Haughton v Shanahan (No 2)

Case [2024] FCA 350

FEDERAL COURT OF AUSTRALIA

Haughton v Shanahan (No 2) [2024] FCA 350

File number: SAD 52 of 2023
Judgment of: CHARLESWORTH J
Date of judgment: 11 April 2024
Catchwords: BANKRUPTCY – application for summary judgment of an originating application – originating application seeking an order under s 153B of the Bankruptcy Act 1966 (Cth) annulling a bankruptcy – where applicant became bankrupt on a creditor’s petition founded on a judgment debt – where unsuccessful appeal from judgment giving rise to judgment debt – where Registrar who made the sequestration order not invited to go behind the judgment other than for limited purposes – where applicant contends the sequestration order ought not to have been made because Registrar should have gone behind judgment – applicant asserting issues arise under the Constitution – arguments raised by applicant on the annulment application having no reasonable prospects of establishing the sequestration order ought not to have been made – originating application summarily dismissed under s 31A of the Federal Court of Australia Act 1976 (Cth) – applicant seeking to agitate a case that could have been agitated in the proceedings in which the judgment debt arose – application for annulment an abuse of process to that extent
Legislation:

Bankruptcy Act 1966 (Cth) ss 40, 41, 43, 52, 86, 153B

Crimes Act 1914 (Cth)

Federal Court of Australia Act 1976 (Cth) ss 31A, 35A

Judiciary Act 1903 (Cth) s 78B

Federal Court (Bankruptcy) Rules 2016 (Cth) r 2.02

Federal Court Rules 2011 (Cth) rr 5.23, 13.01, 26.01, 39.03

Retail and Commercial Leases Act 1995 (SA) s 30

Cases cited:

Attorney-General (WA) v Marquet (2003) 217 CLR 545

Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (1999) 95 FCR 292

Barkla v Allianz Australia Insurance Limited [2018] FCA 2070

Chang v Haughton, in the matter of Haughton [2021] FCA 765

Chang v Haughton, in the matter of Haughton (No 2) [2021] FCA 998

Commonwealth Bank of Australia v Haughton [2020] SASC 135

Corney v Brien (1951) 84 CLR 343

Deputy Commissioner of Taxation v Vasiliades [2015] FCA 1190

Du Bray v ACW [2020] FCA 1142

Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89

Harris v Caladine (1991) 172 CLR 84

Haughton v Chang [2020] SADC 94

Haughton v Chang [2021] SASCA 90

Haughton v Chang [2023] SASCA 112

Haughton v Shanahan [2024] FCA 160

Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51

McDonald v Colbran [2019] FCA 1937

Mineralogy Pty Ltd v Australian Securities and Investments Commission (2021) 156 ACSR 508

QB4 Capital Pty Limited v Guardian Securities Limited [2023] FCAFC 72; 411 ALR 496

R v Davison (1954) 90 CLR 353

Re Flatau; Ex parte Scotch Whisky Distillers Ltd (1888) 22 QBD 83

Re Frank, ex parte Piliszky (1987) 16 FCR 396

Shaw v Yarranova Pty Ltd (No 2) (2017) 252 FCR 267

Wren v Mahony (1972) 126 CLR 212

Division: General Division
Registry: South Australia
National Practice Area: Commercial and Corporations
Sub-area: General…

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Haughton v Shanahan (No 2) [2024] FCA 350
Case
[2024] FCA 350
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CaseChat Overview and Summary

The case of Haughton v Shanahan (No 2) involves the applicant, Mr. Haughton, seeking to annul his bankruptcy under section 153B of the Bankruptcy Act 1966 (Cth). Mr. Haughton became bankrupt following a creditor's petition based on a judgment debt. He had previously lost an appeal against the judgment that led to his bankruptcy. The application for annulment of the bankruptcy was dismissed by the court on the basis that it had no reasonable prospects of success. The legal issues before the court included whether the Registrar who made the sequestration order was correct in not going behind the judgment, and if Mr. Haughton's arguments on the annulment application had any reasonable prospects of success.

The court found that the Registrar was not obliged to go behind the judgment, as Mr. Haughton had not provided any reason for the Registrar to do so, other than asserting that he was not personally liable for the debt because he was not a party to the lease in his personal capacity but as the trustee of a family trust. The court also found that Mr. Haughton's arguments on the annulment application had no reasonable prospects of success, as they were based on allegations of dishonesty and corruption against various courts and politicians, which were lacking in content. The court concluded that the application for annulment was an abuse of process, as Mr. Haughton could have raised these issues in the original proceedings in which the judgment debt arose.

