Federal Court of Australia

Shaw v Singh [2021] FCA 1207

ORDERS

THE COURT ORDERS THAT:

1.    The proceedings be stayed pending the determination of proceedings NSD 1690 of 2019.

2.    The proceedings not proceed until such time as the Court grants leave.

3.    The applicant pay the costs of the respondents of and incidental to the interlocutory application filed on 30 August 2021, such costs to be taxed if not otherwise agreed.

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

REASONS FOR JUDGMENT

COLLIER J:

1    This is an interlocutory application filed on 30 August 2021 by the respondents in the substantive proceedings. The respondents seek the following orders:

1.    An order pursuant to rule 1.32 of the Federal Court Rules 2011 and/or section 23 of the Federal Court of Australia Act 1976 that:

a.    the proceedings be stayed pending the determination of proceedings NSD 1690 of 2019; and

b.    the proceedings may not proceed until such time as the Court grants leave.

2.    The Applicant pay the Respondents’ costs of and incidental to the application.

3.    Such further or other orders as this Honourable Court thinks fit.

2    The applicant was declared bankrupt on 11 June 2014 as a result of a sequestration order made in proceeding VID1371/2013. The Official Trustee in Bankruptcy, a body corporate created under the Bankruptcy Act 1966 (Cth) which administers bankruptcies and other personal insolvency arrangements, became trustee over the applicant’s bankrupt estate, and took control of his property.

3    At relevant times the respondents were public servants employed by the Australian Financial Security Authority, which provides personnel and resources to the Official Trustee in Bankruptcy (in turn).

Procedural history

4    In his amended originating application in the present proceeding filed on 10 August 2021 the applicant sought the following relief against the respondents:

On the grounds stated in the statement of claim, accompanying affidavit or other document prescribed by the Rules, the Applicant claims from the 1-10th respondents in accordance with tort law the torts of breach of Fiduciary duty, misfeasance in public office, malicious prosecution & unconscionable conduct accordance for breaches of s13 Public Service Act 1999 & s19 & s134 Bankruptcy Act 1966.

1.    A letter of apology from each respondent acknowledging their misconduct & breaches of duty to me & the years of stress, anxiety, inconvenience & embarrassment & humiliation I have been subjected to by the consequences of their actions & omissions in administering my estate & in the courts & in communications with them.

2.    $135,000 Damages for years of personal damage to my mental health & well-being, anxiety, emotional distress, inconvenience, embarrassment, humiliation, loss of confidence, loss of enjoyment & loss of faith /confidence in the OT

3.    $115,000 Exemplary damages for ongoing breaches of s19 & s134 Bankruptcy Act 1966, s 13, Public Service Act 1999, and ongoing refusal to acknowledge & rectify breaches that have & continue to cause me personal harm & inconvenience

4.    Costs

On the grounds stated in the statement of claim, accompanying affidavit or other document prescribed by the Rules, the Applicant claims from the 10th to 14thh (sic) respondents in accordance with tort law the torts of breach of Fiduciary duty, misfeasance in public office, & unconscionable conduct accordance for breaches of s13 Public Service Act 1999 & s19 & s134 Bankruptcy Act 1966.

5.    A letter of apology from each respondent acknowledging their misconduct & breaches of duty to me & the years of stress, anxiety , inconvenience & embarrassment & humiliation I have been subjected to by the consequences of their actions & omissions in administering my estate & in the courts & in communications with them.

6.    $135,000 Damages for years of personal damage to my mental health & well-being, anxiety, emotional distress, inconvenience, embarrassment, humiliation, loss of confidence, loss of enjoyment & loss of faith /confidence in the OT

7.    $50,000 Exemplary damages for ongoing breaches of s19 & s134 Bankruptcy Act 1966, s 13, Public Service Act 1999, and ongoing refusal to acknowledge & rectify breaches that have & continue to cause me personal harm & inconvenience

8.     Costs

5    The applicant also relies on an amended statement of claim, similarly filed in this proceeding on 10 August 2021. Materially the applicant pleads:

    Mr Abraham was or should have been aware of the main assets and liabilities of the estate comprising of 3 residential rental properties in Victoria (being 116 Gwynne Street Richmond, 5 Mast Gully Road Upwey, and Units 5 and 19/12 Tivoli Road South Yarra (rental properties)), rental income, cash in a National Australia Bank (NAB) account (in the amount of $24,000) and a loan from that bank (para 6).

    Messrs Singh, Abraham and Mitra were or should have been aware of the amount of the loan and that the applicant was not making loan payments, and they allowed the applicant to continue receiving rental payments from the 3 rental properties from June 2014 until March 2016 (paras 7-9).

