Federal Court of Australia

McCardle v Johnson (No 2) [2022] FCA 168

ORDERS

THE COURT ORDERS THAT:

1.    The claims for final relief in paragraphs 2, 4, 5 and 9 of the amended application filed 22 September 2021 are dismissed, and judgment is entered for the first respondent in relation to these claims.

2.    The claim for compensation for the “fund” in paragraph 7 of the amended application filed 22 September 2021 is dismissed, and judgment is entered for the first respondent in relation to this claim.

3.    The claim that the applicant’s bankruptcy be annulled in paragraph 8 of the amended application filed 22 September 2021 is dismissed, and judgment is entered for the first respondent in relation to this claim.

4.    The amended statement of claim filed 22 September 2021 is struck out in its entirety.

5.    Subject to orders 6 and 7, the applicant has leave to file any further amended statement of claim which is confined to pleading causes of action relating to the final relief claimed in the amended application filed 22 September 2021 other than those claims referred to in orders 1, 2 and 3 above.

6.    Any further amended statement of claim shall be filed and served by 1 April 2022.

7.    By 1 April 2022, the applicant shall pay to the first respondent’s solicitors the amount of $11,000 to be held by that firm as security for the first respondent’s costs up to and including the preparation of a defence to any further amended statement of claim.

8.    If security for costs is not provided pursuant to order 7, the proceeding shall be stayed until further order.

9.    The first respondent has liberty to apply for further security for his costs of this proceeding on three business days’ notice in writing to the applicant.

10.    The applicant shall pay the first respondent’s costs of and incidental to the interlocutory application filed on 26 August 2021 as well as his costs of the proceedings in relation to the claims in orders 1, 2 and 3.

11.    The parties have liberty to apply on two business days’ notice in writing.

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

REASONS FOR JUDGMENT

DOWNES J:

INTRODUCTION

1    Ms Roxanne McCardle, who is the applicant in these proceedings and a lawyer, is an undischarged bankrupt. She became a bankrupt after she filed a debtor’s petition on 31 March 2016.

2    Mr Gregg Johnson, the first respondent, is a registered trustee who became the trustee of the bankrupt estate of the applicant in June 2016. Mr Johnson’s evidence is that, but for the applicant’s conduct and non-compliance with her requirements under the Bankruptcy Act 1966 (Cth), the applicant would have been automatically discharged from bankruptcy on 1 April 2019. His evidence is that he has had cause to lodge four separate objections to discharge following repeated failures by the applicant to comply with his directions and with her obligations. He states that he has in excess of $100,000 in unpaid fees incurred in the administration of the bankrupt estate and that the applicant’s conduct has caused the accrual of significant unnecessary costs in the estate, including legal costs.

3    By application filed on 1 April 2021, the applicant commenced these proceedings against the first respondent. One of the orders sought in the application was that the first respondent’s second objection to discharge “be withdrawn or forthwith dismissed”.

4    The applicant filed a statement of claim on 19 July 2021.

5    By interlocutory application filed on 26 August 2021, the first respondent applied for summary judgment or, in the alternative, an order that the statement of claim be struck out and that the applicant provide security for his costs of the proceedings should they be allowed to continue.

6    An amended application and amended statement of claim were filed on 22 September 2021, and the interlocutory application proceeded on the basis of those amended documents.

7    The second respondent has assisted the Court with submissions about particular legal issues but otherwise has not taken an active role in the application, and does not seek any costs.

8    To date, neither respondent has been required to file a defence.

PROCEDURAL HISTORY

9    This proceeding was commenced by application filed on 1 April 2021.

10    Pursuant to an order dated 6 May 2021, the applicant was granted leave to file and serve an amended application and statement of claim by 17 June 2021. It was noted in that order that a pro bono referral would be made in the applicant’s favour. The applicant obtained the assistance of a barrister pursuant to this referral, and the barrister assisted for an unknown period but is no longer assisting the applicant.

11    By order dated 28 June 2021, the date in the order dated 6 May 2021 was extended to 19 July 2021.

12    The applicant filed a statement of claim on 19 July 2021.

13    The applicant did not appear at the case management hearing on 12 August 2021 and leave was granted to the first respondent to file any application seeking orders striking out the statement of claim and/or for summary judgment together with any affidavits in support on or before 26 August 2021.

14    By interlocutory application filed on 26 August 2021, the first respondent brought the application which is the subject of this judgment.

15    The applicant filed written submissions in response to that application on 7 September 2021.

16    By order dated 8 September 2021, the applicant was granted leave to amend the application and the statement of claim on condition that this was done by 22 September 2021. An order was also made requiring the applicant to file supplementary submissions and any affidavits by 22 September 2021. The applicant was also given an opportunity to file and serve an outline of submissions in reply and affidavits in reply by 15 October 2021 (with the respondents’ affidavits and outlines being due by 6 October 2021).

17    By an amended application filed on 22 September 2021, the applicant seeks final relief including, by way of summary, the dismissal of the first respondent’s second objection to discharge, that an agreement between “the Applicant’s corporate trustee” and the first respondent be set aside, compensation, the review and reduction of the first respondent’s costs and fees, the annulment or discharge of her bankruptcy, and the referral of the first respondent to the “Regulatory branch” of the second respondent for investigation.

18    The applicant also filed an amended statement of claim on 22 September 2021 as well as a document entitled “APPLICANT’S OUTLINE OF AMENDED SUBMISSIONS ON INTERLOCUTORY APPLICATION”. No affidavits were filed by the applicant at this time.

19    On 20 October 2021, the applicant filed an affidavit of herself as well as a document entitled “AMENDED ADDED SUBMISSIONS BY APPLICATION ON 20 OCTOBER 2021”.

20    In an order dated 28 October 2021, it was noted that:

The interlocutory application will proceed in relation to the Amended Application and Amended Statement of Claim filed by the applicant on 22 September 2021 and there is no need for the first respondent to amend the interlocutory application.

21    In an order dated 29 November 2021, it was noted that the interlocutory application would be determined on the papers. The reasons for this are explained in the decision of McCardle v Johnson [2021] FCA 1528.

22    For the following reasons, I will order that:

(a)    the claims for final relief in paragraphs 2, 4, 5 and 9 of the amended application filed 22 September 2021 are dismissed, and judgment is entered for the first respondent in relation to these claims;

(b)    the claim for compensation for the “fund” in paragraph 7 of the amended application filed 22 September 2021 is dismissed, and judgment is entered for the first respondent in relation to this claim;

(c)    the claim that the applicant’s bankruptcy be annulled in paragraph 8 of the amended application filed 22 September 2021 is dismissed, and judgment is entered for the first respondent in relation to this claim;

(d)    the amended statement of claim filed 22 September 2021 is struck out in its entirety;

(e)    subject to the orders in (f) and (g), the applicant has leave to file any further amended statement of claim which is confined to pleading causes of action relating to the final relief claimed in the amended application filed 22 September 2021 other than those claims referred to in (a), (b) and (c) above;

(f)    any further amended statement of claim shall be filed and served by 1 April 2022;

(g)    by 1 April 2022, the applicant shall pay to the first respondent’s solicitors the amount of $11,000 to be held by that firm as security for the first respondent’s costs up to and including the preparation of a defence to any further amended statement of claim;

(h)    if security for costs is not provided as ordered, the proceeding shall be stayed until further order;

(i)    the first respondent has liberty to apply for further security for his costs of this proceeding on three business days’ notice in writing to the applicant;

(j)    the applicant shall pay the first respondent’s costs of and incidental to the interlocutory application filed on 26 August 2021 as well as his costs of the proceedings in relation to the claims in (a), (b) and (c);

(k)    the parties have liberty to apply on two business days’ notice in writing.

