Jose Maria Lopez v Harstedt Pty Ltd
[2018] VSCA 19
•9 February 2018
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2017 0117
| JOSE MARIA LOPEZ | Applicant |
| V | |
| HARSTEDT PTY LTD | Respondent |
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| JUDGES: | SANTAMARIA and NIALL JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 7 February 2018 |
| DATE OF JUDGMENT: | 9 February 2018 |
| MEDIUM NEUTRAL CITATION: | [2018] VSCA 19 |
| JUDGMENT APPEALED FROM: | Lopez v Harstedt Pty Ltd (Unreported, Court of Appeal, Supreme Court of Victoria, Irving JR, 15 December 2017) |
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PRACTICE AND PROCEDURE – Application to set aside orders of judicial registrar refusing extension of time to file application for leave to appeal – Nature of application — Delay of 145 days – Whether adequate explanation for delay – Prospects of success of arguments in support of proposed grounds of appeal – Where applicant impecunious – Whether prejudice to respondent – Application refused.
TRUSTS AND TRUSTEES – Trustee – Duties of trustee – Where trust moneys pooled as part of investment – Whether pooling of trust moneys inconsistent with duty of trustee to deal with trust moneys as separate fund.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr M Y Bearman | Victorian Bar Duty Barrister Scheme |
| For the Respondent | Mr D G Robertson QC with Ms R T Campbell | Katherine Moorhouse Perks |
SANTAMARIA JA
NIALL JA:
Introduction
On 28 October 2015, the applicant, Harstedt Pty Ltd (‘Harstedt’), commenced a proceeding in the County Court against Apollo Development Enterprises Pty Ltd (‘Apollo’), Jose Lopez, Marijan Tomanek and Stephen Moriarty. The trial of the proceeding commenced on 29 March 2017. At the commencement of the trial, Harstedt was granted leave to file an amended statement of claim. The trial took place over six days. On 9 May 2017, the Court gave judgment. On 31 May 2017, it made orders in favour of Harstedt against Apollo and Mr Lopez and dismissed the claim against Mr Tomanek. Mr Moriarty did not appear, and judgment had been entered against him in default of appearance.
On 12 November 2017, some four months after Mr Lopez was required to file any application for leave to appeal under the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’), Mr Lopez applied for an extension of time within which to file an application for leave to appeal the orders of the Court made on 31 May 2017. On 19 November 2017, he filed an application for leave to appeal. At this point in time, Mr Lopez was self-represented. On 15 December 2017, the judicial registrar of the Court of Appeal refused the application for an extension of time on the papers. Mr Lopez, who is now represented by counsel, has applied to set aside the decision of the judicial registrar. For the reasons that follow, we would refuse the application.
Factual background[1]
[1]The following account of the facts has been taken from the reasons of the trial judge in Harstedt Pty Ltd v Apollo Development Enterprises Pty Ltd [2017] VCC 834 (‘Reasons’).
Jeffrey Olsen had been a stockbroker for about 15 years. In late 2006, Mr Olsen was approached by a Noel Carter. Mr Carter said that he had an investment proposal. He described it as a ‘private placement program’ that involved using investors’ capital to make profits that would be shared among investors. Mr Olsen said that he was not interested in the proposal as it offered no capital protection.
On 3 March 2007, Mr Olsen attended a conference at Mr Carter’s office in South Melbourne. At that meeting, Mr Olsen was introduced to Mr Moriarty. Mr Moriarty outlined the proposal and said that funds contributed by Australian investors would stay in Australia in a ‘non-depleting’ account and that the funds would not leave that account.
On 23 March 2007, Mr Olsen attended a further meeting where he was introduced to Mr Lopez, Mr Tomanek and a Graeme Robinson. Mr Olsen gave evidence that Mr Lopez explained the proposal. It involved gearing.
At this stage, various groups seemed to have been involved in the proposal, including Harstedt; a company of which Mr Lopez was a director; Aurora Development Enterprises Pty Ltd (‘Aurora’) as trustee of the Aurora Development Trust, the director of which was Mr Moriarty; and NGS Financial Solutions Pty Ltd (‘NGS’), the directors of which were Mr Carter and Mr Robinson. It appears that NGS was the facilitator of the scheme and that the scheme involved investors depositing money into an account in the name of Apollo at the Commonwealth Bank of Australia (‘CBA’), which would provide a stand-by letter of credit.
During March and April 2007, various discussions took place between the prospective investors with a view to agreeing the basic principles for the investment.
On 25 April 2007, a meeting was arranged to take place at Mr Moriarty’s residence in Geelong. Mr Lopez described the scheme but said that the matter was confidential.
At the meeting, Mr Olsen asked several questions about the security of the arrangement. He was told that there would be three signatories on the CBA account: Mr Lopez, Mr Tomanek and Mr Moriarty. However, Mr Olsen insisted on himself being a signatory to the CBA account. After a vote, it was resolved that Mr Olsen’s signature would be on the CBA account.
On 30 April 2007, Mr Olsen emailed Mr Robinson stating ‘that the Olsen Group’ (Harstedt as trustee of the Olsen Family Trust) would ‘deposit $250,000 immediately subject to everyone’s approval of this email’. It set out a number of conditions.
On 2 May 2007, Mr Olsen had Harstedt deposit $250,000 in a CBA account to the credit of Apollo, using an account number which Mr Carter gave him. Harstedt did not make any further deposits thereafter.
On 31 May 2007, Mr Olsen received a letter dated 31 May 2007 on Apollo’s letterhead addressed to Mr Carter, who was described as ‘Introducer of Harstedt Pty Ltd’. The letter stated, among other things, that the funds deposited by Harstedt ‘will be held as a condition of the [PPP], in a Non-Depleting Account for thirteen months and will be blocked and reserved and under no circumstances can the funds in the account be depleted.’
At some stage, Mr Olsen contacted a Mr Wilson of the CBA and informed him that he was to be an authorised signatory to the Apollo account. Mr Wilson demurred, apparently on the basis that his instructions were coming from either Mr Carter, Mr Moriarty or Mr Tomanek.
Mr Olsen gave evidence that, late in August 2007, he was told that it had been decided that the funds in the Apollo account should be sent offshore. He said that he spoke to Mr Wilson of the CBA complaining that he had not authorised the transaction. Mr Wilson said that he was not an authorised signatory on the account.
It appears that, by 27 August 2007, Mr Olsen had learnt that a decision had been made ‘to send the funds from Apollo offshore’. Mr Olsen emailed Mr Robinson asking several questions about this development.
By September 2007, the Harstedt funds had been aggregated with other funds, and the Apollo account held AU$4,772,185.98. On 7 September 2007, the sum of US$4.2 million, which had been drawn from Apollo’s CBA account, was transferred into a US dollar account kept by the CBA.
On 10 September 2007, some US$4.1 million was transferred from that account to an account held in the name of ‘Back Away S.L. Banco Guipuzcoano’ in Spain (‘the Back Away account’). Mr Lopez signed the request for wire transfer to the Back Away account. The funds have since disappeared.
Summary of proceedings
By writ and statement of claim filed on 28 October 2015, Harstedt brought a proceeding against Apollo, Mr Lopez, Mr Tomanek and Mr Moriarty.[2] It claimed $1,422,183.15, which represented the full return on the investment, including the $250,000 deposit that it paid. Initially, the claims were based in contract and misleading and deceptive conduct.
[2]As mentioned above, Mr Moriarty did not appear, and judgment was entered against him in default of appearance.
