Mackay v GATE - [2017] FCCA 3391

FEDERAL CIRCUIT COURT OF AUSTRALIA

MACKAY & ORS v GATE

[2017] FCCA 3391

Catchwords:
BANKRUPTCY – Where there are applications for summary judgment and security for costs – where both applications are dismissed – where costs arising are reserved to the final hearing – where comment is made as to the inappropriateness of direct communication by a legal representative with the Court or Judge without the agreement of the other party.

Opes Prime Group Limited in liquidation (scheme administrators appointed) v Niako Investments Pty Ltd [2014] VSC 414

First Applicant:

WENDY ANN MACKAY

Second Applicant:

DANIEL JOHN ROBINSON

Third Applicant:

ANNUNAKA PTY LTD (AS TRUSTEE FOR THE H.H. KNEIPP FAMILY TRUST)

Second Respondent:

CAROLYN GATE

File Number:

BRG 954 of 2014

Judgment of:

Judge Coker

Hearing date:

15 November 2017

Date of Last Submission:

15 November2017

Delivered at:

Townsville

Delivered on:

20 November 2017

REPRESENTATION

Solicitors for the Applicant:

Lee & Co Solicitors

Solicitors for the Respondent:

CBC Lawyers

ORDERS

The application for summary judgment initially filed on 4 March 2015 be dismissed.
The application in a case filed 8 November 2017 be dismissed.
The costs of both parties be reserved for final determination of this matter.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT TOWNSVILLE

No. BRG 954 of 2014

WENDY ANN MACKAY

First Applicant

And

DANIEL JOHN ROBINSON

Second Applicant

And

ANNUNAKA PTY LTD (AS TRUSTEE FOR THE H.H. KNEIPP FAMILY TRUST)

