Doulman v ACT Electronic Solutions Pty Limited and Anor (No.2)
[2015] FCCA 1664
•19 June 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| DOULMAN v ACT ELECTRONIC SOLUTIONS PTY LIMITED & ANOR (No.2) | [2015] FCCA 1664 |
| Catchwords: COURTS AND JUDICIAL SYSTEM – Federal jurisdiction – whether the Court has jurisdiction to entertain a claim for indemnity made by a person who was made bankrupt on the basis of a creditor’s petition that was presented by a legal practitioner without the authority of the putative creditor against the legal practitioner who presented the creditor’s petition – whether such claim is a proceeding arising under or by virtue of the Act – whether such claim forms part of the one justiciable controversy arising out of the bankrupt’s claim that he should not have been made bankrupt – whether such claim falls within the Court’s implied incidental power to regulate the conduct of legal practitioners conducting proceedings before it – Court has jurisdiction. PRACTICE AND PROCEDURE – Whether former bankrupt is estopped from bringing claim against legal practitioner who presented the creditor’s petition without the authority of the putative creditor because the claim had been previously litigated – whether the bringing of such a claim is otherwise an abuse of process – claim not precluded and is not an abuse of process. LEGAL PRACTITIONERS – Legal practitioner presenting creditor’s petition without the authority of the putative creditor named in the petition – whether the legal practitioner liable to compensate or indemnify bankrupt for loss suffered as a consequence of having been made bankrupt – legal practitioner is liable. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.5(1), 27(1), 32, 52(1), 153B, 153B(1), 154, 154(1)(b), 154(2) Conveyancing Act 1919 (NSW), s.66G |
| Anonymous [1795] EngR 2351; (1795) 1 Salk 86; 91 E.R. 81 Yonge v Toynbee [1910] 1 KB 215 |
| Applicant: | LLEWELLYN MARK DOULMAN |
| First Respondent: | ACT ELECTRONIC SOLUTIONS PTY LIMITED (ACN 093 599 378) (FORMERLY TAXVIEW PTY LIMITED AS TRUSTEE FOR TAXTRUST) |
| Second Respondent: | MICHAEL EDWARD SLAVEN |
| Other Party: | NIGEL JOHN GABBEDY |
| File Number: | SYG 15 of 2011 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | 15 September 2014 |
| Date of Last Submission: | 29 October 2014 |
| Delivered at: | Sydney |
| Delivered on: | 19 June 2015 |
REPRESENTATION
| Applicant in person. |
| Solicitors for the Second Respondent: | Mr M Carmody of DibbsBarker |
| Counsel for Other Party: | Mr S A Adair |
| Solicitors for Other Party: | Sparke Helmore Lawyers |
DECLARATIONS
Nigel John Gabbedy (Mr Gabbedy) is liable to indemnify Llewellyn Mark Doulman (Mr Doulman) for the liabilities Mr Doulman has to Michael Edward Slaven (Trustee) under s.154 of the Bankruptcy Act 1966 (Cth) (Act) other than the liability Mr Doulman has under s.154 of the Act to pay to the Trustee the Trustee’s legal costs and disbursements referred to in order 2 made on 19 April 2011 in these proceedings (annulment proceedings).
Mr Doulman’s remaining liability to the Trustee under s.154 of the Act in relation to the legal costs and disbursements the Trustee incurred in the annulment proceedings is $4,144.28, and the Trustee’s claims for payment of his legal costs and disbursements in relation to the annulment proceedings will be discharged upon Mr Doulman paying to the Trustee the amount of $4,144.28 by the time specified in order 3.
ORDERS
By 17 July 2015:
(a)Mr Doulman pay to the Trustee the amount of $4,144.28; and
(b)Mr Gabbedy pay to the Trustee such amounts as the Trustee is entitled to recover from Mr Doulman by reason of s.154 of the Act, other than the legal costs and disbursements the Trustee incurred in the annulment proceedings.
Upon the payment of the amounts referred to in order 3, the Trustee shall forthwith take such steps as are in his power to cause to remove all caveats he has caused to be recorded against the title of real property in which Mr Doulman has an interest.
There be liberty to apply on such notice as the circumstances warrant for the purpose of making further orders in the event orders 3 or 4 are not complied with, or in relation to the carrying out of these orders.
Mr Gabbedy pay the Trustee’s costs of the applications in response to which these orders have been made, and Mr Gabbedy and Mr Doulman otherwise pay their own costs.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 15 of 2011
| LLEWELLYN MARK DOULMAN |
Applicant
And
| ACT ELECTRONIC SOLUTIONS PTY LIMITED (ACN 093 599 378) (FORMERLY TAXVIEW PTY LIMITED AS TRUSTEE FOR TAXTRUST) |
First Respondent
| MICHAEL EDWARD SLAVEN |
Second Respondent
NIGEL JOHN GABBEDY
Other Party
REASONS FOR JUDGMENT
Introduction
There are two applications before the Court. One is made by Mr Slaven, the former trustee in bankruptcy of the estate of Mr Doulman (Trustee), and the other by Mr Doulman.
The Trustee seeks an order under s.66G of the Conveyancing Act 1919 (NSW) for the appointment of trustees for sale of land in which Mr Doulman has an interest as a joint tenant, and for the application of the proceeds of sale of Mr Doulman’s interest towards satisfaction of an amount the Trustee claims Mr Doulman owes him. The Trustee claims Mr Doulman owes him at least $52,474.45,[1] being the amount of a default judgment the Trustee recovered against Mr Doulman in the Local Court of New South Wales on 2 March 2012.[2] The $52,474.45 comprises legal costs and disbursements and expenses and remuneration the Trustee claims he incurred and earned as Mr Doulman’s trustee in bankruptcy, both before and after 19 April 2011, when this Court annulled Mr Doulman’s bankruptcy under s.153B(1) of the Bankruptcy Act 1966 (Cth) (Act).[3]
[1] Affidavit of M E Slaven, 12.03.2014, [13]
[2] Affidavit of A G Mahony, 06.03.14, Annexure “DD”
[3] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232
Mr Doulman, on the other hand, claims he owes nothing to the Trustee or, if he does, what he owes should be paid by a solicitor, Mr Gabbedy. Mr Doulman’s claims are premised on the undisputed fact that he was made bankrupt on the basis of a creditor’s petition Mr Gabbedy presented without the authority of the putative creditor named in the creditor’s petition. Mr Doulman submits that, on the proper construction of an order this Court made at the time it annulled Mr Doulman’s bankruptcy, Mr Gabbedy is required to pay the amount claimed by the Trustee. In the alternative, Mr Doulman claims I should make orders that require Mr Gabbedy to indemnify Mr Doulman against all liability Mr Doulman has to the Trustee under s.154 of the Act. (In these reasons, I will refer to this claim as “the indemnity claim” or “Mr Doulman’s indemnity claim”.)
Mr Doulman makes additional claims. He contends he has suffered losses in addition to liabilities he may have incurred to the Trustee. Mr Doulman says he expended significant legal costs, and that his having been made bankrupt has damaged his ability to obtain credit. He claims compensation from Mr Gabbedy for these losses. Mr Doulman also claims the Trustee made a number of errors in the report to creditors he prepared in relation to Mr Doulman’s affairs, and that the Trustee acted improperly by issuing the report to creditors after he was on notice that Mr Doulman should never have been made a bankrupt.
Mr Gabbedy, who necessarily is a party to Mr Doulman’s application, submits that the orders made on 19 April 2011 do not require Mr Gabbedy to indemnify Mr Doulman against all liability Mr Doulman may have to the Trustee under s.154 of the Act. Mr Gabbedy submits that, on their proper construction, the orders are restricted to indemnifying Mr Doulman for the liability he has to the Trustee under s.154 of the Act for the legal costs the Trustee incurred in relation to the proceedings that resulted in the annulment of Mr Doulman’s bankruptcy (annulment proceedings). Mr Gabbedy also submits the Court does not have jurisdiction to consider whether I should make an order requiring Mr Gabbedy to indemnify Mr Doulman against liability Mr Doulman has to the Trustee under s.154 of the Act. Further, Mr Gabbedy submits that even if the Court has jurisdiction to entertain Mr Doulman’s claims, those claims are an abuse of process, first, because Mr Doulman seeks to re-litigate matters that already have been determined adversely to Mr Doulman, and, secondly, because the claims are based on unsupported allegations of serious misconduct by Mr Gabbedy.
The following issues, therefore, arise.
a)On the proper construction of the orders made by this Court on 19 April 2011, is Mr Gabbedy liable to indemnify Mr Doulman against all liability he has to the Trustee under s.154 of the Act?
b)Assuming (a) is answered in the negative, is Mr Doulman entitled to an order that Mr Gabbedy indemnify Mr Doulman against liability Mr Doulman has to the Trustee under s.154 of the Act? I can consider that question only if I find the Court has jurisdiction, and if I do not accept Mr Gabbedy’s contention that Mr Doulman’s indemnity claim is an abuse of process.
c)Assuming Mr Doulman should be indemnified in relation to some or all of the amounts the Trustee claims, what orders should be made?
d)Assuming I have jurisdiction to deal with Mr Doulman’s additional claims, do they succeed?
Before I consider these issues, it will be necessary to set out the facts before and after Mr Doulman’s bankruptcy was annulled, and the reasons for judgment of Smith FM as a result of which Mr Doulman’s bankruptcy was annulled. It will also be necessary to identify the amounts that comprise the $52,474.45 the Trustee claims, and whether the Trustee is entitled to claim those amounts from Mr Doulman.
