Federal Court of Australia

Vines (Trustee), in the matter of the Bankrupt Estate of Mitchell v The Edge TC Pty Ltd (No 4) [2025] FCA 455

ORDERS

THE COURT ORDERS THAT:

1.    The bankrupt's interim application filed on 13 March 2025 is dismissed.

2.    The applicants must serve on the bankrupt forthwith upon filing any written submissions in support of the relief sought in the originating application.

3.    The bankrupt has liberty to apply thereafter.

4.    The bankrupt must pay the applicants' costs of the interim application in any event, to be assessed forthwith.

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

REASONS FOR JUDGMENT

(edited from the transcript)

JACKSON J:

1    In this proceeding the applicants, who are the trustees in bankruptcy of Sam Mitchell, seek various declarations concerning companies and trusts said to have been connected with him. They also seek orders correcting the registers of members of some such companies. The respondents to the proceeding are those companies, nominated beneficiaries of certain of the trusts, and two persons whom the applicants describe as 'purported directors' of certain of the companies. Justice Feutrill explained the nature of the claims and the respondents in two previous decisions in this proceeding: Vines, in the matter of the Bankrupt Estate of Mitchell [2024] FCA 1276; and Vines, in the matter of the Bankrupt Estate of Mitchell (No 2) [2024] FCA 1378 (Vines (No 2)).

2    By an interim application, Mr Mitchell has applied for leave to be heard in the proceeding pursuant to r 2.03 of the Federal Court (Bankruptcy) Rules 2016 (Cth) (Bankruptcy Rules). He seeks leave on terms that he has rights to access documents filed in the proceeding, to submit affidavit evidence, and to make submissions. The applicants oppose any grant of leave.

Principles

3    Rule 2.03(1) of the Bankruptcy Rules simply provides that the Court 'may grant leave to be heard in a proceeding to a person who is not a party to the proceeding'. It may do so on its own motion or on the application of a party or a person who has an interest in the proceeding: r 2.03(5). Leave may be granted on conditions: r 2.03(2).

4    In reliance on Yan v Spyrakis (Trustee), in the matter of the bankrupt estate of Liu [2024] FCA 768 at [24], Mr Mitchell submits that under r 2.03 of the Bankruptcy Rules, 'the test' is that special circumstances must justify the making of an order for leave to be heard.

5    In my respectful view, however, care must be taken not to elevate observations about what was required in a particular case to rules that fetter what is, on its face, an unconstrained discretion. In this context the term 'special circumstances' appears to come from Clyne v Andrew (1984) FCR 169. But in that case, Beaumont J's statement of what was required concerned the specific circumstances before him. His Honour was dealing with an application by a creditor to intervene in an application by the bankrupt for the Court's permission for him to leave Australia. In that context, his Honour said (at 170) that 'where a trustee … can represent the interests of creditors in the application, special circumstances must be shown to exist before intervention of a creditor should be permitted'. So the particular observation was premised on the existence of a person who was already representing the interests of the creditors.

6    That said, it may be accepted that the discretion under r 2.03 must be exercised judicially and, ultimately, with a view to promoting the interests of the administration of justice in the particular case. Hence applications for leave to be heard are not to be granted in every case or as a matter of course. That is so whether they are made by the bankrupt or any other person. It is incumbent on the person moving for leave to be heard to present to the court a persuasive reason as to why, in the circumstances of the particular case, the discretion should be exercised in that person's favour.

Whether Mr Mitchell should have leave to be heard

7    In the present case, Mr Mitchell submits that special circumstances do exist, because he has special knowledge with respect to the matters that appear in affidavits filed by the applicants, his bankrupt estate, and the various entities and trusts to which the proceeding relates. He also submits that he is 'the main contradictor' in the proceeding.

