Smits v Loel

Case [2014] FCA 1341

FEDERAL COURT OF AUSTRALIA

Smits v Loel [2014] FCA 1341

Citation:   Smits v Loel [2014] FCA 1341
Parties: LEONARDUS GERARDUS SMITS v JAMES BERESFORD LOEL, PIONEER INVESTMENTS (AUST) PTY LTD, LILLAS & LOEL LAWYERS and JOHN M O'CONNOR & COMPANY
File number: QUD 725 of 2013
Judge: RANGIAH J
Date of judgment: 10 December 2014
Corrigendum: 13 February 2015
Catchwords: PRACTICE AND PROCEDURE – application for summary judgment by first, second and third respondents –relief sought by applicant aimed at conduct of proceedings in the Supreme Court of Queensland – direct and collateral attacks on orders of Supreme Court – allegations of fraud perpetrated by respondents on Supreme Court – whether proceeding brings administration of justice into disrepute – whether proceeding constitutes abuse of process
Legislation: Federal Court of Australia Act 1976 (Cth) s 31A
Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth)
Federal Court Rules 2011 (Cth) r 26.01(1)(d)
Uniform Civil Procedure Rules 1999 (Qld)
Cases cited: Birdon Pty Ltd v Houben Marine Pty Ltd (2011) 197 FCR 25 cited
Burton v Shire of Bairnsdale (1908) 7 CLR 76 cited
Gallus Properties P/L & Ors v Richardson & Ors [2004] QSC 415 cited
Jefferson v Shirlaw [2007] 1 Qd R 162 cited
Re Baxter; Ex parte Official Receiver v Baxter (1986) 10 FCR 398 cited
Sea Culture International Pty Ltd v Scoles (1991) 32 FCR 275 cited
Shaw v MAB Corporation Pty Ltd [2013] FCA 1231 applied
Shaw v MAB Corporation Pty Ltd [2014] FCA 62 applied
Stergiou v McGrail (unreported, Full Court of the Federal Court, Burchett, Ryan and Gummow JJ, 22 April 1994) applied
Togito Pty Ltd v Pioneer Investments (Aust) Pty Ltd & Ors [2010] QSC 421 cited
Walton v Gardiner (1993) 177 CLR 378 cited
Spencer Bower and Handley Res Judicata, (4th ed, LexisNexis, 2009) cited
Date of hearing: 11 April 2014
Date of last submissions: 8 May 2014
Place: Brisbane
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 94
Counsel for the Applicant: Mr D Edwards
Counsel for the First, Second and Third Respondents: Mr G Handran
Solicitor for the First, Second and Third Respondents: Lillas & Loel Lawyers
Solicitor for the Fourth Respondent: The fourth respondent did not appear

FEDERAL COURT OF AUSTRALIA

Smits v Loel [ 2014] FCA 1341

CORRIGENDUM

1.In paragraph 77 of the Reasons for Judgment, “Keane CJ” should be removed and replaced with “Rares J”.

I certify that the preceding one (1) numbered paragraph is a true copy of the Corrigendum to the Reasons for Judgment herein of the Honourable Justice Rangiah.

Associate:

Dated:        13 February 2015


IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION

QUD 725 of 2013
BETWEEN:

LEONARDUS GERARDUS SMITS
Applicant
AND:

JAMES BERESFORD LOEL
First Respondent

PIONEER INVESTMENTS (AUST) PTY LTD
Second Respondent

LILLAS & LOEL LAWYERS
Third Respondent

JOHN M O'CONNOR & COMPANY
Fourth Respondent

JUDGE:

RANGIAH J

DATE OF ORDER:

10 DECEMBER 2014

WHERE MADE:

BRISBANE

THE COURT ORDERS THAT:

1.Pursuant to r 26.01(1)(d) of the Federal Court Rules

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Smits v Loel [2014] FCA 1341
Case
[2014] FCA 1341
Decision Date

CaseChat Overview and Summary

Smits has brought an application for summary judgment against three respondents, Loel, Pioneer, and Lillas & Loel, in the Federal Circuit Court of Australia. The application arises from a complex set of dealings between the parties, including litigation in the Supreme Court of Queensland. Smits seeks declarations and orders against the respondents, alleging breaches of trust, misappropriation of funds, and violations of the Trade Practices Act and the Corporations Act. The respondents have applied for summary judgment on the grounds that the proceeding is an abuse of process and that Smits has no reasonable prospects of successfully prosecuting the proceeding.

