Macks as Trustee of the Bankrupt Estate of Lee v Lee (No 2)

[2021] FCCA 1800

FEDERAL CIRCUIT COURT OF AUSTRALIA

Macks as Trustee of the Bankrupt Estate of Lee v Lee (No 2) [2021] FCCA 1800

File number(s):

ADG 512 of 2019
ADG 513 of 2019
CAG 27 of 2021

Judgment of:

JUDGE MANOUSARIDIS

Date of judgment:

6 August 2021

Catchwords:

PRACTICE AND PROCEDURE – application for order dismissing proceedings for failure to prosecute proceedings with due diligence after the applicant trustee in bankruptcy was deregistered and therefore had no standing to maintain the proceedings on behalf of the bankrupt estate – whether new trustees acted with due diligence to be substituted as applicants – whether discretionary factors weigh in favour of dismissal – discretionary factors weigh in favour of dismissal subject to receiving evidence relating to benefit creditors are expected to receive if claims made in proceedings succeed – application for dismissal to be set down for further hearing

Legislation:

Federal Circuit Court (Bankruptcy) Rules 2016 (Cth) r 2.03

Federal Circuit Court Rules 2001 (Cth) rr 13.03A(1)(e), 13.03B(1)(a)

Cases cited:

Macks as Trustee of the Bankrupt Estate of Lee v Lee [2021] FCCA 1614

Number of paragraphs:

45

Date of hearing:

30 July 2021

Place:

Sydney

Solicitor for the Applicant in his personal capacity:

Mr A Craven of Andreyev Lawyers, by video

Solicitor for Mr Stephen John Hundy and Mr Daniel Ivan Cvitanovic as interested parties:

Ms A Hogan of Namadgi Legal, by video

Counsel for the Respondents:

Mr J Johnson, by video

Solicitor for the Respondents:

Anderson Lawyers

ORDERS

ADG 512 of 2019

IN THE MATTER OF UNJU LEE

BETWEEN:

PETER IVAN MACKS AS TRUSTEE OF THE BANKRUPT ESTATE OF UNJU LEE

Applicant

AND:

HYE JIN BACK LEE

Respondent

ORDER MADE BY:	JUDGE MANOUSARIDIS
DATE OF ORDER:	6 AUGUST 2021

THE COURT ORDERS THAT:

1.Daniel Ivan Cvitanovik and Stephen John Hundy as trustees of the bankrupt estate of Unju Lee are joined as applicants.

2.The application for dismissal of the proceeding be listed part heard for directions at 9:30 am on 11 August 2021.

ORDERS

ADG 513 of 2019

IN THE MATTER OF UNJU LEE

BETWEEN:

PETER IVAN MACKS AS TRUSTEE OF THE BANKRUPT ESTATE OF UNJU LEE

Applicant

AND:

DONG SIK LEE
First Respondent

KYUNG HEE LEE

Second Respondent

ORDER MADE BY:	JUDGE MANOUSARIDIS
DATE OF ORDER:	6 AUGUST 2021

THE COURT ORDERS THAT:

1.Daniel Ivan Cvitanovik and Stephen John Hundy as trustees of the bankrupt estate of Unju Lee are joined as applicants.

2.The application for dismissal of the proceeding be listed part heard for directions at 9:30 am on 11 August 2021.

ORDERS

CAG 27 of 2021

IN THE MATTER OF THE BANKRUPT ESTATE OF UNJU LEE

BETWEEN:

DANIEL IVAN CVITANOVIC
First Applicant

STEPHEN JOHN HUNDY

Second Applicant

ORDER MADE BY:	JUDGE MANOUSARIDIS
DATE OF ORDER:	6 AUGUST 2021

THE COURT ORDERS THAT:

1.The proceeding, including the application made by Hye Jin Back Lee, Dong Sik Lee, and Kyung Hee Lee for leave to be heard, be listed for directions at 9:30 am on 11 August 2021.

REASONS FOR JUDGMENT

INTRODUCTION

1. On 16 July 2021 I delivered reasons for judgment (earlier reasons) on the basis of which I made the following orders in proceeding ADG513/2019, being a proceeding the applicant, Mr Macks, brought in his capacity as trustee in bankruptcy of the bankrupt estate of Ms Unju Lee (bankrupt): [1]

   [1] Macks as Trustee of the Bankrupt Estate of Lee v Lee [2021] FCCA 1614

   1.The proceeding is listed before Judge Manousaridis at 10:00 am on 30 July 2021 for the purpose of receiving evidence and submissions from Daniel Ivan Cvitanovic and Stephen John Hundy in their capacity as trustees of the bankrupt estate of Unju Lee (Trustees) on the following questions:

   (a)why the proceeding should not be dismissed pursuant to r 13.03B(1)(a) of the Federal Circuit Court Rules 2001 (Cth) on the ground specified in r 13.03A(1)(e) of those rules; and

   (b)assuming the proceeding is not dismissed, why proceeding CAG27/2021 the Trustees commenced in the Canberra Registry of the Federal Circuit Court of Australia (Court) should not be transferred to the Sydney Registry of the Court, and why the application made in that proceeding should not be determined by the Judge to whom proceeding ADG513 of 2019 has been docketed.

   2.By 19 July 2021 the respondents serve by email on the lawyers for the Trustees a sealed copy of these orders together with the reasons for judgment on the basis of which these orders have been pronounced.

   3.The costs of the application to dismiss the proceeding are reserved.

2. I also made orders substantially to the same effect in proceeding ADG512/2019, being a proceeding Mr Macks also brought as trustee of the bankrupt estate of the bankrupt. (I will collectively refer to the respondents in both proceedings as “the respondents”.)

