Hawkins v Kingsway Group Limited (No. 2)

[2009] FCA 1336

FEDERAL COURT OF AUSTRALIA

Hawkins v Kingsway Group Limited (No. 2) [2009] FCA 1336

Federal Court of Australia Act 1976 (Cth) ss 25(1), 25(2B)(aa), 31A
Federal Court Rules O 3 r 3

House v The King 55 CLR 499

DAVID CHARLES HAWKINS v KINGSWAY GROUP LIMITED (ACN 089 265 127)

NSD 1135 of 2009

EMMETT J

6 NOVEMBER 2009

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1135 of 2009

BETWEEN:	DAVID CHARLES HAWKINS Appellant
AND:	KINGSWAY GROUP LIMITED (ACN 089 265 127) Respondent

JUDGE:	EMMETT J
DATE OF ORDER:	6 NOVEMBER 2009
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.The proceeding be dismissed.

2.The appellant pay the respondent’s costs of the proceeding.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

The text of entered orders can be located using eSearch on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1135 of 2009

BETWEEN:	DAVID CHARLES HAWKINS Appellant
AND:	KINGSWAY GROUP LIMITED (ACN 089 265 127) Respondent

JUDGE:	EMMETT J
DATE:	6 NOVEMBER 2009
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. I have before me an application for summary dismissal of an appeal pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth). I have been invited to exercise jurisdiction under that provision pursuant to s 25(2B)(aa). Section 31A(2) provides that the Court may give judgment for one party against another in relation to the whole of a proceeding if the first party is defending the proceeding and the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding. Under s 25(2B)(aa) a single judge or a Full Court may give summary judgment. Otherwise, under s 25(1), the appellate jurisdiction of the Court is to be exercised by a Full Court.

2. It is necessary to say something about the background to the proceeding that is the subject of this application.  The proceeding is an appeal from an order of the Court made by a single judge dismissing an application for review of a decision of the Registrar.  The applicant on the motion for summary dismissal, Kingsway Group Limited (Kingsway), commenced a proceeding in the Supreme Court of New South Wales against the appellant, Mr David Hawkins, and Diddy Boy Pty Ltd (Diddy Boy).  On 27 February 2009, judgment was entered in the Supreme Court proceeding against Mr Hawkins and Diddy Boy. 

3. On 9 March 2009, the Official Receiver sealed a bankruptcy notice addressed to Mr Hawkins based on the judgment in the Supreme Court.  That bankruptcy notice was served on Mr Hawkins on 19 March 2009.  The last day for compliance with the bankruptcy notice was 9 April 2009.  On that day, Mr Hawkins commenced proceeding NSD 300 of 2009 in the Federal Court, seeking extension of the time for compliance with the bankruptcy notice and an order setting aside the bankruptcy notice.  An order was made ex parte on that day, extending the time for compliance to 29 April 2009, the return day of the application. 

4. On 9 April 2009, Mr Hawkins and Diddy Boy also filed with the New South Wales Court of Appeal notice of intention to appeal against the judgment of 27 February 2009.  Filing notice of intention to appeal did not, under the rules of the Supreme Court, constitute the commencement of a proceeding in the Court of Appeal. 

5. On 29 April 2009, the return day of proceeding NSD 300 of 2009, the District Registrar adjourned the proceeding on Mr Hawkins' application to 13 May 2009 to enable him to file and serve further evidence.  On 13 May 2009, Mr Hawkins was represented by Mr Pope, solicitor.  The proceeding was adjourned on Mr Pope’s application to 27 May 2009 to enable Mr Hawkins to commence proceedings in the Court of Appeal. 

6. On 27 May 2009, Mr Hawkins appeared before the District Registrar unrepresented.  The District Registrar dismissed the proceeding with costs, on the basis that there was no proceeding on foot to set aside the judgment of 27 February 2009.  The District Registrar was also not satisfied on the evidence before him that Mr Hawkins had any off-setting claim. 

7. The time within which, under the rules, Mr Hawkins was required to seek review by a judge of the District Registrar's decision of 27 May 2009, expired on 17 June 2009.  No application for review of the District Registrar’s decision was filed within that time. 

