James Legal Pty Ltd v Milanos
[2016] FCCA 3202
•12 December 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| JAMES LEGAL PTY LTD v MILANOS & ANOR | [2016] FCCA 3202 |
| Catchwords: BANKRUPTCY – Application to set aside Personal Insolvency Agreement – application to amend “Statement Setting Out Grounds for Relief” – application refused. |
| Legislation: Bankruptcy Act 1966, ss.222, 222C Federal Circuit Court of Australia Act 1999 (Cth), ss.15, 42 |
| Cases cited: Acton v Hammer [2013] FCCA 1174 Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CLR 175 |
| Applicant: | JAMES LEGAL PTY LTD (ACN 097 306 397) |
| First Respondent: | NICHOLAS MILANOS (AS TRUSTEE OF THE PROPERTY OF ALFRED MICHAEL VINCENT ATTARD) |
| Second Respondent: | ALFRED MICHAEL VINCENT ATTARD |
| File Number: | SYG 2710 of 2015 |
| Judgment of: | Judge Nicholls |
| Hearing dates: | 1 July 2016 and 27 October 2016 |
| Date of Last Submission: | 2 November 2016 |
| Delivered at: | Sydney |
| Delivered on: | 12 December 2016 |
REPRESENTATION
| Counsel for the Applicant: | Mr S Epstein SC |
| Solicitors for the Applicant: | James Legal |
| Solicitors for the First Respondent: | Mr N Fasullo of Somerset Ryckmans |
| Counsel for the Second Respondent: | Mr S Wells |
| Solicitors for the Second Respondent: | Lazarus Legal |
ORDERS
The application made on 27 October 2016 for leave to amend the Statement Setting out Grounds for Relief filed on 6 June 2016 is refused.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 2710 of 2015
| JAMES LEGAL PTY LTD (ACN 097 306 397) |
Applicant
And
| NICHOLAS MILANOS (AS TRUSTEE OF THE PROPERTY OF ALFRED MICHAEL VINCENT ATTARD) |
First Respondent
| ALFRED MICHAEL VINCENT ATTARD |
Second Respondent
REASONS FOR JUDGMENT
This is an application seeking leave to amend an application made by James Legal Pty Ltd ACN 097 306 397 (“the applicant”) under the Bankruptcy Act 1966 (Cth) (“the Act”) on 5 October 2015 seeking an order that the Personal Insolvency Agreement made between Mr Nicholas Milanos (as Trustee Of The Property Of Alfred Michael Vincent Attard) (“the first respondent”) and Mr Alfred Michael Vincent Attard (“the second respondent”) be set aside pursuant to s.222 and s.222C of the Act.
Before the Court
Relevant to the consideration before the Court, the following is a short chronology of the progress of this matter before the Court since the filing of the application on 5 October 2015, supported by an affidavit made by Mr Peter Richard James on 3 October 2015 and filed on 6 October 2015:
1)23 October 2015 – the first respondent filed a submitting notice and a notice of address for service. The second respondent filed a notice of appearance.
2)26 October 2015 – the parties appeared at a first Court date before a Registrar of the Court. On that day, orders were made referring the matter to a Judge of the Court.
3)3 December 2015 – the second respondent filed an Application in a Case (“AIC”) seeking that the applicant’s application filed on 5 October 2015 be struck out. The AIC was supported by an affidavit by Mr Barry Neil Lazarus made on 3 December 2015.
4)14 December 2015 – the applicant filed an affidavit made by Mr Peter Richard James on 14 December 2015.
5)16 December 2015 – the AIC was dismissed by consent. The matter was listed for further directions on 1 April 2016. Orders were made for the filing of evidence by the parties by way of affidavit.
6)8 March 2016 – the second respondent filed an affidavit made by him on 8 March 2016. This was not filed in accordance with the timetable made on 16 December 2015.
7)1 April 2016 – the parties appeared for further directions. On that date orders were made for the filing and serving of any evidence by way of affidavit and written submissions. The matter was listed for final hearing on 1 July 2016.
8)6 June 2016 – the applicant filed an affidavit made by Mr Peter Richard James on 6 June 2016 and a “Statement Setting Out Grounds for Relief”. This was not filed in accordance with the timetable made on 1 April 2016.
9)8 June 2016 and 15 June 2016 – the parties appeared at directions hearings in relation to contraventions of the timetables that had been set. Further orders were made on 15 June 2016, including the filing and serving of any objections to the evidence filed.
