Marshall v Sheahan
[1999] FCA 1064
•22 JULY 1999
FEDERAL COURT OF AUSTRALIA
Marshall v Sheahan [1999] FCA 1064
Matter No. S 7097 of 1999
JILLIAN HELEN MARSHALL & OTHERS v JOHN SHEAHAN, Trustee in Bankruptcy of JILLIAN HELEN MARSHALL & OTHERS
VON DOUSSA J
ADELAIDE
22 JULY 1999
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
S 7097 OF 1999
BETWEEN:
JILLIAN HELEN MARSHALL, RICHARD JOHN COOPER and SIMON VINCENT COOPER
Applicants
AND:
JOHN SHEAHAN, Trustee of the Bankrupt Estates of JILLIAN HELEN MARSHALL, RICHARD JOHN COOPER and SIMON VINCENT COOPER
First Respondent
W J FOUNTAIN PTY LTD [ACN 075 652 318]
Second Respondent
WILLIAM JOHN FOUNTAIN
Third Respondent
JUDGE:
VON DOUSSA J
DATE OF ORDER:
22 JULY 1999
WHERE MADE:
ADELAIDE
THE COURT ORDERS THAT:
1. The notice of motion for leave to appeal be dismissed.
2.Mr Andrew Cooper and Alderman Consultant Solicitors pay the costs of the respondents of and incidental to the notice of motion seeking leave to appeal.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
S 7097 OF 1999
BETWEEN:
JILLIAN HELEN MARSHALL RICHARD JOHN COOPER and SIMON VINCENT COOPER
Applicants
AND:
JOHN SHEAHAN, Trustee of the Bankrupt Estates of JILLIAN HELEN MARSHALL, RICHARD JOHN COOPER and SIMON VINCENT COOPER
First Respondent
W J FOUNTAIN PTY LTD [CAN 075 652 318]
Second Respondent
WILLIAM JOHN FOUNTAIN
Third Respondent
JUDGE:
VON DOUSSA J
DATE:
22 JULY 1999
PLACE:
ADELAIDE
EX TEMPORE REASONS FOR JUDGMENT
This is an application for leave to appeal to a Full Court of the Federal Court of Australia from orders made by Mansfield J on 17 June 1999. His Honour made orders for costs consequent on the dismissal of an application for interlocutory relief which was heard and determined on 4 June 1999. Orders for costs were made against the three named applicants in these proceedings and against two non-parties, namely, Andrew Charles Cooper and Alderman Consultant Solicitors. Alderman Consultant Solicitors are the solicitors on file for the three named applicants in the proceedings. The orders required that the costs of the respondents to the proceedings (who had been the successful parties resisting the interlocutory relief) be taxed on a party and party basis, and be paid by the applicants, by Mr Andrew Charles Cooper and by Alderman Consultant Solicitors.
The present application for leave to appeal against that costs order is brought by Mr Andrew Cooper and Alderman Consultant Solicitors. The applicants, Jillian Helen Marshall, Richard John Cooper and Simon Vincent Cooper, do not seek leave to appeal.
The application for leave to appeal is brought pursuant to s 24(1A) of the Federal Court of Australia Act 1976 (Cth), which provides that an appeal shall not be brought from a judgment of a single judge that is an interlocutory judgment unless the Court or a judge gives leave to appeal. It is common ground between the parties that the order of Mansfield J made on 17 June 1999 is an order interlocutory in nature and that leave to appeal is required.
I have on two occasions pointed out to the applicants for leave to appeal that in making their application to a single judge the single judge exercises the powers of a full court, so that if the single judge refuses leave to appeal, the refusal will stand as a decision of the Full Court of this Court. Any further avenue of appeal will lie only to the High Court of Australia. The application is nonetheless pressed before me.
In Décor Corporation Pty Ltd & Anor v Dart Industries Inc (1991) 33 FCR 397 a Full Court held that in the general run of cases in deciding whether leave to appeal from an interlocutory decision should be given the Court should consider two matters: first, whether in all the circumstances the decision is attended by sufficient doubt to warrant it being reconsidered by the Full Court and, secondly, whether substantial injustice would result if leave were refused, supposing the decision to be wrong.
In applying those considerations a distinction is drawn between interlocutory judgments that relate only to matters of practice and procedure and those which bear on substantive rights. I treat this case as falling into the latter category because, if leave to appeal is not granted, the two applicants for leave will continue to suffer the burden of the order for costs that has been made against them. Nevertheless, I consider that it is incumbent upon them to show that there is an arguable case that the primary judge was in error. If there is no arguable case leave should be refused as an appeal to the Full Court would be futile.