Background
Mr Doulman is made bankrupt
On 29 July 2010 a Registrar of this Court made a sequestration order against the estate of Mr Doulman. The sequestration order was made on the basis of a creditor’s petition Mr Gabbedy presented to the Court in which “TaxView Pty Limited as trustee for Taxtrust (ABN 36 827 739 165)” (TaxView Pty Limited) was named the petitioning creditor. The actual name of that company, however, was ACT Electronic Solutions Pty Limited (ACT Electronic). It had been known as TaxView Pty Limited, but before 24 April 2007.[4]
[4] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [7], third dot point
Mr Gabbedy presented the creditor’s petition purportedly on behalf of TaxView Pty Limited on instructions from another solicitor, Mr Powrie. Although Mr Powrie had been the sole director of ACT Electronic before 21 May 2007,[5] he was not a director of ACT Electronic at the time he instructed Mr Gabbedy to prepare and present a creditor’s petition against Mr Doulman’s estate. At the time Mr Powrie instructed Mr Gabbedy, ACT Electronic was under the control of a receiver and manager who had been appointed on 16 December 2009.[6] The receiver and manager had no knowledge of ACT Electronic’s having been named as a petitioning creditor.
[5] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [7], fourth dot point
[6] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [7], fifth dot point
At the time the creditor’s petition was presented against Mr Doulman, the name of TaxView Pty Limited applied to a different company whose “managers and proprietors, appear to have no interest in the present case”.[7]
[7] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [7], last dot point
Annulment proceedings
On 6 January 2011 Mr Doulman filed an application with this Court in which he sought two orders. The first was that the sequestration order made on 29 July 2010 be set aside. The second order, which Mr Doulman sought in the alternative, was that his bankruptcy be annulled pursuant to s.153B of the Act. Mr Doulman claimed the sequestration order should not have been made because it was made on the basis of a creditor’s petition that was presented by Mr Gabbedy without the authority of the creditor named in the creditor’s petition.
Reasons for judgment of Smith FM
In reasons for judgment delivered on 19 April 2011,[8] Smith FM found that the creditor’s petition had been presented without the authority of ACT Electronic, and, for that reason, the sequestration order should not have been made.[9] Having made those findings, Smith FM had a discretion either to set aside the sequestration order or to annul Mr Doulman’s bankruptcy under s.153B of the Act. That discretion arose because Mr Doulman did not apply to review the Registrar’s decision within the 21-day period prescribed by r.2.03 of the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) (Bankruptcy Rules).
[8] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232
[9] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232
In deciding whether to set aside the sequestration order or make an order annulling Mr Doulman’s bankruptcy, his Honour considered three matters. The first was Mr Gabbedy’s conduct. His Honour accepted Mr Gabbedy acted under an honest belief that Mr Powrie held office as a director of TaxView Pty Limited when giving instructions to Mr Gabbedy.[10] His Honour found, however, that Mr Gabbedy’s mistaken assumption of authority involved a considerable degree of professional fault in the circumstances in which he took instructions from Mr Powrie.[11] His Honour concluded that “Mr Gabbedy’s defaults go to the heart of the Part IV proceedings under the Bankruptcy Act which were pursued by him without authority”. [12]
[10] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [90]
[11] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [72]
[12] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [73]
The second matter Smith FM considered was the conduct of the Trustee. His Honour found the Trustee was not responsible for the delays in the discovery of the true status of Mr Powrie in relation to the putative creditor, nor for the consequential expenses, legal costs, and losses incurred by Mr Doulman as a result of the sequestration order and the need to apply to set it aside.[13]
[13] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [44]
The third matter Smith FM considered was Mr Doulman’s delay in applying to set aside the sequestration order. Under r.2.03 of the Bankruptcy Rules Mr Doulman had 21 days within which to apply for a review of the Registrar’s decision to make a sequestration order. His Honour accepted Mr Doulman first became aware of the sequestration order by no later than 10 August 2010, when Mr Doulman informed the Trustee that he intended to “appeal” the sequestration order.[14] His Honour, however, was not persuaded the evidence provided an acceptable explanation for Mr Doulman’s delay in applying to set aside the sequestration order nor an explanation that caused his Honour “to exercise discretions and powers which would result in [the Trustee] losing the protections of s.154 of the” Act .[15]
[14] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [57], paragraph 38 of the submissions of Mr Doulman’s counsel
[15] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [58]
His Honour attached significance to his finding that, between August and December 2010 Mr Doulman adopted a deliberate strategy to “stall” compliance with the requirements of the Act to which the Trustee had drawn Mr Doulman’s attention, and to delay the making of an “appeal” against the making of the sequestration order.[16] His Honour said:[17]
It is that circumstance which sways my mind against extending time under s.104(2) of the Federal Magistrates Act, and from exercising that power to set aside the Registrar’s order in so far as it included a sequestration order. In my opinion, Mr Doulman’s delay in challenging the sequestration order leaves him with no appropriate remedy other than an annulment under s.153B of the Bankruptcy Act.
[16] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [60]
[17] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [60]
Having decided that the appropriate remedy would be an order annulling Mr Doulman’s bankruptcy, rather than setting aside the sequestration order, his Honour considered the question of costs. Both the Trustee and Mr Doulman applied for orders that Mr Gabbedy pay their legal costs.[18] In addition, however, the Trustee made submissions “seeking to maintain his full right of a trustee’s indemnity in relation to his legal costs from Mr Doulman’s property which vested as a result of the sequestration order”.[19] His Honour said the Trustee “will achieve this outcome pursuant to s.154 of the Bankruptcy Act, as a result of my decision to apply s.153B”. [20] His Honour further said:[21]
In effect, this moves the burden of Mr Slaven’s legal costs onto Mr Doulman, and I accept the submission of Mr Slaven’s counsel that an order against Mr Gabbedy in relation to Mr Slaven’s legal costs is best addressed as part of a single costs order in favour of Mr Doulman, encompassing his own legal costs and those of Mr Slaven for which he will become liable under s.154 of the Bankruptcy Act.
[18] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [65]
[19] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [65] (emphasis added)
[20] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [65]
[21] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [65]
One consequence of Smith FM annulling Mr Doulman’s bankruptcy, rather than setting aside the sequestration order, is that s.154 of the Act applies to so much of Mr Doulman’s property that had vested in the Trustee when the Registrar made the sequestration order against Mr Doulman’s estate. Paragraph (b) of s.154(1) of the Act provides that if a bankruptcy is annulled under s.153B of the Act, the trustee “may apply the property of the former bankrupt still vested in the trustee in payment of the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the trustee”. Further, s.154(2) of the Act provides that if the property of the former bankrupt is insufficient to meet the trustee’s costs, charges, and expenses, the amount of the deficiency is a debt due by the former bankrupt and is recoverable by the trustee by action against the former bankrupt in a court of competent jurisdiction.
In addition to annulling Mr Doulman’s bankruptcy, Smith FM made the following order (Order):
Nigel John Gabbedy must pay the applicant’s costs of the proceedings, including the costs of the second respondent [i.e., the Trustee] for which the applicant is liable under s.154 of the Bankruptcy Act 1966 (Cth), as agreed or taxed pursuant to the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth).
Events after annulment – disputed construction of Order
Almost immediately after Smith FM made the Order, a dispute arose between Mr Doulman and Mr Gabbedy about its proper construction. The dispute was initiated by Mr Gabbedy’s lawyer in a letter dated 21 April 2011 to Mr Doulman’s lawyers, in which Mr Gabbedy’s lawyer stated: [22]
In our view there is no doubt that the only claim made against Mr Gabbedy in these proceedings related to legal costs and disbursements of the proceedings, and that the order made as noted above only relates to legal costs and disbursements (noting in particular Federal Magistrate Smith’s comments at paragraph 65 of the judgment). However, Order 2 as noted above is worded generally in so far as it refers to all of the second respondent’s ‘costs’ under s.154 of the Bankruptcy Act. In our view it was clearly not His Honour’s intention to make an order against Mr Gabbedy in respect of “administration” costs incurred by the second respondent that may be recoverable under s.154 of the Bankruptcy Act. Can you please confirm that you agree with us in this regard?
[22] Affidavit of A G Mahony, 06.03.14, Annexure “D”
In a letter to Mr Gabbedy’s lawyers dated 10 May 2011, Mr Doulman’s lawyers said they disagreed with this interpretation of the Order, and noted paragraph 44 of the reasons for judgment of Smith FM.[23] In that paragraph, his Honour said:
I conclude that Mr Slaven bears no responsibility for the delays in the discovery of the true status of Mr Powrie in relation to TaxView Pty Ltd, nor for the consequential expenses, legal costs, and losses incurred by Mr Doulman as a result of the sequestration order and the need to apply to set it aside. In my opinion, this responsibility falls squarely upon the solicitor who brought the bankruptcy proceedings without authority.
[23] Affidavit of A G Mahony, 06.03.14, Annexure “E”
The letter stated that Mr Doulman “seeks payment from Mr Gabbedy of Mr Doulman’s costs of the proceedings, including the costs of the trustee in bankruptcy for which Mr Doulman is liable under s.154” of the Act. This was met with the following response from Mr Gabbedy’s lawyers on 10 May 2011:[24]
We do not understand the basis of your interpretation of the order made by Federal Magistrate Smith. The applications made against Mr Gabbedy by the Applicant and the Trustee were limited to payment of legal costs and disbursements. The judgment from paragraph 65 onwards makes that very clear, and makes it clear that that was the only issue being considered by Federal Magistrate Smith. As you will recall, the Trustee’s counsel spent considerable time trying to get Federal Magistrate Smith to order that the costs involved with preparing the Trustee’s report should be considered ‘costs of these proceedings’ so that it would be covered by any costs order made against Mr Gabbedy (which he noted would only cover the Trustee’s legal costs and disbursements).
