Federal Court of Australia

The Official Trustee in Bankruptcy v Shaw (No 5) [2024] FCA 1490

ORDERS

THE COURT ORDERS THAT:

1.    The interlocutory application filed on 19 September 2024 be dismissed.

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

REASONS FOR JUDGMENT

SARAH C DERRINGTON J:

Introduction

1    On 12 November 2024, I delivered judgment on an application for leave pursuant to r 26.12 of the Federal Court Rules 2011 (Cth) by the Official Trustee in Bankruptcy, the applicant, to discontinue this proceeding commenced against Mr John Shaw, the respondent, on 2 July 2021: The Official Trustee in Bankruptcy v Shaw (No 4) [2024] FCA 1345. The Official Trustee was granted leave to discontinue the proceeding by filing a Notice of Discontinuance, on conditions that, relevantly, it pay Mr Shaw’s legal costs of the proceeding (such entitlement to costs only to arise upon Mr Shaw’s discharge from bankruptcy). The Official Trustee has subsequently filed a Notice of Discontinuance, on 15 November 2024.

2    Mr Shaw is an undischarged bankrupt pursuant to orders made in VID 1371 of 2013. By the originating application, 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    By an interlocutory application filed on 19 September 2024 (Shaw Application), Mr Shaw had sought various orders (set out in Shaw (No 4) at [3]). As the Official Trustee submitted, many of the orders sought would “fall away” consequent upon the discontinuance of the proceeding. It was not apparent, however, that paragraphs 19 and 20 of the Shaw Application would not survive discontinuance, by which paragraphs Mr Shaw sought an inquiry into the conduct of the Official Trustee pursuant to ss 90-1, 90-2, 90-5, 90-10, 90-15 and 90-20 of the Insolvency Practice Rules (Bankruptcy), Schedule 2 to the Bankruptcy Act 1966 (Cth).

4    Paragraphs 19 and 20 relevantly concern complaints about the Official Trustee’s authority to commence the proceeding, the validity of the proceeding, and the validity of instructions to the applicant’s solicitors to conduct this proceeding. Accordingly, I noted in Shaw (No 4), 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).

5    The parties were ordered to file any submissions as to the continuation of paragraphs 19 and 20 of the Shaw Application. Mr Shaw filed submissions on 18 November 2024, and the Official Trustee filed submissions in Reply on 25 November 2024.

6    As a preliminary matter, Mr Shaw has sought my disqualification from deciding this issue on the basis of apprehended bias.

7    For the reasons that follow, I decline to disqualify myself. Further, I have found that paragraphs 19 and 20 do not survive the discontinuance of the extant proceeding. Accordingly, Mr Shaw’s interlocutory application must be dismissed.

THE APPLICATION FOR DISQUALIFICATION

Relevant principles

8    Mr Shaw submitted that I should recuse myself from determining whether paragraphs 19 and 20 of the Shaw Application survive discontinuance on the basis of apprehended bias. He contends that, in summary, a reasonable observer would:

consider there is a pattern of ambush, denial of procedure or reasonable assistance to a self-represented litigant, railroading, & the appearance, or real risk, of bias & you have prejudged the outcome &/or that you cannot bring an open & impartial mind to the question of whether my … application can proceed either as a cross claim [sic] or s90 ILRA/Bankruptcy inquiry.

9    As I observed in Shaw (No 4), the test for and principles relevant to apprehended bias are well-established. They are set out at [9]-[12] of Shaw (No 4) and it is not necessary to repeat them.

The present case

10    There are two key matters on which Mr Shaw relies in seeking my recusal: first, that I have prejudged the merits of the Shaw Application, and secondly, that he was denied procedural fairness.

Predetermination of the proceeding

11    Mr Shaw submitted that I “have already expressed [my] view & agreed with [the Official Trustee’s] counsel in the hearing on 3 Aug [2023]” as to various procedural matters, including:

a.    Paras 7, 8 & 9 of my July 23 application (now Paras 19 & 20) should be treated as a separate proceeding requiring a new application after the primary matter is finalised.

I.e. if relegated to being a separate proceeding it cannot be a cross claim [sic] in this proceeding (which is denied) & if so, there is a real possibility that you have already predetermined the outcome.

Alternatively, if Paras 19 & 20 are valid cross claims this would mean my right to an inquiry or court assistance in the proceeding has been unfairly restricted & delayed.

b.    There can be no s90 inquiry until there has been an adverse finding against the [Official Trustee].

