Roufeil as Trustee of the Bankrupt Estate of Tarrant v Tarrant Enterprises Pty Ltd as Trustee for the MRT Family Trust
[2021] FCCA 784
•23 April 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
Roufeil as Trustee of the Bankrupt Estate of Tarrant v Tarrant Enterprises Pty Ltd as Trustee for the MRT Family Trust [2021] FCCA 784
File number(s): SYG 446 of 2021 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 23 April 2021 Catchwords: PRACTICE AND PROCEDURE – BANKRUPTCY – trustee in bankruptcy commenced proceeding (Trustee proceeding) under s 139ZQ(8) of the Bankruptcy Act 1966 (Cth) (Act) for judgment of amount demanded by notice (Notice) purportedly issued under s 139ZQ(1) of the Act – in a separate proceeding the respondent applied for an order that the Notice be set aside – that application was dismissed for non-appearance and the respondent’s application to set aside those dismissal orders was also dismissed – respondent then appealed to the Federal Court (FC appeal) to set aside orders refusing to set side dismissal orders – whether in those circumstances the Trustee proceeding is vexatious or oppressive – whether in any event Trustee proceeding should be adjourned pending determination of FC appeal – Trustee proceeding not vexatious or oppressive – balance of convenience favours continuation of Trustee proceeding and discontinuation of FC appeal. Legislation: Administrative Decisions (Judicial Review) Act 1977 (Cth)
Bankruptcy Act 1966 (Cth) ss 30(1)(b), 33(1)(a), 86, 120, 121, 139ZQ, 139ZR, 139ZS, 139ZT, 149D(1)(ab), Div 3, Pt VI
Civil Dispute Resolution Act 2011 (Cth)
Federal Circuit Court Rules 2001 (Cth) rr 9.04, 16.05
Cases cited: Burbank Australia Pty Ltd v Luzinat [2000] VSC 128
Citibank Ltd, in the matter of Stivactas v Parker [2000] FCA 1914
Halse v Norton (1996) 76 FCR 389
John Martin Wedgwood Ex Parte: Bank of New Zealand [1993] FCA 368
Re McLernon; Ex parte SWF Hoists and Industrial Equipment Pty Ltd v Prebble (1995) 58 FCR 391
Tarrant Enterprises Pty Limited ATF MRT Family Trust v Official Receiver in Bankruptcy [2021] FCCA 453
Number of paragraphs: 61 Date of last submissions: 16 April 2021 Date of hearing: 13 April 2021 Place: Sydney Solicitor for the Applicant: Ms T Cochrane of TurksLegal, by telephone Counsel for the Respondent: Mr Q Rares, by telephone Solicitor for the Respondent: M Russoniello Solicitor ORDERS
SYG 446 of 2021 BETWEEN: MARK DAMIAN CHARLES ROUFEIL AS TRUSTEE OF THE BANKRUPT ESTATE OF MERVYN ROSS TARRANT
Applicant
AND: TARRANT ENTERPRISES PTY LTD AS TRUSTEE FOR THE MRT FAMILY TRUST ACN 066 439 316
Respondent
ORDER MADE BY:
JUDGE MANOUSARIDIS
DATE OF ORDER:
23 APRIL 2021
THE COURT ORDERS THAT:
1.The application in a case filed by the respondent on 12 April 2021 is dismissed.
2.The costs of the application in a case are reserved.
3.The proceeding is listed for directions at 9.30 am on 7 May 2021, or at such other time and date convenient to the parties as the Court may fix, such directions hearing to proceed by telephone.
REASONS FOR JUDGMENT
INTRODUCTION
On 22 March 2021 the applicant (Trustee), who is the trustee in bankruptcy of the estate of Mervyn Ross Tarrant (Debtor), commenced this proceeding (Trustee proceeding) against the respondent (Tarrant Enterprises). The Trustee claims judgment for $194,290 (together with interest), being the amount demanded in a notice dated 3 April 2020 (Notice) issued by a delegate of the Official Receiver purportedly pursuant to s 139ZQ(1) of the Bankruptcy Act 1966 (Cth) (Act). The Notice identifies a number of payments totalling $194,290 that it claims were paid out of the Debtor’s bank account to, or for the benefit of, Tarrant Enterprises before the Debtor became bankrupt. The Notice claims that s 120 and s 121 of the Act apply to each of these payments to render them void as against the Trustee.
The matter was listed before me for directions at 9.30 am on 13 April 2021. At the commencement of the directions hearing Mr Rares, counsel for Tarrant Enterprises, said that on 12 April 2021 Tarrant Enterprises had filed an application in a case (and an affidavit in support) for an order that the Trustee proceeding be stayed, dismissed, or adjourned. The application in a case, however, had not yet been accepted for filing and entered in the Electronic Court File. Counsel for Tarrant Enterprises nevertheless explained to me the background to the application in a case. Counsel said that Tarrant Enterprises has applied to the Federal Court (FC appeal) for leave to appeal against orders dismissing a proceeding Tarrant Enterprises filed in this Court to set aside the Notice (first FCC proceeding). Counsel submitted that the questions arising in the FC appeal are the same, or at least substantially the same, as the issues that arise in the Trustee proceeding, and, for that reason, the Trustee proceeding is vexatious. Counsel submitted the Trustee proceeding should therefore be stayed, dismissed, or at the very least adjourned pending the determination of the FC appeal.
Ms Cochrane, who appeared for the Trustee, did not accept the Trustee proceeding is vexatious. Ms Cochrane did accept, however, that the Trustee proceeding should be adjourned pending the determination of the FC appeal. Ms Cochrane said that at the time the Trustee proceeding commenced, the Trustee was unaware Tarrant Enterprises had filed, or intended to file, an appeal with the Federal Court against the orders made in the first FCC proceeding.
Towards the end of the directions hearing Ms Cochrane and counsel for Tarrant Enterprises agreed with my suggestion that I reserve judgment on the application in a case, and deliver judgment after I read the affidavit on which Tarrant Enterprises relies. After I reserved judgment I instructed my associate to inquire whether the parties would consent to my accessing, through the Electronic Court File, the documents filed in the first FCC proceeding and documents exhibited to the affidavit Tarrant Enterprises filed in the FC appeal. The parties, through their lawyers, informed my associate they consent to my accessing these documents.
In these reasons for judgment, therefore, I consider whether I should stay or dismiss the Trustee proceeding or, in the alternative, order that the Trustee proceeding be adjourned pending the determination of the FC appeal. To be in a position to determine these questions it will be necessary to identify the provisions of the Act that have been engaged in the first FCC proceeding and in the Trustee proceeding. I will then set out the procedural history in the first FCC proceeding, the grounds on which Tarrant Enterprises says it is not liable to pay the amount demanded by the Notice, and the grounds on which Tarrant Enterprises seeks leave to appeal the orders made in the first FCC proceeding.
