Federal Court of Australia

The Official Trustee in Bankruptcy v Shaw (No 4) [2024] FCA 1345

ORDERS

THE COURT ORDERS THAT:

1.    The applicant have leave to discontinue the proceeding by filing a Notice of Discontinuance in the form of Annexure A, on the following conditions:

(a)    the applicant must pay the respondent’s legal costs of the proceeding, such entitlement to costs to arise only upon the respondent’s discharge from bankruptcy; and

(b)    the applicant may not recover its legal costs of the proceeding or its legal costs of proceedings QUD 145 of 2023 and QUD 440 of 2023 from the bankrupt estate of the respondent.

2.    The respondent may file any submissions as to the continuation of paragraphs 19 and 20 of the interlocutory application dated 19 September 2024 by 4.00pm on 18 November 2024.

3.    The applicant may file any submissions in reply by 4.00pm on 25 November 2024.

4.    The interlocutory application dated 19 September 2024 be otherwise discontinued.

5.    Costs be reserved.

AND THE COURT NOTES THAT:

1.    The decision on whether paragraphs 19 and 20 of the interlocutory application filed on 19 September 2024 survive discontinuance of the proceeding as a valid cross-claim to the proceeding under r 15.11(b) of the Federal Court Rules 2011 (Cth) is reserved.

2.    The balance of interlocutory application filed on 19 September 2024, excluding paragraphs 19 and 20, does not constitute a cross-claim that would survive the discontinuance of the proceeding under r 15.11(b) of the Federal Court Rules 2011 (Cth).

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

REASONS FOR JUDGMENT

(Delivered ex tempore, revised from transcript)

SARAH C DERRINGTON J:

Introduction

1    This is an application for leave pursuant to r 26.12 of the Federal Court Rules 2011 (Cth) by the Official Trustee in Bankruptcy to discontinue this proceeding commenced against Mr John Shaw on 2 July 2021. The Official Trustee relies on an affidavit of Nathan Thomas Brumley filed on 8 November 2024 (the Brumley Affidavit) and written submissions filed on the same date. On 12 November 2024, Mr Shaw filed a document described as “Respondent’s objections to Brumley affidavit 8 Nov 2024” (Objections).

2    Mr Shaw is an undischarged bankrupt pursuant to orders made in VID 1371 of 2013. In these proceedings, the Official Trustee sought orders prohibiting Mr Shaw from instituting any proceeding without leave of the Court and dismissing any extant proceedings instituted in the Court by Mr Shaw.

3    On 19 September 2023, Mr Shaw filed an interlocutory application seeking:

(1)    my recusal;

(2)    a determination of whether the Official Trustee’s responses on 1 December 2023 to s 70-56 requests for information pursuant to s 70-56 of the Insolvency Practice Rules (Bankruptcy) 2016 (Cth), Sch 2 to the Bankruptcy Act 1966 (Cth), comply with s 70-56, and orders to provide information or pay costs;

(3)    leave to file a cross-claim regarding an “[i]mproper AFSA [Australian Financial Securities Authority] OAIC [Office of the Australian Information Commissioner] application”, “section 70-56 and FOI [freedom of information]”, and “[i]nterference in the administration of justice and malicious prosecution”;

(4)    to set aside my Orders dated 3 August 2023;

(5)    to set aside my Orders dated 6 August 2023;

(6)    determination of “[p]ara 3 of Collier J orders and 3 August orders”, “admission of Sep 2022 Mediation evidence”; and

(7)    to “[c]larify [and] [a]mend application 23 July 2023”.

4    By email to the Queensland Registry on 20 September 2024, Mr Shaw sought a “directions hearing” in respect of his interlocutory application. That hearing was listed for today.

5    Shortly thereafter, on 1 October 2024, the solicitors for the Official Trustee informed Mr Shaw, by email, that it had decided to discontinue the proceedings and sought Mr Shaw’s consent to do so, on the basis that the legal costs it had incurred would not be paid out of the funds in Mr Shaw’s bankrupt estate, and the Official Trustee would consent to paying any external legal costs appropriately incurred by Mr Shaw on the standard basis in relation to proceeding VID 361 of 2021.

6    It is not unusual for such an application to be heard within an existing case management fixture. To the extent that Mr Shaw objected to the application being made by the Official Trustee in the absence of an interlocutory application filed in proper form, pursuant to r 1.34 of the Rules, for the reasons discussed below, I dispense with the need to so.

7    Before continuing, it is necessary to deal with Mr Shaw’s application, also made in stanter, that I recuse myself from hearing the application to discontinue the proceeding brought against him.