More importantly, the Applicant did not make an application that Mr Gabbedy pay the Trustee’s remuneration and expenses in the event that the sequestration order was set aside - the Application was limited to legal costs and disbursements of the proceedings. That issue was not considered by the Federal Magistrates Court, and in our view there was no jurisdiction to make such an order.
[24] Affidavit of A G Mahony, 06.03.14, Annexure “F”
Mr Doulman restated his position over one year later in a letter from his solicitors dated 9 September 2012.[25] That letter relied on paragraph 44 of the reasons for judgment of Smith FM which I have already set out in paragraph 21 of these reasons. Mr Doulman’s lawyers also relied on Smith FM having made the Order pursuant to s.32 of the Act rather than r.21.07 of the Federal Magistrates Court Rules 2001 (Cth). Mr Doulman’s lawyers contended that the reason his Honour did so “was to ensure that your client would be liable for the “consequential, legal costs and losses incurred by Mr Doulman as a result of the sequestration order””. Finally, Mr Doulman’s lawyers contended that the Order is not limited to legal costs but extends to “costs of the proceedings”, which constituted “the entirety of the bankruptcy proceedings from the time that the Creditor’s Petition was presented”.
[25] Affidavit of A G Mahony, 06.03.14, Annexure “DD”
In an affidavit he filed in support of his application, Mr Doulman submitted as follows:[26]
In my application I sought ALL costs from the date of the sequestration order, FM Smith discussed this matter at length and on several occasions and against who [sic] he could make orders for the costs. FM Smith made thorough assessment of various possibilities and I would be surprised if he had made an error as claimed by Mr Gabbedy and Mr Slaven. There was no discussion on what costs were to be included and not included by my Barrister and Mr Slaven’s barrister put forward that Mr Gabbedy should pay the all [sic] costs. I note that there is no transcript available to review the evidence as it [sic] put in the case.
[26] Affidavit of L M Doulman, 10.01.14, [6]
Events after annulment – Trustee’s claims for costs, charges, and expenses
By letter dated 3 May 2011 the Trustee’s solicitors informed Mr Doulman’s solicitors of the amounts the Trustee claimed under s.154 of the Act.[27] The letter separated the Trustee’s legal costs and disbursements of the annulment proceedings from the Trustee’s remuneration and expenses. The Trustee claimed $56,547.55 as his legal costs and disbursements of the annulment proceedings, and $44,139.60 as his expenses and remuneration. By letter dated 6 July 2011 the Trustee’s lawyers provided an “update of legal costs and disbursements” claimed by the Trustee.[28] The Trustee’s lawyers claimed $61,323.40.
[27] Affidavit of M E Slaven, 12.03.14, page 6
[28] Affidavit of M E Slaven, 12.03.14, page 39
In an exchange of emails on 20 and 21 July 2011 Mr Gabbedy’s and Mr Doulman’s lawyers agreed that Mr Gabbedy pay to Mr Doulman “$51,100 inclusive of GST for the Trustee’s legal costs and disbursements”.[29] Mr Gabbedy’s lawyers paid the $51,100 to the Trustee’s lawyers by 5 September 2011.[30] There was also correspondence about the Trustee’s claims for the balance of his legal costs and disbursements, and his other expenses and remuneration.
[29] Affidavit of A G Mahony, 06.03.14, Annexure “P”
[30] Affidavit of M E Slaven, 12.03.14, page 70; Affidavit of A G Mahony, 06.03.14, Annexures “U” and “X”
At around this time, Mr Doulman was anticipating that he would borrow money to pay the Trustee’s remuneration and expenses and the balance of the Trustee’s legal costs and disbursements. In an email sent on 8 August 2011 to the Trustee’s lawyer, Mr Doulman’s lawyer said that Mr Doulman would not “press the request for an assessment if the legal fees are capped at the previously advised total of $61,323.40 (updated by you on 7 July 2011)”.[31] The Trustee’s lawyer responded by email sent on 23 August 2011 in which he said that the Trustee’s “legal fees will be capped at $61,323.40 (plus interest) provided that they are paid within 2 weeks”.[32] These negotiations went no further.
[31] Affidavit of M E Slaven, 12.03.14, page 75
[32] Affidavit of M E Slaven, 12.03.14, page 78
The amounts claimed by the Trustee
The Trustee claims Mr Doulman owes him at least $52,474.45 plus interest. As I have noted earlier, this is the amount of a default judgment the Trustee recovered in the Local Court of New South Wales.[33] The $52,474.45 comprises at least three amounts. The first is $28,765.92 which the Trustee describes as “remuneration and expenses . . . for the period 29 July 2010 to 19 April 2011 plus interest”.[34] This is the amount referred to in an email Mr Doulman’s lawyer sent to the Trustee’s lawyer on 12 July 2011.[35] According to Mr Doulman’s lawyer’s email, the $28,765.92 represents the amount the Trustee last offered to accept in relation to his claim for remuneration and expenses.
[33] Affidavit of A G Mahony, 06.03.14, Annexure “DD”
[34] Affidavit of M E Slaven, 12.03.14, [9.(a)]
[35] Affidavit of M E Slaven, 12.03.14, page 52
The second amount that is included in the $52,474.45 is $5,818.50. The Trustee describes this as “remuneration and expenses . . . for the period 13 July 2011 to 12 December 2011 plus interest”.[36] And the third amount is $13,842.82 which the Trustee describes as “legal costs and disbursements . . . for the period 29 July 2010 to 12 December 2011 (noting that the sum of $51,100 had already been received direct from Mr Gabbedy’s solicitors)”.[37] The $51,100 paid by Mr Gabbedy’s lawyers is the amount Mr Doulman, through his lawyer, agreed to accept from Mr Gabbedy on account of Mr Doulman’s liability for the Trustee’s legal costs and disbursements.
[36] Affidavit of M E Slaven, 12.03.14, [9.(b)]
[37] Affidavit of M E Slaven, 12.03.14, [9.(c)]
There is no evidence that explains the $4,047.21 difference between the $52,474.45 for which the Trustee obtained default judgment, and the sum of the three amounts I have already identified. It is reasonable to infer, however, and I do infer, that $4,047.21 represents interest, or costs and remuneration incurred by the Trustee after 12 December 2011, or both.
Is the Trustee entitled to the amounts he claims?
Although the Trustee holds a default judgment for the amounts he claims, that does not necessarily mean this Court cannot examine the Trustee’s entitlement to the amounts he has recovered in the default judgment. The Court cannot, of course, interfere with the orders of the Local Court of New South Wales; but the Court does have power to restrain the Trustee from acting on that default judgment if the Court were satisfied the Trustee was not entitled to the amounts for which he recovered default judgment. It is to that question I now turn.
The Trustee is entitled to recover the $28,765.92. That represents the amount Mr Doulman and the Trustee agreed should be paid in relation to the Trustee’s claim for remuneration and expenses up to the day on which the agreement was made, namely, 12 July 2011. There is nothing to suggest that Mr Doulman acted unreasonably in agreeing to pay this amount to the Trustee, and I find that it was reasonable for him to so agree.
The other amounts relate to the Trustee’s remuneration and expenses the Trustee earned and incurred after 19 April 2011, when Mr Doulman’s bankruptcy was annulled, and legal costs and disbursements the Trustee incurred before and after 19 April 2011, less the $51,100 Mr Gabbedy paid to the Trustee by 5 September 2011. That the Trustee claims amounts for legal costs and disbursements, and for expenses and remuneration he incurred or earned after Mr Doulman’s bankruptcy was annulled does not necessarily mean they do not fall within s.154 of the Act. It has been held that costs incurred or remuneration earned by a trustee in defending in the face of a bankrupt’s opposition the remuneration, costs, charges and expenses the trustee claimed at the time of annulment were recoverable under s.154 of the Act.[38] It follows that costs incurred and remuneration earned after annulment in seeking to recover costs incurred and remuneration earned before annulment fall within s.154 of the Act.
[38] Pantzer v Wenkart [2006] FCAFC 140 (Black CJ, Ryan and Moore JJ)
The legal costs component of the Trustee’s claim invites some attention. In his affidavit the Trustee deposes Mr Doulman, through his lawyer, agreed to pay the Trustee’s legal costs up to 8 August 2011 in the amount of $61,323.40.[39] The Trustee relies on the email Mr Doulman’s lawyer sent to the Trustee’s lawyer on 8 August 2011 in which Mr Doulman’s lawyer states that Mr Doulman will not “press the request for an assessment if the legal fees are capped at the previously advised total of $61,323.40 (updated by you on 7 July 2011)”.[40] That by itself does not manifest any agreement. Regard must also be had to the response of the Trustee’s lawyer in his email sent on 23 August 2011 where he said that he was “instructed that legal fees will be capped at $61,323.40 (plus interest) provided that they are paid within 2 weeks”.[41] This exchange of emails constitutes an agreement that the Trustee’s costs would be capped at $61,323.40; but the agreement was conditional on Mr Doulman paying the fees within two weeks. That did not occur.
