Frost and Anor v Bovaird and Ors

[2014] HCATrans 208

[2014] HCATrans 208

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S77 of 2014

B e t w e e n -

ALAN MAXWELL FROST

First Applicant

DIANA CATHERINE FALLON

Second Applicant

and

LEON LEWIS MacGILLIVRAY BOVAIRD

First Respondent

LEON LEWIS MacGILLIVRAY BOVAIRD IN HIS CAPACITY AS EXECUTOR OF THE ESTATE OF THE LATE MONICA CATHERINE BOVAIRD

Second Respondent

THE TRUSTEE OF THE BANKRUPT ESTATE OF MAXWELL WALTER ALLEN FROST

Third Respondent

Application for special leave to appeal

BELL J
GAGELER J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 12 SEPTEMBER 2014, AT 12.39 PM

Copyright in the High Court of Australia

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MR B.W. WALKER, SC:   May it please the Court, I appear with my learned friend, MR R.J. CARRUTHERS, for the applicants.  (instructed by MBP Legal)

MR M.K. CONDON, SC:   May it please the Court, I appear with MR P.D. DOYLE GRAY for the first and second respondents.  (instructed by Garland Hawthorn Brahe)

BELL J:   Thank you, Mr Condon.  Just before we turn to you, Mr Walker, I might indicate for the convenience of counsel that we will deal with this matter and then the Court will adjourn until 2.00 pm.  Yes, thank you, Mr Walker.

MR WALKER:   Your Honours, the least contestable proposition found in the application book is at page 12, line 50:

This case is obviously a disaster for everyone involved.

Understandably, the respondent calls in aid everything that gives weight to that pithy and accurate summary as being a reason to refuse to special leave.  We seek to turn that on its head.  One of the reasons why this case is obviously a disaster for everyone involved is that it came to a head with a raft of proposed amendments, large amendments, which are still within the grasp of the Supreme Court in terms of whether leave should be grated, so it is unfinished business, but it came to the Federal Court and thus to the Full Court of the Federal Court at a point where a raft of amendments was being made to proceedings being amendments of a kind which, as you will have seen, attracted item by item, substantive and we would submit, with respect, though it is not for this Court, cogent criticisms of their substance and prospect.

Now, as you know, Justice Perram regarded that indeed as a reason in the fall back oral application with which his Honour dealt in the second half of his reason as an admittedly speculative but nonetheless justified basis to see that if those objections were good the amended application would fail and the costs in question would be relatively slight.  Now, it is not part of my argument here to criticise or indeed address those conclusions at all except to call them in aid to point out that which is also common ground concerning the way in which these disastrous proceedings or multiplicity of proceedings lend themselves to a view of the bankruptcy provisions which we urge.

At page 11 of the application book in paragraph 25, line 40, your Honours will have seen the nature of the exposure of the bankrupt estate to a contingent risk of a kind which in policy evidently led a succession of legislatures here and elsewhere to enact provisions such as those with which we are concerned, relatively, subsection 249(3), and also why the nature of proceedings, particularly if they were to lose, that is, the larger the degree of difficulty in the case attempted by these proposed amendments the more likely it will be that the executors will be held justified to have expended and therefore to ultimately to get an indemnity from the estate.

The very kind of thing which in relation to creditors which not so ironically involves the other side, the very kind of thing which the Bankruptcy Act designedly places within the supervision of the Federal Court.  Now, the question obviously is, is that supervision to be understood in the statute that is being required by the enacted words to require double handling of a kind which causes revulsion against every modern and indeed ancient concept of case management.

BELL J:   Before we get to the terms of the provision, there is the anterior question of the terms of Justice Perram’s grant.

MR WALKER:   There is.

BELL J:   That grant was in broad terms and, as I understand it, your client did not seek to have it conditioned in the respects that you now advance as so important.

MR WALKER:   The answer to your Honour’s question is you are right, with respect, and may I add for completeness that was the evident target of Mr Cotman’s improvised application.  I do not meant that derogatorily but it was done on his feet orally and dealt with on the merits by his Honour, and I should add for completion, neither was Justice Perram’s order the subject of an application for leave to appeal.  Now, that being so, the question is whether or not as a matter of law there is power to make an order in relation to what I am going to call all fresh steps – that is an adaptation of the statutory wording by me – by the so‑called, as his Honour put it, ambulatory reading which his Honour reached about his own order and which is not the object of our application for special leave.

Now, as I say, the spectre of double handling of a kind which it is thought to be the kind of inconvenience very weighty in deciding between two available readings does not really arise unless they are really two available reasonings.  On any view of it, what the Full Court concludes is that just as there can only be one commencement of legal proceedings, so there can only be one step which answers the description of “any fresh step” so that it can only commence once and you get leave to commence, and it would appear that applies obviously with proceedings not commenced before the bankruptcy but for those which had been commenced before the bankruptcy, so says the schematic reading of these provisions, just one step, presumably the first thing identified as a step after the bankruptcy, is that which requires leave and thereafter it is open slather.

Now, it means, bearing in mind the large variety of possibilities in court procedure plus also what might be called a wilderness of single instance decisions illustrating what might be fresh steps, it means that one could posit, for example, that filing – a plaintiff who had commenced beforehand, bankruptcy intervenes, wishes to file a standard motion for directions for case management directions, will require leave of the Federal Court to do so.  That appears to be conceded on the Full Court’s reasoning and by the argument against us.