The application for disqualification

8    Mr Shaw has today sought that I disqualify myself from hearing the Official Trustee’s application for leave to discontinue the proceeding on the basis of apprehended bias.

9    The test of apprehended bias is not in doubt. It is as stated by the High Court in Ebner v Official Trustee in Bankruptcy [2000] HCA 63; 205 CLR 337 at [20] by Gleeson CJ and McHugh, Gummow and Hayne JJ, with Callinan J concurring. As reiterated by the High Court in Charisteas v Charisteas [2021] HCA 29; 273 CLR 289 at [11], Kiefel CJ and Gageler, Keane, Gordon and Gleeson JJ said:

The apprehension of bias principle is that “a judge is disqualified if a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide”. … Its application requires two steps: first, “it requires the identification of what it is said might lead a judge … to decide a case other than on its legal and factual merits”; and, secondly, there must be articulated a “logical connection” between that matter and the feared departure from the judge deciding the case on its merits. Once those two steps are taken, the reasonableness of the asserted apprehension of bias can then ultimately be assessed.

(Citations omitted.)

10    As was observed by Lee J in McKenzie v Cash Converters International (No 3) [2019] FCA 10 at [18]-[19]:

18    There is often arid debate in applications of this kind as to whether the Ebner test is undemanding or creates a “low hurdle”. …

19    Irrespective as to whether one characterises the test as undemanding, balanced against it, of course, is the well-established proposition that a judge should not disqualify himself or herself on the ground of bias or reasonable apprehension of bias unless “substantial grounds” are established.

(Citation omitted.)

11    Authority for that proposition can be found in Bienstein v Bienstein [2003] HCA 7; 195 ALR 225 at [36], see also R v Watson; ex parte Armstrong [1976] HCA 39; 136 CLR 248 at 262 and British American Tobacco Australia Services Limited v Laurie [2011] HCA 2; 242 CLR 283 at [45].

12    In Ebner, Gleeson CJ and McHugh, Gummow and Hayne JJ noted, at [8], that the principled approach involves both: the identification of what might lead a judge to decide a case other than on its legal and factual merits; and the articulation of the logical connection between that factor and “the feared deviation” from the course of deciding a case on its merits.

The present case

13    In the present case, Mr Shaw alleges that case management in this proceeding has been unreasonably prejudicial and that he was denied natural justice and procedural fairness in the determination of the separate questions on the papers that were heard by me in The Official Trustee in Bankruptcy v Shaw (No 3) [2023] FCA 1178.

14    At the relevant case management hearing on 21 August 2023, at which it was agreed between the parties that the separate questions could be heard on the papers, in an attempt to avoid a full trial in the event they were answered in the negative, Mr Shaw said, “they” (being the Official Trustee, “were put on notice to provide a document that proved that the … proceeding was commenced with authority. They’ve provided that document. I’ve challenged it. I don’t have any mor [sic] evidence to put on and … the applicants say they don’t have anything more to produce because I've asked them. So I believe you’ve got everything in front of you that you need to make a decision”.

15    As I observed in Shaw (No 3), at [4]:

Pursuant to the Orders, on 23 August 2023, Mr Shaw filed a list of affidavits, submissions, and authorities on which he wished to rely, albeit one day late. The [Official Trustee] filed its submissions and an affidavit of Daniel Burke (Burke Affidavit) on 1 September 2023. On 5 September 2023, Mr Shaw filed a document in the nature of objections to the Burke Affidavit. Mr Shaw’s submissions in reply were lodged in purported compliance with the Orders, on 8 September 2023. Mr Shaw required leave to file those submissions because they were more than twice the length specified in the Orders for reply submissions. They were accepted for filing on 18 September 2023. Despite those minor aspects of non-compliance with the Orders, I have had regard to all the materials filed by Mr Shaw and the [Official Trustee].

16    Mr Shaw contends that my findings in Shaw (No 3) have unfairly, and without an open hearing, predetermined and shut out issues that were in dispute in the remainder of his interlocutory application filed on 24 July 2023. This is because he contends that Mr Daniel Burke ought to have been cross-examined. Mr Burke’s affidavit was filed by the Official Trustee in response to Mr Shaw’s statement at the case management hearing on 21 August 2023 that he disputed that Mr David Bergman was the Official Trustee at the relevant time. He indicated that he required the Official Trustee to be put to strict proof about the positions held by people who had been involved in administering his bankrupt estate. Mr Shaw had every opportunity to object to Mr Burke’s affidavit, which was filed on 1 September 2023. He did so in his written submissions lodged on 8 September 2023, which were taken into account (Shaw (No 3) at [4]). He could have made an application for Mr Burke to be cross-examined, but he neither filed an application to do so, nor made any reference in his submissions to requiring that Mr Burke be cross-examined prior to the determination of the preliminary issues on the papers.