STATUTORY SCHEME AND SOME PRINCIPLES
I begin with s 139ZQ(1) of the Act, which provides:
If a person has received any money or property as a result of a transaction that is void against the trustee of a bankrupt under Division 3, the Official Receiver:
(a) if the Official Trustee is the trustee--on the initiative of the Official Receiver; or
(b) if a registered trustee is the trustee--on application by the trustee;
may require the person, by written notice given to the person, to pay to the trustee an amount equal to whichever of the following is applicable:
(c) if:
(i) the transaction is void against the trustee under section 128B or 128C; and
(ii) the transaction is by way of a contribution to an eligible superannuation plan for the benefit of a person (the beneficiary) who may or may not be the bankrupt; and
(iii) the beneficiary is a member of the eligible superannuation plan;
whichever is the lesser of the following:
(iv) the money or the value of the property received;
(v) the beneficiary’s withdrawal benefit in relation to the eligible superannuation plan;
(d) in any other case--the money or the value of the property received.
Subsection 139ZQ(2) provides that a notice issued under s 139ZQ(1) “must set out the facts and circumstances because of which the Official Receiver considers that the transaction is void as against the trustee”.
The relevant provisions in Div 3 of Part VI of the Act that render a transaction void include s 120 and s 121. Subsection 120(1) provides:
A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor’s bankruptcy if:
(a) the transfer took place in the period beginning 5 years before the commencement of the bankruptcy and ending on the date of the bankruptcy; and
(b) the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property.
Subsection 121(1) of the Act provides:
A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor’s bankruptcy if:
(a) the property would probably have become part of the transferor’s estate or would probably have been available to creditors if the property had not been transferred; and
(b)the transferor’s main purpose in making the transfer was:
(i) to prevent the transferred property from becoming divisible among the transferor’s creditors; or
(ii) to hinder or delay the process of making property available for division among the transferor’s creditors.
The issuing of a notice under s 139ZQ of the Act (139ZQ Notice) has a number of consequences. One is that the property, if any, that is the subject of the notice becomes charged with the liability of the transferee to make payments to the trustee as required by the notice.[1] Another is that, under s 139ZQ(8), the amount demanded by a 139ZQ Notice is recoverable by the trustee in bankruptcy as a debt by action against the person in a court of competent jurisdiction. Yet another consequence is that the person to whom the 139ZQ Notice is given will be guilty of a criminal offence if he or she refuses or fails to comply with the 139ZQ Notice.[2] These matters are subject to the power of the Court to set aside the notice on an application made under s 139ZS(1) of the Act, which provides:
If the Court, on application by a person to whom a notice has been given under section 139ZQ or by any other interested person, is satisfied that this Subdivision does not apply to the person on the basis of the alleged facts and circumstances set out in the notice, the Court may make an order setting aside the notice.
[1] Act, s 139ZR
[2] Act, s 139ZT
Subsection 139ZS(1A) of the Act provides:
The application must be made:
(a)not later than 60 days after the day the notice under section 139ZQ was given to the applicant; or
(b)if the applicant is another interested person—not later than 60 days after the day the applicant became aware that the notice has been given.
Subsection 139ZS(2) of the Act provides that if a 139ZQ Notice is set aside it will be taken not to have been given.
The power s 139ZQ(1) of the Act confers on the Official Receiver “is conditioned on the existence of circumstances in which a person has received money or property as a result of a transaction that is void against the trustee of a bankrupt under Div 3 of Pt VI of the Act”.[3] In other words, the power “is conditioned not upon the Official Receiver’s opinion or satisfaction that the transaction is void against the trustee but upon the existence of certain circumstances in which a person has received money or property as a result of a transaction that is void against the trustee”.[4] That means that the Official Receiver’s power under s 139ZQ(1) is ““dependent upon the existence of a jurisdictional fact” . . . and must be subject to challenge in circumstances where the supposed existence of that fact is relied upon”.[5]
[3] Re McLernon; Ex parte SWF Hoists and Industrial Equipment Pty Ltd v Prebble (1995) 58 FCR 391, page 397
[4] Re McLernon; Ex parte SWF Hoists and Industrial Equipment Pty Ltd v Prebble (1995) 58 FCR 391, page 401
[5] Re McLernon; Ex parte SWF Hoists and Industrial Equipment Pty Ltd v Prebble (1995) 58 FCR 391, page 401
This has a number of consequences. One is that when an application is made under s 139ZS of the Act to set aside a 139ZQ Notice “the applicant may challenge the statement [in the 139ZQ notice] of facts and circumstances, for the purposes of having the notice set aside”.[6] Further:[7]
A hearing under s 139ZS is . . . a hearing de novo in which the Court may investigate and determine the correctness of the facts and circumstances stated in the notice and whether any defence to the liability asserted in the notice arises out of additional facts proved by the applicant
[6] Re McLernon; Ex parte SWF Hoists and Industrial Equipment Pty Ltd v Prebble (1995) 58 FCR 391, page 401
[7] Re McLernon; Ex parte SWF Hoists and Industrial Equipment Pty Ltd v Prebble (1995) 58 FCR 391, page 403
Another consequence is that making an application under s 139ZS to set aside a 139ZQ Notice is not the only way of challenging such notice. One alternative means would be for the recipient of the 139ZQ Notice to apply for a declaration under s 30(1)(b) of the Act “that the condition precedent to the operation of s 139ZQ had not been satisfied and also to grant an injunction restraining any further proceedings based upon a notice issued under that section”.[8] Another means would be to challenge a 139ZQ Notice collaterally. That could be done as a defence to an action brought under s 139ZQ(8) of the Act, or as a defence to a criminal prosecution brought under s 139ZT.[9]
[8] Re McLernon; Ex parte SWF Hoists and Industrial Equipment Pty Ltd v Prebble (1995) 58 FCR 391, page 403
[9] Re McLernon; Ex parte SWF Hoists and Industrial Equipment Pty Ltd v Prebble (1995) 58 FCR 391, page 403
There is one other consequence to note; and that is that the issue of a 139ZQ Notice does not alter the onus of proving the facts that make a transaction void under s 120 or s 121 of the Act. Thus, in an application under s 139ZS to set aside a 139ZQ Notice, provided the applicant puts before the Court “sufficient evidence to call the validity of the notice into question”, the trustee bears the onus of proving those facts which, under s 120 or s 121, render a transaction void.[10] That is:[11]
[Section] 139ZS has been construed as a provision by which an application made under that section initiates litigation appropriate to resolve a dispute between the trustee and a third party. Then on that construction it would follow, unless the Act provided to the contrary, that the onus of proof in that litigation would be as provided in Div 3 of the Act. Therefore, where an application under s139ZS involves a dispute between the trustee and the person served with the notice as to the application of Div 3 to a transaction, the onus will be on the trustee to satisfy the Court that the provisions of Div 3 so apply, subject to express contrary provisions such as those set out in ss120(2) and (5), 122(3), 123(2) and 124(2) of the Act which place the onus of proof of certain matters on the person seeking to uphold the transaction.
