FEDERAL COURT OF AUSTRALIA

Mulhern v Pearce (No 3) [2015] FCA 806

THE COURT ORDERS THAT:

1.    The first respondent be given leave to reopen the proceeding to adduce further evidence.

2.    Michael Richard Mulhern must not institute proceedings against Mark William Pearce and Andrew John Heers or either of them in this Court without leave of the Court.

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

REASONS FOR JUDGMENT

1    This is an application for a vexatious proceedings order against Michael Richard Mulhern pursuant to s 37AO(2) of the Federal Court of Australia Act 1976 (Cth) (“the Federal Court Act”) and r 6.02 of the Federal Court Rules 2011 (Cth).

2    Mr Mulhern has been a bankrupt since 3 February 2010 when a sequestration order was made against his estate. The applicants for the vexatious proceedings order are the trustees in bankruptcy, Mark William Pearce and Andrew John Heers (“the trustees”).

3    Mr Mulhern filed an originating application on 12 September 2013 seeking orders that the sequestration order be annulled, set aside or discharged and that the trustees return certain travel documents to him. On 17 February 2014, the trustees filed an interim application for an order under the vexatious proceedings provisions preventing Mr Mulhern from starting or continuing any other proceeding in the Court against the trustees without the leave of the Court, as well as seeking summary judgment. Collier J ordered that the vexatious proceedings application be adjourned for hearing on a date to be fixed subject to the outcome of the application for summary judgment.

4    On 1 August 2014, Collier J summarily dismissed Mr Mulhern’s originating application: Mulhern v Pearce (No 2) (2014) 143 ALD 67; [2014] FCA 805 and two related interim applications he had filed. That leaves the trustees’ application for a vexatious proceedings order against Mr Mulhern to decide.

The legislation

5    Part VAAA of the Federal Court Act provides for the making of vexatious proceedings orders. Section 37AO provides, relevantly:

Making vexatious proceedings orders

(1)    This section applies if the Court is satisfied:

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

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

(2)    The Court may make any or all of the following orders:

(a)    an order staying or dismissing all or part of any proceedings in the Court already instituted by the person;

(b)    an order prohibiting the person from instituting proceedings, or proceedings of a particular type, in the Court;

(c)    any other order the Court considers appropriate in relation to the person.

…

(3)    The Court may make a vexatious proceedings order on its own initiative or on the application of any of the following:

…

(c)    a person against whom another person has instituted or conducted a vexatious proceeding;

(d)    a person who has a sufficient interest in the matter.

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

(5)    An order made under paragraph 2(a) or (b) is a final order.

(6)    For the purposes of subsection (1), the Court may have regard to:

(a)    proceedings instituted (or attempted to be instituted) or conducted in any Australian court or tribunal; and

(b)    orders made by any Australian court or tribunal; and

(c)    the person’s overall conduct in proceedings conducted in any Australian court or tribunal (including the person’s compliance with orders made by that court or tribunal);

including proceedings instituted (or attempted to be instituted) or conducted, and orders made, before the commencement of this section.

6    The term “vexatious proceedings” is defined in s 37AM(1) of the Federal Court Act as follows:

vexatious proceeding includes:

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

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

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

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

7    Part 6 of the Federal Court Rules also deals with vexatious proceedings. Rule 6.02 grants power to the Registrar to issue a certificate of vexatious proceedings order. The trustees also bring their application under this rule, but, for the reasons given by Perry J in HWY Rent Pty Ltd v HWY Rentals (in liq) (No 2) [2014] FCA 449 (“HWY Rentals”) at [96], it is unnecessary for me to consider this aspect of the application.

Background

8    In order to place the trustees’ application into context, it is necessary to describe something of the background to the application.

9    Mr Mulhern is an Irish citizen and was also, and perhaps still is, an Australian citizen. In 2013, he purported to relinquish his Australian citizenship by surrendering his passport to the Department of Foreign Affairs and Trade. He is also a permanent resident of the United States of America. He is the holder of an Irish passport and a US Permanent Residence Card (or “Green Card”).

10    On 2 October 2009, Daubney J of the Supreme Court of Queensland ordered that Mr Mulhern pay John Anthony Dodrill the sum of $334,875 and costs on an indemnity basis: Dodrill v The Irish Restaurant & Bar Co Pty Ltd & Ors [2009] QSC 317. A bankruptcy notice was issued against Mr Mulhern seeking payment of the judgment sum. An order for substituted service was made. The bankruptcy notice was not complied with.

11    An order was also made for substituted service of the creditor’s petition. Mr Mulhern did not appear at the hearing of the creditor’s petition, nor do anything to oppose it. On 3 February 2010, a Registrar of the Federal Magistrates Court made a sequestration order against Mr Mulhern’s estate.

12    The trustees estimate that Mr Mulhern has liabilities of more than $60 million, principally to Bank of Queensland Ltd. Mr Mulhern had interests in a number of properties in Australia and continues to have interests in properties in the United States.

13    On 9 August 2011, Logan J ordered that a warrant be issued for Mr Mulhern’s arrest under s 78(1) of the Bankruptcy Act 1966 (Cth) and that he be transported to a gaol in Brisbane and be kept in custody there until the Court otherwise ordered: Pearce (Trustee) v Mulhern (Bankrupt) [2011] FCA 930. The warrant was issued on the grounds that Mr Mulhern had failed to comply with a summons to attend a public examination and had failed to comply with his obligations under the Bankruptcy Act. His Honour held at [5]:

The trustee’s evidence also discloses a pattern of a failure on the part of the bankrupt to fulfil the various duties cast on a bankrupt by s 77 of the Bankruptcy Act in terms of giving to the trustee various books of account and disclosing to the trustee items of property and otherwise aiding the trustee in the administration of his bankrupt estate. There is also reason to believe, on the material read, that the bankrupt has not disclosed property fully and truly to his trustee which would comprise, in terms of the Bankruptcy Act, property of the bankrupt.

