Mulhern v Official Receiver

Case [2015] FCA 807

FEDERAL COURT OF AUSTRALIA

Mulhern v Official Receiver [2015] FCA 807

Citation: Mulhern v Official Receiver [2015] FCA 807
Parties: MICHAEL RICHARD MULHERN and JACQUELINE PATRICIA MULHERN v OFFICIAL RECEIVER
File number: NSD 371 of 2015
Judge: RANGIAH J
Date of judgment: 10 August 2015
Catchwords: PRACTICE AND PROCEDURE – application for summary judgment – whether no reasonable prospect of success – application to review decision of Official Receiver – whether judgment debt was final – whether bankruptcy notice fraudulent or misleading – whether creditor’s petition used for an improper purpose – where claim based on issues already finally resolved against applicant – where application has no reasonable prospect of success – application dismissed
Legislation: Bankruptcy Act 1966 (Cth) ss 15(5), 40, 41, 43(1) and 178
Bankruptcy Regulations 1996 (Cth) Reg 4.01 and 4.02
Federal Court of Australia Act 1976 (Cth) s 21 and 31A
Judiciary Act 1903 (Cth) s 39B
Uniform Civil Procedure Rules 1999 (Qld) s 129
Cases cited: Abigroup Ltd v Abignano (1992) 39 FCR 74 applied
Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 cited
Birdon Pty Ltd v Houben Marine Pty Ltd [2011] FCAFC 126; (2011) 197 FCR 25 cited
CK Nominees Australia Pty Ltd v Official Receiver (WA) (2007) 160 FCR 524; [2007] FCAFC 118 applied
Clyne v Deputy Commissioner of Taxation (NSW) (No 3) (1983) 48 ALR 545 cited
Dodrill v The Irish Restaurant & Bar Co Pty Ltd & Ors [2009] QSC 317 cited
Khouzame v All Seasons Air Pty Ltd [2014] FCA 1319 cited
Licul v Corney (1976) 8 ALR 437; 50 ALJR 439 cited
Minister for Immigration and Citizenshipv SZLIX (2008) 245 ALR 501; [2008] FCAFC 17 cited
Mulhern Constructions & Ors v Mulhern [2012] QSC 120 cited
Mulhern v Bank of Queensland Ltd [2012] FMCA 1266 cited
Mulhern v Bank of Queensland Ltd [2014] FCA 26 cited
Mulhern v Bank of Queensland Ltd [2015] FCA 44 cited
Mulhern v Pearce (No 3) [2015] FCA 806 cited
Olivieri v Stafford (1989) 24 FCR 413 cited
Opie v Opie (1951) 84 CLR 362 cited
Re Baxter; ex parte Official Receiver v Baxter (1986) 10 FCR 398 cited
Re Hanby; Ex parte Flemington Central Spares Pty Ltd (1967) 10 FLR 378 cited
Re Tyndall; Ex parte Official Receiver (1977) 17 ALR 182 cited
Re Wheeler; Ex parte Wheeler v Halse (1994) 54 FCR 166 cited
Shaw v MAB Corporation Pty Ltd [2013] FCA 1231 cited
Shaw v MAB Corporation Pty Ltd (2014) 220 FCR 425; [2014] FCA 62 cited
Stergiou v McGrail [1994] FCA 1041 cited
SZFDE v Minister for Immigration and Citizenship (2007) 232 CLR 189; [2007] HCA 35 cited
Woodall, Ide and Re Richards; Ex parte Sommers (1947) 14 ABC 112 cited
Wren v Mahony (1972) 126 CLR 212; [1972] HCA 5 cited
Xu v Wan Ze Property Development (Aust) Pty Ltd (in liq) (2014) 315 ALR 523; [2014] FCA 461 cited
Date of hearing:

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AGLC
Mulhern v Official Receiver [2015] FCA 807
Case
[2015] FCA 807
Decision Date

CaseChat Overview and Summary

The case of Mulhern v Official Receiver involves the married applicants, both undischarged bankrupts, challenging the decisions of the Official Receiver to issue bankruptcy notices to them. The applicants sought declarations, including that the Official Receiver be restrained from applying for summary dismissal, and summary judgment in their favour. The Official Receiver, in turn, applied for summary judgment against the applicants under section 31A of the Federal Court of Australia Act 1976 (Cth). The primary issue before the court was whether the applicants had any reasonable prospect of successfully prosecuting their claims. The applicants' claims were based on issues that had already been finally resolved against them in previous proceedings, particularly in relation to Mr Mulhern's bankruptcy stemming from a judgment debt and Mrs Mulhern's transfer of funds prior to the appointment of receivers to the Mulhern Group.