[39] Affidavit of M E Slaven, 12.03.14, [5.(b)]
[40] Affidavit of M E Slaven, 12.03.14, page 75
[41] Affidavit of M E Slaven, 12.03.14, page 78
What is the consequence of there being no agreement by Mr Doulman to pay the Trustee’s costs of the annulment proceedings? That depends on the proper construction of the Order. In my opinion, the Order permitted the Trustee to recover on account of his legal costs in the annulment proceedings either only such amount as was to be agreed between the Trustee and Mr Doulman, or as taxed. That is what the Order says. And to the extent there is any doubt from the text of the Order, that doubt is removed by Smith FM’s not being “persuaded that Mr Gabbedy should be ordered to pay the legal costs of Mr Doulman and Mr Slaven on an indemnity basis”.[42]
[42] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [91]
Thus, in the absence of agreement, the Trustee was not entitled to recover from Mr Doulman any part of his legal costs that related to the annulment proceedings without first having his costs taxed. In the exercise of my discretion, however, I do not propose to make any order that prevents the Trustee from recovering the legal costs he claims he incurred in connection with the annulment proceedings. There is in evidence the tax invoices that were issued to the Trustee. On their face, they appear to be reasonable.[43] Further, under cover of a letter dated 13 June 2012, the Trustee’s lawyer provided these tax invoices to Mr Doulman. Mr Doulman, however, appears to have taken no steps to have the costs taxed.
[43] Affidavit of M E Slaven, 12.03.14, pages 129-187
Proper construction of the Order
I now turn to the first issue I must determine; and that is whether, on the proper construction of the Order, Mr Gabbedy is liable to indemnify Mr Doulman for the amounts claimed by the Trustee.
Jurisdiction to construe orders
A court may be required, and thus will have jurisdiction, to construe its own orders in a number of circumstances.[44] This may occur where the court is considering an application whose determination requires the court to apply a previous order it has made, and there is a dispute about the proper construction of the previous order.[45] It may also occur where there is a dispute about the proper construction of final orders a court has made. A dispute about the proper construction of the court’s final orders may be brought before the court in a separate suit for a declaration as to the proper construction of the orders about which there is a dispute.[46]
[44] See the examples given in P. Herzfeld, T. Prince, and S. Tully Interpretation and Use of Legal Sources, 2013, Thomson Reuters at [25.4.690]
[45] See, for example, Carpenter v Pioneer Park Pty Ltd (2008) 71 NSWLR 577 (scope or order granting leave to appeal); Kirkpatrick v Kotis (2004) 62 NSWLR 567 (contempt proceedings).
[46] See, for example, Australian Energy Limited v Lennard Oil N.L. (No.2) [1988] 2 Qd. R. 230. See also Radmanovich v Nedeljkovic [2002] NSWSC 212 at [7] where Young CJ in Eq said: “There is power in a separate suit for any judge of the court to make a declaratory order as to what a previous order of the court means . . . .”
On their face, the order for annulment Smith FM made, together with the Order, constitute the final disposal of Mr Doulman’s application. In my opinion, however, the Court has jurisdiction to determine in these proceedings Mr Doulman’s contentions concerning the proper construction of the Order. On Mr Doulman’s case, the proceedings have not been finalised because the Order has not been executed; and the Order has not been executed because Mr Gabbedy has indicated he does not accept Mr Doulman’s contention that Mr Gabbedy is liable to indemnify Mr Doulman against liability Mr Doulman has or may have to the Trustee under s.154 of the Act. Further, even if the orders Smith FM made are properly characterised as final relief, r.2.01(2) of the Bankruptcy Rules permits a person to make an application to the Court in relation to the proceeding by filing an interim application unless the Court otherwise directs. No party has applied to the Court for a direction under that rule, and I do not propose to so direct.
Principles of construction
A court construes a court order “just like any other document”; it “does not delve into the subjective intention of the judge pronouncing the order”.[47]
[47] Radmanovich v Nedeljkovic [2002] NSWSC 212 at [7] (Young CJ in Eq)
There is a difference of opinion in the authorities about the circumstances in which a court, when construing its orders, may refer to material other than the text of the orders.[48] Some cases insist there must be some ambiguity in the order before the court may refer to the reasons for judgment, while other cases have held that it is permissible or even necessary to consider the reasons for judgment before construing the orders.
[48] J Tarrant “Construing undertakings and court orders”, (2008) 82 Australian Law Journal 82
The weight of authority, at least in the Federal Court, is that a court is entitled to examine the reasons for judgment when construing orders that were made pursuant to those reasons, even where there is no ambiguity in the language of the order.[49] I do not need to consider, however, which of the two approaches is correct because, as is apparent from the correspondence between the lawyers for Mr Gabbedy and Mr Doulman which I have set out above, the Order is ambiguous.
[49] Yates Property Corporation Pty Ltd v Boland (1998) 89 FCR 78; Owston Nominees No 2 Pty Ltd v Branir Pty Ltd (2003) 129 FCR 558 at page 575 ([54]) (Allsop J); Hamersley Iron Pty Ltd v The National Competition Council [2008] FCA 598 at [86] (Weinberg J): “In my opinion, it is permissible when construing court orders (irrespective of whether they be ambiguous) to have regard to, at least, the pleadings which defined the issues to be resolved.”
Does the Order require Mr Gabbedy to indemnify Mr Doulman against liability under s.154 of the Act?
I start with the text of the Order and, in particular, the word “costs”. Where it first appears, “costs” is qualified by one word and one expression, namely, “applicant’s”, and “of the proceedings”. In that context, “costs” bears the meaning explained by Willmer LJ in Buckland v Watts:[50]
What a successful party who has got an order for costs is entitled to recover falls, as is well known, under two headings. One heading covers his disbursements; that is to say, money which he has actually had to pay out to other people, such as witnesses, counsel, professional advisers and so forth. The other heading is described as ‘costs’. This is intended to cover remuneration for the exercise of professional legal skill.
[50] [1970] 1 Q.B. 27 at page 37. The passage I have quoted is included in the longer passage from the judgment of Willmer LJ set out in the judgment of the plurality in Cachia v Hanes (1994) 179 CLR 403 at page 413
Where it appears a second time, the meaning of “costs” is less clear. One possibility is that it simply means the costs the Trustee incurred in the proceedings. One difficulty with so construing “costs” is that the Order does not say that. It qualifies the “costs” of the Trustee by the expression “for which the applicant is liable under s.154” of the Act. That directs attention to s.154 of the Act and, more particularly, to s.154(1)(b) of the Act. Thus “costs”, when it appears the second time in the Order, seems to cover the “costs” of the administration of the bankruptcy within the meaning of s.154(1)(b). This is broader than the usual meaning of “costs” as described in the passage from Buckland v Watts I have set out above. There are, however, other words in the Order that must also be considered.
First, there is the word “including”. This directs attention to what is said earlier in the Order, in particular, “the applicant’s costs of the proceedings”. This again suggests that “costs” bears its usual meaning after all, and is restricted to costs incurred in the annulment proceedings. Second, there is the words “as agreed or taxed pursuant to” the Bankruptcy Rules. This expression makes it even clearer that the word “costs”, as it appears in the Order, is restricted to the usual meaning of “costs”.
The Order, however, does not identify the “costs of the second respondent for which the applicant is liable under s.154” of the Act to which the Order applies. That indeterminacy disappears when Smith FM’s reasons for judgment are considered, and in particular, the passage from his Honour’s reasons for judgment I have set out in paragraph 17 of these reasons. That passage makes it clear that the costs to which the Order applies are the legal costs the Trustee incurred in the proceedings. The Order assumes that the legal costs the Trustee incurred in those proceedings are “costs, charges and expenses of the administration of” Mr Doulman’s bankruptcy within the meaning of s.154(1)(b) of the Act, and that Mr Doulman would be liable for those costs. The purpose of the Order, therefore, was to render Mr Gabbedy liable to pay such of the Trustee’s legal costs of the proceedings for which Mr Doulman would be liable to pay to the Trustee under s.154(1)(b) of the Act, but that the costs would either be agreed or taxed.
What of Mr Doulman’s lawyer’s reliance on what Smith FM said in paragraph 44 of his Honour’s reasons for judgment that “this responsibility”, namely, “the consequential expenses, legal costs, and losses incurred by Mr Doulman as a result of the sequestration order and the need to apply to set aside”, is one that “falls squarely upon the solicitor who brought the bankruptcy proceedings without authority”? Does this compel the Order being construed as requiring Mr Gabbedy to indemnify Mr Doulman against all liability that was to be accrued under s.154(1)(b) on the annulment of Mr Doulman’s bankruptcy? In my opinion, it does not. Although the words Smith FM used, when considered alone, can reasonably be construed as expressing the view that Mr Gabbedy is responsible for “all losses incurred” by Mr Doulman as a consequence of the sequestration order, that does not overcome the language of the Order, either when considered alone or when considered with the passage I have set out in paragraph 17 of these reasons.
Conclusion
On its proper construction, therefore, the Order does not oblige Mr Gabbedy to indemnify Mr Doulman against all liability he may have to the Trustee under s.154 of the Act.
Mr Doulman’s indemnity claim
Mr Gabbedy submits the Court has no jurisdiction to consider Mr Doulman’s indemnity claim. Alternatively, he submits Mr Doulman’s pursuit of the indemnity claim is an abuse of process because it seeks to re-litigate a dispute that had previously been resolved adversely to Mr Doulman, and is otherwise oppressive to Mr Gabbedy.