STRIKE OUT APPLICATION

23    As the first respondent relies upon what he submits is the inability of the applicant to formulate a viable statement of claim as a central premise for his summary judgment application, the issue of whether the statement of claim is defective will be addressed first. In particular, the first respondent submits that:

(a)    the applicant has not pleaded a reasonable cause of action [and] the repeated failure to do so suggests that no such action exists;

(b)    the applicant’s pleadings are liable to be struck out in their entirety and there is no utility in affording the applicant an opportunity to again reformulate her position.

Relevant law

24    Rule 16.02(1) of the Federal Court Rules 2011 (Cth) provides as follows:

16.02     Content of pleadings—general

(1)     A pleading must:

(a)     be divided into consecutively numbered paragraphs, each, as far as practicable, dealing with a separate matter; and

(b)     be as brief as the nature of the case permits; and

(c)     identify the issues that the party wants the Court to resolve; and

(d)     state the material facts on which a party relies that are necessary to give the opposing party fair notice of the case to be made against that party at trial, but not the evidence by which the material facts are to be proved; and

(e)     state the provisions of any statute relied on; and

(f)     state the specific relief sought or claimed.

25    The requirement that material facts be stated in a pleading has two purposes: the natural justice purpose of adequately informing the other party of the nature of the case alleged against that party and the purpose of providing a basis for determining whether that alleged case, so exposed, constitutes a cause of action cognisable at law: see Australian Automotive Repairers’ Association (Political Action Committee) Inc v NRMA Insurance Limited [2002] FCA 1568 at [15] which was cited with approval by Logan and Katzmann JJ in Sabapathy v Jetstar Airways (2021) 283 FCR 348; [2021] FCAFC 25 at [31].

26    As to the first purpose, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her: see Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd [2017] FCAFC 50 at [36]. If a party is not adequately informed of the nature of the alleged case, that party is deprived of this opportunity.

27    Rule 16.02(2) of the Rules provides that:

  (2)  A pleading must not:

(a)     contain any scandalous material; or

(b)     contain any frivolous or vexatious material; or

(c)     be evasive or ambiguous; or

(d)     be likely to cause prejudice, embarrassment or delay in the proceeding;     or

(e)     fail to disclose a reasonable cause of action or defence or other case     appropriate to the nature of the pleading; or

(f)     otherwise be an abuse of the process of the Court.

28    If a pleading falls foul of any of the prohibitions contained in r 16.02(2), then a party may apply to the Court for an order that all or part of the pleading be struck out: r 16.21.

29    In Chandrasekaran v Commonwealth of Australia (No 3) [2020] FCA 1629 at [101] – [106], Wigney J made observations which are apposite to the pleading in this case as follows:

Rules 16.02 and 16.21 must be interpreted and applied in light of s 37M of the FCA Act, which provides that the overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible.

The grounds upon which a pleading can be struck out under r 16.21 of the Rules correspond, to a large extent, with the grounds upon which a proceeding may be summarily dismissed under s 31A of the FCA Act and r 26.01 of the Rules. The Court will proceed to strike out under r 16.21, rather than summarily dismiss the proceeding under r 26.01 of the Rules, where although there are deficiencies in the pleading, a reasonable case may still exist. The granting of leave to replead in those circumstances may allow the applicant to remedy the deficiencies.

The word “vexatious” in the context of rules such as r 16.21 is an “omnibus expression” that includes material which is scandalous, discloses no reasonable cause of action, is oppressive or embarrassing or the inclusion of which is otherwise an abuse of the processes of the Court: … Material in a pleading would also be considered to be vexatious or frivolous if it was included in the pleading with the intention of annoying or embarrassing, or for a collateral purpose, or if it raises matters that are “obviously untenable or manifestly groundless”: ...

The mere allegation of a scandalous fact does not necessarily render the pleading liable to be struck out as scandalous. Material which is degrading, and therefore scandalous, will not be struck out unless it is also irrelevant: Cavill Business Solutions Pty Ltd v Jackson [2005] WASC 138 at [25]. Scandal, in the context of r 16.21 of the Rules, means “the allegation of anything which is unbecoming to the dignity of the Court to hear or is contrary to good manners or which charges some person with a crime not necessary to be shown in the cause” and “any unnecessary (not relevant to the subject) allegation bearing purely upon the moral character of an individual”: Cavill at [25].

A pleading is likely to cause prejudice or embarrassment, for the purposes of r 16.21(1)(d) of the Rules, if it is susceptible to various meanings, contains inconsistent allegations, includes various alternatives which are confusingly intermixed, contains irrelevant allegations or includes defects which result in it being unintelligible, ambiguous, vague or too general: ... Such a pleading could equally be characterised as evasive or ambiguous for the purposes of r 16.21(1)(c) of the Rules.

A pleading may be considered to be embarrassing if it suffers from narrative, prolixity or irrelevancies to the point that it is not a pleading to which the other party can reasonably be expected to plead to: Fuller v Toms (2012) 247 FCR 440 at [80], [84]. A party cannot be expected to respond to mere context, commentary, history, narrative material or material of a general evidentiary nature: Fuller v Toms at [83].

(emphasis omitted)

30    The decision whether it is appropriate to strike out a pleading is a case specific inquiry. The application of the principles will differ depending on the case and on the pleading: see Gall v Domino’s Pizza Enterprises Ltd (No 2) (2021) 150 ACSR 387; [2021] FCA 345 at [18].

31    On any application to strike out all or part of a pleading, there will usually be a tension between two competing and important considerations. The first is avoiding taking an unduly technical approach to the application of the rules of court, especially if that approach would deprive a litigant of advancing a viable claim or defence. The second is enforcing the rules of court to the extent required to ensure that the party which is required to respond to a pleading is able to understand the pleaded case and to meet that case, and is not put to the added expense of pleading to, preparing for and meeting a case at trial which includes, for example, irrelevant allegations. In CFMEU v BHP Coal Pty Ltd at [44], the Full Court observed that:

The Court has a discretion to decline to strike out a defective pleading. Clearly enough, “great caution” should be exercised before striking out a party’s pleaded case and thereby potentially placing an impediment in the path to the vindication of a claim for relief. To do so would expose a party to the prospect of being unfairly denied access to the courts. Greater uncertainty, perhaps, surrounds those circumstances in which a party may be exposed to procedural unfairness by being confronted with a pleading which (for example) is accepted to be sufficiently ambiguous or uncertain such that it should be struck out. To permit such a pleaded case to proceed to hearing exposes that party to the prospect of unfairness by being confronted with a deficiently pleaded case. …

Submissions by the parties

32    The first respondent submits that the amended statement of claim should be struck out in its entirety because it:

(a)    does not disclose a reasonable cause of action;

(b)    is evasive and ambiguous (see, for example, the amended statement of claim at paragraph 4(v));

(c)    does not clearly state the material facts upon which the applicant relies, such that the first respondent has not been given fair notice of the case which the applicant seeks to make against him;

(d)    is embarrassing as it suffers from narrative, prolixity or irrelevancies to the point that it is not a pleading to which the other party can reasonably be expected to plead: Fuller v Toms (2012) 247 FCR 440; [2012] FCA 27 at [80], [84] (see, for example paragraph 4(v), 4(al)-(aq)). The first respondent submits that he should not be expected to respond to the applicant’s mere context, commentary, history, narrative material or material of a general evidentiary nature: Fuller v Toms at [83];

(e)    is scandalous, in that it contains allegations regarding the first respondent bearing purely upon his moral character: Cavill Business Solutions Pty Ltd v Jackson [2005] WASC 138 at [25]; and

(f)    is scandalous in that it impugns the character of people unrelated to these proceedings, (see, for example, paragraphs 4(g), 4(n), 4(y), 4(ak)).

