by the [Bank] being Cash in the sum of $501,000.00 from the funds paid by Mrs Mulhern into Court in the Queensland Court of Appeal proceedings bearing number 4289/2010 (‘QCA Proceedings’);

d.    Costs in relation to the QCA Proceedings 4289/12 in which Mrs Mulhern was granted costs in her favour against [the Bank] on 17 August 2012 calculated and demanded from [the Bank] to be $1,700,000.00 (One million Seven Hundred Thousand) being costs paid in prosecuting and / or defending actions taken by the [Bank] consequential to the Freezing orders in proceeding 5472/10 originally filed under the Court allocated file number of 10756/2010.

Particulars

    i.    Letter Gadens Lawyers to Mrs Mulhern dated 3 June 2010;

ii.    Proceedings 10756/2010 was allocated by the Supreme Court of Queensland Registry to a Probate Matter in the name of Naumann on 4 October 2010.

e.    Repayment of monies seized by the wrongful appointment of receivers, appointed by the [Bank] in the sum of $13,165.14, which were taken from Mrs Mulhern’s Westpac Banking Corporation Account;

f.    Damages in the sum of $23,826,923.00 being the loss of rental income due to be received by the MGAC, but for the wrongful appointment of receivers;

g.    Incurred legal costs by Mrs Mulhern in the sum of additional legal costs of $600,000.00 (Six Hundred Thousand Dollars) since the wrongful appointment of receivers as advised by letter from Avondale Lawyers to Dibbs Barker of 16 August 2013;

h.    Damages due to Mrs Mulhern’s relocation to Ireland from New York since 3 May 2012 until 1 August 20143 accruing at $60,000.00 per month on going.

Irregularly obtained freezing orders

43    The statement of claim pleads:

(1)    The making of the freezing orders;

(2)    That the orders were obtained in circumstances in which the Bank and the Bank’s receivers “knew or ought to have known that the Respondents to those orders would not have been able to Respond” (paragraph 68);

(3)    In obtaining the orders, the Bank provided undertakings to the Court, including in the form of the usual undertaking as to damages;

(4)    The orders were obtained in breach of the Bank’s obligations under the Hague Convention rules for service of documents. The precise breach is not identified;

(5)    The orders were obtained in breach of the Uniform Civil Procedure Rules 1999 (Qld);

(6)    The orders were obtained in breach of procedural fairness to Mrs Mulhern “and her companies”;

(7)    In May 2012, the Bank seized $501,000 from a Bankwest account in Mrs Mulhern’s name;

(8)    In June 2012, the freezing orders were varied in an manner which is said to have deprived Mrs Mulhern “of the ability to retain Australian Lawyers to protect the interest of the Mulhern Group and in particular the rights of Mrs Mulhern and Mr Mulhern” (paragraph 76) and to be paid reasonable living expenses.

44    Paragraph 78 pleads that “All of the plaintiffs have been affected by the terms of the Ex parte Orders and the undertakings provided in obtaining those orders and all have suffered loss and damage”.

45    It is alleged that the sequestration order against Mrs Mulhern’s estate was irregularly obtained (paragraph 79).

46    Paragraph 81 pleads “the effects on each plaintiff as a result of the ex parte orders”, as follows:

a.    With respect to Mrs Mulhern by use of the costs Orders created by the ex parte orders and in breach of undertaking (6) described therein was made a bankrupt again in ex parte proceedings in the Federal Magistrates Court (as it was then) BRG 621 of 2012 on 30 August 2012 resulting in damages for loss of servitude for her Husband and in breach of her human rights to associate with her husband as from 8 January 2012 estimated to be $60,000,000.00 (Sixty Million Dollars).

b.    The Third Plaintiff, Pinnacle Industries 11LLC has suffered loss and damage of $14,000,000 (Fourteen Million) for loss of opportunity;

c.    The Forth [sic] Plaintiff, Andrew Quinert has suffered a loss of commission from property sales and loss of management fees for the sale of a Toowong Property calculated at $900,000 (Nine Hundred Thousand AUD);

d.    The Fifth Plaintiff Mulhern Builders Ltd IRE has lost opportunities due to the ex parte freezing order and the detention of the Mr Mulhern [sic] in Australia with such loss being calculated $3,100,000 (Three Million One Hundred Thousand AUD);

e.    The Sixth Plaintiff Celtic Pacific Contractors LLIC has lost opportunities due to the ex-parte order and the detention of the Mr Mulhern [sic] in Australia such los being calculated $3,300,000 (Three point Three Million AUD);

f.    The Ninth Plaintiff Mulhern Properties Inc the United States based employer of Mr Mulhern has suffered a loss calculated at US $600,000 per week since 1 February 2012, until 1 August 2014 being a total of 124 weeks which loss equates to $74,400,00.00 [sic] (Seventy Four Point Four Million );

g.    The Tenth Plaintiff Cougan Corporation Pty Ltd has lost loans totalling $435,000 it made to the Mulhern Group. This loss would not have been suffered, but for the actions of the Defendants.