Mr Doulman’s claims, and Mr Gabbedy’s submissions, raise the following issues:
a)What are the grounds on which Mr Doulman relies for his indemnity claim?
b)Does the Court have jurisdiction to entertain the indemnity claim?
c)If the Court has jurisdiction to entertain the indemnity claim, is Mr Doulman’s bringing such a claim an abuse of process?
d)If (c) is answered in the negative, is Mr Doulman entitled to succeed on his indemnity claim?
Grounds on which Mr Doulman relies
The grounds on which Mr Doulman relies for his indemnity claim is that Mr Gabbedy presented the creditor’s petition on the basis of which the sequestration order was made without the authority of the putative creditor. Mr Doulman claims Mr Gabbedy did this as a result of fraud. Mr Doulman relies on uncontradicted evidence that Mr Powrie, the person who instructed Mr Gabbedy to present the creditor’s petition, lacked the authority to act as corporate officer of the putative creditor.[51]
[51] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [7]
Does the Court have jurisdiction to entertain the indemnity claim?
The source of the Court’s jurisdiction in bankruptcy is s.27(1) of the Act, which provides that the Court has “jurisdiction in bankruptcy”. The word “bankruptcy”, when used in relation to jurisdiction or proceedings, is defined in s.5(1) of the Act to mean “any jurisdiction or proceedings under or by virtue of this Act”. Whether or not, therefore, the Court has jurisdiction under s.27(1) of the Act over Mr Doulman’s indemnity claim depends, at least initially, on whether that claim is a proceeding “under or by virtue of” the Act.
In my opinion, Mr Doulman’s indemnity claim is a proceeding that is brought “under or by virtue” of the Act. It is a claim that deals with the immediate consequences of two matters that have occurred under the Act – the sequestration order, which was made under s.52(1) of the Act, and the annulment of Mr Doulman’s bankruptcy, which was made under s.153B(1) of the Act. More particularly, the indemnity claim seeks to deal with the operation of a provision of the Act, namely s.154, that has come into play as a consequence of a sequestration order made under s.52(1) of the Act.
Even if the indemnity claim is not a proceeding under or by virtue of the Act, that does not mean the Court cannot have jurisdiction under s.27(1) of the Act to entertain the indemnity claim. The Court’s jurisdiction under s.27(1) is not necessarily limited to matters arising under or by virtue of the Act. That is so because jurisdiction “conferred on a Federal Court in respect of a matter authorises the Court to determine all the claims, federal and non-federal, which are involved in the controversy”.[52] Thus, once the Court has jurisdiction over a matter under s.27(1), it also has jurisdiction in relation to matters over which the Court would otherwise not have jurisdiction if those matters, together with the matters over which the Court does have jurisdiction, form part of a single justiciable controversy.[53] In my opinion, the indemnity claim forms part of the one justiciable controversy, namely, whether an annulment order should be made under s.153B(1) of the Act, and the consequences of the annulment order. The indemnity claim is based almost entirely on the same facts as the facts on which Smith FM relied for annulling Mr Doulman’s bankruptcy. Mr Doulman’s allegations of fraud are also based on these same facts.
[52] Johnson Tiles Pty Ltd v Esso Australia Ltd [2000] FCA 1572 at [85] (French J, as his Honour then was)
[53] Re Wakim; Ex parte McNally (1999) 198 CLR 511 at pages 582-586 (Gummow and Hayne JJ)
There is an additional potential source of jurisdiction for the Court’s entertaining the indemnity claim; and that is the implied incidental power of “a federal court to regulate the conduct of legal practitioners appearing before it to the extent necessary to ensure the observance of their duties to the court and the integrity of its procedures”.[54] The nature and source of this power was considered by French J (as his Honour then was) in De Pardo v Legal Practitioners Complaints Committee:[55]
Like the power of the court to punish for contempt, even if such power is not to be found in some express statutory provision, it has its source in Chapter III of the Constitution. Like the power to deal with contempts, it is “inherent” and is “a power of self protection or a power incidental to the function of superintending the administration of justice”.
[54] De Pardo v Legal Practitioners Complaints Committee [2000] FCA 335; (2000) 97 FCR 575 at page 595, [53]
[55] [2000] FCA 335; (2000) 97 FCR 575 at pages 595-596, [53]. This part of his Honour’s reasons was referred to with approval by Gummow J in APLA Limited v Legal Services Commissioner (NSW) [2005] HCA 44; (2005) 224 CLR 322 at page 396, [186]
This is a potential source of jurisdiction because the conduct on which the indemnity claim relies is that of a lawyer commencing proceedings without the authority of the party purportedly on behalf of whom the proceedings were commenced. Courts have ordered costs against legal practitioners in these circumstances in the exercise of their summary jurisdiction over legal practitioners.[56] Thus, in Yonge v Toynbee Swinfen Eady J said (emphasis added):[57]
It is in my opinion essential to the proper conduct of legal business that a solicitor should be held to warrant the authority which he claims of representing the client; if it were not so, no one would be safe in assuming that his opponent's solicitor was duly authorized in what he said or did, and it would be impossible to conduct legal business upon the footing now existing; and, whatever the legal liability may be, the Court, in exercising the authority which it possesses over its own officers, ought to proceed upon the footing that a solicitor assuming to act, in an action, for one of the parties to the action warrants his authority.
[56] Yonge v Toynbee [1910] 1 KB 215
[57] [1910] 1 KB 215 at page 234
The nature of a court’s summary jurisdiction over legal practitioners was considered in Myers v Elman.[58] Lord Wright said:[59]
This summary procedure may often be invoked to save the expense of an action. Thus it may in proper cases take the place of an action for negligence, or an action for breach of warranty of authority brought by the person named as defendant in the writ. The jurisdiction is not merely punitive but compensatory. The order is for payment of costs thrown away or lost because of the conduct complained of. It is frequently . . . exercised in order to compensate the opposite party in the action.
[58] [1940] A.C. 282
[59] [1940] A.C. 282 at page 319
As these passages suggest, the summary jurisdiction presupposes a liability on the part of the solicitor – Lord Wright refers to a liability in negligence or for breach of warranty of authority – and was introduced for convenience. Its purpose was to relieve persons affected by the solicitor’s conduct from having to commence separate actions against the solicitor, which was the practice followed by the courts of common law and of Chancery until the last quarter of the nineteenth century.
The old practice in the common law courts was described in the ruling of Lord Holt CJ in 1697 who said that “where an attorney takes upon him to appear, the Court looks no farther, but proceeds as if the attorney had sufficient authority, and leaves the party to his action against him”.[60] The practice was modified in 1702 where the attorney was insolvent:[61]
If an attorney appear, and judgment is against his client, and he had no warrant of attorney from him to appear, the question was, if the Court would set aside the judgment? Et per Curiam: If the attorney is responsible, it shall not be set aside, because the judgment was regular; and there is no reason that the plaintiff should suffer when he is not in fault, but if the attorney is not responsible, or suspected to be unable, the judgment shall be set aside, for otherwise the defendant has no remedy.
[60] Anonymous [1795] EngR 2351; (1795) 1 Salk 86; 91 E.R. 81
[61] Anonymous [1795] EngR 2877; (1795) 3 Salk 51; 91 E.R. 685
The practice identified by Lord Holt CJ was altered in a series of cases in the nineteenth century. What occurred was summarised by Rigby LJ in Fricker v Van Grutten:[62]
[T]he Courts of Common Law as well as the Court of Chancery were in the habit of saying to a man, “You are made a plaintiff, and, though you have never authorized it, the Courts cannot go behind the record, and must treat you as though you had been properly made a plaintiff, and your only remedy is against the attorney who wrongfully placed you on the record.” That seems to have been the practice in the Common Law Courts down to the time of Robson v Eaton, in which Lord Mansfield took a strong line, as he often did, and amended the practice, and made an order against the attorney. The case was a remarkable one, and somewhat like the present case, in this, that the attorney who made the mistake acted bona fide. . . .
Afterwards, Baron Parke, who was no mean authority, considered that the old decisions were more correct; but ultimately, in Reynolds v Howell, the Common Law Courts, under the guidance of Blackburn J., emancipated themselves from the old doctrine, and adopted the principle of Robson v Eaton. That principle has since been applied in the Chancery Division in the two cases of Nurse v Durnford and Newbiggin-by-the-Sea, Gas Co. v Armstrong, the latter of which was a decision of the Court of Appeal; and it was afterwards applied again in Cape Breton Co. v Fenn.
In the last-named case the action was dismissed as having been instituted without authority. The solicitor who issued the writ was made to pay the costs of the parties, including those of the official liquidator of the company, which was in liquidation. The costs of the company were directed to be taxed as between solicitor and client, and the costs of the other parties as between party and party. That settled the law upon a more satisfactory basis.
[62] [1896] 2 Ch 649 at pages 661-662 (reference omitted)
Rigby LJ was incorrect in saying that in Robson v Eaton[63] Lord Mansfield made an order against the attorney. Robson v Eaton was a judgment on a demurer arising out of the following facts. The plaintiff sued the defendant in the King’s Bench in an action for money had and received. In his plea the defendant alleged the plaintiff, through his attorney, impleaded the defendant in the Court of Common Pleas for the very same cause of action; that in the course of that suit the Court ordered either that the defendant pay 62l. to the plaintiff if he were to accept that amount or else pay that amount into Court; that pursuant to that order the defendant paid the amount into Court; and that the plaintiff’s attorney took the money out of Court. By his replication, the plaintiff alleged the attorney did not have his authority to act as his attorney. It was common ground that the attorney who purported to act for the plaintiff did so by receiving instructions from a person who had forged a power of attorney in his favour that was purportedly signed by the plaintiff. In his rejoinder the defendant alleged the attorney had been admitted and received on record by the Court of Common Pleas as the attorney for the plaintiff, and thus was permitted by the Court to receive the money out of Court. Lord Mansfield gave judgment for the plaintiff:
There can be no doubt upon this case. The attorney, who trusted to the warrant of attorney, is liable, and Davis who committed the forgery is liable to him.
