FEDERAL COURT OF AUSTRALIA

Garrett v Macks [2015] FCA 254

THE COURT ORDERS THAT:

1.    The application for leave to appeal Tracey J's decision made on 21 November 2014 is dismissed.

2.    The applicant is to pay the respondent's costs of and incidental to the application for leave to appeal.

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

REASONS FOR JUDGMENT

1    The applicant seeks leave to appeal the orders and decision of Tracey J made on 21 November 2014 pursuant to which his Honour ordered, inter-alia, that the applicant’s originating process be dismissed. The respondent opposes such leave to appeal.

2    In my opinion, for the reasons that follow, leave to appeal should be refused.

3    Before proceeding further, I should note one matter. Justice Pagone on 26 February 2015 made, in essence, a vexatious litigant order under s 37AO of the Federal Court of Australia Act 1976 (Cth) (the Act) in proceeding VID 600 of 2014 (Garrett v Commissioner of Taxation [2015] FCA 117) in the following terms (order 4):

The applicant is prohibited from:

(a)    instituting in his own name; or

(b)    causing others to institute; or

(c)    being concerned, whether directly or indirectly, in the institution of,

any proceeding in any registry of the Federal Court of Australia without the leave of this Court.

4    The order made by Pagone J refers to the “institution of”, “instituting” and other verbal forms. The present application for leave to appeal was instituted before that order was made. The order in form does not expressly refer to continuing a proceeding already begun before the order was made. In my view, although the leave application may be a “proceeding”, it is not caught by his Honour’s order. In any event, even if it was so caught, I would grant leave to the applicant to continue with his application for leave to appeal.

Factual Background

5    The relevant factual background is as follows:

(a)    A sequestration order was made against the applicant on 24 September 2004, on which date the respondent was appointed as the trustee in bankruptcy of the applicant’s estate.

(b)    The applicant was discharged from that bankruptcy on 22 April 2009, with the respondent finalising the administration of the applicant’s estate on or about 17 May 2011.

(c)    During the course of the administration of the estate, the applicant and the respondent were involved in various disputes and legal proceedings. Disputes arose concerning which assets formed part of the property of the estate. Further, the applicant commenced administrative review proceedings against the respondent seeking to review decisions made by the respondent in his capacity as trustee.

(d)    On 10 March 2009, the applicant and the respondent entered into a Settlement Agreement to resolve their disputes and differences. Stephen James Duncan (Duncan), the trustee in bankruptcy of the estate of Averil Gay Garrett (the applicant’s former spouse) was also a party to the Settlement Agreement. The applicant has also brought separate proceedings against Duncan. I heard and determined the applications for leave to appeal in each proceeding together (see Garrett v Duncan [2015] FCA 255).

(e)    The respondent complied with his obligations under the Settlement Agreement (see his Honour’s reasons for judgment at [13]). Those obligations included the payment of money to the applicant and to entities (including the Australian Taxation Office) on the applicant’s behalf (see his Honour’s reasons for judgment at [11]).

6    The Settlement Agreement contained various terms including the following:

8.    Releases by Garrett

8.1    Garrett unconditionally releases and forever discharges Macks, Duncan, Lipman Karas, including its directors and employees, Sashi Maharaj QC of counsel, Arturo Dal Cin of counsel, Graham Dart of counsel and Cosoff Cudmore Knox, including its partners and employees from any and all claims whatsoever and howsoever arising out of the facts, matters and circumstances referred to in the Proceedings and in relation to all matters, whensoever or howsoever arising, touching or arising from or in connection with the facts, matters and circumstances alleged in each and every of the Proceedings and including without limitation all matters arising out of the administration by Macks of the bankrupt estate of AMG and the administration by Duncan of the bankrupt estate of Averil Gay Garrett.

8.2    Save as provided for by the terms of this agreement, Garrett forever releases any claim to and entitlement to the Royalty Stream, which has priority over Macks and Duncan.

8.3    Obligations and rights under this clause continue after the expiration or termination of this agreement.

8.4    Nothing in this clause 8 prevents any party from seeking to enforce the obligations or exercise the rights under this agreement.

8.5    For the avoidance of doubt, the releases and discharges given by Garrett in this clause 8 are to be held by Macks and Duncan jointly and severally for themselves and on trust for and on behalf of the parties released and discharged who are not parties to this agreement.