In summary, the court dismissed the originating application for annulment of the bankruptcy, finding that it had no reasonable prospects of success and that it constituted an abuse of process. The orders of the court were that the originating application be summarily dismissed. The dismissal did not prevent Mr. Haughton from bringing properly constituted proceedings seeking directions in connection with the ongoing administration of the bankrupt estate, if he had standing to do so.

Orders

Orders of the court

1. The originating application is summarily dismissed.

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

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

The appropriate order is that the originating application be dismissed as against both the Trustee and Mr Chang. The order does not prevent Mr Haughton from bringing properly constituted proceedings seeking such directions in connection with the ongoing administration of the bankrupt estate as he may have standing to bring.EVIDENCE The Trustee’s application is supported by an affidavit affirmed by him on 19 February 2024 together with written submissions. Mr Haughton relied on eight affidavits sworn by him on 1 May 2023, 22 May 2023, 31 January 2024, 28 February 2024, 14 March 2024, 18 March 2024, 20 March 2024 and 27 March 2024, together with an affidavit of Mr Michael Thomas Holt sworn 31 January 2024. In large parts the affidavits contain material in the nature of legal submissions and I have treated them as such. In other respects the affidavits disclose the issues Mr Haughton seeks to have resolved on the assumption that this Court can and would go behind the Judgment, including by hearing and resolving substantive allegations of wrongdoing against Mr Chang and other evidentiary issues. In the context of the Trustee’s application for summary judgment, those parts of Mr Haughton’s affidavits have been read for the purpose of discerning whether they disclose an arguable case for the annulment of his bankruptcy, considered at their highest. The Court has not read the affidavits for the purpose of resolving any substantive issue of fact arising in the original lease dispute between Mr Haughton and Mr Chang.EARLIER PROCEEDINGS This action is preceded by a history of dispute and litigation between Mr Haughton, Mr Chang and others. The whole of that history is relevant. The following narrative is drawn from the Trustee’s affidavit and is otherwise apparent from the various judgments and orders annexed to it. The District Court Proceedings began their life in the Magistrate’s Court of South Australia in a suit brought by Mr Haughton against Mr Chang and his wife alleging the unlawful termination of a lease. It is common ground that the lease was in relation to land situated in Lonsdale in South Australia and that it permitted Mr Haughton to deposit agreed amounts of fill on the land. Mr Chang counterclaimed for damages flowing from an alleged breach of the lease by Mr Haughton. The District Court Proceedings and the Judgment are otherwise summarised in the reasons of the Court of Appeal of the Supreme Court of South Australia in Haughton v Chang [2023] SASCA 112 (Livesey P, David JA) in terms that are not effectively challenged. I am satisfied that it is a correct summary and I gratefully adopt it:Long running litigation between the parties6 These parties have been engaged in litigation for some years.7The dispute arises out of a lease agreement they entered during 2013 by which the appellant leased land owned by the respondent and Ms Kiew at Liston Road in Lonsdale, south of Adelaide. After entry into the lease the appellant took possession of the land and commenced depositing landfill. He was required to make various payments on presentation of an invoice, including for rent. By 2015 the parties were in dispute over what the respondent and Ms Kiew claimed were late payments by the appellant. The respondent and Ms Kiew instructed their solicitors to terminate the lease agreement and serve a notice of re-entry, after which the locks were changed and possession was resumed.8The appellant commenced proceedings in the Magistrates Court in mid-2015 and these were transferred to the District Court in 2016. An initial trial listed in 2018 did not proceed and the trial was eventually listed to commence in late 2019. By that stage the appellant’s solicitors had been given leave to withdraw and the appellant sought an adjournment. Although that was opposed, the trial was relisted for hearing during mid-2020 with 10 days set aside.9By late 2019 the appellant was raising a number of constitutional