h.    Mr Mulhern has incurred damages for false imprisonment as a result of his arrest upon returning to Australia on 8 January 2012 directly attributed to the actions of the Defendant estimated to be $200M.

47    Paragraph 83 pleads that the damages described in paragraph 68 (which may intend to refer to paragraph 66) “have been sustained by each Plaintiff as a result of the actions of the Defendants.”

Other claims by Mr and Mrs Mulhern

48    Paragraphs 84 and following plead additional losses allegedly sustained by Mr and Mrs Mulhern as a result of the ex parte freezing orders and the actions of the defendants, including:

(a)    Termination of life insurance policies, as a result of Mr and Mrs Mulhern’s inability to make payments on the policies;

(b)    Mr and Mrs Mulhern’s inability to obtain replacement life insurance policies;

(c)    Losses arising from Mrs Mulhern’s sequestration order;

(d)    Losses of equity held in certain properties in the United States of America.

49    At paragraph 92, there is a claim that the Bank has been unjustly enriched in an amount of $364 million on a basis that is not intelligible.

Relevant law

50    Section 31A of the Federal Court of Australia Act 1976 (Cth) (“Federal Court Act”) provides relevantly:

(2)    The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:

(a)    the first party is defending the proceeding or that part of the proceeding; and

(a)    the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.

(3)    For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:

(a)    hopeless; or

(b)    bound to fail;

for it to have no reasonable prospect of success.

(4) This section does not limit any powers that the Court has apart from this section.

51    Rule 26.01 of the Federal Court Rules 2011 (Cth) (“Rules”) provides relevantly:

(1)    A party may apply to the Court for an order that judgment be given against another party because:

(a)    the applicant has no reasonable prospect of successfully prosecuting the proceeding or part of the proceeding; or

(b)    the proceeding is frivolous or vexatious; or

(c)    no reasonable cause of action is disclosed; or

(d)    the proceeding is an abuse of the process of the Court; ….

52    Rule 16.21 of the Rules provides:

(1)    A party may apply to the Court for an order that all or part of a pleading be struck out on the ground that the pleading:

(a)    contains scandalous material; or

(b)    contains frivolous or vexatious material; or

(c)    is evasive or ambiguous; or

(d)    is likely to cause prejudice, embarrassment or delay in the proceeding; or

(e)    fails to disclose a reasonable cause of action or defence or other case appropriate to the nature of the pleading; or

(f)    is otherwise an abuse of the process of the Court.

53    The power to strike out a pleading (in this case, the statement of claim) requires a consideration of the terms of that document. A pleading may be struck out if it is unintelligible, ambiguous or so vague that it fails to identify the material factual allegations to the extent that the other party is not given notice of the real substance of the claim: Priest v State of New South Wales [2006] NSWSC 12 at [34].

54    It must be apparent on the face of the statement of claim that the facts pleaded, if proved, would establish the cause of action relied upon by the relevant plaintiff or plaintiffs. In Wride v Schulze [2004] FCAFC 216 at [25], a Full Court said:

…the pleadings must disclose a reasonable cause of action against the party against whom the cause of action is brought and must state all material facts necessary to establish that cause of action and the relief sought. A “reasonable cause of action"” for this purpose means one which has some chance of success if regard is had only to the allegations and the pleadings relied on by the applicant.

55    The power to strike out a pleading because it discloses no reasonable cause of action will be exercised only in a plain and obvious case, where it is clear that no reasonable amendment can cure the alleged defect and there is no reasonable question to be tried: Polar Aviation Pty Ltd v Civil Aviation Safety Authority [2012] FCAFC 97; (2012) 203 FCR 325 at [43].

56    In contrast, an application for summary judgment requires consideration of matters outside the pleading: Takemoto v Moodys Investors Service Pty Ltd [2014] FCA 1081 at [4] and the cases there cited.

