Lauro v Leopardi
[2019] FCCA 2426
•30 August 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| LAURO v LEOPARDI | [2019] FCCA 2426 |
| Catchwords: BANKRUPTCY – Application for review of estimation made by trustee – debt subject to outcome of District Court proceedings that were not finalised – proof of debt – consideration of section 82(4). |
| Legislation: Bankruptcy Act 1966 (Cth), ss.60(2), 77, 82, 82(4), 82(5), 82(6), 84 |
| Cases cited: Damjanovic v Maley (2002) 55 NSWLR 149 |
| Applicant: | N LAURO |
| Respondent: | V LEOPARDI (DECEASED) |
| File Number: | ADG 374 of 2018 |
| Judgment of: | Judge Brown |
| Hearing date: | 28 June 2019 |
| Date of Last Submission: | 28 June 2019 |
| Delivered at: | Adelaide |
| Delivered on: | 30 August 2019 |
REPRESENTATION
| Counsel for the Applicant: | Mr Eric Lauro purported to appear for the applicant |
| Solicitors for the Applicant: | Not Applicable |
| Counsel for the Respondent: | Mr Ryder |
| Solicitors for the Respondent: | O’Loughlins Lawyers |
| Counsel for the Trustee: | Mr Elson |
| Solicitors for the Trustee: | Fisher Jeffries |
ORDERS
(1) Mrs Anna Leopardi be substituted as the first respondent for the late Vincenzo Leopardi.
(2) The applicant file any amended application and evidence in support of his claim on or before 25 October 2019, such evidence to address the following matters:
a.(a) any specific errors alleged to have been committed by Mr Scott in his adjudication of the quantity of the contingent debt and the procedure it is asserted he should have undertaken to do so; or alternatively
b.(b) the procedure it is asserted that the court should adopt to assess the amount and proof of the debt allegedly owed to the applicant, in respect of the District Court proceedings between the applicant and the late Mr Leopardi;
c.(c) together with the specific evidence and witnesses, if any, the applicant proposes to rely on to prove such debt.
d.(3) The respondent file a response and affidavit in support together with any application in a case on or before 15 November 2019.
e.(4) Further consideration of the matter is adjourned to 22 November 2019 at 9.30am for directions only.
f.(5) Costs reserved.
| (1) FEDERAL CIRCUIT COURT OF AUSTRALIA AT Adelaide |
ADG 374 of 2018
| N Lauro |
Applicant
And
| V Leopardi (deceased) |
Respondent
REASONS FOR JUDGMENT
a.1. In late 2003, Natalie Lauro (Mr Lauro Senior) and the late Vincenzo Leopardi entered into a contract in which Mr Leopardi agreed to build a house for Mr Lauro Senior at a property located at Stradbroke Road, Rostrevor.
b.2. The price contracted for the construction of the house was $450,000.00 or thereabouts. Mr Lauro Senior paid Mr Leopardi the sum of around $240,000, on account of work done. Thereafter, the two fell out. Mr Lauro instructed Mr Leopardi to stop work on the building.
c.3. Mr Leopardi was aggrieved. From his perspective, this represented a breach of the contract. As a consequence, he commenced proceedings, against Mr Lauro Senior, in the District Court of South Australia, seeking the sum of $92,874.12 for alleged unpaid work, loss of profits, interest and costs.
d.4. Mr Lauro Senior defended the proceedings and instituted a set of counter-claims against Mr Leopardi seeking damages for what he alleged was defective work on the property and the breach of a subsequent agreement to rectify brickworks done there.
e.5. Later, Mr Lauro Senior joined an architectural and engineering firm to the proceedings, alleging that they had breached contracts relating to the design and construction of the building or had otherwise been negligent in the services provided to him in respect of the building of the Rostrevor home.
f.6. These proceedings have not been finalised in the District Court. In January of 2013 it was estimated that the trial of the matter would last for approximately 25 days. An earlier hearing of the matter, fixed for September 2011, was vacated on application made by Mr Lauro Senior.
