Application for leave to appeal: Maxwell-Smith v Donnelly (No 2) [2011] FCA 259
Parties:
INGE & EUGENE MAXWELL-SMITH v MAX CHRISTOPHER DONNELLY and S & E HALL PTY LTD
File number:
NSD 420 of 2011
Judge:
BUCHANAN J
Date of judgment:
19 May 2011
Catchwords:
PRACTICE AND PROCEDURE – leave to appeal – issues dealt with in previous litigation – abuse of process – no prospect of success if leave to appeal was granted – leave to appeal refused
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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Details
AGLC
Maxwell-Smith v Donnelly [2011] FCA 523
Case
[2011] FCA 523
Decision Date
CaseChat Overview and Summary
In the case of Maxwell-Smith v Donnelly, the applicants, Mr and Mrs Maxwell-Smith, sought leave to appeal against orders made by Nicholas J on 25 March 2011. The applicants were appealing against the orders made by Moore J on 2 July 2004, which annulled their bankruptcies and allowed the trustee to recover costs, charges, expenses, and remuneration from their property. The applicants' case centred on the procedural fairness of the earlier proceedings and the entitlement of the trustee to recover certain costs.
The primary legal issue the court needed to address was whether the applicants had a valid basis for appealing the orders made by Moore J. The applicants contended that the bankruptcy notice was invalid and that they were denied natural justice. They also argued that the trustee was not entitled to recover certain costs, charges, and expenses from their property. The court had to determine if the applicants had a prospect of success in their appeal and whether it was appropriate to grant leave to appeal.
The court held that there was no appeal available against the judgment of Moore J, as the relevant provisions of the Federal Court of Australia Act 1976 did not allow for such an appeal. Additionally, the court found that there was no prospect of success if leave to appeal was granted, as the applicants' arguments had already been considered and rejected in previous litigation. The court emphasised that there were no further avenues of challenge available to the bankruptcy notice, which was a foundational element for the creditor's petition. The suggestion of mediation, while noted, was conditional upon both parties agreeing to it, which had not occurred.
In light of the above, the court refused the applicants' leave to appeal. The court also ordered that the trustee's costs in administering the estates of the applicants, including costs, charges, expenses, and remuneration related to the application for leave to appeal, were to be paid by the applicants. This ruling was consistent with the authority established in Re Gollan: Ex parte Gollan (1992) 40 FCR 38.
Orders
Orders of the court
1. Leave to appeal against the orders made by Nicholas J on 25 March 2011 be refused.
2. The first respondent’s costs in the administration, under the Bankruptcy Act 1966 (Cth), of the estates of the applicants include the costs, charges, expenses and remuneration of and incidental to the application for leave to appeal filed on 11 April 2011.
Note:
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
There was no appeal available against the judgment of Moore J (sitting on appeal from the FMCA) (Federal Court of Australia Act 1976 (Cth) (“the FC Act”) s 24(1AAA) as then applying). No application was made for special leave to appeal to the High Court. At this point, therefore, there was no further avenue of challenge available to the bankruptcy notice, which represented an unassailable foundation for the presentation of a creditor’s petition, notwithstanding the tentative suggestion by Moore J that it may not be too late to attempt mediation. It will be noted that this suggestion was itself conditional upon acceptance by both parties that mediation should occur. That condition was not met.Sequestration and annulment The attempt to provide an avenue for the consensual resolution of what was becoming an intractable dispute was, regrettably, to lead to further unfortunate events which were later referred to by Moore J in a judgment given on 2 July 2004 (Maxwell-Smith v S & E Hall, in the matter of Maxwell-Smith [2004] FCA 840). His Honour there recorded that, after his earlier judgment, the creditor had advised that it was not willing to engage in mediation but Mr and Mrs Maxwell-Smith said that they were prepared to do so. However, in the meantime, a creditor’s petition based on the bankruptcy notice had been listed for a hearing before a Registrar. Mr Maxwell-Smith had requested that the hearing be delayed but the request had been dealt with equivocally in the Registry. The hearing, on 15 September 2003, went ahead. Mr and Mrs Maxwell-Smith did not appear. A sequestration order was made against the estates of Mr and Mrs Maxwell-Smith on that day. On 2 July 2004 Moore J concluded that Mr and Mrs Maxwell-Smith had been unwittingly denied natural justice. He annulled the bankruptcies. By this time, disputes had arisen between the Maxwell-Smiths and the trustee concerning his costs, charges and expenses, including his remuneration. Moore J ruled that the trustee was entitled to recover those amounts from the property of Mr and Mrs Maxwell-Smith. His Honour said (at [27]):27 In this application, the applicants appear to challenge collaterally the costs, charges and expenses of the Trustee, including his remuneration. However, s 154(1)(b) creates a statutory entitlement or charge enforceable by the Trustee which I have no power to modify or alter. That section relevantly provides:If the bankruptcy of a person (in this section called the former bankrupt) is annulled under this Division:…(b)the Trustee may apply the property of the former bankrupt still vested in the Trustee in payment of the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the Trustee;…(emphasis original)It may possibly be that, as a matter of construction, the reference to costs, charges and expenses as well as remuneration should be treated as amounts reasonably incurred in the administration of the estate. Such a construction might be apt because, arguably, the section is not intended to confer on the Trustee a right to apply the former bankrupt’s property for costs, charges and expenses arising from activities the Trustee should not have engaged in as part of the proper administration of the bankrupt’s estate. In the present case, having regard to the material before me, I am not satisfied that any aspect of the administration of the bankrupts’ estates could be characterised as conduct the Trustee should not have engaged in, including appearing in these proceedings represented by counsel. It will, of course, be open to the applicants to discuss with the Trustee, a scheme of the type raised by the Trustee’s counsel at the hearing, namely the creation of some type of security over their home to enable the satisfaction of amounts due to the Trustee. Consistent with authority, the Trustee is entitled to his costs of this application: Re Gollan: Ex parte Gollan (1992) 40 FCR 38.