Federal Court of Australia

Lafferty v Waterton (No 2) [2020] FCA 1673

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

2.    The appellant do pay the respondent's costs of the appeal.

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

REASONS FOR JUDGMENT

COLVIN J:

1    Ms Susan Lafferty was made bankrupt on 14 August 2019. The sequestration order in respect of her estate was made on the petition of Mr William Waterton, her brother. The debt relied upon to support the petition was an unpaid costs order made after a Supreme Court trial in which Ms Lafferty was unsuccessful in a claim that she was entitled to a one-third share of her mother's estate.

2    The Supreme Court claim was based upon an allegation that some years earlier Ms Lafferty had refrained from pursuing a claim for family provision against her father's estate (which had passed to her mother under the terms of a will) on the basis of a representation by her mother. The alleged representation was to the effect that the inherited estate and any other assets that remained after expending monies on maintenance and support would, on her mother's death, be divided equally between her three children being Ms Lafferty, Mr Waterton and another sibling Madelaine.

3    The representation was said to have been contained in a letter to Ms Lafferty from her mother which said:

However you must remember that Bills main concern was to leave me provided for as is every husbands duty and wish, so if there is anything left after I die please be assured you will get your fair 1/3.

4    Ms Lafferty claimed that in her mother's lifetime, contrary to the representation in the letter, her mother transferred control of the relevant assets to Ms Lafferty's two siblings. As I have indicated, that claim was rejected: Lafferty v Waterton [No 4] [2017] WASC 302. The claim was rejected after a trial at which Ms Lafferty was represented by senior counsel. There has been no appeal.

5    On the petition for a sequestration order, Ms Lafferty claimed, amongst other things, that in support of the application for probate of her father's will, a false statement had been made by Mr Waterton that the will had been witnessed by certain persons. The claim was not recent. It had been raised in the course of an interlocutory application for discovery in the Supreme Court proceedings. In determining that application (on 20 March 2017), the Court referred to claims as to 'uncertainty about when the will of Mr Waterton [snr] was signed, and the circumstances in which he came to sign it' and then observed:

As counsel conceded at the hearing, none of those matters is in issue in this action. If the plaintiff is to challenge the will, it should be in Victoria where the grant of probate was made. But it is not part of this action. The plaintiff's claim is based upon an estoppel arising out of her refraining from making an application for family provision.

The concession had in fact been made on the last occasion this matter was before the court.

…

The circumstances of the preparation signing and execution of the will of Mr Waterton [snr] are not in issue in this action.

See Lafferty v Waterton [No 2] [2017] WASC 84 at [35]-[42].

6    Nevertheless, the submission was advanced on the petition that the Court should go behind the substantive judgment in the Supreme Court that gave rise to the costs order in favour of Mr Waterton against Ms Lafferty based on the allegations concerning the attestation of their father's will. That submission was rejected by the primary judge in making the sequestration order (Waterton v Lafferty, in the matter of Lafferty [2019] FCA 1267) by the following reasoning (at [78]-[81]):

The litigation pursued against Mrs Waterton, William and Madelaine was pursued on a particular basis. The causes of action did not include a claim based upon the invalidity of the Will. So much was made expressly clear both in the reasons in the interlocutory decision in Lafferty v Waterton [No 2] and the trial judge's summary of the claims and relief. Susan chose to pursue a claim based on a representation allegedly made by her mother as to the distribution of her estate. In the context of satisfying the element of reliance and detriment for an estoppel argument, she chose to rely on a claimed lost opportunity to pursue a family provision claim.

William was obliged to address the claim actually brought against him and bear the costs of his lawyers in doing so. The costs order in his favour reflects that outcome.