g.7. On 25 November 2013 Mr Leopardi became bankrupt on his own petition. Alan Scott, an accountant, was appointed Mr Leopardi’s trustee in bankruptcy on 19 March 2014. Mr Leopardi is now dead. It is Mr Lauro Senior’s position that he is a creditor of the bankrupt estate of the late Mr Leopardi as a consequence of his un-concluded District Court action against him.
h.8. In this context, it is important to note that, pursuant to the provisions of section 60(2) of the Bankruptcy Act 1966, one of the consequences of becoming bankrupt is that the bankrupt person is stayed from commencing or pursuing any action commenced by him or her. Rather, the trustee concerned is granted an election to determine whether or not to proceed with any such action.
9. It is implicit that Mr Scott has elected not to proceed with the late Mr Leopardi’s action against Mr Lauro Senior. Mr Scott, however, does have to consider the status of Mr Lauro Senior’s action against Mr Leopardi, in the context of the latter’s bankruptcy. It is this issue which is at centre of these potentially complex proceedings.
j.10. As a result of his bankruptcy, pursuant to the provisions of section 77 of the Bankruptcy Act 1966 (Cth) the late Mr Leopardi was required to provide his trustee with all relevant information concerning his financial affairs.
k.11. In this context, Mr Leopardi completed a statement of his financial affairs. In this document he provided as his then residential and business address premises located at 27 Heggarton Terrace, Newton. The statement further disclosed that this property had been transferred to a family trust on 7 January 2013. The property was said to be subject to various mortgages. In addition, Mr Leopardi disclosed unsecured creditors in an amount of around $90,000.00, which seem mainly to relate to legal fees and credit card debts.
l.12. Section 84 of the Act provides the formal mechanism for any other creditors of a bankrupt to establish the debts said to be owed to them. This is done by providing the relevant trustee with a proof of debt, which is a formal document setting out the relevant particulars of the debt concerned.
m.13. In early February of 2018, following Mr Leopardi’s bankruptcy, Mr Lauro Senior submitted such a proof of debt to Mr Scott. The debt claimed to be owed by Mr Leopardi to Mr Lauro was initially specified as a sum greater than $1m.
n.14. This sum was based on the alleged costs of rectifying the alleged defects to the house at Rostrevor; reimbursement of monies previously paid to Mr Leopardi; the diminution in value of the property concerned; loss of sale of the property; and related expenses.
o.15. Later, in the alternative, on 20 February 2018, Mr Lauro sought payment of a sum of $2.2m on the basis of the property in question being demolished and re-built, if it could not be repaired. The imprecise nature of the debt sought to be proved engaged the provisions of section 82(4) of the Act, which reads as follows:
1. “(4) The trustee shall make an estimate of the value of a debt or liability provable in the bankruptcy which, by reason of its being subject to a contingency, or for any other reason, does not bear a certain value.”
a.16. Between February and August 2018, Mr Scott embarked on a process of adjudicating the debt claimed by Mr Lauro as was required of him by section 82. This process largely consisted of him reviewing the material filed in the proceedings in the District Court between Mr Leopardi and Mr Lauro.
b.17. These documents are voluminous and contain competing expert opinions regarding the nature of the work and rectifications done at the Rostrevor property. Ultimately, Mr Scott formed the view that the claim contained in the relevant proof of debt did not bear a certain value. In these circumstances, he was required to make an estimate of the debt concerned.
c.18. Ultimately, Mr Scott elected to attribute the nominal value of $100.00 to the proof submitted. In so doing, he relied on long-standing English authority provided by Bowen LJ in Morgan v Hardy as follows:
1. “If the trustee cannot estimate the liability he must put down some nominal sum, and then the claimant may appeal. If the court holds the liability is capable of estimation it ceases to be subject of proof in the bankruptcy.”
