O'Neill v Piscopo (No 3)

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FEDERAL COURT OF AUSTRALIA

O’Neill v Piscopo (No 3) [2012] FCA 1036

Citation: O’Neill v Piscopo (No 3) [2012] FCA 1036
Appeal from: Rose & Ors v Piscopo [2010] FMCA 948
Parties: MICHAEL O'NEILL v SAMUEL PISCOPO and TERRY HILL
File number: NSD 52 of 2011
Judge: COLLIER J
Date of judgment: 19 September 2012
Catchwords:

BANKRUPTCY – s 179 Bankruptcy Act 1966 (Cth) – nature of Court’s discretion under s 179 – decision of Federal Magistrate to refuse inquiry into conduct of trustee in bankruptcy or order removal pursuant to s 179 – appellant the solicitor of bankrupt – trustee funded by third party – high level of acrimony between bankrupt and appellant, and third party – claim that trustee controlled by third party – claim that third party motivated by vengeance and desire to oppress and harass bankrupt and his wife – extensive history of litigation involving parties

PRACTICE AND PROCEDURE – whether leave to appeal necessary – interlocutory or final decision – whether judgment in relation to s 179 Bankruptcy Act interlocutory of final – principles in Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397

PRACTICE AND PROCEDURE – nature of appeal against decision of Federal Magistrate – principles in Abeyesinghe v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 1558 – whether delay in delivery of judgment affected quality of reasons

PRACTICE AND PROCEDURE – whether replicating written submissions of parties in judgments constitutes failure of Federal Magistrate to give real and conscientious consideration to the issues – obligation of Federal Magistrate to provide adequate reasons for decision

PRACTICE AND PROCEDURE – examination summons – need for disclosure of material facts – whether failure to include letter from liquidator of New Zealand company in material before Court constituted material non-disclosure – power to issue examination summons exercised in the interests of creditors – whether technical or restrictive approach to the use of the power appropriate – whether trustee should place before Court voluminous material or elaborate statements or reasons

PRACTICE AND PROCEDURE – whether Jones v Dunkel inference to be drawn from wrongful claim of privilege

Legislation: Bankruptcy Act 1966 (Cth) ss 81, 130, 179
Corporations Act 2001 (Cth) Pt 5.3A
Federal Court of Australia Act 1976 (Cth) s 24(1A)
Cases cited: Abeyesinghe v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 1558 cited
Campbell’s Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 ALR 58 cited
Daniels Corporations International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49 cited
Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 cited
Ferella v Official Trustee in Bankruptcy (No 2) [2011] FCA 619 cited
Hall v Nominal Defendant (1966) 117 CLR 423 cited
Hill v James [2004] NSWSC 55 cited
Hill v Piscopo [2007] FMCA 814 cited
Hill v Piscopo [2008] FMCA 574 cited
Hogan v Australian Crime Commission [2009] FCAFC 71 cited
Jones v Dunkel (1959) 101 CLR 298 cited
Karounos v…
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Details
Case
[2012] FCA 1036
Decision Date

CaseChat Overview and Summary

The case of O'Neill v Piscopo (No 3) involved an appeal against the decision of a Federal Magistrate who declined to inquire into the conduct of a trustee in bankruptcy or order his removal. The appellant, Mr O'Neill, is the solicitor for the bankrupt, Mr Hill, and the trustee in bankruptcy is Mr Piscopo. The dispute stems from a history of litigation involving Mr Hill, Mr Piscopo, and third parties, including Mr David James and Ms Rose, with allegations of control, oppression, and vexatious litigation. The case raised several legal issues, including the nature of the Court's discretion under section 179 of the Bankruptcy Act 1966, the necessity of leave to appeal, and the adequacy of the reasons provided by the Federal Magistrate.

The court examined whether the decision of the Federal Magistrate was interlocutory or final, determining the need for leave to appeal. It considered the principles set out in Décor Corporation Pty Ltd v Dart Industries Inc, where it was noted that leave to appeal is generally guided by whether the decision is attended with sufficient doubt to warrant reconsideration and whether substantial injustice would result if leave were refused. The court also reviewed the nature of the appeal against the decision of the Federal Magistrate, guided by principles in Abeyesinghe v Minister for Immigration and Multicultural and Indigenous Affairs. Additionally, it considered whether the delay in delivering the judgment affected the quality of the reasons provided.