[63] [1785] EngR 26; (1785) 1 TR 62; 99 E.R. 973
It will be seen that Lord Mansfield did not make any order against the attorney who purported to appear on behalf of the plaintiff in the action before the Court of Common Pleas and who took out the money the defendant paid into Court. His Lordship only said that the attorney was liable, and that the person who committed the forgery was liable to the attorney. The defendant would have had to enforce the attorney’s liability by separate action. Lord Mansfield’s decision, however, was contrary to the practice as described by Lord Holt CJ because Lord Mansfield ignored the record in the Court of Common Pleas.
Lord Holt CJ assumed there was an action against the attorney available to the person against whom judgment was given while the attorney purported to act for that person; and Lord Mansfield was of the opinion there was available to the defendant an action against the attorney to whom the Court paid out the money. But what was the action that was available to these persons? The action Lord Holt CJ and Lord Mansfield must have had in mind was the action founded on the ancient writ of deceit and, later, the action on the case for damages in the nature of a writ of deceit.
The writ of deceit lay “where one Man doth any Thing in the Name of another, by which the other Person is damnified and deceived”.[64] It was available to persons who suffered loss as a result of orders made by a court under the inducement of deception:[65]
The first form of deceit which was recognized by the common law as a ground of legal liability was that which embodied a deception of the court and a consequent perversion of the ordinary course of legal proceeding. Of such a wrong the common law could take notice because it was an interference with the administration of royal justice. The wrong was viewed as an offense against the king as well as a wrong against the individual who happened to be damaged. Hence the wrongdoer had to pay a fine to the king as well as damages to the individual. False personation in court proceedings, whereby actions were brought without authority or judgments recovered against persons ignorant of the pendency of a suit, was the most common grievance for which the writ of deceit was used.
[64] The New Natura Brevium, Eighth ed. 1755, page 217
[65] Street, T. A. The Foundations of Legal Liability A Presentation of the Theory and Development of the Common Law Vol 1 Theory and Principles of Tort Edward Thompson Company, Northport, Long Island 1906, page 375
The writ of deceit lay in a number of circumstances. It lay, for example, against a person who purchased an original writ in the name of another without that person’s knowledge;[66] and against an attorney who purported to represent a person who had been joined as a defendant, but without that person’s authority, and who permitted judgment to be entered against that person.[67] The writ also lay against other persons. It lay, for example, against a sheriff who, in a praecipe quod reddat,[68] made a false return that a tenant had been summoned, and as a result of which the tenant lost his land.[69]
[66] The New Natura Brevium, Eighth ed. 1755, pages 217-218
[67] The New Natura Brevium, Eighth ed. 1755, page 219
[68] A “praecipe quod reddat” is a “writ directing the defendant to return certain property” (Black’s Law Dictionary, Ninth ed)
[69] The New Natura Brevium, Eighth ed. 1755, page 221
The width of the writ of deceit is illustrated by the facts and decision in Barker v Braham.[70] An attorney, on instructions from his client, sued out a capias ad satisfaciendum[71] on the basis of which the plaintiff, the administratrix of her late husband’s estate, was imprisoned. The attorney made a mistake in suing out the capias because it was not suggested, nor did it appear to the Court, that the plaintiff had been guilty of devastavit.[72] That meant that the plaintiff, being an administratrix, had been taken in execution and imprisoned contrary to law. Lord Chief Justice de Grey, delivering the judgment of the Court of King’s Bench, said that it “is clear that a writ of deceit will lie against an attorney for acting wrongfully in his character of an attorney to the damage of another”.[73]
[70] [1799] EngR 36; (1799) 3 Wils KB 368; 95 ER 1104
[71] A “capias ad satisfaciendum” was a “postjudgment writ commanding the sheriff to imprison the defendant until the judgment is satisfied” (Black’s Law Dictionary, Ninth ed)
[72] “Devastavit” means a “fiduciary’s failure to administer an estate or trust promptly and properly, esp. by spending extravagantly or misapplying assets” (Black’s Law Dictionary, Ninth ed)
[73] [1799] EngR 36; (1799) 3 Wils KB 368 at page 377; 95 ER 1104 at page 1109
We do not hear of the writ of deceit or the action on the case for damages in the nature of a writ of deceit. The claims that previously could have been pursued through such actions, however, are now likely to be considered as discreet areas of law relating to legal practitioners or as a class of abuse of process. The High Court has recognised as a category of abuse of process “proceedings which involve a deception on the court, or are fictitious or constitute a mere sham”.[74] That class of abuse of process would capture many of the claims that were previously actionable under the writ of deceit, including claims in relation to suits commenced by one person in the name of another without that other person’s authority. A claim brought by a lawyer purportedly on behalf of another when the lawyer does not have that authority is a deception of a court, even when it is done unwittingly.
[74] Jeffery & Katauskas Pty Limited v SST Consulting Pty Ltd; Jeffery & Katauskas Pty Limited v Rickard Constructions Pty Limited [2009] HCA 43 at [27]
In my opinion, the reasoning in Robson v Eaton applies to a lawyer who procures the making of a sequestration order by presenting a creditor’s petition without the authority of the putative creditor. Just as the attorney in Robson v Eaton was considered to be liable to make good the loss the defendant suffered by paying the money to the attorney pursuant to the order the attorney procured without the authority of the plaintiff, so too should a lawyer, who did not have the authority of the putative creditor be liable to do all that is reasonably required to make good the loss the person made bankrupt has suffered as a reasonable and foreseeable consequence of the sequestration order
There are, of course, differences. Money paid under a judgment that has been procured by a lawyer without the authority of a plaintiff can easily be restored to the person who made the payment. He or she need only be paid the same amount of money together with, perhaps, interest. A sequestered estate, however, cannot be so easily restored; at least not where the bankruptcy has been annulled under s.153B(1) of the Act. One complication arises out of the interposition of the trustee in bankruptcy. Once appointed, the trustee has duties under the Act which he or she must perform; and in performing those duties, the trustee incurs expenses, and earns remuneration which, if reasonably incurred and earned, must be paid out of the estate. Further, the nature and extent of the expenses a trustee may reasonably incur, and the extent of the remuneration the trustee may reasonably earn, may vary from case to case, and for different reasons, and may be due to acts or omissions for which the lawyer could not in fairness be held responsible.
The reasoning in Barker v Braham also, in my opinion, applies to a lawyer who procures the making of a sequestration order by presenting a creditor’s petition without the authority of the putative creditor. Just as the attorney in Barker v Braham did not have the right to sue out the capias against the plaintiff, so too would a lawyer who presented a creditor’s petition without authority not have the right to present the creditor’s petition. And just as the attorney in Barker v Braham was liable in damages for the injury the issuing of the capias caused the plaintiff in that case, so would a lawyer who without authority presented a creditor’s petition be liable to compensate the person against whom the creditor’s petition was presented for any harm that person suffers as a result of the sequestration order.
Thus, the Court has jurisdiction to entertain Mr Doulman’s indemnity claim for the purpose of determining whether it falls within the summary jurisdiction of a court to control lawyers engaged or purportedly engaged in a matter before the court, and hence falls within the Court’s implied incidental power to regulate the conduct of lawyers who appear before it. The particular jurisdiction that is engaged by Mr Doulman’s indemnity claim is that which courts have exercised over lawyers who commenced or defended proceedings without the authority of the party purportedly on whose behalf the lawyer acts, and which courts have exercised where the lawyer has failed to follow a procedural rule as a result of which damage has been done to another. The precise question is whether, because of his having initiated the bankruptcy proceedings against Mr Doulman without the authority of ACT Electronic, and as a result procured this Court to make a sequestration order against Mr Doulman’s estate, Mr Gabbedy is liable to indemnify Mr Doulman against liability Mr Doulman has to the Trustee under s.154 of the Act.
Is Mr Doulman precluded from pursuing the indemnity claim?
Counsel for Mr Gabbedy submits Mr Doulman’s indemnity claim seeks to “re-litigate a dispute previously determined” and, for that reason, his prosecuting such claim constitutes an abuse of process. Counsel further submits that seeking to re-litigate a dispute previously resolved may constitute an abuse of process even in circumstances falling outside the doctrine of res judicata, issue estoppel, and the extended form of estoppel considered by the High Court in Port of Melbourne Authority v Anshun Pty Ltd.[75]
[75] (1981) 147 CLR 589
Counsel relies on the decision of French J (as his Honour then was) in Spalla v St George Motor Finance Ltd (No 6) where his Honour said:[76]
The doctrines of res judicata, issue estoppel and Anshun do not exhaust the circumstances in which a proceeding may be regarded as amounting to an abuse of process by way of attempted relitigation of a dispute already judicially determined. As another Full Court said in Coffey v Secretary, Department of Social Security [1999] FCA 375; (1999) 86 FCR 434 (at 443):
‘An attempt to litigate in the Court a dispute or issue which has been resolved in earlier litigation in another court or tribunal may constitute an abuse of process even though the earlier proceeding did not give rise to a res judicata or issue estoppel: see Sea Culture International v Scoles [1991] FCA 523; (1991) 32 FCR 275 at 279 and Walton v Gardiner [1993] HCA 77; (1993) 177 CLR 378 at 393–394. Whether it does depends on the facts of the particular case.’