I.e.s90-5 & s90-10 [sic] can only be enlivened by an adverse court finding (which is denied) & if so, the matter must end on discontinuance & there is a real possibility that you have already predetermined the outcome.

…

12    First, consistent with Mr Shaw’s submissions, the notion that paragraphs 19 and 20 should be treated as a separate proceeding is precisely why the question of their constitution as a cross-claim, despite the discontinuance of the extant proceeding, is before the Court. Rule 15.11(b) of the Rules provides that a cross-claim may proceed even if the principal proceeding is discontinued. It is, by its nature, a separate proceeding: see SNF (Australia) Pty Ltd v Ciba Specialty Chemicals Water Treatments Ltd [2015] FCA 787 at [139] (Davies J). A finding at this occasion that the paragraphs constitute a “valid” cross-claim also cannot be said to create “[unfair]” restriction on Mr Shaw’s rights, or delay. It was only on the filing of the Shaw Application that their subject matter was reagitated.

13    Secondly, Mr Shaw has sought to impugn the deferral of paragraphs 7, 8 and 9 of his interlocutory application filed on 23 July 2023 (2023 Application) (which seek an inquiry in the same nature as paragraphs 19 and 20 of the Shaw Application) until after the final hearing, which will now not occur.

14    As Wigney J explained in Shaw v The Official Trustee in Bankruptcy of the Australian Financial Security Authority (No 3) [2021] FCA 1569 at [19], the traditional “two-stage” test under s 179 of the Bankruptcy Act required the Court to first “[determine] that there were grounds for an inquiry” and secondly, conduct the relevant inquiry. That test, however, is no longer required under s 90-10 and 90-15 of the Insolvency Practice Rules. Accordingly, I accept that the formal prerequisite that there be grounds, or a “prior adverse judgement [sic]” – as Mr Shaw puts it – before an inquiry pursuant to s 90 is commenced, has been obviated.

15    However, at the relevant case management hearing on 3 August 2023, I accepted that it would be inappropriate to commence the inquiry sought by Mr Shaw prior to findings about the Official Trustee’s institution and conduct of the proceeding. That was in – and owing to – circumstances where Mr Shaw was levying broad and unsupported allegations against the Official Trustee in relation to, inter alia, its absence of standing. I am fortified in that deferral decision by the observations of Wigney J in Shaw (No 3) [2021], where His Honour explained:

[19]    There is no doubt that s 90-15 of the Schedule is different in its terms to the former s 179 of the Bankruptcy Act. Section 179 of the Bankruptcy Act was framed in such a way as to make it clear that a two-stage process was required. The Court’s power to remove the trustee from office, or make “such order as it thinks proper”, was dependent on the Court having first determined that there were grounds for inquiring into the trustee’s conduct. If the Court determined that there were grounds for an inquiry, it would then conduct the inquiry to determine whether the Trustee should be removed from office or some other order or orders should be made.

[20]    The terms of s 90-10 and s 90-15 do not, however, expressly require such a two-stage process. While s 90-10 empowers the Court to conduct an inquiry into the administration of a bankrupt’s estate, the Court’s powers to make orders under s 90-15 are not expressly premised on such an inquiry having been conducted. To seek or obtain an order pursuant to s 90-15 of the Schedule, the applicant does not necessarily have to first persuade the Court that there are grounds for an inquiry into the administration of the estate, or that such an inquiry should be conducted: Borg v de Vries at [24]. There may be cases where orders under s 90-15 may be made without the need for any inquiry, or any broad inquiry, into the trustee’s administration of the estate. Borg v de Vries was such a case.

[21]    It does not necessarily follow, however, that the Court cannot, or should not, approach some applications for orders pursuant to s 90-15 of the Schedule on the basis that, before embarking on a full hearing and consideration of a case involving allegations of breaches of duty against a trustee and claims that the trustee should compensate the estate for losses arising from those breaches, the Court must first be satisfied that there are grounds for conducting an inquiry into the administration of the bankrupt’s estate; that a two-stage process similar to that required under the former s 179 of the Bankruptcy Act is appropriate. Such an approach may be appropriate where the orders sought by the applicant are based on broad allegations of misfeasance, neglect or other error in the conduct of the administration of the estate by the trustee, particularly where those allegations effectively encompass almost every aspect of the administration of the estate.