33    The second respondent submits that:

(a)    the applicant seeks to invoke the Court’s jurisdiction to consider matters in relation to the administration of her bankrupt estate, including a large range of matters apparently not connected with the first respondent’s administration of the estate;

(b)    section 30(1) of the Bankruptcy Act provides that the Court has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part IX, X or XI coming within the cognizance of the Court and may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to the Bankruptcy Act in any such case or matter;

(c)    the judicial power conferred pursuant to s 30 is intended to assist in the exercise of jurisdiction in bankruptcy. It is an ingredient of the exercise of discretion under such a power that it be ‘necessary for the purposes of carrying out or giving effect to’ the Bankruptcy Act. It is difficult to reconcile, amongst the myriad of relief sought by the applicant, how each component of the relief would fall within the judicial power conferred under s 30 of the Bankruptcy Act;

(d)    if the applicant is intending to invoke s 30 of the Bankruptcy Act, she ought to be required to identify, in respect of each element of relief sought, how that relief falls within the Court’s jurisdiction;

(e)    further, the Court has broad powers to review and direct the administration of a regulated debtor’s estate, by virtue of Subdivision B of Division 90 of Part 3 of the Insolvency Practice Schedule (Bankruptcy) (which is found in Schedule 2 to the Bankruptcy Act);

(f)    the relief sought by the applicant (as set out under the heading ‘Damages’ in the amended statement of claim) is not available under s 90-15 of the Insolvency Practice Schedule (Bankruptcy). While it would be within the jurisdiction and power of the Court to consider making an order that the first respondent make good losses that have been sustained as a result of any breach of duty, it is currently not clear whether such breaches are alleged to have occurred, whether losses have been caused as a result of those breaches and the quantum of what those losses is.

34    Despite filing three sets of submissions in relation to the interlocutory application, the applicant did not address many of the submissions of the respondents. Instead and in summary, the applicant submits that:

(a)    she was entitled to file an amended statement of claim without leave of the court but was informed she required leave;

(b)    the application seeks to cause further injustice, to reward fraudulent debtors, to prevent claims against the trustee and the regulating authority for negligence, recklessness, trespass, bullying and breaches of the relevant Act including its reforms in Schedule 2, which is a denial of access to justice, and an attempt to divert from adhering to the administration of justice;

(c)    the application itself is scandalous, vexatious and should be forthwith dismissed;

(d)    her affidavit and statement of claim provide adequate further and better particulars and details as to the claim and also discloses elements to the claim where such elements are in addition to her claim for equity because she has existing equitable interests owed to her or in the alternative as a resulting or constructive trust due to the basis of her expenses paid against each and every asset or super fund asset.

Analysis

35    The amended statement of claim commences with three paragraphs which contain allegations about the parties (and which appear under a heading “THE PARTIES”).

36    The next paragraph, being paragraph 4, appears under a heading “THE PARTICULARS” and contains subparagraphs (a) to (ay) which span nearly 15 pages of text (commencing partway down page 4 and concluding on page 18). These subparagraphs contain what can only be described as a confusing jumble of multiple and intermixed allegations of fact, law, assertions and submissions.

37    For example, paragraph 4(aj) states the following:

[REDACTED]

38    As another example, paragraphs 4(al) and 4(am) state as follows:

[REDACTED]

39    Paragraph 5 is a lengthy paragraph which contains two subparagraphs, spans more than a page and appears under the heading “DAMAGES”. This paragraph differs from the prayer for relief in the amended application under the subheading “Claim for final orders sought”. It is also a mixed bag of various claims which are not supported by pleaded material facts. For example, paragraph 5(a) states:

By reason of the negligent, reckless, vexatious conduct and actions contrary to good policy and contrary to the laws pertaining to required conduct in bankruptcy, insolvency reform, superannuation, taxation, trespass, privacy, consumer credit such as mortgages, insurance and interference with these and other agreements, and by the interference by the First Respondent and Trustee (Johnson), the Applicant (McCardle) has suffered unnecessary and unreasonable significant loss, lost opportunities, future loss, harm ie injury brought on or contributed to by additional stress, damage and or injury to her reputation and good character, significant obstruction delaying her improving her immediately fragile situation including of financial hardship brought about by frauds on and upon courts, has caused her embarrassment, distress and hurt not merely through the trespass and confiscation of personal documents including original identity documentation, medical reports and prescriptions, but from the extended bankruptcy, without reasonable cause, and she will continue to suffer loss and damage from all this for many unnecessary years to come, and seeks relief and adequate remedies including punitive and or aggravated damages as a deterrent to the insolvency profession from so acting with such recklessness, unreasonableness or with complete disregard to the expected standards of conduct by a person in his position and with such power.

40    Like paragraph 5, many legal conclusions are pleaded in paragraph 4 of the amended statement of claim which are not supported by the plea of any material facts to support them such as:

(a)    negligence: for example, see 4(j), 4(o), 4(p), 4(q), 4(r), 4(t), 4(u), 4(w), 4(x), 4(y), 4(z), 4(aa), 4(ab);

(b)    general assertions of breach of unidentified provisions of the Bankruptcy Act or acting contrary to it: for example, see 4(e), 4(f), 4(h), 4(l), 4(p), 4(q), 4(u), 4(x), 4(y), 4(ad), 4(af), 4(ag), 4(ah), 4(aj), 4(ak), 4(al), 4(am), 4(an);

(c)    deliberate misconduct or abuse of power including conduct intending to cause harm and loss to the applicant: for example, see 4(i), 4(j), 4(o), 4(q), 4(r), 4(t), 4(u), 4(y), 4(z), 4(ab), 4(ad), 4(af), 4(ag), 4(al), 4(am). These allegations are made by way of speculative assertion, and, having regard to the excessive language used, appear designed to attack the first respondent personally for doing his job as the applicant’s trustee in bankruptcy, rather than having any proper evidential basis. This will also have ramifications for the security for costs application.

41    Viewed as a whole, the amended statement of claim does not comply with r 16.02(1)(b) – (e) and r 16.02(2)(c) of the Rules. In particular, it is not as brief as the nature of the case permits, it does not identify the issues that the applicant wants the Court to resolve, it contains ambiguous allegations, it does not identify the provisions of the legislation relied on and it does not state the material facts on which the applicant relies that are necessary to give the respondents fair notice of the case to be made against them at trial. Further, it does not comply with r 16.02(2)(e) because it fails to disclose a reasonable cause of action or other case appropriate to the nature of the pleading. For these reasons, the amended statement of claim is likely to cause prejudice and delay in the proceeding, contrary to r 16.02(2)(d) of the Rules.

42    Further, contrary to r 16.02(2)(d) of the Rules, the amended statement of claim is embarrassing as it suffers from narrative, prolixity or irrelevancies to the point that it is not a pleading to which the respondents can be expected to plead in response. As a matter of fairness, the respondents cannot be expected to plead to the numerous allegations of mere context, commentary, history, narrative material or material of a general evidentiary nature which appear in the amended statement of claim and nor can the Court be expected to conduct a trial based on such claims.

43    Further, contrary to r 16.02(2)(b) of the Rules, the amended statement of claim is replete with bald allegations of misconduct that are irrelevant and scandalous in relation to non-parties such as a magistrate, the applicant’s former husband, a senior barrister, a Federal Magistrate, a judge and a lawyer. Such allegations are also likely to cause prejudice and delay to the proceeding. They are unbecoming of the dignity of the Court to hear. Examples of such allegations are contained in subparagraphs 4(n), 4(u), 4(ai), 4(aj), 4(al), 4(am) and 4(ar).