14    Mr Mulhern was arrested by the Australian Federal Police pursuant to the warrant on 8 January 2012 after arriving at Sydney International Airport. Instead of being transported to gaol in Brisbane as directed by the warrant, he was brought before a Magistrate in Sydney and was released on bail. On 12 January 2012, Buchanan J issued a further warrant for Mr Mulhern’s arrest: Pearce (Trustee) v Mulhern (Bankrupt) (No 2) [2012] FCA 7. A number of documents including his Irish passport and Green Card were seized by the police and were later given to the trustees.

15    On 16 January 2012, upon Mr Mulhern giving undertakings to, inter alia, comply with his duties and obligations under the Bankruptcy Act, Flick J ordered that Mr Mulhern be released from detention at the conclusion of the first day of his public examination in Brisbane: Pearce (Trustee) v Mulhern (Bankrupt) (No 3) (2012) 124 ALD 420; [2012] FCA 16.

16    On 11 December 2012, the trustees filed a notice of objection to Mr Mulhern’s discharge from bankruptcy with the Official Receiver pursuant to s 149B of the Bankruptcy Act. The consequence of the objection is that Mr Mulhern’s bankruptcy has been extended to 23 April 2018.

Proceedings instituted by Mr Mulhern against the trustees

17    Mr Mulhern has embarked on a series of litigation against the trustees in this Court and the Federal Magistrates Court of Australia. Mr Mulhern has repeatedly sought the annulment of his bankruptcy and the return of his Irish passport and his Green Card. Mr Mulhern seeks the return of his travel documents so that he can travel overseas. The trustees fear that if he leaves Australia he will not return and that their ability to administer his estate will be affected.

18    Mr Mulhern and his wife, who is also a bankrupt, have also engaged in litigation against Bank of Queensland Ltd in the Supreme Court of Queensland and in this Court. It will be necessary to consider one piece of that litigation later in these reasons.

19    The trustees allege that the proceedings initiated and conducted by Mr Mulhern against them are “vexatious proceedings” within s 37AO of the Federal Court Act. I will summarise the various proceedings in chronological order.

QUD 176 of 2011 – Pearce (Trustee) v Mulhern (Bankrupt)

20    The trustees commenced proceedings QUD 176 of 2011 in this Court seeking orders requiring Mr Mulhern to attend a public examination.

21    On 2 February 2012, Mr Mulhern filed an interim application seeking review pursuant to s 178 of the Bankruptcy Act of a decision of the trustees made on 1 February 2012 to refuse consent for him to travel to Ireland. The application sought orders for the delivery up of his Australian and Irish passports.

22    On 2 February 2012, Jagot J found that it would not be just and equitable to make an order returning Mr Mulhern’s travel documents: Pearce (Trustee) v Mulhern (Bankrupt) (No 4) [2012] FCA 54. Her Honour accepted that the reasons for Mr Mulhern’s travel were genuine, namely that he wished to return to Ireland to attend his father’s funeral and be with his family. However, her Honour found that Mr Mulhern was a “serious flight risk” and had serious doubts that he would return to Australia, irrespective of the undertaking to that effect he was willing to give the Court. The administration of his bankruptcy would be hampered by his being permitted to travel overseas. Accordingly, her Honour dismissed Mr Mulhern’s interim application with costs.

QUD 208 of 2012 – Mulhern, in the matter of Mulhern (Bankrupt) v Pearce (Trustee)

23    On 13 April 2012, Mr Mulhern commenced proceedings QUD 208 of 2012 in this Court against the trustees and Mr Dodrill. The originating application sought orders including that:

The Australian made bankruptcy of Michael Richard Mulhern, born on 19 May 1960, be annulled pursuant to Section 153B of the Bankruptcy Act 1966 (Cwlth).

24    Mr Mulhern also filed an application for interim relief, seeking an order that:

The Australian, Irish and USA travel documentation seized on 8 January 2012 be returned at the interim hearing date.

25    On 19 April 2012, Logan J dismissed Mr Mulhern’s application for interim relief with costs: Mulhern, in the matter of Mulhern (Bankrupt) v Pearce (Trustee) [2012] FCA 570. His Honour treated the application as if it were an application pursuant to s 178 of the Bankruptcy Act for review of a decision of the trustees made on 3 April 2012 to not return his travel documents and to not give him permission to depart Australia. His Honour noted that the facts were not in all material respects the same as when Jagot J refused the similar application made in proceedings QUD 176 of 2011.

26    The trustees’ reasons for the refusal were contained in a letter dated 3 April 2012 and referred to ten matters, including breaches of the undertakings given by Mr Mulhern to the Court on 16 January 2012, ongoing failures to comply with his duties as a bankrupt and the risk that he would not return to Australia if his travel documents were returned and he travelled overseas. Logan J held that the evidence bore out each of the matters to which the trustees had referred. His Honour was not persuaded that it would be just and equitable to make an order reversing the decision of the trustees.

27    An affidavit sworn by Mr Mulhern reveals that his application for annulment was based on the lack of personal service of the bankruptcy notice and creditor’s petition. He also asserted fraudulent conduct on the part of Mr Dodrill and Bank of Queensland Ltd, but without providing particulars of any substance or evidence. He also alleged that various lawyers and the trustees had engaged in unethical conduct, describing the trustees’ refusal to return his travel documents as “oppressive, is an abuse of power and is immoral and commercially illogical” and “unconscionable conduct…withholding my passports for ransom and suppressing my rights.”

28    On 17 May 2012 Dowsett J dismissed Mr Mulhern’s principal application and ordered that he pay the trustees’ costs. It appears that no reasons for the judgment were published. However, later reasons for judgment given by Greenwood J in Mulhern v Pearce [2012] FCA 631 at [37] describe how Dowsett J came to dismiss the application:

37    When the application came before Dowsett J, the affidavit material reflected that Mr Dodrill had not been served with the application. Moreover, Dowsett J sought, on a number of occasions, to determine whether Mr Mulhern would be willing to give an undertaking to the court to serve all of the unsecured creditors with the annulment application, with the result that upon performance of that undertaking the matter might be determined with some urgency. Mr Mulhern was not willing to give that undertaking unless an order was also made that Mr Mulhern’s passport and travel documentation be returned to him. Dowsett J was not willing to make that order and since Mr Mulhern was not willing to give the undertaking to serve unsecured creditors with the annulment application, the application was dismissed.