a.19. On 24 August 2018, Mr Scott wrote to Mr Lauro advising him of this decision. The grounds on which he reached his decision can be summarized as follows:
The evidence available to him indicated that there was a significant level of controversy between the parties, in the relevant unconcluded litigation, regarding whether the building works were faulty and who was responsible in this regard;
In particular, whether the deficits in the building were attributable to the work of the late Mr Leopardi or the engineering services separately contracted for by Mr Lauro;
In these circumstances, it was possible that Mr Lauro could be found to have breached his contract with Mr Leopardi and be therefore liable to him for breach of contract, rather than vice versa;
Accordingly, Mr Scott formed the view that there existed genuine doubt about the claim and he personally was unable to form a view as to the merits of either the claim or the counter-claim, given the very many areas of evidentiary controversy, including amongst the experts retained; and
These difficulties were compounded by the fact that the proof of debt was presented in the form of alternative amounts.
a.20. In support of his position that it would be extremely difficult for him to make a fair estimate of the value, of any of Mr Lauro’s claims, Mr Scott pointed out the following:
He personally was not an expert in construction law;
The issues were complex;
No funds were available in the estate to commission his own expert report;
The District Court had anticipated it would take 25 days to hear all the relevant evidence concerned;
He was not in a position to allocate similar resources himself to determining the matter;
In any event, ultimately the determination of the issues arising depended on findings regarding the overall credibility of the witnesses, who were proposed to be called in the aborted District Court proceedings;
There were no funds in the estate itself and he himself was not prepared to outlay his own funds to investigate the issue further.
a.21. In summary, Mr Scott considered that whether Mr Lauro would be able to establish a breach of contract against Mr Leopardi would be determined by both lay and expert evidence, which it had been anticipated would be provided orally at the trial in the District Court.
b.22. Mr Scott himself considered that he could not make the necessary determination on the basis of the written material alone, which was contradictory in nature, both in respect of the expert evidence and the evidence of the parties themselves. These difficulties were compounded by the death of Mr Leopardi.
c.23. In short, Mr Scott was of the opinion he was unable to estimate the claim made against Mr Leopardi’s estate in a fair manner. Pursuant to section 82(6) of the Act, if a debt is found to be incapable of fair estimation it cannot be proved or established in any relevant bankruptcy.
d.24. In the context of this finding, Mr Scott advised Mr Lauro of the provisions of section 82(5) of the Act, which reads as follows:
1. “(5) A person aggrieved by an estimate so made may appeal to the Court not later than 28 days after the day on which the person is notified of the estimate.”
a.25. On 14 September 2018 Mr Lauro purported to commence proceedings in this court to review Mr Scott’s decision. The application in question was prepared by Eric Lauro, who is described as the son and next of kin of Mr Lauro. The application was supported by an affidavit affirmed by Eric Lauro, in which he states that he has brought the proceedings on behalf of his father pursuant to a power of attorney because his father is “currently medically unfit to attend to any legal matter.”
b.26. Mr Eric Lauro is legally qualified but not currently entitled to practice as a legal practitioner in either South Australia or the Federal Courts of Australia. He has appeared on the majority of mentions of the matter and concedes he has prepared the various documents filed to date in the proceedings. Mr Lauro Senior has never appeared in court, nor formally deposed any document.
c.27. Mr Leopardi’s next of kin is his widow Mrs Anna Leopardi. She has instructed solicitors to appear on her behalf in this proceedings. However, she has not formally filed any affidavit evidence or made any actual applications in the case. Her counsel is Mr Ryder. She wishes to safeguard her position in the event that Mr Lauro Senior’s proof of debt is accepted in her late husband’s bankruptcy.
d.28. Mr Scott has also instructed solicitors to appear on his behalf. It is his position that he has done all that is required of him under the Bankruptcy Act 1966. He has adjudicated the proof of debt and found it impossible to allocate anything other than a nominal value to it. From his perspective, there is nothing more he can do. He is reluctant to commit further financial resources to the case given his evidence that “no monies have been recovered in the bankrupt estate” of the late Mr Leopardi.