[10] Halse v Norton (1996) 76 FCR 389, page 392 (Black CJ).
[11] Halse v Norton (1996) 76 FCR 389, page 398
Finally, it will be necessary to say something about who must, or may, be joined as a respondent in an application under s 139ZS to set aside a 139ZQ Notice. A useful starting point is the following observations of Cooper J in John Martin Wedgwood Ex Parte: Bank of New Zealand:[12]
Section 139ZS of the Act gives to the applicant a right to come to this court to set aside the notice. Where the notice is procured at the initiative of the trustee (section 139ZQ(1)(b)) and the trustee is the person to receive the value of the property (section 139ZQ (1) and (7)) and the person entitled to sue for the recovery of it as a debt (section 139ZQ(8)), the trustee, is in my view the proper respondent who, being the beneficiary of the notice, has the necessary interest to appear and argue in support of the validity of the notice.
[12] John Martin Wedgwood Ex Parte: Bank of New Zealand [1993] FCA 368, at [24]
That does not mean, however, that the Official Receiver can never be a proper party. That point has been recognised in the cases. In Halse v Norton Lee and RD Nicholson JJ said:[13]
If a notice served on a person under s139ZQ remains uncontested, service of the notice provides the trustee with a right that may be enforced against that person, namely, the right to recover as a debt the sum claimed in the notice. If the claim for the payment of money made in the notice is disputed, s 139ZS provides a means by which the controversy as to the application of Div 3 of the Act to the transaction is to be resolved and determined by the Court. In most cases it will be necessary for the trustee to be joined as a party to a proceeding commenced under s 139ZS, but if the applicant, or the Official Receiver, fails to have the trustee so joined the Official Receiver will stand in the trustee's place and be under the same onus of proof as the trustee.
[13] Halse v Norton (1996) 76 FCR 389, page 399
This passage suggests that it is open to a party to name the Official Receiver as the sole respondent in an application under s 139ZS to set aside a 139ZQ Notice and, if that occurs, the onus lies on the Official Receiver to join the trustee on whose application the 139ZQ Notice was issued.
Where an application under s 139ZS of the Act joins both the Official Receiver and the trustee, the following principles apply on the question of costs:[14]
The authorities to which I have referred to above proceeded on the basis that the Trustee is the real party with an interest in the proceedings and in my view the present is not a case where the Official Receiver should be ordered to pay costs. Although the Act provides that the issue of a Notice under s 139ZQ is discretionary (by using the word “may”) it does not follow that the Official Receiver ought to suffer the burden of costs where the Notice is issued and the Trustee is unable to make out the position for which he contends. The position may be otherwise in circumstances where it could be shown that there was some default on the part of the Official Receiver, such as issuing a notice in an incorrect form, which led to its being set aside or where it was manifest on the facts set out as part of the Notice that there was no basis for the claim to be made out. However, it is not necessary, in my view, for the Official Receiver to embark on a detailed investigation as to the factual or legal merits of the claim which forms the basis of the request for the Notice.
[14] Citibank Ltd, in the matter of Stivactas v Parker [2000] FCA 1914, at [12]
BACKGROUND
The Debtor became a bankrupt pursuant to a sequestration order made on 8 September 2016.
The Notice
On 3 April 2020 the Official Receiver issued the Notice. The Notice makes allegations that include the following:
(a)The Debtor became bankrupt on 8 September 2016.
(b)The Debtor is a former director of Tarrant Enterprises which, in turn, is the trustee of the MRT Family Trust (Trust) established in March 1999. The Debtor is a general beneficiary of the Trust.
(c)The Debtor had previously traded as a sole trader under the name “Tarrants Accountants & Business Advisors”.
(d)During the financial years ended 30 June 2016 and 30 June 2017 the Debtor made contributions to the Trust that were credited to the capital accounts of his children Lara Tarrant and Steven Tarrant, who are beneficiaries of the Trust. Those payments totalled $194,290.
(e)The payments referred to in (d) are void under s 120 of the Act, and also under s 121 of the Act.
Tarrant Enterprises commences first FCC proceeding
On 9 June 2020 Tarrant Enterprises commenced the first FCC proceeding by filing an application in this Court, together with a statement of claim, in which it sought an order that the 139ZQ Notice be set aside. The application named the Official Receiver, not the Trustee, as the respondent. The proceeding was initially docketed to Judge Dowdy.
Tarrant Enterprises was not legally represented at the time it filed the application, and it appears the application and statement of claim were prepared by Ms Lara Tarrant, a director of the Trust. Ms Tarrant appears to have a law degree but she does not have a practising certificate. The statement of claim reflects its not having been prepared by a qualified lawyer to the extent it alleges many matters that are not material to whether the payments identified in the Notice are void under s 120 or s 121 of the Act. The statement of claim, however, is intelligible. It accepts that the payments identified in the Notice were made; and it directly addresses the claim the Notice makes that the payments are void by raising two grounds.
The first is that during the period over which the payments were made the Debtor owed the Trust $173,657; and that amount is available to be set off under s 86 of the Act against the $194,290. The second ground is that the $194,290 constituted contributions the Debtor made partially to compensate the Trust for the losses the Debtor is said to have caused the Trust while acting as financial advisor, tax agent, and accountant to the Trust. The statement of claim also makes other claims. It claims the Notice is an abuse of process because it has been issued in circumstances where there is pending an application made by the Debtor to the Administrative Appeals Tribunal (Tribunal) in relation to the decision the Inspector General made under s 149D(1)(ab) of the Act to extend the Debtor’s bankruptcy; and it seeks relief under the Administrative Decisions (Judicial Review) Act 1977 (Cth) (ADJR Act).
Course of first FCC proceeding
On 24 June 2020 Ms Farmer, the lawyer for the Official Receiver, sent to Tarrant Enterprises, by email, a letter dated 24 June 2020 attaching a notice of appearance.[15] The letter identified “four matters which need to be addressed in relation to your Statement of Claim”. These were that the statement of claim incorrectly named the respondent as “Official Receiver, Australian Financial Authority”; the Trustee “is a necessary party to the Proceeding and ought to be joined as the Second respondent”; Ms Tarrant is not a registered lawyer and, for that reason, Tarrant Enterprises requires an order under r 9.04 of the Federal Circuit Court Rules 2001 (Cth) (FCC Rules) permitting Tarrant Enterprises to proceed without a lawyer; and the claim under the ADJR Act is liable to be struck out.