57    Both powers are to be exercised with caution.

58    In Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118 at [24] to [26], French CJ and Gummow J said (footnotes omitted):

[24] The exercise of powers to summarily terminate proceedings must always be attended with caution. That is so whether such disposition is sought on the basis that the pleadings fail to disclose a reasonable cause of action or on the basis that the action is frivolous or vexatious or an abuse of process[47]. The same applies where such a disposition is sought in a summary judgment application supported by evidence. As to the latter, this Court in Fancourt v Mercantile Credits Ltd [(1983) 159 CLR 87 at 99] said:

“The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried”.

More recently, in Batistatos v Roads and Traffic Authority (NSW) [(2006) 226 CLR 256 at 275 [46]] Gleeson CJ, Gummow, Hayne and Crennan JJ repeated a statement by Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde [(2000) 201 CLR 552 at 575-576 [57]] which included the following:

“Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way.”

There would seem to be little distinction between those approaches and the requirement of a “real” as distinct from “fanciful” prospect of success contemplated by s 31A. That proposition, however, is not inconsistent with the proposition that the criterion in s 31A may be satisfied upon grounds wider than those contained in pre-existing Rules of Court authorising summary dispositions.

[25] Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a “fanciful” prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue. Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law. But where the success of proceedings is critically dependent upon a proposition of law which would contradict a binding decision of this Court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospect of success.

59    In Jefferson Ford Pty Ltd v Ford Motor Co of Australia Ltd [2008] FCAFC 60; (2008) 167 FCR 372 at [21] to [23], Finkelstein J said, referring to the distinction between Order 14 of the former Federal Court Rules and s 31A of the Federal Court Act:

[21] In Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd [2006] FCA 1352; (2006) 70 IPR 146 Rares J attempted to describe the requisite standard under s 31A. After reviewing many cases, most from different and not necessarily analogous areas, he came down to the view (expressed at 157) that if there was “a real issue of fact to be decided” or “possibly, where there is a real issue of law” to be resolved the matter should go to trial. This, with respect, does not seem to be very far removed from the old O 14 test. So the standard must be found elsewhere.

[22] Perhaps one should look further at what Parliament intended to achieve. In O 14 cases, to show cause against an application for summary judgment, a defendant is required to go into some detail and state clearly and concisely the facts to be relied upon: Country Estates Pty Ltd v Leighton Contractors Pty Ltd (1975) 49 ALJR 173, 173-174. This requires only the material facts to be stated as distinct from the evidence that would establish those facts: Ritter v North Side Enterprises Pty Ltd [1975] HCA 18; (1975) 132 CLR 301, 304. If the test under s 31A raises the hurdle for the opposing party, it may be necessary for that party at a minimum to provide an outline of the evidence that will be relied upon. The outline must be sufficient to show that there is a genuine dispute about facts that are material to the outcome of the case. That will enable the judge to make some assessment of the merits. It would not, of course, be necessary, in most cases, to require the party to do more than provide an outline, because that would turn the summary judgment application into a trial.

[23] In other words, the section requires the judge to conduct what might loosely be described as a preliminary trial and look more closely than he would under an O 14 application to a party’s assertion that there is a real question of law or fact to be decided. Such an assertion is to be examined with a critical eye. The judge is to decide whether the opposing party has evidence of sufficient quality and weight to be able to succeed at trial. There will be cases where the asserted facts appear to be so improbable that there is no point in allowing them to go to trial. There will be others where the opposing party has not been able to show that the asserted facts are likely to be established at a trial. On questions of law, the judge should conduct an inquiry into their merit, not for the purpose of resolving them (though this can be done – see Rosser v Austral Wine and Spirit Co Pty Ltd [1980] VR 313, 320) and also not simply to determine whether the argument is hopeless, but in order to decide whether it is sufficiently strong to warrant a trial. If the judge is satisfied that he (or she) is able to resolve any contested legal issue at a summary hearing and without undue delay, it may be better all around if that be done. If not, then at least the merits must be tested. That will then give s 31A a substantial operation, which is what, it seems to me, was intended.

60    In Fortron Automotive Treatments Pty Ltd v Jones (No 2) [2006] FCA 1401 at [20] French J said:

“in order to secure judgment under s 31A it must be shown that the party prosecuting or defending the proceeding has no reasonable prospect of success. This judgment can be made, by reference to pleadings, where there is a defect in the pleadings which cannot be cured. Alternatively, it may be a judgment made by reference to evidence put on in support of an application under s 31A which reasonably excludes the possibility that facts essential to the success of the claim or defence will be able to be established”.