challenges to the jurisdiction of the District Court to hear the case. After the appellant failed to attend two directions hearings, the trial commenced on 1 June 2020. According to the District Court judge who heard the trial, the appellant maintained his objection but did not intend to prosecute his claim:Mr Haughton attended on the first day of trial with a large group of people that he described as amicus curae. Owing to the limited size of the courtroom, and COVID-19 social distancing requirements, it was necessary for a number of these to sit outside. This caused some contention but ultimately the matter commenced. It did not appear that Mr Haughton was hampered in his submissions by limiting the number of supporters in Court. At the outset, Mr Haughton sought to challenge the jurisdiction of the Court to hear this action. He did not explain why he had not raised this by way of application or amendment of his pleadings. When pressed he said that he did not intend to address or call any evidence concerning the substantive issues raised in his pleadings against the Changs. It was pointed out to Mr Haughton that he had issued the proceedings against Mr Chang and Ms Kiew; he had invoked the jurisdiction of the Court. Mr Haughton disputed this by saying ‘the jurisdiction is fraudulent and I found out after it was invoked by my lawyers’. There was considerably more in this vein. I attempted to have Mr Haughton articulate what his application was with limited success…(Citation omitted)10Eventually the appellant declined to prosecute his action. He also declined to discontinue it. The judge gave the appellant some time to consider whether he would press his claim. He was warned that he was at risk of the claim being dismissed. In response, the appellant purported to serve criminal proceedings on the court, placing a large box of documents on the bar table. The appellant told the judge that he would see her in the Full Court of the Supreme Court of Victoria. Service was declined and the box was made available to the appellant for collection.11In the course of her reasons, the judge referred to other litigation in which the appellant had made similar arguments about jurisdiction. These arguments had previously been described as being ‘without merit’, ‘manifestly misconceived’ and ‘seriously legally flawed’. The judge agreed with these conclusions. In the face of the appellant’s failure to raise his jurisdictional issue in a proper form and his stated intention not to prosecute his claim, the judge dismissed the appellant’s claim.12A counterclaim was, however, pressed. Mr Chang and Ms Kiew were not legally represented and had an imperfect grasp of what was required to prove their counterclaim. The trial was adjourned for some days to give them an opportunity to seek legal advice. Despite his objections to the jurisdiction of the court, the appellant later attended and cross-examined the respondent and gave evidence in support of his own defence. After carefully considering the terms of the agreement and the evidence offered in support of the cross-claim, the trial judge gave judgment on the counterclaim in the sum of $364,988 inclusive of interest but in addition to costs.13The appeal against that judgment was dismissed. Doyle JA (with whom Bleby JA agreed) rejected the appellant’s allegations of perjury by the respondent:Mr Haughton’s complaints appear to be two-fold. First, he contends that the trial Judge was led into error as a result of Mr Chang having committed perjury. In this regard, he seeks to rely on fresh evidence regarding the terrain of the Property; he contends that this evidence proves that Mr Chang gave dishonest evidence when he said that there was a functional fence on the Property at the time Mr Haughton took possession.Secondly, Mr Haughton contends that the lease had been frustrated before the respondents had terminated the Agreement, due to issues with the stormwater connection on the Property. He again seeks to rely on fresh evidence, including photographs of the Property, documents produced by the Onkaparinga Council, and correspondence from the same.Having reviewed the material filed by Mr Haughton, I do not think there is any merit in either of these challenges to the trial Judge’s decision. There is no basis in the material before the Court from which it could sensibly be inferred that Mr Chang gave dishonest evidence, nor is there any evidence to support Mr Haughton’s claim that the Agreement had been frustrated.14The Court refused to receive further evidence on appeal and refused the appellant an extension of time in which to appeal.

