Garrett v Legal Services Board
[2015] VSC 599
•30 October 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST
S CI 2014 03714
| ANDREW GARRETT | Plaintiff |
| v | |
| LEGAL SERVICES BOARD | Defendant |
S CI 2015 00644
| ANDREW MORTON GARRETT | Plaintiff |
| v | |
| LEGAL SERVICES BOARD | Defendant |
S CI 2015 01047
| ANDREW MORTON GARRETT | Plaintiff |
| v | |
| THE LEGAL SERVICES BOARD | Defendant |
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JUDGE: | RIORDAN J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 20 October 2015 |
DATE OF JUDGMENT: | 30 October 2015 |
CASE MAY BE CITED AS: | Garrett v Legal Services Board |
MEDIUM NEUTRAL CITATION: | [2015] VSC 599 |
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BANKRUPTCY – Election by trustee in bankruptcy not to continue proceedings – Whether bankrupt may amend actions to include claim for a ‘personal injury or wrong’ within the meaning of s 60(4) – Appropriate orders to be made pursuant to s 60 where trustee elects not to continue proceedings – Plaintiff’s actions dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | In person | In person |
| For the Defendant | Ms L Kirwan | Victorian Legal Services Board |
HIS HONOUR:
The defendant in each of these three proceedings has filed a summons on 28 August 2015 seeking in effect orders that each proceeding be stayed or dismissed ‘by reason of the election on 23 June 2015 by the trustee of the bankrupt estate of Andrew Morton Garrett pursuant to s 60(2) of the Bankruptcy Act 1966 (Cth) to discontinue the action’.
Background
The background to these claims relate to long running disputes between the plaintiff and associated entities, on one hand; and solicitors Mr Francis Cahill and Mr Peter Hambros and associated entities, on the other. An example of the allegations made by the plaintiff is set out in Garrett v Cahill.[1] I summarise the facts relevant to the current application as follows.
[1][2015] VSC 572 [5]-[29].
On 14 May 2014, the plaintiff lodged a claim on the Fidelity Fund with the defendant (‘the Fidelity Fund claim’) under Part 3.6 of the Legal Profession Act2004 (‘the Act’) to recover the sum of $4.8 million arising out of the alleged conduct of Mr Cahill and Mr Hambros and their associated entities.
On 22 July 2014, the plaintiff filed proceeding S CI 2014 03714 seeking judicial review pursuant to O 56 of the Supreme Court (General Civil Procedure) Rules 2005 of a decision of a manager of the defendant made on 10 July 2014. Essentially, the originating motion alleges the following facts:
(a) On 14 May 2014, the plaintiff lodged the Fidelity Fund claim.
(b)By letter dated 20 June 2014 to the plaintiff, the defendant requested further information with respect to the Fidelity Fund claim.
(c)On 8 July 2014, the plaintiff and a Mr Nowak met with representatives of the defendant and delivered further information regarding the Fidelity Fund claim.
(d)By letter dated 10 July 2014 to the plaintiff, Mr Tim O’Farrell, Manager of Administrative Law and Consumer Matters for the defendant, responded to a request for an advance payment under s 3.6.13 of the Act. Mr O’Farrell stated that because the defendant had only received additional information from the plaintiff two days earlier, ‘it cannot be said that your claim is likely to be allowed’.[2]
[2]The information about the content of this letter is from a decision by Mukhtar AsJ in S CI 2014 03714: Garrett v Legal Services Board (Unreported, Supreme Court of Victoria, Mukhtar AsJ, 30 October 2014) [5].
On 30 October 2014, Mukhtar AsJ granted the defendant’s application for a summary dismissal (among other orders) of proceeding S CI 2014 03714.
On 9 February 2015, the defendant did not accept the Fidelity Fund claim because the defendant was not satisfied that the plaintiff was authorised to make the claim on behalf of the Andrew Garrett Family Trust No 4 (‘the 9 February 2015 decision’).
On 2 March 2015, the plaintiff made an ex parte application before Mukhtar AsJ for review of the 9 February 2015 decision by filing an affidavit sworn on 13 February 2015 pursuant to s 4 of the Administrative Law Act 1978 (proceeding S CI 2015 00644). The application was adjourned to 25 March 2015.
On 10 March 2015, the plaintiff commenced proceeding S CI 2015 01047 by filing a notice of appeal and a summons against the 9 February 2015 decision pursuant to s 3.6.23 of the Act, which permits a claimant to appeal against a decision of the defendant ‘to wholly or partly disallow a claim’.