e.29. In his administration of the late Mr Leopardi’s estate, Mr Scott identified three unsecured creditors. These creditors were a legal firm owed $85,812.61; and two banks, each who held a credit card debt, which in total amounted to less than $800.00. The legal debt has been settled by a related party. In all these circumstances, Mr Scott has deposed as follows:
1. “I do not propose to take any position at the hearing of the Application I so far as it concerns the review of my adjudication. As is evident from my reasons set out in the adjudication, in my view, it is entirely appropriate, and indeed necessary, for the Court to consider the complexities of the Applicant’s claim and to determine whether it can be fairly estimated.
2. I will provide any materials and information necessary to assist the Court in the process but intend to take a neutral position.”
a.30. Attached to Mr Scott’s affidavit are over a thousand pages of the various documents, which he consulted, in making his adjudication. These documents are largely the various reports and pleadings filed in the District Court proceedings. It is Mr Scott’s position that his analysis of these various documents led him to the conclusions, which he drew.
b.31. He does not intend to defend those conclusions in the current proceedings. Rather, if the court determines a different value to the proof of debt proffered by Mr Lauro Senior, to that reached by him, he will abide by that decision. However, underpinning this position is that he doubts that this will have any utility in practical terms.
c.32. In his application filed on 14 September 2018, Mr Lauro Senior asserts that he is aggrieved by Mr Scott’s decision. I do not doubt that this is the case. He further asserts that there is no basis on which it was reasonable for Mr Scott to attribute a nominal value to the debt in question and in so doing, he further asserts Mr Scott took into account irrelevant considerations or failed to take into account relevant considerations. He has not specified what those consideration are.
d.33. It is further asserted that Mr Scott has breached the principles of justice in respect of his administration of the estate in the sense that he was not given a right to be heard in respect of the adjudication. It is alleged that Mr Scott did not properly administer the estate.
e.34. It would appear to be Mr Scott’s view that he was not obliged to confer with Mr Lauro Senior in respect of his adjudication and, if there is any criticism of his administration of the estate of the late Mr Leopardi, he should raise it with the Australian Financial Security Authority “AFSA”. He has however, through his legal representative indicated a willingness to discuss the issues raised in the case, either with Mr Eric Lauro or Mr Lauro Senior.
f.35. Mr Eric Lauro objects to Mr Ryder being involved in the proceedings. It is his position Ms Leopardi has no standing in the matter. On the other hand, it is Mr Ryder’s position that, given Mr Scott’s neutrality in the matter, it is in the interests of justice that there be a contradictor to any position advocated by Mr Lauro Senior. It is further his position that, if a debt based on the un-concluded District Court proceedings is proved, it may have consequences for his client.
g.36. More significantly, Mr Ryder is critical that the application does not disclose how Mr Scott’s adjudication is erroneous or propose any other methodology which he (Mr Scott) could have adopted in any attempt to quantify the contingent debt. However, Mr Ryder has not formally applied to have the application summarily dismissed.
h.37. In essence, Mr Ryder contends that it not helpful for Mr Lauro Senior to make appeals to principles of administrative law, particular considerations of natural justice, when the court’s task, arising under section 82(5) is to either confirm the methodology undertaken by Mr Scott or undertake its own quantification by some other means.
38. In these circumstances, it is Mr Ryder’s contention that Mr Lauro Senior needs to provide sufficient evidence to furnish such a methodology otherwise his application can achieve nothing. It is not sufficient for Mr Lauro Senior to merely say he disagrees that his proof of debt should not be included in the bankruptcy. Rather he must provide arguments and evidence which justify this conclusion. Otherwise the court cannot complete its task under section 82(5).
j.39. In addition, he calls into question Mr Eric Lauro’s entitlement to appear as an advocate on his father’s behalf in these proceedings, given he is not currently admitted to practice, as a legal practitioner, in the High Court of Australia. However, no formal application has been made in this regard. In this context, Mr Ryder also points out that Mr Eric Lauro has not produced any power of attorney, donated to him by his father, in these proceedings, although he (Eric Lauro) has deposed that it exists.