61    An instance in which the moving party might obtain summary judgment on this basis is where a party “completely fails to identify any valid claim or cause of action, to the court or fails to provide any factual material that could amount to a valid claim, in the materials he or she places before the court, having been given a reasonable opportunity to do so”: Dowling v Commonwealth Bank of Australia [2008] FCA 59 at [30]. In Dowling, Reeves J said at [30]:

The complete absence of an identified and valid claim and, more importantly, the factual materials to found either that valid claim, or some other form of valid claim, along with the likelihood that the applicant has no reasonable prospects of ever being able to produce that material, justifies a conclusion that there is not, and never will be, a valid claim before the court. This obviously cannot be remedied by orders to amend or strike out the pleadings because no amount of pleadings will remedy the fundamental absence of a valid claim. Moreover, the complete absence of a valid claim in this sense i.e. no identification of a claim, no factual foundation for a claim and no prospect of providing either, must lead inexorably to the conclusion that the applicant has no prospects of prosecuting his or her proceedings to a successful conclusion.

The position of bankrupt plaintiffs

62    As explained in Rogers v Asset Loan Co Pty Ltd [2006] FCA 434 at [36] and following, the entitlement of a bankrupt to commence or maintain proceedings is significantly restricted by the Bankruptcy Act. First, “the property of the bankrupt” vests in the trustee in bankruptcy upon the making of a sequestration order against the bankrupt’s estate: s 58(1) Bankruptcy Act. After-acquired property of the bankrupt vests in the trustee in bankruptcy as soon as it is acquired by, or devolves upon, the bankrupt: s 58(1)(b). By s 5(1) of the Bankruptcy Act, the property of the bankrupt means, in this context, the property divisible among the bankrupt’s creditors; and any rights and powers in relation to that property that would have been exercisable by the bankrupt if he or she had not become a bankrupt.

63    Section 116(2) provides that s 116(1) does not extend to certain property, including any right of the bankrupt to recover damages or compensation of the kind specified in s 116(2)(g), being, of potential relevance:

(i)    for personal injury or wrong done to the bankrupt, the spouse or de facto partner of the bankrupt or a member of the family of the bankrupt;

…

and any damages or compensation recovered by the bankrupt (whether before or after he or she became a bankrupt) in respect of such an injury or wrong …

64    It follows that, during bankruptcy, only the trustee of the bankrupt’s estate has standing to commence (and thereafter maintain) a claim for relief with respect to the property of a bankrupt, subject to the exception in s 116(2)(g) of the Bankruptcy Act.

statement of claim should be struck out

65    At the hearing of the application, Mr McClelland conceded that there were “problems” with both the originating application and the statement of claim and that both documents needed to be redrafted. He did not identify any particular part of the statement of claim which arguably disclosed a cause or causes of action, or which the plaintiffs sought to maintain. Nevertheless, Mr McClelland did not concede that the statement of claim should be struck out. He said that what the plaintiffs sought was “something from the bank that tells us that what we’re writing is just a load of rubbish”.

66    The plaintiffs are not entitled to a response from the Bank to their claim unless and until they are able to articulate it with sufficient clarity and precision: cf Shelton v National Roads and Motorists Association Ltd (NRMA Ltd) [2004] FCA 1393; (2004) 51 ACSR 278 at [51]. The claim cannot be answered until it is known, and the Bank is entitled to have the plaintiffs commit themselves clearly to the case they choose to mount: cf Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd (1996) ATPR 41-522 at 42,679 and 42,683.

67    Accordingly, in order to obtain any substantive response to their claims, it is necessary for the plaintiffs first to articulate a claim which discloses a reasonable cause of action against the Bank.

68    Although Mr McClelland did not say so clearly, the effect of his submissions was to acknowledge that the statement of claim, as presently drafted, is liable to be struck out.

69    In summary, the statement of claim sets out at length facts concerning the relationship between the Bank and the Mulhern Group of companies, and alleges that the various plaintiffs suffered loss by reason of those facts. However, with only very limited exceptions (concerning Mr and Mrs Mulhern who, as noted above, are bankrupt), the statement of claim does not identify facts that might conceivably support the existence of a cause of action in favour of any of the various plaintiffs.

