Federal Court of Australia

Mehajer v National Australia Bank, in the matter of Bankrupt Estate of Mehajer [2021] FCA 1642

ORDERS

THE COURT ORDERS THAT:

1.    The applicant’s request to amend the originating application be dismissed.

2.    The originating application be dismissed.

3.    The applicant pay the respondents’ costs of and in connection with the application on a lump sum basis.

4.    The costs of the second respondent be paid in the fixed lump sum amount of $15,000 within 28 days of the date of this order.

5.    The first respondent file and serve a short document identifying the amount of the lump sums costs order that it contends should be made by 12:00 AEDT on 17 December 2021.

6.    If necessary, the applicant file and serve a short document in response to the first respondent’s document, as outlined in order 5, by 16:00 AEDT on 22 December 2021.

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

REASONS FOR JUDGMENT

Delivered ex tempore, revised from transcript

JAGOT J:

1    This matter involves an application seeking both an interlocutory and permanent injunction restricting the first respondent, National Australia Bank (NAB), from exercising certain rights of sale arising under loan agreements in relation to two properties in Lidcombe.

2    The matter first came before me in my capacity as the General Duty Judge. I refused to grant the interlocutory relief sought and listed the application for hearing on the question of final relief today. As noted, the final relief sought includes an injunction restricting NAB from exercising a right of sale, as well as an order granting the applicant the authority to dispose of the properties the subject of the loan agreements with NAB within a period of six months.

3    Yesterday afternoon the applicant forwarded to the Court and the other parties an affidavit indicating that he wished to seek other orders from the Court under s 178 of the Bankruptcy Act 1966 (Cth). The orders sought are expressed in the affidavit in the following terms:

(i) That consent is given to the Applicant to initiate the complaint against the Financial Ombudsman Services against the First Respondent, The National Australia Bank. See Applicant’s submissions dated 2 December 2021 at [24] to understand the nature of the complaint. if consent is given to the Applicant, there will be no losses incurred to the estate or the second respondent. The complaint has already been opened by the Applicant and is pending consent from his trustee to progress. The complaint will close on or before 4 January 2022 if consent is not provided to the applicant.

(ii) That consent is given to the Applicant to object to the ATO’s Notice of Assessment which reads a payment amount of circa $9,500,000.00. This includes a high interest of approximately 75%.

(iii) That consent is given to the Applicant to initiate the sale of the Lidcombe Properties within 6 months from being ordered to do so.

(iv) That consent is given to the applicant to adjudicate each of the debts recorded in the Applicant’s estate (report to creditors) as none of the debts have been adjudicated

(v) Or alternatively, the court appoints a new official trustee to replace Paul Gerard Weston effective immediately.

4    The second respondent managed to file written submissions in response to the applicant’s affidavit opposing the applicant agitating, in the context of this proceeding, the relief indicated in the affidavit. The first respondent supported the submissions made for the second respondent.

5    I agree with the respondents’ submissions that if the applicant wishes to make any application seeking relief of the kind which is sought, then it is not appropriate to do so in the context of the current proceeding. As set out in the written submissions for the second respondent, there are numerous matters which would create a difficulty for the applicant in seeking the relief sought. I can see no basis upon which I should permit the hearing today in respect of the originating application and the relief sought therein to be derailed or disrupted by the applicant seeking the relief that is otherwise identified in the affidavit.

6    The relevant matters include that a number of the same issues appear to be the subject of other proceedings, NSD287/2020 in which the applicant seeks the replacement of his trustee in bankruptcy. Those proceedings, apparently, are listed for hearing on 18 March 2022.

7    In addition, in proceeding NSD2185/2019, which was filed before this proceeding, the applicant sought to agitate various issues in respect of the conduct, or alleged conduct, of his trustee in bankruptcy. The issues raised by Mr Mehajer in NSD2185/2019 were dealt with in Mehajer (Bankrupt) v Weston (Trustee) [2020] FCA 596.

8    In all of the circumstances, I am not satisfied that any amendment of the originating application in this proceeding should be permitted. Accordingly, the application by the applicant to amend the originating application or otherwise to seek relief as identified in the affidavit dated 14 December 2021 is dismissed.

9    As noted, the substantive application in this matter is for an injunction to restrict NAB from exercising a right of sale, which it is accepted has arisen in relation to two properties at Lidcombe, and instead for the applicant to be granted authority to dispose of those properties within a period of six months or such other period as may be permitted. Although the relief sought is styled as an interlocutory injunction as against NAB, in substance what is sought is an order preventing NAB from exercising a right of sale at all, so that the applicant instead can sell the properties.

10    The application is supported by a range of material both in writing and by way of oral submissions made by the applicant today. Those written and oral submissions traverse much of the background as between the applicant, and the first and second respondents. In effect, the oral submissions of the applicant made today involve a plea to be given extra time in order to raise finance to discharge the debts of the applicant to NAB. The various written and oral submissions acknowledge, but do not effectively confront, the insuperable problems for the making of the application.