3. The respondents served the orders and my earlier reasons on the lawyer for Daniel Ivan Cvitanovic and Stephen John Hundy (Trustees). In response to being served with the orders, the Trustees filed in each proceeding an affidavit made by Mr Hundy on 27 July 2021, an affidavit made by Ms Hogan on 27 July 2021, the lawyer for the Trustees, and written submissions prepared by Ms Hogan.

4. At the hearing on 30 July 2021 counsel for the respondents said the respondents pressed their applications that each proceeding be dismissed. Counsel for the respondents submitted the material on which the Trustees rely do not provide an adequate explanation for the Trustees’ failure to have taken any steps in the proceedings before 1 July 2021.

5. In these reasons for judgment, therefore, I consider whether, in light of the materials the Trustees have filed, and the submissions they have made on the basis of those materials, I should dismiss the proceedings pursuant to r 13.03B(1)(a) of the Federal Circuit Court Rules 2001 (Cth) (FCC Rules). In large part, that turns on two things. The first is whether I was incorrect to find in my earlier reasons that the Trustees had taken no steps to prosecute the proceedings by applying to be substituted as the applicants in each proceeding.[2] That is necessary because the Trustees submit they did take reasonable steps to appear in the proceedings and to be substituted as applicants. The second is, to the extent I was correct in so finding, whether the Trustees have given an adequate explanation for their having not done so.

   [2] Macks as Trustee of the Bankrupt Estate of Lee v Lee [2021] FCCA 1614, at [31], [33]

   TRUSTEES’ SUBMISSIONS

6. The Trustees submit as follows:

   (a)The Trustees are not parties to the proceeding, and, for that reason, r 13.03B(1)(a) and r 13.03A(1)(e) of the FCC Rules, applying as they do only to an “applicant”, do not apply to the Trustees.[3]

   (b)The Trustees either appeared or took reasonable steps to appear on 20 April 2021. Mr Thomas appeared on their behalf and “[a]ny confusion or disagreement about the capacity in which Mr Thomas appeared on this occasion is not the fault of the” Trustees.[4]

   (c)The Trustees “appeared on 25 May 2021”.[5]

   (d)The Trustees “were available to appear on 2 July 2021 and 16 July 2021”.[6]

   (e)The Trustees “took reasonable steps to ensure that an application for their substitution was before the Court on 2 July 2021”.[7]

   (f)Any “alleged failure by the Current Trustees to engage in party-party correspondence does not prima facie constitute default of the FCCR or any past direction in this proceeding”.[8]

   [3] [Trustees’] Outline of Submission [9]

   [4] [Trustees’] Outline of Submissions [13(c)]

   [5] [Trustees’] Outline of Submissions [13(d)]

   [6] [Trustees’] Outline of Submissions [13(e)]

   [7] [Trustees’] Outline of Submissions [13(f)]

   [8] [Trustees’] Outline of Submissions [13(h)]

   DETERMINATION

7. I will consider each of the Trustees’ submissions in turn.

   No default by Trustees

8. It is correct that the Trustees cannot be said to have been in default; and that is because they have not and are not parties to the proceedings. In my earlier reasons I did not make any finding that the Trustees were in default. I found that Mr Macks, through lack of capacity, had not prosecuted the proceedings with due diligence, and the Trustees, who have had the capacity to prosecute the proceedings since 1 April 2021, had taken no action to do so by applying to be substituted as applicants in each proceeding.[9] The Trustees’ conduct, however, is relevant to the exercise of the discretion of the power under r 13.03B(1)(a) of the FCC Rules to dismiss the proceedings that has arisen from my finding that Mr Macks has not prosecuted the proceedings with due diligence within the meaning of and r 13.03A(1)(e) of the FCC Rules.

   [9] Macks as Trustee of the Bankrupt Estate of Lee v Lee [2021] FCCA 1614, at [31], [33]

   Directions hearing of 20 April 2021

9. On 20 April 2021 Mr Thomas told me that he had been informed “yesterday”, that is, on 19 April 2021, that the Trustees had been appointed on 1 April 2021, but said he otherwise was not in a position to inform the Court what the Trustees proposed to do in relation to the proceedings. It may therefore be accepted that Mr Thomas made these statements at the request of the Trustees. But it cannot be said the Trustees applied, at the directions hearing of 20 April 2021, to be substituted as applicants in the proceedings. Their appearance was limited to informing the Court they needed further time to determine what they proposed to do in relation to the proceedings.

   Directions hearing of 25 May 2021

10. At the directions hearing on 25 May 2021 Mr Thomas informed me the Trustees and Mr Macks had entered into an in-principle agreement for the assignment of the causes of action that are the subject of the two proceedings (Causes of Action); and it may be accepted Mr Thomas told me this at the request of the Trustees. What Mr Thomas said at the directions hearing on 25 May 2021, however, also cannot be characterised as an announcement that the Trustees intended to apply to be substituted as the applicants in the proceedings. Mr Thomas’ announcement conveyed the very different message that the Trustees had decided to relieve themselves of the responsibility of prosecuting the Causes of Action by having entered into an in-principle agreement to assign them.

    Did the Trustees take reasonable steps to apply for substitution on 2 July 2021?

11. The Trustees submit they took reasonable steps to ensure that an application for their substitution was before the Court on 2 July 2021. The basis of that submission is the affidavit of Ms Hogan in which she deposes as follows:

    (a)On 16 June 2021 Ms Hogan had a telephone discussion with Mr Craven, the lawyer for Mr Macks, “as regards substitution of the applicant”.

    (b)Ms Hogan was “attracted” to making an application under r 11.03 and r 11.04 of the FCC Rules “to achieve substitution”, although Mr Craven was attracted to r 10.1.