10)24 June 2016 – the second respondent filed an affidavit made by him on 24 June 2016 and written submissions.
11)1 July 2016 – the matter proceeded to final hearing. The matter did not conclude within the time estimated by the parties. Leave was granted to the second respondent to file some “short form” evidence in relation to a point that had been raised.
12)17 October 2016 – the second respondent filed an affidavit made by him on 17 October 2016.
13)27 October 2016 – the matter was listed for resumption of the hearing. At the resumption of the hearing, the applicant sought leave to amend the application.
As stated above, at the commencement of the adjourned hearing on 27 October 2016, the applicant’s counsel sought leave to amend the applicant’s “statement setting out grounds for relief” (“SSOGFR”). The applicant handed up an amended SSOGFR on which he sought to rely. No satisfactory explanation was given by the applicant for the late attempt to amend its case, let alone any evidence in support.
Although the first respondent had filed a submitting notice, his solicitor who was present in Court, was given the opportunity to address the proposed amended SSOGFR given that it made direct reference to the conduct of the first respondent and sought relief against him.
Both respondents opposed the grant of leave. Given the large number of proposed amendments, the parties were given the opportunity to file written submissions. All parties have taken up that opportunity.
Section 42 of the Federal Circuit Court of Australia Act 1999 (Cth) (“the FCCA Act”) provides that the Court must “endeavour to ensure that the proceedings are not protracted”. In Acton v Hammer [2013] FCCA 1174 at [57] the Court cited French CJ in Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CLR 175 (“Aon Risk”), and relevantly stated :
“Those paragraphs address, fairly and specifically, the obligation upon Courts to ensure that business is transacted effectively and efficiently, by reference, not only to the interests of the parties, but those of the Court and other litigants and users of the Court. In particular, French CJ, quoting the decision of Lord Griffiths observes:
The pressure on Courts caused by the great increase in litigation and the consequent necessity that, in the interests of the whole community, legal business should be conducted efficiently. The emollient effect of an order for costs as a panacea may now be consigned to the Aladdin’s cave, which Lord Reid rejected as one of the fairy tales in which we no longer believed.”
In this light, it is important to note that the Federal Circuit Court Rules 2001 (Cth) (“the FCC Rules”), made under the FCCA Act, which relevantly have as their object, in part, at r.1.03 (of the FCC Rules) as follows:
“(1) The object of these Rules is to assist the just, efficient and economical resolution of proceedings.
(2) In accordance with the objects of the Act, the Rules aim to help the Court:
* to operate as informally as possible
* to use streamlined processes
* to encourage the use of appropriate dispute resolution procedures.
(3) The Court will apply the Rules in accordance with their objects.
(4) To assist the Court, the parties must:
*avoid undue delay, expense and technicality
…”
The Rules of this Court do provide for the making of an AIC (see r.4.01 of the FCC Rules). However, as is made clear in r.4.01(4) of the FCC Rules, if a person makes an AIC before final orders have been made in a proceeding, as in this case, the AIC must be made in accordance with r.4.08 of the FCC Rules.
Relevantly, r.4.08(3) of the FCC Rules, when read with r.4.05 of the FCC Rules, requires a supporting affidavit to be filed at the same time, and served on all persons against whom the order is sought.
In the current case, this has not occurred. No AIC was filed in support of the application for amendment, let alone any affidavit to support the attempt to amend at this “late” stage. Further, no attempt was made by counsel to explain the failure to comply with this obligatory step. These are not cases involving unrepresented applicants where some consideration may be given to the use of r.1.06 of the FCC Rules.
In the current case, the applicant is a law firm. The application to the Court made on 5 October 2015 was prepared by a solicitor. Counsel has been involved since at least as at 15 June 2016, when written submissions were drafted by counsel.
These proceedings have therefore been on foot since 5 October 2015, in relation to an insolvency agreement entered into on 18 August 2015. Yet, as set out above, on the second day of the hearing on 27 October 2016, adjourned from 1 July 2016, and also in circumstances where the matter had been set down for a one-day hearing, the applicant sought to amend its application.
As stated above, the applicant’s counsel raised the matter of the amendment of, in effect, the grounds of the application, without any attempt to comply with the Rules of Court or, importantly, to otherwise satisfactorily explain why the matters sought to be raised now were not raised earlier in the proceedings.