[15] Exhibit LR-2 to affidavit of L Tarrant 19.02.2021 (filed in first FCC proceeding), page 47 (being annexure “A” to affidavit of K P Farmer 25.01.2021 filed in first FCC proceeding)
On 14 August 2020 Ms Cochrane, the lawyer for the Trustee, sent to Tarrant Enterprises, by email, a letter dated 14 August 2020 in which she stated the following:[16]
In accordance with the determination of the Full Court in the matter of Re Wedgewood; Ex parte Bank of New Zealand (1993) 116 ALR 153, it is my client’s view that he is the appropriate respondent to the application that has been made. Accordingly, I invite you to amend the application and join Mr Roufeil.
In the event I do not receive notice from you of your intention to do so within 14 days of the date of this letter, or prior to the first hearing of this matter (whichever is the earliest), I am instructed to approach the Court to seek that Mr Roufeil be joined. In the event that application becomes necessary for my client to make, this letter will be relied upon in respect of my client’s costs.
[16] Exhibit LR-2 to affidavit of L Tarrant 19.02.2021 (filed in first FCC proceeding), page 51 (being annexure “B” to affidavit of K P Farmer 25.01.2021 filed in first FCC proceeding)
On 17 September 2020 Mr Adair, a lawyer for the Official Receiver, sent an email to Ms Tarrant.[17] The email was copied to Ms Cochrane and Ms Lisa Morrissey, from Turks Legal, who I infer are the lawyers for the Trustee. In his email Mr Adair said the matter had been allocated to Judge Dowdy, and that his Honour had requested the parties provide consent orders by 17 September 2020. Mr Adair continued:
For the reasons articulated in our letter dated 24 June 2020, it is our client’s view that the trustee . . . should be joined as a party to these proceedings and that the Applicant . . . should be represented by a lawyer or leave should be sought for it to proceed without a lawyer.
[17] Affidavit of Lara Tarrant 22.03.2021, [7] (filed in FC Appeal); pages 20-21 of exhibit LR-2 to affidavit of L Tarrant 19.02.2021 (filed in first FCC proceeding)
Mr Adair then set out proposed short minutes of order that provided for the Trustee being joined as a party, and for Ms Tarrant causing Tarrant Enterprises to appoint a lawyer within seven days, or for Ms Tarrant to file within fourteen days an application in a case, and supporting affidavit for an order under r 9.04 of the FCC Rules, seeking leave that Tarrant Enterprises start and carry on the proceeding otherwise than by a lawyer.
On 17 September 2020 Ms Tarrant responded by email stating that Tarrant Enterprises did not consent to the Trustee being added as a party because “[w]e are seeking legal advice as to whether Mr Roufeil [that is, the Trustee] ought to be joined as a party to these proceedings and expect to be in a position to meaningfully address this issue shortly”.[18] Ms Tarrant requested that the matter be listed for directions after 22 October 2020, because on that day there was listed for hearing before the Administrative Appeals Tribunal the Debtor’s application in relation to the extension of the Debtor’s bankruptcy. Ms Tarrant said that the issues in that application will necessarily determine whether the Notice ought to have been issued. On the same day Mr Adair forwarded this exchange of emails to Judge Dowdy’s associate.[19] According to Ms Tarrant, on 21 September 2020 she had emailed a lawyer for advice, but she received no response, and “nothing happened in the matter”.[20]
[18] Affidavit of Lara Tarrant 22.03.2021, [8] (filed in FC Appeal); pages 22-23 of exhibit LR-2 to affidavit of L Tarrant 19.02.2021 (filed in first FCC proceeding)
[19] Affidavit of Lara Tarrant 22.03.2021, [8], [9] (filed in FC appeal); pages 24-25 of exhibit LR-2 to affidavit of L Tarrant 19.02.2021 (filed in first FCC proceeding)
[20] Affidavit of Lara Tarrant 22.03.2021, [10] (filed in FC appeal)
On 23 December 2020 Ms Tarrant and the Official Receiver received an email from the Court stating the proceeding was listed for hearing on 29 January 2021, and that the hearing would proceed through Microsoft Teams.[21] This led Ms Tarrant to correspond with a junior barrister about Tarrant Enterprises being represented at the hearing. Ms Tarrant says “72 emails were sent between myself and [junior counsel] during this time”.[22]
[21] Affidavit of Lara Tarrant 22.03.2021, [13] (filed in FC appeal); pages 27 of exhibit LR-2 to affidavit of L Tarrant 19.02.2021 (filed in first FCC proceeding)
[22] Affidavit of Lara Tarrant 22.03.2021, [15] (filed in FC appeal)
On 11 January 2021 Ms Dimovska, a lawyer for the Official Trustee, sent an email to Ms Tarrant and to two other lawyers who I infer are the lawyers for the Trustee.[23] Ms Dimovska referred to an email having been sent to Judge Dowdy’s associate on 17 September 2020, but to which no response had been received. Ms Dimovska also said, however, that a review of the Commonwealth Courts Portal showed the proceeding had been docketed to Judge Street. Ms Dimovska continued:
You will note that the matter has been listed for final hearing on 29 January 2020 [sic]. As you will no doubt appreciate, this matter is not ready to proceed to final hearing as the only substantive document that has been filed is a Statement of Claim and there a number of procedural issues that remain to be resolved, as per our attached email.
It is our view that the proceeding should instead be listed for case management and we propose to send the below email to Street J’s Associate . . .
[23] Affidavit of Lara Tarrant 22.03.2021, [17] (filed in FC appeal); page 29 of exhibit LR-2 to affidavit of L Tarrant 19.02.2021 (filed in first FCC proceeding)
Ms Dimovska then set out a draft of an email she proposed be sent to the associate of Judge Street. By email sent on 12 January 2021 Ms Tarrant informed Ms Dimovska she had no objections to Ms Dimovska’s proposed email “if this has not yet been sent to the Federal Circuit Court”.[24]
[24] Affidavit of Lara Tarrant 22.03.2021, [17]-[19] (filed in FC appeal); page 31 of exhibit LR-2 to affidavit of L Tarrant 19.02.2021 (filed in first FCC proceeding)
On 12 January 2021 Ms Dimovska sent the following email to the associate to Judge Street:[25]
[25] Exhibit LR-2 to affidavit of L Tarrant 19.02.2021 (filed in first FCC proceeding), page 32
We confirm we act for the Official receiver, the respondent in the proceeding.
We note from your email below that the proceeding has been listed for final hearing on 29 January 2021, however, to date, there has only been a Statement of Claim and a Notice of Appearance filed.
On 17 September 2020 we sent the attached email to the chambers of Dowdy J as his Honour had requested consent orders by that date. The parties have not received a response to that email. As you will note from the email, it is our client’s position that:
1.Mark Roufeil, the trustee in bankruptcy, should be joined as a party to these proceedings as it was on his application that the relevant notice under section 139ZQ was issued; and
2.that the Applicant should, by reason of it being a corporation and pursuant to rule 9.04 of the Federal Circuit Court Rules 2001 (Cth), be represented by a lawyer or, alternatively, leave should be sought for it to proceed without a lawyer.