In the appeal, the court found that the decision of the Federal Magistrate was final and did not require leave to appeal. The court concluded that the appellant had not demonstrated that the judgment under appeal resulted from any legal, factual, or discretionary error. Furthermore, the court held that the Federal Magistrate had provided adequate reasons for his decision and that the omission of certain information did not amount to misleading conduct or require a particular inference under Jones v Dunkel.

The court refused leave to appeal and dismissed the appeal, ordering the parties to file submissions regarding costs. The decision underscored the importance of the quality and adequacy of reasons provided by the Federal Magistrate, and the need for parties to demonstrate clear errors to successfully appeal such decisions.

Orders

Orders of the court

1. Leave to appeal be refused.

2. The appeal be dismissed.

3. The parties file submissions as to costs in accordance with a timetable to be settled by the Docket Judge.

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

Background

Background to the litigation

In my view leave to appeal (to the extent necessary) ought be refused, and the appeal ought be dismissed, for reasons to which I now turn.Background Prior to February 2002, Mr Hill controlled a number of companies known as the Hill Wine Group, which had an annual turnover of approximately $50 million. The business of the group was conducted across New South Wales and South Australia, and included ownership of vineyards, a wine distribution business, and a warehouse. Corporations related to Mr Hill included:·Hill International Wines NZ Ltd, which was controlled by Mr Hill;·BDT Holdings Pty Ltd, which was controlled by Ms Rose;·Vintage Wine & Spirits Australia Pty Ltd, which was controlled by Ms Rose;·Rosehill Wine Corporation Pty Ltd, which was controlled by Ms Rose. On or around 11 February 2002 administrators were appointed to the Hill Wine Group pursuant to Pt 5.3A of the Corporations Act 2001 (Cth). A deed of company arrangement was proposed in respect of the group but rejected by creditors on 22 April 2002, and the administrators were appointed as liquidators of the group on that date. After the Hill Wine Group went into liquidation, Mr Hill engaged in discussions with Mr David James in respect of a business deal involving the acquisition of the wine distribution business of the Hill Wine Group from the liquidators. Mr James has established interests in the wine industry in Australia and overseas, including through corporate vehicles. One of those corporate vehicles is James Estate Wines Pty Limited.Litigation in Supreme Court of New South Wales The sequence of events following the initial discussions between Mr Hill and Mr James, and the ensuing litigation, were explained in the judgment of Bergin J in her judgment in Hill v James [2004] NSWSC 55 and the subsequent decision of the Court of Appeal in James v Hill [2004] NSWCA 301. As her Honour at first instance in Hill v James [2004] NSWSC 55 observed at [1]:This litigation arises out of the liquidation of the Hill Wine Group of companies (the Group) in 2002 and the attempted purchase back of some of the assets of the Group by the plaintiff, Terry Donald Hill in conjunction with the first defendant, David Anthony James. The evidence establishes a level of commercial skulduggery that each of these vignerons pursued as if it were their normal or usual way of doing business. Unfortunately a member of the legal profession, the third defendant, was also involved in this trickery. The third defendant to whom her Honour referred was Mr David Brooks. The facts before her Honour included the following:·Mr Hill and Mr James had entered an agreement whereby Mr James had agreed that Mr Hill would purchase a wine distribution business from him at the same price that he (Mr James) had purchased it from the liquidators of the Hill Wine Group.·Mr Hill then entered into negotiations with a third party to sell to it 45% of the wine distribution business in order to secure funds to complete the purchase from Mr James, but failed to disclose to the third party the fact that he (Mr Hill) was only buying the business for $10.3 million. Mr Hill represented to the third party that the business was worth $24 million.·Mr James became aware that Mr Hill stook to profit if the third party purchased 45% of the wine distribution business.·Mr James then negotiated with the liquidators to buy the wine distribution business for only $6.9 million. Mr James went to considerable efforts to conceal from Mr Hill the true price at which Mr James purchased the wine distribution business from the liquidators.·Without the knowledge of Mr Hill, Mr James and his solicitor Mr Brooks changed the amounts in draft asset sale contracts with the liquidators before those contracts were sent to Mr Hill for his approval.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