This was all done in the context of knowledge on Susan's part as to the alleged invalidity of the Will: receipt of documentary supporting evidence from Ms Prater in 2013 and 2016; advice received from her barrister husband including as to the validity of the Will; representation by senior counsel; disclosure to the Court of the alleged invalidity of the Will; concessions made as to the nature of the claim being brought against her mother's estate and her siblings and the irrelevance of the invalidity of the Will in that context; and an interlocutory judgment which stated that there was no relevant connection and was not the subject of any appeal. Such matters indicate no mere forensic error on the part of those representing her but a considered and informed decision over the course of several years as to the causes of action that Susan chose to pursue in the Supreme Court proceedings. I also note that in Ramsay Health Care, the particular evidence that was not considered by the trial judge was directly relevant to quantum and so to the existence of the debt claimed under the guarantee. In this case, as Allanson J determined and Susan conceded, the alleged invalidity of the Will was not relevant to the causes of action that were pursued. Allanson J properly focussed on the pleaded representation by Mrs Waterton: Susan's case failed because the pleaded representation could not be established, and that finding was not premised on any claim about the validity of the Will, as conceded by Susan in the proceedings.

In coming to this view I have not proceeded on the basis that Susan is simply bound by the conduct of her case before the trial judge. That notion alone is not a sufficient reason not to look behind a judgment: Ramsay Health Care at [67]. I have taken into account the manner in which she conducted her case because it is relevant to the question of fraud raised by Susan and the exercise of the Court's discretion. It informs the question of the matters that were quite deliberately in issue and relevant to the hearing before the trial judge, and so the basis upon which the debt to William was incurred.

7    A claim that the presentation of the petition was an abuse of process because it was a step taken in furtherance of a fraud perpetrated when obtaining probate for the father's will was also rejected on the same reasoning.

8    In early September 2019, Ms Lafferty commenced an appeal against the decision to make a sequestration order as to her estate. Two grounds are sought to be raised. First, an allegation of error in failing to find that the evidence about the probate for the will was a sufficient reason for going behind the underlying judgment which gave rise to the costs order. Second, alleged error in rejecting the claim of abuse of process.

9    Arrangements were not made for the settling of an appeal book index and the filing of Parts A and B of the appeal book within the time required by the Federal Court Rules 2011 (Cth). Then, an application was brought by Mr Waterton for security for costs. On 4 December 2019 I determined that the application should be allowed: Lafferty v Waterton [2019] FCA 2049. Orders were made for the provision of security in the amount of $30,000 with liberty to apply to dismiss the appeal if the security was not provided. The appeal was stayed pending provision of the security.

10    Security has not been provided. On 8 July 2020, Ms Lafferty filed an affidavit which stated, relevantly for present purposes (paras 3-5, 9-11):

It was my intention to obtain litigation funding from Armis Capital, a provider of litigation funding to fund the appeal and to pay the required security as part of the funding.

One of the conditions of obtaining litigation funding was that the litigation funder was not prepared to provide funding in the event the Respondent was charged with a criminal offence in relation to any matters in issue in the appeal.

I am informed by Detective Acting Sergeant Tobin of the Melbourne Crime Investigation Unit and I verily believe that the Respondent has been charged with perjury in the State of Victoria in relation to the affidavit he swore on 14 July 2004 (affidavit of executor) and filed in support of his application to obtain probate of my late father's will (Will) in the Supreme Court of Victoria.

…

As a consequence of the perjury charge there is no prospect of my obtaining litigation funding until the criminal proceedings have been concluded.

I presently do not have the financial capacity to raise the security required to comply with the order other than by the medium of litigation funding.

I respectfully request that the appeal remain stayed until the perjury proceedings have been concluded.

11    Mr Waterton now applies for the appeal to be dismissed by reason of the failure to provide security as ordered.

12    There are solicitors on the record for Ms Lafferty. They have filed written submissions in opposition relying on the affidavit of Ms Lafferty. On the day before the scheduled hearing they requested that the issue be determined on the papers. Those representing Mr Waterton sought to make oral submissions in addition to written submissions that had been filed. In those circumstances, the scheduled hearing proceeded. There was no appearance for Ms Lafferty. Brief oral submissions for Mr Waterton were received. In those events, I am satisfied that there has been notice of the application and the hearing and there has been an opportunity afforded to appear. I have considered the affidavit of Ms Lafferty and the written submissions filed on her behalf.