8. In the mean time, on 9 June 2009, Kingsway presented a bankruptcy petition against Mr Hawkins in the Federal Magistrates Court.  The first return day of the bankruptcy petition was 9 July 2009.  Despite a number of attempts to serve Mr Hawkins, the petition had not been served by that time and the hearing of the petition was adjourned.

9. On 17 July 2009, Mr Hawkins filed a second application to set aside the bankruptcy notice, being proceeding NSD 739 of 2009.  That application was returnable on 29 July 2009.  Mr Hawkins was without legal advice in relation to the drafting of that application.  It may be, and this is a matter of conjecture, that Mr Hawkins, by filing that application, was intending to seek a review of the District Registrar’s decision of 27 May 2009.  However, there is no evidence about that one way or the other.  Even if it were an application for review of the District Registrar’s decision, it was more than four weeks out of time. 

10. Having regard to the difficulty experienced by Kingsway in serving Mr Hawkins with the petition, Kingsway filed an application on 22 July 2009 for orders for substituted service.  On 24 July 2009, on the return of the petition, a registrar of the Federal Magistrates Court made orders for substituted service. 

11. On 29 July 2009, proceeding NSD 739 of 2009, Mr Hawkins’s second application to set aside the bankruptcy notice, came before a registrar of the Court.  Mr Hawkins was represented by Ms McEniery, on instructions of Mr John Mulally, solicitor.  The Registrar dismissed that proceeding with costs on the basis that there was no evidence before the Registrar that any appeal proceeding had been commenced in the Court of Appeal, and that there was no evidence of the quantum or merit of any such proceeding. 

12. Service of the petition was affected on Mr Hawkins in accordance with the order of substituted service, and the return day for the petition was amended to 21 August 2009.  Following service, Mr Hawkins filed in the Court of Appeal, on 10 August 2009, a summons seeking an extension of time to file an application for leave to appeal from the judgment of 27 February 2009 and seeking leave to appeal.  Thus, it is clear that the application for leave to appeal from the judgment of 27 February 2009 was out of time. 

13. On 14 August 2009, Mr Hawkins commenced a third proceeding in the Federal Court, namely, NSD 300 of 2009.  The proceeding was expressed to be an application to set aside the bankruptcy notice and an order setting aside the order of the District Registrar of 27 May 2009.  As I understand the position, Kingsway accepts that that proceeding should be treated as an application for review of the District Registrar's decision of 27 May 2009 and that is how it has been treated.  It is from orders made in that proceeding that Mr Hawkins seeks to appeal to the Full Court. 

14. On 21 August 2009, the return day of the petition, Mr Hawkins was represented by Mr Di Francesco, of counsel, on instructions of Mr John Mulally.  The hearing was adjourned to 4 September 2009. 

15. On 2 September 2009, proceeding NSD 300 of 2009 came before Stone J.  It is necessary to say something about the proceedings on that day.  Mr Hawkins was represented by Mr Di Francesco of counsel.  After announcement of appearances and a brief recounting of the procedural history, her Honour said that technically what Mr Hawkins would need was an extension of time within which to apply for review of the District Registrar's decision of 27 May 2009.  Mr Di Francesco agreed with that proposition. 

16. Her Honour then said that a big hurdle for Mr Hawkins was the delay.  Mr Di Francesco also agreed with that proposition.  Her Honour suggested that the appropriate principles to apply are those that would apply in seeking leave for an extension of time to appeal against an interlocutory judgment of the Court.  That would involve consideration of the reasons for the delay and whether the application, were the leave to be granted, has any real chance of success or whether it would be a futility.  Mr Di Francesco said expressly that he did not disagree with those propositions. 

17. Mr Di Francesco then pointed out that there was no affidavit from Mr Hawkins setting out the reasons for the delay in bringing the application.  Her Honour said that if there was no affidavit that attempted to explain the delay then, short of putting Mr Hawkins in the witness box, to enable him to give evidence, there was nothing before her Honour to explain the delay, yet that is a crucial part of any application that her Honour was then being asked to consider.  After further exchanges, her Honour indicated that she would permit Mr Di Francesco to call Mr Hawkins to give evidence to explain the delay. 