(Emphasis added.)

16    The primacy of the Court’s discretion is clear. This authority establishing the deferral of any inquiry until after the final hearing was entirely within the discretion of the Court, the decision to do so cannot be said to invoke any “real possibility” that I had “predetermined the outcome” of the proceeding.

17    Mr Shaw separately submitted that I “partly determined the [Official Trustee’s] application [for discontinuance] before [his] recusal application [sought orally on 12 November 2024]”, and that it reasonably “[led] [him] to believe & [he] [says] a reasonable observer would believe that the result was predetermined”. That submission cannot be reconciled with the sequence of my reasons in Shaw (No 4), and in the absence of any evidence to support it, it must too be rejected.

18    Mr Shaw also impugns my failure to “ask questions regarding estate administration & costs or rendered any assistance” at the case management hearing on 3 August 2023, citing that “S90-5 & s90-10 [sic] empowers the court to ask the [Official Trustee] questions or call for documents”. Because the inquiry pursuant to s 90 was deferred until after the final hearing, there was no basis pursuant to s 90 at that case management hearing upon which the Court could provide the assistance referred to by Mr Shaw. Nonetheless, even where such a basis existed, Mr Shaw cannot compel the Court to exercise its discretion in any particular manner: see Davis v Military Rehabilitation and Compensation Commission [2024] FCA 736 at [62].

19    Further, Mr Shaw has submitted that, because I stated at the hearing on 12 November 2024 that this proceeding was “not a bankruptcy matter”, the Official Trustee is acting beyond its authority. It is unclear how this relates to a matter relevant to recusal, but his submission was:

You … stated in the hearing on 12 Nov 2024 that:

(a)    This proceeding is not a bankruptcy matter – (If not a bankruptcy matter, that creates doubt over your belief in your findings in FCA1178 that the proceeding is related to the administration of the estate.)

(Footnote omitted.)

…

    … if this is not a bankruptcy matter related to the administration of the estate, s134 does not apply & the [Official Trustee] is acting beyond its authority to take this legal action or make the discontinuance application.

20    The relevant “findings in FCA1178 [sic]” appear – according to Mr Shaw –at [8]-[19] in The Official Trustee in Bankruptcy v Shaw (No 3) [2023] FCA 1178. By [7], the analysis that followed until [19] dealt with whether the Official Trustee had jurisdiction under the Bankruptcy Act to institute the proceeding. Relevantly, I set out, at [7]:

Mr Shaw contends that the [Official Trustee] lacks jurisdiction under s 134(1)(j) of the Bankruptcy Act to bring the present application under s 37AO(2) of the FCA Act. The basis for this contention is that a s 37AO application does not relate to the “administration of the estate” of the bankrupt. Accordingly, Mr Shaw argues that the OT is acting outside the scope of the powers conferred upon it by ss 18 and 134 of the Bankruptcy Act, and that the s 37AO application should be dismissed.

21    While I found in Shaw (No 3) that the proceeding was “[related] to” the administration of Mr Shaw’s estate (at [19]), that was for the purpose of satisfying that the Official Trustee had jurisdiction to commence the proceeding pursuant to s 134(1)(j) of the Bankruptcy Act. It is another matter entirely whether the proceeding is a bankruptcy matter, and it is beyond doubt that it is not. The Official Trustee sought orders prohibiting Mr Shaw from instituting any proceeding in this Court without leave, pursuant to s 37AO(2) of the Federal Court of Australia Act 1976 (Cth). A reference to or discussion in the reasons regarding provisions of the Bankruptcy Act cannot confer on the proceeding the character that it is a “bankruptcy matter”.

22    Mr Shaw also complained he was “shocked” at my reference in Shaw (No 4) to his not having requested to cross-examine Mr Daniel Burke. He submitted “a reasonable observer would believe that it appears likely [I] knew or should have known that [he] requested to cross examine but … [chose] to ignore, not inform [myself], or admit to, any possibility of injustice”. Mr Shaw pointed to a “Notice of Objection & email, [his] leave application … in qud440 & submission sent to [the Court] for the 23 Oct 2023 adjournment hearing & [his] recent affidavits & filed in this proceeding [sic]”, all said to contain the relevant request for cross-examination.

