Carson (by her litigation representative Jodi-Ann Michael) v Gabriele

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FEDERAL COURT OF AUSTRALIA

Carson (by her litigation representative Jodi-Ann Michael) v Gabriele [2024] FCA 702

File number(s): NSD 903 of 2021
Judgment of: THAWLEY J
Date of judgment: 27 June 2024
Catchwords:

PRACTICE AND PROCEDURE – review of Registrar’s decision under s 35A(6) of the Federal Court of Australia Act 1976 (Cth) – Registrar granted leave to withdraw creditor’s petition – Registrar ordered costs against the respondent in a fixed amount – hearing de novo – Registrar’s decision set aside – creditor’s petition dismissed – applicant ordered to pay respondent’s costs

PRACTICE AND PROCEDURE – where applicant incapable of managing own affairs from commencement of proceedings – where applicant did not commence proceedings by her litigation representative – whether litigation representative can be appointed retrospectively to cure an irregularity in the proceedings – litigation representative appointed retrospectively

PRACTICE AND PROCEDURE – costs – where respondent paid amount of judgment debts after the due date – where petitioning creditor continued to seek a sequestration order in order to secure payment of costs incurred in bringing and conducting the proceedings before bringing the proceedings to an end – where respondent then engaged legal representatives in relation to the hearing before the Registrar – where petitioning creditor then sought withdrawal of petition

BANKRUPTCY – where bankruptcy notice based on four Local Court judgments arising from orders for costs – whether court should go behind judgments – where judgment amount and interest claimed in bankruptcy notice paid after date for payment expired – where respondent was solvent – petition dismissed  
Legislation:

Bankruptcy Act 1966 (Cth)

Electronic Transactions Act 1999 (Cth)

Federal Court of Australia Act 1976 (Cth)

Bankruptcy Regulations 2021 (Cth)

Federal Court Rules 2011 (Cth)

Civil and Administrative Tribunal Act 2013 (NSW)

Civil Procedure Act 2005 (NSW)

Crimes (Domestic and Personal Violence) Act 2007 (NSW)

Guardianship Act 1987 (NSW)

Local Court Act 2007 (NSW)

Real Property Act 1900 (NSW)

Uniform Civil Procedure Rules 2005 (NSW)
Cases cited:

CDN16 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2021] FCA 699

Culleton v Balwyn Nominees Pty Ltd [2017] FCAFC 8; 343 ALR 632

Dey v Victorian Railway Commissioners [1949] HCA 1; 78 CLR 62

Kaur v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2021] FCA 1469

Mao v AMP Superannuation Ltd [2015] NSWCA 252

Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v Mukiza [2022] FCAFC 105

Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72

Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28; 261 CLR 132

Rowe (by her litigation representative, Public Trustee of Western Australia ) v Barton as trustee for Barton Family Trust trading as Sealwerx WA (No 2) [2021] FCA 1010

Wren v Mahony [1972] HCA 5; 126 CLR 212
Division: General Division
Registry: New South Wales
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Number of paragraphs: 148
Date of hearing: 26 June 2024
Counsel for the Applicant:  Mr A Kernaghan
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Details
Case
[2024] FCA 702
Decision Date

CaseChat Overview and Summary

This case involved a review of a decision made by a Registrar of the Federal Court of Australia in relation to a bankruptcy petition filed against Ms Carson, represented by her daughter Jodi-Ann Michael. The court was tasked with determining whether the Registrar's decision to grant leave for the withdrawal of the creditor's petition, and to order costs against the respondent in a fixed amount, was appropriate. The court also considered whether a litigation representative could be appointed retrospectively for Ms Carson, given her incapacity, and whether the court should examine the underlying judgments that formed the basis of the bankruptcy notice.

The court found that the Registrar's decision to grant leave to withdraw the creditor's petition and to order costs against the respondent should be set aside. The creditor's petition was dismissed, and the applicant was ordered to pay the respondent's costs. The court reasoned that the respondent had paid the amount of the judgment debts after the due date, and the petitioning creditor continued to pursue a sequestration order to secure payment of costs incurred in the proceedings. The court held that the creditor's conduct was unreasonable and that the Registrar's order for costs should be set aside. Furthermore, the court found that the underlying judgments, which were based on orders for costs, were not properly before the court and should not have been considered in the bankruptcy notice.

The court also addressed the issue of appointing a litigation representative for Ms Carson. Given that Ms Carson was incapable of managing her own affairs from the commencement of the proceedings, the court found that it was appropriate to appoint Jodi-Ann Michael as her litigation representative retrospectively. This appointment was made to cure the irregularity in the proceedings and to ensure that Ms Carson's interests were properly represented.

In conclusion, the court set aside the Registrar's orders, dismissed the creditor's petition, and ordered the applicant to pay the respondent's costs. The court appointed Jodi-Ann Michael as the litigation representative for Ms Carson, effective from the date of the filing of the creditor's petition. The decision underscores the importance of ensuring proper representation for parties who are incapable of managing their own affairs and the need for courts to carefully consider the circumstances in which costs are awarded in bankruptcy proceedings.

Orders

Orders of the court

1. Pursuant to r 9.63 of the Federal Court Rules 2011 (Cth), Ms Jodi-Ann Michael is appointed as the litigation representative for Ms Carson, with effect from the date of the filing of the creditor’s petition on 24 August 2023.