The court was required to decide whether the proceeding constitutes an abuse of process and whether Smits has reasonable prospects of successfully prosecuting the proceeding. The court noted that Smits had sought various declarations and orders against the respondents, some of which were aimed at conduct of proceedings in the Supreme Court. The court also considered the relationship between the relief sought and the various judgments of the Supreme Court that were the subject of many of the orders sought. The court found that the proceeding was an abuse of process because it involved direct and collateral attacks on orders of the Supreme Court and allegations of fraud perpetrated by the respondents on that court. The court also found that Smits had no reasonable prospects of successfully prosecuting the proceeding because certain propositions of fact underlying the causes of action were untenable and because a number of the causes of action were barred by limitation periods.

The court dismissed the proceeding against the first, second and third respondents pursuant to r 26.01(1)(d) of the Federal Court Rules 2011 (Cth). The court noted that the proceeding brought the administration of justice into disrepute and that it constituted an abuse of process. The court also found that Smits had no reasonable prospects of successfully prosecuting the proceeding. The court did not make any orders as against the fourth respondent, J M O’Connor, as the application was not pursued against that respondent.

Orders

Orders of the court

1. Pursuant to r 26.01(1)(d) of the Federal Court Rules 2011 (Cth), the proceeding against the first, second and third respondents is dismissed.

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

Background

Background to the litigation

The proceeding arises out of a complex set of dealings between the parties and a lengthy series of litigation in the Supreme Court. I will limit my description of such dealings and proceedings to what is necessary in order to explain the relief sought in the principal proceeding.Background Ammbar Pty Ltd (“Ammbar”) was the registered owner of Lot 202 on Survey Plan 161001 in the County of Livingstone, Parish of Hewittville at Yeppoon (“the Yeppoon land”). Ammbar had attempted to develop the Yeppoon land by way of a joint venture. The project faced a number of financial difficulties and the land was heavily mortgaged. In 2005, Loel received instructions to act for the director of Ammbar in proceedings in the Supreme Court. During the course of the same year, Smits had retained Loel to act for him in relation to other legal matters. Loel invited Smits to become involved with the Yeppoon land and asked Smits to ascertain whether Smits’ friend, Kevin Richard Shirlaw (“Shirlaw”), would also consider becoming involved. Shirlaw’s involvement was in his personal capacity and as receiver and manager of a company known as Ostabridge Pty Ltd (“Ostabridge”). Pursuant to an order of the Supreme Court made on 8 November 2004, Philip Gregory Jefferson and Matthew Leslie Joiner were appointed receivers to Ammbar and a company known as Broadbeach Vista Pty Ltd which was also involved in the joint venture: Gallus Properties P/L & Ors v Richardson & Ors [2004] QSC 415. Ammbar was wound up on 2 December 2005 and deregistered on 3 June 2007. There were nine mortgages registered over the Yeppoon land to various individuals and entities. By November 2005, the status of the various morgtages was as follows: By Declaration of Trust dated 11 November 2005, Shirlaw (in his capacity as an individual and as receiver and manager of Ostabridge) as trustee was to acquire mortgages 702987988 (“the first mortgage”) and 704246070 (“the second mortgage”) and hold them on trust for Smits, Pioneer and Shirlaw (the beneficiaries) as tenants in common in equal shares. Shirlaw became the registered holder of the first and second mortgages on 14 November 2005 for consideration of $1,006,901. On 18 November 2005, Shirlaw commenced proceeding BS 9791 of 2005 in the Supreme Court seeking leave to exercise his power of sale as mortgagee. Helman J granted leave by consent on 28 November 2005 on the undertaking of Shirlaw to pay the proceeds of sale into an interest bearing account in the names of Shirlaw, the receivers, Jefferson and Joiner, and Business Bridging Finance Pty Ltd. Shirlaw entered into a contract for the sale of the Yeppoon land to Zonebar for approximately $3.4 million. Settlement occurred on 23 December 2005, with Zonebar paying approximately $1.9 million of the purchase price. It appears that the remaining $1.5 million was never paid. Shirlaw received proceeds of $1,868,112.32 once the costs of sale were deducted. It appears that $1,368,112.32 of the proceeds was used as consideration for the transfer of mortgages 703494840, 704544382, 707227959 and 709100851 to Shirlaw. The net proceeds of the sale, an amount of $500,000, were transferred into a joint account in purported compliance with the order of Helman J.