The primary judge made the orders for costs against the two non-parties pursuant to s 43 of the Federal Court of Australia Act. This provision empowers the Court or a judge to award costs in all proceedings before the Court. The power given by s 43 is a discretionary power, and it is one that is not fettered by strict rules or tests. The High Court of Australia in Knight & Anor v F P Special Assets Ltd & Ors (1992) 174 CLR 178 enunciated principles which should guide a court in the exercise of such a general discretionary power as to costs in the making of an order for costs against a non-party. Mason CJ and Deane J at pp 192-193 said it was appropriate to recognise a category of case in which costs might be awarded against a non-party, and
“…that category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made.”
His Honour sought to apply those principles to the circumstances of the matter before him.
As the decision of the primary judge involved the exercise of a discretion, a court of appeal will interfere only in accordance with the well-known principles which govern appeals from the exercise of a discretion expressed in House vThe King (1936) 55 CLR 499 at 504-505. Without reading in full that passage, it is incumbent upon a person seeking to attack the exercise of a discretion to show that the judge erred in law, or in fact either by taking into account an irrelevant factual matter or leaving out of account a relevant one or by plainly mistaking the facts upon which the discretion was exercised, or that the exercise of the discretion was so unjust that lying behind it must be some undisclosed error.
His Honour found that the three applicants in whose names the application for interlocutory relief was sought were insolvent in the sense referred to by Mason CJ and Deane J in the passage to which I have referred. That was an inevitable finding as the three named applicants are bankrupts. The first respondent, Mr Sheahan, is the trustee of their estates. There is no dispute as to that finding, which was plainly right.
It is contended however that his Honour made an error in his approach to the matter because the interlocutory application was brought pursuant to, or related to an application under, ss 178 and 179 of the Bankruptcy Act 1966 (Cth). The proposed ground of appeal which the applicants for leave would argue if leave were granted reads:
“…that the learned justice erred in fact and law on the issue as to whether they ought to be joined as parties in such a matter and whether an application was in fact and in law permitted by an application pursuant to sections 178 and 179 of the Bankruptcy Act by bankrupts for the removal of their trustee in bankruptcy.”
I find this proposed ground of appeal difficult to follow. I understand that it seeks to raise a point that his Honour erred in proceeding as he did under s 43 of the Federal Court of Australia Act because the application was made under s 178 or s 179 of the Bankruptcy Act. In my opinion that is a point without any substance whatsoever.
The jurisdiction of this Court in respect of bankruptcy matters, including applications made to the Court under ss 178 and 179 arises under s 27(1) of the Bankruptcy Act which provides that the Federal Court has jurisdiction in bankruptcy and that the jurisdiction is exclusive of the jurisdiction of all courts other than the jurisdiction of the High Court under s 75 of the Constitution. The exercise of that jurisdiction is governed by the Federal Court of Australia Act, including the provisions of s 43. Plainly, s 43 was an available power to be exercised by the primary judge.
The second observation to be made about the proposed ground of appeal is that the application for interlocutory relief went beyond an application for review of a decision of the trustee under s 178 and for the removal of the trustee in bankruptcy under s 179 of the Bankruptcy Act. In particular, it sought, and primarily sought on my interpretation of the papers, an urgent order preventing the completion of a sale of a farming property, Rothmore Farm, which had been entered into by the first respondent, as the trustee of the bankrupt estates of the three applicants, with the second and third respondents. That contract provided for the sale of the farm for $1.5 million.
His Honour held in the case of Mr Andrew Cooper that he had played an active part in the conduct of the litigation and that he had an interest in the subject of the litigation. That finding is attacked. In respect of that finding the primary judge said:
“The interlocutory application itself was to procure an order that Rothmore Farm should not be sold pursuant to a contract of sale entered into between the first applicant (sic, respondent) and the second and third respondents.
Andrew Cooper filed an affidavit to say that he was prepared to purchase the property if that contract were not performed for the sum of $1.5 million. The purpose of the application at least in part, as I judge it to have been from the submissions and from the affidavit material before me, was to prevent the sale of the Rothmore Farm to the second and third respondents so that Andrew Cooper could acquire it and so that the farming activities of the Cooper family could continue on Rothmore Farm: so much was acknowledged this morning in submissions by counsel for the applicants, Andrew Cooper and the solicitors.
