Campbell & Diboll
[2021] FedCFamC1F 114
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Campbell & Diboll [2021] FedCFamC1F 114
File number(s): WOC 455 of 2013 Judgment of: GILL J Date of judgment: 8 October 2021 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – SUMMARY DISMISSAL – Correct test to be applied – Application to enforce obligation to pay liquidator’s fees arising under court orders – Whether no reasonable prospect of success – Whether approval of creditors constitutes evidence of propriety – Whether remuneration claimed by liquidators is supported by evidence of sufficient particularity – Application for summary dismissal refused Legislation: Corporations Act 2001 (Cth)
Family Law Act 1975 (Cth) s 45A
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 46
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 10.09
Cases cited: Bretton & Bondai [2013] FamCAFC 168
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Lindon v The Commonwealth (No 2) (1996) 70 ALJR 541
Re Halifax Investment Services Pty Ltd (in liq)(No 9) [2020] FCA 925
Spencer v The Commonwealth (2010) 241 CLR 118
Division: Division 1 First Instance Number of paragraphs: 48 Date of hearing: 7 & 8 October 2021 Place: Canberra Counsel for the Applicants: Mr Lipp Solicitor for the Applicants: Chamberlains Law Firm Counsel for the Respondent: Mr Moller Solicitor for the Respondent: Farrar Gesini Dunn ORDERS
WOC455 of 2013 BETWEEN: MR X
First Applicant
MR Z
Second Applicant
AND: MS DIBOLL
Respondent
ORDER MADE BY:
GILL J
DATE OF ORDER:
8 OCTOBER 2021
THE COURT ORDERS THAT:
1.The oral application made by the respondent on 7 October 2021 for summary dismissal of the applicant’s Amended Application in a Case filed 25 June 2021 is dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Campbell & Diboll has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
GILL J
INTRODUCTION
These proceedings involve the enforcement of orders made by Faulks DCJ dealing with the remuneration of liquidators appointed in respect of a company associated with the parties to the marriage. It is now disputed between the liquidators and the respondent wife the degree to which she is liable for costs which they now claim. Accordingly, what is sought by way of enforcement is the court’s determination of a specific dollar figure for the liability of the wife to the liquidators. The liquidator pursues a further payment from the respondent of $64,117.56, while the respondent seeks the refund of $15,780 to her. Both parties pursue costs.
On the morning of the commencement of the first day of the hearing of the matter the applicant sought an adjournment. This was predicated upon the filing of material on behalf of the respondent wife wherein she sought to introduce expert evidence from another liquidator (Mr E) as to the propriety of the costs incurred by the liquidators. Prior to dealing with the admissibility of that proposed evidence, which I determined was to be resolved in advance of dealing with the adjournment application, leave was granted to the respondent wife to make an application for summary dismissal of the liquidator’s claim, such application being predicated upon the notion that the evidence sought to be relied upon by the liquidator and filed in advance of the hearing was inadequate to sustain the liquidators claim.
This judgment concerns that application for summary dismissal.
PRINCIPLES — SUMMARY DISMISSAL
Counsel for the liquidators pointed to the general principles relating to summary dismissal set out in the judgment of Barwick CJ in General Steel Industries Inc v Commissioner for Railways (NSW) (“General Steel”).[1] Although Barwick CJ provides relevant background for the customarily cautionary approach taken by courts when determining summary dismissal applications,[2] this Court operates within a different statutory framework to that considered by Barwick CJ. This difference has been noted in Bretton & Bondai,[3] where the Full Court held that the applicable test for summary dismissal applications is not the “doomed to fail” test outlined by Kirby J in Lindon v The Commonwealth (No 2) (“Lindon”)[4] which reflects the higher threshold tests set out by Barwick CJ in General Steel. Rather, the statutory formulation which is to be applied proceeds from a “conceptually different” basis to that articulated in those earlier cases.[5]
[1] (1964) 112 CLR 125.
[2] Ibid 129.
[3] [2013] FamCAFC 168.
[4] (1996) 70 ALJR 541, 544–5.
[5] Bretton & Bondai [2013] FamCAFC 168, [59] (Finn & Strickland JJ), [122] (May J).
The Federal Circuit and Family Court of Australia Act 2021 (Cth) s 46 (the “FCFCOA Act”) and the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 10.09 (“the Rules”) make provision for summary dismissal. Section 46 of the FCFCOA Act is in substantively the same terms as the Family Law Act 1975 (Cth) s 45A.