…

10.    Covenant not to sue

10.1    Garrett must not make any claim whatsoever or howsoever arising against any of Macks, Duncan, Lipman Karas, including its partners and employees, Sashi Maharaj QC of counsel, Arturo Dal Cin of counsel, Graham Dart of counsel and Cosoff Cudmore Knox, including its partners and employees arising directly or indirectly out of or relating to:

10.1.1    the conduct of the Proceedings; or

10.1.2    the administration of the bankrupt estate of AMG; or

10.1.3     the administration of the bankrupt estate of Averil Gay Garrett.

(the Releases)

The proceedings before Tracey J

7    On 5 June 2014, the applicant commenced the proceeding below against the respondent by the filing of a fast-track application. In the proceeding, the applicant made the following claims for purported final relief:

1.    That an Order is made that the Surplus of the Bankrupt Estate SA 1590/2004 is paid to the nominated Account of the Applicant as set out in his email to the Respondent dated 24th May 2014.

2.    That the Respondent provides a list of and a copy of every Document or Thing related to the administration of the Bankrupt Estate SA 1590 of 2004.

3.    That an order is made that all advice received by the Respondent and communications between the Respondent and Lipman Karas that would normally be the subject of Legal Privilege is provided pursuant to Order 2.

4.    Such other orders as this Honourable Court Deems fit.

8    On 19 September 2014, the respondent filed an interlocutory application seeking orders for summary judgment pursuant to s 31A(2) of the Act and also invoking r 26.01 of the Federal Court Rules 2011 (Cth). The respondent, in essence, contended that the effect of the releases and covenant not to sue contained in the Settlement Agreement constituted a complete defence to the applicant’s claim for final relief.

9    The respondent’s application was heard by his Honour on 21 November 2014. On that date his Honour granted the application and dismissed the applicant’s fast-track application. Leave to appeal has been sought from that decision.

Application for leave to appeal

10    The order made by Tracey J is an interlocutory judgment (s 24(1D)(b) of the Act). Accordingly, the applicant requires leave to appeal (see s 24(1A) of the Act).

11    In determining whether leave to appeal should be granted, the Court is required to consider whether:

(a)    in all the circumstances the decision below is attended with sufficient doubt to warrant its reconsideration; and

(b)    substantial injustice would result if leave were refused supposing the decision to be incorrect (Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398 to 399).

12    Expressed slightly differently, leave to appeal will be granted where there is a reasonably arguable case that the decision of his Honour was affected by an appealable error and a grant of leave is necessary to remedy a substantial injustice (Re CSR Ltd (2010) 183 FCR 358 at [5]). Leave will more readily be granted where an interlocutory decision determines substantive rights as distinct from being a matter of mere practice and procedure.

13    In summary, the applicant’s proposed draft notice of appeal raised the following 8 grounds:

1.    Whether it was reasonable for his Honour to make the findings and orders.

2.    Whether his Honour erred in his exercise of discretion in not ordering the issuing of a subpoena against Skip Lipman or that the respondent comply with a notice to produce.

3.    Whether his Honour was bound to consider all the evidence filed in the proceeding.

4.    Whether his Honour was unreasonable in failing to adjourn the application for 12 weeks upon the application of the applicant as a matter of procedural fairness and natural justice.

5.    Whether it was open to the Court to interpret the application as an application under s 179 of the Act which was not precluded by the Deed.

6.    Whether his Honour exercised the discretion of the Court reasonably in failing to observe that the respondent was bound to annul the sequestration order under s 153A of the Act.

7.    Whether his Honour acted reasonably in not finding that the respondent had trespassed on the estate of the applicant since 24 September 2004.

8.    Whether his Honour acted reasonably in the exercise of discretion as a matter of law in respect to the principles of procedural fairness and natural justice.

14    First, no error is demonstrated as to the manner in which Tracey J approached the exercise of his discretion and task in considering whether to grant summary judgment pursuant to s 31A of the Act. His Honour appropriately approached the task with caution (see at [20]) and also having regard to the principles expounded in Spencer v The Commonwealth (2010) 241 CLR 118. The Court can grant summary judgment where, as a matter of law, the applicant has no entitlement to the relief sought, even if he establishes the facts which he seeks to prove. Further, and relevant to the context of the present case, s 31A has been applied to give summary judgment where an applicant has instituted proceedings contrary to terms of settlement which resolved by compromise the relevant applicant’s claims (Rucinski v Monash University [2012] FCA 362).