44    Further, many such allegations appear designed to cause harm to the reputation of third parties who are not parties to this proceeding and so the pleading is an abuse of the process of the Court, contrary to r 16.02(2)(f).

45    For these reasons, the amended statement of claim is struck out in its entirety. Whether the applicant should be granted leave to replead is considered at the same time as the summary judgment application is addressed.

SUMMARY JUDGMENT APPLICATION

Summary of submissions by the parties

46    In addition to his attack on the amended statement of claim, the first respondent submits that the applicant has no reasonable prospects of success, and that judgment should be entered, because the orders or relief sought by her are unable to be granted by the Court or that it is otherwise not appropriate in the circumstances for the Court to make any orders with respect to the first respondent in his role as trustee of the bankrupt estate.

47    The applicant’s submissions address many of the facts which fall within the scope of the case which are sought to be pleaded in the amended statement of claim and, by reference to these facts, it is submitted that “there are issues of fraud affecting provable debts, issues of misconduct throughout, and breaches of the relevant Act”.

48    In relation to the application for summary judgment, the applicant also submits to the effect that:

(a)    the orders sought by the first respondent are a denial of access to justice;

(b)    the Court has jurisdiction to hear all matters raised by her; and

(c)    this is a complex matter and should not be dismissed at this early stage because the applicant’s claims can be substantiated by documentary evidence.

Relevant legal principles

49    Section 31A(2) of the Federal Court of Australia Act 1976 (Cth) provides the power to grant summary judgment to a party defending a claim:

31A     Summary judgment

…

(2)     The Court may give judgment for one party against another in relation to the     whole or any part of a proceeding if:

(a)     the first party is defending the proceeding or that part of the     proceeding; and

(b)     the Court is satisfied that the other party has no reasonable prospect of     successfully prosecuting the proceeding or that part of the proceeding.

(3)     For the purposes of this section, a defence or a proceeding or part of a     proceeding need not be:

(a)     hopeless; or

(b)     bound to fail;

for it to have no reasonable prospect of success.

(4)     This section does not limit any powers that the Court has apart from this     section.

…

50    Rule 26.01 of the Rules provides:

26.01     Summary judgment

(1)     A party may apply to the Court for an order that judgment be given against     another party because:

(a)     the applicant has no reasonable prospect of successfully prosecuting     the proceeding or part of the proceeding; or

(b)     the proceeding is frivolous or vexatious; or

(c)     no reasonable cause of action is disclosed; or

(d)     the proceeding is an abuse of the process of the Court; or

(e)     the respondent has no reasonable prospect of successfully defending     the proceeding or part of the proceeding.

…

(4)     If an order is made under subrule (1) dismissing part of the proceeding, the     proceeding may be continued for that part of the proceeding not disposed of     by the order.

…

51    In Fair Work Ombudsman v Austrend International Pty Ltd (2018) 273 IR 439; [2018] FCA 171 at [12]-[20], Gilmour J summarised the principles applicable to a summary judgment application:

[12]     It is well accepted the power to dismiss an action summarily is not exercised lightly. In Danthanarayana v Commonwealth of Australia [2016] FCAFC 114, the Full Court said, at [4], that:

…to summarily dismiss a proceeding, and thereby preclude a person from having their case determined on its merits at a final hearing, is a serious step taken only with great care and if it is possible to conclude with confidence that there is no reasonable prospect of success; this is so despite the fact that under s 31A(2) of the Federal Court of Australia Act 1976 (Cth) … the power to summarily dismiss a proceeding is not dependent on the case being “hopeless” or “bound to fail” for it to have no reasonable prospect of success (Spencer v Commonwealth [2010] HCA 28 ; (2010) 241 CLR 118 at [17]–[26]).

[13]     Section 31A lowers the bar for obtaining summary judgment. The inquiry is whether there is a ‘reasonable’ prospect of prosecuting the proceeding or part of the proceeding, not whether a certain and concluded determination could be made that the proceeding or part of the proceeding would necessarily fail. Judgment may be granted even if it cannot be said the case is so clearly untenable that it could not possibly succeed: Spencer v Commonwealth of Australia (2010) 241 CLR 118 at [51]–[60] (per Hayne, Crennan, Kiefel and Bell JJ).

[14]     Once a moving party has established a prima facie case that the opponent has no reasonable prospect of success, the opposing party must respond by pointing to specific factual or evidentiary disputes that make a trial necessary. General or non-particularised denials will be insufficient to defeat the motion: Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd (2008) 167 FCR 372 per Gordon J, as her Honour then was, at [127].

[15]     Her Honour then said:

[130]     A fifth principle is that where there is a real issue of fact relevant to a pleaded cause of action, it is unlikely that that part of the proceeding has no prospect of success…So, for example, if the pleadings, affidavits, and other materials considered in connection with the summary judgment motion, reveal a factual dispute and that factual dispute must be resolved to determine whether or not the claim succeeds, it cannot be said that the claim has “no reasonable prospect of success”…On the other hand, if the factual contest is unnecessary to the resolution of the cause of action pleaded, then in the absence of other relevant material, there is nothing to prevent the court entering judgment on that claim.

…

[132]     I now come to a final, sixth principle, which is that in determining whether a real issue of fact exists such as to preclude summary judgment, the court must draw all reasonable inferences - but only reasonable inferences - in favour of the non-moving party…I emphasise “reasonable” because it is on this point that the lowering of the bar effected by s 31A becomes clear. By distinguishing between “hopeless” cases and those without reasonable prospects for success, the statute makes clear that the court need not (indeed, must not) refuse summary judgment on the basis of a factual dispute said to arise only from a plausible, as opposed to a reasonable, inference.

[16]     In a separate joint judgment in Spencer, French CJ and Gummow J stated at [25] that:

Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue.

[17]     Their Honours added at [26] that “[w]here an application under s 31A requires consideration of apparently complex questions of fact, then the caution uttered by Lord Hope is relevant”. This is a reference to his Lordship's decision in Three Rivers District Council v Governor and Company of the Bank of England (No 3) [2003] 2 AC 1 at 260-261, in which he stated:

[M]ore complex cases are unlikely to be capable of being resolved [by way of summary judgment] without conducting a mini-trial on the documents without discovery and without oral evidence… that is not the object of the rule. It is designed to deal with cases that are not fit for trial at all.

…

[19]     In George v Fletcher (Trustee) [2010] FCAFC 53, Ryan and Logan JJ said, at [75], after referring to the judgment of Lindgren J in White Industries Australia Ltd v Cmr of Taxation (2007) 160 FCR 298 at [50]–[54]:

… [Section] 31A is not concerned just with pleadings but with substance, not form. The mere presence of a factual controversy, however trifling, implausible, tenuous or tangentially relevant is not a bar to the exercise of the power conferred by s 31A to grant summary judgment. That would be inconsistent with the way in which the phrase “no reasonable prospect of success” is to be read in light of s 31A(3) (and s 17A(3)).

[20]     Accordingly, the mere existence of a factual dispute is not necessarily a bar to a grant of summary judgment. Rather the Court is required to evaluate the quality and weight of the evidence. When this leads to a conclusion that the version of the facts asserted by the party resisting the motion is either so improbable, or fanciful, or trifling, or implausible, or tenuous then summary judgment must be granted. So understood there is, in such a case, no real issue of fact: Australian Securities and Investments Commission v Cassimatis (2013) 220 FCR 256 at [46]–[47].