'Special knowledge'

8    Mr Mitchell has filed no evidence in support of his application for leave to be heard (other than an affidavit of a solicitor referring to the authenticity of particular documents, the purpose of which was unclear, and to which his counsel did not refer). Mr Mitchell has, however, referred to evidence in affidavits previously filed by the applicants as examples of statements about events which are known only to Mr Mitchell or his solicitors (along with the deponent). He advances these as matters indicating that he has special knowledge of circumstances relevant to the proceeding.

9    I am not, however, persuaded that those examples do indicate that Mr Mitchell has special knowledge of that kind. They are taken from affidavits sworn on 30 October 2024 variously by: one of the trustees in bankruptcy, Matthew Vines; one of the receivers whom the Court appointed over certain property, Richard Albarran; and a director of a secured creditor of one of the trustee companies, Alexander Shaik. The first two examples comprise evidence about the terms of a particular conversation between Mr Vines and Mr Mitchell and his lawyer. However, even if the terms of that conversation prove to be important, and controversial, there are at least three people who could give evidence about it, and the fact that Mr Mitchell may be one such witness hardly justifies giving him leave to be heard with broad liberty to file evidence and make submissions.

10    The third example, from Mr Shaik's affidavit, deposes to a variation to a trust deed, annexing the deed of variation. It is unclear what special light Mr Mitchell might cast on that seemingly straightforward evidence which would justify giving him leave to be heard with such broad liberty.

11    In that regard, Mr Mitchell has referred to an affidavit he swore in the proceeding on 31 October 2024, in which he gives his own version of the telephone conversation, and also alleges that the deed of variation was entered into without the consent of the beneficiaries of the trust. But this is simply evidence that may or may not be adduced by a party, and will be given weight or not, in the usual way. In addition, Mr Mitchell's response to the specific evidence given by Mr Shaik is broad and, on its face, does not appear to give the Court any particular insight into the circumstances that it would not otherwise have.

12    All in all then, these examples of the evidence that Mr Mitchell might give do not provide any basis to give him broad liberty to be heard, in a capacity otherwise than as a witness, in the proceeding as a whole.

13    As to Mr Mitchell's 'special knowledge', it may be accepted that, like any bankrupt person, he has particular knowledge of his own affairs. It is also apparent from the number of entities concerned in the proceeding that those affairs are complex. However, if those circumstances were sufficient to justify the giving of leave to be heard, then granting such leave to bankrupt persons would be commonplace. In truth, however, Mr Mitchell has not referred to any case where a bankrupt person has been given leave to be heard in proceedings concerning his or her bankruptcy (as distinct from proceedings where the bankrupt is properly an applicant or respondent). Nor has my research revealed any.

14    Mr Mitchell has filed no evidence in support of his application that would take the position beyond the above commonplace circumstances, nor has he descended to the specifics of any matter in which his particular knowledge of his own affairs puts him in a position to assist the court in the capacity of an intervener. To the extent that he does have particular information, he is subject to comprehensive duties to provide that information to his trustees in bankruptcy under s 77 of the Bankruptcy Act 1966 (Cth). Counsel for Mr Mitchell properly accepted that proposition. If Mr Mitchell has information that sheds a different light on any matter that has been put in the proceeding to date, then he should give it to the applicants, and as officers of the Court they can be expected to bring it to the Court's attention.

15    Further, the applicants submit, and I accept, that the issues in the proceedings are likely to be resolved by an examination of the books and records of Mr Mitchell and the respondents, such as trust deeds, deeds of variation and appointment and the like. Mr Mitchell has not identified anything he knows that justifies him being given leave to be heard with comprehensive liberty to file evidence and make submissions.

Mr Mitchell as contradictor

16    Mr Mitchell also relies on an observation that Feutrill J made in Vines (No 2) at [63], that he 'appears to be the principal contradictor and person interested in the relief the applicants seek'.