    Messrs Singh and Mitra did not tell the applicant that the NAB loan payments and other outgoings needed to be paid from the relevant rental income (para 10).

    Messrs Singh, Mitra, Rowland, Abraham, Melvin, Alinea and Hasan failed, inter alia, to discuss administration options with the applicant, take reasonable steps to consult with the applicant, resolve disputes with him, ensure that payments were made for the outgoings in respect of the rental properties, maintain leases, claim insurance, and properly manage the properties (para 11)

    Messrs Singh and Mitra were aware of the risk of the loan defaulting in September 2016, and failed to take any reasonable steps to prevent the default (para 12).

    Messrs Singh and Mitra gave deceptive and misleading responses to the applicant’s questions regarding costs charged to his estate for Harris Carlson appearing in the annulment hearings (para 13).

    Messrs Rowland, Mitra and Alinea were aware the loan defaulted in July 2017 and did not inform the applicant or take any reasonable steps to rectify the default (para 14).

    The decision of Messrs Mitra, Rowland and Alinea to sell the Gwynne Street property was based on a grossly inaccurate equity calculation (para 14.4)

    Messrs Alinea, Rowland, Melvin and Mitra failed to rule on Yarranova POD $1.7 million and LPLC POD of $80,000 in a reasonable time (para 14.9)

    Messrs Alinea, Melvin, Hasan and Abraham and Ms Todd unlawfully and unnecessarily sold the Tivoli Road property in July 2019 (para 14.11)

    Messrs Alinea, Melvin, Mitra, Hasan and Abraham prepared a deceptive, misleading and grossly inaccurate annulment calculation in August 2019 falsely purporting to show that the estate was in deficit by approximately $123,000 (para 14.12)

    Messrs Abraham and Hasan improperly engaged solicitors Harris Carlson to appear in every court hearing day in annulment proceedings VID 774 of 2014 and the subsequent appeal without having any forensic purpose, necessity or reasonable justification to do so in the interests of the estate or creditors (para 14.14)

    Mr Abraham’s spending was reckless (para 15)

    Messrs Melvin, Alinea, Hasan, Mitra and Abraham breached model litigant provisions (paras 16, 20, 22).

    The respondents breached their obligations and common law fiduciary duties to the applicant (para 25), were negligent (para 28), were misleading deceptive and unconscionable (para 30), and engaged in breaches over a prolonged period of time (para 31).

    Messrs Findlay, Parkinson, Shaw and McCormick breached their obligations to the applicant by refusing to conduct an investigation into the substance of the applicant’s complaints and made misleading and deceptive statements (paras 42-68);

6    Earlier on 10 October 2019 the applicant had commenced proceedings in the Federal Court, being NSD 1690 of 2019. In the originating application in that matter the applicant claimed as follows:

1.    In accordance with s90-1, -15 & 20 of the Insolvency Law Reform Act 2016 & Bankruptcy Act 1966, and Civil Dispute Resolution Act the applicant seeks the following Orders:

a.    an order that a person within AFSA with experience & qualifications to be decided by the court be appointed as the representative of the Trustee of the estate;

b.     an order that the costs of Harris Carlson solicitors acting in court action VID 778 of 2019 be assessed & fully or partially borne by the Trustee.

c.    An order that the costs of Harris Carlson solicitors appearing in annulment application VID 774 of 2014 & subsequent appeal be assessed & fully or partially borne by the Trustee

d.    an order to compensate the estate losses & damages sustained because of breaches of duty by the Trustee;

e.    an order to require the Trustee to charge a fair and reasonable remuneration based on a court assessment of the value of tasks performed & services provided by the Trustee.

2.    The applicant applies for a compensation based on breaches of duty in the Trustees conduct in the administration, financial dealings & transactions of the applicants estate, Including but not limited to:

a.    Failure to take reasonable steps to prevent default of a NAB mortgage over 116 Gwynne St, Richmond

b.    Failure to keep the bankrupt informed on the status of the NAB loan & default, and failing to make reasonable or timely financial decisions to maximise the value & rental return to the estate

c.    Failure to take reasonable steps to prevent the NAB selling the Gwynne street property instead of Tivoli road or Mast Gully road to minimise loss to the estate.

d.    Failure to advise the bankrupt that it was NAB and not the Trustee that was selling Gwynne St in circumstances where the Trustee would have or should have known that the bankrupt was unaware of the NAB selling the property & relied on the Trustee to look after the interest of the estate

e.    Failure to take reasonable steps to prevent the NAB selling Gwynne St at below reasonable market value

f.    Failure to take reasonable steps to maximise rental returns on 3 properties being 5/12 Tivoli Road, 5 Mast Gully road & 116 Gwynne St

g.    Marketing & selling 5/12 Tivoli road before admitting proofs of debts that would indicate that sale is required.

h.    Generally failing to respond to reasonable requests from the bankrupt relating to the administration of or reporting on the status of the estate in a reasonable or timely manner resulting in excessive cost in administration & distress & inconvenience to the bankrupt & estate losing the opportunity maximise benefit to the estate.