The court considered the principles set out in Mulhern v Bank of Queensland [2015] FCA 44, which provide that a proceeding or part of a proceeding need not be hopeless or bound to fail for it to have no reasonable prospect of success. The applicants' submissions were described as emotive, unhelpful, and often irrelevant, and the court found that they did not disclose any reasonable prospect of successfully prosecuting the proceeding. The applicants did not address the issue of their standing to bring the proceedings as bankrupts, and the court proceeded on the assumption that they had standing.

The court dismissed the applicants' interlocutory application, which sought to restrain the Official Receiver from applying for summary judgment. The court held that while the Official Receiver had failed to comply with an order to file the application for summary judgment by a specified time, the delay was short and there was no prejudice to the applicants. The court granted an extension of time for the Official Receiver to file the application for summary judgment and dismissed the applicants' originating application. The court also ordered that the Official Receiver pay any costs wasted by reason of the non-compliance with the court's order, and that the applicants pay the Official Receiver's costs of the proceeding.

In summary, the court dismissed the applicants' claims and granted summary judgment in favour of the Official Receiver, finding that the applicants had no reasonable prospect of successfully prosecuting their claims based on issues that had already been finally resolved against them. The court also dismissed the applicants' interlocutory application and granted an extension of time for the Official Receiver to file the application for summary judgment.

Orders

Orders of the court

1. The name of the respondent is amended to “Official Receiver”.

2. The time for the filing of the respondent’s application for summary judgment be extended to 25 May 2015 nunc pro tunc.

3. The applicants’ interlocutory application filed on 27 May 2015 is dismissed.

4. The applicants’ originating application filed on 3 April 2015 is dismissed.

5. The respondent pay the applicants’ costs (if any) thrown away by reason of the respondent’s failure to comply with the order of the Court made on 27 April 2015.

6. The applicants otherwise pay the respondent’s costs of the proceeding.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

For the reasons that follow, the respondent should be granted an extension of time and should have summary judgment against the applicants. The applicants’ interlocutory application and their originating application will be dismissed. Background The applicants are married to each other. Each of them is an undischarged bankrupt. In Mulhern v Pearce(No 3) [2015] FCA 806, I described the various proceedings that Mr Mulhern commenced against the trustees of his estate. He has repeatedly sought orders for the annulment or discharge of his bankruptcy and the return of his Irish passport and US Green Card. He has been unsuccessful in each of those proceedings. Mr Mulhern’s bankruptcy stems from a judgment debt: see Dodrill v The Irish Restaurant & Bar Co Pty Ltd & Ors [2009] QSC 317. On 2 October 2009, Daubney J of the Supreme Court of Queensland conducted a trial at which Mr Mulhern failed to appear. By that time Mr Mulhern had left Australia and was living in the United States of America. Daubney J made a number of orders against Mr Mulhern, including the following order:5.Mulhern Constructions Pty Ltd (A.C.N. 060 410 102) and Michael Richard Mulhern pay the Second Applicant the sum of $334,875 within 21 days of the service of a copy of this order. The “Second Applicant” referred to in the order of Daubney J was John Anthony Dodrill. On 1 April 2009, the Supreme Court had given Mr Mulhern’s solicitors leave to withdraw from the proceedings, but an order was made that “Shand Taylor Lawyers shall until further order remain the address for service [for Mr Mulhern].” In their written submissions, the applicants seem to acknowledge that the order made by Daubney J was served upon Shand Taylor. The applicants have certainly not contended that the order was not served on Shand Taylor. On 26 October 2009, on the application of Mr Dodrill, an Official Receiver in bankruptcy issued a bankruptcy notice directed to Mr Mulhern. The bankruptcy notice was founded on the judgment debt. The bankruptcy notice set out an address for Mr Mulhern which was his address at some time before he left Australia. The bankruptcy notice read, relevantly, as follows: On 4 November 2009, Burnett FM (as his Honour was then) of the Federal Magistrates Court of Australia ordered that service of the bankruptcy notice be effected by service on Shand Taylor Lawyers. Mr Mulhern did not comply with the bankruptcy notice. On 3 February 2010, a Registrar of the Federal Magistrates Court made a sequestration order against Mr Mulhern’s estate. Mr Mulhern states that he did not become aware of the sequestration order until 1 March 2010. The history of Mrs Mulhern’s bankruptcy is described in the judgment of Jacobson J in Mulhern v Bank of Queensland Ltd [2014] FCA 26. Mrs Mulhern was a director of five companies known as the Mulhern Group. Some days before the Bank of Queensland Ltd (“the Bank”) appointed receivers to the Mulhern Group, Mrs Mulhern transferred $480,000 from the companies’ bank accounts to her personal account. The Bank obtained Mareva relief against her in the Supreme Court of Queensland. Mrs Mulhern was unsuccessful in her application to set the freezing orders aside, resulting in a costs order being made against her: see Mulhern Constructions & Ors v Mulhern [2012] QSC 120.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The respondent did not comply with the Court’s order. The order ought to have been complied with. The respondent should have explained its failure to comply with the order on affidavit. However, the failure to provide an explanation is not fatal. It is relevant that the respondent did seek the applicants’ consent to the variation of the order to extend the time for compliance shortly prior to the expiration of the time for compliance with the order, but consent was refused by the applicants. The applicants have not identified any prejudice to them as a result of the non-compliance with the order, given that the application was filed a week later. Any prejudice to the applicants in terms of any costs they have wasted as a result of the default can be dealt with by an appropriate costs order. In these circumstances, the respondent will be allowed an extension of time nunc pro tunc. I will dismiss the applicants’ interlocutory application. The respondent’s application for summary judgment The respondent’s application for summary judgment relies on s 31A of the Federal Court of Australia Act1976 (Cth). Section 31A provides, relevantly:(2)The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:(a)the first party is defending the proceeding or that part of the proceeding; and(b)the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.(3)For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:(a)hopeless; or(b)bound to fail;for it to have no reasonable prospect of success. In Mulhern v Bank of Queensland [2015] FCA 44 at [56]–[61], Gleeson J set out a summary of the principles relevant to an application under s 31A. I respectfully adopt that summary. The applicants challenge the decision of an Official Receiver made on 26 October 2009 to issue the bankruptcy notice addressed to Mr Mulhern and the decision made on 14 March 2012 to issue the bankruptcy notice addressed to Mrs Mulhern. The applicants filed a voluminous affidavit of Mr Mulhern with their originating application. They have indicated that they do not intend to file any further affidavits in the proceedings. The respondent submits that the applicants’ submissions and material disclose that they have no reasonable prospect of successfully prosecuting the proceeding. It may be said that much of the applicants’ written and oral submissions are emotive, unhelpful and irrelevant. While the applicants submit that the respondent made a number of legal errors when issuing the bankruptcy notices, their submissions are not always easy to follow. The applicants submit that the Court’s power to make the declarations they seek arises under s 39B of the Judiciary Act 1903 (Cth) and s 15(5) of the Bankruptcy Act. The parties did not address the question of the applicants’ standing, as bankrupts, to bring the proceedings. In the absence of a submission by the respondent to the contrary, I will proceed on the assumption that they have standing.