23    None of those references displace my observations in Shaw (No 4). While Mr Shaw did, by a document dated 5 September 2023, in the nature of his objections to the affidavit of Mr Burke filed on 1 September 2023, “request the opportunity to cross examine [sic] Burke”, that request sought cross-examination at the point when, relevantly, “the issue of conduct [of the proceeding] is examined”. That also appears to be the basis of his complaint as to my denial of his opportunity to cross-examine Mr Burke in his application for leave to appeal Shaw (No 3).

24    That request, however, was not pertinent to the determination on the papers whether, as a matter of law, the Official Trustee had standing to commence and conduct the proceedings as was determined in Shaw (No 3). Had either of Questions 2 or 3 in Shaw (No 3) been answered in the negative, and the matter proceeded to a full hearing, that would have been the point at which it may have been appropriate for Mr Shaw to cross-examine Mr Burke. That result having not arisen, neither did the opportunity for cross-examination. It was not a request for cross-examination “prior to the determination of the preliminary issues on the papers” the subject of Shaw (No 3): see Shaw (No 4) at [16]. In any event, it was not in the proper form of an application for cross-examination. His affidavits filed on 19 September 2024 and 4 November 2024 respectively state only that he was “shut out from introducing truth” of various matters relevant to Mr Burke’s affidavit. His submissions filed on 23 October 2023 similarly criticise the evidence of Mr Burke, but fail to expressly advance an application for cross-examination. To the extent Mr Shaw complains about the evidence of Mr Burke, I do not accept that there is any proper request to cross-examine him prior to the determination of preliminary issues relevant to the Official Trustee’s authority in Shaw (No 3).

Denial of procedural fairness

25    The second matter on which the recusal application rests is the allegations that Mr Shaw was denied procedural fairness by “allowing the [Official Trustee] to ambush [him] in what [he] requested to be a … case management hearing”. His submissions attest, in substance, to having been afforded an insufficient period to prepare for the hearing of the application for discontinuance on 12 November 2024, and misled about the nature of the hearing, such that he was “[ambushed]” and denied “a fair chance to respond”, which produced a result that was “inevitable” and “unfair”. Relevantly, he says he was only given notice of the Official Trustee’s “case” for discontinuance on the evening of 8 November 2024, four days prior to the hearing.

26    The nature and content of Mr Shaw’s complaint about lack of procedural fairness echoes his oral submissions at the hearing on 12 November 2024, which were found in Shaw (No 4) not to demonstrate any lack of procedural fairness. He has not, at this occasion, put forward any further reason why (or any further evidence to suggest that) I should deviate from that finding.

27    Mr Shaw knew, by email from the solicitors for the Official Trustee dated 1 October 2024, that the Official Trustee proposed to discontinue the proceeding. He was provided with a copy of the Notice of Discontinuance and, later, a revised version, on 9 October 2024 and 8 November 2024 respectively. By email to the Official Trustee dated 11 October 2024, Mr Shaw indicated that he would agree to discontinuance, on conditions. By email to Mr Shaw on 8 November 2024, the Official Trustee provided him with a copy of the Notice of Discontinuance, the affidavit material and written submissions to be relied upon at the hearing. For the reasons set out in [35] of Shaw (No 4), the requirement for the Official Trustee to file an interlocutory application in proper form was dispensed with because Mr Shaw was on notice as to its substance. It is difficult to reconcile these circumstances with Mr Shaw’s submission that he was “[ambushed]” by the hearing of the application for discontinuance, or that he was not afforded a reasonable opportunity to prepare his response.

28    Mr Shaw submitted that it is “unfair … (or) … unrealistic to somehow prepare for an application that had not yet been defined (until 8 Nov) and never formally filed” and that he “should not be expected to tailor [his] preparation based on the month-old opposing solicitor view without court confirmation or a following application”. None of those circumstances prevented him from preparing a response to the application. Indeed, by email from the solicitors for the Official Trustee on 10 October 2024, over one month before the hearing, he was notified that the Official Trustee expected the hearing would be used to, inter alia, “determine whether or not to allow the proceeding to be discontinued”. Even absent that notification, as I set out in Shaw (No 4), at [35], Mr Shaw was provided with a reasonable opportunity to prepare his case:

The fact that an application [for discontinuance] would be made [by the Official Trustee], 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.

(Emphasis added.)