18. When asked, in his oral evidence in chief, what steps he had taken to deal with or respond to the District Registrar’s orders of 27 May 2009, Mr Hawkins said that he had formed the view that the principal issue was the judgment of 27 February 2009.  He said that he had devoted all his time and energy to the filing of the appeal papers in relation to that judgment.  He had also filed an affidavit in proceeding NSD 300 of 2009, in which he set out the steps that had been taken.  In that affidavit, he referred to the filing of the notice of intention to appeal on 9 April 2009 and the dismissal of his application by the District Registrar on 27 May 2009.  He also referred to the other proceedings in the Federal Court to which I have referred. 

19. Mr Hawkins then said that he had lodged a draft notice of appeal with the Registrar of the Court of Appeal for assessment on 20 July 2009.  He attended the Registry of the Court of Appeal on 29 July 2009 and was told that the documents that he had lodged could not be located.  On 7 August 2009, he received a telephone call from the Court of Appeal saying that the documents had been accepted for filing and had been approved on 27 July 2009.  He attended the Registry of the Court of Appeal on 10 August 2009, and provided further copies of the relevant appeal papers. 

20. In his affidavit, Mr Hawkins referred to the notice of motion or summons that he had filed in the Court of Appeal.  That summons contains an endorsement showing that it was filed in the Court of Appeal on 10 August 2009.  Mr Hawkins also referred in his affidavit to the summary of argument that he said had been filed with the Court of Appeal.  In his evidence before Stone J, Mr Hawkins said that he filed his application in proceeding NSD 739 of 2009 on 17 July 2009 because, he believed, the bankruptcy notice was wrong.  He said that he did not have any legal advice in drafting that document.  He also said that he had filed the original initiating process in NSD 300 of 2009 on 14 August 2009, following the preparation of the appeal papers in the Court of Appeal.  He also said that he did not obtain any legal advice in preparing those documents, and had no legal assistance in drafting them. 

21. Mr Hawkins also said in his evidence that he first retained John Mulally to act for him in relation to the petition filed by Kingsway, some 24 or 36 hours before it came on for hearing on 21 August 2009.  He said that, prior to appointing John Mulally to act in connection with the petition at that time, he had not obtained any advice from any legal practitioner about the bankruptcy notice.  He confirmed that he had obtained no legal advice prior to appointing John Mulally in how to review the orders of the District Registrar of 27 May 2009.

22. In cross‑examination, Mr Hawkins pointed out that, in addition to filing the application on 14 August 2009, he had also filed papers in the Court of Appeal in the space of three months.  He said that he had clocked up about 140 hours doing that, whereas in relation to the Federal Court proceeding he had spent no more than 15 hours.  He disagreed with the proposition that, since 27 May 2009, when the orders were made by the District Registrar, all that he had done in the Court of Appeal was file a summons seeking leave to appeal out of time.  He then referred to the summary of argument to which I have already referred.  He said that it took 140 hours to put that material in a form acceptable to the Registrar of the Court of Appeal.  He ended by saying that the turn around time between lodging the documents with the Court of Appeal and picking them up was three weeks, during which time he could do nothing because the Court had the papers. 

23. That is the extent of the evidence before Stone J by way of explaining the delay between the making of the orders of 27 May 2009 and the application for review of those orders by a judge of the Court.  The primary judge reserved her decision on Mr Hawkins’s application and, on 23 September 2009, gave reasons for ordering that the application be dismissed with costs. 

24. In her Honour’s reasons of 23 September 2009, Stone J observed that the power to extend time in Order 3, rule 3 of the Federal Court Rules is a wide power that permits the Court to extend or abridge the time before or after the time expires, at the discretion of the Court.  Her Honour observed that, when a party who has neglected to observe the requirements of the Federal Court Rules imposed on a party for the protection of the other side, and that party comes to the Court for indulgence to ask that the proceeding should continue notwithstanding the default, that party must satisfy the Court that justice requires that the default be overlooked. Such a party must satisfy the Court that there is some reasonable kind of explanation or excuse for its neglect of the rules. 