Each of Apollo, Mr Lopez and Mr Tomanek filed a defence. They pleaded, among other things, that the claims by Harstedt were statute barred under the Limitation of Actions Act 1958.
Several months later, Harstedt was granted leave to file an amended statement of claim. It alleged that, by transferring the moneys from Apollo’s CBA account into the US dollar account kept by the CBA and, later, the Back Away account,[3] Apollo had committed a fraudulent breach of trust by the implementation of a dishonest and fraudulent design. It also alleged that Mr Lopez and Mr Tomanek were liable as third parties in that dishonest and fraudulent design. Harstedt said that, between September 2007 and September 2011, Apollo acknowledged its indebtedness to Harstedt by a series of emails. Harstedt abandoned its claim for the full return on the investment and, instead, claimed $250,000 in equitable compensation from Apollo, Mr Lopez and Mr Tomanek. It also claimed interest under section 58 of the Supreme Court Act 1986.
[3]Reasons [119]–[120]. The trial judge said that, in its pleadings, Harstedt referred to the transactions that led the $250,000 deposits to be remitted from Apollo’s CBA account to the Back Away account as ‘the withdrawal’; the defendants referred to the transactions as ‘the transfer’. The trial judge recounted (at [120]): ‘Over the objection of [counsel for the defendants], I permitted [Harstedt] to amend its Statement of Claim to broaden the definition of “withdrawal” and to extend to each of the steps which led the funds from the original [CBA] account in Australia to the Back Away Account in Spain. A similar amendment was consequentially adopted by the first to third defendants in their Defences.’
Apollo, Mr Lopez and Mr Tomanek amended their defences. The defence filed by Apollo was, in substance, the same as those filed by Mr Lopez and Mr Tomanek. Relevantly, Apollo alleged that Harstedt was not a beneficiary of the trust of which Apollo was trustee and therefore did not have any rights against it with respect to the $250,000 deposit.[4] It alleged that, in April 2007, Harstedt, Mr Lopez, Mr Tomanek and others entered into an agreement to participate in the investment scheme.[5] It also alleged that that agreement was varied on 21 August 2007 such that Apollo, with the consent of the beneficiaries and with Harstedt’s knowledge, agreed to transfer part of the pooled capital of the investors to a bank account as directed by a trader, a Diego Moreno Romero. In the event, Mr Romero directed that the moneys be transferred to the Back Away account. In July and August 2007, each participant was given an opportunity either to withdraw their participation in the scheme or alternatively to authorise the transfer.[6] Apollo alleged that, in July 2007, Harstedt caused the transfer to the Back Away account to be authorised and that the transfer was implemented with the knowledge of Harstedt. It said that an employee of Banco Guipuzcoano, or the solicitor for Mr Romero, misappropriated the funds. Apollo denied that it had implemented a dishonest and fraudulent design. It denied that Mr Lopez, Mr Tomanek and Mr Moriarty were liable as third parties. It also denied that it, Mr Lopez or Mr Tomanek had acknowledged any indebtedness to Harstedt. It said that Harstedt was aware of the transfer, which occurred with Harstedt’s prior knowledge and consent.
[4]Instead, said Apollo, any rights which Harstedt had were ‘rights as against the trustee of the Aurora Development Trust and/or … as against NGS Financial Solutions’. It will be recalled that the director of Aurora was Mr Moriarty and the directors of NGS were Mr Carter and Mr Robinson. Apollo alleged: ‘[N]otwithstanding that a sum of $250,000 was paid into [Apollo’s CBA account] by agents of [Harstedt], [Harstedt] (for reasons advantageous to [Harstedt] and by reason of agreements made between it and the trustee of the Aurora Development Trust and NGS Financial Solutions Pty Ltd … in law, the payment of the said sum of $250,000.00 was made by the trustee of the Aurora Development Trust as a beneficiary of the [Apollo] Trust … by reason of which any and all rights in law and/or equity attaching to the sum of $250,000.00 … were held by the trustee of the Aurora Development Trust’.
[5]Apollo alleged that the agreement was partly oral and partly to be implied.
[6]Apollo alleged that the transfers to the Back Away account was made in reliance upon representations from Banco Guipuzcoano and the solicitor for Mr Romero ‘that the money could not be withdrawn without the prior consent of [Apollo].
The trial of the proceeding took place between 27 March 2017 and 3 April 2017. Mr Olsen was the only witness who gave evidence. At the close of Harstedt’s case, the three defendants made a no-case submission. The trial judge put them to their election. The trial judge suggested, and both counsel agreed, that the matter proceed to closing submissions.
The trial judge delivered judgment on 9 May 2017. For present purposes, it is important to note several of his conclusions:
(a) on the face of the arrangements between Apollo and Harstedt, a trust was established with Apollo as trustee, Harstedt as beneficiary and the trust property as the capital sum of $250,000, representing the moneys that Harstedt deposited into Apollo’s CBA account;[7]
[7]Reasons [173], [179].
(b) it seems to have been contemplated that the moneys deposited by Harstedt could be pooled with moneys deposited by other investors, and the moneys were so pooled;[8]
[8]Reasons [173].
(c) Harstedt participated in the investment on the assumption ‘that the $250,000 would be held inviolate in a “non-depleting” account’;[9]
[9]Reasons [192].
(d) Apollo breached its obligations as trustee in parting with the $250,000;[10]
[10]Reasons [180].
(e) Apollo’s breach of trust was fraudulent and dishonest;[11]
[11]Reasons [185], [192]
(f) there was ‘both a dishonest or fraudulent design on the part of Apollo and the requisite assistance by the second defendant, Mr Lopez’, so as to make him liable under the second limb in Barnes v Addy;[12]
(g) ‘Mr Lopez was aware of the requirement to hold the investment deposit inviolate’;[13] and
(h) Mr Tomanek had no ‘knowledge of the dishonesty of Apollo’s breach of trust’, and therefore Harstedt’s claim against Mr Tomanek must fail.[14]
[12](1874) 9 Ch App 244. See Reasons [197].
[13]Reasons [198].
[14]Reasons [208]–[209].
On 31 May 2017, the trial judge ordered that Apollo and Mr Lopez pay to Harstedt the sum of $250,000, together with interest in the sum of $31,780.82.[15] He dismissed the claim against Mr Tomanek. He also ordered that Apollo and Mr Lopez pay the costs of Harstedt and that Harstedt pay 25 per cent of the costs of Mr Tomanek.
[15]In his reasons, the trial judge said (at [235]) that there was no basis for an award of interest under s 58 of the Supreme Court Act 1958. In the event, the trial judge awarded interest against Apollo and Mr Lopez at the trustee rate of 8 per cent per annum from the date on which the proceeding was filed.
Application for leave to appeal brought by Mr Tomanek
On 27 June 2017, Harstedt filed an application for leave to appeal against the orders of the trial judge that Harstedt’s claim against Mr Tomanek be dismissed and that Harstedt pay 25 per cent of the costs of Mr Tomanek.