Third Applicant

And

CAROLYN GATE

Second Respondent

REASONS FOR JUDGMENT

On 31 October 2014, in other words, more than three years ago, proceedings were commenced in this Court pursuant to the provisions of the Bankruptcy Act. The proceedings have grown, developed and, in some respects, morphed into other applications over the period of time that has passed since the original application before this Court.
There is now in place, directions with regard to the final determination of the application. However, presently before the Court are two further applications which require determination. The first of those is an application by the applicants for a summary judgment to be delivered against the respondent.
The basis for that is contained, initially, in the proceedings that were commenced on 4 March 2015. Later in 2015, various orders were made including orders with regard to the preservation of certain items of property the subject of the proceedings before this Court, but it would appear that there was no formal order made with regard to the determination of whether or not summary judgment should be entered.
The applicants have therefore asked that that particular aspect of the matter be dealt with, specifically in light of the fact that it was submitted, that if summary judgment were to be entered in relation to the matter, and obviously the applicants then being successful, there would have been a very considerable reduction in the time that would be required for the determination of the application before the Court. However, it is clear that the convenience of one party or another to the proceedings, or in fact to the Court in reducing the length of proceedings is not a basis upon which summary judgment should be entered.
Summary judgment should be considered in terms of the rules of Court relating to an application for summary judgment and consideration, obviously, of the claim that is made and the defence that is delivered in relation to that claim. In particular, it is necessary to consider whether there are reasonable prospects of successfully defending the claims that are brought against the respondent. To the applicants’ great credit, when directions were made on the first occasion of this matter coming before the Court on 15 November 2017, the solicitor appearing for the applicants indicated, that whilst they were strongly of the view that the application for summary judgment has merit, they were happy to, as it was put, consent to summary judgment being adjourned to the first consideration at the hearing and for costs to be reserved as costs in the cause.
It is understandable that such a position is taken in relation to this matter. There are certainly substantial matters to be considered in relation to the determination of the proceedings and it is understandable that the far greater consideration, certainly from the perspective of the applicants but I would think also from the perspective of the respondents, is for there to be an ultimate determination in relation to the proceedings. Understandably however, counsel appearing for the respondent submitted, correctly, I would suggest, that it was not appropriate to adjourn an application for summary judgment to consideration at the final hearing.
The application for summary judgment should be either determined or dismissed. And in the circumstances, whilst the solicitor for the applicant strongly submits that the matter should be stood over, I am certainly more inclined to the view that the appropriate course is to consider the application and to determine whether it would be successful or be dismissed. In my assessment, and I do not intend to provide a lengthy recitation in relation to this matter, there are issues in dispute which require determination.
There is certainly not any suggestion of a position where there is no reasonable prospect of the respondent defending all or part of the various claims that have been brought, in relation to these particular proceedings and, accordingly, I am not at all of the mind to consider that it is appropriate to summarily dismiss the response to the application that is filed in relation to this matter. Accordingly and without hesitation therefore, I intend to dismiss the application for summary judgment filed initially in this Court on 4 March 2015.
I shall turn to the issue of costs shortly but it is important firstly to note that there was a second application before the Court, one brought by the respondent Carolyn Gate. In that application, being an application in a case filed on 8 November 2017, the respondent seeks an order for security for costs of the proceedings that have been before the Court. An amount of $49,214, inclusive of GST is sought, in respect of the security for costs. It is also then sought in the application in a case that there should be further directions made as to the conduct of the proceedings and an order that the third applicant, Annunaka Pty Ltd, pay the respondents’ costs of and including the security for costs, in relation to the proceedings.
The application is opposed. Again, with respect, I do not intend to provide a lengthy dissertation in relation to these proceedings. The application for security for costs is based upon the suggestion that there are multiple applicants, and of course that is the case in relation to these proceedings, and that one of those applicants is a company and that accordingly, there needs to be consideration as to security being provided to the respondents, in relation to such matters.
I was understandably referred by the legal representatives for the respondents to the decision of Derham J, in Opes Prime Group Limited in liquidation (scheme administrators appointed) v Niako Investments Pty Ltd [2014] VSC 414 where specific reference was made to the law and, in particular, a point which, in my assessment, looms large in relation to this matter was made, that is to the following effect:
If a natural person ordinarily resident within the jurisdiction is also a plaintiff, the Court will not as a rule require the plaintiff corporation to give security for the defendant’s costs. The individual plaintiff will be liable for the defendant’s costs if the proceedings fails. But the defendant would not have been entitled to security if that plaintiff had sued alone, even if the plaintiff was insolvent, and there is no reason why the joinder of a company which is insolvent as co-plaintiff should put the defendant in a better position with respect to security.
The fact to be recognised in relation to this matter in particular is that the first and second applicants are specifically involved in the litigation and have claims in conjunction with the third applicant corporation. The fact is that each also has individual claims, in relation to various aspects of the proceedings that are before the Court, and it is certainly contended on the part of the respondents therefore, that there is a prospect that the claim of the company may be unsuccessful and as a result of that, an order might specifically be made against the company rather than against the other applicants and that therefore, there is a risk that the company will not be in a position to pay the financial obligations that might arise.
What is suggested in Opes Prime (supra), is that the Court must consider the degree of the overlap between the claim of the corporation and that of the individual. The notation in the Opes Prime case goes on to note:
If there is a very limited overlap so that the defendant will incur substantial costs in meeting the corporation’s claim which it will have no entitlement to recover from the natural person should the defendant succeed against the individual, then, in the absence of other relevant considerations, a proper exercise of discretion would generally require security to be provided by the corporation.
What is required therefore is an assessment by the Court of the degree of overlap between the claim of the corporation or company and the claim of the various individuals. In this matter it is my assessment that the claim of the individuals Ms Mackay and Mr Robinson and Annunaka are, to a very significant degree, overlapped or, if you like, enmeshed, one with the other. It is clear that the entirety of the claims that each make, though in respect of different items of property, arise as a result of the bankruptcy order made in 2007 with regard to the estate of the late Henry Harvey Kneipp.
It is clear in my assessment that there is such a significant overlap in relation to the proceedings, that whilst there may certainly be some question as to costs that might be ordered against the first applicant, second applicant or third applicant, there is not such a situation that it would in any respect be appropriate that an order should be made for security for costs against Annunaka Pty Ltd, particularly when that would, to all intents and purposes, shut down the application as between the third application and the respondent. Accordingly, I intend again without hesitation to dismiss the application for security for costs brought by the respondent against the third applicant in the application in a case filed on 8 November 2017.
I then need obviously to turn to the issue of costs but before doing so, it is important, in my assessment, that one other matter be brought to the fore. That relates to an approach apparently made on the part of the respondent to file a further affidavit, in relation to these proceedings. My practice, the same as in my assessment or understanding, all judges, is not to address issues that arise with regard to correspondence in relation to matters that are before the Court and which are forwarded to chambers.
In that regard, I am mindful of the directions of this Court which are contained within the document provided to parties to proceedings in any circumstances, when correspondence is forwarded to the Court. The document headed, “communicating with judges’ chambers, notice to litigants and legal practitioners”, includes a number of points which, in my assessment, are salient to the situation that exists, in relation to these proceedings.
This matter was heard before the Court on Wednesday, 15 November 2017. The decision in relation to the matter was adjourned to today. Subsequently, and I do not know the date that it occurred but it was obviously 16 or 17 November 2017, a further affidavit was forwarded along with correspondence to the Court. I am advised that there was also, I think understandably, a response forwarded by the legal representatives for the applicants objecting to the communication with the Court and the attempt to have certain further information brought to the attention of the Court.
The notation with regard to communication with judges’ chambers is relevant in respect of that particular incident. It is important, in my assessment, that it should be formally recorded here and I note that the direction of the Court contained within the practice direction is as follows:
The Federal Circuit Court encourages commonsense management of cases within dockets. As a result, it is recognised that formal and procedural matters can be dealt with by informal processes with significant savings in Court time and expense to the parties. For that reason, we accept that consent orders, consent adjournments and the like can be the subject of joint email communication with our Associates. To that end, generic chambers email addresses should be used. However, all parties and practitioners should otherwise understand the basis upon which contact with judges (via their Associates) about substantive matters should – or should not – occur. All such communications must be undertaken with care to ensure that the impartiality and integrity of the Court is not undermined.
The notation then goes on:
It is never appropriate for any party or any legal practitioner to attempt to contact a judge directly about a matter for which the judge is responsible. It is not usually appropriate for any party (or any legal practitioner) to contact an Associate of a judge about a matter unless all parties are in agreement that this is appropriate and for good reason. If agreement cannot be reached and the issue cannot otherwise be resolved, then the Associate may be contacted to arrange for the matter to be listed for directions, provided that all parties are advised of the request.
It is noteworthy, with respect, that the communication forwarded to the Court in the days following the hearing of the application on 15 November 2017, in no way accorded with the appropriate, proper and professional approach that should be taken, with regard to communications. I struggle to understand why that should be, but in any event, I make it clear that I have not read the communication that has been forwarded, nor any accompanying documentation, other than to have been advised quite properly by my Associate, that communication had been forwarded and that the legal representatives for the other side, in this case the applicants, had objected, understandably and properly, to the manner in which such an application had been made.
As is clear, unless there is uniform agreement between all parties to proceedings in relation to communication with the judge’s chambers, be it directed to the judge himself or herself or to the judge’s Associate, such communication simply should not occur and, with respect, simply should not occur in circumstances where the party seeking to communicate are legally trained persons. I make those comments in relation to the matter simply to reinforce the importance of a clear understanding in relation to communication with a judge and a judge’s chambers.
I turn then finally to the issue of the costs that arise in relation to both the application for summary judgment and the application for security for costs. In my assessment, both of those applications should be considered as costs being reserved to final determination of the proceedings, as costs in the cause. It is, if you like, simply one more basis upon which the parties could and should give consideration to possible resolution of this matter. It is clear, from the consideration of the material now filed, that the costs that have been incurred by all parties is very considerable and it is of concern that it may be the case that in the end, all will find themselves beneficiaries in some way of some form of pyrrhic victory where they may win the battle but lose the war, in that any claim that is successfully brought one against the other will be well and truly overborne by the very significant costs that will be assessed.
Accordingly, as I say, the costs in relation to both applications are reserved to the final determination, to be considered as costs in the cause.

I certify that the preceding twenty-four (24) paragraphs are a true copy of the reasons for judgment of Judge Coker.

Date: 16 March 2018