52    In B&K Holdings (Qld) Pty Ltd v Garmin Australasia Pty Ltd (2019) 134 ACSR 404; [2019] FCA 64 at [19]-[20], Derrington J stated that:

It is also relevant to observe, as did Doyle J in Brooks v Young (as executor) (2018) 361 ALR 329; [2018] SASCFC 81 at [34], that the modern tests for summary judgment do not require a case to be hopeless or “bound to fail” before the power will be exercised. The bar is not so low. The Court only has to be satisfied that there is “no reasonable prospect of successfully prosecuting the proceeding”. Doyle J subsequently said:

[35]    The nature of the test is such that it will not ordinarily be appropriate to determine a matter summarily where the outcome is likely to turn upon contested issues of fact. Similarly, it will not ordinarily be appropriate to resolve complex or unsettled issues of law on a summary judgment application, at least not where their determination may be bound up in contested issues of fact. Trkulja (aka Trkulja) v Google LLC (2018) 356 ALR 178; [2018] HCA 25 is an illustration of the caution that is necessary in such cases.

[36]    However, I do not understand this need for caution to prevent a matter being determined on a summary basis if, after a careful or detailed analysis of the relevant legal issues, a clear outcome emerges. To the contrary, if such analysis leads the Court to be satisfied the claim does not have a reasonable prospect of success, then the evident intention of r 232 is to permit the Court to enter summary judgment and save the parties and the Court the time and expense of the proposed proceedings and trial.

(footnote omitted).

It is also pertinent to keep in mind that on a summary judgment application, the question for the Court is not, in this case, whether the respondent is liable to the applicant, but whether the applicant has reasonable prospects of establishing that liability at trial: RB Lease Pty Ltd v Heron [2013] QCA 181 (RB Lease) at [14].

Analysis

Final relief sought in relation to second objection to discharge

53    Paragraph 1 of the claim for final orders sought in the amended application claims:

That the First Respondent's second Objection to the Applicant's discharge be forthwith dismissed pursuant to ss149A-D, 149F-G of the [Bankruptcy Act 1966 (Cth)] and Schedule 2, as amended, (noting a challenge to a third Objection is currently before the Administrative Appeals Tribunal, whilst the     first Objection was withdrawn by the First Respondent for risk of being found vexatious and frivolous if he had continued with it)…

54    The following facts appear not to be in contest:

(a)    on 19 June 2018, the first respondent filed a second notice of objection to the applicant’s discharge from bankruptcy pursuant to s 149D(1)(e) and s 149D(1)(f) of the Bankruptcy Act (the second objection to discharge);

(b)    on 22 July 2019, the applicant requested that the second respondent review the first respondent’s second notice of objection to discharge;

(c)    on 8 August 2019, the second respondent decided not to accept the request for review on the basis that the request was made outside the 60 day timeframe as required by s 149K of the Bankruptcy Act; and

(d)    no further action, by way of review, was sought by the applicant in relation to the second respondent’s decision not to review the second objection to discharge.

55    The Court does not have the power to “dismiss” the second objection to discharge pursuant to ss 149A – 149D and ss 149F – 149G Bankruptcy Act, being the sections relied upon in the amended application. However, the amended application also refers to Schedule 2, as amended, (which is a reference to Schedule 2 of the Bankruptcy Act) as the legal basis for seeking the dismissal of the second objection to discharge. As to this, the applicant has not identified the provision within Schedule 2 which provides the source of jurisdiction for the Court to “dismiss” the second objection to discharge.

56    The allegations in the amended statement of claim which are made in support of the claim for “dismissal” of the second objection to discharge are as follows:

(z) It was not known at this time, that the Trustee had lodged another Objection, a second objection on 19 June 2018 alleging a breach of s149D of the Bankruptcy Act 1966 (Cth), that is failure to disclose income or pay a liable amount (namely the $250 per week contribution) yet he was well aware the Applicant was unwell, was not working, had not been not (sic) earning any income, had been waiting for Centrelink for an extreme length of time, and had no capacity nor any liability to continue with the contribution given she was no longer earning the threshold annual sum, yet he simply refused to adjust the contribution to nil or act in a reasonable manner, which is an abuse of power, negligence, grossly unreasonable, is a further attempt to annoy and frustrate the Applicant, to delay her discharge without reasonable cause to do so, will achieve no benefit at all to him in the long term given the personal circumstances and age of the Applicant, yet will cause considerable prejudice to her including of loss, harm and damage for over eight years;

(aa) At the time (from 2017 onwards) the Applicant was relying heavily on the public library, and its limited times for Internet access, to attend to any emails or documents including for the AAT, and furthermore there was an expectation that the Trustee would personally serve her and it is asserted that comments made by her to his lawyer would have or should have alerted them to the fact she was unaware so not notified of any second objection having been lodged with AFSA, he was unreasonable and reckless in issuing the second Objection at the time he did, and was negligent once being aware of her not knowing of the objection in not highlighting it to her, knowing there would be an opposition to any further objection by her, yet he failed to do so or to act impartially.

57    The first respondent submits that the order sought ought not to be made where the applicant did not seek a review of the second respondent’s decision pursuant to s 149K Bankruptcy Act.

58    While that submission has merit, it does not justify dismissal of the relief claimed in paragraph 1 on a summary basis. That is because the factual allegations in the amended statement of claim to support this claim include that the first respondent issued the second objection to discharge without reasonable cause, and that the first respondent did not take proper steps to bring the second objection to discharge to the applicant’s attention (which was the reason that a review was not sought within time). Whether these factual allegations can be established by the applicant and whether, even if established, they justify an order as sought in paragraph 1 (assuming the Court has jurisdiction) are matters for trial. For these reasons, I am unable to conclude that the applicant has no reasonable prospect of successfully prosecuting this claim.

59    For these reasons, and because I consider that the deficiencies in the pleading in relation to this claim are curable, summary judgment will not be entered in relation to paragraph 1 of the claim for final orders in the amended application and the applicant will be granted leave to replead this aspect of her case.

Final relief in relation to superannuation fund

60    Paragraph 2 of the claim for final orders sought in the amended application claims:

That the agreement between the Applicant’s corporate trustee and First Respondent in relation to a superannuation fund asset be set aside for reason of the transfer lacking the two necessary mandatory provable elements of any clawback, and lacking the consent of the ATO as required, with a refund or compensation to be granted to the fund in the sum of $75,000 plus interest and legal costs being in law and equity pursuant to ss58, 116 and 121 of the Act and Schedule 2, as amended…

61    This claim was the subject of evidence in the applicant’s affidavit filed on 1 April 2021 as follows:

[REDACTED]

62    In summary, then, [redacted]. The applicant disputes that the first respondent had any lawful right to make the claim that he did, and, on that basis, seeks to set aside the compromise reached between the first respondent and the trustee of the superannuation fund in relation to his claim.

63    However, the amended statement of claim does not disclose a reasonable cause of action to support such a claim.

64    Further, neither the pleading nor the applicant’s affidavit material discloses any ground on which the applicant, who was not a party to the compromise, could apply to set it and the subsequent consent order aside.

65    For these reasons, the claim by the applicant for final relief in paragraph 2 of the amended application is dismissed on the grounds that she has no reasonable prospect of successfully prosecuting this claim and, further, because no reasonable cause of action is disclosed.

66    Paragraph 4 of the claim for final orders sought in the amended application claims:

That the Applicant be compensated by the First Respondent for the unlawful interference of additional fund assets and interests such interferences being to purposely cause losses, financial hardship, loss of opportunity and future losses to the fund, pursuant to ss 19 and 116 of the Act, Schedule 2, as amended (noting these losses are substantial) …

(emphasis added)

67    The references to “unlawful interference of additional fund assets and interests” and “losses to the fund” appear to be a reference to the applicant’s superannuation fund.

