Johnson v Powrie
[2018] ACTSC 283
•12 October 2018
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Johnson v Powrie |
Citation: | [2018] ACTSC 283 |
Hearing Date: | 12 February 2015 |
Submissions Dates: | 9, 12 and 24 February 2015 |
DecisionDate: | 12 October 2018 |
Before: | Refshauge J |
Decision: | No orders or directions in the conduct of these proceedings may be made or given until Stephen Hundy, trustee of the bankrupt estate of Alan Charles Powrie applies to be made a party to the proceedings. |
Catchwords: | PRACTICE AND PROCEDURE – Costs – defendant made bankrupt – whether trustee of defendant’s bankrupt estate can apply for costs – need to be made a party and given leave |
Legislation Cited: | Bankruptcy Act1966 (Cth), s 58(3) Court Procedures Rules 2006 (ACT), r 231 |
Cases Cited: | ANZ Banking Group Ltd v Computer Plus [1992] 1 VR 607 Doran v Isaacs (1912) 12 SR(NSW) 699 Re-Engine Pty Ltd (in liq) v Fergusson [2007] VSC 57 |
Parties: | Noel Patrick Johnson (Plaintiff) Alan Charles Powrie (Defendant) |
Representation: | Counsel Mr W Sharwood (Plaintiff) Mr J Weller (Defendant) |
| Solicitors Nichol & Co (Plaintiff) Weller & Associates (Defendant) | |
File Number: | SC 766 of 2005 |
REFSHAUGE J:
These proceedings commenced in the Australian Capital Territory are part of litigation that has been in the Courts of this Territory and the Supreme Court of New South Wales for over a decade. It is litigation that could properly be described as a saga and one in which the conduct of all involved has exhibited many of the undesirable characteristics of litigation conducted between what might accurately be described as warring parties, abetted by their lawyers.
The genesis of the proceedings was when the Plaintiff, Noel Patrick Johnson, retained, the Defendant, Alan Charles Powrie, then an Australian lawyer, as his solicitor to conduct ultimately unsuccessful defamation proceedings in the Supreme Court of New South Wales.
The background of the proceedings and their progress is set out in a decision of the Court of Appeal, Johnson v Powrie [2018] ACTCA 46 at [4]-[73] (“the Court of Appeal decision”). I do not need to repeat what I there said but, so far as what I said is relevant, I incorporate it into these proceedings.
The Proceedings
By Originating Application filed on 26 October 2005, Mr Johnson commenced these proceedings claiming from Mr Powrie damages in compensation for negligence of which Mr Powrie was asserted to have been guilty in the conduct of the defamation proceedings.
At the time, the Supreme Court Rules 1937 (ACT) made provision for proceedings in the Court to be commenced by Originating Application. Those rules expired on 1 July 2006 when the Court Procedures Rules 2006 (ACT) came into force.
As required under r 10 of the Supreme Court Rules, a Statement of Claim accompanied the Originating Application.
An appearance was entered for Mr Powrie by the solicitors for his professional indemnity insurer.
Mr Johnson’s claim for damages including both the amount of certain adverse costs orders that had been made against him in an application to set aside service of the Statement of Claim in the NSW proceedings but also for costs he paid to Mr Powrie for his legal services in resisting that application and of an application needed to extend the time for service of the Statement of Claim. In the Statement of Claim, Mr Johnson claimed that all these costs were the consequence of the negligence by Mr Powrie in the conduct of the proceedings. In these reasons, I shall call the costs Mr Johnson actually paid to Mr Powrie “the Legal Costs”.
In his defence, Mr Powrie denied that he had served the Defendant in the New South Wales proceedings, but admitted that he had arranged for a process server to do so. He admitted, however, that he knew that the service of the Statement of Claim had been defective, that he had been told of it, and that by the time the New South Wales Supreme Court held the service defective, the Statement of Claim was stale and could not be re‑served without an extension of time being granted by the Court.
Mr Powrie also admitted that Mr Johnson was ultimately ordered to pay the defendant’s costs of the order extending time for service of the Statement of Claim. He denied, however, that he had been negligent or that Mr Johnson had suffered loss and damage.