Section 46 of the FCFCOA Act provides:
(1) The Federal Circuit and Family Court of Australia (Division 1) may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is prosecuting the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding.
(2) The Federal Circuit and Family Court of Australia (Division 1) may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is defending the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.
(3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:
(a) hopeless; or
(b) bound to fail;
for it to have no reasonable prospect of success.
(4) This section does not limit any powers that the Federal Circuit and Family Court of Australia (Division 1) has apart from this section.
The Rules also provide a process whereby an application for summary orders may be made by a party claiming in relation to an application or response that:
(a) the court has no jurisdiction; or
(b) the other party has no legal capacity to apply for the orders sought; or
(c) it is frivolous, vexatious or an abuse of process; or
(d) there is no reasonable likelihood of success.[6]
[6] Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 10.09(1).
An application under r 10.09 must be filed in accordance with the approved form.[7] This was not done, however leave was given during the hearing to dispense with the formal requirement imposed by r 10.09(2) and for a summary dismissal application to be made orally. The giving of such leave was considered appropriate on the basis that on the first day of the trial, the parties were in a position to understand the case put by the applicant and for the applicant to state their case and point to the evidence to be brought forward.
[7] Ibid r 10.09(2).
The statutory language in these provisions reflects the provisions relating to summary dismissal applicable in the Federal Court considered by the High Court in Spencer v The Commonwealth (“Spencer”).[8] The majority’s observations as to the test to be applied were relied upon by May J in Bretton & Bondai to establish that the tests in General Steel and Lindon are no longer applicable to applications for summary dismissal in this Court under the regime provided for under the then Family Law Rules 2004 (Cth), which was in the same terms as the presently applicable r 10.09.[9] Although May J dissented as to the result in that case, her Honour was not in dissent in relation to the summary dismissal issue.
[8] (2010) 241 CLR 118, 138–141 (Hayne, Crennan, Kiefel and Bell JJ).
[9] Bretton & Bondai [2013] FamCAFC 168, [57] (Finn & Strickland JJ), [121] (May J).
In Spencer, immediately after considering the test outlined in General Steel Industries, the majority observed:
Because s 31A(3) provides that certainty of failure (“hopeless” or “bound to fail”) need not be demonstrated in order to show that a plaintiff has no reasonable prospect of prosecuting an action, it is evident that s 31A is to be understood as requiring a different inquiry from that which had to be made under earlier procedural regimes. It follows, of course, that it is dangerous to seek to elucidate the meaning of the statutory expression “no reasonable prospect of successfully prosecuting the proceeding” by reference to what is said in those earlier cases.[10]
[10] Spencer v The Commonwealth (No 2) (2010) 241 CLR 118, 140 [56].
The majority considered that the phrase “no reasonable prospect” of success should be understood as follows:
full weight must be given to the expression as a whole. The Federal Court may exercise power under s 31A if, and only if, satisfied that there is “no reasonable prospect” of success. Of course, it may readily be accepted that the power to dismiss an action summarily is not to be exercised lightly. But the elucidation of what amounts to “no reasonable prospect” can best proceed in the same way as content has been given, through a succession of decided cases, to other generally expressed statutory phrases, such as the phrase “just and equitable” when it is used to identify a ground for winding up a company. At this point in the development of the understanding of the expression and its application, it is sufficient, but important, to emphasise that the evident legislative purpose revealed by the text of the provision will be defeated if its application is read as confined to cases of a kind which fell within earlier, different, procedural regimes.[11]
[11] Spencer v The Commonwealth (No 2) (2010) 241 CLR 118, 141 [60].
Accordingly it may be accepted that the power granted to the court to summarily dismiss a claim operates on a broader basis than General Steel or Lindon, extending beyond those cases where the action or defence might be considered to be doomed to fail to the broader category of cases which can be described as having no reasonable prospect. The statutory power requires a lower threshold.
THE OBLIGATION IMPOSED ON THE RESPONDENT WIFE
The application to enforce, which is the subject of the summary dismissal application, is reliant upon the orders of Faulks DCJ as the source of the obligation cast upon the respondent wife to pay the liquidator. The liquidator accepted that the wife’s liability flowed from those orders and not from any obligation otherwise cast upon her by the operation of the Corporations Act 2001 (Cth). Those orders are set out below.