For present purposes, it is necessary only to extract the proposed grounds of appeal in that application:
1.The learned Judge erred in finding at paragraph [207] of his Reasons for Judgment (‘the Reasons’) that [Mr Tomanek’s] evidence to the Australian Securities and Investments Commission (‘ASIC’) was or meant that he assumed that one Stephen James Moriarty (the Fourth Defendant in the County Court) (‘Moriarty’) had the consent of the investors introduced by him, including [Harstedt], to the transfer of the trust moneys to an offshore account not controlled by [Apollo] when in fact [Mr Tomanek] had said to ASIC that he did not know what Moriarty had said to the investors introduced by him.[16]
2.The learned Judge erred in holding at paragraph [207] of the Reasons that the evidence did not establish knowledge by [Mr Tomanek] of the dishonesty of the trustee’s breach of trust when in fact [Mr Tomanek] was aware of all of the circumstances which rendered, in the absence of the consent of the beneficiaries of the trust, the transfer of the trust moneys to an offshore account not controlled by the trustee dishonest but did not think and had no reason to think that [Harstedt], as a beneficiary of the trust, had consented to such transfer.
3.The learned judge ought to have found that [Mr Tomanek] knowingly assisted the trustee in the transfer of the trust moneys to an offshore account not controlled by the trustee, a transaction which, in the absence of the consent of the beneficiaries of the trust, was a fraudulent breach of trust, [Mr Tomanek] not thinking and having no reason to think that [Harstedt], as a beneficiary of the trust, had consented to the transaction.
4.The learned Judge erred in holding at paragraph [235] of the Reasons that section 58 of the Supreme Court Act 1986 is not applicable to [Harstedt’s] claim but ought, instead, to have allowed interest thereon, under that section, from 30 June 2008 at the rates from time to time prescribed under the Penalty Interest Rates Act 1983
[16]It is unnecessary for present purposes to explain the involvement of ASIC in this case.
Application for an extension of time
Under the Rules, Mr Lopez was required to file any application for leave to appeal by 28 June 2017. On 12 November 2017, he applied for an extension of time within which to file an application for leave to appeal the orders of the trial judge made on 31 May 2017.
Mr Lopez made his application for an extension of time on the following grounds:
1.My financial circumstances have prevented me from retaining solicitors to prepare an application for leave to appeal.
2.Despite best efforts, I was unable to procure pro bono assistance, and I have prepared my application as a self-represented litigant.
3. The appeal has real merit and a real prospect of success.
4.As the case involves allegations of fraud, I would suffer substantial injustice if my application for an extension of time in which to Appeal were not granted
Mr Lopez also filed an affidavit sworn by him on 12 November 2017. In his affidavit, he deposed to the circumstances in which he had been represented by solicitors at trial. He said:
The Third Defendant in the Proceeding, Marijan Tomanek, paid for the total costs of retaining our solicitors, Bowman & Knox, for the joint defence of [Apollo, Mr Lopez and Mr Tomanek] (in the region of $80,000). Due to my financial circumstances (explained at paragraph 13 below), I was unable to make any contribution towards these legal costs and I was effectively relying on the generosity of Tomanek, whom I have known and considered a friend for over thirty years.
In the Proceeding, [Harstedt] failed in its case against Tomanek, but succeeded against myself and Apollo Development Enterprises Pty Ltd. The result was such that I could no longer retain any solicitors or Counsel on my own. As such I have been self-represented since early June 2017.
Following the judgement, Bowman & Knox advised me of my options in relation to filing an appeal, however it was clear that I was in no financial position to pay lawyers to assist me in this regard. It was determined that I would need to seek out a pro-bono barrister who would be willing to take on the case. Bowman & Knox advised via letter dated 23 May 2017 that they would be willing to provide limited assistance on a pro-bono basis, provided that I could find a barrister who was also willing to do so. However it was clear from their further letter dated 1 June 2017 that our retainer was at an end …
As far as I am aware, Bowman & Knox continue to represent Tomanek in relation to [Harstedt’s] appeal of Judge Macnamara’s finding in respect of [Mr Tomanek] (proceeding SAP CI 2017 0080 in the Victorian Court of Appeal - Harstedt v Tomanek).
We pause here to note that, as early as 23 May 2017, Bowman & Knox, who represented Mr Lopez at trial, were giving him advice as to the steps that were necessary to prepare an application for leave to appeal to the Court of Appeal. That letter records that Mr Lopez had instructed Bowman & Knox that his daughter ‘has made an Application for pro-bono assistance which we presume is via the Victorian Bar’. The letter stated:
In the above circumstances, without seeking to apply unnecessary pressure, if you intend to engage Counsel we strongly suggest that it is in your interests to engage them by weeks’ end to ensure that they have sufficient time to prepare the necessary documentation.
The letter from Bowman & Knox dated 1 June 2017, to which Mr Lopez also referred above, was exhibited to Mr Lopez’s affidavit. That letter contains the following paragraph:
You instruct that you are not in the financial position to retain our firm and Counsel for an appeal and/or preliminary advice in relation to seeking leave out of time in the future. Although we anticipate your daughter has obtained the material, we attach a self-represented litigant’s information pack from the Supreme Court website, which may provide useful information and/or avenues of assistance.
The attachment to which the letter refers — namely, the information pack from the Court website — was omitted from the exhibit. In his reasons for refusing the application for an extension of time, the judicial registrar pointed out that ‘the self-represented litigant’s information pack from the Supreme Court website’ contains ‘information about the Victorian Bar Duty Barrister Scheme’.[17]
[17]Lopez v Harstedt Pty Ltd (Unreported, Court of Appeal, Supreme Court of Victoria, Irving JR, 15 December 2017) [21] (‘Refusal reasons’). At the hearing of the present application, counsel for Mr Lopez accepted the accuracy of the judicial registrar’s observation.
In his affidavit, Mr Lopez also deposed to his efforts to obtain legal representation:
Over the month following the trial, and with assistance from family members, I began to contact various pro bono organisations, including Justice Connect, Legal Aid and community legal centres in search of pro bono assistance. It would sometimes take several days for these organisations to reply, but in the end no assistance was forthcoming. In each case I was told that the organisation could not take on or refer the case due to the commercial and relatively complex nature of the matter. The case simply did not fall within those recognised categories that pro bono organisations typically service.
Despite this, I continued to prepare for an appeal with the assistance of others who wanted to help and who were intimately involved in the events which were the subject of the Proceeding. I do not have a legal background, so it was difficult to understand precisely what was required for an appeal.
Sometime in mid-September, I telephoned the Supreme Court’s Self-Represented Litigant service in relation to the taxation of the Respondent’s solicitor’s costs, which the Respondent was seeking to enforce against me. I do not recall precisely what was discussed, but the representative there informed me that the Court of Appeal could assign matters to the Victorian Bar’s Duty Barrister Scheme for pro bono assistance, provided I could compile the necessary documents for appeal. Prior to that, my understanding was that the Duty Barrister Scheme was administered only by Legal Aid, which had previously rejected my application for assistance.[18]
The Court of Appeal assured me that they could review my documents once they were submitted, and let me know if anything was missing or if I had not provided something in the correct form, allowing resubmission in those circumstances. On that basis I decided I would have to do my best to submit an application for leave to appeal by myself. My hope is to find a barrister willing to assist through the Duty Barrister Scheme, however I am prepared to self-represent if necessary.
Since the judgment and orders were made, I have informed the Respondent and his solicitors on several occasions of my intention to appeal.
[18]We note that Mr Lopez does not explain the source of this misapprehension. As discussed at [31] above, he received an information pack from the Court website that contained ‘information about the Victorian Bar Duty Barrister Scheme’.