70    For example, it is alleged that Ms Mulhern was subject to “threats and intimidation” by agents of the Bank “as a result” of public examinations conducted by the Bank’s agents in this Court in Brisbane which have caused her “to lose all faith in the Australian Courts to protect her rights and those of her family”. Although the pleading is not completely clear, it seems to allege that, by reason of Ms Mulhern’s loss of faith, she suffered all of the losses allegedly suffered by the Mulhern Group of companies (paragraph 83 of the statement of claim) without any identification of facts to support this allegation, or to permit identification of any cause of action which would entitle her to make a claim against the Bank for those losses. One stated particular of the losses of the Mulhern Group is the prior equitable interest of the first plaintiff (Ms Mulhern) in those companies in the sum of $30 million, although there are no facts to support the allegation that Ms Mulhern had any such prior equitable interest. (The reference to the first plaintiff may be an error: the plaintiffs adduced evidence from Mr Franklin that Mr and Mrs Mulhern were the owners of the alleged prior equitable interest).

71    This is a plain and obvious case warranting that the statement of claim be struck out in its entirety. The defects of the pleading are pervasive. The plaintiffs did not seek to maintain any particular part of the statement of claim. The real issue is whether the plaintiffs should be given an opportunity to re-plead or whether the Bank is entitled to summary judgment in its favour.

should the proceedings be dismissed?

72    In order to determine this question, it is necessary to consider whether the Bank has established that the plaintiffs or any of them have no reasonable prospect of successfully prosecuting the proceeding or a part of the proceeding, or whether any reasonable cause of action is disclosed, having regard to the available evidence.

73    As noted in paragraph 60 above, this judgment may be made by reference to pleadings where there is a defect in the pleadings which cannot be cured. In this case, the fundamental question is whether the available evidence demonstrates the possibility that the currently defective pleadings may be amended, or re-drawn, to allege a viable cause of action.

The plaintiffs’ case

74    Mr McClelland handed up written submissions which, in addition to setting out relevant legal principles, made the following points:

a.    There is a factual dispute with respect to the interest rate the defendant was to charge (paragraph 7). It emerges from the statement of claim that this dispute concerns the interest rate or rates charged to one or more of the Mulhern Group of companies;

b.    The plaintiffs contend that, if the Bank was not entitled to charge the rate it in fact charged and by reference to which it calculated the debt or debts on which it took enforcement action, then “all of the actions which have been taken by [the Bank] are tainted” (paragraph 12). The particular actions are not specified;

c.    The Bank has never “provided any positive assertion” in response to the case of any of the plaintiffs (paragraph 17);

d.    There was no valid service of process in proceedings commenced in the Supreme Court. The proceedings are not identified, but they appear to be proceedings in which the freezing orders were made. It is then contended that every action taken by the bank “based upon the tainted freezing orders, is also tainted” (paragraph 28).

75    At the hearing, I asked Mr McClelland to identify the cause or causes of action asserted by each of the plaintiffs. In response, Mr McClelland made submissions which may be summarised as follows:

a.    Ms Mulhern has a claim in trespass based upon the fact that the freezing orders were obtained irregularly. The trespass is “the taking of the properties, appointing receivers and all that sort of stuff which has gone on since” the freezing orders were obtained. It was said that Ms Mulhern was a “beneficiary of her mother and father’s efforts”;

b.    Pinnacle (the third plaintiff) “was financing the Mulherns’ operations in Australia to some degree”. It was “refinancing the Mulhern Group away from the Bank…and had the money ready to go when these events seem to have overtaken everybody”. Mr McClelland did not identify any particular cause of action asserted by Pinnacle;

c.    Mr Quinert (the fourth plaintiff) is said to have an action against the Bank, on the basis that he suffered loss (in the form of loss of commission) as a result of the Bank appointing receivers and managers to the Mulhern Group of companies ;

d.    Mulhern Builders Ltd IRE and Celtic Pacific Contractors LLIC (the fifth and sixth plaintiffs) are said to have suffered loss by reason of Mr Mulhern’s retention in Australia, because of his bankruptcy and also as a result of the freezing orders;

e.    Emerald and Toowong Prime (the seventh and eighth plaintiffs) lost moneys invested with the Mulhern Group of companies;

f.    Mulhern’s Properties (the ninth plaintiff) is Mr Mulhern’s overseas employer.