29    Later, Greenwood J recorded at [41] that:

41.    Mr Mulhern submitted that ultimately he did not wish to give the undertaking sought by Dowsett J as he did not want to put himself in a position where he made prejudicial admissions that any particular person was properly described as one of his “creditors”. Mr Mulhern disputes that he has creditors and was concerned to avoid any suggestion of a concession or admission that by serving any one or more persons on that footing he would be conceding that X or Y was in fact a creditor. Nevertheless, Mr Dodrill is a creditor.

QUD 242 of 2012 – Mulhern v Pearce

30    In proceedings QUD 242 of 2012, Mr Mulhern filed a notice of appeal on 21 May 2012 against the orders of Dowsett J made in QUD 208 of 2012. On 18 July 2012, Collier J directed that Mr Mulhern file and serve a draft index to Parts A and B of the Appeal Book within 14 days. Mr Mulhern failed to comply with her Honour’s order.

31    On 17 August 2012, upon the trustees’ application, Besanko J dismissed Mr Mulhern’s appeal for want of prosecution and failure to comply with a direction: Mulhern v Pearce [2012] FCA 884. Besanko J noted that Mr Mulhern had indicated in an email that he would consent to the trustees’ application if the trustees returned his travel documents. In circumstances where Mr Mulhern offered no explanation for his non-compliance, and in the absence of any indication of an intention to comply with Collier J’s order, Besanko J made orders dismissing the appeal and awarding the trustees their costs as costs in the bankrupt estate.

QUD 244 of 2012 – Mulhern v Pearce

32    On 23 May 2012, Mr Mulhern filed an application in this Court for an extension of time within which to appeal against the orders made by Logan J on 19 April 2012.

33    On 31 May 2012, Mr Mulhern also filed an interlocutory application seeking review under s 178 of the Bankruptcy Act of another decision of the trustees of 25 May 2012 to refuse to return his travel documents and to refuse him permission to leave Australia.

34    Greenwood J refused to grant an extension of time to allow Mr Mulhern to appeal against Logan J’s decision on the basis that no arguable error had been demonstrated: Mulhern v Pearce [2012] FCA 631.

35    Greenwood J also dismissed the interim application for review of the trustees’ decision. The trustees had based their decision to refuse Mr Mulhern the return of his travel documents on the same ten matters they had relied on in their letter of 3 April 2012. His Honour said that the material indicated that: none of those matters had been addressed; no material change in the circumstances had occurred since then; information had not been provided as sought by the trustees; and that Mr Mulhern continued to fail to cooperate and assist the trustees. Accordingly, His Honour was satisfied that the trustees’ decision ought not to be interfered with. His Honour also awarded costs against Mr Mulhern.

QUD 577 of 2012 – Mulhern v Pearce

36    On 19 October 2012, Mr Mulhern commenced proceedings QUD 577 of 2012 in this Court seeking an order pursuant to s 153B of the Bankruptcy Act annulling his bankruptcy. The trustees were named as respondents to the proceeding.

37    In an affidavit, Mr Mulhern set out the grounds he relied on in support of his application. Mr Mulhern deposed that he emigrated from Australia to the United States with his family in May 2007. He has not owned any real property in Australia since he and his wife sold their family residence in August 2007. At the time of his emigration, he was not conducting any business in Australia. Mr Mulhern deposed that he had never been served with the bankruptcy notice or the creditor’s petition. Finally, Mr Mulhern deposed that the petitioning creditor’s debt was paid into the trust account of Lynch Morgan Lawyers following the sale of a commercial property. He offered no evidence to establish this assertion; only that the appointment of receivers means he can no longer access the relevant documents.

38    On 15 November 2012, Reeves J made a number of directions designed to facilitate the hearing of the trustees’ application for dismissal of Mr Mulhern’s application as an abuse of process.

39    Then, on 26 November 2012, Reeves J made orders by consent dismissing Mr Mulhern’s application and awarding the trustees their costs of the application, including all reserved costs, from Mr Mulhern’s estate. Mr Mulhern has not provided any explanation as to why he consented to the dismissal of the application.

SYG 2805 of 2012 – Mulhern v Pearce

40    Four days later, on 30 November 2012, Mr Mulhern commenced proceedings SYG 2805 of 2012 in the Federal Magistrates Court of Australia in Sydney. Again, the trustees were named as respondents. Mr Mulhern sought the relief that included the following:

1.    That the Sequestration Order made against the Applicant be annulled pursuant to Section 153B of the Bankruptcy Act 1966 on the following grounds;

A    that at the Time of the Sequestration Order Section 43(b) of the Bankruptcy Act 1966 was not complied with in that the Applicant was not personally present or ordinarily resident in Australia, did not have a dwelling house or place of business in Australia, was not carrying on business in Australia & was not a member of a firm or partnership carrying on business in Australia.

B    that service of the Bankruptcy Notice, Creditors Petition & associated documents never occurred.

C    the requirements for international service were never complied with.

(Errors in original)

41    Mr Mulhern also sought an interim order for the return of his Australian and Irish passports and his Green Card. This was treated by the Court as an application for review pursuant to s 178 of the Bankruptcy Act of a decision of the trustees made on 30 November 2012.

42    The trustees applied successfully for the transfer of the proceeding to the Brisbane Registry of the Federal Magistrates Court: Mulhern v Pearce & Anor [2012] FMCA 1186.

43    Mr Mulhern swore an affidavit in the proceeding on 30 November 2012. He repeated much of what he deposed in the affidavits sworn in QUD 577 of 2012. In particular, he deposed as to his residency, his absence of business interests in Australia, allegations as to the validity of the bankruptcy notice and service thereof, his dispute of the petitioning creditor’s debt and his repeated requests for the return of his travel documentation.