11    First, as has been pointed out by both respondents, the effect of s 58(1) of the Bankruptcy Act is that the applicant’s property has vested in the second respondent as trustee in bankruptcy of the applicant’s estate. Despite this, under s 58(5) of the Bankruptcy Act, NAB, as a secured creditor, is entitled to realise or otherwise deal with its security, including by taking possession of the properties the subject of the loan agreements, which it has done.

12    The second respondent has identified a series of authorities from which it is plain that any relevant rights of the applicant such as to found the capacity to make an application for relief as sought in the application have vested in the second respondent as the applicant’s trustee in bankruptcy: see Cummings v Claremont Petroleum NL (1996) 185 CLR 124 at 135 – 138; Foong v Commonwealth Bank of Australia [2014] NSWCA 246 at [11]; Integrated Securities No 3 Pty Ltd v Oceans 5 Ultimate Getaways Pty Ltd [2021] NSWSC 278 at [7]; National Australia Bank v Strik [2009] NSWSC 184 at [9]; Westpac Banking Corporation v Nolan [2016] NSWSC 778 at [21]; Hilton v Gidley [2016] NSWSC 594 at [22]-[23].

13    Accordingly, the applicant has no standing to bring the proceeding to seek the relief which he does.

14    The other difficulty for the applicant is that he is currently subject to the Felons (Civil Proceedings) Act 1981 (NSW). This is because he is presently in custody having been convicted of a serious indictable offence. I accept that this legislation applies to the Federal Court exercising federal jurisdiction in New South Wales by operation of s 79 of the Judiciary Act 1903 (Cth). Under the Felons (Civil Proceedings) Act, s 4 provides that a person in the position of the applicant, that is, who has been convicted of a serious indictable offence, may not institute any civil proceeding in any court except by leave of that court granted on application. By s 5, the court shall not grant leave unless satisfied that the proceedings are not an abuse of process and that there is prima facie ground for the proceeding. Section 7 provides at the hearing or determination of an application neither the applicant nor the persons who would be a defendant are entitled to appear or be represented other than by leave. It should be taken that given the way in which this matter has been heard, I have, effectively, granted leave to both the applicant and the two respondents to appear at what I am treating as an application for a grant of leave under s 4 of the Felons (Civil Proceedings) Act.

15    However, I am persuaded by the submissions for the respondents that no grant of leave should be or, indeed, can be granted given that I am not satisfied that the proceedings are not an abuse of process or that there is a prima facie ground for the proceedings. One reason for this is that the applicant does not have standing to bring the application. Even if the applicant was ultimately successful in other proceedings he has on foot seeking an annulment of the bankruptcy, the current position is that the applicant is a bankrupt and, accordingly, any rights he may have such as to found the capacity to bring the application for relief are vested in the second respondent. For this reason also, it must be concluded that I am unable to be satisfied that the proceeding does not involve an abuse of process or that there is a prima facie ground for the leave sought in the application.

16    There are other substantive difficulties for the grant of any relief sought. As the second respondent has pointed out, a person seeking to enjoin a mortgagee’s power of sale generally must either pay the debt or, in the event of dispute of the debt, pay the amount subject to dispute into a court: see Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161. Despite the submissions on behalf of the applicant that he should be given more time to obtain funding, there is no basis to conclude that this is a realistic prospect.

17    As has also been pointed out, if this ordinary rule is to be put to one side, the applicant has not proffered any undertaking as to damages that might be incurred by NAB if it is prevented from exercising its power of sale, even on some temporary basis. Further, if there were any such undertaking, given the applicant’s current status as a bankrupt, it is not apparent that any such undertaking could be accepted unless it was supported by appropriate security, for which there is presently no evidence. Further, the applicant’s trustee in bankruptcy, as is apparent from the trustee’s response to the applicant’s affidavit of 14 December 2021, does not consent to the applicant bringing this application. This is so despite the second respondent being aware of the range of complaints that the applicant has against NAB. The trustee also does not consent to the applicant being granted any authority to dispose of the properties the subject of the loan agreements with NAB.

18    In these circumstances, by operation of s 5 of the Felons (Civil Proceedings) Act, no leave could be granted to the applicant to institute these proceedings.

19    It necessarily follows for these reasons that the entirety of the application in proceeding NSD1237/2021 must be dismissed.

20    I am satisfied in this matter that I should make lump sum costs orders.

21    The applicant should pay the respondents’ costs of and in connection with the application on a lump sum basis.

22    Noting that I have considered the second respondent's updated submissions and accept that total costs incurred by the trustee have exceeded $23,000, it seems entirely reasonable to me for the applicant to pay the second respondent’s costs in a fixed lump sum amount of $15,000 within 28 days of the date of this order.

23    Since NAB has not quantified its costs of this proceeding, NAB is ordered to file and serve a short written document identifying its proposed lump sum costs amount by midday on 17 December 2021. If necessary, the applicant may file and serve any short written document in response by 4 pm on 22 December 2021.

Associate:

Dated:    22 December 2021