    (c)Mr Craven said he proposed to file an interim application on behalf of Mr Macks “inter alia seeking substitution of the proposed assignee as applicant in the event of section 100-5 approval”. Ms Hogan asked Mr Craven to seek instructions to “in that same interim application, also seek orders for substitution of my clients as applicants in the alternative event section 100-5 approval was refused”. That seemed the “most expeditious way” “to both address substitution and facilitate a formal right of audience”.

    (d)This discussion was formalised in cl 4.3(a)(i) of “the Confidential Assignment Deed dated 25 June 2021”.

    (e)At 12:24 pm on 1 July 2021 Ms Hogan received a copy of the interim application Mr Macks filed on 17 June 2021 in each of the proceedings. Ms Hogan noticed the interim application “did not reflect the expected and agreed course”. Ms Hogan queried this with Mr Craven by email sent at 1:35 pm on 1 July 2021.

    (f)Realising she would not “be able to appear in response to Mr Macks’ interim application, as I had expected, I immediately sought instructions from my clients to file an interim application inter alia seeking leave to be heard under” r 2.03 of the Federal Circuit Court (Bankruptcy) Rules 2016 (Cth). Ms Hogan appreciated “in hindsight” that she could have “also included in this interim application a request for my clients’ substitution”. The only explanation Ms Hogan “can offer is that I was rushing at the last minute”.

    (g)Ms Hogan filed the Trustees’ interim application and affidavit just after 4:00 pm on 1 July 2021, and emailed copies to the parties’ representatives at 4:53 pm. Ms Hogan also filed a letter with the Registry explaining that the application was urgent due to the 10:00 am listing on 2 July 2021.

    (h)On 2 July 2021 Ms Hogan arrived “at work early, to finalise preparations for the listing”. Ms Hogan received an email from Mr Craven at 8:46 am “confirming that he intended to seek leave to orally amend his client’s interim application to alternatively seek my client’s substitution”. Ms Hogan telephoned Mr Craven and indicated she was available to appear “but had neither received sealed documents back from the Court nor an invitation from the Registry to appear either by audio or audio-visual means”. She told Mr Craven she would remain available by mobile, and she requested Mr Craven inform the Court of this.

    (i)Ms Hogan “was available to appear for Mr Hundy and Mr Cvitanovic on Friday, 16 July 2021”.

12. This evidence must be viewed in light of other evidence. First, there is cl 4.3 of the deed of assignment the Trustees and Mr Macks apparently executed on 25 June 2021:

    Prosecution of the Actions

    (a)Promptly following execution of this Deed, the Former Trustee and/or Assignee must at their cost instruct solicitors to:

    (i)file an application for:

    A.leave for the Assignee to be heard in the Actions;

    B.in the event the Approval Application succeeds, joinder of the Assignee and removal of the Bankrupt Estate as applicant to the Actions;

    C. in the event the Approval Application does not succeed, substitution of the Assignors in place of the Former Trustee as applicants to the Actions in their capacity as Trustees of the Bankrupt Estate; and

    (ii)file and serve appropriate evidence in active opposition to, and actively oppose, the pending applications for dismissal of the Actions,

    and thereafter, and until the Effective Date, the Assignor, Assignee, and Former Trustee must co-operate in good faith to ensure that the Actions remain on foot pending the outcome of the Approval Application.

13. By this clause the Trustees had agreed that Mr Macks would continue to take what action was necessary to regularise the proceedings before me, including resisting the applications for dismissal, without any further action by the Trustees at least until a court determined the application the Trustees intended to make for the approval of the assignment of the Causes of Action.

14. Second, there is the email Ms Hogan sent to the respondents’ lawyer at 6:09 pm on 30 June 2021. Ms Hogan sent this email in response to an enquiry made at 9:56 am on 30 June 2021 by the respondents’ lawyer’s enquiring whether Ms Hogan was “instructed to file an appearance in these matters”. After informing the respondents’ lawyer that the Trustees applied to the Canberra Registry of the Court for approval of the assignment of the Causes of Action, Ms Hogan said:[10]

    Regarding Friday’s listings in AGD 512/2019 [sic] and ADG 513/2019. As you are aware, Mr Macks is no longer trustee of the bankrupt estate and, therefore, presently lacks standing to appear as applicant. Meister Legal [Mr Macks’ lawyers on the record until 21 June 2021] has, we understand, recently provided to you a copy of their notices of ceasing to act (please let us know if you have not seen these). Our clients cannot appoint solicitors to appear, or appear in their own right, as they are not named parties. We understand that Mr Macks may currently be preparing a rule 11.02/11.03/11.04 application, to address these procedural issues. However, we do not presently know where that application is up to.

    Although clearly not ideal, we consider that the most appropriate course for Friday at this point is to administratively timetable Mr Macks’ rule 11.02/11.03/11.04 application, vacate the 2 July hearing date and allocate a future directions hearing date on/around the notified list date for our clients’ new application.

    [10] Affidavit of D Aspite 01.07.2021, annexure “G”

15. This email was entirely unhelpful. By the time Ms Hogan had sent the email she must have known that the Trustees and Mr Macks had entered into the deed of assignment, containing, as it does, cl 4.3. Ms Hogan must also have known that the contents of the deed of assignment had not been disclosed to the respondents, and the Trustees had no intention of disclosing its contents to the respondents. That is apparent from the email to which I refer in the following paragraph. The straightforward response Ms Hogan ought to have given, but did not give, to the respondents’ lawyer’s enquiry was that which is reflected in cl 4.3 of the deed of assignment, namely, that the Trustees did not intend to appear at the hearing on 2 July 2021 because the Trustees had agreed that Mr Macks would appear and attend to all matters relating to the regularisation of the proceedings, and to the respondents’ application to dismiss the proceedings. If the explanation for Ms Hogan not disclosing this to the respondents’ lawyer is an obligation of confidentiality to which she believed the Trustees subjected themselves by signing the deed, she should have asked Mr Macks’ consent to disclosing what she may have regarded to be confidential information.