76    Mr McClelland did not make any substantive oral submissions about Cougan Corporation (the tenth plaintiff), but referred to the Mr Franklin’s affidavit, which discloses that Cougan Corporation lent $435,000 to Mr Mulhern “based on security of a second mortgage …over Gladstone Stage 1”. Cougan Corporation appears to claim that it lost the value of its security as a result of the Bank’s appointment of receivers to one or more of the Mulhern Group of companies.

77    Nor did Mr McClelland address orally the particular claims of Mr and Mrs Mulhern. He accepted that, as bankrupts “[o]n the purely legal point of view” neither of them “have standing to do anything”.

Plaintiffs’ evidence

78    Ms Mulhern’s affidavit deposes to the following matters of potential relevance:

a.    Her schooling has been “dramatically affected” by the freezing orders;

b.    She believes that she was followed by agents of the Bank in Sydney and she has fears for her personal safety.

79    Mr Franklin’s affidavit contains evidence of the following matters:

a.    His role in the relationship between the Mulherns, the Mulhern Group and the Bank;

b.    The financial position and strategy of the Bank at certain times;

c.    An arrangement by which Bankwest was to “take out” the Bank’s securities over the Mulhern Group prior to the appointment of receivers to the Mulhern Group;

d.    The loan from Cougan Corporation referred to above;

e.    His belief that Cougan Corporation was affected by the freezing orders “and is entitled to relief in relation on the undertakings provided”.

80    Mr McClelland’s affidavit is not relevant to the prospects of the proceeding.

Consideration

81    It is necessary to consider individually the particular positions of the various plaintiffs. However, there are certain, more general aspects of the case that can be addressed first.

82    Concerning the contention that there is an unresolved dispute as to the interest rates charged by the Bank, this is only significant if there is a plaintiff who can identify a cause of action which raises for determination that factual issue. A person seeking relief must have a real interest in the issue sought to be determined: a Court will not decide a question that is purely hypothetical in the sense that it will produce no foreseeable consequences for the parties to the proceeding: cf Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564 at 582.

83    No evidence was adduced that any of the plaintiffs apart from Mr and Mrs Mulhern might be parties to any relevant contract or contracts under which interest was charged or demanded. In this regard, I read the reference in paragraph 23 of the statement of claim to “the sixth plaintiff CPP and the seven plaintiff GUP” to be a reference to Celtic and Gladstone (two of the Mulhern Group of companies) and not to Celtic Pacific Contractors LLIC and Emerald. Accordingly, there was no basis for concluding that there might be any relevant cause of action in contract in favour of any of the plaintiffs apart from Mr and Mrs Mulhern (putting aside for the moment their status as bankrupts).

84    No submission was made to support any other cause of action in favour of any of the plaintiffs (with the possible exception of Mr and Mrs Mulhern) based on a claim that the Bank overcharged interest to any party. For example, it was not alleged that any relevant representation was made by the Bank to any of the plaintiffs apart from Mr Mulhern (paragraph 29 of the statement of claim) and Mrs Mulhern (paragraph 51 of the statement of claim), or that any relevant representation was intended to be relied upon by any of the plaintiffs apart from Mr and Mrs Mulhern.

85    Accordingly, to the extent that the proceedings seek to agitate a dispute about interest rates, with the possible exception of Mr and Mrs Mulhern, there is nothing to indicate that any of the plaintiffs has any reasonable prospect of successfully prosecuting the proceeding.

86    As to Mr and Mrs Mulhern, they do not have standing to bring claims to the extent that those claims have vested in their respective trustees in bankruptcy. Any claims that might be based on breach of contract or estoppel have vested in the trustees.

87    To the extent that the plaintiffs’ claims are based upon contentions that orders were wrongfully obtained in the Supreme Court, the proceedings are an abuse of process because they are a collateral attack upon a final decision of that Court: cf Stergiou v McGrail [1994] FCA 1041 at [8]; Shaw v MAB Corporation Pty Ltd [2014] FCA 62; 220 FCR 425 at [60]. In any event, this Court does not have jurisdiction or power to set aside orders of the Supreme Court of Queensland: cf Shaw v MAB Corporation Pty Ltd [2013] FCA 1231 at [44]; Birdon Pty Ltd v Houben Marine Pty Ltd [2011] FCAFC 126; (2011) 197 FCR 25 at [96] (Rares J); Re Baxter; ex parte Official Receiver v Baxter (1986) 10 FCR 398 at 401. To the contrary, a decision of the Supreme Court may create an “issue estoppel” if it determines an issue in a cause of action as an essential step in its reasoning, precluding re-litigation of that issue: cf Stergiou at [8].