44    The trustees applied for an order requiring Mr Mulhern to pay security for costs of the proceeding.

45    On 25 March 2013, Burnett FM (as his Honour then was) dismissed Mr Mulhern’s interim application for the return of passports and Green Card with costs: Mulhern v Pearce & Anor [2013] FMCA 229. His Honour also ordered Mr Mulhern pay security for the costs of the proceeding and ordered that in the event Mr Mulhern failed to do so within a specified time, the proceeding would be deemed dismissed with costs. Finally, his Honour ordered that Mr Mulhern pay the trustee’s costs of the application for security for costs.

46    Burnett FM’s reasons disclose that Mr Mulhern applied to the trustees for the return of his travel documentation so that he could return to Ireland to support his wife, who was suffering ill health. His Honour considered it “somewhat puzzling” that Mr Mulhern’s wife’s ill health had not been mentioned in earlier applications, but declined to draw any adverse inference from that omission. His Honour also noted the trustees’ submission that there had been no material change in circumstances since the last occasion on which Mr Mulhern had applied for the return of his travel documents. However, his Honour considered that the wife’s ill health might “perhaps” distinguish the circumstances, although that was a matter that ought to have been raised before Greenwood J. His Honour stated that Mr Mulhern remained “as recalcitrant today as he obviously had been on the previous occasions before Greenwood, Logan and Jagot JJ”. His Honour held that the trustees’ decision was reasonably open on the facts before them and there was no basis for interference with the exercise of their discretion.

47    The proceedings were subsequently dismissed pursuant to the orders of Burnett FM when Mr Mulhern failed to provide the security for costs that had been ordered.

NSD 1888 of 2013 – Mulhern v Pearce

48    This proceeding was commenced in the New South Wales District Registry of this Court on 12 September 2013. The trustees and Mr Dodrill are respondents. Mr Mulhern’s originating application sought orders that the sequestration order made against him be annulled or set aside or that he be discharged from bankruptcy or that the trustees be ordered to discharge him from bankruptcy. Mr Mulhern also sought the return of his Irish passport and Green Card.

49    Mr Mulhern also filed an interim application on 12 February 2014 seeking the return of his Irish passport and Green Card and seeking a declaration that he be discharged from bankruptcy forthwith “as there is no basis for his Bankruptcy being maintained and in any event a Sequestration Order should never have been made”. Mr Mulhern again sought the same declaration in a further interim application filed on 5 March 2014.

50    The proceeding was transferred to Queensland pursuant to an order of Robertson J on 31 October 2013: Mulhern v Pearce [2013] FCA 1138

51    As I have noted, on 1 August 2014, Collier J summarily dismissed Mr Mulhern’s originating application and his interim applications: Mulhern v Pearce (No 2) (2014) 143 ALD 67; [2014] FCA 805. Her Honour made the order pursuant to r 26.01 of the Federal Court Rules. Her Honour noted that Mr Mulhern’s submissions in support of the order annulling his bankruptcy were to a large extent identical to submissions that had been advanced on his behalf in previous proceedings. Specifically, Mr Mulhern relied on the fact that: the requirements of s 43(1)(b) of the Bankruptcy Act were not satisfied at the time the sequestration order was made; he was not carrying on a business, as this is different to being a director or controller of a company that carries on a business; the debt that was the subject of the bankruptcy had been paid; and the bankruptcy notice and creditor’s petition were not properly served on him.

52    Mr Mulhern advanced different submissions for the return of his travel documentation. He claimed that his passport and Green Card were contained in a briefcase which the solicitor for the trustees undertook to return to Mr Mulhern in the application before Flick J (see Pearce (Trustee) v Mulhern (Bankrupt) (No 3) (2012) 124 ALD 420; [2012] FCA 16) and that neither document falls within the scope of s 77(1)(a)(ii) of the Bankruptcy Act.

53    Collier J found that Mr Mulhern had no reasonable prospects of successfully prosecuting the claim for the annulment of his bankruptcy. As to Mr Mulhern’s contention that the sequestration order should not have been made because he had not been personally served with the bankruptcy notice and the creditor’s petition, her Honour observed that orders for substituted service had been made by the Federal Magistrates Court pursuant to s 309(2) of the Bankruptcy Act and that case law established that the power to order substituted service is not conditional upon the debtor’s presence in Australia. As to the contention that the jurisdictional prerequisites in s 43(1)(b) of the Bankruptcy Act were not satisfied, her Honour noted that there was ample evidence, uncontested by Mr Mulhern, demonstrating that he had a place of business in Australia and was carrying on business in Australia at the relevant time. As to Mr Mulhern’s contention that the debt the subject of the bankruptcy had been paid, her Honour held that this was no more than a bare assertion and, in any event, it was not in dispute that Mr Mulhern was insolvent and it is generally not possible for a debtor to make out a case for annulment if he or she was in fact insolvent at the time of being made bankrupt.

54    Collier J also noted that the rule under which Mr Mulhern sought to be discharged from his bankruptcy did not exist and that the Court possesses no jurisdiction which would allow it to order a trustee to discharge a bankrupt from bankruptcy. Her Honour concluded:

96    There is no material before me to substantiate a claim that a sequestration order should not have been made in respect of Mr Mulhern. The arguments and evidence he has put to this Court are, in my view, without merit. On the material before me Mr Mulhern has no reasonable prospect of successfully prosecuting a claim for annulment of his bankruptcy on this basis.

55    As to the order sought that the trustees return to Mr Mulhern his Irish passport and his Green Card, her Honour found that there was uncontested evidence that Mr Mulhern’s passport and Green Card were not in Mr Mulhern’s briefcase when the briefcase was provided to the trustees by the Australian Federal Police. Therefore, any order made by Flick J concerning the return of the contents of the briefcase would not encompass the passport and the Green Card. Collier J also considered it extremely unlikely that Flick J would make an order that would have the effect of circumventing orders made by other judges of the Court. Collier J rejected Mr Mulhern’s submission that an Irish passport was not a “passport” within the meaning of s 77(1)(a)(ii), and found that Mr Mulhern’s Green Card was “property” which could properly be seized by the trustees under ss 58 and 77(1)(a)(i) of the Bankruptcy Act.