3.    Compensation to be paid to the estate by the Trustee based on an assessment of damages to be agreed by the parties or determined by the court.

7    In NSD 1690 of 2019 the applicant also relied on a statement of claim filed on 4 February 2020. Materially he pleaded:

    From on or about August 2014 the Trustee was, or should have been aware of the main assets of the estate comprised of 3 residential rental properties in Victoria, rental income & some cash in a NAB account. (& as outlined in the applicants affidavits in an appeal of the sequestration order, matter VID 354 of 2014 dated 23 Oct 2014, the Trustee was aware of these proceedings)

a. 116 Gwynne street Richmond valued at $700,000 in 2014 with rental income of $3215 per calendar month as of March 2016.(Gwynne)

b. 5 Mast Gully rd. Upwey valued at $450,000 in 2014 with rental of $335 per week as of March 2016 (Upwey)

c. Unit 5 & 19/12 Tivoli rd. South Yarra valued at $270,000 in 2014 with rental income of $1040 pcm as of March 2016. (Tivoli)

d. Funds in NAB account of approx. $24000 (the Trustee had been corresponding with the NAB & seized these funds in Mar 2015)

(para 2)

    From on or about August 2014 the Trustee was or should have been aware of a joint mortgage to the NAB over the 3 properties of approximately $180,000 (& as outlined in the applicants affidavits in matter 354 of 2014) (being a NAB mortgage of approximately $180,000) (para 3)

    The Trustee allowed the applicant to receive rental payments from the 3 properties from June 2014 to until March 2016 after which time the Trustee directed all rental to be paid to the Trustee. (para 5)

    The Official Trustee has statutory and fiduciary duties to the applicant (paras 6, 7, 9)

    The Official Trustee had acted negligently and failed to meet its duties (para 10), including:

•    failing to take reasonable steps to consult with or inform the applicant of possible alternative financial options (para 11);

•    failing to maintain leases or re-lease the Gwynne and Tivoli properties (para 12);

•    failing to claim insurance for loss of rental and repair costs (para 13);

•    failing to make loan repayments to ensure the NAB mortgage did not default (para 14-18);

•    withholding information (para 19);

•    in respect of the management and sale of the rental properties (para 20, 21)

•    failing to rule on unproven debts submitted by the Legal Liability Costs Committee (para 22)

•    engagement by the Official Trustee of solicitors Harris Carlson to appear in every court hearing day in annulment proceedings VID774/2013 and subsequent appeal without having any forensic purpose or reasonable justification to do so in the interests of the estate (paras 23-27);

•    The failure of the Official Trustee to make reasonable and properly informed decisions based on sound financial reasoning resulted in the estate suffering loss, which loss could have been prevented if the Trustee had (inter alia) followed up the NAB, monitored rental income, taken reasonable steps to determine the value of each property, not sold the Gwynne Street property at an undervalue (para 28).

8    It is not contentious that:

    the proceedings in NSD1690/2019 were heard by Justice Wigney on 8 October, 9 October and 25 November 2020;

    the matter returned before Justice Wigney on 20 April 2021; and

    Judgment in NSD1690/2019 is currently reserved.

9    In the proceedings before me the respondents have legal representation. Mr Shaw is presently unrepresented.

Submissions of the parties

10    In summary the respondents submit

    There are extensive allegations common to both proceedings.

    The conduct said to give rise to an entitlement to damages is substantially the same conduct in both proceedings.

    The Court may exercise its discretion to stay a matter on a temporary basis, where the interests of justice would be served by the stay.

    The proceeding should be stayed pending delivery of judgment by Justice Wigney.

    Even if the applicant is successful before Justice Wigney the conduct of the individuals the subject of the present proceedings will be relevant to further progress of the claims in NSD1690/2019.

11    In summary the applicant submitted:

    He has a genuine dispute and has sought to engage in discussions with the respondents, however they have refused.

    In his view it would now be preferable to put the proceedings in NSD1690/2019 “on hold” and complete the present proceeding as the actions of the individual respondents would be relevant in the other matter.

    The respondents are wrong in submitting that the proceedings in NSD1690/2019 will determine relevant facts.