88    In particular, in relation to claims based upon the allegation that the Bank wrongfully obtained the freezing orders, that order was unsuccessfully challenged by Mrs Mulhern, when she applied to have the order varied or discharged. Subsequently, the freezing orders were superseded by the Supreme Court’s decision in May 2012 that the Bank was entitled to the funds affected by the order. Although Mrs Mulhern commenced an appeal from that decision, it was ultimately dismissed. These matters place insuperable constraints around the prospect of any action arising out of the freezing orders.

Ms Mulhern (First plaintiff)

89    There is nothing, either in the statement of claim or in the evidence, which leads me to suspect that Ms Mulhern has any cause of action against the Bank. Despite Mr McClelland’s oral submissions, there is no evidence of any trespass by the Bank to any property of Ms Mulhern. The issues raised by the plaintiffs in their written submissions do not disclose any reason to believe that Ms Mulhern has any reasonable prospect of successfully prosecuting the proceeding against the Bank. Nor does Ms Mulhern’s affidavit evidence.

90    I readily accept Ms Mulhern’s evidence that she has been adversely affected by her parents’ respective bankruptcies. However, that does not mean that she has a legal claim against the Bank for any amount, let alone the amounts claimed in the proceeding.

91    In this case, Ms Mulhern has not identified either a valid claim or any factual basis for any claim that she could make, if given an opportunity to re-plead.

Mrs Mulhern (Second plaintiff)

92    To the extent that Mrs Mulhern is seeking to bring claims that have vested in her trustee in bankruptcy, she has no standing. To that extent, the proceedings should be either stayed or dismissed.

93    Does Mrs Mulhern seek to bring claims that do not vest in her trustee in bankruptcy? It is possible that the claim for loss of consortium may be such a claim. However, the claim is based on the alleged wrong involved in obtaining the sequestration order against her estate (see statement of claim paragraph 81(a)). The correctness of that order has been challenged by Mrs Mulhern unsuccessfully, in the Federal Magistrates Court and this Court. Accordingly, that issue has been finally resolved against Mrs Mulhern and her claim for loss of consortium is bound to fail: cf Walton v Gardiner (1993) 177 CLR 378 at 393.

Pinnacle and Mulhern’s Properties (Third and ninth plaintiffs)

94    There is no evidence to support a contention that either of these entities has or may have a cause of action against the Bank. No possible cause of action was identified. The mere facts that Pinnacle was a potential funder of the Mulhern Group of companies and that Mulhern’s Properties was and is Mr Mulhern’s employer do not point to any possible cause of action.

Mr Quinert, Emerald, Toowong Prime and Cougan Corporation (Fourth, seventh, eighth and tenth plaintiffs)

95    Mr Quinert’s claim appears to be founded solely upon the proposition that he suffered loss either by reason of the making of the freezing orders, or as a result of the Bank appointing receivers and managers to the Mulhern Group of companies. In either case, there is no evidence that Mr Quinert has or may have a cause of action against the Bank. As noted above, the funds the subject of the freezing orders were ultimately determined to be owed to the Bank and the appointment of the receivers and managers was decided by the Supreme Court to have been validly made.

96    Similarly, the claims of Emerald and Toowong Prime are based solely upon their financial interests in members of the Mulhern Group of companies and their alleged situation as entities “affected” by the freezing orders. The claim made by Cougan Corporation is said to arise from its position as a lender to Mr Mulhern (or one of the Mulhern Group of companies). Their respective positions are relevantly no different from that of Mr Quinert.

Mulhern Builders Ltd IRE and Celtic Pacific Contractors LLIC (Fifth and sixth plaintiffs)

97    These companies are said to have suffered loss by reason of Mr Mulhern’s retention in Australia, because of his bankruptcy and also as a result of the freezing orders.

98    Again, there is no identified cause of action in favour of either company against the Bank and no apparent factual basis to found any cause of action.

Mr Mulhern (Eleventh plaintiff)

99    If Mr Mulhern had an actionable claim for false imprisonment, then that claim may not form part of his bankrupt estate. However, it would not be a claim against the Bank. Further, there is no basis articulated for an action for false imprisonment. The only available evidence is that Mr Mulhern was arrested pursuant to a court order.

100    Otherwise, Mr Mulhern has no standing to bring the claims for the relief specified in the statement of claim, even if those claims are based on reasonable causes of action, which appears not to be the case.