k.40. In this context, Mr Ryder has drawn my attention to proceedings involving the Lauros in the Supreme Court of South Australia, Lauro v Minter Ellison Lawyers,which he contends is apposite to the current matter. In the case, Hinton J said as follows:
1. “Mr Eric Lauro is the son of the applicant. He appeared in this Court to make submissions on behalf of the applicant. The Notice of Appeal and the interlocutory application were both signed by Eric Lauro. Mr Eric Lauro did not possess lawful authority to institute either proceedings. He referred the Court to a letter in which his father, the purported applicant, had delegated to his son authority, his son claimed to act as he had done. I rejected that letter as inadequate for the purpose for which it was deployed.”
a.41. It was Mr Ryder’s submission that these comments were apposite to the current matter. Mr Eric Lauro has signed the initiating application and sworn its supporting affidavit. It is Mr Eric Lauro’s position that his father is medically unwell and so currently unable to engage in the proceedings.
b.42. In that application, Mr Leopardi is named as the respondent. As he is deceased, he cannot be a party to the proceedings. Mrs Leopardi describes herself as the administrator of his estate and his principle beneficiary.
c.43. As previously indicated, Mr Eric Lauro objects to the court having corresponded with Mr Ryder, as he had not specifically joined Mrs Leopardi to the proceedings. In my view, given the death of Mr Leopardi, she has standing to appear in the matter.
d.44. The application was first listed for mention on 24 October 2018. Mr Eric Lauro purported to appear for his father; a solicitor appeared on behalf of the estate of Mr Leopardi; Mr Scott was represented by his solicitor, Ms Riach. Mr Lauro was referred to Justice Net for possible legal assistance.
e.45. Mr Scott had filed his lengthy affidavit a few days beforehand. He was directed to provide this to the solicitors for the late Mr Leopardi’s estate. On this first mention date, Ms Riach indicated her willingness to meet with the Lauros to discuss the matter informally. The case was adjourned until 27 March 2019.
f.46. On 15 March 2019, Ms Riach contacted Mr Eric Lauro by email to enquire of him whether he intended to proceed with the application and whether or not he had been successful in obtaining legal assistance for his father. In replying, Mr Eric Lauro indicated that he did not expect to be in Adelaide on the adjourned date and would be seeking to adjourn the proceedings.
g.47. For administrative reasons, which are not clear to me, the case was adjourned from 27 March to 5 April 2019. Neither the applicant nor Mr Eric Lauro appeared on this occasion. In addition, legal counsel were not retained. Ms Riach reiterated Mr Scott’s position that he intended to take a neutral role.
h.48. Mr Ryder submitted that the application needed to be brought to a conclusion and his client was entitled to know the basis on which Mr Lauro Senior considered the adjudication of Mr Scott was in error or could otherwise be subject to challenge. On this occasion, the following orders were made:
1. “1. Ms Anna Leopardi file a Notice of Address for Service within seven (7) days of today’s date.
2. The applicant file his evidence in support of his application by no later than 31 May 2019.
3. The applicant and the respondent (noting the Trustee has filed their submissions) file any written submissions on which they wish to rely by no later than 7 June 2019.
4. Further consideration of the matter is adjourned to 27 June 2019 at 2:15pm NOTING the Trustee is excused from attendance.”
a.49. The next thing which occurred was that on 31 May 2019, Mr Eric Lauro filed a further affidavit to which were attached a variety of documents, which included the following:
A sickness certificate relating to his father, indicated that he was scheduled for surgery on 27 June 2019 to remove a minor tumour;
Documents relating to the Rostrevor property;
Medical notes relating to Mr Lauro Senior dated 24 May 2012 indicating he had been assaulted by Mr Leopardi;
Royal Adelaide Hospital inpatient record indicated Mr Lauro Senior had been admitted for chest pain in September 2008;
A psychological assessment of Mr Lauro Senior dated 11 April 2012;
An intervention order against Mr Leopardi naming the Lauros as protected persons dated 20 October 2012;
Records of SAPOL in respect of the arrest of Mr Leopardi in October of 2013; and
Testimonials as to the good character of Mr Lauro Senior.