15    Second, no error is demonstrated as to his Honour’s reliance upon the Settlement Agreement. No relief was sought by the applicant in his application that the Settlement Agreement should be set aside. The submission now advanced by the applicant complaining as to the lack of bona fides of the parties in entering into the Settlement Agreement was simply bare assertion unsupported by any proper evidentiary foundation. Put simply, the respondent performed his obligations under the Settlement Agreement according to the evidence before his Honour and the applicant received benefits under the Settlement Agreement accordingly (see his Honour’s reasons at [11] and [13]). Let me elaborate further.

16    The applicant raised before me a multiplicity of issues concerning the Settlement Agreement, but they were all premised in some way on the proposition or foundation that the Settlement Agreement was not binding or should not be enforced. But as I say, the originating process did not raise any such relief. Further, the applicant never made any application to his Honour foreshadowing any such relief.

17    Further, in a proposed amended notice of appeal, the applicant has sought to raise many more grounds of appeal (48 in total) which purportedly embrace a challenge to the original judgment debt, the original sequestration order and consequently the validity of the trustee’s appointment, all for the purpose of seeking to collaterally challenge or being anterior to a challenge to set aside the Settlement Agreement. But the originating process before his Honour never embraced such points and nor were such points ever raised before his Honour. Moreover, the proposed grounds raised are nebulous and misconceived. The proposed amended notice can be put to one side.

18    No error is demonstrated as to his Honour’s construction and application of the releases. The claim for relief sought by the applicant was caught by the releases (see his Honour’s reasons at [21], [24] and [26]). The applicant’s claim was one “arising out of the administration by Macks of the bankrupt estate” (cl 8.1) or “arising directly or indirectly out of or relating to… the administration of the bankrupt estate” (cl 10.1.2).

19    Further, the releases constituted an accord and satisfaction which barred the applicant from any right to relief under the application (see his Honour’s reasons at [23] to [26]).

20    Third, the applicant raised before me the issue that his originating process was an application under s 179 of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) and that, accordingly, the Court’s exercise of jurisdiction and powers under s 179 could not be foreclosed by the terms of the Settlement Agreement; in other words, the releases and the covenant not to sue could not be a conclusive bar. But even assuming this, his Honour was quite correct or would have been quite correct to reject any such application in the exercise of his discretion based upon the existence of the Settlement Agreement and the releases that it contained. To pursue such an application in the face of the Settlement Agreement and the releases and covenant not to sue was an abuse of process. Even if his Honour was in error in treating the releases and the covenant not to sue as a conclusive bar, no substantial injustice would be caused to the applicant if leave was refused; the proceeding in any event was an abuse of process.

21    Fourth, just looking at the form of the relief contained in the originating process, much of it was based on a false premise; no surplus had been established on the evidence. Further, the other relief sought in the originating process had not been independently justified in any event. Even if his Honour had in any way been in error in confining his decision to the effect of the releases, and I do not say that he was so in error, no substantial injustice would be caused by refusing leave to appeal. The claims in the originating process appeared hopeless in any event. It is appropriate to elaborate further.

22    The essence of one claim advanced by the applicant is that the respondent in administering the applicant’s estate accumulated a surplus in the amount of $88,531, which the applicant asserted was his property. But the respondent’s affidavit evidence demonstrated that this claim lacked any evidentiary basis (see the affidavit of the respondent sworn 1 September 2014). There was no surplus in the estate. In this context there was another misconceived argument advanced by the applicant in relation to the operation of s 129AA of the Bankruptcy Act that fails in limine both factually and legally.

23    Further, putting to one side order 1 in respect of the applicant’s claim in his originating process, orders 2 and 3 are, of their nature, claims in the nature of discovery and production of documents in any event and are not aptly described as principal relief.