13    An appeal may be dismissed if an appellant fails to comply with an order to provide security for the costs of an appeal and the appellate jurisdiction to dismiss may be exercised by a single judge: Nyoni v Pharmacy Board of Australia (No 2) [2019] FCA 225 (White J).

14    For the following reasons, I am satisfied that the appeal should be dismissed.

15    It has not been demonstrated that the grounds that are sought to be advanced in the appeal are reasonably arguable.

16    Even assuming that probate was obtained by way of a false affidavit (a matter as to which I express no view), the nature of the Supreme Court proceedings depended upon a claim that the assets of the father had passed to the mother under the terms of a will in respect of which Ms Lafferty may have made a claim for family provision. Therefore, issues about the will were not only irrelevant to the Supreme Court proceedings, the claim made depended upon the validity of the father's will.

17    Further, the submissions advanced for Ms Lafferty do not dispute the findings by the primary judge to the effect that the decision not to question the validity of the will in the Supreme Court proceedings was a considered position adopted by senior counsel and was no mere forensic error. Nor is there any real articulation as to why the decision by Allanson J was infected with error such that the consequent costs order might be impugned. In those circumstances, there is no reasonably arguable basis for inquiring into the validity of the judgment debt according to the principles recently articulated in Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28; (2017) 261 CLR 132.

18    As to the alleged abuse of process, the claim in the Supreme Court was brought by Ms Lafferty not Mr Waterton. It resulted in the costs order. As has been explained, the circumstances in which probate of the will was obtained were not relevant to those proceedings. Therefore, the basis for the claim that the petition was an abuse rises no higher than alleging that conduct by Mr Waterton that was unrelated to the basis for the petition that may be found to have been a crime means that the petition was an abuse. There is no reasonably arguable basis for a proposition of that kind.

19    In addition, the evidence as to attempts to obtain litigation funding and why it has not been obtained is sparse. There is no evidence of any documents containing communications with the litigation funder. The affidavit of Ms Lafferty is significant for what it does not say. In particular, it does not say that the only reason funding was not obtained was by reason of the pending committal hearing. Indeed it says that was 'one of the conditions of obtaining litigation funding'. On the face of it, funding of an appeal of this kind which, of itself would not produce any fruits that might be made available to a litigation funder would be unusual. It appears that it may be said that the funding would support an appeal so that the bankruptcy of Ms Lafferty could be brought to an end and she could then bring proceedings in respect of her father's will. However, Ms Lafferty has had a number of years to pursue litigation of that kind and has not done so.

20    The scant evidence provides no indication that the security as ordered is likely to be provided by means of a litigation funder at some future date depending on the outcome of the criminal proceedings against Mr Waterton.

21    It was submitted for Mr Waterton that the father's will may still be able to be proved informally according to relevant statutory provisions and therefore it did not follow that the allegations concerning the circumstances in which probate was obtained would mean that there would be an intestacy (being the position adopted by Ms Lafferty). However, there is no basis upon which I could evaluate those matters and they do not impress as a separate reason why the appeal may be viewed as lacking any real merit.

22    A substantial period has elapsed since the order for security was made. There is no application seeking a variation of the interlocutory order for security based upon current circumstances.

23    There is injustice to any party who faces court proceedings that are not progressing due to the conduct of the other party. A party is entitled to have matters brought to an end rather than have the prospect of an appeal held open indefinitely.

24    There is no evidence to suggest that Ms Lafferty is otherwise solvent if the unpaid costs orders were disregarded or is prejudiced by the sequestration order in respects other than the ability to advance the complaints about the grant of probate of the father's will.

25    In all of those circumstances, I am satisfied that it is appropriate to exercise the power to dismiss the appeal. There is no reason why costs should not follow that event and there should be an order for the costs of the appeal to be paid by Ms Lafferty.

Associate:

Dated:    20 November 2020