The failure to follow the FCC Rules, whose objects are the efficient and economical resolution of the proceedings, in my view, informs the matters set out below.
It is important to note the following, even though no reference was made to them by the applicant:
1)Section 15 of the FCCA Act:
“Making of orders and issue of writs
The Federal Circuit Court of Australia has power, in relation to matters in which it has jurisdiction, to:
(a) make orders of such kinds, including interlocutory orders, as the Federal Circuit Court of Australia thinks appropriate; and
(b) issue, or direct the issue of, writs of such kinds as the Federal Circuit Court of Australia thinks appropriate.”
2)Rule 7.01(1) of the FCC Rules:
“Power to amend
(1) At any stage in a proceeding, the Court or a Registrar may allow or direct a party to amend a document (other than an affidavit) in the way and on the conditions the Court or the Registrar thinks fit.”
3)Rule 1.06 of the FCC Rules provides that the Court may dispense with the Rules if it considers it is in the interests of justice to do so.
The exercise of the Court’s power is, therefore, discretionary with reference to what the Court thinks appropriate, or “thinks fit”. The applicant’s failure to comply with the FCC Rules in the making of the application to amend may be addressed, if it is in the interests of justice to do so.
The applicant’s explanation of the proposed amendments appear essentially to have two foci. First, to raise an argument which seeks to impugn certain conduct of the first respondent. This focuses on what are said to be incorrect, or incomplete, “matters” in the first respondent’s (the Trustee’s) report to creditors, and the lack of diligence or lack of impartiality on his part.
The second focus is on the second respondent’s statement of affairs which the first respondent was required to produce to the applicant, by orders made by a Registrar of the Court on 26 October 2015. The proposed argument here is that the statement omitted certain material particulars, and was “incorrect” in respect to other material particulars.
The applicant submits that the factual basis for all of its proposed amendments clearly arise from the evidence provided in the proceedings. Although the import of this assertion is not expressly stated, it is reasonable, in context, to understand this as an argument that the applicant is not seeking to raise matters not already known on the material in these proceedings, but rather seeking to expand the detail or particularity of its case. In this light, the respondents cannot be said to be unfairly prejudiced if the proposed amendments were to be permitted (see in particular [1.13] and [9.1] of the applicant’s written submissions of 31 October 2016).
The question that immediately, and relevantly, arises is, if the amendments were so readily available on the evidence, if the “contents of the documents are irrefutable” (see [9.1] of the applicant’s written submissions of 31 October 2016), then why did the applicant not raise these matters at the available and appropriate time. Instead of doing this the applicant waited until the commencement of the adjourned date of the hearing to do so, and further, did not follow the process set out in the FCC Rules for such action.
The first respondent, in particular, would be significantly prejudiced if the proposed amendments, which wholly or in part, relate to him, were to be allowed. The second respondent would also suffer prejudice and in circumstances where costs may not be adequate to address this prejudice.
However, and further, I agree with the second respondent that, in its approach to considering the applicant’s request for leave to amend, it is not simply a matter for the respondents to demonstrate they would not be prejudiced. What is in the interests of justice requires a balancing of a number of elements and what is reasonable in the circumstances.
As set out above, this matter has been on foot for some time. Orders, made by consent, by a Registrar of the Court on 26 October 2015 required the applicant to file a SSOGFR by 16 November 2015. The documents on which the applicant now relies to base his proposed amendments are the statement filed “late” on 6 June 2016 (albeit apparently “served” by the applicant on 16 December 2015, see the second respondent’s submissions filed on 1 November 2016 at [8]), the affidavit of Mr Peter Richard James made on 14 December 2015, and in particular exhibit “PJ2” to this affidavit and “AE1” filed at the hearing on 1 July 2016.
As noted above, the applicant at that time was, and continues to be, a firm of solicitors. The applicant’s statement, and affidavit (referred to at [23] above), were prepared by a solicitor. The filing of these documents at that time would have been done in the knowledge that the first respondent had filed a submitting notice on 23 October 2015.
In its submissions, the applicant asserts that while the first respondent, through his solicitor, has described himself as having “only filed a submitting appearance” (at [5.5] of the applicant’s written submissions of 31 October 2016), he has nonetheless been legally represented at the hearing and “successfully pressed an objection” to the admission of certain evidence.