24    Fifth, no error is demonstrated in his Honour’s decision to refuse a further adjournment on 21 November 2014. Aside from the matters that his Honour identified in his reasons (at [15], [16] and [17]), no evidence was filed by any legal representative or proposed legal representative of the applicant supporting the applicant’s assertion that a further 12 week adjournment would have enabled such a representative to properly deal with the matter. Further, as his Honour set out in his reasons (at [3], [4] and [6]), the applicant had already been granted a number of indulgences to enable him to obtain legal representation. His Honour’s approach in refusing the adjournment application was consistent with appropriate case management principles, the overarching purpose described in s 37M of the Act and the principles expounded in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at [92] to [101].

25    Further, contrary to the applicant’s submission, any further adjournment would have caused prejudice to the respondent. As the respondent submitted to me, aside from continuing to be vexed by a proceeding which ought never to have been commenced, the respondent would have incurred further costs thrown away in having to prepare for yet a further hearing, including the briefing of counsel to appear at a further hearing with little, if any, prospect of ever recovering such costs. The applicant did not proffer a worthwhile undertaking to pay the respondent’s costs thrown away by reason of any adjournment sought including the previous adjournments which had been granted.

26    Further, in considering the question of an adjournment, his Honour was also not required to limit himself to just the competing interests of the parties before him. His Honour would undoubtedly have also had in mind the observations in Sali v SPC Ltd (1993) 116 ALR 625 at 629 per Brennan, Deane and McHugh JJ:

In determining whether to grant an adjournment, the judge of a busy court is entitled to consider the effect of an adjournment on court resources and the competing claims by litigants in other cases awaiting hearing in the court as well as the interests of the parties. As Deane J pointed out in Squire v Rogers ((1979) 27 ALR 330 at 337) this “may require knowledge of the working of the listing system of the particular court or judge and the importance in the proper working of that system of adherence to dates fixed for hearing”. What might be perceived as an injustice to a party when considered only in the context of an action between parties may not be so when considered in a context which includes the claims of other litigants and the public interest in achieving the most efficient use of court resources.

27    Finally, it is appropriate to comment upon a number of other matters emphasised by the applicant in oral submissions.

28    The applicant asserted that his Honour failed to have regard to all of the evidence before him. There is no substance to this assertion. I should say that in any event most of the applicant’s evidence was largely irrelevant to the matters that his Honour was required to and did consider. Much of it was directed to exposing the entrails of a history of the events and circumstances which affected or purportedly affected the applicant as seen through his own distorted and astigmatic lens. This was typified by the very detailed chronology that the applicant provided to me setting out numerous events over the period 31 May 1993 to 21 November 2014. At best, some of it might have had relevance, if in an admissible form (most of which was not in such a form), to assertions concerning the respondent’s earlier activities or even the validity of the sequestration order previously made or a potential annulment (s 153B of the Bankruptcy Act). But the proceeding before Tracey J involved no such issues or, as I have said, a challenge to the Settlement Agreement. Moreover, and for completeness, when an adjournment was sought by the applicant before his Honour, the applicant did not expressly identify that one purpose was to consider amending the proceedings to claim relief by way of setting aside the Settlement Agreement.

29    Further, the applicant sought to place before me new material that had not been before his Honour. Most of it was irrelevant to the matters that I had to deal with, including references to entirely unrelated South Australian proceedings and also freedom of information requests involving the Australian Taxation Office. I reject the applicant’s application to rely upon this new material. It is largely irrelevant and is sought to be put before me by the applicant on a misconceived premise. Further, for the material that was in existence at the time of the hearing before his Honour, no satisfactory reason has been advanced as to why it was not put before his Honour.

30    Further, as I have said earlier, the applicant has sought leave to put forward a proposed amended notice of appeal containing 48 proposed grounds of appeal. It is not useful for me to go through each one of them. In oral argument, the applicant’s “real” grounds of complaint were crystallised and have been addressed by me earlier. None of the proposed grounds of appeal have substance, whether the principal arguments addressed above or the lengthy grounds referred to in the proposed amended notice of appeal.

Conclusion

31    In summary, the applicant has not shown that his Honour’s decision was attended with any sufficient doubt such as to warrant the grant of leave to appeal.

32    Moreover, given the form of the orders sought in the originating process, the applicant has not in any event shown that he would suffer substantial injustice by my refusing leave, even if the decision below was incorrect.

33    The application for leave to appeal will be dismissed with costs.

Associate:

Dated:    23 March 2015