Federal Court of Australia

Jones v Porter [2022] FCA 1219

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be dismissed as not competent.

2.    The appellant pay the respondents’ costs.

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

REASONS FOR JUDGMENT

CHEESEMAN J:

INTRODUCTION

1    These reasons address an objection to the competency of an appeal from a judgment of the Federal Circuit Court (now the Federal Circuit and Family Court of Australia) in which the Circuit Court refused to order an inquiry into the administration of the appellant’s bankrupt estate: Jones v Porter [2021] FCCA 234 (PJ).

2    The proceedings in this Court have a protracted history. The conduct of the proceedings has been impacted by the arrangements put in place to manage the COVID-19 pandemic. As explained below, the impact of the COVID-19 measures in these proceedings has resulted in logistical difficulties that, while not unique, have been extensive.

3    The proceedings were listed for an in person hearing of the issue of the competency of the appeal, and if competent, the appeal itself, to be heard concurrently in person on 11 October 2022. The appellant, Richard Jones, did not appear at the hearing. For the reasons which follow, when Mr Jones did not appear, I ordered that the issue of competency of the appeal be determined on the papers, the parties having exchanged written submissions in relation to that issue ahead of the scheduled hearing. These reasons address the issue as to the competency of the appeal.

4    The respondents, Jason Porter and Paul Weston, were appointed as trustees of the bankrupt estate of Mr Jones, on the making of a sequestration order on 5 October 2012. Mr Porter retired as a trustee of the estate on 31 July 2015. Notwithstanding this, I will for ease of expression refer to Mr Porter as a trustee in these reasons.

5    The primary judge refused to order an inquiry into the conduct of the trustees because he was not satisfied that there were substantial grounds for believing that they had erred in the administration of the Mr Jones’ estate: PJ[4]. Accordingly, being satisfied that an inquiry would be unlikely to reveal misconduct on the part of the trustees, the primary judge decided that it was not appropriate to order an inquiry and to put the trustees and the creditors to the expense and trouble that would necessarily be involved if an order for an inquiry was made: PJ[3]-[4].

6    Mr Jones seeks to raise three grounds of appeal: (1) denial of “procedural fairness and natural justice”; (2) failure to exercise “discretion judicially with proper regard to the rules of reason and justice”; and (3) that the “judge made the order limiting oral submissions at the commencement of the hearing which were contrary to the hearing guidelines and directions given by [case management judge]”. Ground 3 is in substance a particular of ground 1.

7    The trustees contend that the appeal is incompetent in that the decision appealed from is interlocutory and Mr Jones has not sought, nor obtained, leave to appeal. Accordingly, each of the trustees presses an objection to the competency of the appeal. Mr Jones contends that the decision below was not interlocutory and that his appeal may be brought as of right.

8    During the case management of the present proceedings, Mr Jones was afforded an opportunity to consider his position and file an application for leave to appeal if he saw fit. He has not done so and maintains that it is not necessary for him to obtain leave to appeal.

procedural history

9    Mr Jones represented himself in the proceedings below and continues to do so in the present proceedings. Mr Jones is experienced in conducting litigation on his own behalf. He has done so in a number of proceedings which he has pursued against the respondents. Mr Jones says that he is in poor health and is vulnerable to COVID-19 and that for this reason, for the past two years, he has actively isolated and avoided gatherings and interaction with people likely to be affected by COVID-19.

10    In his notice of appeal filed 3 March 2021, Mr Jones provided a post office box address at a regional location as his address for service (notwithstanding that it is doubtful that a post office box meets the requirements of an address for service under r 11.01 of the Federal Court Rules 2011 (Cth): see Tait v C Reynolds a Deputy District Registrar of the Queensland District Registry of the Federal Court of Australia [2003] FCA 619 (Kiefel J, as her Honour then was); Sarikaya v Victorian WorkCover Authority (1997) 80 FCR 262 (Black CJ). He appears to limit his visits to check the post office box because of his expressed health-related concerns about interacting with others. In the result, there has, in the main, been a delay of around one week between the despatch and receipt of communication to and from Mr Jones.

11    Mr Jones maintains he has no phone service and no email address at which he can be contacted. He has appeared by phone at the case management hearings in these proceedings. He says that he has used a borrowed phone for this purpose and does not have the consent of the owner to provide this number as means by which he can be contacted. The position in relation to provision of an email address is similar. At times he has experienced difficulty in participating in the case management hearings for various reasons associated with his access to, and use of, technology.