In relation to his financial circumstances, Mr Lopez deposed:
Having no assets or income, I am unable to pay the judgement sum of $281,780.82 plus the Respondent's costs. Attached to this affidavit is evidence provided by my accountant showing that I have had no income from FY09 to FY17 …
In 2007 I was involved in a financial investment that contributed to the collapse of my business and the loss of my sole source of income in 2009. In 2012 I separated from my wife, who took sole possession of the remaining assets.
Since around 2008, I have spent the majority of my time living in Spain, where I have effectively been living off the generosity of family and friends. I have kept records of most of the money transfers I have received from people who have helped me to sustain myself over the years. To the extent the Court considers necessary, I am prepared to produce these records to the Court’s satisfaction.
Additionally, Apollo Development Enterprises Pty Ltd (the First Defendant in the Proceeding) is also without any income or assets. Attached to this affidavit is evidence provided by my accountant showing that Apollo has had no income from FY09 to FY17 …
I have informed the Respondent on several occasions of these financial circumstances.
On 19 November 2017, Mr Lopez filed an application for leave to appeal and a written case. At this point in time, Mr Lopez was not represented by counsel, and it appears that he drew those documents himself.
On 5 December 2017, Harstedt filed a notice of opposition to the application for an extension of time and submissions. In its notice, Harstedt set out the following reasons for its opposition:
1.The factors to be considered by this Honourable Court pursuant to Order 64. Rule 8, such as:
1.1 the length of the delay;
1.2 the reasons for the delay;
1.3 the prospects of success of the proposed Application for leave to Appeal;
1.4overarching purpose and obligations of the Civil Procedure Act 2010 (Vic); and
1.5 the prejudice to the respondent.
Harstedt also filed an affidavit sworn by its solicitor, Katherine Moorhouse Perks, on 4 December 2017. In her affidavit, Ms Moorhouse Perks deposed that no part of the judgment debt had been paid to Harstedt. She said that, on 22 June 2017, Harstedt brought a proceeding in the County Court against Mr Lopez seeking an order under s 172 of the Property Law Act 1958 to set aside the alleged transfer of Mr Lopez’s undivided interest as joint proprietor of land at 10 Gaunt Street, Lara, to his wife as sole proprietor (‘the s 172 proceeding’). The s 172 proceeding was set down for trial on 27 November 2017.
Ms Moorhouse Perks deposed that, on 23 November 2017, Mr Lopez sent an email to the County Court seeking a stay of the s 172 proceeding. She said that, on 24 November 2017, a registrar of the County Court heard the application for a stay and ordered that the trial date be vacated and the s 172 proceeding fixed for hearing on 23 July 2018.[19]
[19]The registrar made his order conditional on Mr Lopez’s paying Harstedt the sum of $3,000 towards its costs thrown away.
Ms Moorhouse Perks also deposed that she has calculated the costs incurred by Harstedt in the s 172 proceeding between 29 June 2017[20] and 24 November 2017 to be $28,253. She said that Harstedt has also suffered costs thrown away in the s 172 proceeding, by reason of the vacation of the trial date, in the sum of $5,915, of which $2,915 is unpaid.[21] She also said that Harstedt filed a summons for taxation of the costs payable by Mr Lopez to Harstedt pursuant to the order of the trial judge. The bill of costs served with the summons claimed costs in the sum of $184,200.77.
[20]This is the day after the last day by which, under the Rules, Mr Lopez had to file any application for leave to appeal the orders of the trial judge made on 31 May 2017.
[21]The sum of $3,000 was paid by Mr Lopez to Harstedt pursuant to the order of the registrar that the trial date be vacated and the proceeding fixed for hearing. See fn 19 above.
Ms Moorhouse Perks further deposed that she estimated the costs that Harstedt would incur in defending the application for an extension of time as $22,272.63. She said that she also estimated the costs that Harstedt would incur if Mr Lopez’s application for an extension of time were unsuccessful, and if Harstedt then sought a review of that decision, as $37,779.33. She also said that she estimated the costs that Harstedt would incur in defending the application for leave to appeal, and the appeal, as being in the further amount of $45,038.50.
Finally, Ms Moorhouse Perks said:
The grounds of [Harstedt’s] opposition to the application for an extension of time to seek leave to appeal are that:
(a) [Mr Lopez’s] delay is inordinate and in adequately [sic] explained;
(b)the extension of time would not be in accordance with the Civil Procedure Act 2010; and
(c)having regard to [Mr Lopez’s] lack of income and assets, [Harstedt] would be irreparably prejudiced by the grant of the application for an extension of time.
On 15 December 2017, the judicial registrar of the Court of Appeal refused the application for an extension of time on the papers. The judicial registrar was not satisfied that Mr Lopez had provided a satisfactory explanation for what the registrar described as a significant delay in bringing the application for leave to appeal, even taking into account that Mr Lopez was self-represented.[22] However, he was also not satisfied, on the material before him, that Mr Lopez’s proposed application for leave to appeal was so devoid of merit as to call for a refusal of an extension of time.[23] In dealing with the question of prejudice to Harstedt, the judicial registrar disagreed with Harstedt’s estimate of its costs likely to be thrown away if an extension of time were granted. Nevertheless, he was satisfied that ‘the amount is likely to be significant and, in the circumstances, unrecoverable due to Mr Lopez’s financial circumstances’.[24] He concluded that Harstedt would be significantly prejudiced if an extension of time were granted.[25]
[22]Refusal reasons [23].
[23]Ibid [27].
[24]Ibid [32].
[25]Ibid.
Application to review decision of judicial registrar
On 22 December 2017, Mr Lopez filed an application to have the decision of the judicial registrar reviewed and set aside. The application annexed a ‘proposed amended application for leave to appeal’ and a ‘proposed revised written case’. Both documents were drawn by counsel who had been appointed to represent the applicant under the Duty Barrister Scheme. Mr Lopez has also applied for leave to file and serve these documents substantially in the form annexed. Initially, he did not file an affidavit.
Mr Lopez has made his application to have the decision of the judicial registrar reviewed and set aside on the following grounds:
1.The applicant was denied procedural fairness as it was given no notice that the Court intended to determine the application after counsel was appointed under the Duty Barrister Scheme at the request of the Court to review the application for leave to appeal, including the grounds and written case in support thereof, thereby leading the applicant to believe that no determination would be made without prior notice to enable counsel to undertake the review.
2.The learned Judicial Registrar erred by considering a four-month delay too great in circumstances in which the respondent pointed to no prejudice that it would suffer in the conduct of the application.
3.The learned Judicial Registrar erred by weighing costs of the respondent that would be incurred in respect of a separate appeal brought by the respondent in respect of a different party, and to which the applicant was not and is not party.
In his proposed amended application for leave to appeal, Mr Lopez has proposed the following grounds of appeal:
1.The learned Trial Judge erred in finding that a trust was established with Apollo Development Enterprises Pty Ltd as trustee, the respondent as beneficiary and the trust property being the capital sum of $250,000 subscribed by it.
2.The learned Trial Judge should have found that the respondent did not establish on the balance of probabilities that the $250,000 paid by it was held on trust by Apollo.
3.The learned Trial Judge erred in finding that ‘Mr Lopez was aware of the requirement to hold the investment deposit inviolate’, and thereby assisted the trustee with knowledge a [sic] dishonest and fraudulent design on the part of the trustee.