Accordingly, would you please advise if his Honour would be minded to list the proceedings for case management instead of final hearing on 29 January 2021, so that orders and/or a timetable can be made to progress the proceedings.
The director of the Applicant and the solicitors for Mr Roufeil have been copied in to this email.
On 22 January 2021 Judge Street’s associate sent an email to the parties stating that the “matter remains fixed for final hearing”.[26]
[26] Exhibit LR-2 to affidavit of L Tarrant 19.02.2021 (filed in first FCC proceeding), page 33
On 25 January 2021 Ms Tarrant sent an email to Judge Street’s associate requesting that “his honour [sic] briefly identify for the parties any deficiency in the conduct of either party that his Honour is concerned gives rise to a determination at, in my respectful submission, this early point in the proceeding”. Ms Tarrant further stated that a “communication at his Honour’s earliest convenience shall greatly assist the parties in their preparation for the hearing date, including obtaining further advice and representation”. Ms Tarrant received no reply. [27]
[27] Affidavit of Lara Tarrant 22.03.2021, [24] (filed in FC appeal); page 35 of exhibit LR-2 to affidavit of L Tarrant 19.02.2021 (filed in first FCC proceeding)
On 27 January 2021 Ms Farmer, the lawyer for the Official Receiver, emailed to Judge Street’s chambers the following email:[28]
We act for the Respondent. We have copied the solicitor for the Applicant in to this email and confirm it is written with her consent.
The matter is listed for hearing on 29 January 2021. Both the Applicant and Respondent consider the hearing should be vacated.
[28] Affidavit of Lara Tarrant 22.03.2021, [25] (filed in FC appeal); page 101 of exhibit LR-2 to affidavit of L Tarrant 19.02.2021 (filed in first FCC proceeding)
Ms Farmer attached two affidavits made by her and also proposed short minutes of order, noting that Tarrant Enterprises agreed to orders 1 to 4, but not to order 5, being made. The proposed orders included orders that the hearing of 29 January 2021 be vacated; Tarrant Enterprises be given leave to join the Trustee as the second respondent and file an amended application; and for the proceeding to be listed for a case management hearing on 26 February 2021.[29]
[29] Affidavit of Lara Tarrant 22.03.2021, [25] (filed in FC appeal)
On 28 January 2021 Ms Tarrant emailed to the lawyers for the Official Receiver and the Trustee, and also emailed to Judge Street’s associate, affidavits made by Ms Tarrant and Mr Steven Tarrant, and a draft form of application seeking an order under s 139ZS(1A) extending time to apply against the Trustee for an order setting aside the Notice, an order under s 33(1)(a) of the Act that the hearing that had been set down on 29 January 2021 be vacated, and an order pursuant to r 9.04 of the FCC Rules that Ms Tarrant have leave to start and carry on the first FCC proceeding on behalf of Tarrant Enterprises.[30]
[30] Affidavit of Lara Tarrant 22.03.2021, [27] (filed in FC appeal); pages 109-132 of exhibit LR-2 to affidavit of L Tarrant 19.02.2021 (filed in first FCC proceeding)
Hearing on 29 January 2021
The hearing of the application commenced at 11:00 am on 29 January 2021. According to Ms Tarrant, at the appointed time she attended the proceeding by logging into Microsoft Teams and waited in the “lobby” to be admitted. Ms Tarrant says, however, that she was “denied access”.[31] Ms Tarrant says that she sent an email at 7.37 am on 29 January 2021 to Judge Street’s associate stating that she intended to appear at the hearing;[32] Ms Tarrant sent an email to Judge Street’s associate at 11.09 am on 29 January 2021 stating that she seemed to be having difficulties with the Microsoft Teams link because it said she was denied access, and she requested that the associate “help me rectify or call me”;[33] and at 11.16 am on 29 January 2021 Ms Tarrant sent an email to Judge Street’s associate stating that she had been “waiting online in the Microsoft Teams waiting area and was then denied access”, and she “would appreciate if I could be let into the proceedings asap”.[34] Ms Tarrant received no reply to her emails; and that may be because by 11:04 the hearing was concluded, and Judge Street made the following orders (29 January 2021 orders):
1.The application for leave to appear under r 9.04 of the Federal Circuit Court Rules 2001 (Cth) is refused.
2.The proceedings are dismissed under r 13.03C(1)(c) of the Federal Circuit Court Rules 2011 (Cth).
3,The applicant pay the respondent’s costs fixed in the amount of $6,500.00.
[31] Affidavit of Lara Tarrant 22.03.2021, [32] (filed in FC appeal)
[32] Exhibit LR-2 to affidavit of L Tarrant 19.02.2021 (filed in first FCC proceeding), page 138
[33] Exhibit LR-2 to affidavit of L Tarrant 19.02.2021 (filed in first FCC proceeding), page 139
[34] Exhibit LR-2 to affidavit of L Tarrant 19.02.2021 (filed in first FCC proceeding), page 140
There is no transcript of the hearing before his Honour. I have accessed and heard the audio recording of the hearing, however, which records the following occurred:
11:00:30
JUDGE STREET: This is Judge Street of the Federal Circuit Court of Australia in an open courtroom that is being recorded and I am calling for directions in the matter of Tarrant Enterprises Pty Ltd against the Official Receiver.
*inaudible*
JUDGE STREET: Is there an appearance for the applicant? Is there an appearance for the applicant?
JUDGE STREET: This is Judge Street of the Federal Circuit Court of Australia calling for hearing the matter of Tarrant Enterprises, is there an appearance for the applicant? Is there an audio problem?
MS FARMER: Your Honour this is Kirsten Farmer solicitor for the respondent.
JUDGE STREET: Thank you.
MS FARMER: Am I able to be heard?
JUDGE STREET: Yes, thank you Ms Farmer.
JUDGE STREET: Is there an appearance for the respondent?
MS FARMER: Ms Farmer the Official Receiver sorry your Honour the Official Receiver is the respondent and it is Ms Farmer who is appearing.
JUDGE STREET: Sorry Ms Farmer, I understood that. I’ll just call it again. Is there an appearance for the corporate entity?
MR TARRANT: My name is Mr … Tarrant and I am here participating.
JUDGE STREET: Mr… is there a lawyer acting for the applicant?
MR TARRANT: Yes I believe that there is another member who will be joining shortly. Just logging in now. They will certainly be participating today.
JUDGE STREET: There’s a Mr Tarrant you don’t have leave to appear for the corporate entity, you’re not a solicitor. I won’t grant you leave to appear. There is no practitioner at the moment who has appeared. There is no practitioner on the record. No one has filed an address for service. I can’t see any lawyer present and unless Ms Farmer you wish to say otherwise, I propose to dismiss the proceedings under rule 13.03C(1)(c) and make an order for costs.