12    The respondents were initially represented in the proceedings below by solicitors but during the protracted history of the proceedings their solicitors ceased to act and they have since been represented by Mr Spencer of counsel. They continue to be represented by Mr Spencer in this Court. Mr Spencer does not have the support of a solicitor. Mr Jones does not communicate with Mr Spencer directly. Communications from Mr Jones have been sent to the Court and forwarded by the Court to Mr Spencer on behalf of the respondents.

13    On 24 March 2022 at a case management hearing at which Mr Jones attended by phone, orders were made setting the proceedings down for an in person hearing on 29 July 2022. I note that at that time Mr Jones foreshadowed that he had plans to embark on travel within Australia.

14    Pursuant to orders made 24 June 2022, a Registrar re-listed the hearing to 12 August 2022 in order to deal with issues that had arisen relating to the appeal books.

15    On 15 July 2022, I made orders re-listing the hearing to 11 October 2022. This was as a result of Mr Jones stating that he was unavailable during August 2022 for a hearing due to travel plans he says he made based on the original appointment of a hearing date of 29 July 2022. A copy of the 15 July 2022 orders were mailed to Mr Jones at his nominated post office box by the Court.

16    Mr Jones sent a letter dated 28 September 2022 to my chambers which was stamped as received by the Court on 6 October 2022. The letter was received by my chambers on 7 October 2022. In that letter, Mr Jones noted the listing of the hearing for 11 October 2022 in person and said that he was highly vulnerable to COVID-19 due to his age and chronic cardio vascular condition. Mr Jones requested that “masks be worn in all circumstances in which [he] may be exposed either by close contact or circulation of air within parts of the building to which [he is] exposed”.

17    Also on Friday, 7 October 2022, Mr Jones contacted the Court via telephone and spoke to a Client Service Officer in the Registry. Mr Jones was told that his letter dated 28 September 2022 had been received by my chambers on Friday, 7 October 2022, and it was confirmed that the hearing on Tuesday, 11 October 2022 was listed for an in person hearing. As will be apparent from the history outlined above, the Court had no way to contact Mr Jones in a timely way before the scheduled hearing. When the hearing was called on 11 October 2022, Mr Jones did not appear. Mr Spencer, counsel for the respondents, did appear. In Mr Jones’ absence, oral argument on the substantive issues was not heard. Mr Jones had previously sought to have the issue of competency determined in advance of the appeal and on the papers. At that time, the trustees opposed that course for reasons it is not necessary to revisit. In the circumstances of Mr Jones’ non-appearance and having regard to the general content of Mr Jones’ communications with the Court late last the week and the submissions made by him in November and December 2021, I ordered that the issue as to competency be determined on the papers on the basis of the written submissions that had been filed. The trustees did not oppose that course given the circumstances on 11 October 2022. The proceedings were otherwise adjourned.

18    On 11 October 2022, but following proceedings being adjourned, my chambers received a letter from Mr Jones dated 7 October 2022 which had been sent by express post. In that letter, Mr Jones noted that he would be unable to attend the hearing due to his concerns about his vulnerability if exposed to COVID-19 in crowded environments in Sydney. In his letter, Mr Jones requested that the hearing be conducted virtually, or determined on the papers, and if the matter could not proceed either way, an adjournment of the hearing to allow a new arrangement to be put in place. By the time Mr Jones’ letter was received, I had decided that the appropriate course in all of the circumstances would be to determine the issue of competency on the papers. This proved to be one of the suggested courses pressed by Mr Jones in his latest letter and, as mentioned, the respondents did not press their earlier opposition to this approach.

CONSIDERATION

19    The respondents’ objection to the competency of the appeal is a threshold issue. If the respondents’ contention is correct and the appeal is incompetent, the proceedings must be dismissed: Re Media, Entertainment and Arts Alliance; Ex parte Hoyts Corporation Pty Ltd [1994] HCA 66 at [2]; 119 ALR 206 at 207.

20    Section 24(1)(d) of the Federal Court of Australia Act 1976 (FCA Act) is the source of the jurisdiction to hear an appeal from the Circuit Court. The jurisdiction is subject to s 24(1A) which relevantly provides that an appeal shall not be brought from a judgment of the Circuit Court that is an interlocutory judgment unless the Court or a Judge gives leave to appeal.

