Batterham v Clayton Utz Partnership

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FEDERAL COURT OF AUSTRALIA

Batterham v Clayton Utz Partnership [2022] FCA 360

File number(s): NSD 790 of 2021
Judgment of: HALLEY J
Date of judgment: 7 April 2022
Catchwords: PRACTICE AND PROCEDURE – application for summary dismissal or strike out pursuant to rr 16.21 and 26.01 Federal Court Rules 2011 (Cth) and s 31A of the Federal Court of Australia Act 1975 (Cth) – where applicant a discharged bankrupt who seeks to recover alleged diminution in value of shares, compensation for a  personal costs order made against him and compensation for stress and anxiety and loss of future income – where applicant and trustee of self-managed superannuation fund commenced various proceedings – where claims disclose no reasonable cause of action – where loss and damage not caused by respondents – where proceedings time barred – where no relevant implied term in deed of release – where claims barred as a result of res judicata and issue estoppel – where causes of action vested in applicant’s trustee in bankruptcy upon making of a sequestration order – proceedings dismissed as against each of the respondents
Legislation:

Bankruptcy Act 1966 (Cth) ss 58, 60, 116

Competition and Consumer Act 2010 (Cth), Schedule 2, Australian Consumer Law ss 18, 21

Corporations Act 2001 (Cth) s 184

Federal Court of Australia Act 1976 (Cth) s 31A

Superannuation Industry (Supervision) Act 1993 (Cth) s 26

Federal Court Rules 2011 (Cth) rr 16.21, 26.01

Uniform Civil Procedure Rules 2005 (Cth) r 13

Industrial Relations Act 1996 (NSW) s 106

Legal Profession Act 2004 (NSW) s 368

Vexatious Proceedings Act 2008 (NSW) s 8
Cases cited:

Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Limited (2014) 317 ALR 73; [2015] FCA 634

Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54

Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2020) 278 FCR 450; [2020] FCAFC 130

Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd (2021) 285 FCR 133; [2021] FCAFC 40

Batterham v Goldberg and Others (2014) 226 FCR 166; [2014] FCAFC 136

Batterham v Goldberg trading as Turner Freeman & Ors (2014) 285 FLR 370; [2014] FCCA 302

Batterham v Nauer [2020] NSWCA 204

Batterham v Nauer, in the matter of Peter James Batterham [2019] FCA 485

Batterham v Nauer, in the matter of Peter James Batterham [2019] FCA 1648

Batterham v QSR Limited (2006) 225 CLR 237; [2006] HCA 23

Batterham v Turner Freeman [2015] FCCA 145

Blair v Curran (1939) 62 CLR 464

Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337; [1982] HCA 24

Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd [1987] ATPR 40-822

Crowley v Worley Parsons Limited [2017] FCA 3

Finsec Pty Limited as Trustee of the Batterham Retirement Fund v Marcel Andre Nauer [2019] NSWSC 1831

Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82

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Details
Case
[2022] FCA 360
Decision Date

CaseChat Overview and Summary

Batterham v Clayton Utz Partnership is a case in which the applicant, Batterham, sought to recover a diminution in value of shares, compensation for a personal costs order, and compensation for stress, anxiety, and loss of future income. The respondents were Clayton Utz Partnership, Turner Freeman, and Mr Rush. The court was required to determine whether the claims disclosed a reasonable cause of action, whether the loss and damage alleged were caused by the respondents, and whether the claims were time-barred, precluded by res judicata and issue estoppel, or vested in Batterham's trustee in bankruptcy. The court also had to consider whether an implied term existed in a deed of release.

The court found that Batterham's claims disclosed no reasonable cause of action, failed to articulate a coherent basis for attributing the loss and damage to the respondents, and could be characterised as an abuse of process. The claims were also time-barred, precluded by res judicata and issue estoppel, and, in the case of Clayton Utz, precluded by a deed of release. To the extent that any cause of action might have existed for the alleged loss of future income, it would have vested in Batterham's trustee in bankruptcy upon the making of the sequestration order against him. The court dismissed the proceedings against each of the respondents, ordered Batterham to pay the respondents' costs, and set out provisions for any future or varied costs orders.

Orders

Orders of the court

1. The proceedings against each of the respondents be dismissed pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth) and r 26.01 of the Federal Court Rules 2011 (Cth).

2. The applicant is to pay each of the respondents’ costs of and incidental to the proceedings, as taxed or agreed.

3. If any of the respondents seek any further or varied costs orders they are to file and serve a copy of such orders, together with an outline of written submissions not exceeding two pages in length and any evidence in support of those orders, within 14 days of the making of these orders.