There then followed considerable, and complex, litigation involving Mr Hill’s bankrupt estate, including the following:·In 2007 the Federal Magistrates Court dismissed Mr Hill’s application for the return of his passport to allow him to travel to London on business and to visit friends (Hill v Piscopo) [2007] FMCA 814).·In 2008 the Federal Magistrates Court ordered that Mr Hill’s passport be returned to allow him to travel to attend a friend’s wedding in New Zealand (Hill v Piscopo [2008] FMCA 574).·On 13 February 2008 Mr Piscopo applied to the Federal Magistrates Court for the issue of four summonses in regards to Mr Hill’s estate, naming Mr Hill as a relevant person to give evidence and produce documents, and Ms Rose, Mr O’Neill and Mr Eddy as examinable persons to give evidence and produce documents. Examination summonses were issued on 4 April 2008 pursuant to s 81 of the Bankruptcy Act. (It is these examination summonses which were the subject of the application before his Honour in this proceeding below.)·On 4 June 2008 Mr Hill filed subpoenas issued to Mr Piscopo and others, seeking (in paragraph 3 of the subpoena) documents recording communications between Mr Piscopo and Mr David James, Mr David Brooks, Mr Hill and Ms Rose. On 13 June 2008 Mr Piscopo filed an interim application seeking to have paragraph 3 of the subpoena set aside. That application was dismissed (Piscopo v Hill [2008] FMCA 1266).·Subpoenas were issued on 18 June 2008 to a number of third parties including Westpac Banking Corporation on the application of Mr Piscopo.·The application before his Honour below was filed by Ms Rose and Mr O’Neill on 9 October 2008. Ms Rose and Mr Hill sought the following interim orders:1. The examination summonses issued to:- Terry Donald Hill dated 4 April 2008- Elema Rose dated 4 April 2008- Michael O’Neill dated 4 April 2008- Nicholas Eddy dated 4 April 2008be discharged.2. The subpoenas issued on 18 June 2008 to:- the proper officer of Westpac Banking Corporation;- the proper officer of Provident Capital Limited;- the Secretary of R. L. Kremnizer & Co;- the proper officer of Bovis Lend Lease Limited;- the Secretary of Wine-Ark Pty Ltd;- the proper officer of GE Morttgage (sic) Solutions Ltdbe set aside3. Pursuant to section 179(1) of the Bankruptcy Act 1966 the Court:(a)inquire into the conduct of the Respondent in relation to the bankruptcy of Terry Donald Hill;(b) remove the Respondent from that office; and(c) make any such further order as it thinks proper;4.The Respondent pay the Applicants’ costs of and incidental to this Interim Application on an indemnity basis5. Such further or other orders as the Court deems fit(Tracking in original.)·On 19 December 2008 Foster J dismissed proceedings commenced by Mr Piscopo to have NOT Lawyers prevented from acting in proceedings involving Mr Hill’s bankrupt estate: Piscopo v NOT Lawyers [2008] FCA 1907.·Amended Particulars of Respondent’s Abuse of Process were filed in support of the application on 19 December 2008 and included the following:A. The examination proceedings and the trusteeship generally are:1.being used to oppress and harass Terry Hill (‘Mr Hill’) and his wife, Elena Rose (‘Ms Rose’), his lawyer, Michael O’Neill (‘Mr O’Neill’) and his former lawyer , Nicholas Eddy (‘Mr Eddy’);2.being used to further a vendetta by David James (‘Mr James’) and David Brooks (‘Mr Brooks’) against Mr Hill and Mr O’Neill;3.being used to obtain documents and other information from Messrs Hill, O’Neill and Eddy and Ms Rose and under a subpoena from corporations related to Mr Hill and Ms Rose, financiers, accountants of and contractors to such corporations so supply same to Mr James and Mr Brooks, so as to enable Mr James and Mr Brooks or both of them to:a. gain confidential information;b. gain a commercial advantage;c. commercially disadvantage Ms Rose’s interest;4.in substance a delegation to Messrs James and Brooks of the conduct of litigation or steps in litigation involving the trustee and the bankrupt’s estate;5.affected by material inroads on the trustees independence caused by Messrs James and BrooksB. The examination proceedings and the trusteeship generally are:1.a product of the trustee being overborne by his sponsors, Messrs James and BrooksC.As an officer of the Court, a bankruptcy trustee and an applicant for exparte orders, the trustee has, by relying on his affidavit sworn 4 December 2007 to found the issue of the 4 examination summonses herein:1. materially mislead the Court:Further particularsa.as to the facts and matters stated in paragraph 3(m) of that affidavit. The trustee failed to disclose that Helen Walker advised in writing that she had mistakenly written that the shareholding in Nominee Shareholdings Ltd was held in trust for the bankrupt and instead advised that the shareholding was held for Ms Rose;b. (withdrawn)c.As to the facts and matters alleged in paragraph 4 of the affidavit by failing to disclose the written report made by the bankrupt’s solicitors to the trustee dated 3 May 2007.2.included the allegation or suggestions that were either unfounded or only founded on assertions made to him by Mr Brooks, such allegations being made in:a. paragraph 3(g), as to repayment;b. paragraph 3(o), as to ‘significantly’ more value;c. paragraph 3(u) as to BDT Holdings making loans “… through trust distributions.”·The application filed by Ms Rose and Mr O’Neill was heard, and dismissed, by his Honour below. The learned Federal Magistrate noted that after his judgment had been completed and edited, the solicitors representing Mr Piscopo advised the Court that, as a result of a global settlement of all proceedings and claims involving Ms Rose and Mr Piscopo, consent orders disposing of the proceedings as far as concerned the claims between Ms Rose and Mr Piscopo were forwarded to the Court, and therefore no orders were made in respect of Ms Rose. It is this decision which is the subject of appeal in this proceeding.Decision of his Honour