17    Mr Shaw contends that “a reasonably informed observer would conclude that there is a reasonable apprehension that I have been unfairly shut out, not been afforded procedural fairness & issues have been prejudged & I will not be afforded a fair hearing of the remaining issues in dispute” (emphasis in original).

18    The difficulty with Mr Shaw's contention, however, is that he has exercised his right to seek leave to appeal from my judgment in Shaw (No 3) and, in his application for leave to appeal, he raised the grounds that he had been unfairly denied a fair trial, not afforded procedural fairness, and that issues had been pre-judged. On 21 February 2024, in Shaw v The Official Trustee in Bankruptcy [2024] FCA 137 at [6], Jackman J refused that application for leave on the basis that there was no demonstrated merit in any of the proposed grounds of appeal and there did not appear to be any realistic prospect of success on appeal. That application was, therefore, dismissed.

19    It is not clear, therefore, what Mr Shaw identifies as the factor or matter that might lead me to decide the balance of his case, should that become necessary, other than on its legal and factual merits. Because that factor has not been identified, he has necessarily failed to articulate the logical connection between that factor and the feared deviation from the course of deciding a case on its merits.

20    A trial judge is expected to undertake the work allocated to that judge, unless the judge is unable to uphold his or her judicial oath.

21    I do not believe that there is any sound basis upon which any apprehension of bias might be held by a reasonably fair-minded observer that Mr Shaw's opposition to the Official Trustee’s application for leave to discontinue might not be determined on the merits.

22    For that reason, I decline to disqualify myself.

The application to discontinue the proceeding against Mr Shaw

23    The Official Trustee seeks leave to discontinue the proceeding by filing a Notice of Discontinuance in the usual form, on the following conditions:

(a)    The Applicant must pay the Respondent’s legal costs of the proceeding, such entitlement to costs to arise only upon the Respondent’s discharge from bankruptcy; and

(b)    The Applicant may not recover its legal costs of the proceeding or its legal costs of proceedings QUD145/2023 and QUD440/2023 from the bankrupt estate of the Respondent.

24    Mr Shaw does not consent to the discontinuation of the proceeding whilst he has an extant interlocutory application.

25    The Brumley Affidavit, to which Mr Shaw objects, does little more than exhibit correspondence passing between the solicitors for the Official Trustee and Mr Shaw between 1 October 2024 and today, certain court documents, and the Official Trustee’s responses (dated 1 December 2023) to Mr Shaw’s requests for information made between 17 September 2023 and 1 November 2023.

26    The Objections are as follows:

As to [2], Mr Shaw objects to Mr Brumley’s statement that he is authorised by the Official Trustee to make the affidavit on its behalf.

As to [6]-[12], Mr Shaw objects to the paragraphs exhibiting the correspondence between the parties on the basis that the correspondence is irrelevant to the case management hearing.

As to [13], Mr Shaw objects to the statement that the Official Trustee does not agree to pay Mr Shaw’s costs in so far as they relate to QUD 145 of 2023 and QUD 440 of 2023, on the basis that it is “Irrelevant Opinion, Source of belief not produced”.

As to [16], Mr Shaw objects to the Statement that the Official Trustee does not agree to Mr Shaw’s third condition of discontinuance – seeking a hearing of his interlocutory application of 19 September 2024 – “Irrelevant Opinion, Source of belief not produced”.

As to [18], which explains the Official Trustee’s position in relation to each paragraph of the interlocutory application of 19 September 2024 consequent on the proceeding be discontinued, on the basis that it is “Not admissible, Not stating facts, Opinion”.

27    There is some force in Mr Shaw’s objection to [18], which is really in the nature of submissions. The position outlined in that paragraph was, in any event, dealt with by Counsel in written and oral submissions. It is unnecessary for me to have regard to that paragraph.

28    The balance of the objections cannot be sustained. I am not prepared to infer, in the absence of a skerrick of evidence to the contrary, that a legal practitioner who has sworn to having been instructed to: make an affidavit on behalf of his client; give his client’s position on matters relating to costs; and respond on his client’s behalf to a proposed condition put by the other side, is being anything other than entirely truthful. This is not the first occasion on which Mr Shaw has cast such an aspersion on a legal practitioner without any basis for so doing.

29    Further, there is nothing objectionable in [6]-[12]. The correspondence between parties since the last hearing is inevitably a matter that is commonly brought to the attention of the Court at a case management hearing and is, in any event, relevant to the Official Trustee’s application to discontinue the proceeding.