The proceedings were then subject to case management and a Certificate of Readiness for trial was filed on 13 September 2007. Initially the trial was set to be heard on 14 and 15 February 2008. On the first day of the trial, however, the proceedings were adjourned. The bench sheet on which the associate to the judge hearing a matter records the proceedings before the judge does not disclose why the adjournment occurred. It may not be necessary to do so, but, if known to the Court, can be helpful if recorded. It was again adjourned when before the Court on the date to which it had been adjourned and the record shows that the Court was told that there were settlement negotiations taking place between the parties.
On the next date, it became clear that the settlement had proved somewhat successful and that an agreement as to the settlement had been prepared but not signed. The Court directed that, if it was not signed within 11 days, then the matter would be re-listed but otherwise it was stood over generally.
The Court was later contacted by Mr Johnson’s solicitor seeking a date for hearing and the Court was advised that the claim had not been settled despite the parties’ efforts. It was put that “[t]hey cannot even agree on a hearing date”.
The proceedings were then mentioned in Court on 20 October 2008 and adjourned “to a date to be agreed by the parties” with the judge’s associate. The Court records do not show any such date and the proceedings were next in Court on 18 June 2010.
In the meantime, however, the parties had managed to reach a settlement and a Deed of Settlement and Release was made on 24 April 2009. I shall refer to it as the Deed of Release. It provided for three payments by Mr Powrie to Mr Johnson. Two were relatively straight forward – a quantified sum of damages, the costs of the proceedings as agreed or assessed by a firm of legal costs consultants and the Legal Costs to be “determined by the Deputy Registrar”.
The reason for the manner of determining the last payment appears to have been because those amounts were not covered by the policy issued by the professional indemnity insurer of Mr Powrie and had to be dealt with separately. To have the Deputy Registrar determine the Legal Costs, instead of the legal costs consultants, would not incur any fees, which fees would have had to be borne by the parties.
Upon the determination of the Legal Costs by the Deputy Registrar a Notice of Discontinuance was to be filed with no order as to costs.
The Deputy Registrar determined the Legal Costs in the sum of $500. That sum was paid by Mr Powrie. No Notice of Discontinuance was filed, however, and Mr Johnson instead sought a reconsideration of the determination. When the Deputy Registrar, on the reconsideration, made the same decision, he applied to the Master for a review of the decision.
On 13 August 2010, the Master dismissed the application for a review and Mr Johnson then appealed to the Court of Appeal from that decision.
No steps were taken by Mr Powrie to have the proceedings discontinued by Mr Johnson, such as by seeking a mandatory injunction requiring Mr Johnson to discontinue the proceedings in accordance with the terms of the Deed of Release.
On 28 February 2013, Mr Johnson filed in these proceedings a further application seeking an extension of time within which to appeal the decision of the Deputy Registrar made on 24 June 2009 (“the ancillary application”). It seems that this may have been a response albeit somewhat dilatory to the suggested possible proceedings discussed by Katzmann J on the hearing of the appeal to the Court of Appeal as set out in the Court of Appeal decision (at [48]).
The application was docketed to Higgins CJ who, on 9 April 2013, stood it over generally.
Mr Powrie was made bankrupt some weeks later on 27 May 2013. The trustee of his estate was said to be Stephen Hundy.
The matter came before Murrell CJ on 13 December 2013 when the proceedings were adjourned to 7 February 2014. The transcript shows that Mr Johnson’s solicitor appeared and also mentioned the matter for “the liquidator”, presumably intending to refer to the trustee, who was said to have been represented by another lawyer, Karl Pattenden. Mr Johnson’s solicitor told the Court that “the matter [was] to be discontinued with no order as to costs” and that he would file the appropriate document. It was noted on the bench sheet that Mr Johnson would lodge a proof of debt in the bankruptcy of Mr Powrie, but the transcript does not actually include mention of that.
The matter was mentioned on 7 February 2014 and adjourned to 21 February 2014 when the Court noted that the proceedings were to be discontinued by filing “[a]ppropriate documentation” by 28 February 2014. No Notice of Discontinuance is on the Court file.
The Court then listed the proceedings for call-over on 14 August 2014. On this occasion, Joe Weller appeared for Mr Powrie. Mr Pattenden did not appear. Mr Weller told the Court that Mr Powrie did not consent to the discontinuance unless his costs were paid. No reference was made to the Deed of Release. He suggested that Mr Johnson’s solicitor did not have the trustee’s consent to a discontinuance.