25. Her Honour also said that, in addition to the explanation for the delay, it has generally been accepted that it is also necessary to consider the likelihood of prejudice to the respondent and whether the applicant for an extension of time has an arguable case.  Those propositions are consistent with the way in which the issue was formulated at the hearing on 3 September 2009, with which Mr Di Francesco agreed.  Her Honour concluded that Mr Hawkins's evidence did not satisfy her that there was any reasonable explanation of his delay. 

26. Stone J said that Mr Hawkins claimed to have been disadvantaged because he was not legally represented, but gave no explanation as to why he did not have legal representation.  Her Honour said that it may have been that Mr Hawkins did not have the necessary resources but, if so, it was for him to put that issue before the Court and that it was not for the Court to speculate as to the reason.  Her Honour found that the extent of the delay in seeking an extension of time and the paucity of the explanation of the delay was a sufficient ground to refuse an extension of time.  Her Honour was satisfied that the Court's discretion to extend the time should not be exercised in Mr Hawkins's favour.  For those reasons, her Honour dismissed the proceeding.  It is inherent in those reasons and orders that her Honour refused an extension of time within which to bring the proceeding.  The proceeding was, therefore, incompetent. 

27. In the meantime, the petition came before registrars of the Federal Magistrates Court on 4 September 2009, 11 September 2009, 18 September 2009, 2 October 2009, 9 October 2009 and 20 October 2009.  On each occasion, the petition was adjourned, on the final occasion to 17 November 2009. 

28. In the meantime, on 8 October 2009 Mr Hawkins commenced a proceeding in the Federal Court purporting to seek leave to appeal from the orders made by Stone J on 23 September 2009.  That is the proceeding presently before me.  Kingsway accepts that leave to appeal was not required because the orders of 23 September 2009 were final orders.  Kingsway did not object to the commencement of that proceeding being treated as the filing of a notice of appeal. 

29. The draft notice of appeal was inadequate and leave was given to file an amended notice of appeal.  On 28 October 2009, Mr Hawkins filed an amended notice of appeal.  The grounds are as follows: 

    (1)Her Honour erred in the exercise of her discretion in relation to Order 3, rule 3 of the Federal Court Rules in that she did not take into account the whole of the appellate procedures undertaken by Mr Hawkins that related to and formed part of the appeal against the orders of the District Registrar of 23 May 2009. 

    (2)Her Honour erred in her findings that Mr Hawkins agreed that he was represented by a solicitor and counsel in the Supreme Court proceedings upon which the judgment was based. 

    (3)Her Honour erred in finding that Mr Hawkins had done very little in respect of advancing and preparing the appeal to the Court of Appeal. 

    (4)Her Honour erred in finding that the evidence of Mr Hawkins was not sufficient to explain the delay, and the link between the absence of legal representation to prosecute the appeal before her Honour. 

    (5)Her Honour erred in finding that, even if her Honour granted the extension of time for the filing of the application for review of the order of the District Registrar, the application had little, if any, chance of success. 

    Kingsway says that the appeal on those grounds has no reasonable prospects of success. 

30. The purpose of s 31A is to strengthen the power of federal courts to deal with unmeritorious matters by broadening the grounds on which they can summarily dispose of unsustainable cases. Section 31A itself makes clear that a proceeding need not be hopeless or bound to fail for it to have no reasonable prospect of success. Nevertheless, the Court must be cautious not to do a party any injustice by summarily dismissing a proceeding. In particular, the Court ought not to dismiss a claim based on a predictive assessment of prospects where it is possible that, if the claim were it to go to a hearing, it may succeed.

31. It was certainly not the intention of the Parliament in introducing s 31A to require the Court to engage in lengthy and elaborate trials on an interlocutory basis for the purposes of determining whether or not a proceeding has no reasonable prospects of success. Further, if there is a real issue of fact or law to be decided, and the rights of the parties depend upon it, it would normally be appropriate for the issue to go to trial. The summary dismissal procedure should not be used to shut out proceedings where, on a proposition of law, there may be room for doubt on questions of law. Further, an inquiry as to the merits should not be for the purpose of resolving the merits in order to determine whether an argument is hopeless, but in order to decide whether the argument is sufficiently strong to warrant a trial.