Furthermore, as appeared in the course of the submissions, counsel for the applicants on a number of occasions made submissions that Andrew Cooper was actively interested in the outcome of the application and was, in a general sense, described as ‘client’ involved in the application. It also appeared in the course of submissions that he was a person from whom counsel for the applicants anticipated that an undertaking as to damages in the usual form was to be provided. … In those circumstances it seems to me that the requirements for the exercise of the power, albeit to be cautiously exercised, are made out and that it is appropriate in this instance that an order for costs be made against Andrew Cooper.”
Mr Kerin, who has appeared today for the applicants for leave, argues that his Honour erred in the factual material upon which he based his finding because the real purpose of preventing the sale going ahead between the first respondent and the second and third respondents was not to enable Mr Andrew Cooper to buy the property for $1.5 million but to enable the property to be put up for sale at a higher price. That submission does not pay due regard to the affidavit that was filed in the proceedings by Mr Andrew Cooper on 27 May 1999, in which he deposed that if the order sought restraining the sale were made he undertook to purchase the farm for $1.5 million, settling within twenty-one days of the date of the order.
Moreover, Mr Kerin was forced to acknowledge in argument before me that Mr Andrew Cooper himself had an interest in the property that was proposed to be sold, so that if there were a sale at a higher price - as was suggested today - he would benefit from that higher price. Plainly, he had an interest in the proceedings and no arguable basis has been put forward today to indicate that his Honour erred in finding that he had an interest in the litigation.
The other aspect of the finding against Mr Andrew Cooper was that he played an active part in the conduct of the litigation. It is not suggested that the primary judge’s description of the role played by Mr Andrew Cooper during the hearing of the interlocutory injunction was wrongly described, or that Mr Cooper’s role was other than his Honour described it. It is plain from the material on the Court file that his Honour was correct in saying that it was Mr Andrew Cooper who was the proposed party to give an undertaking and, in that sense, as well as by the statements of his counsel during the interlocutory proceedings, that he was indeed playing an active part in the conduct of the litigation.
In my view, no ground has been shown today for arguing that his Honour erred in law, or in his finding of the facts upon which the discretion was exercised in making the costs order against Mr Andrew Cooper. Accordingly, there would be no prospect of an appeal against that exercise of discretion succeeding . For that reason, I consider that leave to appeal should be refused in the case of Mr Andrew Cooper.
The order for costs against Alderman Consultant Solicitors was made on a different basis. The primary judge referred to the principles expressed in Myers v Elman (1940) AC 282 and, in particular, stressed that lawyers should not, so long as they are not guilty of either professional misconduct or gross, as opposed to mere, negligence in the way they conduct their client’s case, be exposed to personal liability to pay either the costs of their own client or those of the opposing litigant. Nevertheless, his Honour considered that the conduct of the solicitors in the proceedings relating to the interlocutory injunction was such as to warrant an order for costs being made against them.
His Honour then stated a number of grounds that supported that conclusion. The first was that there was no undertaking or security for any undertaking proffered at the hearing on 4 June 1999 in support of the application for an interlocutory injunction. It is of course a well-recognised requirement that applicants for an interlocutory injunction which will expose the respondents to the possibility of loss give an undertaking as to damages. There is a standard form of undertaking, which is what his Honour refers to as “an undertaking in the usual form”.
The requirement for an undertaking had been plainly identified by his Honour at an earlier hearing on 27 May 1999 and, on that day, specific directions were given by him requiring the applicants to file and serve any undertaking which they or any other person on their behalf may proffer if any or all of the interlocutory orders sought were granted, and directing the applicants to file the terms of any proposed security to be offered in support of any such undertaking by 28 May 1999.
No such undertaking or particulars of security were given. All that was given was the undertaking to which I have earlier referred by Mr Andrew Cooper in his affidavit to purchase the farm and settle within twenty-one days. It cannot be seriously disputed that Mr Andrew Cooper was not at the time himself in a position to give security necessary to support an undertaking in the usual form. His Honour was entitled to be critical of the solicitors’ actions in permitting the application to go forward, when it plainly had no prospect of success, because the prerequisite undertaking directed to be given by his Honour had not been given.
His Honour however did not rest his conclusion purely on that ground. His Honour said:
“Counsel for the applicants, Andrew Cooper and the solicitors, has today indicated that he is instructed on behalf of all those parties, that the applicants determined to proffer no undertaking nor to proffer any security in support of the application for interlocutory relief beyond that contained in the affidavit of Andrew Cooper to undertake to purchase Rothmore Farm for $1.5 million if the Court set aside the contract between the first respondent and the second and third respondents.”