Decision

Reasons for decision

Nor is the proceeding constituted as an application for review of the Registrar’s decision and there is no proper basis for treating it as such. The absence of an application for review is to be understood against the reasons of White J discussed earlier in these reasons. They record that Mr Haughton has previously been given guidance about s 35A of the FCA Act, and the reasons themselves repeat that guidance. Mr Haughton has had the benefit of those reasons for some years now. Against that background, I consider it neither necessary nor appropriate to repeat the guidance previously given to Mr Haughton, notwithstanding his status as an unrepresented litigant. Whether this action enjoys reasonable prospects of success is a question to be determined having regard to the conditions on the power under s 153B of the Bankruptcy Act, as summarised earlier in these reasons.Going behind the Judgment On an annulment application the Court may receive evidence that was not before the Registrar or Judge who made the sequestration order. However, in determining whether the sequestration order ought not to have been made, it is relevant to consider the evidence and submissions upon which the bankrupt relied in opposing the petition. The Trustee deposed that the Registrar had provided Mr Haughton with an opportunity to file evidence in opposition. The material that he filed is now annexed to the Trustee’s affidavit. At the hearing of the present application, Mr Haughton did not adduce evidence to show that the Trustee’s description of what occurred in Sequestration Proceedings was inaccurate or incomplete. The affidavit relied upon by Mr Haughton in opposition to the petition was short. It was confined in its subject matter to an assertion that he was not personally liable in debt to Mr Chang, because he was not party to the lease in his personal capacity but rather as the trustee of a family trust. He annexed an extract from the Judgment together with correspondence directed to the Registrar of the District Court requesting that the record of that Court be corrected to correctly identify him as having been sued in his capacity as a trustee. To the extent that Mr Haughton relies upon the same contention for any purpose in support of the Annulment Application it has no reasonable prospects of success. The Registrar was plainly correct to proceed on the basis that a trustee is personally liable for the debts of the trust, although a trustee may turn to the trust to be indemnified in respect of such debts: QB4 Capital Pty Limited v Guardian Securities Limited [2023] FCAFC 72; 411 ALR 496, Moshinsky, Stewart and Jackman JJ at [90] and the cases cited therein. Mr Haughton’s affidavit in the Sequestration Proceedings is relevant for what it does not contain. Critically, Mr Haughton advanced no reason for the Registrar to go behind the Judgment other than the argument based on his status as trustee. In those circumstances, the Registrar could be under no obligation to consider any of the matters now raised by Mr Haughton in seeking to annul his bankruptcy: she was entitled to act on the Judgment as proof of the debt and she implicitly did so. Nothing adduced by Mr Haughton in this proceeding supports a claim that the Registrar ought to have considered the exercise of her discretion to go behind the Judgment of her own volition, nor that the exercise of any discretion not to go behind the Judgment miscarried. The judgment followed contested litigation in which Mr Haughton had every opportunity to make forensic choices to prosecute his claim (or not prosecute it as the case may be) and to defend the counterclaim. There was nothing before the Registrar to suggest otherwise.

Ratio Decidendi

Legal Principle Established

The affidavits also contain allegations of dishonesty and corruption directed to various courts and politicians. They are lacking in content and I have understood them as in the nature of a summation of Mr Haughton’s sense of grievance that various courts have thus far failed to recognise any merit in his claims.CONSIDERATION The submission that the Registrar lacked the power to make the sequestration order was based on R v Davison (1954) 90 CLR 353. It cannot enjoy reasonable prospects of success given the later authorities concerning the question and the availability of an avenue for de novo review. In considering Mr Haughton’s affidavits and submissions I have otherwise borne in mind that he is a self-represented litigant. The materials reflect that status. They are replete with legal language but in many respects the points he seeks to make are incomprehensible or demonstrate a fixation on matters that (as explained below) cannot assist him in the present proceeding. Mr Haughton’s submissions otherwise betrayed a belief that this Court’s jurisdiction can be invoked as a means of redress against his perceived adversaries, including for the purpose of securing criminal convictions and orders for the imposition of penalties. These are not criminal proceedings. The issue in dispute is whether this Court should exercise the jurisdiction under s 153B of the Bankruptcy Act. Nor is the proceeding constituted as an application for review of the Registrar’s decision and there is no proper basis for treating it as such. The absence of an application for review is to be understood against the reasons of White J discussed earlier in these reasons. They record that Mr Haughton has previously been given guidance about s 35A of the FCA Act, and the reasons themselves repeat that guidance. Mr Haughton has had the benefit of those reasons for some years now. Against that background, I consider it neither necessary nor appropriate to repeat the guidance previously given to Mr Haughton, notwithstanding his status as an unrepresented litigant. Whether this action enjoys reasonable prospects of success is a question to be determined having regard to the conditions on the power under s 153B of the Bankruptcy Act, as summarised earlier in these reasons.Going behind the Judgment On an annulment application the Court may receive evidence that was not before the Registrar or Judge who made the sequestration order. However, in determining whether the sequestration order ought not to have been made, it is relevant to consider the evidence and submissions upon which the bankrupt relied in opposing the petition. The Trustee deposed that the Registrar had provided Mr Haughton with an opportunity to file evidence in opposition. The material that he filed is now annexed to the Trustee’s affidavit. At the hearing of the present application, Mr Haughton did not adduce evidence to show that the Trustee’s description of what occurred in Sequestration Proceedings was inaccurate or incomplete.