Conclusion

101    Apart from Mr and Mrs Mulhern, the plaintiffs have not identified any real issue of fact or law to be decided as between themselves and the Bank. There is currently no evidence that would support a conclusion that there may be any real issue of fact or law to be decided as between any of the plaintiffs and the Bank.

102    There remains the question whether any of the plaintiffs has any prospect of ever identifying a valid claim against the Bank.

103    In Mulhern’s Properties Inc v Bank of Queensland [2013] FCA 401, Flick J struck out the applicant’s statement of claim but declined to order summary judgment in the Bank’s favour. In that case, the applicant was represented by Mr Mulhern. At [40] and [41], Flick J said:

[40] …Even though the bar may well have been lowered by the introduction of s 31A of the Federal Court of Australia Act (Hicks v Ruddock [2007] FCA 299 at [12]; Kowalski v MMAL Staff Superannuation Fund Pty Ltd [2009] FCAFC 117 at [25], [2009] FCAFC 117; 178 FCR 401 at 408 [per] Spender, Graham and Gilmour JJ), it is not considered appropriate to entertain an application for summary judgment without affording the Applicant an opportunity to seek to amend – with the assistance of a lawyer – the existing Statement of Claim. When drafting any amendment, the legally skilled draftsman will have the benefit of the written submissions filed on behalf of the Bank of Queensland. Whether or not one or other of those difficulties is addressed or not considered to be as difficult as envisaged by the Bank – and not resolved by this Court – is a matter to which future consideration can be directed.

[41] An order striking out the existing Statement of Claim in its entirety is not to be construed as precluding the ability of Mulhern’s Properties to file a fresh Statement of Claim which does comply with the Rules of this Court. Within a morass of poorly organised facts and badly articulated arguments a lawyer may be better able to discern a cause of action than an unrepresented litigant and a better able to discern a cause of action which requires judicial resolution. Considerable caution must be exercised before any Court precludes a litigant from placing before a Court a properly articulated cause of action: Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 at 536-537. …

104    This is not a case in which the Court has been presented with facts and arguments that have not been reviewed by a lawyer for the purpose of identifying a cause of action. In this case, the pleading was certified by the plaintiffs’ lawyer and the plaintiffs had the opportunity of adducing evidence to demonstrate their prospects after receiving the Bank’s interlocutory application. Despite these opportunities, there has been no identification on behalf of the first and third to tenth plaintiffs of any basis for a prospect of successfully prosecuting the proceeding. In those circumstances, I am satisfied that those plaintiffs have no reasonable prospect of successfully prosecuting the proceeding my view. In those circumstances, caution does not require the Court to refrain from giving summary judgment.

105    It follows, in my opinion, that the proceedings brought by the first and third to tenth plaintiffs should be summarily dismissed pursuant to both s 31A of the Federal Court Act and rule 26.01 of the Federal Court Rules.

Mrs Mulhern

106    For the reasons given at paragraphs 87 and 88 above, I am satisfied that Mrs Mulhern has no reasonable prospects of successfully prosecuting the proceeding insofar as she seeks relief arising out of:

(1)    orders made by the Supreme Court of Queensland;

(2)    the sequestration order made against the estate of the second plaintiff.

107    Accordingly, the proceedings should be dismissed as an abuse of process to the extent that they are based upon the claims that receivers and managers were wrongfully appointed to the Mulhern Group of companies, the alleged unlawfulness of the freezing orders and the making of the sequestration order.

108    There are some aspects of the pleading, particularly the claims of breach of contract and estoppel, about which I am not satisfied that Mrs Mulhern has no reasonable prospect of successfully prosecuting.

109    By s 60(2) of the Bankruptcy Act, an action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.

110    In this case, the proceedings were commenced after Mrs Mulhern became a bankrupt. However, the same considerations that underlie s 60(2) would warrant that the proceedings be stayed, at least for the duration of the bankruptcy. The result will be that Mrs Mulhern’s claims are not dismissed in their entirety, but she may not seek to file an amended statement of claim while the proceedings are stayed.

Mr Mulhern

111    Mr Mulhern’s position is relevantly similar to that of Mrs Mulhern, except that it is not clear that he was a party to any proceedings in which the validity of the appointment of receivers and managers to the Mulhern Group of companies has been determined.

112    Since the claim for false imprisonment has no prospects against the Bank, that part of the proceedings should also be summarily dismissed.

Associate:

Dated:    5 February 2015