    The hearing before Justice Wigney is only the first stage of a two-stage statutory judicial review of the conduct of the Official Trustee.

    The respondents have not yet identified the facts and evidence they claim are the same in both proceedings.

    The present interlocutory application is premature and ill founded, based on speculation gleaned by simply comparing the statements of claim in each case.

    Counsel for the respondents has a conflict of interest as he is also counsel in NSD1690/2019.

    There is evidence of misconduct and cover up of systemic abuse of accountability standards.

    If Justice Wigney finds in the applicant’s favour, it would be beneficial to finalise this proceeding first.

Consideration

12    In Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) v Oswal [2011] FCA 424 (Burrup) McKerracher J observed as follows:

8.    The Court has a general power to control its own proceedings pursuant to s 23 of the Federal Court of Australia Act 1976 (Cth). The general power enables the Court to order temporary stay of proceedings in various circumstances including where a proceeding is pending in another court and it is desirable that such earlier proceeding proceed to its conclusion before the Federal Court proceeding is determined.

9.    The parties advance arguments by reference to a list of considerations collected in Sterling Pharmaceuticals Pty Ltd v The Boots Company (Australia) Pty Ltd [1992] FCA 72; (1992) 34 FCR 287. A number of cases in this Court and others have followed the approach taken by Lockhart J in Sterling Pharmaceuticals. Sterling Pharmaceuticals concerned litigation in New Zealand similar to that subsequently commenced in Australia between related parties. The New Zealand litigation had included the dismissal of an application for an interim injunction. Lockhart J noted that ‘extensive affidavit evidence was filed’ in the New Zealand proceeding. This included a significant number of expert affidavits from witnesses from various countries. Seven interlocutory applications had been heard subsequent to the application for interim injunction relief. Discovery by exchange of lists of documents had occurred and the New Zealand proceeding was expected to occupy some 21 days of hearing and expected to take place before the end of that year. (The application for a stay was heard at the end of February). A stay of the Australian proceeding was sought.

10.    Lockhart J noted (at 291):

In my opinion relevant considerations to be taken into account in the present case include the following:

•    Which proceeding was commenced first.

•    Whether the termination of one proceeding is likely to have a material effect on the other.

•    The public interest.

•    The undesirability of two courts competing to see which of them determines common facts first.

•    Consideration of circumstances relating to witnesses.

•    Whether work done on pleadings, particulars, discovery, interrogatories and preparation might be wasted.

•    The undesirability of substantial waste of time and effort if it becomes a common practice to bring actions in two courts involving substantially the same issues.

•    How far advanced the proceedings are in each court.

•    The law should strive against permitting multiplicity of proceedings in relation to similar issues.

•    Generally balancing the advantages and disadvantages to each party.

11.    Although resolution of the issues in New Zealand or Australia would not have given rise to an issue estoppel in the other country, his Honour observed that it:

... would be quite unreal to regard companies from the same international group as if they were totally independent of each other such that the success or reversal of one of them in proceedings in one country would not materially, as a practical matter, affect the conduct of their associates in another country where the proceedings involve similar issues.

12.    The issues in the New Zealand case were not identical with the Australian case but his Honour was satisfied that the basic issue was the same in each proceeding. His Honour noted that resolution of issues in the New Zealand case, unless there was some serious deficiency in the evidence of the unsuccessful party in the New Zealand proceeding, should determine the issues in the Australian proceeding.

13    I note that the principles articulated by Lockhart J in Sterling Pharmaceuticals Pty Ltd v The Boots Company (Australia) Pty Ltd (1992) 34 FCR 287; [1992] FCA 72 (and adopted by McKerracher J in Burrup) were approved as applicable principles by the Full Court in Oswal v Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) [2011] FCAFC 117 at [29] (Oswal). See also the recent decision of Markovic J in Porter, in the matter of Slater (No 2) [2020] FCA 1547 at [29] (Porter).

14    While earlier authorities in this Court relied primarily on s 23 of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act), Courts in more recent cases have relied on s 37M of the Federal Court Act to the extent that duplication of proceedings and resultant inefficiency and cost implications are relevant factors for the Court to take into consideration in exercising its discretion. To that extent I also note further discussion by Markovic J in Porter at [30], and the decision of Bennett J in Apotex Pty Ltd v Les Laboratoires Servier (No 6) [2012] FCA 745.

15    Turning now to the interlocutory application before me, I am satisfied that a stay in the terms sought by the respondents is warranted.