On 19 March 2015, Derham AsJ granted the defendant’s application to summarily dismiss the appeal. On the same day, the plaintiff filed a notice of appeal seeking to set aside the orders of Derham AsJ.
On 14 April 2015, the appeal came on for hearing before me and orders were made for further submissions to be filed by both parties.
On 7 May 2015, the defendant filed its further submissions and requested a further hearing pursuant to a provision in the ‘Other Matters’ section of the order of 14 April 2015.
On 8 May 2015, the defendant filed an affidavit relating to the matters referred to in its submissions.
On 15 May 2015, the Federal Circuit Court of Australia at Melbourne made a sequestration order against the estate of the plaintiff.
By letter dated 26 May 2015 to Mr Timothy Holden as trustee in bankruptcy of the estate of the plaintiff, the defendant gave notice of each of the actions.
By letter dated 23 June 2015 to the defendant, Mr Holden elected under s 60 of the Bankruptcy Act 1966 (Cth) not to continue with Supreme Court of Victoria proceedings S CI 2014 03714, S CI 2015 01047 and S CI 2015 00644.
On 14 October 2015, the defendant filed a further affidavit in which it disclosed that it had, after filing its affidavit on 8 May 2015, discovered that the delegation pursuant to which the 9 February 2015 decision was made, was inadequate. Accordingly, on 18 July 2015, the defendant made a decision that it did not accept the Fidelity Fund claim.
The application
Each of the three proceedings relate to purported decisions of the defendant with respect to the Fidelity Fund claim, which is formally administered by the defendant under the Act and, since 1 July 2015, pursuant to the provisions of the Legal Profession Uniform Law. In summary, the status of each proceeding is as follows:
(a)Proceeding S CI 2014 03714: by summons dated 13 April 2015, the plaintiff seeks an extension of time to file and serve a notice of appeal from the orders of Mukhtar AsJ summarily dismissing the application.
(b)Proceeding S CI 2015 00644: on 13 April 2015, the application was adjourned to a date after the hearing and determination of the plaintiff’s appeal in proceeding S CI 2015 01047.
(c)Proceeding S CI 2015 01047: by notice of appeal dated 19 March 2015, the plaintiff seeks to set aside the orders of Derham AsJ made on 19 March 2015 dismissing the appeal.
The defendant seeks orders that each of the proceedings be dismissed following the trustee’s election not to continue the proceedings pursuant to s 60 of the Bankruptcy Act 1966 (Cth). That section relevantly provides as follows:
(2)An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.
(3)If the trustee does not make such an election within 28 days after notice of the action is served upon him or her by a defendant or other party to the action, he or she shall be deemed to have abandoned the action.
(4)Notwithstanding anything contained in this section, a bankrupt may continue, in his or her own name, an action commenced by him or her before he or she became a bankrupt in respect of:
(a)any personal injury or wrong done to the bankrupt, his or her spouse or de facto partner or a member of his or her family; or
(b)the death of his or her spouse or de facto partner or of a member of his or her family.
…
(5)In this section, action means any civil proceeding, whether at law or in equity.
The defendant’s submissions
The defendant submitted that for the purposes of s 60(2) an ‘action’ includes an application for leave for an extension of time for appeal.[3] Accordingly, it is submitted that the plaintiff’s application in S CI 2014 03714 is an action within the meaning of s 60(2).
[3]Deputy Commissioner of Taxation v Garrett [2015] VSC 347 [19]-[26].
The defendant further submitted that none of the actions are in respect of any personal injury or wrong within the meaning of s 60(4) for the following reasons:
(a)In Deputy Commissioner of Taxation v Garrett,[4] the Court followed the statement of Dixon J in Cox v Journeaux (No 2)[5] that a ‘personal injury or wrong done to the bankrupt’ depended upon ‘whether the damages or part of them are to be estimated by immediate reference to pain felt by the bankrupt in respect of his mind, body or character and without reference to his rights of property’.[6]
(b)The plaintiff’s claims relate to the Fidelity Fund claim and any appeal from such decision or relief sought in consequence of the defendant’s failure to pay such a sum could not be said to be an action ‘in respect of any personal injury or wrong done to the bankrupt’.[7]
(c)Actions seeking relief in the nature of prerogative writs are stayed by operation of s 60(2).[8] Furthermore, s 60(2) encompassed all proceedings commenced by a bankrupt prior to bankruptcy other than those excepted by s 60(4).[9]
(d) None of the proceedings were brought by the plaintiff in his capacity as trustee; but even if the proceedings were brought as a trustee, the proceedings still fall within the ambit of s 60.[10]
[4][2015] VSC 347 [30].