56    As well as ordering that Mr Mulhern’s principal application and interim applications be dismissed, Collier J also ordered that:

Until further order Michael Richard Mulhern must not start or continue any other court proceeding against Mark William Pearce and Andrew John Heers without the leave of the Court except for any appeal that may be brought against the judgment delivered by the Court on 1 August 2014.

57    Mr Mulhern has not sought leave to appeal against the judgment of Collier J.

NSD 887 of 2014 – Emer Marie Mulhern & Ors v Bank of Queensland

58    The final proceeding that the trustees rely upon is proceeding NSD 887 of 2014 filed in this Court on 29 August 2014. After I had reserved my judgment in this application, the trustees applied to adduce further evidence concerning Mr Mulhern’s conduct in NSD 887 of 2014.

59    In that proceeding, Mr Mulhern and ten other plaintiffs sued Bank of Queensland Ltd for damages in respect of the Bank’s conduct in dealing with Mr Mulhern, his wife and the Mulhern group of companies. The trustees’ evidence is that Mr Mulhern did not seek their consent to be a party to the originating application.

60    The plaintiffs filed an interlocutory application on 28 November 2014 seeking relief, including the following:

3.    That the decision of the Official Receiver to seal and issue Bankruptcy Notices on 26 October 2009 as against the eleventh Plaintiff Mr Richard Mulhern (the Notices) be reviewed and the Bankruptcy Notices subsequently issued be declared void and of no consequence on the basis that the Official Receiver did not have the jurisdiction to issue the Notices.

…

5.    That pursuant to Rule 20.23 Mark William Pearce, and Andrew John Heers (the Eleventh Plaintiff’s Court Appointed Trustees in Bankruptcy) be ordered to disclose and / or pursuant to Rule 20.32 produce the following documents to the Court forthwith

a.    Mr Mulhern’s expired Australian Passport

b.    Mr Mulherns United States of America Green Card; and

c.    Mr Mulherns Irish Passport

d.    All other documents retained or seized as contained upon the person or as contained in the brief case of Mr Mulhern as a result of his arrest at the Sydney Airport on 8 January 2012.

61    Although the trustees are not parties to NSD 887 of 2014, it is plain that the interlocutory application sought orders against them. The interlocutory application was addressed to both the Bank of Queensland and the trustees and the details of the trustees’ address are set out under the heading “Service on the Respondent” in the application. The significance of the application is that it may be in breach of the interlocutory injunction granted by Collier J on 1 August 2014 restraining Mr Mulhern from starting court proceedings against the trustees without the leave of the Court

62    On 5 February 2015, Gleeson J gave summary judgment against Mr Mulhern in relation to all claims for relief arising out of orders made by the Supreme Court of Queensland and his claim for false imprisonment and otherwise staying the proceedings brought by him until the conclusion of his bankruptcy or further order. The stay was granted on the basis that Mr Mulhern is an undischarged bankrupt and lacked standing to bring the proceedings without the consent of the trustees: Mulhern v Bank of Queensland [2015] FCA 44.

63    The considerations relevant to an application to adduce further evidence were summarised by Collier J in Bing! Software Pty Ltd v Bing Technologies Pty Ltd (No 2) [2008] FCA 1761 at [13] – [15]. I respectfully adopt her Honour’s analysis.

64    The evidence of Mr Mulhern’s conduct in NSD 887 of 2014 is highly relevant to this application. The interlocutory application that the trustees seek to rely on was not made until after I had reserved my judgment. In these circumstances, I consider that the trustees should be granted leave to adduce the further evidence.

The trustees’ submissions

65    The trustees submit that the proceedings commenced against them by Mr Mulhern are vexatious both in terms of their substance and the manner in which they were conducted. The trustees rely, in particular, on the following matters:

    Each of the annulment applications and applications for permission to travel overseas and for the return of Mr Mulhern’s travel documentation relied upon the same factual and legal grounds;

    Aside from the first two applications for the return of travel documentation, there had been no material change in circumstances to justify the repeated applications;

    Mr Mulhern has failed to explain the delay in seeking to have his bankruptcy annulled and the multiple applications brought by him for the annulment.

66    The trustees submit that Mr Mulhern has instituted or conducted proceedings against them “frequently” within the meaning of s 37AO(1)(a) of the Federal Court Act.

67    The trustees rely on the following factors to argue that the Court should exercise its discretion to make a vexatious proceedings order:

    Mr Mulhern provided instructions to his lawyers to prepare draft proceedings against the trustees, and then provide that document to the trustees at a time when subject to an interlocutory order made by Collier J on 12 March 2014 which prohibited him from starting any proceedings against the trustees.

    In becoming a plaintiff in proceeding NSD 887 of 2014 without first obtaining the consent of the trustees, Mr Mulhern has disregarded his obligations as a bankrupt.

    The interlocutory application in NSD 887 of 2014 was brought in contravention of Collier J’s order of 12 March 2014 and 1 August 2014.

    Mr Mulhern’s propensity to blame his litigious failings on Australian courts rather than accept responsibility for his own conduct is an “outrageous and scandalous slur” on the Court.

    Mr Mulhern alleges, without evidence, misconduct by the trustees and the trustees’ solicitor, racial discrimination by virtue of the operation of Australian bankruptcy law and a conspiracy against him.

    Mr Mulhern continues to argue in this proceeding that his bankruptcy ought to be annulled on grounds and for reasons that have already been adversely determined against him by Collier J.

68    The trustees submit that the way in which Mr Mulhern has conducted his affairs in the past demonstrates a high likelihood that he will commence further vexatious proceedings against them. In particular, the trustees rely on: Mr Mulhern’s failure to make full disclosure of his financial affairs; his breaches of undertakings to the Court and his obligations under the Bankruptcy Act; his alleged provision of false affidavit evidence; and his alleged breaches of the offence provisions under the Bankruptcy Act.

69    The trustees contend further that the refusal of Mr Mulhern to cooperate with the trustees and comply with his obligations under the Bankruptcy Act and with Court orders indicate that the orders sought should be made. These factors have caused the trustees to incur considerable costs in administering the estate. The trustees rely on the affidavit of Mark William Pearce filed in QUD 208 of 2012 to detail the instances on which Mr Mulhern has breached his obligations under the Bankruptcy Act. Further occasions on which Mr Mulhern has failed to comply with requests by the trustees are detailed in the affidavit of Andrew John Heers filed in proceeding NSD 1888 of 2013.