His Honour noted that it was not simply a matter that the applicants had given instructions to provide no undertaking, which their solicitors had complied with. Rather, as his Honour continued:
“The course of the hearing on the application for interlocutory relief indicates that counsel for the applicants was instructed that, notwithstanding the instructions …which had existed as between the applicants and the solicitors, an undertaking as to damages had been or was about to be filed.”
The hearing on 4 June proceeded on that basis; in other words, even though the applicants had instructed Alderman Consultant Solicitors that there would be no undertaking given, the case was allowed to proceed with counsel and the other parties misled as to the likelihood of there being the necessary undertaking given in the course of the hearing. His Honour observed that the only conclusion he could draw from the facts that were made known to him was that the instructions which the applicants had given to Alderman Consultant Solicitors were not satisfactorily conveyed to counsel. Again his Honour was entitled to be critical of that serious omission. His Honour continued:
“The failure of the solicitors to give clear instructions to counsel for the applicants that notwithstanding those matters, namely, the decision not to give the undertaking - the applicants wish to proceed with the interlocutory application without any undertaking or without any security led to a considerable amount of time of the hearing being wasted on submissions which were, in the event, misconceived because of the underlying instructions which I am now told existed and which led to adjournments from time to time during the course of the hearing. In my view, those issues occupied most of the hearing. I am unable to attribute responsibility for that misunderstanding to other than the solicitors’ failure to properly instruct counsel.”
No attempt has been made today to demonstrate that his Honour in any way erred in reaching that conclusion. That, in itself, in my view, was a sufficient ground to warrant the exercise of discretion made by the trial judge. More importantly, however, it is not demonstrated that there is any arguable case to suggest that his Honour in exercising his discretion proceeded on some wrong premise.
The primary judge then added that there were other matters which counsel for the applicants, Mr Andrew Cooper and the solicitors, acknowledged before him as indicating some failure on the part of the solicitors in respect of the proceedings on the interlocutory injunction. However, his Honour described those as being of lesser measure. Without identifying them again, they relate to delays which had occurred in compliance with directions given on 27 May 1999 and in the provision of certain affidavit material.
Significantly, however, his Honour noted in respect of those matters:
“It has not been put by counsel for the applicants, for Andrew Cooper or for the solicitors, that there were any particular exculpatory circumstances which led to that material or those affidavits being presented in that form or being advanced at the time at which they were advanced; in particular, it has not been asserted that that was due to some dilatory conduct on behalf of the applicants.”
Mr Kerin today, when asked whether there was a direct attack upon those conclusions by the primary judge, said that he was not himself present at the hearing of the application for costs and could not speak first hand about what had happened. He said he was in no position to suggest that his Honour in any respect erred in those conclusions. Absent some basis to argue his Honour was wrong in saying that it was not asserted that there was some dilatory conduct on behalf of the applicants, there is no basis to suggest that his Honour proceeded erroneously in the exercise of his discretion to award costs against Alderman Consultant Solicitors.
I note that Mr Kerin argued today that his Honour erred in giving insufficient weight to the fact that the directions of 27 May 1999 required a number of things to be done at short notice. It is true that the directions did require some things to be done at short notice. One was to give the undertaking and to provide information about security within twenty-four hours. However, that ceases to be a relevant matter when it is acknowledged, as it was by counsel for the applicants, Mr Andrew Cooper and Alderman Consultant Solicitors before the primary judge, that a decision had been made not to give the undertaking or particulars of security.
Mr Kerin also said that insufficient consideration was given by the primary judge to the fact that a solicitor cannot put something on the file unless the client provides the information and that, coupled with the short time, makes it unreasonable to hold Alderman Consultant Solicitors responsible for the delays. But that submission cannot stand in the face of the unchallenged statement in the reasons of the primary judge that it was not asserted before him that the delays and other criticisms were due to some dilatory conduct on behalf of the applicants.
In my view, no arguable basis has been shown in any respect upon which there would be any prospect of successfully challenging the exercise of the discretion by the primary judge. In my view, there would be no point in granting leave to appeal to either Alderman Consultant Solicitors or Mr Andrew Cooper and, in those circumstances, I refuse the application for leave to appeal, and the notice of motion will be dismissed with costs.
I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice von Doussa. Associate:
Dated: 22 July 1999
Counsel for the Applicant: Mr P Kerin Solicitor for the Applicant: Alderman Consultant Solicitors Counsel for the First Respondent: Mr M Crawley Solicitor for the First Respondent: Piper Alderman Counsel for the Second and Third Respondents: Mr A Thiele Solicitor for the Second and Third Respondents: Andrew B Thiele & Co. Date of Hearing: 22 July 1999 Date of Judgment: 22 July 1999
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