In his written submissions dated 31 May 2017 in support of the first and second proposed grounds, counsel for Mr Lopez drew attention to the trial judge’s finding that the $250,000 deposit was intended to be pooled with the moneys deposited by other investors. He contended that this finding was inconsistent with the obligation of a trustee to keep trust moneys ‘separate’ or deal with trust moneys ‘as a separate fund’ on behalf of a beneficiary.[26] Counsel also contended that the $250,000 was to be subject to debit for bank fees, and therefore, so it was submitted, the trust capital could never be for the full amount ‘inviolate’ and without debit.
[26]Mr Lopez cited H A Ford and W A Lee, Thomson Reuters, Principles of the Law of Trusts [1.3410]; Henry v Hammond [1913] 2 KB 515, 521; Cohen v Cohen (1929) 42 CLR 89, 101; NCR Australia Pty Ltd v The Credit Connection Pty Ltd (in liq) [2004] NSWSC 1 [84].
During oral argument, counsel for Mr Lopez also drew attention to the following paragraph of the further amended statement of claim of Harstedt:[27]
[27]The parties in the present application have not provided this Court with copies of the pleadings below. At the hearing of the present application, the Court proposed that it obtain copies of the pleadings from the application book filed in the application for leave to appeal brought by Harstedt against Tomanek. Neither of the parties objected to this course. The further amended statement of claim is simply dated ‘March 2017’.
[Apollo] is and was at all times material:
…
(c)Inviting members of the public to lodge deposits into its Bank account on the warranties that a deposit into the Bank Account of [Apollo] by a member of the public:
(i)would remain identifiable;
…
(iii)would be returned in full on expiry of the term [of a minimum of 40 weeks] …
Counsel accepted that the $250,000 deposited by Harstedt was trust property. However, he contended that Harstedt failed to establish the very trust that it had pleaded — that is, an express trust in which any funds deposited would remain identifiable and the funds of which would be returned in full at some stage in the future — because the moneys deposited by investors were pooled and because the $250,000 deposited by Harstedt was to be subject to debit for bank fees and, therefore, could not be returned in full.
As to the third proposed ground, counsel for Mr Lopez said that this ground arises if this Court upholds the trial judge’s finding that Apollo held the $250,000 deposited by Harstedt on an express trust ‘with a term that the amount was “inviolate in the sense of not being the subject of any debit”’.[28] Counsel contended that Mr Lopez did not have the requisite knowledge of any dishonest and fraudulent design on the part of Apollo such as to give rise to liability under the second limb in Barnes v Addy. Counsel said that the trial judge made no finding of fact that Mr Lopez had any requisite knowledge that the deposit was to be held inviolate, despite the conclusion that Mr Lopez ‘was aware of the requirement to hold the deposit inviolate’.[29] Counsel also argued that there was no evidence to establish that Mr Lopez had any knowledge, in the sense discussed by the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd,[30] of the inviolate nature of the account.
[28]Reasons [173].
[29]Ibid [198].
[30](2007) 230 CLR 89, 163–4 [174]–[178].
Material filed in opposition to application
On 9 January 2018, Harstedt filed a notice of opposition to the application to have the decision of the judicial registrar reviewed and set aside. It set out the following reasons for its opposition:
1. the length of the applicant’s delay;
2. the reasons for the delay;
3.the prospects of success of the proposed Application for leave to Appeal;
4.the overarching purpose and obligations under the Civil Procedure Act 2010; and
5. the prejudice to the respondent.
Harstedt also filed another affidavit sworn by Ms Moorhouse Perks on 9 January 2018. In this affidavit, Ms Moorhouse Perks said that Harstedt relied upon the same material filed by it in opposition to the application for an extension of time.
Nature of present application
The present application is an application for review of a decision of a judicial registrar with respect to an application for an extension of time. It is necessary to explain briefly the nature of such an application.
As a starting point, rule 64.08(1) permits this Court or the Registrar to extend the time to file or serve an application, including for leave to appeal. Section 11(5) of the Supreme Court Act 1986 permits this Court to discharge or vary a judgment, order or direction given or made by a judicial registrar.
Rule 64.42(8) permits this Court, constituted by one or more Judges of Appeal, to ‘set aside or vary any direction given or order made by an Associate Judge or the Registrar.’ The ‘Registrar’ for the purposes of r 64.42 (and r 64.08) is defined in r 1.13 as the Registrar of the Court of Appeal. Section 113N of the Supreme Court Act 1986 empowers the Chief Justice to assign the duties of that office to a judicial registrar, who may then, by virtue of s 113O but subject to s 11(4A), exercise the powers conferred on him or her by the Rules. Section 11(4A) enables the Rules to provide for the jurisdiction and powers of the Court of Appeal to be exercised by a judicial registrar constituting the Court of Appeal.
Rule 64.42(9) provides that an application for an order under r 64.42(8) shall be dealt with on the basis of the application, written cases (if applicable) and documents filed by the parties prior to the judicial registrar’s decision. Rule 64.42(10) provides that further material shall not be relied upon except with leave.
The nature of the jurisdiction exercised by this Court in such an application was discussed recently in Leeworthy v Registrar of the Licensing Appeals Tribunal.[31] In that case, Tate and McLeish JJA drew attention to the uncertainty whether an applicant requires leave to appeal from the decision of a judicial registrar refusing an extension of time.[32] They did not consider it appropriate to resolve the issue.[33] However, they proceeded on the basis that, if leave was required, it should be granted in the circumstances of the case before them.[34]
[31][2017] VSCA 353 (‘Leeworthy’).
[32]Ibid [5]–[13].
[33]Ibid [11].
[34]Ibid [13]. Cf Bisognin v Hera Project Pty Ltd [2016] VSCA 322 [105] (Santamaria and Ferguson JJA and Riordan AJA).
If leave to appeal from the decision of the judicial registrar is required, this Court may only grant leave if it is satisfied that the present application to review the decision of the judicial registrar has a real prospect of success.[35] We will assume, for present purposes, that the higher threshold applies and that leave is required. In doing so, we stress that we express no concluded view, one way or the other, on the question whether leave is required in every application of this kind. On this footing, we consider that the application to review the decision of the judicial registrar has a real prospect of success and that leave should therefore be granted.
[35]Supreme Court Act 1986 s 14C.
In the present application, Mr Lopez relied upon material that is altogether different from the material that was before the judicial registrar. In particular, Mr Lopez has sought that the present application be determined having regard to his proposed amended application for leave to appeal and proposed revised written case. During the hearing of the present application, this Court granted leave to Mr Lopez to rely upon these new materials. Counsel for Harstedt took no objection.
Harstedt has indicated that it relies upon the material filed by it on 5 December 2017 — namely, its notice of opposition to the application for an extension of time, submissions, the first affidavit of Ms Moorhouse Perks and a list of authorities.
Contentions of Mr Lopez
Counsel for Mr Lopez introduced his written submissions as follows:
This application is made because the applicant’s counsel misunderstood that a decision concerning the applicant’s application for extension of time to lodge an appeal was to be made prior to him having the opportunity to review the substance of the appeal. Counsel was appointed under the Duty Barrister Scheme to conduct the application for leave to appeal and any appeal but not the application for an extension of time. Upon counsel’s enquiry of the registry, counsel was led to believe that no immediate decision was to be made, and that there was time for him to review the material.
Counsel for Mr Lopez contended that, if this Court were to grant leave to Mr Lopez to file and serve the proposed amended application for leave to appeal and the proposed revised written case, the application for leave to appeal ‘should have real prospects of success’.