a.50. From those documents and from what Mr Eric Lauro has said in court, it is apparent that there was significant levels of ill will between the Lauro family and the late Mr Leopardi. It is Mr Eric Lauro’s view that the stresses and strains of the unfinished District Court proceedings have permanently injured his father’s health and also jeopardised his own wellbeing.
b.51. In these circumstances, he sought an extension of the timeframes stipulated in the 5 April 2019 order. Against this background, the case did not proceed any further on the adjourned date of 27 June 2019. What did become apparent was the ill will between the Lauros and anyone associated with the late Mr Leopardi and the powerful emotions which the aborted District Court proceedings had precipitated.
c.52. It is Mr Scott’s position that he has nothing to add to his adjudication of debt. It is his view that he does not have to defend it in the current proceedings. Rather, Mr Lauro Senior, whose proof of debt it is, bears the onus of proving the debt in question to the court’s satisfaction. Mr Ryder agrees and wishes to be able to be the contradictor in respect of any arguments to be advanced in this regard.
d.53. In this context, two questions emerge. Firstly, is Mr Eric Lauro entitled to appear in the matter on behalf of his father. Secondly, what procedural matters need to be attended in order to ready the case for the hearing required under section 82(5).
e.54. In respect of the first matter, no formal application has been made to restrain Mr Eric Lauro from acting nor has Mr Eric Lauro sought the court’s permission to act for his father. Rather, having completed the application and sworn an affidavit in support, Mr Eric Lauro seems to have assumed that he is entitled to appear on his father’s behalf.
f.55. Section 44 of the Federal Circuit Court of Australia Act 1999 (Cth) provides as follows:
1. “A party to a proceeding before the Federal Circuit Court of Australia is not entitled to be represented by another person unless:
2. (a) under the Judiciary Act 1903, the other person is entitled to practise as a barrister or solicitor, or both, in a federal court; or
3. (b) under the regulations, the other person is taken to be an authorised representative; or
(c) another law of the Commonwealth authorises the other person to represent the party.”
a.56. However, the court has a discretion to allow any person to appear before it and represent a party in proceedings before it and also determine the scope of such representation. This may range from providing assistance at the bar table in respect of note taking; collating of documents; and suggesting lines of questioning of witnesses; to more significant activities, such as making submissions.
b.57. As a matter of general principle, the power to grant leave to an unqualified advocate is to be used sparingly. There are good reasons why this is so. Firstly, the general restriction of appearance to either the actual parties concerned and to qualified persons seeks to ensure that the court has the assistance of individuals who know their case or qualified legal practitioners, who can make informed submissions to assist the court, based on relevant legal authorities.
c.58. Secondly, legal practitioners have ethical duties both to their clients and to the court and if they breach those duties can be subject to professional sanction or discipline. In addition, they hold insurance in respect of any possible breach of tortious liability arising from professional negligence. Lay advisers are not subject to any such professional discipline or insurance.
d.59. Thirdly, legal practitioners can be expected to understand the difference between acting on instructions and acting without instructions. There is a real risk that an unqualified advocate will stray across the line and assume the running of the particular case in question. I consider that there is a significant risk of this occurring in the present matter.
e.60. In Damjanovic v Maley the New South Wales Court of Appeal examined, in great detail, the principles relevant to the exercise of the discretion. They can be summarised as follows:
The complexity of the case;
Genuine difficulties of the unrepresented person;
The unavailability of disciplinary measures and a duty to the court by lay advocates;
Protection of the client and the opponent;
Lay advocates in inferior courts and tribunals; and
The interests of justice.