16. Third, there is the email Ms Hogan sent to the respondents’ lawyer at 9:50 am on 1 July 2021 to which she attached the application the Trustees made to the Canberra Registry of the Court seeking approval to the assignment of the Causes of Action (Approval Application). Ms Hogan said that that application was supported by an affidavit made by Mr Hundy “dated 30 June 2021”, but said that “[t]his document will not be shared at this time”, and that “[w]e have sought a confidential marking”. The contents of Mr Hundy’s affidavit have now been disclosed, subject to some redaction. In paragraph 15 of that affidavit Mr Hundy deposes that on 25 June 2021 “a confidential, conditional assignment deed was signed”, and a copy is annexed to his affidavit.

17. Fourth, there is the email the respondents’ lawyer sent at 11:56 am on 1 July 2021 to Ms Hogan in response to Ms Hogan’s emails of 6:09 pm on 30 June 2021 and 9:50 am on 1 July 2021.[11] The email is as follows:

    [11] Affidavit of D Aspite 01.07.2021, annexure “I”

    Dear Ms. Hogan

    We refer to your email of 30 June 2021 at 6:09pm and to your email of this morning at 9:50am.

    You appreciate that our clients are particularly concerned about the conduct of the trustees of the property of Unju Lee, a regulated debtor, in that they have not in any way sought to engage with the proceedings that had been brought in the name of the administration.

    The cause of action which is the subject of the proceedings vested in your clients as at 1 April, 2021 and they have not since that time:

    (a)       sought in any way to file a Notice of Appearance in relation to the proceedings;

    (b)participate in the proceedings or seek to participate in the proceedings which have been brought on behalf of the estate;

    (c)communicated with this firm or our clients with a view to satisfying their obligations enshrined within the Bankruptcy Act 1966 and in particular s. 19 (1) (j), (k) and (l) with appropriate standards set out in the Insolvency Practice Rules (Bankruptcy) 2016;

    (d)sought in any way to engage in alternative communications relating to resolution of the proceedings vested in them in the interests of the creditors of the estate and in particular seek to discuss the possibility of resolution of the present proceedings in any way, shape or form;

    (e)in any way complied with obligations to the Court as a party to the proceedings generally described as within the “overriding purpose.”

    The flagrant disregard of duties in circumstances of the estate being a party to court proceedings is particularly surprising. You seem to ignore the fact that the prescribed official name of the proceedings is “The Trustees of the Property of Unju Lee, a Bankrupt” or by reference to the Insolvency Practice Schedule (Bankruptcy), a Regulated Debtor.

    To suggest in the circumstances that your clients “cannot appoint solicitors to appear, or appear in their own right, as they are not named parties” is with all due respect totally misconceived and shows a misunderstanding of the role of your clients in their capacity.

    On at least one occasion your clients apparently instructed Mr Thomas – who previously represented Mr Macks, to appear on their behalf. He of course now has a conflict of interest and duty in that he has acted for the previous trustee and it would be inappropriate for him to represent the interests of your clients in any outstanding Interim Application seeking dismissal of the proceedings.

    Your clients have been served with the Interim Application and have manifestly ignored it.

    You have been invited to file a Notice of Appearance and it appears that your instructions are not to do so, leaving it to Mr Macks to intermeddle in the proceedings as he is not, other than in name, able to conduct the proceedings not vested in your clients.

    The conduct of your clients amounts to a fundamental breach of obligations towards the Court.

    In addition, the total discourtesy on the part of your clients to engage with our clients in respect of the proceedings is to put it politely surprising and disappointing.

    It must be assumed that your clients as the Trustees of the Property of Unju Lee, a Bankrupt have no interest whatsoever in the maintenance of the proceedings and in those circumstances would not be in a position to oppose the relief sought.

    You have for the first time in your email indicated that we may be provided with the Application in the envisaged proceedings to which you refer. On each prior occasion you indicated that our clients would not be given any opportunity of being heard. That constitutes, what our clients regard as, an ongoing breach of duty by your clients to our clients and more importantly to the Court in the Proceedings which are on foot.

    There has been no disclosure by you, or your clients, of what arrangements may have been reached with Mr Macks and why they are better for the proper administration of the estate under their control.

    Our instructions are to seek to proceed with the Interim Application on Friday. It is a matter for your clients whether they seek to participate. As the matter stands Mr Macks is not able to in any way act as a registered trustee in bankruptcy.

    Objection will be taken to the Interim Application filed by Mr Macks proceeding as it is predicated on him becoming the owner of the cause of action the subject of the proceedings, which in turn is subject to the Court approval contemplated by the s. 100-5.

    Regards

    Dyana Elsemary

    Solicitor

1. Fifth, there is the email Ms Hogan sent to Mr Craven at 1:35 pm on 1 July 2021.[12] It appears to forward the email the respondents’ lawyer sent at 11:56 am on 1 July 2021. Ms Hogan’s email is as follows:

   Please note below, suggest you read from the bottom up.

   I can see that your interim applications do not address the scenario where the assignment is not approved. I think that is because you filed it, before that part was put in the deed. Can you please confirm that you will file an amended application?

   What orders do you intend to seek, tomorrow?

   Do you see any benefit from our firm attending?

   [12] Affidavit of A M Hogan, page 13

2. Sixth, there is the email Ms Hogan sent to the respondents’ lawyer at 2:02 pm on 1 July 2021 in response to the respondents’ lawyer’s email sent at 11:56 am on 1 July 2021:[13]

   Our firm does not conduct litigation by correspondence; we will address the Court about the relevant legal issues in the appropriate manner at the appropriate time.

