FEDERAL COURT OF AUSTRALIA

Williamson (Trustee) v Rumsley, in the matter of Clifford (a Bankrupt) [2015] FCA 639

IN THE MATTER OF THE BANKRUPT ESTATE OF PHILIP GEORGE CLIFFORD

THE COURT ORDERS THAT:

1.    The second respondent’s interlocutory application dated 27 May 2015 be dealt with on an expedited basis and the time for serving this application be abridged.

2.     The orders of Deputy District Registrar Stanley made on 20 May 2015 be stayed pending determination of this proceeding (WAD 17 of 2015) or further order of this Court.

3.     The first respondent pay the second respondent’s costs of the interlocutory application on an indemnity basis to be taxed if not agreed, and to be paid forthwith.

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

IN THE MATTER OF the bankrupt estate of PHILIP GEORGE CLIFFORD

REASONS FOR JUDGMENT

1    This is an urgent application by the second respondent, Vegas Enterprises Pty Ltd (Vegas) for an order staying orders made by Deputy District Registrar Stanley on 20 May 2015 in WAD 28 of 2009 (Appropriation Orders) pending determination of these present proceedings (WAD 17 of 2015) or further order of this Court.

2    The application is supported by the following affidavits:

(a)    Mr Geoff Backshall sworn on 27 May 2015; and

(b)    Ms Susannah Hill sworn on 28 May 2015.

3    Vegas also relied upon the affidavit of Ms Saran Emily Bavich sworn on 15 April 2015, which was filed earlier in the substantive proceeding. The application is opposed by the first respondent, Mr Alan Phillip Rumsley. He relies upon his affidavit sworn on 28 May 2015, together with another sworn by him on 9 February 2015 and filed earlier in the proceeding.

4    The background to this application is that Mr Rumsley, who is a solicitor, acted for Mr Philip George Clifford in proceedings, before Barker J, which have been finalised following a trial. Mr Clifford was the beneficiary of a costs order against Vegas on the cross-claim in those proceedings (the Costs Order). Mr Clifford in due course assigned his interest in the Costs Order to Mr Rumsley (the assignment). Mr Clifford was later declared bankrupt. His trustees in bankruptcy, as applicants, have challenged, in the substantive proceedings, the validity of the assignment.

5    The costs the subjects of the Costs Order have been taxed in the sum of $110,000. This constitutes a judgment debt.

6    Mr Rumsley, I am informed, entered an appearance in the substantive proceeding on 8 February 2015. The proceedings were instituted on 21 January 2015 and there is a trial of preliminary issues listed for 11 June 2015. If the trustees are successful in their application, then Mr Rumsley will have no valid claim as against Vegas in respect of the Costs Order.

7    Mr Rumsley on 21 February 2015 applied to this Court pursuant to Part 4, Division 5 of the Civil Judgments Enforcement Act 2004 (WA) (the Act), read together with section 53 of the Federal Court of Australia Act 1976 (Cth), for debt appropriation orders directed to Vegas’ bank, Westpac Banking Corporation (Westpac). He did so ex parte. Deputy District Registrar Stanley made the Appropriation Orders on 20 May 2015.

8    Counsel for Mr Rumsley informed the Court that his client did not inform Deputy District Registrar Stanley, who dealt with his application for the debt appropriation orders, that the assignment which underpinned his claim to be a judgment debtor (see section 3 of the Act) was the subject of challenge as I have described. Nor did Mr Rumsley inform Vegas, or the trustees, or myself as the docket judge, that he had applied for debt appropriation orders.

9    Counsel for Mr Rumsley disavowed his initial submission that section 15(3) of the Act was the only available pathway for Vegas to restrain the operation of the Appropriation Orders. That is a concession, in my view, correctly made because section 15, it seems to me, is concerned with orders suspending enforcement of a judgment. The Appropriation Orders do not constitute such a judgment. Accordingly, the application before me is properly one to stay the Appropriation Orders.

10    Counsel for Mr Rumsley submits his client was entitled to apply for the debt appropriation orders and to do so ex parte. Nonetheless, he was, in my opinion, required, particularly as an officer of the Court, to make disclosure to Deputy District Registrar Stanley that the very basis upon which he was resting his entitlement to the Appropriation Orders, namely, the assignment, was being impugned in the present proceedings.