Counsel for Mr Lopez further contended that the prospect of Harstedt’s wasting costs in the application for leave to appeal against Mr Tomanek is irrelevant to whether Harstedt suffered prejudice by Mr Lopez’s filing his application for leave to appeal some four months after it was required to be filed. He submitted that Harstedt has not pointed to any prejudice that it would suffer with respect to the proceeding involving Mr Lopez. He also said that it is his understanding that Harstedt was in a position for both applications to be heard on 7 February 2018, being the date of the hearing of the present application.
Finally, counsel for Mr Lopez explained the failure on the part of Mr Lopez initially to have an affidavit filed on his behalf in the present application as follows:
No affidavits have been filed because counsel is retained without a solicitor under the Duty Barrister Scheme, and the applicant is away for the Christmas vacation. Should it be necessary for this application proceed to a hearing, the applicant proposes to make an affidavit as to the matters concerning counsel’s dealings with the Registry under the Duty Barrister Scheme.
On 2 February 2018, the Registry of the Court of Appeal wrote to the parties requesting that Mr Lopez file with the Registry an affidavit made by him ‘as to the matters concerning counsel’s dealings with the Registry under the Duty Barrister Scheme’.
On 6 February 2018, Mr Lopez provided the Registry with an affidavit sworn by him on 6 February 2018. In his affidavit, Mr Lopez referred to his affidavit sworn on 12 November 2017 in support of an application for an extension of time. Relevantly, he deposed:
As I said in my affidavit of 12 November 2017 made in support of my application for an extension of time, I became aware in mid-September 2017 that I could apply for assistance under the duty barrister scheme if I could compile the necessary documents for an appeal. After I compiled and filed the documents, of which my affidavit formed part, the Court of Appeal Registry provided me with a form to request assistance under the scheme. I filled out the form and gave it to the Registry. At that time, my application for leave to appeal and any appeal was to be heard on 7 February 2017.
On 27 November 2017, I received a telephone call from Michael Bearman of counsel who informed me that he was the barrister allocated to assist me.
On 30 November 2017, Ms Anna Domine, Registry Lawyer exchanged a chain of emails with the respondent’s solicitor, Ms Katherine Moorhouse Perks. In the final email, Ms Moorehouse [sic] Perks stated that she was instructed that [Harstedt] intended to oppose my 12 November 2017 application for an extension of time … I am informed by Mr Bearman and believe that he received copies of those emails at that time.
On 1 December 2017, I met with Mr Bearman for the first time. At our meeting, I provided him with the material from the trial in the County Court below. Including the transcript and the court books, that material filled a dozen A4 ring-bound folders. Mr Bearman said to me that it would take him two to three weeks to review them.
On 5 December 2017, I received an email from Ms Moorehouse Perks serving me with materials opposing my application for an extension of time. The email included an earlier email from Ms Moorehouse Perks to the Registry by which she filed the materials. The earlier email stated that [Harstedt] sought to be heard ‘orally on the extension of time application’ …
I forwarded the emails to Mr Bearman as soon as I received them. Late in the afternoon of 5 December 2017, I had a telephone discussion with Mr Bearman about the extension of time application. Mr Bearman said to me that he was concerned about his position because he did not have an instructing solicitor as he was granted a special dispensation under the terms of the duty barrister scheme to appear in court without an instructing solicitor only for the allocated hearing under the scheme, which was my application for leave to appeal and any appeal. He said to me that he would call the Registry and if necessary the coordinator of the Victorian Bar’s pro bono scheme committee to sort things out.
I am informed by Mr Bearman and believe that, on the afternoon of 6 December 2017, he spoke to a person at the Court of Appeal Registry by telephone. I am informed by Mr Bearman and believe that to the best of his recollection the person with whom he spoke was Ms Domine but that he was not certain because he had had several conversations with different persons at the Registry employees [sic] about the allocation of the case under the pro bono scheme at about that time. I am informed by Mr Bearman and believe that in his conversation:
(a)he explained his concerns about his position under the duty barrister scheme;
(b)he stated that he would make enquiries of the Victorian Bar’s pro bono committee; and
(c)he was told that the Registry would advise him of the likely date of any oral hearing in due course so that alternative counsel might be found under the duty barrister scheme to appear for me if that was necessary.
I am informed by Mr Bearman and believe that thereafter that he:
(a)unsuccessfully sought to raise the matter with a member of the pro bono committee that afternoon;
(b)left the matter with the coordinator of the scheme with the Victorian Bar; and
(c)has still not had a response from the pro bono committee.
I did not hear from the Registry about my matter again until 15 December 2017, when I was received [sic] a copy of the decision of Judicial Registrar Irving refusing my application for an extension of time. I forwarded that decision to Mr Bearman on the same day.
Later that day Mr Bearman called me. During our telephone conversation he informed me, and I believe that:
(a)he was surprised by the decision, as he had not been expecting a communication from the Registry about an oral hearing and did not know that the extension of time application was even being considered at that time; and
(b)at the time, he had almost completed reviewing the trial materials and formed a view about my application but had not had time to prepare any proposed amended documents in consequence of his view; and
(c)if the Judicial Registrar decision was to be reviewed, he would need to prepare the proposed amended documents, which would take him several days because he was very busy prior to Christmas.
I am informed by Mr Bearman and believe that if he had known that my extension of time application was to be determined on the papers, he would have sought to make arrangements for any decision to be deferred until after he had had the opportunity to complete his review of the trial materials, and prepare any proposed amended documents that he thought necessary for my application for leave to appeal to this Court.
Contentions of Harstedt
In its written submissions filed on 5 December 2017 and 9 January 2018, Harstedt contended that the proposed grounds of appeal upon which Mr Lopez now relies have no prospects of success. It put forward several arguments as to why the contentions in support of the first and second proposed new grounds were ‘utterly hopeless’ and why the contentions in support of the third proposed new ground were also ‘hopeless’.
Harstedt noted that, in his written submissions in support of the present application, Mr Lopez did not address the length of the delay, the reasons for the delay or the overarching purpose and obligations under the Civil Procedure Act 2010.[36] In its written submissions in opposition to the application for an extension of time, Harstedt said that Mr Lopez had failed to provide an adequate explanation for what was a delay of 145 days.[37] It referred to evidence of Mr Lopez’s receiving advice on 1 June 2017 from his solicitors that it was their ‘view that it is preferable to appeal within time, or seek leave to proceed out of time as soon as possible thereafter’. Harstedt asked this Court to infer from that advice that Mr Lopez’s failure to file an application for leave to appeal by 28 June 2017 ‘was tactical, if not contumelious’: he filed the application less than a week before the trial of the s 172 proceeding was to commence, and he later relied upon the filing of that application in support of his application seeking a vacation of the trial date in the s 172 proceeding.
[36]The application for leave to appeal brought by Harstedt against Mr Tomanek initially had been set down for hearing on 7 February 2018. At the hearing of the present application, by reference to the overarching purpose of the Civil Procedure Act, counsel for Harstedt drew attention to the fact that the application for leave to appeal brought by Mr Lopez resulted in the vacation of the date of that hearing.
[37]Harstedt referred to Hewitt v Count Financial Ltd [2017] VSCA 354.
Harstedt contended that it would be irreparably prejudiced if this Court were to grant the present application and Mr Lopez were ultimately to fail. Harstedt said that it would be unable to recover from Mr Lopez the costs incurred by it in the light of Mr Lopez’s financial position. Moreover, Harstedt argued that, if the appeal were successful, Harstedt would be prejudiced in that it would have irreparably lost the costs of the s 172 proceeding, ‘all such costs after 28 June 2017 having been incurred on the faith of its understanding that no appeal or application for leave to appeal had been instituted by Mr Lopez’.