70    Finally, the trustees submit that an order of the kind sought is necessary to prevent further prejudice to the administration of the estate and the interests of the creditors.

Mr Mulhern’s submissions

71    In written submissions filed in advance of the hearing, Mr Mulhern indicated that he neither intended to appear at the hearing of the trustees’ application nor instruct legal representatives to appear for him. He requested that the trustees’ application be decided in chambers. I determined that the application should be heard in open court. Mr Mulhern then instructed a solicitor, Mr McClelland, to appear for him. Mr McClelland had previously been on the record in this proceeding and has appeared for Mr Mulhern in a number of other proceedings.

72    Although Mr Mulhern’s written submissions contend that a vexatious proceedings order should not be made, they do little to advance his case. Much of his written submissions are occupied with arguments as to why he ought to have been granted the relief he sought in his originating application. Those arguments have already been determined against him by Collier J, and there has been no application for leave to appeal against her Honour’s judgment. He explains that he did not appeal against that judgment because “my United States employer Mulhern Properties Inc. has refused to waste further funds in Australian Court proceedings where my chances of getting relief from the Australian Court system has proved to be impossible.”

73    Mr Mulhern submits that the trustees’ application ought not to be granted and that he should be permitted to leave Australia to return home. He submits that orders of the kind sought by the trustees would have the effect of preventing the actions of the trustees from being “freely brought into account”.

74    Mr Mulhern submits that the reason for his continual applications to review decisions made by the trustees is in an attempt for him to “regain his freedom”. He accepts that “[a]ll prior applications have been unsuccessful” and that “[a]ll of the Applications have sought the same or similar relief”.

75    Mr Mulhern submitted the trustees abused their powers to extend the period of bankruptcy. He argues that the Court should draw an inference that the sole reason behind the extension was to exert pressure on Mr Mulhern. He describes his treatment by the trustees as “cruel and inhumane punishment for the purpose to extort information from me or my family concerning my perceived international interests which are beyond the reach of this jurisdiction”. He adds that “[m]y family’s assets overseas will never be the subject to the demands of the Australian Bankruptcy Trustees who have been illegitimately appointed in this case”.

76    Importantly, and perhaps to his detriment, Mr Mulhern concedes in his supplementary written submissions that:

[E]ach of the annulment applications have been brought on the same facts. This suggests that there is the consistency in allegations and types of allegations suggest the truth of the matters being asserted by Mr Mulhern.

77    As to the applications for the return of Mr Mulhern’s Irish passport and Green Card, his supplementary written submissions state:

[T]he repeated applications to the Court are explained by repeated refusals of the trustees to allow Mr Mulhern to be reunited with his family and travel overseas. Viewed objectively that action in all of the circumstances is reasonable.

78    Mr Mulhern submits that there were reasonable grounds for repeatedly bringing the applications when examined “against a background of tortuous and inhumane suffering.”

79    At the hearing of the trustees’ application, Mr McClelland stated that Mr Mulhern would not bring another application against the trustees. Mr McClelland then made the following concession:

He doesn’t object to an order preventing him bringing an action against the trustees. He doesn’t. The Court may make that order, but to expand the order out to say that he cannot bring proceedings against anyone in Australia without coming back to Court for leave, seeking leave first, in all the circumstances…

Consideration

80    Although Mr Mulhern no longer objects to an order preventing him from bringing proceedings against the trustees without the leave of the Court, it is nevertheless necessary to consider whether the requirements of s 37AO of the Federal Court Act are satisfied and whether the Court’s discretion should be exercised in favour of making such an order.

81    A vexatious proceedings order is made to protect the public and the Court, and not to impose punishment for litigious conduct: HWY Rentals at [100] (and the cases cited therein). Such an order is not lightly made: Kowalski v MMAL Staff Superannuation Fund Pty Ltd (2007) 242 ALR 370; [2007] FCA 1069 at 380 [44]. It is necessary to take a cautious approach both to the question of whether the requirements of s 37AO are met and the exercise of the discretion.

82    Plainly, the trustees have standing to bring the application, pursuant to s 37AO(3) of the Federal Court Act.

83    Mr Mulhern has been provided with, and he has availed himself of, the opportunity to be heard as required by s 37AO(4) of the Federal Court Act.

Are the proceedings “vexatious proceedings”?

84    Section 37AO applies if, relevantly, “a person has frequently instituted or conducted vexatious proceedings in Australian courts or tribunals.” Section 37AO(6) allows the Court to take into account not only proceedings instituted in any Australian court, but orders made by any Australian court and a litigant’s overall conduct in proceedings, including his or her compliance with orders.

85    Section 4 of the Federal Court Act defines “proceeding” as “a proceeding in a court, whether between parties or not, and includes an incidental proceeding in the course of, or in connexion with, a proceeding, and also includes an appeal”. For the purposes of civil proceedings before a court, s 37AM(1) defines “institute” to include “the taking of a step or the making of an application that may be necessary before proceedings can be started against a party”. In my opinion, the words “instituted…proceedings” encompass not only originating applications, but also interlocutory or interim applications: cf National Australia Bank Ltd v Freeman [2005] FCA 1895 at [23], Ramsay v Skyring (1999) 164 ALR 378; [1999] FCA 907 at [59]. Those words also encompass an application for an extension of time within which to appeal: HWY Rentals at [102], Fuller v Toms [2015] FCAFC 91 at [37].

86    As to whether the various proceedings are “vexatious proceedings”, it is necessary to have regard to the definition of that expression in s 37AM(1) of the Federal Court Act. The definition is inclusive and identifies four specific bases upon which a proceeding may be found to be vexatious, namely:

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

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

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

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

87    In Attorney-General (NSW) v Chan [2011] NSWSC 1315 at [33], Adamson J said as to the equivalent provision in New South Wales:

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

88    Mr Mulhern commenced and conducted the following proceedings in which he sought the annulment of his bankruptcy:

(a)    QUD 208 of 2012;

(b)    QUD 242 of 2012;

(c)    QUD 577 of 2012;

(d)    SYG 2805 of 2012;

(e)    NSD 1888 of 2013, including two interim applications.