a.61. Busy, high volume courts, may be more inclined to grant leave to unqualified persons, particularly in straightforward matters. The litigation in the District Court seems to have been particularly complex. The proceedings, in this court, require at least some appraisal of those proceedings but without the full scale forensic examination envisaged in the District Court trial.
b.62. That is the essential difficulty in the case, which also faced Mr Scott. It may be impossible for anyone to be able to predict, with the required degree of certainty, what would have been the result of these bitterly contested proceedings. Certainly whether Mr Lauro Senior would have secured a judgment in the tens of thousands of dollars or whether the case would have gone the way of Mr Leopardi.
c.63. That is the task facing Mr Lauro Senior. I do not regard it as a necessarily straightforward or cut and dried matter. Rather, as Mr Scott found it, it is a task fraught with difficulty. Accordingly, this may be a factor which militates against leave being granted.
d.64. Also, it is apparent that Mr Eric Lauro is also significantly emotionally involved in the case. In such circumstances, it may be difficult for him to provide dispassionate advice to his father. As such, there may be a risk of him running an unmeritorious case, which may result in a costs order being made against Mr Lauro Senior.
e.65. Although Mr Eric Lauro has a law degree, it does not necessarily mean he will provide appropriate representation for his father and provide him with dispassionate advice, given the paternal ties between them and Mr Eric Lauro’s emotional involvement with the case and his subjective perception of it.
f.66. In addition, at this juncture, it is uncertain to me whether Mr Lauro Senior is actually ever going to come to court. He has not done so as yet. It seems difficult to see how Mr Eric Lauro can become his permanent proxy in the case. Given his absence, I do not know if Mr Lauro Senior has any difficulties in respect of his English language skills or grappling with the legal issues arising in the case.
g.67. Finally, of course, the most important consideration is the interests of justice. The general public has an interest in justice being done and being seen to be done. The public has an interest in the effective, efficient and expeditious disposal of litigation in the courts.
h.68. The best means of this being achieved is if each party to an action has qualified and skilled lawyers to represent them. The adversarial system, which prevails in this country, is predicated on the basis that parties are represented by skilled professionals of equal competence, who are bound by the same ethical and professional standards.
69. The orders I made on 5 April 2019 do not seem to me to have been unreasonable ones, with or without the benefit of hindsight. Mr Lauro Senior and indeed Mr Eric Lauro have disregarded them. The orders were designed to provide a mechanism to bring the matter to some conclusion.
j.70. It is not sufficient for Mr Lauro Senior to assert that he has a debt due from the late Mr Leopardi. He has to prove the debt in Mr Leopardi’s bankruptcy. Contingent debts are those not capable of being allocated an ascertainable value. In Pyramid Building Society (in liq) v Terry & Anor, Gaudron & Gummow JJ said as follows:
1. “…section 82(4) empowers, and indeed requires, the trustee to take certain steps in a bankruptcy administration if the be, as may not always be the case, a debt or liability which is provable in the bankruptcy but does not bear a certain value. However, if section 82 be read as a whole after the operation upon it of section 243 and rule 84, contingent debts will not be allowed in a composition.”
a.71. It is Mr Scott’s position, as I understand, that he has taken the necessary steps required of him to see if the proof of debt proffered by Mr Lauro Senior is capable of bearing some form of value. His view is that it has a nominal value only. Contingent debts – that is a debt which requires the satisfaction of some other eventuality – in this case an outcome in the District Court proceedings, which favours Mr Lauro Senior, are not otherwise allowed in the bankruptcy.
b.72. In my view, at this stage, it is incumbent on Mr Lauro Senior to provide some further particulars in support of his cause of action and provide evidence in support thereof. It is not sufficient, in my view, for him to assert merely that he disagrees with Mr Scott’s assessment of the issues thrown up by the unfinished District Court proceedings, which are apparently incapable of ever being concluded, given the death of Mr Leopardi.