But that if following steps have been taken to do that there is then a massive amendment proposed, so the next thing would be a notice to amend, to add parties, to raises causes of action which subject to court rules would have been statute barred had they been brought in fresh proceedings, that is, the most drastic form of transformation of proceedings possible, that that will not be subject to any bankruptcy court supervision at all.  There is evidently no policy from a reading of the Act in its historical setting which would justify that, and the fact that there is double handling is really only giving effect to what might be called the intractable meaning of the words.  The phrase is “any fresh step” and the word “any” is as capable, indeed does accommodate both the notion of each and every as well as of all kinds describable.  “Any” is a word not able to be cut back in it is comprehensiveness.

BELL J:   The provision commences with:

(b)except with the leave of the Court and on such terms as the Court thinks fit –

which brings one back to the question of ‑ ‑ ‑

MR WALKER:   Quite so – the particular order.

BELL J:   Yes.

MR WALKER:   Now, that express power to impose terms, and I should say, it being discretionary there may have been by implication that power in any event, that express power is called in aid by the reasoning against us both in the Full Court and by our learned friends in their submissions here.  To say, in effect, that the spectre we raise of major transformations with bankruptcy implications not being subject to the requirement for leave simply because they are not the very next step after bankruptcy can be dealt with by, as it were, ensuring that something in the nature of a net is cast into the future by the terms of the leave granted and at that point that the paragraph falters out because the terms by which one would describe that without confusing by repetition the matter by simply using statutory terms, remains entirely elusive.

One has seen epithets like substantial, one might even say, such as to increase the expenditure beyond a certain amount.  In our submission, any possibility that one can moot is either overly mechanistic of a kind that one would not ordinarily understand in the supervision of a bankrupt estate, or is so invidiously vague as to generate adjectival arguments about interpretation; what did the terms mean when they said, you have leave to take this fresh step on terms that anything substantial beyond that will need to be the subject of a fresh application.  That, of course, will produce unnecessary, in our submission, argument about what is substantial.

It is for those reasons that sticking as one should to the last of the words themselves in the statute, one comes back to this phrase and the issue we raise is simply and solely this; are we right in proposing that the phrase “any fresh step” is intractable as to its comprehending more than one?  If we are, observations about inconvenience are really only pointing out that one way or the other, whichever side be correct, there is the possibility of two courts looking at proceedings.  Now, as you would expect, we offer about that but they are looking at it from different vantage points and for different purposes.

BELL J:   Do I understand that your submission is that one cannot qualify the provision by the notion of a substantial step and it follows that every single step would require to come back to the Federal Court?

MR WALKER:   Yes.

BELL J:   That, I think, is perhaps a ‑ ‑ ‑

MR WALKER:   I cannot put an argument about the intractable wording without it having that rebarbative consequence, yes.

BELL J:   So this represents something of a tweaking of the arguments that were run below, as I understand.

MR WALKER:   Yes, because upon consideration of an issue as it ought attempted to be presented in this Court, it is impossible to point to the nature of the text in the statute and simultaneously to cleave to vague notions of epithets that perhaps should gloss the matter.  Now, as I say, this was sidestepped in the reasoning against us and the argument against us by reference to the capacity to apply terms and the one thing I want to say about that is this:  there may well be a jurisdictional question, there is certainly a strong discretionary question about whether one could even with terms exercise the power under 249(3) by guessing at future steps and by saying that there are certain steps of a certain kind which may or may not happen which ought to be the subject of fresh leave.  There is also a jurisdictional question as to whether one can grant leave to “any fresh step” and say anything about something which is not before the Court.  That is a step which may never be taken at all.

GAGELER J:   Mr Walker, where under section 249(3)(b) leave is granted to commence proceedings, would you say that in such a case every fresh step in those new proceedings is also governed by the provision?

MR WALKER:   I am bound to, yes.  I am bound to and it is the marvellous prospect that is opened.

GAGELER J:   Well, we might need a few more registrars in bankruptcy.

MR WALKER:   Yes.  That is why of course I have to put it as being these are words that are intractable.  If that be an inappropriate way to read this, it is because everyone has in mind some platonic ideal of how the statute could otherwise have been expressed.  But it has not been expressed so as to cut back what the word “any” means in “any fresh step” because in reality the reasoning against us proceeds by saying any fresh step (but not really).  So it is for those reasons, in our submission, that there is extremely short, sharp point which is raised, entirely a matter of the Court’s powers.

We are talking about what is obviously intended to be beneficial legislation in the sense of the court administering the bankruptcy keeping a grip on litigation.  Of course there can be policy differences, indeed, robust policy criticisms of a notion of that extending to leave before a person can

take “any fresh step”, but that is what Parliament enacted.  Please your Honours.

BELL J:   Yes, thank you.  Mr Condon, we do not need to hear from you.  We are of the opinion that the decision of the Full Court of the Federal Court of Australia was plainly correct.  Special leave is refused with costs.

MR CONDON:   Your Honours, on that issue of costs, can I take the Court to page 73 of the Court book?

BELL J:   Yes.

MR CONDON:   Your Honours will recall that submissions were made consequent upon the applicants not obtaining any judicial advice to bring these proceedings.  The order as to costs, flagged at page 73 of the Court book, was an order for costs but with no indemnity under the estate.

BELL J:   Yes, Mr Walker.

MR WALKER:   Your Honours, questions of indemnity generally ought to await more than simply the merits of this dispute.  There is so much more than this and this dispute is informed by, among other things, the amendment application.  In our submission it is better if a court in charge of the indemnity, which is the Supreme Court, were to deal with that question.

BELL J:   Yes.  Mr Condon, we are not inclined to vary the order in the respect that you seek.

MR CONDON:   I am most obliged.  Thank you, your Honours.

BELL J:   The Court will adjourn.

AT 12.55 PM THE MATTER WAS CONCLUDED