Harstedt also contended that Mr Lopez’s proposed application for leave to appeal is substantially different in scope and subject matter to the application for leave to appeal filed by Harstedt with respect to Mr Tomanek. The issue in that application is whether Mr Tomanek knowingly assisted in Apollo’s fraudulent breach of trust, and Mr Tomanek has not filed any notice of contention raising any of the matters the subject of Mr Lopez’s proposed application for leave to appeal. Accordingly, so it was submitted, Harstedt would incur additional costs if it were required to defend any such appeal. Harstedt said that this is worsened by the impecuniosity of Mr Lopez. It also said that its costs of opposing Mr Lopez’s application for an extension of time and the present application are likely to be irrecoverable.
Analysis
In deciding an application for an extension of time, it is necessary to take into account several factors, including the length of the delay, the reasons for the delay, the prospects of the application for leave to appeal succeeding and the extent of any prejudice to the respondent.[38] As to the prospects of the application for leave to appeal succeeding, the Court will not extend time if the appeal is so devoid of merit that it would be futile to do so.[39]
[38]Gippsreal Ltd v Kenny [2016] VSCA 65 [21]. See generally Jackamarra v Krakouer (1998) 195 CLR 516, 519–24 (Brennan CJ and McHugh J).
[39]Muto v Secretary to the Department of Planning (2013) 38 VR 293, 296 [13] (Nettle AP and Neave JA).
Section 8(1) of the Civil Procedure Act 2010 provides that the Court must seek to give effect to the overarching purpose in the exercise of any of its powers. Section 7(1) provides that the overarching purpose of the Civil Procedure Act and the rules of court in relation to civil proceedings ‘is to facilitate the just, efficient, timely and cost‑effective resolution of the real issues in dispute’.
The proceeding the subject of the present application is one to which the overarching obligations under the Civil Procedure Act apply.[40] Moreover, as a party to that proceeding, Mr Lopez is a person to whom the overarching obligations apply.[41] Section 25 of the Civil Procedure Act sets out one of those overarching obligations. It provides that, for the purpose of ensuring the prompt conduct of a civil proceeding, a person to whom the overarching obligations apply must use reasonable endeavours in connection with the civil proceeding to act promptly and minimise delay.
[40]Section 11 of the Civil Procedure Act provides: ‘The overarching obligations apply in respect of the conduct of any aspect of a civil proceeding in a court’, including, relevantly, any appeal from an order or a judgment in a civil proceeding. Section 3 defines ‘civil proceeding’ as ‘any proceeding in a court other than a criminal proceeding or quasi-criminal proceeding’.
[41]Civil Procedure Act 2010 s 10(1)(a).
Delay
In Hewitt v Count Financial Ltd,[42] Tate and Kyrou JJA considered a delay of 42 days ‘to be a period that is material and requires a full explanation’, contrasting it to ‘a trifling period of one or two days’.[43] The applicant in that case was self-represented. He was well familiar with his case, despite its complexity.[44] He tried to file his application within the 28-day period but it was rejected.[45] He was unable to obtain legal representation despite making attempts to do so.[46] He could only devote weekends to preparing his case due to full-time employment.[47] In all the circumstances, Tate and Kyrou JJA did not consider there to be a proper basis for adequately explaining a material delay.[48]
[42][2017] VSCA 354.
[43]Ibid [22].
[44]Ibid [25].
[45]Ibid [23].
[46]Ibid [23]–[24].
[47]Ibid [24]. There is no evidence to this effect in the present case.
[48]Ibid.
In Gippsreal Ltd v Kenny,[49] Kyrou JA said that a delay of 29 days was ‘not minor’ but nevertheless granted an extension of time.[50] The delay in that case was the result of a genuine mistake by the lawyers of the applicant as well as a delay on the part of the Court below in authenticating an order.[51]
[49][2016] VSCA 65.
[50]Ibid [26].
[51]Ibid [32].
There is only so much that can be gained by considering the length of delay in other cases that have dealt with applications of this kind. Each case turns on its facts. However, the two decisions discussed above offer some guidance as to the impact of the length of delay on the outcome of an application for an extension of time.
In the present case, the length of the delay, some 145 days, is egregious. Further, we are not satisfied that Mr Lopez has provided an adequate explanation for the delay. We accept that Mr Lopez has had difficulty in securing legal representation. It was suggested at the hearing — albeit faintly — that Mr Lopez may not have understood the time limits affecting any application for leave to appeal. However, the letter from Bowman & Knox to Mr Lopez dated 1 June 2017 shows that Mr Lopez had been notified, the day after the trial judge made final orders, of the requirement to apply for an extension of time if he did not file an application for leave to appeal within time. The same letter attached an information pack obtained from the Court website containing ‘information about the Victorian Bar Duty Barrister Scheme’. Mr Lopez said that he was under a misapprehension as to how the Scheme operated. He does not explain the source of his misapprehension or what changed in his understanding that led him eventually to approach the Scheme. He has not given an adequate explanation for his delay.
Mr Lopez apparently had made no attempt to file his application for leave to appeal within the 28-day period.[52] The application for leave to appeal and the written case that he had initially filed while self-represented indicates that he was familiar with his case as presented before the County Court. His lack of legal expertise does not explain the length of the delay. It is also not suggested that the delay was the result of extenuating circumstances.[53] Mr Lopez has relied heavily upon the events following his securing legal representation on 27 November 2017 — notably, the communications involving the Registry of the Court of Appeal and the unexpected receipt of the judicial registrar’s reasons — as providing some sort of explanation for the delay. However, these events all took place weeks after Mr Lopez filed his application for an extension of time (12 November 2017) and his application for leave to appeal (19 November 2017). They do not explain the initial delay of some four months.
[52]Cf Hewitt v Count Financial Ltd [2017] VSCA 354.
[53]Cf Gippsreal Ltd v Kenny [2016] VSCA 65.
Prospects of success
We now turn to assess the prospect of success of the proposed amended application for leave to appeal. In advancing its contentions, counsel for Harstedt properly accepted that the onus was upon it to establish that the present application should be refused on the basis that the proposed grounds of appeal in the application for leave to appeal itself had no prospect of success. Counsel also accepted that the material before the Court on the present application did not contain all the material that would be contained in an application for leave to appeal. In the event, we are of the view that, had the application for leave to appeal been confined to the first and second proposed grounds of appeal, it would not have had reasonable prospects of success. However, as will be seen below, we do not express any conclusion with respect to the third proposed ground of appeal.
We will deal first with the first and second proposed grounds of appeal.
It will be recalled that the first and second proposed grounds, in broad terms, impugn the trial judge’s conclusion that a trust was established with Apollo as trustee, Harstedt as beneficiary and the trust property being the deposited sum of $250,000.
The contentions in support of these grounds are summarised above.[54] In our opinion, these contentions are without merit. It seems to us that they misunderstand the principle that a trustee is to keep trust moneys ‘separate’ or deal with trust moneys ‘as a separate fund’ on behalf of a beneficiary. Separation, in this sense, refers to the separation of trust funds from the personal funds of the trustee or, where applicable, the separation of funds of separate trusts (absent an express authorisation to the contrary).[55] The pooling of trust moneys, in itself, does not infringe this principle. To illustrate the point, one need only look at the obligations of responsible entities in respect of managed investment schemes under ch 5C of the Corporations Act 2001 (Cth), fund managers in respect of superannuation funds and solicitors in respect of accounts in which client moneys are held on trust.