68    By paragraph 4 of the amended application, the applicant therefore seeks to be personally compensated for unidentified and unquantified losses which are alleged to have been suffered by her superannuation fund, and not by her. The legal basis upon which she is able to sue for losses suffered by the fund is not pleaded. Further, no facts are pleaded which support the legal conclusion that the first respondent’s “interference” was unlawful or the nexus between that “interference” and the losses suffered by the fund. For these reasons, the amended statement of claim does not disclose a reasonable cause of action for the relief claimed in paragraph 4.

69    For these reasons, the claim by the applicant for final relief in paragraph 4 of the amended application is dismissed on the grounds that she has no reasonable prospect of successfully prosecuting this claim and, further, because no reasonable cause of action is disclosed.

70    Paragraph 7 of the claim for final orders sought in the amended application claims:

That the Applicant and her fund be compensated by the Respondents equally or as determined by this Honourable Court each on their negligent or reckless     or intentional bad faith as liability for the loss, harm, damage, distress, loss of opportunity and future loss, including for aggravated and punitive damages as a deterrent, and the Applicant to be refunded the fair and just monetary balance of her estate.

(emphasis added)

71    The reference to “her fund” appears to be a reference to the applicant’s superannuation fund.

72    This means that the applicant is seeking compensation on behalf of her superannuation fund for losses which are alleged to have been suffered by the superannuation fund. However, the amended statement of claim does not disclose a reasonable cause of action to support such a claim. The legal basis upon which she is able to sue for losses suffered by the fund is not pleaded and is not otherwise apparent. Further, no facts are pleaded which support the conclusion that the fund has suffered any loss by reason of conduct which is “negligent or reckless or intentional bad faith” or that there is any proper basis to award “aggravated and punitive damages”.

73    For these reasons, the claim by the applicant for final relief in paragraph 7 of the amended application, insofar as it claims compensation for “her fund”, is dismissed on the grounds that she has no reasonable prospect of successfully prosecuting this claim and, further, because no reasonable cause of action is disclosed.

Final relief claiming compensation

74    Paragraphs 3, 6, 7 and 8 of the amended application seek this final relief:

3.    That the Applicant be compensated by the First Respondent for the unlawful trespass of the family home, a stored vehicle, search and seizure of all manner of documents and other items including legally privileged documents and files, personal original identity documents and qualifications, medical reports and prescriptions and the like, causing an offense, distress, harm and embarrassment to the Applicant, in addition to his breach of his Undertaking to the Court, pursuant to s130 of the Act and Schedule 2, as amended;

…

6.     That the Applicant be compensated by the Respondents equally in relation to     the three Objections extending discharge for inadequate reasons, being caused     by recklessness, bad faith or negligence, lack of oversight and ease of     foreseeability of the ongoing harm, loss and damage causing unfair and unjust     consequences to the Applicant which should be deterred on the basis of public     confidence being affected and undermined by the prejudice and overall     inconsistencies towards the Applicant by the Respondents;

7.     That the Applicant … be compensated by the Respondents equally or as determined by this Honourable Court each on their negligent or reckless or intentional bad faith as liability for the loss, harm, damage, distress, loss of opportunity and future loss, including for aggravated and punitive damages as a deterrent, and the Applicant to be refunded the fair and just monetary balance of her estate

8.    That … compensation [be] paid equally by the Respondents for the damages caused by the unnecessary oppressive objections and extensions to her 2019 discharge.

75    The first respondent submits that the Court does not have jurisdiction to hear an application for compensation in relation to an alleged trespass (being the claim for final orders sought in paragraph 3), but does not develop the submission or identify any authority in support of it.

76    The first respondent also submits that the applicant’s claim for compensation at paragraphs 6 and 7 of her “claim for final orders sought” is embarrassing in that the first respondent is not aware of the basis for the claim of compensation or the loss which the applicant is alleged to have suffered.

77    The first respondent concedes that the Court has a broad power to make decisions in relation to the administration of the applicant’s estate (which includes decisions affecting the trustee). However, he submits that it is not appropriate to exercise the power in the circumstances of this case and that, having regard to the evidence before the Court on this application, summary judgment should be granted.

78    The second respondent submits that it would be within the jurisdiction and power of the Court to consider any making an order that the first respondent make good losses that have been sustained as a result of any breach of duty but that, having regard to the pleading, it is currently not clear whether such breaches are alleged to have occurred, whether losses have been caused as a result of those breaches and the quantum of what those losses is alleged to be.

79    The focus of the respondents’ submissions is therefore primarily upon the manner in which the statement of claim has been pleaded, rather than to challenge the ability of the applicant to seek compensation. No submission was made by the respondents that the defects in the amended statement of claim could not be cured.

80    For these reasons, I am unable to conclude at this stage that the applicant has no reasonable prospect of successfully prosecuting her claims for compensation provided that she attends to pleading a statement of claim which complies with the Rules and addresses the numerous defects which are described earlier in these reasons.

81    In particular, while the amended statement of claim makes various assertions of unlawful conduct against the respondents, nothing is pleaded to flow from this conduct in terms of identified losses being caused and the quantum of those losses. This tends to demonstrate that the claims for compensation do not have good prospects of success.

82    The applicant will be afforded a third opportunity to plead a statement of claim which supports the relief claimed in paragraphs 3, 6, 7 and 8 of the amended application insofar as they relate to a claim by her for compensation.

Final relief claiming review of costs and fees

83    Paragraph 5 of the claim for final orders sought in the amended application claims:

That the First Respondent's costs and fees be reviewed by this Honourable Court and substantially reduced in relation to unnecessary works, costs and     fees, and his having prior notice of the Applicant's intended challenges to provable debts, secured debts, insurance claims with a free independent assessment by AFCA and appeals or reviews being denied by him, with such     review being pursuant to ss 19, 82-84, 90 and 107 of the Act, Schedule 2, as amended…

84    In summary, only two facts were pleaded in the amended statement of claim in support of this claimed relief.

85    First, there is an allegation as to the first respondent’s failure to caution himself or his costs despite the applicant indicating that certain provable debts were based in error, fraud and were non-genuine provable debts. This is unintelligible.

86    Second, there is an allegation that the first respondent’s attendance to the appeal court on a couple of occasions increased his costs and that of his lawyer against the estate, all being unnecessary and contrary to the Act, professional standards, Rules, directions and common decency. However, other than an assertion that the attendance was “unnecessary”, the basis upon which these fees are challenged is a mystery.

87    No discernible cause of action has been pleaded in the amended statement of claim to support the relief sought in paragraph 5, including that there needs to be a review of all of the first respondent’s fees and charges. Further, the pleaded facts do not justify an order that the first respondent’s fees be “substantially reduced in relation to unnecessary works, costs and fees”.

88    Having regard to the emotionally charged allegations made against the first respondent in the amended statement of claim, the claim for a wholesale review and substantial reduction of the first respondent’s “costs and fees” appears intended to cause maximum harm to the first respondent personally rather than being based upon any evidence which could be adduced by the applicant at a trial and which would demonstrate that the first respondent’s costs and fees charged by him were excessive so as to justify interference by the Court. For this reason, this claim is a speculative one which has no proper basis with the consequence that there is no utility in permitting the applicant leave to replead this part of her case.

89    For these reasons, the claim by the applicant for final relief in paragraph 5 of the amended application is dismissed on the grounds that she has no reasonable prospect of successfully prosecuting this claim and, further, because no reasonable cause of action is disclosed.

Final relief claiming annulment or discharge of bankruptcy

90    Paragraph 8 of the claim for final orders sought in the amended application claims:

That the Applicant’s bankruptcy be annulled or discharged forthwith immediately by this Honourable Court ...;

91    The first respondent submits that:

(a)    it is not open to the Court to discharge the bankrupt in circumstances where there is an ongoing review in relation to objections by the first respondent; and

(b)    it is not open for the Court to annul the applicant’s bankruptcy under s 153B of the Bankruptcy Act, noting in particular that the bankruptcy occurred as a result of the applicant filing a debtor’s petition where there are no pleadings of any error having been made by the Official Receiver.