29    To the extent Mr Shaw relies on evidence of (or prior allegations about) lack of procedural fairness relating to my decision in Shaw (No 3), and as I stated in Shaw (No 4) at [18], Jackman J’s judgment in Shaw v The Official Trustee in Bankruptcy [2024] FCA 137 found there was no demonstrated merit in any of the proposed grounds of appeal from that judgment. Those grounds relevantly included Mr Shaw’s complaint that he had not been afforded procedural fairness.

30    Mr Shaw contended that I have pre-judged the matter at issue. That submission must necessarily carry with it the implication that he fears I will decide the issue other than on its legal and factual merits: Ebner v Official Trustee in Bankruptcy [2000] HCA 63; 205 CLR 337 at [8]). For the reasons set out above, and in circumstances where I have expressly reserved my consideration of the issue and granted the parties time to lodge competing submissions, I am not persuaded that a fair-minded lay observer might reasonably apprehend that I might not bring an impartial mind to the question of whether paragraphs 19 and 20 should survive the Official Trustee’s discontinuance of the proceeding.

31    I decline to disqualify myself.

DO PARAGRAPHS 19 AND 20 SURVIVE THE DISCONTINUANCE?

Relevant principles

32    It is well-established that a party, with leave, may discontinue a proceeding. In Covell Matthews & Partners v French Wools Ltd [1977] 1 WLR 876 at 879, Graham J explained the importance of avoiding undue prejudice to a defendant where the discontinuance of a proceeding is sought:

… the court will, normally, at any rate, allow a plaintiff to discontinue if he wants to, provided no injustice will be caused to the defendant. It is not desirable that a plaintiff should be compelled to litigate against his will. The court should therefore grant leave, if it can, without injustice to the defendant, but in doing so should be careful to see that the defendant is not deprived of some advantage which he has already gained in the litigation and should be ready to grant him adequate protection to ensure that any advantage he has gained is preserved.

33    In O’Neill v Mann [2000] FCA 1680, Finn J, while citing Covell with approval, qualified the above statement by Graham J, characterising the “protection” to be afforded to a defendant from discontinuance as a matter ultimately for the Court’s discretion. His Honour said, at [11]:

… inability completely to protect a respondent will not in all circumstances result in leave being refused. The matter remains one for the exercise of the Court’s discretion in each case. The common device employed to protect a respondent is the imposition of terms on an applicant as a condition of the grant of leave. Those terms may be so onerous that an applicant for leave may not wish to accept them.

(Emphasis added.)

34    Relevantly, the Official Trustee has agreed to pay Mr Shaw’s legal costs as a condition of the grant of leave to discontinue the proceeding. I accept that to be a condition favourable to Mr Shaw (and the bankrupt estate), to which he has consented. Mr Shaw’s submissions, however, under the heading “Leave to discontinue principles”, set out the following – somewhat perplexing – references to case authority, which establish “some principles of granting leave”. Mr Shaw appears to express, by each of these statements, his objections to the discontinuance.

i.    A judicial review of all the relevant circumstances is required…Has not happened

ii.    Reasons for the discontinuance are relevant to the exercise…Not provided

iii.    Establishing whether the applicant has authority is required…Not established

iv.    Where the respondent is deprived of some advantage or imposing of some disadvantage, leave without just terms might not be appropriate…No reasons

v.    Any element of public interest should be considered. No consideration

vi.    Terms should do justice to both parties if possible … No reasons

35    As to the authorities to which Mr Shaw refers in support of (i)-(vi) above (Covell; Covell Matthews & Partners v French Wools Ltd [1978] 1 WLR 1477; SCI Operations Pty Ltd v Trade Practices Commission [1984] FCA 52; 2 FCR 113 at 142-143, 161-162 and 184-185; Levinge on behalf of the Gold Coast Native Title Group v State of Queensland [2012] FCA 1321 at [39]), to the extent they are relevant, they do not advance any basis to refuse discontinuance in and of this proceeding, nor do his subsequent observations establish he has suffered (or would suffer) any further disadvantage by the discontinuance.

36    Further, I note that Mr Shaw’s submissions also referred to the comments of Lee J in Trade Practices Commission v Manfal Pty Ltd (No 3) (1991) 33 FCR 382, at 383, which emphasise, inter alia, the consideration of “whether discontinuance against one respondent may impose injustice on another”. However, as the Official Trustee submitted, Mr Shaw is the only respondent to this proceeding, and accordingly, the need for that consideration does not arise.