Ratio Decidendi

Legal Principle Established

In the supplementary notice the appellant sought the following orders:1.That Orders 2 and 3 of the Magistrate’s decision made on 14 December 2010 be set aside;2.Instead, an order be made that pursuant to section 179 of the Bankruptcy Act 1966 (Cth) that the Court inquire into the conduct of the First Respondent in relation to the bankruptcy of the Second Respondent;3.Further, an order pursuant to section 179 of the Bankruptcy Act 1966 (Cth) that the First Respondent be removed from his office as the trustee in bankruptcy of the Second Respondent, and that the Official Trustee in Bankruptcy be appointed in his stead;4.The First Respondent pay the Appellant’s costs of the proceeding below and of this appeal.ConsiderationInterlocutory or final judgment? It is common ground between the parties that a threshold issue for determination of this proceeding is whether the appellant requires the leave of this Court to appeal from the decision of his Honour below. The key question in this respect is whether his Honour’s decision is final or interlocutory – leave to appeal is required in respect of interlocutory decisions (s 24(1A) Federal Court of Australia Act 1976 (Cth)). In circumstances where leave is required, the discretion of the Court to grant leave to appeal is generally guided by:·whether, in all the circumstances, the decision is attended with sufficient doubt to warrant its being reconsidered; and·whether substantial injustice would result if leave were refused, supposing the decision to be wrong.(Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-399) These guiding principles can be compared with the case the appellant is required to make to be successful in the appeal against his Honour. As Kenny J observed in Abeyesinghe v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 1558:An appeal from a judgment of the Federal Magistrates Court is not an appeal by way of a hearing de novo, nor is it an appeal in the strict sense: cf Farrington v Deputy Commissioner of Taxation [2002] FCA 1013 at [4] per Kenny J and Low v Commonwealth of Australia [2001] FCA 702 at [3] per Marshall J. Such an appeal is conducted as a re-hearing. On an appeal by way of re-hearing, the powers of an appellate court are exercisable only if the appellant can demonstrate that, having regard to the evidence before the appellate court, the judgment under appeal is a consequence of some legal, factual or discretionary error: see Allesch v Maunz [2000] HCA 40; (2000) 203 CLR 172, at 178-9 per Gaudron, McHugh, Gummow and Hayne JJ; Minister for Immigration and Multicultural and Indigenous Affairs v Jia [2001] HCA 17; (2001) 205 CLR 507, at 533 per Gleeson CJ and Gummow J; and Coal & Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; (2000) 203 CLR 194 at 203 per Gleeson CJ, Gaudron and Hayne JJ.(cf Gordon J in SZOCE v Minister for Immigration & Citizenship [2011] FCA 133) Before his Honour the appellant submitted that Mr Piscopo did not explain his omission to inform the Court of the information he had received from Ms Walker, and that the omission was explicable in one of three ways:·the omission was not misleading;·the omission was due to inadvertence;·the omission was deliberate. The appellant submitted that, in light of the principles in Jones v Dunkel, this was the proper inference for his Honour to draw, and is of particular concern because Mr Piscopo has been a solicitor for 22 years.