17    But that observation was made expressly subject to hearing from the parties. And for the purposes of the present application, which the applicants do oppose, Mr Mitchell has not identified any interest he has in the outcome of the proceeding. He has not applied on the basis of any such interest to be joined as a party, under the principles explained in News Ltd v Australian Rugby Football League Ltd [1996] FCA 870; (1996) 64 FCR 410. Nor has he identified how his interests would be directly affected by a decision in the matter, in accordance with the general principles governing leave to intervene explained in Roadshow Films Pty Ltd v iiNet Limited [2011] HCA 54; (2011) 248 CLR 37 at [2]-[3].

18    It must be recalled that to the extent that Mr Mitchell had a proprietary interest in any of the trusts, the companies or their assets before the sequestration order, those interests vested in the applicants by force of s 58(1) of the Bankruptcy Act. In his own submissions, Mr Mitchell refers to his 'pre-bankruptcy interest'. After his bankruptcy, his position has changed.

19    As to Mr Mitchell's apparent wish to act as a contradictor, it is true that none of the 20 respondents in the proceeding have filed a notice of address of service, so it may be inferred that they do not wish to take part in the proceeding. However, in Yan at [28], Perry J held that in the case before her Honour, 'while the absence of a contradictor may support an application for leave to intervene, this factor alone is not sufficient to establish "special circumstances" justifying the making of the order for leave to be heard'. Similarly here, I do not consider that the fact that only Mr Mitchell appears willing to oppose the relief sought is, by itself, sufficient to justify leave to be heard.

20    That is so even if Mr Mitchell is not held to the threshold of 'special circumstances' in the different facts of this case. He has not identified any specific interest he has in the relief sought, and he has not identified any specific way in which his participation in the proceeding, on the fulsome terms sought, will assist the Court. On the present application, he has not identified anything beyond what Hill J in Wily (as Trustee of the Bankrupt Estate of Fuller) v Fuller [2000] FCA 1512 at [55] called 'an intellectual and perhaps emotional interest in the proceedings'.

21    Mr Mitchell's counsel also referred, in broad terms, to the existence of a dispute between the trustees in bankruptcy and his client, and submitted that, in those circumstances, his client had a right to be heard. But the proceeding as presently constituted names 20 respondents who have been identified as persons or entities whose rights or obligations may be affected by orders made in the proceeding, and, at least at present, Mr Mitchell is not among them. The fundamental requirement - that persons whose rights may be affected by the outcome of the proceeding are to be heard - may be taken to have been satisfied by the service of the originating application and supporting documents on those respondents (or, to date, on most of them, where efforts to serve the others presumably continue). If those respondents do not choose to take part in the proceeding, then no complaint about whether any person has been given a right to be heard can be made.

Prejudice

22    Counsel for Mr Mitchell asked rhetorically what the prejudice would be if his client were to obtain the leave he seeks. When that question was put to counsel for the applicants, he did not identify any specific reason why Mr Mitchell's participation in the proceeding would cause prejudice to his client or to the proper conduct of the proceeding. He referred, in very general terms, to a concern about the possibility of delay, and 'blurring' of the true issues in the proceeding. But he did not refer to any specific evidence that gave any reason to think that Mr Mitchell would behave in such a way as to bring either of those things about.

23    Nevertheless, an absence of specific reasons to be concerned about prejudice is not enough by itself to justify an order giving a person leave to be heard. In the end, it is for Mr Mitchell, as the applicant for that order, to advance persuasive reasons as to why it should be made. And as I have explained, I do not consider that he has.

Leave to heard will not be granted at this stage

24    For those reasons, I will not grant Mr Mitchell leave to be heard on the basis of his present application.

25    It may be, however, that after the issues in the proceeding and the evidence relied on become better defined, Mr Mitchell may be able to identify specific matters where he is in a position to assist the Court. It is likely that those issues will become clear when the applicants have filed written submissions in support of their application. I will therefore order that the applicants are required to provide a copy of those written submissions to Mr Mitchell forthwith upon filing them, and will reserve liberty to Mr Mitchell to apply thereafter.

Associate:

Dated:    7 May 2025

SCHEDULE OF PARTIES