89    In each proceeding Mr Mulhern has claimed that the sequestration order should not have been made on one or more of the following grounds:

(a)    he was never served personally with either the bankruptcy notice or the creditor’s petition;

(b)    the sequestration order was made in circumstances where the requirements of s 43(1)(b) of the Bankruptcy Act were not met because he was not an Australian resident from May 2008 and he did not conduct a business in Australia as at 17 May 2010;

(c)    the debt the subject of his bankruptcy has been satisfied; and

(d)    there was fraudulent conduct on the part of Mr Dodrill or Bank of Queensland Ltd.

90    That each proceeding sought an annulment of the bankruptcy upon some combination of these grounds is apparent from the affidavits filed in the applications, various affidavits and reasons for judgment I have described. In his supplementary written submissions, Mr Mulhern also conceded that “each of the annulment applications have been brought on the same facts.”

91    In NSD 1888 of 2013, Collier J summarily dismissed Mr Mulhern’s originating application and his interim applications (which sought substantially the same relief) on the basis that those applications had no reasonable prospects of success. Her Honour dismissed the proceedings pursuant to r 26.01 of the Federal Court Rules, specifically noting that the trustees had not relied upon s 31A of the Federal Court Act, which provides, in sub-section (3), that a proceeding need not be hopeless or bound to fail in order for it to have no reasonable prospect of success. Collier J was plainly correct to summarily dismiss the applications for the reasons given by her Honour.

92    None of the other proceedings in which Mr Mulhern sought annulment of his bankruptcy proceeded to a substantive hearing. QUD 208 of 2012 was dismissed by Dowsett J because Mr Mulhern refused to undertake to serve the creditors, including the petitioning creditor named in the application. The appeal against Dowsett J’s orders in QUD 242 of 2012 was dismissed because of Mr Mulhern’s failure to comply with directions made by the Court. QUD 577 of 2012 was dismissed by consent. Proceeding SYG 2805 of 2012 was dismissed when Mr Mulhern failed to provide security for costs.

93    Since each of those proceedings sought annulment of the bankruptcy on the same factual and legal basis as NSD 1888 of 2013, I conclude that none of them had any reasonable prospect of success. Each of those proceedings was instituted and pursued without reasonable ground within paragraph (c) of the definition of “vexatious proceedings”.

94    In addition, QUD 208 of 2012 could not possibly succeed in circumstances where Mr Mulhern was unwilling to serve the petitioning creditor and his other creditors. For that additional reason, those proceedings were instituted and conducted without reasonable grounds.

95    In QUD 242 of 2012, Mr Mulhern’s unwillingness to comply with directions leads to the inference that at some point after he commenced the appeal he ceased to have an intention to prosecute his appeal to a final hearing. He has not filed an affidavit giving any alternative explanation for his conduct. I consider that his maintenance of the appeal when he had no intention of prosecuting it to a final hearing meant that it was being conducted for the purpose of causing delay or detriment or for some other wrongful purpose.

96    Although he was unwilling to conduct the appeal to a hearing, Mr Mulhern brought QUD 577 of 2012. His consent to those proceedings being dismissed with costs must have reflected his opinion or belief that the proceeding could not succeed. Mr Mulhern has provided no other explanation for his conduct. Despite this, he filed SYG 2805 of 2012 four days later. In circumstances where Mr Mulhern must have thought or believed that those proceedings could not succeed, I infer that they must have been brought to delay or harass the trustees or for some other wrongful purpose.

97    Mr Mulhern instituted the following proceedings against the trustees seeking the return of his Irish passport and US Green Card:

(a)    interim application in QUD 176 of 2011;

(b)    interim application in QUD 208 of 2012;

(c)    interim application in QUD 244 of 2012;

(d)    interim application in SYG 2805 of 2012;

(e)    originating application and interim application in NSD 1888 of 2013.

98    I do not regard the first application in QUD 176 of 2011 as being made without reasonable ground. Similarly, the interim application in QUD 208 of 2012 cannot be regarded as being made without reasonable ground in circumstances where Logan J noted that the facts were not in all material respects the same as when Jagot J refused the application in QUD 176 of 2011. In addition, I am unable to conclude that the application for an extension of time within which to appeal against the judgment of Logan J was made without reasonable ground.

99    However, the interim application in QUD 244 of 2012 to review the trustees’ decisions to refuse to return Mr Mulhern’s Irish passport and Green Card had no reasonable prospects of success. Greenwood J concluded that none of the matters that the trustees had relied on in their letter of 3 April 2012 had been addressed, that Mr Mulhern had continued to fail to cooperate with and assist the trustees and that there had been no material change in the circumstances. In these circumstances, the interim application was made without reasonable ground.

100    I do not think that the interim application in SYG 2805 of 2012 can be regarded as being made without reasonable ground. In that application Mr Mulhern relied upon a new factor, namely the illness of his wife. Although Burnett FM expressed some scepticism about why that factor had not been raised in earlier applications, his Honour did not make any finding that the allegation was untrue.

101    In NSD 1888 of 2013, Mr Mulhern sought an order in his originating application for the return of his Irish passport and US Green Card. Collier J held that this aspect of the application had no reasonable prospects of success. I respectfully agree with her Honour’s reasons for that conclusion.

102    Mr Mulhern also filed an interim application in NSD 1888 of 2013 seeking the return of his Irish passport and his Green Card and declarations that he be discharged from bankruptcy. He then filed a second interim application seeking the same declaration. Mr Mulhern has not explained why he did so when he had sought the same relief in his originating application. In my opinion, the interim applications could have no purpose other than to harass or annoy or cause detriment to the trustees or to achieve another wrongful purpose.