Paragraphs 19 and 20 of the Shaw Application

37    The Official Trustee submitted that paragraphs 19 and 20 “fall away as a result of the discontinuance … as the proposed inquiry concerns the conduct of this proceeding which would come to an end on discontinuance”. While that matter is relevant to Mr Shaw’s entitlement to the relief sought, it does not address the question of whether paragraphs 19 and 20, as a question of form, can survive discontinuance of the extant proceeding a cross-claim.

38    There is no definitive statement of law prohibiting aspects of an interlocutory application from surviving discontinuance of a proceeding as a cross-claim, despite Schedule 1 to the Rules defining an interlocutory application as “an application, other than a cross-claim …”. Cross-claims are governed by Pt 15 of the Rules. Rule 15.01 relevantly permits a respondent to bring a cross-claim against an application for any relief to which the respondent would be entitled to in a separate proceeding. A cross-claim is defined to include a counter-claim, cross-action, set-off and third party claim. As O’Bryan J said in McEvoy v Federal Commissioner of Taxation [2021] FCA 216 at [8], those expressions are not further defined and take an ordinary meaning.

39    In any event, the Court has broad power by r 1.32 (and s 23 of the Federal Court of Australia Act 1976 (Cth)), make any order that it considers appropriate in the interests of justice. Prima facie, there is no reason why, as a matter of form at least, paragraphs 19 and 20 could not survive the discontinuance of the claim against Mr Shaw. Such an approach was taken by Windeyer J in Lord (as liquidator for the second plaintiff) v CMR of Taxation (unreported, Supreme Court of New South Wales (Equity Division), 11 September 2002) at [4], where his Honour ordered an amendment to an interlocutory application to allow it to become a cross-claim:

In my view the present proceedings are a claim for final relief. A claim for final relief is not a claim for interlocutory relief which can be brought by interlocutory process. It follows from this, in my view, that while it is quite clear that proceedings of this type may be brought in the same proceedings in respect of which the preference proceedings are brought, they must be brought by way of cross-claim. There is no reason under the Corporations Rules why that cannot be done, as the rules of court apply, insofar as they are not inconsistent with the Corporations Rules. In any event, to solve any problem, I direct that the interlocutory process become a cross-claim and I amend the proceedings accordingly.

(Emphasis added.)

40    As to paragraphs 19 and 20 of the Shaw Application, they read as follows:

19.    In accordance with s90-1, s90-2, s90-5, s90-10, s90-15 & s90-20 of the Insolvency Law Reform Act (ILRA), the court enquire into the legality, conduct & reasons for the OT initiating & maintaining this application taking into account the grounds outlined in the body of this application including:

a.    Impermissible conflict of interest per IPR s42-20

b.    the reasons for initiating proceeding without warning & maintaining this application & necessity for this application

c.    Whether proceeding is Anshun estopped by failure to raise as an issue in proceeding NSD1690/2019 commenced Oct 2019

d.    OT reasons & necessity to dismiss extant proceedings NSD9 & QUD127

e.    Reasons for refusing my undertaking & whether mediation demands were a genuine attempt to settle, improper or amount to “unambiguous impropriety”.

f.    Impact on the administration of the estate

g.    Whether the action is “necessary or commercially sound” considering the costs of proceedings & impact on the public interest, estate & creditors.

h.    Failure to provide fearless & full, frank disclosure, as an officer of the court, in application & responses to questions of the respondent

i.    Whether AFSA public officials have acted lawfully or in good faith and/or breached Bankruptcy Act and/or Public Service Act 1999 Code of Conduct

j.    Whether there is evidence of, or instances of, conflict of interest, abuse of power or process, &/or improper purpose or other reason justifying dismissal of this proceeding.