92    The second respondent submits that the Court is empowered to make an order annulling a bankruptcy in accordance with s 153B of the Bankruptcy Act. Sections 153B(1)–(2) of the Bankruptcy Act provide as follows:

153B    Annulment by Court

(1)    If the Court is satisfied that a sequestration order ought not to have been made or, in the case of a debtor’s petition, that the petition ought not to have been presented or ought not to have been accepted by the Official Receiver, the Court may make an order annulling the bankruptcy.

(2)    In the case of a debtor’s petition, the order may be made whether or not the bankrupt was insolvent when the petition was presented.

93    The second respondent submits that the case, as pleaded by the applicant, does not address why her debtor’s petition ought not to have been accepted by the Official Trustee.

94    I am unable to conclude at this stage that the applicant has no reasonable prospect of obtaining an order that her bankruptcy be discharged. That is because such relief may be dependent upon whether the relief sought in relation to the second objection to discharge is granted (which has not yet been determined). For this reason, it is not appropriate to dismiss this claim on a summary basis.

95    However, having regard to her pleaded case and her affidavit evidence, the applicant does not have any proper legal basis to seek an annulment of her bankruptcy. This conclusion does not turn on contested issues of fact and nor do they turn on complex issues of law.

96    For these reasons, the claim by the applicant in paragraph 8 of the amended application that her bankruptcy be annulled forthwith is dismissed on the grounds that she has no reasonable prospect of successfully prosecuting this claim and, further, no reasonable cause of action is disclosed.

Final relief claiming that the first respondent be referred

97    Paragraph 9 of the claim for final orders sought in the amended application claims:

That the First Respondent be referred to the Regulatory branch of AFSA for investigation of his conduct towards the Applicant during her bankruptcy period from 2016 onward…

98    The legal basis upon which this Court has power to “refer” the first respondent to the “Regulatory branch” of the second respondent for investigation of his conduct has not been identified by the applicant in the prayer for relief itself or in her submissions. The first respondent submits that the Court does not have any such power, and I accept this submission.

99    This conclusion does not turn on contested issues of fact and nor does it turn on complex issues of law.

100    For this reason, the claim by the applicant for the final relief in paragraph 9 of the amended application is dismissed on the grounds that she has no reasonable prospect of successfully prosecuting this claim.

Conclusion

101    For these reasons, the claims for final relief in paragraphs 2, 4, 5 and 9 of the amended application filed 22 September 2021 will be dismissed, and judgment entered for the first respondent.

102    In addition, the claim for compensation for the “fund” in paragraph 7 of the amended application filed 22 September 2021 will be dismissed, and judgment entered for the first respondent.

103    Furthermore, the claim that the applicant’s bankruptcy be annulled in paragraph 8 of the amended application filed 22 September 2021 will be dismissed, and judgment entered for the first respondent.

104    The applicant will be granted leave to replead a statement of claim which relates to the relief sought in the balance of the paragraphs seeking final relief in the amended application, on condition that any such further amended statement of claim is filed and served by 1 April 2022 and security for costs is also provided by that date (which issue will now be addressed).

SECURITY FOR COSTS

105    The first respondent also seeks orders for security for costs pursuant to s 56 of the Federal Court of Australia Act and r 19.01 of the Rules, being, in the first instance, the amount of $15,000 up to the close of pleadings.

Relevant legal principles

106    Section 56 of the Federal Court of Australia Act relevantly provides:

56     Security

(1)     The Court or a Judge may order an applicant in a proceeding in the Court, or an appellant in an appeal under Division 2 of Part III, to give security for the payment of costs that may be awarded against him or her.

(2)     The security shall be of such amount, and given at such time and in such manner and form, as the Court or Judge directs.

(3)     The Court or a Judge may reduce or increase the amount of security ordered to be given and may vary the time at which, or manner or form in which, the security is to be given.

(4)     If security, or further security, is not given in accordance with an order under this section, the Court or a Judge may order that the proceeding or appeal be dismissed.

(5)     This section does not affect the operation of any provision made by or under any other Act or by the Rules of Court for or in relation to the furnishing of security.

107    Rule 19.01(1) of the Rules provides as follows:

19.01    Application for an order for security for costs

(1)     A respondent may apply to the Court for an order:

(a)    that an applicant give security for costs and for the manner, time and terms for the giving of the security; and

(b)    that the applicant’s proceeding be stayed until security is given; and

(c)    that if the applicant fails to comply with the order to provide security within the time specified in the order, the proceeding be stayed or dismissed.

108    In General Trade Industries Pty Ltd (in liquidation) v AGL Energy Limited [2020] FCA 1562, Derrington J considered the principles in relation to applications for security for costs, stating at [32]:

It is uncontroversial that the purpose of an order for security for costs is to provide a successful defendant or respondent with protection for the costs it will incur in defending the proceedings. It is also not in doubt that the Court’s discretion to make an order for security for costs must be exercised judicially, but is otherwise unfettered: Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1, (Bell Wholesale) 3; Health & Life Care Ltd v Price Waterhouse (1993) 11 ACSR 326, 329 – 330. The governing consideration is what is required by the justice of the matter, which depends entirely on the circumstances of the case: Merribee Pastoral Industries Pty Ltd v Australia and New Zealand Banking Group Ltd (1998) 193 CLR 502, 513 [26].

109    In All Class Insurance Brokers Pty Ltd (in liquidation) v Chubb Insurance Australia Limited [2020] FCA 840, Allsop CJ summarised the relevant principles at [41]–[42] as follows:

Section 56 of the Federal Court of Australia Act does not expressly impose any threshold to be met before the Court considers the various discretionary matters. However, the applicant’s inability to pay the costs of the respondent remains an important consideration in the exercise of the Court’s discretion.

The Court’s discretion to require the provision of security for costs is broad and the factors informing the exercise of that discretion cannot be stated exhaustively. The only limitation is that the discretion be exercised judicially: Bell Wholesale Co Ltd v Gates Export Corporation [1984] FCAFC 29; 2 FCR 1 at 3. The matter which lies at the heart of the discretion is one of fairness, both in terms of whether security should be granted, and if so, in what amount: Madgwick v Kelly [2013] FCAFC 61; 212 FCR 1 at 21 [92]. The Court aims to achieve a “balance between ensuring that adequate and fair protection is provided to the defendants, and avoiding injustice to an impecunious plaintiff by unnecessarily shutting it out or prejudicing it in the conduct of the proceedings”: Rosenfield Nominees Pty Ltd v Bain & Co (1988) 14 ACLR 467 at 470 (Giles J).

(emphasis added)

110    The other relevant factors beyond an applicant’s impecuniosity which were identified by Allsop CJ at [43]–[44] include:

(a)    whether the application for security for costs has been brought promptly;

(b)    the strength and bona fides of the applicant’s case;

(c)    whether the applicant’s impecuniosity was caused by the respondent’s conduct which is the subject of the claim;

(d)    whether the respondent’s application for security is oppressive, in the sense that it is being used merely to deny an impecunious applicant a right to litigate;

(e)    whether there are aspects of public interest which weigh in the balance against the making of an order.

111    In Tran v The Commonwealth (2009) 111 ALD 111; [2009] FCA 921, Jagot J stated at [5]:

Courts are reluctant to order that an impecunious applicant, being a natural person, provide security where the effect would be to stifle that person’s access to the courts. This is the basis for the traditional rule at common law that “poverty is no bar to a litigant”: Cowell v Taylor (1885) 31 Ch D 34 at 38 ...