JUDGE STREET: Is Mr M… your lawyer Mr Tarrant?
MR M: No your Honour I appear for the Trustee were he to be joined.
JUDGE STREET: Yes I understand Mr M… I don’t propose to take that course. The applicant… I make the following orders. The application for leave to appear under rule 9.04 is refused. There is no appearance… the Court notes that there has been no appearance by the applicant. The proceedings are dismissed under r 13.03C(1)(c) of the Federal Circuit Court Rules. Do you seek a fixed costs order or an indemnity costs order Ms Farmer?
MS FARMER: Your Honour I seek a fixed costs order in the sum of $6,500.
JUDGE STREET: Very well. The Court orders the applicant to pay the respondents costs fixed in the amount of $6,500. The orders of the Court as identified will be up on the Commonwealth Courts Portal a copy will also be emailed to the respective parties. Thank you for attending the hearing. The Court will now disconnect this hearing.
11:04
Application for leave to set aside 29 January 2021 orders
On 19 February 2021 Tarrant Enterprises filed an interim application seeking, among other things, an order under r 16.05(2)(a) of the FCC Rules to set aside the 29 January orders. Judge Street heard that application on 10 March 2021 and dismissed it on that day (10 March orders). I will refer to his Honour’s reasons in a moment. Relevant at this point are the written submissions counsel for Tarrant Enterprises prepared in support of its application to set aside the 29 January 2021 orders, and in particular that section headed “Appendix”. That is relevant because it sets out what counsel there describes as “the substance of the substantive application for this interim application”.[35] This sets out two broad grounds for Tarrant Enterprise’s denying it is liable to pay the amount demanded by the Notice, one of which is not contained in the statement of claim. The first ground consists of the following elements:[36]
(a)In 2007 Tarrant Enterprises took out a loan with National Australia Bank (NAB).
(b)The Debtor guaranteed the loan.
(c)On 29 July 2014 NAB sent a default notice to each of Tarrant Enterprises and the Debtor demanding that Tarrant Enterprises or the Debtor pay to NAB $265,175.54 to remedy default of loan.
(d)On 3 October 2014 NAB wrote to the Debtor and said that “pursuant to the provisions of the Guarantee, the Bank hereby demands payment by You of the following moneys that are secured by the guarantee and are due and owing to the Bank” and “Total amount demanded $1,902,679.40”.
(e)From 21 July 2015 to 29 August 2016 transfers totalling $194,290 were made by the Debtor directly to a loan “account operated with the National Australia Bank by [the Trust] . . . account name ‘Tarrant Enterprises Pty Ltd ATF MRT Family Trust’”. That is the Debtor “paid money directly from his account to the NAB loan account that he had guaranteed”.
(f)The $194,290 the Debtor paid, therefore, “reduced the NAB loan, which he had guaranteed and which guarantee had been called on”.
[35] Submissions of the applicant, [31] (filed in first FCC proceeding)
[36] Submissions of the applicant, [32]-[37] (filed in first FCC proceeding)
In its counsel’s written submissions, Tarrant Enterprises submits that in these circumstances the payments are not void as against the Trustee, either under s 120(1) or s 121(1) of the Act. In relation to s 120(1) of the Act Tarrant Enterprises submits “the transferee”, namely, Tarrant Enterprises, did give consideration for the $194,290 the Debtor paid, that consideration being “the reduction in the amount he owed as a guarantor of the loan”.[37] As for s 121(1) of the Act, Tarrant Enterprises submits:
(a)the payments cannot be characterised as payments made for the purpose of preventing the amounts to be divisible about the Debtor’s creditors, or to hinder or delay the process of making the money available for division among his creditors; and the payments were made to reduce the NAB loan amounts owing on the NAB loan;[38]
(b)the Debtor received consideration for the payments, namely, a reduction in his liability under the guarantee to the NAB and, for that reason, s 121(4) of the Act applied to deny the application of s 121(1) of the Act to the payments;[39]
(c)the payments constituted the “transfer of property under a debt agreement” within the meaning of s 121(7).
[37] Submissions of the applicant, [45] (filed in first FCC proceeding)
[38] Submissions of the applicant, [46]-[47] (filed in first FCC proceeding)
[39] Submissions of the applicant, [48]-[49] (filed in first FCC proceeding)
The second ground stated in counsel’s written submissions reflects the second of the grounds stated in the statement of claim. Tarrant Enterprise claims the Debtor made the payments “to make up the losses that he caused the trust”. Tarrant Enterprises proposes to rely on evidence from the Debtor that shows that “the dual purpose of the transfers was to satisfy my personal guarantee to NAB whilst simultaneously compensating [the Trust] for the losses that I had caused”.[40]
[40] Submissions of the applicant, [52 fn 27], (filed in first FCC proceeding)
10 March 2021 dismissal of application to set aside 29 January orders
As I have already noted, on 10 March 2021 Judge Street heard Tarrant Enterprises’ application to set aside the 29 January 2021. There is no transcript of the hearing, but I have listened to the audio recording of the hearing.
After identifying some of the material before the Court, his Honour informed counsel for Tarrant Enterprises that “the concerns that the Court has is effectively threefold”. The first was that Tarrant Enterprises had been “clearly on notice of the need to obtain legal representation for the hearing”, but that “on no view had steps been taken to obtain legal representation”. The second “concern” is that Tarrant Enterprises was on notice of the need to apply to join the Trustee as the proper or necessary party and, although there had been a “late change of heart” by Tarrant Enterprises, it had made a deliberate decision not to join the Trustee. The third “concern” was that the statement of claim “is patently vexatious and oppressive”, and an “abuse of process”.
Counsel for Tarrant Enterprises addressed each of these “concerns”.
(a)As to the first “concern” counsel submitted there is evidence that Ms Tarrant had contacted junior counsel for assistance, but there were two matters that made it unnecessary for Tarrant Enterprises to have appeared by a lawyer at the hearing on 29 January 2021. The first was that Tarrant Enterprises had applied for an order that Tarrant Enterprises continue the proceeding without a lawyer. That is a reference to the draft application Ms Tarrant had sent by email to Judge Street’s associate on 28 January 2021.[41] The second is that the parties had consented to orders that included an order that there be added a necessary party, namely, the Trustee, without the joinder of which the proceeding could not continue. Thus, if Tarrant Enterprises’ application for leave to proceed without a lawyer were not granted, an order joining the Trustee would nevertheless have been made and Tarrant Enterprises would have secured a lawyer to represent it for the next occasion the proceeding would be before the Court.
(b)As to the second “concern”, counsel submitted that although it is true Tarrant Enterprises did not make a formal application for the joinder of the Trustee, the parties approached the hearing on 29 January 2021 on the agreed position that the Court should order the joinder of the Trustee as the second respondent.
(c)As to the third “concern”, counsel submitted the proceeding should continue by affidavits, but if the Court were to order that it continue by pleadings, the Court should take some comfort that counsel would draft a statement of claim.