On 13 March 2015 Faulks DCJ ordered:
Each of the applicant and the respondent will pay one half of the proper costs of the liquidators in relation to Y Pty Limited, such costs to be borne equally taking account of the money already paid by the respondent wife in these proceedings amounting to some $7,500.[12]
[12] Orders 13 March 2015, Order 3.
On 24 October 2016 Faulks DCJ further ordered:
In addition to any sums recovered by the liquidators in the proper execution of their duties, in furtherance of Order 3 made by me on 13 March 2015, each of the parties will pay one half of the proper costs to the liquidators in relation to Y Pty Limited on the basis that each will be responsible for one half of the amount outstanding taking account of the fact that $7,500 had at the date of the last order already been paid by the respondent.[13]
[13] Orders 24 October 2016, Order 13.
THE FACTUAL CONTENTION KEY TO ENGAGING THE OBLIGATION
The summary dismissal claim focuses upon what is the central factual contention in the case, being whether the claims made by the liquidator are “proper” as described in the orders of Faulks DCJ.
The respondent wife asserts that the proof offered by the liquidator is incapable of establishing this fundamental factual matter.
THE EVIDENCE TO ESTABLISH THE KEY FACTUAL CONTENTION
But for any evidence that the liquidator might seek to lead in reply to evidence hoped to be led for the respondent from Mr E, the liquidator currently relies wholly on evidence proffered by Mr Z in his affidavit filed 25 June 2021. The evidence relevant to whether the charges are proper (and hence the evidence essential to determining the summary disposal) is contained in the various annexures to that affidavit that produce reports from the four creditors’ meetings that have been conducted by the liquidator.
There are two aspects of those reports relied upon, being firstly their recording of creditor approval of the remuneration claims made by the liquidator and secondly, the schedules annexed thereto as provided to the creditors outlining of the basis for those remuneration claims.
Different considerations apply to what may be gleaned from each of those creditors’ meetings.
The first creditors’ meeting
The first of those creditors’ meetings, occurring in June 2015, contained an executive summary setting out both the work undertaken until then, being 2 October 2014 to 8 May 2015 of $41,074.50, along with prospective remuneration from 9 May 2015 to the conclusion of the liquidation of $15,390 totalling $56,464.50.[14] These amounts were approved by the creditors, including by the respondent wife (herself a creditor).[15] For the purposes of determining the summary dismissal application the approval by the wife on that occasion acts as an admission against interest as to her recognition of the propriety of those expenditures as approved.
[14] Affidavit of Mr Z filed 26 June 2021, p. 100.
[15] Ibid p. 125–6.
This approval predated the orders made by the Deputy Chief Justice.
It may be understood that the prospects for the success of the claim seeking further payment rely upon the subsequent creditors’ meetings.
The second creditors’ meeting
The report in relation to the second creditors’ meeting (occurring on 24 September 2015, again in advance of the orders made by the Deputy Chief Justice), contains a remuneration report from the liquidator.[16] The creditors approved an amount of $34,832 covering the periods 20 May 2015 to 31 August 2015 and 1 September 2015 to the conclusion of the liquidation ”set on an interim basis”.[17] That approval of remuneration was on the basis of what was contained in the report.
[16] Ibid p. 155.
[17] Ibid p. 180–2.
While approved by the creditors, there is no indication that approval for such came from the respondent wife as one of the creditors.
The third creditors’ meeting
The third of the creditors’ meetings occurred on 22 December 2016 following the orders made by the Deputy Chief Justice. The report contains a remuneration report[18] setting out that the total remuneration previously approved is $91,296.50, and records that the liquidators sought approval for a further $16,527.30 for the period 1 September 2015 to 30 November 2016 and a further $5,000 to cover estimated future fees ”on a full and final basis”[19] to the conclusion of the liquidation. The report records a proxy vote against the approval of the remuneration made behalf of the respondent wife.[20]
[18] Ibid p. 192–3.
[19] Ibid p. 192
[20] Ibid p. 219.
The fourth creditors’ meeting
The fourth creditors meeting on 29 January 2019 approved further remuneration.[21] It is not controversial that the respondent wife was not present, although it is controversial as to whether or not she was on notice of the creditors’ meeting.
[21] Ibid p. 242–4.
That meeting involved approval for the further $45,679.60 remuneration for the liquidator for the period 1 December 2016 through to 6 January 2019, along with approval of an anticipated further $5,000 to finalisation.[22]
[22] Ibid p. 243.