30    That correspondence shows that, by return email sent at 2.11pm on 1 October 2024, Mr Shaw: asked certain questions about costs; queried the continuance of his interlocutory application and particularly what he describes as a “review of the decision 6 October 2023”; noted his agreement to the Official Trustee advising the Court both that it wishes to discontinue the proceeding and, if necessary, will seek leave to do so; and raised questions in relation to his appeal proceedings NSD 9 of 2022 and NSD 42 of 2022, both with the Official Trustee as respondent. He also noted that he had requested a “directions hearing” for 7 October 2024.

31    By email to Mr Shaw on 9 October 2024, the solicitors for the Official Trustee attached a Notice of Discontinuance for Mr Shaw’s consideration, and informed him, inter alia, that:

(1)    the legal costs incurred by the Official Trustee in the proceeding would not be borne by his bankrupt estate;

(2)    the Notice of Discontinuance to be filed will provide that the Official Trustee pays Mr Shaw's legal costs of the proceeding;

(3)    upon discontinuance, all of the Official Trustee's claims in the proceeding will end. They could not give legal advice about the status of the interlocutory application; and

(4)    if the proceeding is discontinued, the Official Trustee expects that the stay of proceedings in NSD 9 of 2022 and NSD 42 of 2022 would be lifted, and a new timetable fixed in respect of both proceedings; and

(5)    the Official Trustee does not agree that it is liable to compensate Mr Shaw or his bankrupt estate.

32    From this correspondence, it is clear that, from at least 9 October 2024, Mr Shaw has been on notice that the Official Trustee proposed to discontinue the proceeding.

33    Mr Shaw responded by email dated 11 October 2024 indicating that he would agree to discontinuance on terms that the Official Trustee’s costs of the proceeding (and its costs in respect of Mr Shaw’s applications for leave in QUD 145 of 2023 and QUD 440 of 2023) were not recovered from his bankrupt estate or him personally; that the Official Trustee agrees to pay Mr Shaw’s recoverable legal costs including in respect of his applications for leave in QUD 145 of 2023 and QUD 440 of 2023; and that his interlocutory application filed on 19 September 2024 be listed for a hearing.

34    The solicitors for the Official Trustee advised Mr Shaw by email on 8 November 2024 that the Official Trustee did not agree to the listing of the interlocutory application for hearing for the reason that the matters raised in that application would fall away upon the discontinuance of the proceeding. The Official Trustee also did not agree to pay Mr Shaw’s costs in proceedings QUD 145 of 2023 or QUD 440 of 2023 because final costs orders have been made in each of those proceedings. In that email, Mr Shaw was invited to consent to the attached Notice of Discontinuance, failing which he was again informed that the Official Trustee would seek leave to discontinue the proceeding.

35    Consequently, by at least 8 November 2024, Mr Shaw was on notice that the Official Trustee would seek leave to discontinue the proceeding in the absence of Mr Shaw’s consent. The fact that an application would be made, and the reasons for making the application, were set out for Mr Shaw. Thus, he had all the information that would ordinarily be provided by a formal interlocutory application. Further, Mr Shaw conceded he had been served with the Brumley Affidavit and the written submissions on 8 November 2024. It is for these reasons that I have dispensed with any requirement for the Official Trustee to file an interlocutory application in proper form.

36    Further, in all the circumstances, it is appropriate that the Official Trustee be granted leave to discontinue the proceeding. The Official Trustee has, as is usual, undertaken to pay Mr Shaw’s costs.

37    As to the continuance of Mr Shaw’s interlocutory application, it is appropriate that both he and the Official Trustee are afforded the opportunity to make submissions as to whether paragraphs 19 and 20 of that application, being that the Court conduct an inquiry pursuant to ss 90-1, 90-2, 90-5, 90-10, 90-15 and 90-20 of the Insolvency Practice Rules, constitutes a cross-claim that survives discontinuance of the proceeding under r 15.11(b) of the Rules.

38    Mr Shaw conceded that everything else he wished to raise in his interlocutory application would be captured by an inquiry, were one to be ordered.

Disposition

39    For these reasons, the Official Trustee should be granted leave to discontinue the proceeding on the conditions previously mentioned. Mr Shaw should have until 4.00pm on 18 November 2024 to file any submissions he wishes to make in respect of paragraphs 19 and 20 of his interlocutory application dated 19 September 2024. The Official Trustee should have until 4.00pm on 25 November 2024 to file any submissions in response. The balance of the interlocutory application dated 19 September 2024 should be dismissed.

40    The costs of today are reserved.

Associate:

Dated:        21 November 2024