4. The applicant is to file and serve an outline of submissions not exceeding two pages in length, together with any evidence in support, in response to any application made for further or varied costs orders pursuant to Order 3, within 14 days of receiving such application.

5. Any application for further or varied costs orders made pursuant to Order 3 will be determined on the papers without a further oral hearing.

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

Background

Background to the litigation

I am satisfied that the claims pleaded by Mr Batterham in the AOA and the ASOC disclose no reasonable cause of action, fail to articulate any coherent basis on which the loss and damage alleged can be attributed to the respondents, can fairly be characterised as an abuse of process, are time barred, precluded by the doctrines of res judicata and issue estoppel and in the case of Clayton Utz are also precluded, at least in part, by a deed of release. Further, I am satisfied that to the extent that any cause of action might have been available to Mr Batterham in respect of the alleged loss of future income as a promoter of private equity opportunities it would have vested in his trustee in bankruptcy on the making of the sequestration order against him.FACTUAL BACKGROUND The relevant factual background is set forth in the following affidavits:(a)the affidavit of Peter Andrew Yeldham, a partner of King & Wood Mallesons, the solicitors for Clayton Utz, affirmed 9 November 2021; (b)the affidavit of Anna Williams, a principal of YPOL Lawyers, the solicitors for Turner Freeman, affirmed 7 September 2021;(c)the affidavit of Paul Boleslaw Kozub, of Gilchrist Connell, the solicitors for Mr Rush, affirmed 10 September; and(d)the affidavits of Mr Batterham affirmed 19 August 2021, 14 October 2021 and 21 October 2021.Establishment of the BRF On 29 October 1999, the BRF was established as a superannuation plan by a deed poll titled “Trust Deed and Rules of the Batterham Retirement Fund” (Trust Deed). On 4 September 2002, by a deed of change of trustee, Maylord was appointed as trustee of the BRF. At all relevant times, Mr Batterham has been the sole member of the BRF. Clause 5.3 of the Trust Deed provides that if the BRF has fewer than five members (as has at all times been the case) and the fund is not a self-managed superannuation fund (for the purposes of the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act)) then the trustee must be an “Approved Trustee” (within the meaning of the SIS Act or regulations). The term “Approved Trustee” is no longer a defined term within the SIS Act but at the relevant time it referred to a trustee approved by the Australian Prudential Regulation Authority pursuant to s 26 of the SIS Act as then in force. Clause 6.3 of the Trust Deed further provides that:No person who is disqualified under the Statutory Requirements from acting as Trustee shall be appointed as a trustee. Any Trustee who becomes so disqualified shall immediately resign.QSR Proceedings In or about June 2003, Mr Batterham and Maylord commenced proceedings against QSR Limited (QSR) in the IRC (QSR Proceedings). Mr Batterham had previously been a director of QSR. Relief was sought under what was then s 106 of the Industrial Relations Act 1996 (NSW) in respect of an allegedly unfair contract, namely, a deed pursuant to which Maylord, as trustee of the BRF, was entitled to receive options to acquire shares in QSR (Option Deed). Mr Batterham retained Clayton Utz to represent him and Maylord in those proceedings.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The Cost Certificate was then filed in the Sydney Registry of the Local Court of New South Wales, with the result that pursuant to what was then s 368 of the Legal Profession Act 2004 (NSW), it took effect from 8 October 2013 as a judgment entered in that Court in favour of Turner Freeman against Mr Batterham and Maylord (Local Court Judgment).Issue of Bankruptcy Notice On 18 October 2013, on the application of Turner Freeman, the Official Receiver issued a bankruptcy notice based on the Local Court Judgment (Bankruptcy Notice).Application to set aside Bankruptcy Notice Mr Batterham then filed an application in the Federal Circuit Court to have the Bankruptcy Notice set aside on two grounds. First, he contended that his liability for Mr Kenzie QC’s fees was governed by Chapter 5 of the High Court Rules 2004, such that it was not open to Turner Freeman to invoke the Legal Profession Act 2004 (NSW) to obtain a costs assessment with respect to those fees. Second, he contended that Turner Freeman was not the proper creditor in relation to those fees and thus was not entitled to apply for the issue of the Bankruptcy Notice. On 13 February 2014, the Federal Circuit Court dismissed Mr Batterham’s application: Batterham v Goldberg trading as Turner Freeman & Ors (2014) 285 FLR 370; [2014] FCCA 302. In dealing with the second of the grounds stated above, Judge Raphael said:8 … It appears, from the evidence that I have seen in affidavits filed in the matter that after Mr Batterham dispensed of the services of Clayton Utz and took on the services of Turner Freeman, he instructed Turner Freeman to continue to involve Mr Kenzie. He attended the hearing of the matter in the High Court in which Mr Kenzie appeared, and then attended a conference with Mr Kenzie after the hearing. As Ms Hutley says at 3.4 of her decision:I did not accept that the costs respondent was not liable to the costs applicant for senior counsel’s fair and reasonable fees. The costs respondent is a sophisticated businessman and would understand if work is performed for him, he is responsible for the costs of that work. The costs respondent did not inform the costs applicant that he was not going to be responsible for senior counsel’s fees. In all the circumstances, it was reasonable for senior counsel to rely on the credit of his instructing solicitors, the costs applicant, who in turn relied on the credit of the costs respondent, the client. I do not accept that senior counsel should look to the first respondent for his fees, the subject of this application as they relate solely to the work he performed for the costs respondent after he withdrew instructions from that firm.…10… It is argued that the creditor is not a proper party to the bankruptcy notice. I propose to deal with that point very shortly. Although Mr Kenzie is the person who performed the work and although that work was performed for Mr Batterham, in the absence of a negotiated agreement between Mr Batterham and Mr Kenzie, either evidenced by a costs agreement and disclosure statement or in some other way that would establish a contract between them directly, the usual situation that has applied in excess of 100 years would apply in this case. Namely, counsel looks to the solicitor for payment of his fees and the solicitor looks to his client.