11    In those circumstances, I do not consider that Deputy District Registrar Stanley would have been obliged to make the orders, had she known that this was the position. The entire basis of the jurisdiction to make such orders was not developed in argument. However, I think it likely that had she been informed of the pending substantive proceedings, then Deputy District Registrar Stanley would have directed that the other parties to this proceeding be informed. Each had a clear interest. The trustees have an interest in ensuring that funds to which they are entitled to be paid, if any, by Vegas are not paid to Mr Rumsley, who it contends has no entitlement to receive them. Vegas has an interest in knowing to whom, if anyone, it is obliged to pay the costs the subject of the Costs Order. It has filed a submitting appearance in the substantive proceeding to that end.

12    Had those other parties been so informed, I consider it likely that one or other or both would have sought relief from the Court failing Mr Rumsley agreeing not to prosecute his claim for the debt appropriation orders. This may have been in the way of an application under section 15(2) of the Act made to Barker J to suspend the Costs Order, or by some alternative form of relief.

13    I will say no more than that it is surprising that, as an officer of the Court, with full knowledge of the substantive proceeding, Mr Rumsley nonetheless, without notice to the other parties, or to the docket judge, applied for these debt appropriation orders. If the Appropriation Orders are not stayed then it seems likely that Westpac, upon whom the orders have been served, will pay the amount of the judgment debt to Mr Rumsley. This is the basis for the urgency attaching to the interlocutory application. I would regard such an outcome as subversive to the administration of justice.

14    Counsel for Mr Rumsley submits that any such stay order ought to be on terms, either by Vegas providing an undertaking as to damages or the funds being paid to Mr Rumsley, and to be held by him in an interest-bearing account until the disposition of the substantive proceeding. There is no basis in my opinion for requiring the imposition of these or any similar terms. There is no evidence that Vegas is unable to pay the judgment debt. More importantly, I would regard it as being offensive to justice to impose such terms in the circumstances in which the Appropriation Orders were obtained.

Stay Orders

15    Accordingly, for these reasons, I will order that:

(1)    Vegas’ interlocutory application dated 27 May 2015 be dealt with on an expedited basis and the time for serving this application be abridged;

(2)    The orders of Deputy District Registrar Stanley made on 20 May 2015 be stayed pending determination of this proceeding (WAD 17 of 2015) or further order of this Court.

Costs

16    Vegas, pursuant to the liberty to make submissions in respect of costs, has applied for an order that Mr Rumsley pay the costs of the interlocutory application upon an indemnity basis to be taxed if not agreed. Vegas points in support of its application for indemnity costs to the circumstances which I have described in my reasons for judgment which led to Mr Rumsley obtaining the Appropriation Orders. It was those orders which led to the necessity to bring this application, or at least the prosecution of those orders by Mr Rumsley in seeking to obtain the amount of the judgement debt from Westpac.

17    Vegas also submits that Mr Rumsley’s refusal to desist from that course when invited to do so by Vegas’ solicitors is a further reason for the imposition of an order for costs upon an indemnity basis. Counsel for Mr Rumsley submits that he did not know before the matter came on for hearing this morning that non-disclosure of the substantive proceedings to Deputy District Registrar Stanley was a basis for the application, although he accepts, as he must, that he knew about it at the very outset of the hearing, because counsel for Vegas so informed the Court.

18    His response to that by way of submission was that he did not have sufficient time on his feet to consider that submission. I reject both of those submissions made on behalf of Mr Rumsley. As an experienced litigation solicitor Mr Rumsley ought to have known that he should have made such disclosure, yet despite the matters that I put to his counsel, neither he nor his client seemed to understand that the conduct of Mr Rumsley was inimical to the administration of justice in this Court. I have no hesitation in these circumstances in making an order for costs as sought by Vegas.

19    The question of costs which I am determining concerns the costs of the interlocutory application. It does not concern the costs of the substantive proceeding. It may, for example, be the case that if the trustees are successful, then the judgment debt on which Mr Rumsley relies by virtue of the assignment will be one that he has no interest in. So there is no basis for tying, as counsel for Mr Rumsley submitted, any order for costs that I make in relation to this interlocutory application to what might or might not happen in the substantive proceeding.

20    That costs have been incurred by Vegas, which was merely a submitting party in the substantive proceeding, has been occasioned by Mr Rumsley’s conduct and only by his conduct. Vegas’ interlocutory application is an entirely discrete matter from the issues in the substantive proceeding. I will order that Mr Rumsley pay Vegas’ costs on an indemnity basis to be paid forthwith.

Associate:

Dated: 25 June 2015