The schedule relied upon by the liquidator at the meeting was not included as part of the annexure, although the respondent identified that the report appears at annexure J of the affidavit of Mr E that she seeks to rely upon in the proceedings (although the admission of that affidavit remains controversial and subject to leave being granted with such leave not having yet been granted).
The liquidator’s contention in relation to the meetings
The contention of the liquidator is that the approval of the creditors is sufficient to evidence the propriety of the liquidator’s charges for the purpose of the summary dismissal application and secondly, that the schedules (to the extent that they are produced) that set out the liquidator’s expenses to the creditors’ meetings, if accepted at face value as is necessary for determining the application, also sufficiently evidence the propriety of the claims.
Leaving aside the first of those meetings, the respondent wife contends that the creditors’ meetings do not evidence propriety and secondly, that what was produced by the liquidator for the creditors’ meetings was so lacking in particularity as to be deficient for the purpose of establishing propriety.
THE SIGNIFICANCE OF THE APPROVALS BY THE CREDITORS
Under the Insolvency Practice Schedule (Corporations) (“IPS”) of the Corporations Act 2001 (Cth) the liquidator is entitled to receive remuneration for the necessary work properly performed in relation to external administration (s 60-5). Approval by a creditors’ meeting is an available mechanism for the approval of a liquidator’s fees and expenses (s 60-10(1)(a)), or where that has not occurred, approval may be obtained from a court (s 60-10(1)(c)).
It is arguable that where the liability to pay flows from the IPS that the approval by the creditors’ meeting not only authorises the payment but also evidences the remuneration as falling within the description given at s 60-5. However, the liability here flows from the orders of Faulks DCJ rather than from the IPS.
The creditors’ approval ordinarily operates against a background where the liquidator’s fees are drawn from the subject matter of the liquidation, being that to which the creditors make claim. That is not the case in relation to the current claim.
These matters tell against treating the creditors’ approval pursuant to the statutory scheme set out in the IPS as evidence of propriety to justify a payment arising under court orders outside of the scheme set out in the IPS.
It is however arguable that where the liability falls upon a particular creditor that the creditor’s assent at the meeting the payment acts as an admission against interest that the remuneration is proper, as was the case in respect of the first meeting.
That leaves the respondent’s agreement at the first meeting as providing evidence to support the part of the claim reliant upon the sum approved at the first meeting (half of which approximates that which has been paid by the respondent and as such does not appear to constitute a portion of that which is now claimed against her).
The approval at the subsequent meetings does not evidence propriety.
THE SIGNIFICANCE OF THE SCHEDULES
That leaves the schedules setting out the claims made by the liquidator and presented at the second, third and fourth meetings.
It should immediately be recognised that the schedule for the fourth meeting has not been introduced into evidence by the liquidator, leaving that portion of the claim without support.
Schedules relating to the remuneration for the second and third meetings were provided.
The respondent identified from authorities that relate to the court approval process at 60-10(1)(c) such as by Gleeson J in Re Halifax Investment Services Pty Ltd (in liq)(No 9)[23] the requirement that sufficient detail be provided, generally by an account in itemised form, to enable the court to assess propriety. The respondent submits that the schedules lack such particularity, meaning that the court will be unable to make the findings of propriety that the liquidator is burdened with establishing.
[23] [2020] FCA 925.
The relevant reports appear at pages 155 to 164 and 192 to 202 of Mr Z’s affidavit of 25 June 2021.
The liquidator emphasises that, for the purposes of this application to dismiss, the evidence of the liquidator should be accepted at face value. That is, at least, a prudent course to take in this case, although whether it is required in all cases seeking summary dismissal is a matter for specific consideration at another time.
However, even taking that course, what is established is that the work was undertaken, not that it is proper in the terms specified by Faulks DCJ.
It may be readily observed that the remuneration schedules are limited in their particularity, in a manner that places at risk much of the claim by the liquidator.
However, under circumstances where it rests upon the respondent to establish that there are no reasonable prospects or likelihood of success, it is not apparent that all of the matters listed are so lacking in specificity as to be unable to sustain the liquidator’s claim that the expenses were proper.
CONCLUSION
The liquidator’s case appears at present in a fragile state. Subject to further argument on the substantive case, much of the claim for remuneration appears inadequately supported. However, it cannot be concluded that there are no reasonable prospects for success in relation to the claim (at least in part). Accordingly, the application for summary dismissal is refused.
I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Gill. Associate:
Dated: 8 October 2021
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