21    The test for determining whether a judgment is final or interlocutory is whether the judgment or order, as made, finally determines the rights of the parties: Bienstein v Bienstein [2003] HCA 7; 195 ALR 225 at [25]; Plaintiff S164/2018 v Minister for Home Affairs [2018] HCA 51; 361 ALR 8 at [11]; Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2000] FCA 1572; 104 FCR 564 at [42]. That depends upon the legal and not the practical effect of the judgment: Carr v Finance Corporation of Australia Ltd (No 1) [1981] HCA 20 at [2], [21]-[25]; 147 CLR 246 at 248, 256. A judgment is not final where it is open to a party to bring a second application, even if it would be doomed to fail: Plaintiff S164/2018 at [11]; Boensch v Somerville Legal Pty Ltd [2019] FCA 1752 at [19].

22    The substantive order made by the primary judge was to dismiss the second further amended originating application filed on 20 March 2020. The relief sought in that application was framed as follows: “[t]he Court conduct an enquiry into the conduct of the Trustees under Division B 90-10 (2)(a) and S30, of the Bankruptcy Act (2006)”.

23    The parties did not refer the Court to any authority which addressed whether a decision in relation to an inquiry into the administration of a regulated debtor’s estate under s 30 and s 90-10 is interlocutory or final in nature.

24    The trustees relied on authority in respect of the now repealed s 179 of the Bankruptcy Act 1966 (Cth), the predecessor of s 90-10. Those authorities determined that decisions made under s 179 in relation to an inquiry into the conduct of the bankruptcy trustee were interlocutory and thus attracted the requirement for leave to appeal. The trustees also relied on authority to similar effect in relation to the analogous provision in respect of an inquiry into the conduct of a liquidator under the now repealed s 536 of the Corporations Act 2001 (Cth).

25    Mr Jones sought to distinguish the authorities relied on by the respondents in respect of the former s 179. His principal contention was that the primary judge’s decision should be characterised as final because the orders made by the primary judge dismissed the application for an inquiry “in toto”. He further submitted that, contrary to the respondents’ contention, the primary judge’s decision precluded him from bringing a further application for an inquiry into the trustees’ conduct and that was another reason that the decision should be characterised as final.

26    Section 30(2) of the Act relevantly provides:

(2)     The Court may direct such inquiries to be made and accounts to be taken for the purposes of any proceeding before the Court as the Court considers necessary and may, when directing an account to be taken, or subsequently, give special directions as to the manner in which the account is to be taken or vouched.

27    Section 90-10 of the Insolvency Practice Schedule (Bankruptcy), schedule 2 to the Act, relevantly provides:

(1)      The Court may, on the application of a person mentioned in subsection (2), inquire into the administration of a regulated debtor’s estate.

(2)      Each of the following persons may make an application for an inquiry:

(a)      a person with a financial interest in the administration of the regulated debtor’s estate;

(b)      if the committee of inspection (if any) so resolves—a creditor, on behalf of the committee;

(c)      the Inspector-General.

…

28    Section 90-10 was introduced into the Act by the Insolvency Law Reform Act 2016 (Cth), with one of its objects being to create common rules applicable to both corporate and personal insolvencies. The introduction of common provisions in the Corporations Act and the Act means that decisions under each legislation are of assistance in the application of the other: see Borg v de Vries (Trustee), in the matter of the Bankrupt Estate of David Morton Bertram [2018] FCA 2116 at [24]–[28]; Frigger v Trenfield (No.10) [2021] FCA 1500; 397 ALR 24 at [552].

29    Prior to the introduction of the Insolvency Practice Schedule (Bankruptcy) (which is schedule 2 to the Act), the power of the Court to order an inquiry was contained in s 179(1) of the Act. Section 179(1) provided:

179      Control of trustees by the Court

(1)      The Court may, on the application of the Inspector-General, a creditor or the bankrupt, inquire into the conduct of a trustee in relation to a bankruptcy and may do one or both of the following:

(a)      remove the trustee from office; and

(b)      make such order as it thinks proper.