   We agree that Mr Macks cannot act as registered trustee in bankruptcy, and that he currently lacks standing to conduct the actions as trustee of the Bankrupt Estate. We have said as much to you previously. There is no argument to be had between us, in this regard.

   Regarding this paragraph:

   Your clients have been served with the Interim Application and have manifestly ignored it.

   Are you referring to Mr Mack’s interim application, your clients’ dismissal application, or something else?

   In the meantime, it is obvious that this matter has history, and you are frustrated. We are not the cause of this frustration and, even if we were, lashing out at us is unbecoming and unhelpful. We consider your odious accusations about our competency, diligence, and professional ethics/conduct to be entirely without foundation and completely inappropriate. We invite you to consider your position further, including with reference to rule 32 of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 (NSW). We trust this is the first, and last time, we will have cause to initiate such a conversation with your firm.

   [13] Affidavit of A M Hogan, pages 13-14

3. This email merits three observations.

   (a)It is obvious from the contents of the respondents’ lawyer’s email sent at 11:56 am on 1 July 2021 that the “Interim Application” to which that email referred is the interim application the respondents filed in each proceeding for dismissal. That is apparent from the second last paragraph of the email in which the respondents’ lawyer states that their instructions “are to seek to proceed with the Interim Application on Friday”.

   (b)Ms Hogan did not address the substance of the matters the respondents’ lawyer raised in the email sent at 11:56 am on 1 July 2021. Ms Hogan ought to have addressed them.

   (c)Ms Hogan’s statement that “we will address the Court about the relevant legal issues in the appropriate manner at the appropriate time” was high handed. It is also possible the statement did not accurately reflect Ms Hogan’s or the Trustees’ intentions. Ms Hogan’s statement implied that she or the Trustees would address, at the hearing on 2 July 2021, the matters raised in the respondents’ lawyer’s email. That, however, is not consistent with the email Ms Hogan had sent to Mr Craven at 1:35 pm on 1 July 2021 where she asked what orders Mr Craven would be seeking at the hearing on 2 July 2021, and whether Mr Craven saw any benefit in Ms Hogan’s firm appearing at the hearing. Ms Hogan’s statement is also not consistent with the contents of Mr Hundy’s affidavit filed on 2 July 2021 because Mr Hundy does not address any of the matters raised in the respondents’ lawyer’s email sent at 11:56 am on 1 July 2021.

4. Seventh, there is the email Mr Craven sent to Ms Hogan at 8:47 am on 2 July 2021:

   Please give me a call if you have the time.

   I intended to put the alternative in the application orally – your inference about us filing it prior to finalisation of the deed is correct.

   I think best if you do not appear this morning. If, for some reason, His Honour is minded to entertain the respondents’ application, then I would seek to have the application listed at a later date to allow your client to put on material and appear.

5. Finally, there is what occurred at the hearing on 2 July 2021. Consistently with the email Mr Craven sent to Ms Hogan at 8:47 am on 2 July 2021, the Trustees did not appear. Mr Craven appeared, and he said he appeared for Mr Macks in Mr Macks’ personal capacity. There are, however, a number of aspects of Mr Craven’s appearance that merit attention.

   (a)In the course of the hearing I informed the parties the Registry had received for filing an application lodged by the Trustees. Counsel for the respondents informed me that that was the application that was served on the respondents’ lawyer on 1 July 2021. Counsel for the respondents submitted that, for some reason, the Trustees had made a conscious election not to appear. Given Mr Craven’s email to Ms Hogan sent at 8:47 am on 2 July 2021, that submission appears to be correct.

   (b)Mr Craven did not volunteer to me what he knew, namely, that at 8:47 am on the morning of the hearing he sent an email to Ms Hogan in which he recommended that Ms Hogan not appear at the hearing. Mr Craven’s silence left me with the impression that no one before me could offer an explanation for the Trustees’ not appearing at the hearing on 2 July 2021. That impression was incorrect. Mr Craven was in a position to tell me because, in the email he sent to Ms Hogan at 8:47 am on 2 July 2021, he recommended Ms Hogan not appear; and it appears Ms Hogan accepted that recommendation.

   (c)In the course of the hearing I suggested to Mr Craven that, even if the Trustees had made the Approval Application which was not returnable until 2 August 2021, it was open to the Trustees now to take over the proceedings. Mr Craven offered a number of explanations. Mr Craven did not, however, offer what now appears to be the correct explanation, namely, cl 4.3 of the deed of assignment. That clause is premised on Mr Macks, not the Trustees, maintaining the proceedings until such time as the Approval Application is determined. By omitting to disclose to me the agreement reflected in cl 4.3 of the deed of assignment, Mr Craven left me with an incorrect impression of the reasons the Trustees had not applied to substitute themselves as applicants.

   (d)In the course of the hearing I asked Mr Craven why the deed of assignment was confidential. Mr Craven said the Trustees considered that the disclosure would compromise these proceedings; and that the terms of the deed of assignment were irrelevant. Subject to some redaction, however, the deed of assignment was adduced into evidence at the hearing on 30 July 2021. It has not been submitted by the Trustees that the disclosure would potentially compromise the Causes of Action. (There is another aspect to this issue to which I return below.)

   (e)Mr Craven did make an oral application at the hearing that Mr Macks’ interim application be amended to include an alternative claim that if the Approval Application is not granted the Trustees be substituted as applicants. It is true that, as Mr Craven submitted at the hearing on 30 July 2021, I did not refer to that application in my earlier reasons. But Mr Craven did not at the hearing on 2 July 2021 identify any basis on which I could have even entertained that application, given that Mr Craven announced he appeared, and appeared only, for Mr Macks, and not for the Trustees.