32. In refusing to extend the time for filing the application for review of the Registrar’s decision, Stone J exercised a discretion.  Such a discretion must, of course, be exercised judicially.  Nevertheless, an appellate court will generally not interfere with the exercise of discretion unless the primary judge acted on a wrong principle, extraneous, or irrelevant matters guided or affected the primary judge, the primary judge mistook the facts, or the primary judge failed to take into account some other material consideration (see House v The King 55 CLR 499 at 504).

33. I do not consider that there are any questions of law or issues of fact raised by the notice of appeal that stand in the way of summary dismissal.  Mr Hawkins points to what he says are errors of fact made by the primary judge, particularly an observation that he was represented in the Supreme Court proceeding that led to the judgment of 27 February 2009.  The evidence before her Honour was that he had been represented by lawyers up until the day of the hearing.  However, that matter has nothing to do with the exercise of the discretion whether or not to extend the time for seeking review of the District Registrar’s decision of 27 May 2009.  If anything, that goes to the question of whether or not there was any prospect of Mr Hawkins succeeding in his application to set aside the bankruptcy notice on the basis that there was some prospect that an appeal to the Court of Appeal might succeed. 

1. There is no suggestion that her Honour applied an incorrect principle in the exercise of her Honour's discretion.  Her Honour stated the principles, which were accepted by counsel in appearing for Mr Hawkins.  There is no reason to doubt that her Honour applied those principles correctly.  There was nothing extraneous or irrelevant that affected her Honour’s decision to refuse an extension of time. 

2. Her Honour made no mistake about the facts upon which the decision to refuse an extension of time was based.  Her Honour made it clear that it was based on the absence of any satisfactory explanation for the delay in seeking a review of the District Registrar's decision.  I consider that her Honour took into account all relevant and material considerations that were before her Honour in exercising the discretion.  On that basis, it appears to me that Mr Hawkins has no reasonable prospect of successfully prosecuting an appeal on the grounds stated in the amended notice of appeal. 

3. It should also be borne in mind that the further delay of the bankruptcy petition could be prejudicial to Kingsway.  The petition has been successively adjourned by reason of the currency of this proceeding.  It is also important to realise and bear in mind that the failure of Mr Hawkins's application to set aside the bankruptcy notice is not fatal to his opposition to the bankruptcy petition.  Certainly, had he succeeded in having the bankruptcy notice set aside, there would have been no act of bankruptcy committed by reason of his failure to comply with it.  It has not been suggested that there is any other deficiency in the bankruptcy notice.  Mr Hawkins at one stage suggested that the bankruptcy notice overstated the debt.  However, that submission was misconceived.  It was not suggested that the amount of the judgment debt of the Supreme Court was overstated in the bankruptcy notice. 

4. It would clearly be open to Mr Hawkins, on the hearing of the bankruptcy petition by the Federal Magistrates Court, to seek further adjournment of the hearing of the petition, pending the determination of his application for leave to appeal from the orders of the Supreme Court of 27 February 2009.  Alternatively, it would be open to him to submit to the Federal Magistrates Court that the petition should be otherwise dismissed within the discretion conferred by the Bankruptcy Act.  That discretion would arise if the Court were satisfied that it is appropriate to go behind the judgment debt, upon which the bankruptcy notice and the petition are based. 

5. If the Federal Magistrates Court were persuaded that, notwithstanding the summary judgment of 27 February 2009, Mr Hawkins is not truly indebted to Kingsway, the Court could dismiss the petition. Of course, once an act of bankruptcy has been committed, it cannot be undone. Nevertheless, matters of bankruptcy, insofar as they involve status, are areas where time limits are critical. I do not consider that there was any arguable error demonstrated on the part of Stone J in refusing to extend the time for seeking the review of the District Registrar’s order. In the circumstances, I consider that the appeal should be dismissed pursuant to s 31A.

I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate:
Dated:       17 November 2009

The Appellant appeared in person
Counsel for the Respondent:	Mr PG Cutler
Solicitor for the Respondent:	Willis & Bowring

Date of Hearing:	6 November 2009
Date of Judgment:	6 November 2009