[54]See [45]–[46] above.
[55]In Cohen v Cohen (1929) 42 CLR 89, an authority upon which Mr Lopez relied, Dixon J said (at 101) that the relevant principle is that a trustee is not to mix trust funds ‘with other funds as his own and treat [the beneficiary] simply as a creditor whose debt, like other debts, was to be met out of his general resources’ (emphasis added). See also Australian Securities Commission v AS Nominees Ltd (1995) 62 FCR 504, 514 (Finn J).
We also consider that there is no merit in the contention of Mr Lopez that the $250,000 deposited by Harstedt was to be subject to debit for bank fees and, therefore, that the trust capital could never be for the full amount ‘inviolate’ and without debit. It appears to have been a condition of the investment that any deposited funds would be held in a non-depleting account.[56] It follows that the deposited moneys could not have been the subject of any debit. Mr Lopez has not pointed to any evidence to the contrary. Moreover, his contention is at odds with the following unimpeached finding of the trial judge:
Here, the evidence indicated that Harstedt paid money to Apollo on terms acknowledged by Apollo which meant that Apollo was not free to use it as its own. The arrangements contemplated that the money was to be held inviolate in the sense of not being the subject of any debit …[57]
[56]See [12] above; Reasons [57].
[57]Reasons [173] (emphasis added).
Furthermore, we consider that there is no merit in the contention of Mr Lopez that Harstedt failed to establish the existence of the very trust that it had pleaded. The parts of the further amended statement of claim to which counsel for Harstedt drew the attention of the Court concern representations, or what Harstedt described as ‘warranties’, made to members of the public with respect to the proposed investment. In the further amended statement of claim, Harstedt also alleged:
10. On 2 May 2007:
…
10.5[Harstedt] deposited $250,000 into the Commonwealth Bank of Australia Account … on the basis that none of the money would be withdrawn or removed from that bank account until it was returned to [Harstedt] and that it would receive by 2 December 2007 three times the amount deposited ($750,000.00) less 30% commission payable to NGS Financial Services Pty Ltd $225,000.00, leaving a net return to [Harstedt] of $525,000 plus the return of the initial deposit of $250,000 being a total payment due on 2 December 2007 of $775,000.00.
Plainly, the trial judge’s findings with respect to the establishment of the trust, summarised above, are consistent with this pleading.
It remains to address the third proposed ground. This ground appears to overlap, in substance, with the second and third proposed grounds of appeal in the application for leave to appeal brought by Harstedt against Mr Tomanek.[58] In broad terms, each of the grounds impugns a finding of the trial judge, or the state of the evidence, with respect to the knowledge of Mr Lopez or Mr Tomanek of the dishonest and fraudulent design on the part of Apollo. In the case of Mr Tomanek, it is Harstedt that complains about the trial judge’s dismissal of the claim against Mr Tomanek under the second limb in Barnes v Addy; in the present case, it is Mr Lopez who complains about the trial judge’s conclusion that Mr Lopez was liable as a third party under the second limb in Barnes v Addy. It is important to bear in mind, however, that the liability of Mr Lopez and the exoneration of Mr Tomanek, as it were, arose more or less from the same substratum of facts and in circumstances where both individuals were officers of the company that had engaged in the breach of trust. We therefore consider it inappropriate to pass any remarks about the merits of the arguments in support of Mr Lopez’s third proposed ground, however remote those arguments might appear from one another, lest it be seen as prejudging the second and third proposed grounds of appeal in the application for leave to appeal brought by Harstedt, which is yet to heard. At all events, the material before the Court does not enable us to evaluate the merits of Mr Lopez’s third proposed ground in any substantial way. It suffices to conclude that, even if we were satisfied that that ground was not devoid of merit, we would still refuse the application for an extension of time in view of the delay and the inadequate explanation for the delay.
[58]See [26] above.
Prejudice to Harstedt
For completeness, we will deal with the issue of any prejudice that Harstedt might suffer if the application for an extension of time were granted. Broadly expressed, Harstedt pointed to three instances of prejudice in the present case:
(i) its inability to recover costs from Mr Lopez if this Court were to grant the present application and Mr Lopez were ultimately to fail in his appeal;
(j) its losing the costs of the s 172 proceeding, ‘all such costs after 28 June 2017 having been incurred on the faith of its understanding that no appeal or application for leave to appeal had been instituted by Mr Lopez’; and
(k) the fact that Mr Lopez’s proposed application for leave to appeal is substantially different in scope and subject matter to the application for leave to appeal filed by Harstedt with respect to Mr Tomanek, with the result that Harstedt would incur additional costs if it were required to defend any such appeal.
We emphasise that prejudice for present purposes does not refer to prejudice at large. Rather, a respondent to an application for an extension of time must identify a particular prejudice which it would suffer if the application for an extension of time were granted, and which the respondent would not otherwise have suffered if the applicant had brought the application for leave to appeal within time.[59]
[59]See Hewitt v Count Financial Ltd [2017] VSCA 354 [56].
Viewed in this light, we reject Harstedt’s contention that it would be prejudiced due to its inability to recover costs from Mr Lopez. The recoverability of costs from Mr Lopez would have been a live issue even if Mr Lopez had filed his application for leave to appeal within time. The same reasoning applies with respect to Harstedt’s complaint that Mr Lopez’s proposed application for leave to appeal is substantially different in scope and subject matter to the application for leave to appeal filed by Harstedt with respect to Mr Tomanek. We note that the issue of the recoverability of costs against Mr Lopez may have been addressed by a security for costs application, which could have led to a stay of the proceeding if an order for security was made and not honoured.[60] Harstedt made no such application.[61]
[60]Ibid.
[61]At the hearing of the present application, counsel for Harstedt suggested that, in so far as Mr Lopez was impecunious, any application for security for costs would simply have burdened Harstedt with further expenditure which it could not hope to recover.
Finally, Harstedt pointed to prejudice in the sense that, if the application for an extension of time were granted and Mr Lopez succeeded in his appeal, it would lose the costs of the s 172 proceeding, ‘all such costs after 28 June 2017 having been incurred on the faith of its understanding that no appeal or application for leave to appeal had been instituted by Mr Lopez’.[62] The short answer to this submission is that any such prejudice is of Harstedt’s own making. On the evidence of Ms Moorhouse Perks,[63] Harstedt brought the s 172 proceeding on 22 June 2017, six days before Mr Lopez was required under the Rules to file any application for leave to appeal. Counsel for Harstedt accepted that the s 172 proceeding had been brought before the expiry of the 28-day period within which to file an application for leave to appeal. At the time of bringing the s 172 proceeding, Harstedt ought to have been alert to the possibility that Mr Lopez might still file an application for leave to appeal before 28 June 2017. Nothing in the material before this Court suggests that Mr Lopez somehow misled Harstedt into thinking that he would not do so. Further, it is not plain to us that Harstedt’s expenditure on the s 172 proceeding (in the period commencing 28 days after judgment through to the date upon which the trial of the s 172 proceeding was adjourned) necessarily has been lost.
[62]During the hearing, counsel for Harstedt also said that, just as a judgment creditor is entitled to execute a judgment, so too was Harstedt entitled to bring the s 172 proceeding.
[63]See [36] above.
Conclusion
The application for an extension of time should be refused.
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