2. Pursuant to r 1.34, compliance with the requirement in r 9.63(1) and (2) of the Rules is dispensed with.

3. The orders made by the Registrar on 4 April 2024 are set aside.

4. The creditor’s petition filed on 24 August 2023 be dismissed pursuant to s 52(2) of the Bankruptcy Act 1966 (Cth).

5. The applicant pay the respondent’s costs as agreed or assessed.

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

Background

Background to the litigation

There is also an anterior issue as to whether a litigation representative should be appointed for Ms Carson. It is necessary to delve into the facts in some detail in order to resolve these issues.THE FACTS The applicant is Ms Carson, who is elderly and suffers from dementia and anxiety. She is legally incapacitated. The solicitors commencing these proceedings did not apparently perceive this to create any difficulty. Ms Michael is Ms Carson’s daughter and holds an enduring power of attorney in respect of her and is an enduring guardian. Ms Carson was the long-standing de facto spouse of Ms Gabriele’s late father, Mr John Alvarez. On 16 October 1985, Mr Alvarez and his first wife, Ms Pamela Alvarez, purchased 46 Bambil Crescent, Dapto, New South Wales as joint tenants (the Dapto property). On 6 January 1997, following her divorce from Mr Alvarez, Ms Alvarez transferred her one‑half share in the Dapto property to Mr Alvarez and Ms Carson as joint tenants. This transfer was registered incorrectly in the folio of the Torrens register. The folio incorrectly recorded that the entirety of the Dapto property was held by Ms Carson and Mr Alvarez as joint tenants. The folio should have recorded Mr Alvarez as owning a half share of the property as tenant in common. The folio should have recorded Mr Alvarez and Ms Carson as joint tenants of the other half share, as tenant in common with Mr Alvarez. Ms Gabriele contends that the intentions of relevant persons at the time of Ms Alvarez’s transfer was that half the Dapto property would go to Mr Alvarez’s children of his first marriage, Ms Gabriele and her sisters, after he died. Mr Alvarez died on 22 September 2014. Upon Mr Alvarez’s death, the entirety of his estate passed to Ms Carson under his will. Mr Alvarez’s estate comprised his interest in the Dapto property and the sum of $50,000 held in a joint bank account. A Notice of Death was registered on 17 October 2014, which had the effect of recording Ms Carson as the sole registered proprietor of the land. Ms Gabriele believes that “[Ms Carson] has always insisted that half of the estate would still go to my sisters and me, although [Ms Michael] stepped in and changed things later, relying strictly on [Mr Alvarez’s] will”. On 21 October 2014, Rachel Stubbs and Associates wrote a letter to Ms Gabriele, which stated:[W]e are instructed that our client [Ms Carson] has received a lengthy email from you dated 6 October 2014 demanding that our client divide Mr Alvarez’ estate 50% to you and your sisters ... A long email has also been sent to our client’s son in law Perry Michael. We understand that you have also been telephoning the NSW Trustee and Guardian about this matter.Our client instructs that she feels both harassed and upset by these email letters and the verbal conversations, demanding that the estate be divided differently to that, as set out, in the testator’s last will. On 27 October 2014, Ms Gabriele raised with the Registrar-General the possibility that there had been an incorrect registration of a transfer. On 29 October 2014, the Registrar-General wrote to Ms Gabriele agreeing that there had been errors and stating that he proposed to correct them under s 12(1)(d) of the Real Property Act 1900 (NSW). The letter included:•The Notice of Death should have only affected the one-half share interest in the Land which Sandra Carson intended to hold as joint tenants with John Alvarez (deceased); leaving the remaining one-half share in the name of John Alvarez as tenant in common to be transmitted to his executor, administrator or beneficiary.Before I can alter the folio of the register for the land to correct the error, I am required to notify any person who may be affected by the alteration. I have sent a notification to Sandra Carson of my intention to alter the folio of the Torrens register for the Land so that it reflects the intention of the documents that have been lodged for registration. For the reasons set out in the preceding paragraphs, I intend to do this by recording Sandra Carson and John Alvarez as the registered proprietors of the Land, as tenants in common in equal shares.I intend on altering the register after one (1) month from the date of the Notice unless before the expiration of that time I serve me with, or written notice of, an Order of the Supreme Court of New South Wales preventing me from doing so.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

Taking all of these matters into account, and taking into account considerations of proportionality, there should be an order that the applicant pay Ms Gabriele’s costs. Whilst I have considered whether those costs should be paid on an indemnity basis, or whether they should be paid on a scale basis, I have ultimately concluded that they should be paid on a party and party basis. CONCLUSION The following orders should be made on the review under s 35A(6) of the FCA Act:1.Pursuant to r 9.63 of the Rules, Ms Jodi-Ann Michael is appointed as the litigation representative for Ms Carson, with effect from the date of the filing of the creditor’s petition on 24 August 2023.2.Pursuant to r 1.34, compliance with the requirement in r 9.63(1) and (2) of the Rules is dispensed with.3.The orders made by the Registrar on 4 April 2024 are set aside.4.The creditor’s petition filed on 24 August 2023 be dismissed pursuant to s 52(2) of the Act.5.The applicant pay the respondent’s costs as agreed or assessed.

Ratio Decidendi

Legal Principle Established

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