103    The trustees were not parties to NSD 887 of 2014, nor did Mr Mulhern’s interlocutory application seeking the return of his Irish passport and his Green Card name the trustees as parties. However, Mr Mulhern sought orders against the trustees and his interlocutory application indicated that the trustees were to be served. In my opinion, the interlocutory application was a court proceeding started against the trustees. The application seems to have been commenced in that way in an attempt to circumvent the interlocutory injunction granted by Collier J restraining Mr Mulhern from commencing proceedings against the trustees without the leave of the Court. The application was an abuse of process.

104    In summary, I have concluded that the following proceedings were vexatious proceedings:

(a)    QUD 208 of 2012;

(b)    QUD 242 of 2012;

(c)    interim application in QUD 244 of 2012;

(d)    QUD 577 of 2012;

(e)    SYG 2805 of 2012;

(f)    NSD 1888 of 2013 and the two interim applications;

(g)    interim application in NSD 887 of 2014.

Have the proceedings been instituted or conducted “frequently”?

105    In Fuller v Toms [2015] FCAFC 91, the Full Court at [33] approved the exposition of the meaning of “frequently” in s 37AO of the Federal Court Act given by Perry J in HWY Rentals at [110]–[114]. The Full Court also approved the observation of Pagone J in Garrett v Commissioner of Taxation [2015] FCA 117 at [8] that the word “frequently” in s 37AO has its ordinary meaning. The Full Court held that there was no error in the conclusion of the primary judge that a litigant who had commenced five separate proceedings over a period of five years had “frequently” instituted and conducted proceedings, notwithstanding that the number of proceedings may be considered small.

106    Mr Mulhern has instituted and conducted a total of 9 vexatious proceedings against the trustees over a period of approximately two years.

107    The proceedings have broadly been an attempt by Mr Mulhern to re-litigate the same issues: Attorney-General (NSW) v Chan at [37]; Attorney General (NSW) v Gargan [2010] NSWSC 1192 at [7]. Of the proceedings that Mr Mulhern has instituted, it is also relevant that none have gone to trial: Garrett v Make Wine Pty Ltd (2014) 110 IPR 244; [2014] FCA 1258 at 293 [214].

108    On any view, it is difficult to escape the conclusion that Mr Mulhern is a person who has instituted and conducted vexatious proceedings frequently.

109    The preconditions in s 37AO(1) of the Federal Court Act are accordingly satisfied.

Should the Court’s discretion be exercised in the trustees’ favour?

110    It remains to be considered whether the Court should exercise its discretion to make an order in favour of the trustees.

111    In Gargan v Kippin Investments Pty Ltd [2009] FCA 398 at [12], Perram J said:

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

112    In Ramsey v Skyring Sackville J said, in relation to the old r 6.02, at 392 [67]:

The cost to the court system and the community of litigants who refuse to accept that a point has been decided authoritatively against them, or who are otherwise determined to pursue hopeless courses in the courts, can be very high. Such litigants are often immune to costs orders and exempt from paying the court fees which other litigants must meet. The present case illustrates the amount of time and the extent of the resources required to address the obstinacy of a single litigant.

113    Sackville J’s observations are also true of the present case. The trustees have been required to appear in court because of proceedings instituted against them by Mr Mulhern on the following occasions:

114    Mr Mulhern has failed in each proceeding. In fact, he has prosecuted only one of them to finality. The evidence before me indicates that the trustees have expended significant resources in defending the myriad of proceedings brought by Mr Mulhern. The impact on the resources of both the Court and the trustees is clearly a relevant consideration that goes towards the exercise of the discretion.

115    It is no exaggeration to say that Mr Mulhern displays complete lack of insight into his litigation history. That Mr Mulhern attempts to justify his persistent attempts to relitigate the same issues as reflective of the “truth of the matters” and “explained by repeated refusals of the trustees” does no more than lend support to Perram J’s observation that “frequently enough, the vexatious are betrayed out of their own mouths”: Gargan v Kippin Investments Pty Ltd at [9]. Even in his submissions concerning the present application, Mr Mulhern has continued to focus on why his bankruptcy should be annulled and why his Irish passport and Green Card should be returned. Those matters have been determined against him by Collier J, and no application for leave to appeal has been sought against her Honour’s judgment.

116    Mr Mulhern’s lack of insight is emphasised by his threat to commence proceedings against the trustees at a time when the injunction made by Collier J prevented him from doing so. It is also emphasised by his interlocutory application seeking orders against the trustees in NSD 887 of 2014 in breach of Collier J’s order. Mr McClelland’s attempt to justify that application by submitting that “the participation of the trustees was passive” is specious.

117    Mr Mulhern’s lack of insight is further demonstrated by the very serious allegations of impropriety he has made against officers of the Court, namely the trustees and their solicitors, without evidence. Those allegations are made all the worse by the uncontradicted evidence of the trustees that Mr Mulhern has almost entirely failed to comply with his obligations as a bankrupt. Mr Mulhern’s failure to comply with court orders, requests made by the trustees and his obligations under the Bankruptcy Act have been carefully detailed in the numerous judgments referred to earlier. I am entitled to take those decisions into account and the views expressed within them: Attorney-General (NSW) v Chan at [39]; Attorney General (NSW) v Wilson [2010] NSWSC 1008 at [22] and Attorney General (NSW) v Gargan at [7]. Mr Mulhern’s propensity for the sensational and the way he has conducted his general affairs does not lend itself to a conclusion that there is a low prospect of future vexatious proceedings.

118    The trustees do not seek an order prohibiting Mr Mulhern from instituting any proceedings in Australia. The particular form of order they seek would only prohibit the institution of proceedings against the trustees. I take into account Mr Mulhern’s belated concession that he does not object to an order of this kind being made.

Conclusion

119    I consider that the Court’s discretion should be exercised in favour of making an order that Mr Mulhern must not start or continue a proceeding in the Court against the trustees or either of them without the leave of the Court.

120    The final matter that remains to be determined is the question of costs of proceedings NSD 1888 of 2013. Collier J dismissed Mr Mulhern’s originating application summarily, but reserved costs. The trustees have now been successful in obtaining an order under s 37AO(2) of the Federal Court Act. I will hear from the parties as to costs.

Associate:

Dated:    10 August 2015