[41] In response to that submission his Honour said that no application had been made for leave for Tarrant Enterprises to proceed without a lawyer. Counsel for Tarrant Enterprises referred his Honour to order 3 of the draft application Ms Tarrant had sent to Judge Street’s associate on 28 January 2021 and read the order sought: “Pursuant to Federal Circuit Court Rule 9.04, grant Lara Tarrant leave to start and carry on these proceedings on behalf of the Applicant”. His Honour said “that application that was not filed was not one that was likely to be the subject of any grant of leave”.
In reasons for judgment delivered ex tempore,[42] his Honour found, among other things, that in initial correspondence Tarrant Enterprise’s stance “was to refuse to join the trustee”; that was “an informed decision” by Tarrant Enterprises; the statement of claim was “prolix and vexatious and failed to join the trustee being a necessary party”; the statement of claim was “deliberately defective” in “nature in want of joinder of the trustee”, Tarrant Enterprises pursued “a deliberate course . . . not to obtain representation”, and it maintained that “deliberate course . . . at the time of the proposed consent orders”; Tarrant Enterprises had not filed any formal application for leave to proceed without a lawyer; Tarrant Enterprises took no step to put on an affidavit as to why, as a matter of justice, such leave should be granted; and Tarrant Enterprises made a deliberate decision not to obtain legal representation before the Court at the time of the intended final hearing.[43] Given these findings his Honour found Tarrant Enterprises had not given an adequate explanation for not appearing at the hearing of 29 January 2021, by which his Honour must be taken to have meant Tarrant Enterprises’ not appearing by a lawyer.
[42] Tarrant Enterprises Pty Limited ATF MRT Family Trust v Official Receiver in Bankruptcy [2021] FCCA 453
[43] Tarrant Enterprises Pty Limited ATF MRT Family Trust v Official Receiver in Bankruptcy [2021] FCCA 453, at [3] – [5]
His Honour was also not satisfied there would be any utility in reinstating the first FCC proceeding. His Honour said (emphasis added):[44]
Further, the Court is not satisfied that there would be any utility in reinstating the proceedings that had been fixed for a final hearing on 29 January 2021, as, in the form that the proceedings as they then stood, would be doomed to failure.
The Court must be satisfied that there would be utility in reinstatement of proceedings. The Court is not so satisfied. Nor in the circumstances of this case is the Court satisfied, in the interests of the administration of justice, that it would be appropriate to reinstate the proceedings in this case. For these reasons, the application in a case filed on 19 February 2021 is dismissed.
[44] Tarrant Enterprises Pty Limited ATF MRT Family Trust v Official Receiver in Bankruptcy [2021] FCCA 453, at [14]-[15]
FC appeal
On 23 March 2021 Tarrant Enterprises commenced the FC appeal in which it seeks to set aside the orders Judge Street made on 10 March 2021. The draft notice of appeal that accompanied Tarrant Enterprises’ application for leave contains the following grounds:
1.Judge Street erred in law by failing to afford the applicant procedural fairness, in that the applicant was not heard in relation to the orders made on 29 January 2021 and therefore the Court ought to have set those orders aside pursuant to FCC Rules 16.05 or by its inherent power.
2.His Honour erred in law by failing to give adequate reasons generally and particularly in relation to (implicitly or otherwise rejecting or not considering) each written submission made by counsel for the applicant (being paragraphs 4 to 19 of the written submissions, the oral submissions, and to the extent such submissions were necessary, paragraphs 31 to 57 of the written submissions).
3.His Honour erred in law in applying the wrong test to the application to set aside the orders made on 29 January 2021, and in doing so (and generally) took into account irrelevant considerations, and did not take into account relevant considerations, mistook the facts and took into account considerations not raised in the submissions of the parties in relation to the 10 March 2012 hearing or raised by the Court in the 10 march 2021 hearing.
SUBMISSIONS AND ISSUES
Tarrant Enterprises submits the FC appeal and the Trustee proceeding relate to the same or at least substantially the same subject matter; and that in those circumstances the Trustee proceeding is vexatious and should therefore be stayed. Tarrant Enterprises relies on a number of authorities, but the relevant principles on which it relies are those stated by Beach J in Burbank Australia Pty Ltd v Luzinat:[45]
Where a party to a proceeding institutes a second proceeding in a different form in relation to the same subject matter as the first proceeding, prima facie the second proceeding is vexatious and will be stayed: see McHenry v. Lewis (1882) Vol.XXII Chancery Division 399 and Williams v. Hunt (1905) 1 K.B.512.
In such a situation the courts have for many years taken the view that a litigant already deeply involved in one piece of litigation would be unduly harassed if a second piece of litigation was to proceed at the same time as the first. And such a principle applies to proceedings whether they be before a court, a board or a tribunal.
All the more so where there is a significant risk, as there is in the present case, that VCAT's findings and the Board's findings may be in conflict one with the other.
[45] Burbank Australia Pty Ltd v Luzinat [2000] VSC 128, at [28]-[30]
Two questions arise. Is the Trustee proceeding different in form from the first FCC proceeding and the FC appeal but one that relates to the same subject matter? If so, is the Trustee proceeding vexatious, or should it in any event be adjourned pending the determination of the FC appeal?
DETERMINATION
The FC appeal and the Trustee proceeding do not relate to the same subject matter. The subject matter of the Trustee proceeding is whether the payments totalling $194,290 identified in the Notice are void as against the Trustee, for the reasons stated in the Notice. The subject matter in the FC appeal, on the other hand, is Judge Street’s refusal to exercise the discretionary power conferred by r 16.05(2)(a) of the FCC Rules to set aside the 29 January orders. More particularly, the subject matter in the FC appeal are the grounds of appeal Tarrant Enterprises states in the draft notice of appeal that forms part of its application for leave to appeal from the 29 January orders. Tarrant Enterprises claims that in refusing to exercise the power under r 16.05(2)(a) of the FCC Rules Judge Street denied Tarrant Enterprises procedural fairness, his Honour failed to give adequate reasons, and his Honour failed to address grounds and submissions on which Tarrant Enterprises relied.
That the Trustee proceeding and the FC appeal do not relate to the same subject matter is also apparent from the relief Tarrant Enterprises seeks in the FC appeal. In the FC appeal Tarrant Enterprises does not seek an order that the Notice be set aside; and it does not even seek an order that the Federal Court itself order that the Trustee be added as a respondent. Tarrant Enterprises instead seeks orders that the 29 January orders and the 10 March orders be set aside, and that the First FCC proceeding be remitted to a judge of this Court other than Judge Street. What would be remitted, if Tarrant Enterprise were to succeed, would at the very least include one of the claims Tarrant Enterprises intended to pursue at the hearing on 29 January 2021, namely, that the Trustee be added as a party.