6. This evidence does not support the submission that the Trustees made an attempt to apply at the hearing of 2 July 2021 to be substituted as applicants. On the contrary, the evidence inescapably points to one conclusion; and that is the Trustees approached the hearing on 2 July 2021 on the basis of cl 4.3(a) of the deed of assignment. In other words, the Trustees approached the hearing of 2 July 2021 on the basis that it would be the responsibility of Mr Macks to oppose the applications for dismissal, and for him to regularise the parties, at least until such time as the Approval Application was determined on or after 2 August 2021. There is nothing to suggest the Trustees had retained Mr Craven to appear on their behalf; and the Trustees do not say they had instructed Mr Craven to appear on their behalf.

7. The Trustees did at 4:02:55 pm on 1 July 2021 lodge for filing an application for an order in each proceeding that they be heard at the hearing on 2 July 2021; and with those applications they lodged for filing an affidavit Mr Hundy made on 1 July 2021 (which was not available to me at the hearing on 2 July 2021).[14] It is not correct to submit, however, as the Trustees appear to submit, that by lodging the application they intended and expected to appear at the hearing on 2 July 2021. That the Trustees did not intend to appear is suggested by the email Mr Craven sent to Ms Hogan at 8:47 am on 2 July 2021 in which he recommended that Ms Hogan not appear.

   [14] Affidavit of A M Hogan, pages 6-7

8. Ms Hogan annexed this email to her affidavit; and she deposes to having a conversation with Mr Craven in the morning of 2 July 2021:[15]

   I received an email from Mr Craven at 8.46am confirming that he intended to seek leave to orally amend his client’s interim application to alternatively seek my client’s substitution. I telephoned Mr Craven and indicated that I was available to appear but had neither received sealed documents back from Court nor an invitation from the Registry to appear either by audio or audio-visual means. I said that I would remain available by mobile (provided) and requested that this please be mentioned to His Honour. I can see online in eLodgment that my clients’ interim application and supporting affidavit were not processed until 11.42am ACST on 2 July 2021, almost two hours after this matter was listed. Mr Craven has since told me that he raised my clients’ substitution with this Honourable Court on Friday, 2 July 2021.

   . . . .

   I was available to appear for Mr Hundy and Mr Cvitanovic on Friday, 16 July 2021, however, I did not receive an invitation from the Registry to appear either by audio or audio-visual means and therefore could not do so.

9. This part of Ms Hogan’s affidavit conveys she intended to appear at the hearing on 2 July 2021, but she did not appear because, although she had made herself available, the Registry did not invite her to appear. That is inconsistent with what Mr Craven said to Ms Hogan in the email he sent Ms Hogan at 8:47 am on 2 July 2021 that “I think best if you do not appear this morning”. Ms Hogan does not in her affidavit address this part of Mr Craven’s email; and, for that reason, it is open to find, and I do find, that Ms Hogan accepted Mr Craven’s recommendation. I therefore do not accept Ms Hogan’s evidence to the extent she intends to convey that she expected to be invited by the Registry to appear at the hearing, and it was the absence of such invitation that explains her failure to appear. I accept Ms Hogan may have said to Mr Craven she was available; but if she did so it should be seen in the context of Mr Craven’s email. If Ms Hogan told Mr Craven she was available to appear, she would have left it for Mr Craven to inform her if she should appear.

10. Even if I were to accept that Ms Hogan intended to appear and expected she would be invited to appear at the hearing on 2 July 2021, had Ms Hogan appeared she would have applied for an order that, if the Approval Application is not granted, the Trustees should be substituted as applicants. That is confirmed by the affidavit of Mr Hundy made on 1 July 2021. Mr Hundy deposes that the Trustees assigned the Causes of Action, and that the Trustees have applied for approval to the Canberra Registry of the Court. The following are the only things Mr Hundy said in relation to the Trustees being joined as applicants to the proceedings:

    10.If the Approval Application [that is, the application filed in the Canberra Registry of the Court for approval of the deed of assignment] is granted, the appropriate applicant in this proceeding will be Peter Ivan Macks as trustee for the Macks Lee Trust. In that case, Mr Macks will be the most appropriate person to prepare to meet the respondents’ dismissal application.

    11.If the Approval Application is not granted, the appropriate applicants in this proceeding will be Daniel Ivan Cvitanovic and Stephen John Hundy as trustees of the Bankrupt Estate of Unju Lee. In that case, Mr Cvitanovic and I will be the most appropriate persons to prepare to meet the respondents’ dismissal application.

11. An application that the Trustees be appointed as applicants should the Approval Application not be granted cannot be characterised as an application that the Trustees be substituted as applicants; and that is because the application by the Trustees to be made applicants, consistently with cl 4.3(a) of the deed of assignment, was wholly conditional on the Court not granting the Approval Application on or after 2 August 2021. What in effect the Trustees would have sought to do, had Ms Hogan appeared at the hearing on 2 July 2021, is to support Mr Macks’ interim application that the proceedings be stayed until such time as the Court determined the Approval Application.

12. Even if it be assumed that the application the Trustees intended to put before the Court on 2 July 2021 could be characterised as an application for substitution, I do not accept the Trustees took reasonable steps to put such application before the Court. At the directions hearing on 25 May 2021 I made orders requiring Mr Macks to file by 16 June 2021 an application in relation to approval of any assignment. In her affidavit Ms Hogan refers to that deadline, but offers no explanation why it was not met or, if she realised the deadline could not be met, why she did not inform the respondents or the Court. Ms Hogan also offers no explanation why the Trustees waited until she received an email from Mr Craven at 12:24 pm on 1 July 2021 before the Trustees decided to lodge the application at 4:02:55 pm on 1 July 2021.