[76] [2004] FCA 1699 at [66]
I do not agree that Mr Doulman’s indemnity claim is an attempt to re-litigate an issue Smith FM determined against him. As I have already found, the Order related to Mr Doulman’s liability under s.154 of the Act for the legal costs the Trustee incurred in the proceedings Mr Doulman commenced to set aside the sequestration order or annul his bankruptcy. Mr Doulman did not include in the application by which he commenced those proceedings any claim for indemnity. In his application Mr Doulman sought an order setting aside the sequestration order, an order, in the alternative, under s.153B of the Act annulling his bankruptcy, “[s]uch further and other orders as the Court thinks fit”, and “[c]osts”. There is nothing in Smith FM’s reasons, or in the orders his Honour made, to suggest that Mr Doulman made a claim that he be indemnified for anything other than his liability to pay the Trustee’s costs.
That Smith FM did not determine the indemnity claim does not mean Mr Doulman may not be prevented from making that claim now. For it is a well-established principle (Anshun principle) that a person who has been a party to a proceeding that has been concluded may in certain circumstances be prevented from bringing a claim based on matters which were not the subject of the earlier proceeding. The Anshun principle, which also applies to bankruptcy proceedings,[77] was classically described in 1843 by Sir James Wigram VC in Henderson v Henderson:[78]
[W]here a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.
[77] Macchia v Nilant [2006] FCA 213 (Siopis J)
[78] (1843) 3 Hare 100; 67 ER 313 at page 319 ([115])
A more modern formulation is the following passage from the judgment of Somervell LJ in Greenhalgh v Mallard:[79]
. . . res judicata for this purpose is not confined to the issues which the court is actually asked to decide, but . . . it covers issues or facts which are so clearly part of the subject-matter of the litigation and so clearly could have been raised that it would be an abuse of the process of the court to allow a new proceeding to be started in respect of them.
[79] [1947] 2 All ER 255 at page 257. This passage was referred to with approval by Lord Wilberforce in Brisbane City Council v Attorney-General (Qld) [1979] A.C. 411 at page 425
This passage was quoted with approval by the plurality in Port of Melbourne Authority v Anshun Pty Ltd, although the plurality was of the view that the abuse of process test “is not one of great utility”.[80]
[80] (1981) 147 CLR 589 at page 602
The Anshun principle “is based on the reasonableness or otherwise of the conduct of a litigant in earlier proceedings”.[81] Thus, that the party could have raised a claim or a defence in the former proceeding does not necessarily mean it was unreasonable for the party not to have raised it in the earlier proceedings. The assessment of a party’s reasonableness in not raising a claim or defence that he or she wishes to raise in a separate proceeding “is not to be made mechanistically, but rather there is a value judgment to be made referable to the proper conduct of modern litigation”.[82]
[81] Meriton Apartments Pty Ltd v Industrial Court of New South Wales [2009] NSWCA 434 at [60] (Handley AJA, Allsop P and Tobias JA agreeing)
[82] Champerslife Pty Ltd v Manojlovski (2010) 75 NSWLR 245 at [3] (Allsop P)
Assuming the Anshun principle applies to the indemnity claim (an assumption whose correctness I will consider in a moment), was it unreasonable for Mr Doulman not to have advanced it before Smith FM? In my opinion, it was not unreasonable. The principal issue in Mr Doulman’s application appears to have been the manner in which Smith FM should exercise his discretion, given that it was clear that the evidence established Mr Gabbedy presented the creditor’s petition without authority. It was not reasonable to have expected Mr Doulman to have properly considered whether he should claim an indemnity against Mr Gabbedy when the centre of the controversy between the parties was whether the sequestration order should be set aside or an annulment order should be made.
There may be a reason why the Anshun principle may not apply where a court has made an order on the presentation of a claim by a person acting without authority. That is so because the court itself will have been misled, and it has an interest, separate from the interests of persons who have been injured, in reversing any orders it may have made on the basis of its having been misled. Thus, even if Mr Doulman acted unreasonably in not bringing before Smith FM the indemnity claim, Mr Gabbedy’s unwitting deception of the Court in making the sequestration order may not be ignored. Given I have found, however, it was not unreasonable for Mr Doulman not to have raised the indemnity claim in the annulment proceedings, it is not necessary to say anything further about this issue.
Finally, Mr Gabbedy submits that the claims made by Mr Doulman are oppressive because they are based on the most serious kind of allegations against him. That a claim is based on serious allegations does not by itself render a claim an abuse of process. The question that must be determined is whether there is evidence which supports those allegations, or whether there are any other reasons which prevent me from inquiring into the matters Mr Doulman alleges.
Should Mr Doulman be indemnified?
The sequestration order that was made against the estate of Mr Doulman, and the circumstances in which it was made, are analogous to the order made by the Court of Common Pleas in Robson v Eaton, and the manner in which the order was made. In both cases, the orders were made on the application of a lawyer who purported to act on behalf of the party which sought the order but who did not have the authority to do so. Just as in Robson v Eaton the attorney who did not have the authority to seek that order was regarded as being liable to restore to the defendant the money the defendant paid to the attorney pursuant to that order, so too should Mr Gabbedy, who did not have the authority of ACT Electronic to obtain the sequestration order, be liable to make good the loss Mr Doulman suffered as a reasonable and foreseeable consequence of the sequestration order.
The sequestration order that was made against the estate of Mr Doulman, and the circumstances in which it was made, are also analogous to the attorney’s suing out a capias in Barker v Braham. Just as the attorney in that case did not have the authority to sue out a capias, so too Mr Gabbedy did not have the authority to present the creditor’s petition against Mr Doulman. There is another respect in which the facts in Barker v Braham are similar to the facts before me. The capias was a form of execution of judgment; so too, in a sense, is a sequestration order, the difference being that bankruptcy is a form of execution made on behalf of all of a debtor’s creditors.
In my opinion, Mr Gabbedy, having brought about Mr Doulman’s bankruptcy without authority, is liable to indemnify Mr Doulman for such losses as Mr Doulman has suffered or is liable to suffer as can reasonably be attributed to Mr Gabbedy’s actions. This includes liability Mr Doulman has or may have to the Trustee under s.154 of the Act. I will consider later in these reasons the losses for which Mr Gabbedy is liable to indemnify Mr Doulman.
Mr Gabbedy has submitted that Mr Doulman should be granted no relief because he delayed in bringing his application. There is no question Mr Doulman delayed. Mr Doulman, however, signalled to Mr Gabbedy in no uncertain terms almost immediately after Smith FM annulled Mr Doulman’s bankruptcy that he considered Mr Gabbedy was responsible for indemnifying Mr Doulman from the consequences of his having been made bankrupt on the basis of a creditor’s petition Mr Gabbedy presented without authority.
Was there fraud?
Mr Doulman makes various allegations of improper conduct by Mr Gabbedy and the Trustee, among others. It is not open to me to consider whether there was fraud on the part of Mr Gabbedy or the Trustee. As I have noted above, Smith FM accepted that Mr Gabbedy acted under an honest belief that Mr Powrie held office as a director of TaxView Pty Limited when instructing Mr Gabbedy.[83] His Honour also found that the Trustee was not responsible for the delays in the discovery of the true status of Mr Powrie in relation to the putative creditor, nor for the consequential expenses, legal costs, and losses incurred by Mr Doulman as a result of the sequestration order and the need to apply to set it aside.[84]
[83] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [90]
[84] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [44]
In any event, the evidence does not even raise an arguable case of fraud by Mr Gabbedy or the Trustee.
Costs of settling and costs of removing adverse credit references
Mr Doulman claims Mr Gabbedy should compensate Mr Doulman for the legal costs he incurred in settling the amount of the Trustee’s costs. There is no basis for this claim. First, although there was extensive correspondence after Smith FM made the Order, very little of that correspondence related to the legal costs the Trustee claimed. Some of the correspondence related to the proper interpretation of the Order. Mr Doulman, through his lawyers, propounded a construction of the Order I have found is incorrect.
Even if I ignore these matters, the Trustee made offers in relation to his costs. There is nothing to suggest the offers were not within the range of what he was likely to obtain on taxation; and there is nothing to suggest Mr Gabbedy acted unreasonably in the manner he responded to the Trustee’s offers. Even if Mr Gabbedy acted unreasonably, it was open to Mr Doulman to apply to have the Trustee’s costs taxed.
Mr Doulman also claims compensation for the costs of removing adverse credit ratings that have been raised against him as a result of his bankruptcy. In principle, if Mr Doulman suffered loss or is liable to suffer loss because his bankruptcy resulted in adverse credit references being recorded against his name, he should be entitled to compensation for such loss. There is no evidence, however, that Mr Doulman has suffered any such loss. This part of Mr Doulman’s claims, therefore, does not succeed.
Provision of Trustee’s file to correct misstatements
Mr Doulman seeks an order requiring the Trustee to produce documents that would permit the correction of false and incorrect statements he claims the Trustee made. This claim is based on four affidavits Mr Doulman has prepared. Although the affidavits are very detailed, they are to a very large extent based on the premises that the Trustee knew or, at the very least, ought to have known, that TaxView Pty Limited had not authorised the presentation of the creditor’s petition, the Trustee ought not to have prepared a report to creditors, and ought not to have joined the proceedings for annulment after Mr Doulman’s solicitor informed the Trustee by letter dated 11 January 2011 that the applicant named on the creditor’s petition had not authorised the presentation of the petition.[85] The difficulty with these premises, however, is that Smith FM made findings about what the Trustee knew or ought to have known, and what he and his employees did or ought to have done, which prevent me from inquiring into the matters alleged by Mr Doulman.