The proceedings were then listed before me on 12 February 2016. Prior to that time, both parties had filed written submissions. Those filed by Mr Weller stated that he now appeared for Mr Hundy. The submissions addressed these proceedings as well as those in the Court of Appeal and another matter in this Court between the same parties in the same capacity, numbered SC 408 of 2012. I was required to determine what progress was to be made on three matters.
Mr Weller submitted that the application should be dismissed for want of prosecution and, indeed, on the basis of a statement made by Mr Johnson’s solicitor on 14 August 2014, he submitted that it was never intended that it be progressed.
The statement of Mr Johnson’s solicitor was:
In relation to the confusion about the court number, if I can provide this clarification it is the case that his Honour did dismiss the application by Johnson in April 2013, that bore a similar number and award costs but it’s also the case that another application and proceedings was filed in the court – broadly – sorry, on the 30 November 2012, or thereabouts and it has that number 408/12 and that is the proceeding that’s before the court at the moment.
…
That was an application to extend the time to review the decision of the Registrar [sic] in relation to costs and it was there – I think it was squarely put on the basis that there Magistrates Court proceedings on foot and if they were determined they would resolve the matter. Those proceedings in the Magistrates Court were defeated by the bankruptcy and that just leaves these proceedings hanging at which the applicant is saying, “Well, look let’s just discontinue it.” There’s a degree of futility.
There was much confusion in this statement, for the application to extend time to review the decision of the Deputy Registrar was in fact this proceeding and the proceedings numbered SC 408 of 2012 had been commenced to seek an extension of time to have costs assessed under Div 3.2.7 of the Legal Profession Act 2006 (ACT).
It is, quite frankly, entirely unclear what Mr Johnson’s solicitor was trying to say because of the confusion.
In reply, counsel for Mr Johnson referred to the disciplinary proceedings that had been taken by the ACT Law Society against Mr Powrie and the findings of the ACT Civil and Administrative Tribunal that he failed to conduct his proceedings with Mr Johnson fairly and honestly, that he failed to act with candour in his dealing with the Magistrates Court, that he deliberately or recklessly misled the Magistrates Court and that he failed to act with candour and frankness with a fellow practitioner. Having made these findings, the Tribunal recommended that Mr Powrie’s name be struck off the roll of practitioners kept in the Territory. Accepting the Tribunal’ findings as to Mr Powrie’s conduct, the Full Court of this Court ordered the removal of Mr Powrie’s name from the roll of practitioners: Law Society (ACT) v Powrie [2017] ACTSCFC 4; 12 ACTLR 184.
Counsel for Mr Johnson submitted that it was actions by Mr Powrie that had caused costs incurred since the now two settlements of the various disputes when he failed to make the payment required after the mediation of the Court of Appeal proceedings, forcing Mr Johnson to commence proceedings in the Magistrates Court. In the other ACT Supreme Court proceedings (SC 408 of 2012), the Application in Proceedings was, incorrectly, said to have been “an application mentioned by Katzmann J” in the Court of Appeal and motivated by Mr Johnson taking “a conservative approach pending the conclusion of the Magistrates Court proceedings”.
Those latter proceedings were stayed by operation of law following Mr Powrie’s bankruptcy but in circumstances as described by the Full Court of this Court in Law Society (ACT) v Powrie at 187; [10]-[12]; 190-1; [21]-[27], where the Full Court accepted that the findings of the ACT Civil and Administrative Tribunal on this matter were correct, namely that Mr Powrie had failed to act with candour and frankness in his dealings with the Magistrates Court.
Mr Powrie’s lack of candour and frankness had meant that the Magistrates Court did not, as it was able to do, conclude the hearing of the Magistrates Court proceedings prior to his bankruptcy which, on the submissions of Mr Johnson’s counsel, would have rendered the current proceeding unnecessary. There seems some merit in these submissions.
Mr Johnson’s counsel submitted that the costs of the hearing of this matter on 12 February 2015 should be borne by the trustee of Mr Powrie’s bankrupt estate on an indemnity basis.
While that proposition is attractive in all the circumstances and while it is no bar that the trustee is not presently a party (Knight v FP Special Assets Ltd (1992) 174 CLR 178), I do not think the circumstances are appropriate for such an order at this stage, though circumstances may change in that regard.