It is true that if Tarrant Enterprises were to succeed in the FC appeal and if, on the first FCC proceeding being remitted to a judge of this Court, the judge were to order that the Trustee be added as a respondent, there would be two proceedings dealing with the same subject matter, namely, the Trustee proceeding and the (restored) first FCC proceeding. There are, however, two things that may be said about this.
(a)First, that it is possible that at some stage an order or orders will be made in the FC appeal and then in the first FCC proceeding that will result in there being two proceedings having the same subject matter does not by itself render the commencement and continuation of the Trustee proceeding vexatious. The Trustee was not a party to the first FCC proceeding; and there is nothing to suggest the Trustee played any role in that proceeding other than to indicate he would consent to being joined as a party.
(b)Second, and more importantly, the Trustee proceeding as currently constituted already has the Trustee as a party. Subject to the unlikely possibility of there being any legitimate reason for joining the Official Receiver as a party, the parties in the Trustee proceeding can therefore immediately proceed to litigate whether the payments the Notice identifies are void under s 120 or s 121 of the Act. In those circumstances it is difficult to conclude that the continuation of the Trustee proceeding would vex Tarrant Enterprises. On the contrary, Tarrant Enterprises’ continuation of the FC appeal is likely to produce unnecessary costs and delay because, if it were to succeed, Tarrant Enterprises would be placed in the position in which it currently finds itself in the Trustee proceeding, namely, as a party to a properly constituted proceeding in which the question whether the payments identified in the Notice are void under s 120 or s 121 of the Act can be litigated. Even if Tarrant Enterprises were not to succeed in the FC appeal, there would still be on foot a properly constituted proceeding to litigate the claims alleged in the Notice.
These considerations strongly favour the continuation of the Trustee proceeding and the discontinuation of the FC appeal. There is, however, an additional consideration. It may reasonably be supposed that Tarrant Enterprises believes the circumstances in which the 29 January and 10 March orders were made operated an injustice against it, and this injustice should be redressed on appeal. The circumstances that may give rise to such sense of injustice might include the following:
(a)Ms Tarrant intended and attempted to appear at the hearing on 29 January 2021 to seek leave for Tarrant Enterprises to proceed without a lawyer.
(b)Ms Tarrant attempted to gain entry into the Microsoft Teams hearing but, because of some technological difficulty, she could not do so.
(c)Ms Tarrant sent Judge Street’s associate two emails at the time she was experiencing difficulty seeking assistance, but her emails were ignored.
(d)Given the Trustee was a necessary party it is inevitable, as the lawyers for the Official Receiver and the Trustee recognised, that the hearing on 29 January 2021 could not have proceeded, even if Tarrant Enterprises had appeared by a lawyer; and that is because procedural orders would have had to be made to recognise the Trustee’s being joined, not only as a necessary party, but as the party who was likely to be the moving party, given it is likely the Trustee would have had to bear the onus of proving that the payments identified in the Notice are void under s 120 or s 121 of the Act.
(e)It is more than reasonably arguable that, given the Court was on notice that Tarrant Enterprises intended to apply for leave under r 9.04 of the FCC Rules to proceed without a lawyer, the Court was at the very least obliged to permit Ms Tarrant to appear for the limited purpose of making such application. The Court did not give Ms Tarrant or Mr Tarrant an opportunity to make such application, thus rendering the 29 January orders irregular, and therefore liable to be set aside as of right.
(f)It is more than reasonably arguable that in the reasons for judgment of 10 March 2021 Judge Street assessed the utility of setting aside the 29 January orders by reference to the statement of claim his Honour had held to be vexatious and oppressive, and not by reference to the grounds on which counsel for Tarrant Enterprises identified in his written submissions on which Tarrant Enterprises intended to rely.
(g)It is more than reasonably arguable that in deciding whether to set aside the 29 January orders his Honour ought to have considered, but his Honour failed to consider, the interest the Trustee had in the proceeding not being dismissed. Given that Tarrant Enterprises had disputed liability to pay the amount demanded by the Notice, the Trustee can only recover that amount by action in a court.
I do not intend to gainsay the importance of these matters to Tarrant Enterprises, but they are not particularly relevant to whether the Trustee proceeding is vexatious. The balance of convenience strongly favours the Trustee proceeding continuing and the FC appeal being discontinued. The Trustee proceeding reflects the position Tarrant Enterprises will be in if it succeeds in the FC appeal, and if a different judge in the (restored) first FCC proceeding were to make the orders the parties intended the Court to make on 29 January 2021.
There is one final matter to note. Even if the Federal Court were to form the view that Tarrant Enterprises has unimpeachable grounds of appeal, it might nevertheless conclude there would be no utility in granting Tarrant Enterprises leave to appeal against the 10 March orders; and that is because there is already on foot a properly constituted proceeding – the Trustee proceeding – in which the claims made in the Notice can be litigated.
CONCLUSION AND DISPOSITION OF APPLICATION FOR STAY
The Trustee proceeding is not vexatious; and it should not be stayed or adjourned until such time as the FC appeal is determined. I propose, therefore, to dismiss Tarrant Enterprises’ application in a case, reserve the question of costs, and set the matter down for directions.
FAILURE TO PROVIDE GENUINE STEPS STATEMENT
At the directions hearing on 13 April 2021 Ms Cochrane informed me that the Trustee did not provide to Tarrant Enterprises a “genuine steps statement” as the Trustee accepts he ought to have done under the Civil Dispute Resolution Act 2011 (Cth) (CDR Act). Although the Trustee’s failure to provide such statement may become relevant to the exercise of the power to order costs, there is nothing in the CDR Act that compels me to require the Trustee to provide such a statement now that he has commenced the Trustee proceeding; and I would in any event see no utility in requiring the Trustee to provide such statement.
The Trustee’s failure to provide a “genuine steps statement”, however, may be relevant to the costs Tarrant Enterprises incurred in the FC appeal. I do not intend to suggest that the Trustee’s failing to provide a genuine steps statement before he commenced the Trustee proceeding has the consequence of the CDR Act applying to the FC appeal. Had the Trustee, however, provided a “genuine steps statement” before he commenced the Trustee proceeding Tarrant Enterprises and the Trustee might have entered into discussions about how the question of the validity of the Notice should be litigated, and could have agreed that that question should be litigated in a single proceeding – either by Tarrant Enterprises instituting an appeal and have that question determined in the first FC proceeding, assuming Tarrant Enterprises were to succeed in the appeal, or by the Trustee commencing a fresh proceeding, as he has done. Perhaps one way the parties may deal with the costs Tarrant Enterprises incurred in commencing the FC appeal, assuming Tarrant Enterprises decides to abandon it, is for Tarrant Enterprises and the Trustee to agree that Tarrant Enterprises’ costs in the FC appeal be included in Tarrant Enterprises’ costs of the Trustee proceeding.
I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 23 April 2021
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