20.    In accordance with s90-5, s90-10, s90-15, s90-20 of the Insolvency Law Reform Act the court make enquiries of the Official Trustee & require the appropriate officer SES grade or above to attend & provide relevant documents &/or give evidence relating to & including:

a)    Verification of the authority of solicitor instructors after proceeding costs exceeded $100,000 & $300,000

b)    Reasons & belief necessity to maintain this application.

c)    Reasons why this application was not made when first considered in Nov 2019 & why undertakings not acceptable in the interests of estate.

d)    Reasons & belief of necessity to dismiss extant proceedings NSD9 & QUD127

e)    Response to allegation of conflict of interest & improper purpose

f)    Reasons for alleged improper mediation demands

g)    Impact on the administration of the estate

41    The Official Trustee submitted that, because Shaw (No 3) finally determined the subject of paragraphs 7, 8 and 9 of the 2023 Application, Mr Shaw is shut out from agitating paragraphs 19 and 20 of the Shaw Application. Mr Shaw conceded (in paragraph 1(a) of his submissions dated 18 November 2024) that the relief sought by paragraphs 7, 8 and 9 of the 2023 Application is now contained in paragraphs 19 and 20. Paragraphs 7, 8 and 9 read as follows:

7.    … In accordance with s90-1, s90-2, s90-5, s90-10, s90-15 & s90-20 of the Insolvency Law Reform Act (ILRA), the court enquire into the legality, conduct & reasons for the OT initiating this application taking into account the grounds outlined in the body of this application including:

a.    Impermissible conflict of interest per IPR s42-20

b.    the reasons for initiating proceeding without warning & maintaining this application & necessity for this application

c.    Whether proceeding is Anshun estopped by failure to raise as an issue in proceeding NSD1690/2019 commenced Oct 2019

d.    OT reasons & necessity to dismiss extant proceedings NSD9 & QUD127

e.    Reasons for refusing my undertaking & whether mediation demands were a genuine attempt to settle, improper or amount to “unambiguous impropriety”.

f.    Impact on the administration of the estate

g.    Whether the action is “necessary or commercially sound” considering the costs of proceedings & impact on the public interest, estate & creditors.

h.    Failure to provide fearless & full, frank disclosure, as an officer of the court, in application & responses to questions of the respondent

i.    Whether AFSA public officials have acted lawfully or in good faith and/or breached Bankruptcy Act and/or Public Service Act 1999 Code of Conduct

j.    Whether there is evidence of, or instances of, conflict of interest, abuse of power or process, &/or improper purpose or other reason justifying dismissal of this proceeding.

8.    In accordance with s90-5 5, s90-10, s90-15 & s90-20 of the Insolvency Law Reform Act the court make enquires of the Official Trustee & requires the following persons to attend & provide relevant documents &/or give evidence relating to above & including:

a.    The appropriate OT/AFSA officer (SES1 grade or above) that is able to give evidence relating to

i.    Reasons & belief of the authority, standing & necessity for this application

ii.    Reasons why this application was not made when first considered in Nov 2019

iii.    Reasons & belief of necessity to dismiss extant proceedings NSD9 & QUD127

iv.    Response to allegation of conflict of interest & improper purpose

v.    Reasons for alleged improper mediation demands

vi.    Impact on the administration of the estate

b.    Ms Rebecca Longford of AFSA to give evidence in relation to

i.    Authority to delegate authority to Mr Hasan

ii.    Longford Letter 26 Sep 2022

iii.    Longford response to my letter 4 Jan 2023

c.    Mr Abid Hasan of AFSA to give evidence responding to

i.    Status of case management & proceeding impact on administration of estate

ii.    allegations of conflict of interest

iii.    allegations of lack of authority to instruct solicitors on behalf of the applicant

iv.    Funding of the application, costs & expected benefit to the estate.

v.    Costs & attitude of creditors to the application

d.    Mr Osborne of AFSA relating to

i.    his letter of 1 June 2023

ii.    & entitlement to claim legal privilege in the email dated 9 April 2021 (produced in response to NTP1)

e.    Mr Shaw of AFSA relating

i.    to his letters of 5 & 26 March 2021

ii.    Extent of investigation conducted by the IG relating to my complaints.

9.    In the alternative, the court to grant leave for the respondent to subpoena the above persons to attend & provide documents &/or give evidence relating to above.

42    Paragraph 7 of the 2023 Application and paragraph 19 of the Shaw Application are in identical terms. Paragraph 20 of the Shaw Application also reflects the substance of the relief sought in paragraph 8 of the 2023 Application. The alternative request for leave to issue subpoenas is not reflected in paragraph 19 or 20, but that does not substantively differentiate the relief sought.