13. Finally, the Trustees ignore that at the directions hearing on 25 May 2021 it was contemplated that any application for the approval of the assignment was to be filed in the proceedings before me, and any such application would be made returnable before me at the time I was to hear the applications for dismissal. The Trustees instead filed an application in the Canberra Registry of the Court. The evidence before me reveals two explanations why that occurred. The first is the explanation Mr Macks purported to give as set out in my earlier reasons, namely, that he had been informed by Mr Hundy that the Trustees “do not consider it is appropriate to bring” the Approval Application “as the matters the court would be required to consider may prejudice the prosecution of the actions and therefore the intended benefit of the assignment”. Mr Craven repeated the substance of that explanation at the hearing on 2 July 2021.

14. The second explanation is the very different explanation Mr Hundy gives in his affidavit of 27 July 2021. Mr Hundy says that the Trustees and Ms Hogan live and work in Canberra, and there is no named respondent in the Approval Application and, for “these reasons” it appeared to the Trustees that filing the Approval Application in Canberra “was the most convenient and cost-effective course of action”. That ignores the place and time at the directions hearing on 25 May 2021 I had contemplated an application for approval of the deed of assignment would be heard and determined, namely, by the making of applications in the proceedings themselves to be heard by me at the same time I were to hear the dismissal applications. It also ignores that it was likely the respondents would wish to be heard on the Approval Application. Mr Hundy also refers to Sydney having entered into lockdown due to COVID-19.

15. Did the Trustees or their lawyer in fact inform Mr Macks or his lawyer that the reason the Approval Application was filed in Canberra was because, as Mr Macks deposed, the Trustees considered that the “matters the court would be required to consider may prejudice the prosecution of the actions and therefore the intended benefit of the assignment”? If not, on what basis did Mr Macks depose the Trustees had formed that view? If the Trustees in fact formed that view, why do they no longer hold that view? Were the Trustees in any event aware that Mr Macks would be putting before the Court the explanation contained in his affidavit to which I refer in my earlier reasons? These questions have not been addressed by the Trustees or by Mr Macks to the extent it is within their knowledge to address them; and those questions should be addressed.

16. I should note that cl 7 of the deed of assignment is headed “Announcements and Confidentiality”. The clause imposes an obligation of confidentiality on the “Assignor”, the Trustees, but not on the “Assignee”, Mr Macks. That suggests that Mr Macks was, and always has been, at liberty to disclose the contents of the assignment.

    Did the Trustees take reasonable steps to appear on 16 July 2021?

17. In her affidavit Ms Hogan deposes:

    I was available to appear for Mr Hundy and Mr Cvitanovic on Friday, 16 July 2021, however, I did not receive an invitation from the Registry to appear either by audio or audio-visual means and therefore could not do so.

18. At the conclusion of the hearing on 2 July 2021 I listed the applications for dismissal for judgment at 9:30 am on 14 July 2021. Later, at my direction, my associate informed the legal representatives of Mr Macks and of the respondents that I would not give judgment on 14 July 2021, but I would instead give judgment at 9:30 am on 16 July 2021. Ms Hogan does not say she was notified of these matters; but, given Ms Hogan says she was available to appear on 16 July 2021, I infer Mr Craven or perhaps the respondents’ lawyer informed Ms Hogan of the listing of 14 July 2021 and, when that was altered, the listing of 16 July 2021.

19. Ms Hogan’s affidavit implies she expected to receive an invitation from the Registry to appear at the delivery of judgment. If that is what Ms Hogan intends to convey, I would have difficulty in accepting that she expected to be contacted by the Registry to appear. First, Ms Hogan does not say she was notified by the Court of the listing; and I am not aware the Court informed Ms Hogan of the listing. I therefore infer Mr Craven or perhaps the respondents’ lawyer informed Ms Hogan of the listing. If that inference is correct, Ms Hogan would not have expected the Registry to invite her to appear at the delivery of judgment because it would not have been the Court that would have notified her of the listing. Second, given, on her evidence, Ms Hogan expected to be invited by the Registry to the hearing on 2 July 2021, but she received no such invitation, it does not appear to me that, in the absence of any communication between Ms Hogan and the Court, Ms Hogan could reasonably have expected the Registry to invite her to appear at the delivery of judgment.

20. Even if Ms Hogan intended to appear at the time I delivered judgment, I would not accept that she was unable to appear because the Registry did not invite her to appear. It was open to Ms Hogan to communicate to my associate or to the Registry by email or by telephone in advance of the time at which the judgment was to be delivered with a request for relevant dial in details.

    Alleged failure to engage in party-party correspondence

21. It may be accepted, as the Trustees submit, that a party’s failure to engage in party-party correspondence does not prima facie constitute default of the FCC Rules. A party’s failure to do so, however, is not irrelevant to the exercise of the discretion to dismiss a proceeding that arises where there has been default. That is particularly so where the correspondence to which a party has failed to respond go to matters relevant to any issue that is due to be heard before a court. It is the obligation of lawyers representing parties to litigation to cooperate in identifying the true issues a court will be required to determine, and not to put off engagement with legitimate matters raised in correspondence by a blanket assertion that they will be addressed in court.