30    As observed by Collier J in O’Neill v Piscopo (No 3) [2012] FCA 1036 (at [72]-[73]):

72     In Ferella v Official Trustee in Bankruptcy (No 2) [2011] FCA 619 Yates J explained the nature of the Court’s discretion conferred by s 179(1), and relevant guiding principles as to the exercise of the discretion. As Yates J explained in Ferella, trustees in bankruptcy are properly to be regarded as officers of the Court and are subject to the general control of the Court (at [12]). The Court has a broad discretion to make orders under s 179, including an inquiry into the conduct of the trustee. It is clear that the standards required of trustees in bankruptcy are high, and that they are subject to duties both under the relevant legislation and the general law in relation to the administration of the estate. However the Courts also recognise that the discretion under s 179 to order an inquiry is tempered by a number of considerations, including the requirement that the applicant for the order demonstrate substantial grounds for believing that the trustee erred in the administration or has engaged in misconduct. As Yates J observed, it follows that trustees acting honestly, with ordinary prudence and within the limits of their trust, are not liable for mere errors of judgment (at [15]).

73     I also note, as a further consideration, the fact that the appointment of a trustee in bankruptcy can itself be the source of considerable angst and hostility, not only from the bankrupt, but from third parties whose sympathies may lie with the bankrupt. It follows that the Court should be mindful of the well-established policy in bankruptcy legislation that the Court should not unduly interfere with the day-to-day administration of a bankrupt’s estate by a trustee (Ferella at [16]).

31    In determining whether an order should be made under s 179(1) the Court undertook a two-staged consideration: Macchia v Nilant [2001] FCA 7; 110 FCR 101 at [49]-[50]. In the first stage, the Court considered whether, on the grounds and facts before it, a case had been made out for an inquiry: Re Alafaci; Registrar in Bankruptcy v Hardwick (1976) 9 ALR 262 at 268. Generally speaking, the Court did not order an inquiry under s 179(1) unless it considered on the evidence that there were substantial grounds for believing that the trustee had erred in his or her administration: Re Gault; Gault v Law (1981) 57 FLR 165 at 173. The resolution of the first stage in an applicant’s favour would result in the Court identifying an issue or issues that would be the subject of an inquiry and making directions to determine the course that such an inquiry would take: Re Alafaci at 268. That involved the exercise of “a broad discretion as to whether or not there are sufficient grounds to make an inquiry appropriate”: Macchia at [49]. See also, for example: Ferella v Official Trustee in Bankruptcy (No 2) [2011] FCA 619 and Maxwell-Smith v Donnelly [2006] FCAFC 150.

32    At the time of the decision in Re Alafaci, s 179(1) of the Act was framed in terms slightly different to the terms in which s 179(1) was framed at the time of the decision in O’Neill. The difference between the wording of s 179(1) as considered in Re Alafaci compared to that considered in O’Neill reflected the substitution of the Inspector-General for the Registrar for purposes of standing. That amendment is not material for present purposes.

33    A decision dismissing an application under the former s 179(1) of the Act was held to be interlocutory in O’Neill (at [68-69]) and treated as such by the Full Court in Ferella v Official Trustee in Bankruptcy [2013] FCAFC 43 (at [1]).

34    In O’Neill, at first instance in the then Federal Magistrates Court of Australia, the primary judge dismissed an application seeking orders discharging examination summonses in relation to the estate of the second respondent, a bankrupt, issued at the request of the first respondent, and removing the first respondent as the trustee in bankruptcy of the second respondent pursuant to s 179(1). Mr O’Neill contended that the decision to refuse to order an inquiry was final, and accordingly leave was not required and brought an application for leave in the alternative. The question of whether leave to appeal was required, and if so, should be granted was heard together with the appeal. Justice Collier held that the appellant required leave to appeal, because the decision to dismiss the application under s 179(1) was interlocutory in nature:

68        In my view however the judgment below was interlocutory. As explained by Taylor J in Hall v Nominal Defendant (1966) 117 CLR 423 at 439-440:

A great deal has been said concerning the distinction between final and interlocutory orders but it has, in the main, been the practice of courts to confine themselves to a consideration of the character of the particular order in question in each case. Indeed, in In re Page; Hill v. Fladgate Cozens-Hardy M.R. commenced his judgment by saying: “I have no intention of attempting the task of defining exhaustively or accurately the meaning of an interlocutory order. I leave that to others. The only point we have to decide here is whether the order in this particular case is an order which must be appealed against within the time limited for appeals from interlocutory orders”. “Others” have, however, not, in general, attempted the task which the Master of Rolls declined to undertake. However, at an earlier stage Lord Alverstone C.J., when called upon to say whether a particular order was interlocutory or final said: “It seems to me that the real test for determining this question ought to be this: Does the judgment or order, as made, finally dispose of the rights of the parties? If it does, then I think it ought to be treated. as a final order; but if it does not, it is then, in my opinion, an interlocutory order”: Bozson v. Altrincham Urban District Council. Much the same test has been proposed on other occasions and, if I may say so with respect, it provides a broad test which is unexceptionable. So an order made in the course of an action or suit which does not conclude the rights of the parties inter se, although it may, of course, conclude the fate of the particular application in which it is made, is interlocutory only. On this basis an order staying proceedings against one of several defendants on the ground that they are scandalous, vexatious and an abuse of the process of the Court has been treated as interlocutory: Hind v. Marquis of Hartington. The same view was taken of an order striking out a plaintiff’s statement of claim on the ground that it disclosed no reasonable cause of action: Jones v. Insole and of an order dismissing an action as frivolous and vexatious in In re Page. In Manley Estates Ltd. v. Benedek there were successive applications to extend time under a provision similar to that in question here, whilst Atwood v. Chichester shows that an order dismissing an application to set aside a default judgment did not constitute a bar to a subsequent application of the same character.

(Footnotes omitted.)

69        In this case there does not appear to be any doubt that, while his Honour’s orders may have concluded the fate of Mr O’Neill’s application before the learned Federal Magistrate, the orders of his Honour did not conclude the rights of the parties to make a fresh application for an inquiry or the removal of Mr Piscopo as trustee of Mr Hill’s bankrupt estate. I am satisfied that this is a clear case of an interlocutory judgment, from which leave to appeal is required pursuant to s 24(1A). Indeed, it appears that Emmett J took a similar view in relation to the appellant’s original case concerning the examination summonses in that his Honour refused leave to appeal against that part of the decision of the Federal Magistrate (and, indeed, no issue is taken by the appellant in relation to the disposition of that aspect of the original appeal).

35    The proceedings at first instance which gave rise to the appeal in Ferella involved an application pursuant to s 179 of the Act for orders that there be inquiries into the respondent’s conduct in relation to certain bankrupt estates. The primary judge ordered that there be a limited inquiry into such conduct. The appellants appealed effectively seeking to extend the ambit of the proposed inquiry. On the appeal, the Full Court treated the primary judgment of Yates J as interlocutory (at [1]) and accordingly leave to appeal was required.

36    By way of analogy, an order that there be an inquiry into the conduct of a liquidator pursuant to what was s 536 of the Corporations Act was similarly regarded to be interlocutory: Hall v Poolman [2009] NSWCA 64; 75 NSWLR 99 at [3]-[4], as was an order dismissing such an application: Vink v Tuckwell [2008] VSCA 204; 68 ACSR 265. Historically the approach to the supervision of trustees had been informed by the approach to the supervision of liquidators and vice versa: see Macchia at [34] and Hall v Poolman at [70].

37    The decision below was not a decision on the merits. That is apparent from the nature of the discretion that the primary judge was called on to exercise under s 90-10 of schedule 2 to the Act. It is reflected in the primary judge’s reasons given for refusing to order an inquiry. The primary judge held that there were no substantial grounds for believing that the trustees had erred in the administration of the appellant’s estate or failed to act in the manner required by the Act or the general law. The primary judge found there to be no proper evidentiary basis to advance an assertion that the trustees had engaged in misconduct warranting an inquiry, and no evidence reflecting indifference by the trustees to the standards and the duties of the trustees (PJ[22]). Accordingly, the primary judge dismissed the application for an inquiry into the trustees’ conduct.

38    The decision of the primary judge does not preclude a further application for an inquiry being brought in the future. While it is correct that as a matter of practicality any future application may be struck out if it is an abuse of process, the decision of the primary judge does not, as a matter of law, preclude such an application being made. Consistently with the authorities in respect of the former s 179 of the Act and the former s 536 of the Corporations Act, and for the reasons given, I am satisfied that the decision of the primary judge to refuse to order an inquiry under s 90-10 of schedule 2 to the Act is an interlocutory decision. There is no appeal from an interlocutory decision except by leave: FCA Act, s 24(1A). Mr Jones was provided with an opportunity to make an application for leave and declined to make the application. The appeal is incompetent and must be dismissed with costs.

conclusion

39    For the reasons given, I will make orders dismissing the proceedings.

Associate:

Dated:    14 October 2022