It seems to me that because these proceedings are still in form taken against Mr Powrie, a bankrupt, in respect of a provable debt in his bankruptcy, Mr Johnson cannot take a step in the proceedings without the leave of the Federal Circuit Court or the Federal Court of Australia: s 58(3) of the Bankruptcy Act 1966 (Cth). It is not clear that applying for costs of these proceedings would be such a step, but it seems to me clear that seeking to have the proceedings dismissed or otherwise terminated is such a step: ANZ Banking Group Ltd v Computer Plus [1992] 1 VR 607 at 608, 610; Doran v Isaacs (1912) 12 SR (NSW) 699.
On the other hand, as the proceedings are in respect of a provable debt, any interest Mr Powrie has in them is now vested in his trustee in bankruptcy. See Court of Appeal decision at [85]-[87]. Further, Mr Powrie has no right to participate in the proceedings. See Court of Appeal decision at [89]-[91]. Were serious allegations of personal misconduct made against Mr Powrie in the proceedings, however, he could be given leave to appear, notwithstanding the otherwise absence of his standing in the proceedings: Re-Engine Pty Ltd (in liq) v Fergusson [2007] VSC 57 at [67]-[68].
Accordingly, unless and until the trustee is made a party to these proceedings, no further proceedings can be taken; Mr Johnson is prevented by s 58(3) of the Bankruptcy Act from doing so; Mr Powrie, through his bankruptcy, no longer has any interest in the proceedings; the trustee of his bankrupt estate is not a party and so has no present standing to participate in the proceedings.
What might be called the principal claim, that is the claim in negligence made in these proceedings, has been compromised. If Mr Powrie’s evidence and submissions are accepted, then all the preconditions have been met for discontinuance in accordance with the Deed of Release, which, until set aside, is enforceable and has effectively brought the principal proceedings to an end.
If that is not to be accepted, then the events as described by Mr Johnson is that there has not been a proper determination of the costs by the Deputy Registrar and, until that is completed by determination of the Appeal referred to above (at [19]), there is no need nor case for further proceedings in this matter.
The ancillary application, however, is not really a matter that, though filed in the same Court file as the principal proceedings, arises out of the principal proceedings, though, of course, it is closely related (if only because of the terms of the Deed of Release, which it now turns out have been rather unsatisfactorily drawn if it was to avoid confusion and any opportunity for the enforcement of the settlement to be frustrated). The ancillary application should, strictly, have been made in separate proceedings.
The error probably was in the conducting of the assessment of costs in the file and under the number of the principal claim, when it was a separate matter under Div 3.2.7 of the Legal Profession Act. The review of it would have naturally flowed on from that.
The decision of Master Harper is subject to appeal and, until that appeal is concluded, there is no further action to be taken in this matter. It may be that Mr Johnson could set off any costs payable under that decision against the $10,000 he appears to be claiming from Mr Powrie’s bankrupt estate.
If the appeal is upheld then the ancillary application will likely be rendered moot. If not, Mr Johnson may wish to prosecute it. There is, therefore, some basis for leaving these proceedings on foot.
They cannot be taken any further, however, unless and until the trustee applies to become a party to the proceedings under r 231 of the Court Procedures Rules. See Re Davies [1961] ALR 886 at 888. In addition, the Court must give Mr Johnson leave to continue the proceedings in any event.
It may be that Mr Johnson will also require leave of the Federal Circuit Court or the Federal Court before he can take a step in the proceedings: s 58(3) of the Bankruptcy Act. Whether any opposition he intends to mount to any application by the trustee to be joined as a party to the proceedings, to be given leave to continue the proceedings or to seek to have them terminated and Mr Johnson pay his costs would be, within the section, a step in the proceedings requiring leave is not an easy question to answer not one on which I have had the benefit of submissions not found any authority. I comment no further than to note that it is a question that may need to be considered were the trustee to make any or all of these applications.
In my view, until the trustee has applied to be substituted as defendant and Mr Johnson has secured leave to proceed, no further steps can be taken in the proceedings and no further directions given or orders made. I will so order.
| I certify that the preceding forty-nine [49] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Refshauge. Associate: Date: 12 October 2018 |
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