c.73. The orders of 5 April 2019 were intended to secure this outcome. They have been essentially disregarded. In my view, it is appropriate that Mrs Anna Leopardi be substituted as the respondent to the proceedings, in lieu of her late husband. She has an interest in the outcome of Mr Lauro Senior’s application.
d.74. In my view, it would also be in the interests of justice that there be a contradictor to any submissions made by Mr Lauro Senior in regards to the possible inclusion of the relevant debt and its quantum, given the fact that Mr Scott proposes to remain neutral on the basis that he does not consider it appropriate for him, in effect, to defend his analysis of the matter and the adjudication reached by him.
e.75. Whether Mrs Leopardi chooses to challenge Mr Eric Lauro’s standing to initiate and act in the current proceedings is a matter for her, at this stage. However, Mr Eric Lauro is on notice that he is not automatically entitled to act on the assumption that he and his father are one and the same person or that his previous legal qualifications entitle him to any right of appearance.
f.76. In these circumstances, I will refrain from setting the matter for final hearing but extend the time for Mr Lauro Senior to file any amended application and evidence in support of his claim. In my view, those advising Mrs Leopardi are entitled to such material. Although the court, pursuant to the provisions of section 17A of the Federal Circuit Court of Australia Act 1999 has jurisdiction to summarily dismiss an application which has no reasonable prospect of being prosecuted successfully, such authority is to be carefully utilised.
g.77. Rule 13.10 of the Federal Circuit Court Rules 2001 reads as follows:
1. “The Court may order that a proceeding be stayed, or dismissed generally or in relation to any claim for relief in the proceeding, if the Court is satisfied that:
2.the party prosecuting the proceeding or claim for relief has no reasonable prospect of successfully prosecuting the proceeding or claim; or
3.the proceeding or claim for relief is frivolous or vexatious; or
4.the proceeding or claim for relief is an abuse of the process of the Court.”
a.78. The jurisdiction of the court to dismiss a claim upon the basis that it discloses no reasonable cause of action is to be sparingly invoked. The case “must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination … by the court …” In Webster v Lampard the High Court said as follows:
1. “The power to order summary judgment must be exercised with exceptional caution … and should never be exercised unless it is clear that there is no real question to be tried.”
a.79. In this case, Mr Lauro Senior has not, as yet, provided any alternative basis on which Mr Scott could have proceeded, unless, by necessary implication, it was to accept every proposition put forward by him and his respective witnesses and experts and reject everything propounded by Mr Leopardi and his witnesses and experts. In my view, there must be a more logical and reasoned analysis in this regard, otherwise the case may not be able to proceed further.
b.80. At first blush, Mr Scott was placed in an invidious position. He was called upon to adjudicate, at second hand, a complex piece of litigation, involving competing claims of fact, which relied on differing expert opinions. It is difficult to see how he could have resolved such issues without recourse to an extensive hearing, involving cross examination, which is likely to be beyond the capacity of the estate to sustain.
c.81. In my view, the onus is on Mr Lauro Senior to turn his mind to these issues and indicate what evidence and witnesses he proposes to call. In these circumstances, Mrs Leopardi can then consider her position and consider what applications, if any, she proposes to make to the court.
d.82. I will give Mr Lauro Senior, given the issues of ill health which surround him, ample time to prepare such material and provide, I hope, the necessary directions as to what it should contain.
e.83. Given the complexities of the issues arising in the matter and the weight of documents pertaining to the aborted District Court proceedings, I propose a period of eight weeks for this to occur. In this context, in my view, it will not be sufficient for Mr Lauro merely to attach a plethora of documents to his affidavit and assert it is for the court to analyse them because, from his context, their contents are axiomatic in their support of him. More must be done.
f.84. For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding eighty-four (84) paragraphs are a true copy of the reasons for judgment of Judge Brown
Associate:
Date: 30 August 2019
Key Legal Topics
Areas of Law
-
Insolvency
-
Civil Procedure
Legal Concepts
-
Appeal
-
Costs
-
Jurisdiction
-
Procedural Fairness
-
Statutory Construction
0
8
3