    Conclusions

1. In my earlier reasons I concluded that Mr Macks, through lack of capacity, failed to prosecute with due diligence the proceedings; and the Trustees, who have had the capacity to prosecute the proceedings since 1 April 2021, failed to do so by applying to substitute themselves as applicants. The Trustees challenge the second of these findings; they have submitted they made reasonable attempts to be substituted as applicants, and, for that reason, the discretion to dismiss the proceedings because of Mr Macks’ incapacity to prosecute them should not be exercised in favour of dismissal. I have found the Trustees did not at any time apply to be substituted as applicants. At most, they intended to apply on 2 July 2021 for an order that they be substituted as applicants, but only if the Approval Application, which had been set down for a first court date on 2 August 2021 in the Canberra Registry of the Court, was rejected. In other words, the Trustees manifested an intention by no earlier than 4:02:55 pm on 1 July 2021 of a conditional intention to be substituted as applicants which would take effect, if at all, on or after 2 August 2021, and only if the Approval Application were to fail.

2. The Trustees have now indicated they apply to be substituted as applicants. That, however, does not necessarily mean I should exercise my discretion against dismissing the proceedings. The following findings I have made are relevant to the exercise of that discretion:

   (a)The Trustees have not addressed the existence of two apparently inconsistent explanations for their having decided to file the Approval Application in a separate proceeding in the Canberra Registry of the Court. Moreover, the explanation Mr Macks gave appears to ignore that the deed of assignment does not bind him to keep the terms of the assignment confidential; and the explanation Mr Hundy has given ignores that my orders of 25 May 2021 contemplated that an application for approval would be filed in the proceedings and determined by me at the same time as the respondents’ application for dismissal.

   (b)The Trustees, through Ms Hogan’s emails of 30 June 2021 and 1 July 2021, failed to disclose to the respondents’ lawyer what they ought to have disclosed, and what they ultimately did disclose by filing and serving Ms Hogan’s affidavit of 27 July 2021, namely, the agreement the Trustees had reached with Mr Macks about the conduct of the proceedings and, in particular, about the conduct of the hearing that had been listed on 2 July 2021.

   (c)Mr Craven failed to disclose to me at the hearing on 2 July 2021, in circumstances where he ought to have, the communications he had with Ms Hogan in the morning before the commencement of the hearing in which he had recommended that she not appear at the hearing.

   (d)Mr Craven failed to disclose to me at the hearing on 2 July 2021, in circumstances where he ought to have, the actual agreement Mr Macks and the Trustees had made about the conduct of the proceedings.

   (e)I have found that Ms Hogan’s explanation for not appearing at the hearing on 2 July 2021 is inconsistent with the email she received from Mr Craven at 8:47 am on 2 July 2021 which she did not address in her affidavit.

3. Given these findings, I would be inclined to exercise my discretion in favour of dismissing both proceedings on the ground that Mr Macks, through lack of capacity, has failed to prosecute the proceedings with due diligence. I am not prepared, however, to do so at this stage, because there is one issue that has not been the subject of any evidence; and that is the interests of the creditors of the bankrupt estate. If, for example, there are creditors and a successful prosecution of the proceedings is likely to result in a tangible benefit to the creditors, that might well be a decisive factor in favour of my not dismissing the proceedings, and in my dealing with any prejudice the respondents may have suffered by making appropriate costs orders.

4. I propose, therefore, to reserve my judgment on whether to dismiss the proceedings until after I allow the Trustees an opportunity to file evidence that identifies the benefits the creditors of the bankrupt estate are likely to receive if the Trustees succeed in the Causes of Actions. This evidence might also be relevant to whether approval should be given to the assignment of the Causes of Action. In that regard, on 30 July 2021, with the consent of the parties, I made an order transferring the Approval Application to the Sydney Registry of the Court, and that it be entered into my docket. In those circumstances, it might be appropriate if I hear further submissions on the respondents’ application to dismiss the proceedings at the same time I hear the Approval Application. This would reflect what I intended to achieve by the orders I made on 25 May 2021.

   DISPOSITION

5. I propose to make an order in each proceeding joining the Trustees as applicants. I consider an order joining the Trustees as applicants rather than an order substituting them as applicants is appropriate because there may be advantages in Mr Macks continuing to be an applicant, at least until the determination of the Approval Application. In that regard, I propose to list the proceedings and the Approval Application for directions at 9:30 am on 11 August 2021. I will also list for directions at 9:30 am on 11 August 2021 the application the respondents have filed in the Approval Application for leave to be heard at the hearing of that application. At the directions hearing, subject to hearing submissions to the contrary, I propose to make the following orders:

   (a)In each of proceedings ADG512/2019 and ADG513/2019:

   (i)The respondent’s (or respondents’) application for dismissal be adjourned part heard to 14 September 2021 to be heard at the same time as the application made in proceeding CAG27/2021.

   (ii)By 20 August 2021 the Trustees file and serve evidence in relation to the benefits creditors of the bankrupt estate of the bankrupt are expected to receive if the Trustees succeed in the Causes of Action.

   (iii)By 3 September 2021 the respondent (or respondents) file any evidence on which they intend to rely.

   (b)In the Approval Application (being proceeding CAG27/2021):

   (i)The respondents in proceedings ADG512/2019 and ADG513/2019 have leave to be heard at the hearing.

   (ii)By 20 August 2021 the Trustees file and serve any additional evidence on which they rely in support of the Approval Application.

   (iii)By 3 September 2021 the respondents in proceedings ADG512/2019 and ADG513/2019 file an application in a case seeking to be joined as respondents together with all affidavits on which they rely for joinder and for opposing the Approval Application.

   (iv)The Approval Application be heard on 14 September 2021 together with the part heard applications for dismissal made in proceedings ADG512/2019 and ADG513/2019.

6. I will vacate the proposed directions hearing if, before 11 August 2021, the parties notify my associate they agree to my making orders to this effect in chambers.

7. There remains outstanding Mr Mack’s application filed on 17 June 2021. It appears sensible that I should not make any order in relation to that application until such time as I have finally determined the dismissal applications and the Approval Application, and after I hear further submissions on costs.

I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis.

Associate: 

Dated:       6 August 2021