[85] See, for example, Affidavit of L M Doulman, 23.06.14, [20]
As recorded in Smith FM’s reasons for judgment, the Trustee gave evidence of what he did in the course of his administering Mr Doulman’s estate. The Trustee was not cross-examined, and Smith FM accepted the Trustee’s evidence.[86] In addition, a member of the Trustee’s staff, Mr Hawken, gave evidence which Smith FM summarised as follows:[87]
Mr Hawken said that immediately upon receiving notice of the trustee’s appointment on 5 August 2010, he “took steps to obtain contact details of” the petitioning creditor shown on the sequestration order. He performed a ‘current extract’ ASIC search on TaxView Pty Ltd, but:
5. The details contained in the company extract referred to in paragraph 4 do not match those of the first respondent. They relate to a different company entirely. In light of this, I decided that it would be simplest to contact the solicitors for the first respondent to obtain the details I required.
Mr Hawken then obtained contact details for the petitioning creditor by speaking to a member of Mr Gabbedy’s staff, and obtaining from them a copy of the petition. He said in [h]is affidavit: “I considered that there was no need for further enquiries to be made in relation to the details of the first respondent”.
[86] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [38]
[87] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [41]
It is clear from an earlier part of Smith FM’s reasons for judgment that the company Mr Hawken’s searched was not TaxView Pty Limited, the company that was named as the petitioning creditor (which, is in fact ACT Electronic), but a different company that was also named TaxView Pty Limited.
Smith FM noted the following in relation to Mr Hawken’s evidence:[88]
Counsel for Mr Doulman did not cross-examine Mr Hawken in relation to this, but in submissions he criticised Mr Hawken’s failure to conduct historical ASIC searches such as those which were eventually conducted on behalf of Mr Doulman in January 2011. He submitted that if these had been conducted by the Trustee in August 2010, the fatal flaw in the bankruptcy proceedings would have been revealed, and an application to set aside the sequestration order would have been made earlier by either Mr Doulman or Mr Slaven himself.
[88] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [42]
Smith FM then made the following findings:[89]
I doubt whether a sufficient evidentiary foundation exists for me to draw that inference. However, even accepting that this might have happened, I do not accept that any unreasonableness attended Mr Hawken’s conduct in August 2010. It was not the trustee’s responsibility to verify the foundations of the sequestration order, and in particular the existence of the alleged indebtedness of the petitioning creditor and the authority of its solicitors to obtain the sequestration order. No duty to investigate the debt would arise, at least, until the trustee was called upon to rule on a proof of debt submitted by that creditor. Mr Slaven had reasonably delayed calling for proofs of debt until he received Mr Doulman’s statement of affairs and clarification of his intentions in relation to an ‘appeal’. I consider that it was reasonable on the part of Mr Hawken to conclude that, at the start of the administration, he needed no more than the details about TaxView Pty Ltd which he was given by Mr Gabbedy’s staff.
[89] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [43]
In addition, as I have already noted, Smith FM made the following findings in relation to the Trustee:[90]
I conclude that Mr Slaven bears no responsibility for the delays in the discovery of the true status of Mr Powrie in relation to TaxView Pty Ltd, nor for the consequential expenses, legal costs, and losses incurred by Mr Doulman as a result of the sequestration order and the need to apply to set it aside. In my opinion, this responsibility falls squarely upon the solicitor who brought the bankruptcy proceedings without authority.
[90] Doulman v ACT Electronic Solutions Pty Limited & Anor [2011] FMCA 232 at [44]
In the face of these findings, it is not open to me to inquire into the matters alleged by Mr Doulman.
Conclusions and relief
My conclusions may be summarised as follows:
a)On the proper construction of the Order, Mr Gabbedy is liable to indemnify Mr Doulman only in relation to the liability Mr Doulman has to the Trustee under s.154 of the Act for the legal costs the Trustee incurred in the annulment proceedings.
b)The Court has jurisdiction to entertain Mr Doulman’s indemnity claim because the claim is a proceeding that is brought “under or by virtue” of the Act, or because it is a claim that forms part of the one justiciable controversy, namely, whether Mr Doulman should have been made bankrupt, or because it falls within the Court’s implied incidental power to regulate legal practitioners who conduct proceedings before it.
c)Mr Doulman is not estopped from bringing the indemnity claim, and his bringing the indemnity claim is not an abuse of process.
d)There is a well-established jurisdiction for the making of compensatory orders against legal practitioners who have commenced proceedings without authority, or who have otherwise failed to observe a procedural rule of court. Mr Doulman’s indemnity claim falls within this jurisdiction, with the consequence that Mr Gabbedy, having caused Mr Doulman to be made bankrupt on the basis of a petition he had no authority to present, is liable to indemnify Mr Doulman for the losses Mr Doulman incurred as a result of his having been made bankrupt. That includes the liability Mr Doulman has to the Trustee under s.154 of the Act.
I have concluded that in principle Mr Gabbedy is liable to indemnify Mr Doulman for the liability Mr Doulman has to the Trustee under s.154 of the Act. This would include all of the $52,474.45 the Trustee recovered in the Local Court of New South Wales except that part which relates to the legal costs and disbursements the Trustee incurred in connection with the annulment proceedings. That is so because, as I have already noted, on 21 July 2011 Mr Doulman, through his lawyer, agreed to accept from Mr Gabbedy $51,100 on account of his liability to the Trustee for the Trustee’s costs in the annulment proceedings (July costs agreement).
It is possible to estimate from two tax invoices that were issued by the Trustee’s lawyer the Trustee’s legal costs and disbursements in relation to the annulment proceedings, and against the payment of which Mr Gabbedy is not liable to indemnify Mr Doulman because of the July costs agreement. The first is dated 11 April 2011 which claims $51,679.31.[91] This covers work up to and including 11 April 2011. The second invoice is dated 26 May 2011.[92] It covers work up to and including 10 May 2011. It claims fees of $2,554.20 (inclusive of GST) for 54 units of work. This translates to $47.30 per unit. Of the 54 units, 22 units were recorded for work up to and including 19 April 2011 and, therefore, can be said to relate to the annulment proceedings. This translates to fees of $1,040.60 (inclusive of GST). The invoice dated 26 May 2011 also includes disbursements totalling $1,618.56 (inclusive of GST). All these disbursements were incurred before 19 April 2011 and, for that reason, I find that they all relate to the annulment proceedings. Accordingly $2,659.16 of the 26 May 2011 invoice relates to the annulment proceedings.
[91] Affidavit of M E Slaven, 12.03.14, pages 141-145
[92] Affidavit of M E Slaven, 12.03.14, pages 146-149
I find, therefore, that the costs the Trustee incurred in relation to the annulment proceedings were $54,338.47 ($51,679.31 + $2,659.16); and that Mr Doulman remains liable to pay to the Trustee $3,238.47, being the difference between $54,338.47 and the $51,100 Mr Gabbedy paid by September 2011 on account of the Trustee’s costs. It is reasonable to add interest to this sum for the period commencing 1 September 2011 and ending on 17 July 2015. I propose to apply the interest rate of 7.22%, being the average of the interest rates prescribed by Practice Note CM 16 of the Federal Court after 30 June 2011. That amounts to $905.81.[93] The amount for which Mr Doulman remains liable to pay the Trustee, therefore, is $4,144.28.
[93] 3 x (7.22% x $3,238.47) + 319/365 x (7.22% x $3,238.47) = $905.81 (calculated to 2 decimal places)
Accordingly, I propose to resolve the applications before me as follows.
a)I will declare that Mr Gabbedy is liable to indemnify Mr Doulman for the liability Mr Doulman has to the Trustee under s.154 of the Act other than the liability Mr Doulman has under s.154 of the Act to pay the Trustee’s legal costs and disbursements of the annulment proceedings.
b)I will declare that Mr Doulman’s remaining liability to the Trustee under s.154 of the Act in relation to the legal costs and disbursements the Trustee incurred in the annulment proceedings is $4,144.28.
c)I will order that within twenty-eight days of the date I make these orders:
i)Mr Doulman pay to the Trustee the amount of $4,144.28; and
ii)Mr Gabbedy pay to the Trustee such amounts as the Trustee is entitled to recover from Mr Doulman by reason of s.154 of the Act, other than the legal costs and disbursements the Trustee incurred in the annulment proceedings (which I have found to be $54,338.47).
d)I will order that upon the payment of the amounts referred to in (c), the Trustee will remove all caveats he has caused to be recorded against the title of real property in which Mr Doulman has an interest.
e)I will reserve to the parties liberty to apply in relation to the implementation of these orders, and in relation to making further orders in the event any of the orders are not complied with.
It will be seen that I have made no orders for the appointment of trustees for sale. My expectation is that if the orders I propose to make are complied with, there will be no need for me to make any order appointing trustees for sale. Nothing I have said in these reasons, and nothing that I propose to order pursuant to those reasons, is intended to prevent the Trustee from applying for an order appointing trustees for sale if the orders I propose to make are not complied with.
Given my conclusions, I am also of the opinion that Mr Gabbedy should pay the Trustee’s costs of these applications, and that Mr Gabbedy and Mr Doulman should otherwise each pay their own costs.
I certify that the preceding one hundred and four (104) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Associate:
Date: 19 June 2015
0
26
5