I understand the submission to be that, notwithstanding the assertion that “only” a submitting appearance has been filed, the first respondent has taken some active role in these proceedings.
The first respondent’s conduct in this regard must be understood in the context in which it has been performed. Contrary to the implication of some inconsistency in the first respondent’s conduct, my view is that the first respondent has, appropriately, responded to what the applicant has elected to put before the Court, and at the time at which that election was sought to be exercised.
The applicant’s initiating documents made no allegation, or raised any claim calling for any active involvement by the first respondent. In this light, it was reasonable for the first respondent, given there was nothing put to which he had to respond, nor was any relief sought against the first respondent, to file the submitting notice. I cannot see that the attendance by the first respondent’s solicitor at direction hearings and attendance at the hearing, in any way of itself, can be said to constitute some conduct contrary to the submitting notice.
It is the case that in his affidavit of 3 October 2015, Mr James made reference to certain claimed conduct by the first respondent, in essence “restricting” the way he was able (on behalf of the applicant) to access view, inspect, and make notes about, the first respondent’s records. Notwithstanding this, in its SSOGFR filed on 6 June 2016, the applicant did not identify, or press, any relief that it sought in relation to the first respondent.
I agree with the first respondent that, regard must be had to the purpose of pleadings in proceedings before this Court. It is not a case of simply saying that this is not a Court of “strict pleadings”. Plainly, pleadings can be amended consistent with Court orders, and with leave of the Court.
The issue, however, in terms of the efficient conduct of matters before this Court, in light of the workload of the Court, and in terms of procedural fairness to the party, or parties, against which a case is raised, is that pleadings are meant to inform and define the issues. In the current case, the respondents are entitled to know the case, if any, put against them, and to know it in a timely and appropriate fashion so that they may also respond in a timely fashion.
In this light, I agree with the first respondent that, in all the circumstances, it is not appropriate that the applicant be permitted to, certainly in the case of the first respondent, and at this late stage, substantially expand his case, particularly when it has had ample opportunity to do so at an appropriate and reasonable time. As the first respondent submitted ([4] of the first respondent’s written submissions filed 2 November 2016):
“The purpose of pleadings in proceedings is to define the issues so that the opposing parties can know the case they must meet and the issues the Court will be required to decide. Pleadings also affect any evidence that may be adduced by the parties. As Perram J noted in Stewart v Deputy Commissioner of Taxation [2010] FCA 402 at [35]:
‘…It follows that a pleading which departs from its principal purpose of affording procedural fairness to the opposing party is a pleading which confounds the ends of justice. It engenders expense, delay and the wastage of public resources; it is not to be countenanced.’
In the current proceedings, the Applicant must be limited to its pleadings as filed. The proposed Amended Statement clearly raises significant concerns given the relevant factors summarised in Equuscorp above.”
I do not accept the applicant’s submissions that the granting of leave would not require additional evidence from, at least, the first respondent. The applicant submits that it is difficult to imagine what that evidence may be.
However, and for example, the applicant’s proposed amendments focus on what are said to be “discrepancies” in documents before the Court. At [8] of its written submissions, the applicant points to what is described as a “discrepancy” between one item in the list of unsecured creditors in the debtor’s statement of affairs and a relevant proof of debt (see Exhibit “PJ2” annexed to the affidavit of Mr Peter Richard James made on 14 December 2015).
The applicant’s submission that documents in evidence do not otherwise explain this discrepancy, even if accurate, does leave open the possibility that the respondents would seek the opportunity to “discover”, and present, documents which may do so, or to attempt to investigate to see if any such document exists.
Further, I agree with the second respondent’s submission that some of the matters now the subject of the proposed amendment were raised by the applicant in opening submissions on 1 July 2016. That fact, rather than supporting the request to amend now, exacerbates the applicant’s delay in raising the matter that it now seeks to raise. In the absence of any explanation to the contrary, it cannot be said that the applicant was not able, as at least 1 July 2016, instead of 27 October 2016, to have sought to make his application to amend at that earlier time.
Plainly, the applicant’s proposed amendments to his SSOGFR have not been the subject of any contested hearing. While the parties have been given the opportunity to make “short” submissions explaining their position, the situation is that any assessment of the merits of the applicant’s proposed amendments can more accurately only be described as being at an “impressionistic” level.