Ratio Decidendi

Legal Principle Established

The applicants’ interlocutory application seeks orders including the following:1.A declaration that the Respondent be restrained by permanent injunction with respect to its foreshadowed application for summary dismissal.2. A declaration that because of the default of the respondent in failing to comply with an order of this Court that the Court give Judgment in favour of the applicants in accordance with the final orders being sought in the Originating Application filed in these proceedings on 17 April 2015. alternatively3.Summary judgment in favour of the Applicants pursuant to Section 31A of Federal Court of Australia Act 1976.ConsiderationThe applicants’ interlocutory application The applicants’ interlocutory application is based upon the failure of the respondent to comply with the Court’s order that the respondent file any application for summary judgment by 4 pm on 18 May 2015. The applicants submit that “[d]elay is the denial of justice”. They submit that the failure to comply with orders is particularly egregious because the respondent is an officer of the Commonwealth. They rely on Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 for the proposition that if a party unilaterally disregards directions then such unwillingness or inability to comply without adequate justification may justify dismissal. The respondent submits that the delay was short, the application being filed a week out of time. The delay was explained, from the bar table, as “solicitor error” related to illness of the solicitor responsible for the carriage of the matter. The respondent argues that there is no prejudice to the applicants by reason of the delay. The respondent submits that an extension of time to file the application for summary judgment should be granted. The respondent did not comply with the Court’s order. The order ought to have been complied with. The respondent should have explained its failure to comply with the order on affidavit. However, the failure to provide an explanation is not fatal. It is relevant that the respondent did seek the applicants’ consent to the variation of the order to extend the time for compliance shortly prior to the expiration of the time for compliance with the order, but consent was refused by the applicants. The applicants have not identified any prejudice to them as a result of the non-compliance with the order, given that the application was filed a week later. Any prejudice to the applicants in terms of any costs they have wasted as a result of the default can be dealt with by an appropriate costs order. In these circumstances, the respondent will be allowed an extension of time nunc pro tunc. I will dismiss the applicants’ interlocutory application. The respondent’s application for summary judgment The respondent’s application for summary judgment relies on s 31A of the Federal Court of Australia Act1976 (Cth). Section 31A provides, relevantly:(2)The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:(a)the first party is defending the proceeding or that part of the proceeding; and(b)the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.(3)For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:(a)hopeless; or(b)bound to fail;for it to have no reasonable prospect of success.