[5](1935) 52 CLR 713.
[6]Ibid 721 (citation omitted).
[7]Bryant v Commonwealth Bank of Australia (1997) 75 FCR 545 held that damages sought which were consequential upon proprietary claims which passed to a trustee in bankruptcy were not covered by s 60(4). See also the cases referred to in Fletcher v Westpac [2012] WASCA 154 [20]-[21].
[8]Daemar v Industrial Commissioner of New South Wales (1988) 12 NSWLR 45.
[9]Garrett v Commissioner of Taxation [2015] FCA 665.
[10]Re Lofthouse (2001) 107 FCR 151 [19]-[20]; Deputy Commissioner of Taxation v Garrett [2015] VSC 347 [34]-[36].
The plaintiff’s submissions
The plaintiff submitted that the proceedings were not stayed by s 60(2) for the following reasons:
(a)Just as s 60(4) excludes claims against solicitors for breach of duty in failing to properly prosecute a defamation claim,[11] claims against lawyers arising from their defaults with respect to trust moneys are similarly excluded. The plaintiff referred to the following comments of Burchardt J in Garrett v Cahill:
[11]Moss v Eaglestone (2011) 83 NSWLR 476.
The conduct of MrCahill and Mr Hambros, as indicated by these papers, would certainly give rise to concerns. The GST input credit is certainly consistent with an elaborate sham. The payment of the $2 million by way of loans would bear careful investigation.[12]
[12][2015] FCCA 26 [53].
I reject the submission that because a claim against a lawyer for failing to prosecute a defamation action was included in the exception in s 60(4), other claims against lawyers for default with respect to trust moneys and the like are also so excepted. In Moss v Eaglestone,[13] Allsop P decided that an action for defamation would be so excepted because it was plainly ‘an action…in respect of [a] personal injury or wrong’ and would not form part of the bankrupt’s estate divisible among creditors;[14] and therefore there was no reason why a claim against the lawyer for failing to recover compensation should be treated differently.[15] The underlying money claims made in these proceedings would not be excluded from the estate and, accordingly, do not form part of the claims excluded by s 60(4).
[13](2011) 83 NSWLR 476.
[14]Ibid [8] (Allsop P, with whom Campbell and Young JJA agreed).
[15]Ibid [65].
(b) The plaintiff sought leave to amend the originating motion in S CI 2014 03714, the application for review in S CI 2015 00644 and the notice of appeal in S CI 2015 01047, to incorporate further grounds for review relating to separation of powers issues, human rights issues, and champerty and maintenance agreements between insolvency practitioners and lawyers, and trespass on the bankrupt estate. It was submitted that claims incorporating such further grounds would not be stayed by s 60(2).
The plaintiff’s application to amend must be refused. Putting to one side:
(i) the procedural irregularities in the oral application, and
(ii) the fact that, in my opinion, he was unable to articulate any cause of action raising these issues against the defendant,
amendments to an action after it has been stayed by s 60(2) cannot be reinstated by subsequent amendment. The Court has no discretion as to the application of ss 60(2) & (3). Nor was the plaintiff able to explain how reliance on the separation of powers issues, human rights issues and other issues would bring the claims within the ambit of s 60(4).[16]
[16]See Garrett v Commissioner of Taxation [2015] FCA 665 [39] (Kenny J).
(c) The plaintiff submitted that s 60(2) did not apply because there was a duty on the Court to exercise its inherent jurisdiction to supervise solicitors being Mr Cahill and Mr Hambros.
The plaintiff accepted that this was a repetition of the argument he advanced and I rejected in Garrett v Cahill.[17] I reject this submission for the same reasons as I did in that case.[18] In particular, I do not accept that the Court is under any duty to investigate and the provisions of ss 60(2) & (3) are not discretionary and do not entitle a court to disregard the subsections on the basis that it proposes to carry out investigations of the underlying allegations.
(d) The plaintiff submitted that s 60(2) did not apply to these actions because they were brought in his capacity as trustee.