43    It is important to note that the three questions set out in paragraph 6 of the 2023 Application informed the three separate questions that were determined in Shaw (No 3). Each of those questions bore directly on the subject matter raised in paragraphs 7 and 8 (and 19 and 20); namely, the authority of the Official Trustee to institute and conduct the proceeding. Those questions were:

(1)    Is the Applicant authorised under the Bankruptcy Act 1966 (Cth) to institute proceedings under s 37AO(2) of the Federal Court of Australia Act 1976 (Cth) against the Respondent?

(2)    Have these proceedings, VID 361 of 2021, been validly instituted by the Applicant with the authority of the Official Receiver under ss 15 and 18 of the Bankruptcy Act 1966 (Cth)?

(3)    Have the Applicant’s solicitors been validly instructed and conducted the proceedings with the authority of the Applicant in accordance with ss 15 and 18 of the Bankruptcy Act 1966 (Cth)?

44    Each of the separate questions in Shaw (No 3) were answered affirmatively. On 28 February 2024, Mr Shaw’s appeal from that decision was refused: Shaw v The Official Trustee. Mr Shaw submitted Shaw (No 3) “is not a final judgment as Fed Court Act s 24E allows a final appeal”. However, the interlocutory status of the judgment is irrelevant. As the Official Trustee submitted, the effect of the refusal of Mr Shaw’s appeal is that Shaw (No 3) has determined with finality the Official Trustee’s authority in the commencement and conduct of the proceeding. Mr Shaw, by paragraphs 19 and 20, now asks that the Court “enquire into the legality, conduct & reasons for the [Official Trustee] initiating & maintaining this application” and, additionally, “make enquiries of the Official Trustee & require the appropriate officer … to attend & provide relevant documents &/or give evidence”.

45    The Official Trustee submitted that, because Jackman J in Shaw v The Official Trustee rejected Mr Shaw’s complaints in respect of Shaw (No 3), he is issue estopped from raising the matters set out in, relevantly, paragraphs 19 and 20 of the Shaw Application. That submission must be accepted.

46    In Blair v Curran [1939] HCA 23; 64 CLR 464, Dixon J set out a leading statement on the function and role of, inter alia, issue estoppel. At 531-532, His Honour said:

A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded or be restrained or that rights be declared. The distinction between res judicata and issue-estoppel is that in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order.

Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded. In matters of fact the issue-estoppel is confined to those ultimate facts which form the ingredients in the cause of action, that is, the title to the right established. Where the conclusion is against the existence of a right or claim which in point of law depends upon a number of ingredients or ultimate facts the absence of any one of which would be enough to defeat the claim, the estoppel covers only the actual ground upon which the existence of the right was negatived. But in neither case is the estoppel confined to the final legal conclusion expressed in the judgment, decree or order.

(Emphasis added.)

47    Subsequently, in Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; 256 CLR 507, the plurality (French CJ, Bell, Gageler and Keane JJ), at [22], relevantly described the difference between the doctrines of res judicata and issue estoppel:

The second form of estoppel is almost always now referred to as “issue estoppel”. Estoppel in that form operates to preclude the raising in a subsequent proceeding of an ultimate issue of fact or law which was necessarily resolved as a step in reaching the determination made in the judgment. The classic expression of the primary consequence of its operation is that a “judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies”.

(Emphasis added.)

48    It is apparent that both paragraphs 19 and 20 are seeking to have the questions addressed in Shaw (No 3) reopened. That is not only, in effect – whether intentional or otherwise – an attempt to circumvent the decision in Shaw (No 3), but also an attempt to advance a position that is unsupported by any new evidence that might persuade the Court, in its discretion, to order an inquiry. Mr Shaw cannot now overcome Shaw (No 3) by agitating for relief sought in the guise of a new interlocutory application without a skerrick of fresh evidence.

49    I therefore find that, to the extent paragraphs 19 and 20 do not fall away, Mr Shaw is issue estopped from reopening the findings of this Court as to the Official Trustee’s authority.

DISPOSITION

50    The effect of paragraphs 19 and 20 not surviving the discontinuance as a cross-claim in the proceeding is that Mr Shaw’s interlocutory application must be dismissed.

51    Mr Shaw has sought, by his written submissions, leave to file amended paragraphs 19 and 20 of the Shaw Application, inserting a request for the payment of compensation. Because I have found paragraphs 19 and 20 cannot survive the discontinuance, a grant of leave would be futile.

52    There will be no orders as to costs.

Associate:

Dated:        20 December 2024