The difficulty in these circumstances is that to properly assess the merits of the applicant’s proposed amendments would require the very process which the applicant seeks, and the respondents oppose.
This point is illustrated by the example referred to by the second respondent in his submissions. The applicant wishes to press the assertion (at [9](i) of the proposed amended SSOGFR) that the first respondent’s report to creditors did not disclose the profits made by the second respondent and his wife in relation to the sale of two properties.
The fact of those sales were known to the applicant as at 14 December 2015 when Mr James made his affidavit of that date (see the relevant Annexures to that affidavit). The applicant argues that the relevant documents at “PJ-2” reveal a particular “profit” made by them. As the second respondent correctly, in my view submits, the simple comparison between the purchase and sale prices of the two properties does not reveal the “true” profit and it does not take into account any expenses incurred, if any, in any improvements, in relation to the two properties.
In short, the applicant had available, at least as at 14 December 2015, information which may have been of use to the totality of his case. For some unexplained reason it elected to not directly refer to this as part of its case until 1 July 2016, and then made no identification of it as part of an intended amendment to the SSOGFR until the resumption of the hearing on 27 October 2016.
In essence, the amendments sought by the applicant now rely on impugning the conduct of the respondents. That is the first respondent’s conduct in relation to the report to creditors, and the second respondent’s conduct in the reporting on his financial affairs.
However, in the weighing of the relevant factors in the consideration of the exercise of the Court’s discretion, the applicant’s conduct of its case, and also in light of the requirement for the efficient conduct of proceedings as set out above, is as the second respondent submits, a relevant consideration in the exercise of the Court’s discretion as to what is fit or appropriate in the interests of justice.
This case has been before the Court since 5 October 2015. The second respondent’s submissions set out relevant references to the applicant’s conduct of its case ([8] of the second respondent’s written submissions of 1 November 2016):
“It is submitted that the Applicant's conduct in these proceedings generally is a relevant consideration in the exercise of the Court's discretion and that the Court should have regard to the following matters in relation to case management and the objects set out in r 1.03:
a. On 26 October 2015, the Court ordered the Applicant to file any further evidence upon which it intended to rely by 16 November 2015 (Order 2). Its further evidence (which included exhibit PJ-2) was not filed until 14 December 2015;
b. Also on 26 October 2015, the Court ordered the Applicant to file and serve a statement setting out the grounds for relief under ss. 222 and 222C by 16 November 2015. This was not served until 16 December 2015 and it was not filed until 6 June 2016;
c. Because of these delays, the second respondent filed an Application in a Case on 3 December 2015, which sought, inter alia, an order that the Application be struck-out. The application was not ultimately pressed because the Applicant served its evidence and Statement on the morning of the return date of the application to strike-out. The Applicant was, however, ordered to pay the second respondent's costs of the application to strike-out;
d. On 1 April 2016, the Court ordered the Applicant to file and serve any evidence in reply by 13 May 2016. Evidence in reply (an affidavit of Mr James sworn 6 June 2016) was not served until 8 June 2016;
e. On 27 October 2016, the Court ordered the Applicant to file and serve its submissions in support of the application for leave to amend by Friday, 28 October 2016. In breach of this order (and without any explanation for the breach), this was not done until about midday on 31 October 2016.”
It is a matter for the applicant as to how it chose to conduct the prosecution of its case. However, the failure to comply with Court orders, the absence of relevant regard for the FCC Rules, the unexplained “late” attempt to amend the basis and scope of its case, and in relation to the first respondent substantially so, weighs heavily against the exercise of discretion in its favour.
Even if the proposed amendments had some reasonable prospect of success, that is, there was some arguable case to be made, the unexplained failure to bring forward this case at an appropriately earlier time outweighs that element in the circumstances of this case. There would plainly be prejudice to both respondents if the leave was granted. As the second respondent submits, even an order for indemnity costs would not, in my view, compensate either of the respondents for the prejudice to be suffered (see Aon Risk at [99]).
Ultimately, parties before the Court must bear, and accept, some responsibility for the efficient, and fair, conduct of their cases. The applicant’s unexplained delay, in the circumstances of the timing of its request to raise matters which, on its own submission, were available to be raised earlier, is the factor that is the strongest call for the leave to be refused. I will make that order.
I certify that the preceding forty-seven (47) paragraphs are a true copy of the reasons for judgment of Judge Nicholls
Associate:
Date: 12 December 2016