112    This statement was cited with approval in Frigger v Kitay [2019] FCA 624 at [35].

113    Although courts are disinclined to order a natural person to provide security for costs, they are more willing to do so when impecuniosity is accompanied by another factor: Knight v Beyond Properties Pty Ltd [2005] FCA 764 at [32]–[33]; Etnyre v Australian Broadcasting Corporation [2021] FCA 610 at [11]. For example, in Chang v Comcare Australia [1999] FCA 1677, an impecunious natural person was ordered to provide security where the applicant had limited prospects of success.

Evidence adduced by the first respondent

114    The following evidence was given by the first respondent by his affidavit sworn 26 August 2021:

In total, I have in excess of $100,000.00 in unpaid fees incurred in the administration of the Estate, due in part to a shortfall in assets and a failure by the Applicant to pay her compulsory contributions as assessed under the Act.

I consider that the Applicant's conduct and non-compliance with her requirements under the Act has occasioned the accrual of significant unnecessary costs, including legal costs, in the Estate.

In addition, I have incurred costs responding to voluminous repetitive requests for information from the Applicant in these proceedings and others.

115    The first respondent also deposed that he was not aware of any further assets in the estate which could be realised to pay:

(a)    the shortfall in his fees to date;

(b)    the fees payable to his solicitors in respect of previous proceedings;

(c)    the fees payable to his solicitors in respect of these proceedings;

(d)    any adverse costs order(s) which might be made against the applicant in these proceedings.

116    The first respondent understands that his likely costs exposure to the close of pleadings is expected to exceed $20,000. He also understands and believes that his likely costs (should the matter proceed to a contested trial) will exceed $50,000 based on his discussions with his solicitors. Mr Sankey, the first respondent’s solicitor, gave unchallenged evidence that:

I estimate that the First Respondent's costs of investigating, preparing and pleading a defence of the Applicant's claim including responding to any likely interlocutory applications brought by either party concerning the pleading will well exceed $20,000.00.

It is my experience that were the First Respondent to receive an order for its costs on a party basis, it is likely that the assessment of costs to the close of pleadings would see the First Respondent entitled to not less than $13,500.00 (ex GST) and maybe significantly more depending upon how many iterations of the Statement of Claim are to be advanced.

117    The first respondent’s solicitors requested the applicant provide evidence as to her ability to meet any adverse costs order which might be made in these proceedings by 20 August 2021. However, no response was received to this request by the deadline.

118    The applicant was also requested by email on 24 August 2021 for an explanation as to why orders for security for costs ought not to be sought. The applicant’s subsequent reply on the same day did not address this.

Submissions of the parties

119    The first respondent makes the following submissions in support of an order for security for costs:

(a)    these proceedings lack merit and are likely, if not doomed, to fail;

(b)    the applicant’s conduct thus far in these proceedings (in addition to her conduct throughout her bankruptcy as deposed to by the first respondent) leads to an inference that the proceedings, if continued, would be protracted and expensive for the first respondent;

(c)    the applicant, by her own admission, is of limited means and reliant on social security payments;

(d)    the applicant has been non-compliant in relation to her requirements as a bankrupt and in relation to requests made by the first respondent, resulting in unnecessary costs being incurred;

(e)    the first respondent has already incurred significant costs which may exceed the assets in the bankrupt estate;

(f)    there is substantial risk that the applicant will not be willing or able to pay the first respondent’s costs in relation to this proceeding; and

(g)    in all of the circumstances, it is appropriate for the Court to make the order.

120    The applicant submits that:

(a)    the first respondent’s application for security for costs is a common commercial tactic to shut down access to justice for individuals, and is traditionally used against corporations, and is particularly offensive and vexatious when considering the reasons for the circumstances of the bankrupt’s current financial position;

(b)    an application for security for costs is a contentious tactic and strategy, which should not be occurring, and the first respondent should instead be adhering to his duties and conduct as is mandatory; and

(c)    the first respondent fails to understand or appreciate his position as a registered trustee and the obligations, duties and standards imposed on him in that position.

Analysis

121    Having regard to the evidence, there is strong reason to believe that the applicant will be unable to pay the first respondent’s costs of this proceeding if so ordered. The applicant has been a bankrupt since filing a debtor’s petition on 31 March 2016. Her bankruptcy was not caused by any action of the first respondent. Further, despite request, the applicant did not provide evidence as to her ability to meet any adverse costs order. Nor did the applicant adduce any such evidence in response to the application.

122    The applicant submits, in effect, that the application is a tactic to “shut down” her access to justice. However, the deficient and excessive manner in which the applicant pleaded her case demonstrates that she made no genuine attempt to comply with the Rules and that the first respondent is justified in being very concerned that the applicant’s approach to this proceeding will lead to him incurring significant legal costs.

123    In support of this conclusion, the manner in which the applicant pleaded her case is unlikely to be accidental. The applicant is a well-educated person who was admitted as a lawyer in 2006 and who has had access to pro bono legal assistance. The applicant was also given an opportunity to rectify her application and statement after the interlocutory application was filed.

124    There is no submission by the applicant that the application for security for costs was not brought promptly. Indeed, it was brought shortly after the applicant filed her first statement of claim on 19 July 2021 and then failed to appear at a case management hearing on 12 August 2021. No defence has yet been filed by the respondents and has not been required by the Court.

125    Following the statement of claim being struck out, the applicant will be granted leave to file and serve a further amended statement of claim limited to those claims which have not been dismissed. Having regard to the applicant’s failure to plead a reasonable cause of action to date despite having two opportunities to do so and the assistance of counsel, it is open to conclude that the applicant’s prospects of success in relation to these claims are not particularly strong.

126    There is no evidence to support an inference that the application for security for costs is being brought in order to deny the applicant a right to litigate. Indeed, the first respondent estimates that his likely costs exposure by close of pleadings will be $20,000 and he is not aware of any further assets which could be realised to pay his shortfall in fees and fees payable to his solicitors in respect of this and previous proceedings. The first respondent’s motives in bringing this application are therefore defensive rather than oppressive.

127    While there does exist a public interest in ensuring that the conduct of trustees in bankruptcy is lawful, there is also a public interest in ensuring that trustees in bankruptcy are not prevented from being able to efficiently administer a bankrupt’s estate and are not required to incur excessive, unrecoverable costs in meeting claims of the kind which are made in this proceeding.

128    Courts are traditionally disinclined to order security against natural persons. There is also a reasonable prospect that an order for security would stultify these proceedings. However, these factors are outweighed by the other factors identified above which, taken together, indicate that the applicant either does not intend to or will not comply with her statutory obligation to conduct the proceeding in a way that is consistent with the overarching purpose described in s 37M Federal Court of Australia Act: see s 37N of that Act.

129    As to quantum of security, the estimate by Mr Sankey of $13,500 excluding GST (or approximately $15,000) is likely to be on the basis that the applicant will be permitted to advance all of her claims. However, the applicant’s case has been somewhat diminished by the dismissal of some of her claims. For this reason, an appropriate amount of security is $11,000 including GST.

130    For these reasons, it is appropriate to order that:

(a)    by 1 April 2022, the applicant shall pay to the first respondent’s solicitors the amount of $11,000 to be held by that firm as security for the first respondent’s costs up to and including the preparation of a defence to any further amended statement of claim;

(b)    if security for costs is not provided, the proceeding shall be stayed until further order;

(c)    the first respondent has liberty to apply for further security for his costs of this proceeding on three business days’ notice in writing to the applicant.

COSTS

131    As the first respondent has been successful in relation to the interlocutory application, costs will follow the event and he will be awarded his costs. For the same reason, the applicant will also be ordered to pay the first respondent’s costs of those claims which have been dismissed.

Associate:

Dated:    4 March 2022