16    First, as submitted by the respondents, there is clear and extensive overlap between the issues the subject of the applicant’s claims in both the present matter and in NSD1690/2019. In particular I note that, in both claims, the applicant pleads breaches of statutory and/or fiduciary duties in respect of:

    failure to take reasonable steps to consult with or inform him of possible alternative financial options;

    conduct of the respondents concerning rental properties, being 116 Gwynne Street Richmond, 5 Mast Gully Road Upwey, and Units 5 and 19/12 Tivoli Road South Yarra;

    failure to maintain leases or re-lease the rental properties and/or monitor and increase the rental charged;

    failing to claim owner’s corporation insurance for loss of rental & repairs costs;

    failing to take any or any reasonable steps to make loan payments from the funds in the estate or from rental income;

    failing to take reasonable steps to market and sell a property to prevent the NAB loan from defaulting;

    being aware that the loan was in default and failing to take reasonable steps to prevent the default; and

    incurring unnecessary and unreasonable costs through the engagement of solicitors Harris Carlson.

17    Indeed, the conduct of the respondents as alleged by the applicant in the present proceedings appears directly referable to the applicant’s grievances against the Official Trustee in NSD1690/2019. While the applicant contends that the respondents have not identified the facts and evidence they claim are the same, in my view this is unnecessary to support a stay of these proceedings at this stage, in circumstances where there is clear overlap in the facts and issues pleaded by the applicant in both cases.

18    Second, although the applicant now appears to be of the view that the proceeding before Justice Wigney should be put “on hold” while the present matter progresses:

    The applicant’s claim in NSD1690/2019 was commenced two years ago, and was the subject of hearing over several days (namely, on 8 October, 9 October and 25 November 2020) before his Honour. His Honour reserved judgment on 25 November 2020.

    On 21 January 2021, the applicant filed an interlocutory application to reopen the hearing in NSD1690/2019 and adduce further evidence. Justice Wigney heard that interlocutory application on 20 April 2021 and reserved his decision.

    Insofar as I am aware, there was no reason why the applicant could not have sought the individual respondents to be joined to the proceeding in NSD1690/2019 at that point (or earlier) if he considered it necessary to do so.

19    By instituting the present proceeding in QUD127/2021, the question arises whether the applicant has sought to – in effect – again reopen the proceedings in NSD1690/2019, although this time without seeking leave from Justice Wigney.

20    Third, given that judgment in NSD1690/2019 is currently reserved, and Justice Wigney will in due course deliver it, I am unable to identify any public interest associated with permitting the current proceeding before me to continue in parallel with the proceedings before his Honour.

21    Fourth, and critically, I consider that only undesirable confusion can ensue if Justice Wigney and I separately examine significantly overlapping and related issues, and separately make findings in relation to what appear to be common facts. In particular, depending on the material before the Courts and the arguments advanced, there is a serious risk of potentially detrimental conflicting factual findings in the two matters.

22    Fifth, although the applicant complains of alleged conflict of interest on the part of Counsel for the respondents in also acting for the Official Trustee, it is entirely unclear that there is any such conflict, particularly in light of what appear to be a common factual sub-stratum in both proceedings. Indeed, given the significant overlap in issues and facts pleaded, I consider it likely that the same witnesses will be required to give evidence in both cases.

23    Sixth, I accept the submission of the respondents that costs will be unnecessarily incurred by the respondents in seeking to meet the present claim, while awaiting judgment by Justice Wigney in a related matter.

24    Seventh, I also accept the submission of the respondents that if the applicant is successful in NSD1690/2019, the Court can then revisit the issue whether the present proceeding should be listed for hearing with NSD1690/2019.

25    Eighth, given the similar issues pleaded, I consider this to be a case where the law should properly strive against permitting multiplicity of proceedings. In my view the interests of justice support orders staying the present proceedings until the matter in NSD1690/2019 is resolved.

26    Finally, I am unable to identify any prejudice to the applicant in the present circumstances by the stay, given that his grievances concerning similar issues have already been canvassed before the Court in NSD1690/2019, and he can expect a judgment in that matter. The obverse of this lack of prejudice is what appears to be – at this stage – unnecessary duplication of costs and time on the part of the respondents. Further, there is the prospect of inefficient use of valuable Court time in revisiting similar issues as were before Justice Wigney, contrary to s 37M of the Federal Court Act.

Conclusion

27    The respondents have been successful in respect of this interlocutory application. I consider that the proceedings should be stayed pending the determination of proceedings in NSD 1690 of 2019, and that they should not proceed until such time as the Court grants leave.

28    I also consider that costs ought follow the event as contemplated in Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25.

Associate:

Dated:    7 October 2021

SCHEDULE OF PARTIES