Ratio Decidendi

Legal Principle Established

On 13 November 2014, a sequestration order was made in respect of Mr Batterham’s estate (Sequestration Order). Prior to the making of the Sequestration Order, Mr Batterham had commenced proceedings on 14 October 2014, against Mr Kenzie QC and Turner Freeman in the District Court of New South Wales (District Court Proceedings), seeking “[l]egal fees paid to Clayton Utz and not recovered in the settlement with them for professional misconduct plus interest”. Mr Batterham alleged that Turner Freeman had provided him with only minimal assistance during the High Court Appeal, and therefore the Bankruptcy Notice was improperly issued. On 21 November 2014, Mr Batterham applied to the Federal Circuit Court for a stay of the Sequestration Order pending the determination of the District Court Proceedings by which he sought, out of time, to appeal against the Costs Assessment (Bankruptcy Proceedings). On 20 February 2015, the application for a review of the making of the Sequestration Order was dismissed: Batterham v Turner Freeman [2015] FCCA 145. In dismissing the application, Judge Altobelli relevantly said at [9]:[I]n circumstances where the Applicant participated in the costs assessment (e.g. Applicant’s email 7 November 2011, being the annexure A11 to his affidavit of 7 November 2014) it is not possible on the material he has presented to the Court to discern how the judgment was tainted by fraud, collusion or miscarriage of justice … The evidence suggests that a real, current debt exists. On 10 March 2015, orders were made dismissing the District Court Proceedings pursuant to s 60(3) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) and r 13 of the Uniform Civil Procedure Rules 2005 (Cth) (UCPR).Nauer Proceedings Maylord, as the trustee of the BRF, has been involved in a number of proceedings relevant to the claims now before the Court. The first proceedings commenced by Maylord against Mr Nauer and his related companies in the Supreme Court of New South Wales were concluded when the parties entered into a deed of settlement dated 4 July 2011 (Deed of Settlement). On 19 December 2014, however, Maylord commenced further proceedings in the Supreme Court against Mr Nauer and his related companies raising essentially the same issues as in the earlier proceedings. These proceedings were dismissed on 24 April 2015 by Hammerschlag J by reason of a failure to comply with directions but the dismissal was on terms that it was without prejudice to it recommencing the proceedings within 12 months. On 22 April 2016, two days before the expiry of the 12 month period permitted by Hammerschlag J, Maylord, in its capacity as trustee of the BRF, recommenced the proceedings against Mr Nauer and his related companies (Nauer Proceedings). Mr Batterham alleged, inter alia, in the Nauer Proceedings that he had, or was to have, a minority interest through corporate entities in a joint venture with Vesture Limited (Vesture) and others in a strata property management business conducted through an entity called Victorian Body Corporate Services Pty Limited (VBCS). Mr Nauer, who was associated with Vesture, was also a director of ZCL, a special purpose company incorporated in the British Virgin Islands to implement the proposed joint venture. Mr Batterham alleged that Mr Nauer breached his fiduciary duties as a director of ZCL, breached of the Corporations Act 2001 (Cth) (Corporations Act) and the ASX Listing Rules, engaged in unconscionable conduct, and claimed that Mr Nauer gained a financial advantage by deception arising from the joint venture.