The plaintiff accepted that this submission was a repeat of the submission which he made and I rejected in Deputy Commissioner of Taxation v Garrett.[19] I reject this submission for the same reasons I gave in that case.[20]
[17][2015] VSC 572.
[18]Ibid [37]–[40].
[19][2015] VSC 347.
[20]Ibid [32]–[36].
Appropriate orders
Section 60(2) of the Bankruptcy Act 1966 (Cth) contemplates that an action will be stayed ‘until the trustee makes an election… to prosecute or discontinue the action’. Pursuant to s 60(3), if the trustee fails to so elect within 28 days of notice of the action being served upon him or her, the trustee is deemed to have abandoned the action.
In this case, the trustee elected on 23 June 2015 ‘not to continue the action’ with respect to each of the proceedings after receiving notice from the defendant on 26 May 2015.
The defendant submits that although r 25.02 of the Supreme Court (General Civil Procedure) Rules 2005 provides that a plaintiff may discontinue a proceeding before the close of pleadings, or at any time, by leave of the Court or with the consent of all other parties; no such application is being made in this case. Accordingly, the defendant submits that, once the trustee elects to discontinue the action, the appropriate order is that the proceeding be dismissed.
In Cole v Challenge Bank Ltd,[21] the Full Court of the Federal Court considered a similar situation where a trustee had stated that he ‘did not intend to pursue’ the bankrupt’s appeal. Gray J said that he would construe the trustee’s words as an election to discontinue the appeal in accordance with s 60(3). Emmett J said:
The trustee in bankruptcy is the person in whom this appeal is presently vested. The trustee has evinced a clear intention not to prosecute the appeal, whether by way of discontinuance or abandonment does not much matter. I would be inclined to agree with my brother Nicholson that the correspondence evinces an intention to allow the appeal to be abandoned pursuant to s 60(3). There has been no appearance from the appellants. It is clear, in the absence of any formal step, either by the appellants or the trustee in bankruptcy, to dispose of the appeal, that some step has to be taken to dispose formally of the appeal.[22]
[21][2002] FCAFC 200 (‘Cole’).
[22]Ibid [22].
Accordingly, the Full Court ordered that the appeal be dismissed. Further, the court ordered that the appellant pay the respondent’s costs of the motion and on the appeal. Gray J determined the order for costs on the basis that the costs would normally follow the event;[23] and Nicholson J reasoned by analogy with the costs order which would follow on the filing of a notice of discontinuance.[24]
[23]Ibid [17].
[24]Ibid [20].
In Voskuilin v Morisset Mega Markets,[25] Gzell J considered similar circumstances where the trustee had made no election with respect to a claim for damages alleging a breach of the Retail Leases Act 1994 (NSW). As a result, the proceedings were deemed to have been abandoned. His Honour considered that similar considerations applied to those in Cole and ordered the proceeding be dismissed and the plaintiff pay the defendant’s costs of the action.[26]
[25][2005] NSWSC 34 (‘Voskuilin’).
[26]Ibid [16].
In Savage v Australian United Funds Management Ltd,[27] Young JA considered the appropriate orders where the trustee did not make an election with respect to a summons for leave to appeal. His Honour considered the view that the dismissal of the action may not be appropriate if it was likely to lead to a plea of res judicata on a further action brought on the same facts.[28] His Honour decided that it was appropriate to follow the approach adopted in both Cole and Voskuilin where the application was for leave to appeal because ‘[t]he same consideration about the bankrupt after discharge suing again does not apply’.[29] Accordingly, it was ordered that the summons for leave to appeal be dismissed with costs.
[27][2011] NSWCA 270 (‘Savage’).
[28]See eg Millane v President of Shire of Heidelberg [1928] VLR 52, 53; Bendigo Bank Ltd v Demaria [2001] VSC 218 [35]–[36].
[29]Savage [2011] NSWCA 270 [25].
In my opinion, the applications in these cases being effectively an application for leave to appeal, an appeal and an application to review the same decision are appropriately to be dealt with on the approach of Young JA in Savage.
Accordingly, I propose to order as follows:
(a) Proceeding S CI 2014 03714:
The summons dated 13 April 2015 be dismissed with costs.
(b) Proceeding S CI 2015 00644:
The application by the plaintiff pursuant to the Administrative Law Act 1978 commenced on 13 February 2015 be dismissed with costs.
(c) Proceeding S CI 2015 01047:
The notice of appeal dated 19 March 2015 be dismissed with costs.
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