Evidence

Evidence Before The Court

Finally, the originating application seeks the following declarations and orders against J M O’Connor:(a)To re-pay to the Applicant the amounts stated in paragraph 2, less the amount referred to in paragraph 8 of the Statement of Claim on account of breaches of trust, breaches of implied conditions of the Retainer Agreement and/or misappropriation of such amounts.(b)Such other orders, declarations and relief as this Honourable Court deems fit in the premises.(c)Costs on an indemnity basis.(d)An Order that interest be paid on all amounts found to be the Applicant pursuant to section 47 of the Supreme Court Act 1995 (Qld), section 60 of the Civil Liability Act 2003 (Qld) or any succeeding enactment based upon equitable compensation.(Errors in original)The evidence Smits has sworn one affidavit in this proceeding. The main purpose of that affidavit is to challenge the effect and validity of the Deed of Assignment between Pioneer and Lillas & Loel. Smits asserts that the Deed of Assignment was not properly executed, and in any event, the costs order made in proceeding BS 5325 of 2008 on 23 February 2011 was not registered in the Circuit Court and consequently cannot be relied on by the respondents. Smits deposes to having claimed various set-offs, cross-claims and cross-demands in excess of the amount of the judgment debts in submissions filed in proceeding BRG 670 of 2012 in the Circuit Court. Loel has sworn a lengthy affidavit in support of this application on behalf of himself, Pioneer and Lillas & Loel. He sets out the protracted procedural history of the litigation between the parties. Smits has not sought to contradict Loel’s account of the procedural history. Loel deposes that he is not aware of any document signed by Shirlaw which served to formally abandon his rights in relation to Ammbar, the mortgages or any proceeds from the sale of the land. On 13 January 2014, the respondents filed a Notice to Admit. In an affidavit filed by leave at the hearing of the application, the respondents indicated that Smits had not responded to the notice. As a result, Smits is deemed to have made certain admissions in relation to facts and documents in the proceeding because of r 22.04 of the Rules. By operation of the respondents’ Notice to Admit, Smits is deemed to have admitted that he knew between 9 April 2006 and 9 May 2006 that Shirlaw did not intend to rely on there being money secured by the first mortgage or the second mortgage for the purposes of the summary judgment application in BS 336 of 2006. Smits is also deemed to have admitted the authenticity of several documents which arguably demonstrate that Smits knew of the facts concerning the alleged abandonment in proceedings BS 336 of 2006 much earlier than he says he did. The respondents have not sought to rely on r 22.07 of the Rules which would allow them to apply to the Court for any judgment or order to which they would be entitled on the admissions.The submissions The respondents submit that they should have summary judgment because the proceeding is an abuse of process and because Smits has no reasonable prospects of prosecuting the proceeding. They submit that Smits has no reasonable prospects both because certain propositions of fact underlying the causes of action are untenable and because a number of the causes of action are barred by limitation periods. For present purposes, however, it is only necessary to focus upon the abuse of process argument.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

As to the allegations of abuse of process, Smits’ written submissions assert that Shaw is distinguishable. He points out that, unlike in Shaw, there is no question of Anshun estoppel operating here because Smits only became aware of the alleged fraud in June 2011. He also states that in Shaw, the conduct took place “in the course of conduct of those proceedings”, whereas here the alleged fraud preceded and was independent of the proceedings themselves. Rather, the actions taken by Smits (described above) were infected by the fraud.Consideration The respondents’ interlocutory application states that it is made pursuant to r 26.01 of the Rules and s 31A of the Act. However, s 31A is not mentioned in the respondents’ written submissions and they therefore appear to disclaim reliance on that provision. Rule 26.01 of the Rules provides relevantly:(1)A party may apply to the Court for an order that judgment be given against another party because:(a)the applicant has no reasonable prospect of successfully prosecuting the proceeding or part of the proceeding; or…(d)the proceeding is an abuse of process of the Court; … It is necessary to give close consideration to the relief sought by Smits in the originating application and the relationship between that relief and the various judgments of the Supreme Court which are, directly or indirectly, the subject of many of the orders sought. In summary, the principal relief Smits seeks against Loel and Pioneer in the originating application, consists of:·Orders declaring that Loel and Pioneer contravened the TPA and the CCA by not disclosing the abandonment, and declaring that they took unfair advantage of their silence in the conduct of proceedings BS 6354 of 2006, BS 10707 of 2006 and BS 5325 of 2008 and in relation to the negotiation, execution, implementation and enforcement of the Deed of Settlement. ·An order declaring the Deed of Settlement void or varying the terms of the Deed of Settlement.·An order under the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”) setting aside the final orders made by Margaret Wilson J in BS 5325 of 2008 and an order that the respondents pay to Smits the costs he incurred in relation to those proceedings on an indemnity basis. ·An order under the UCPR setting aside the orders made by the Court of Appeal in proceeding CA 159 of 2011 and an order that the respondents pay to Smits the costs he incurred on an indemnity basis. ·An order that Loel and Pioneer refund money paid by Smits to James Conomos Lawyers or Pioneer pursuant to consent orders made by White J on 2 August 2007 in BS 6354 of 2006 and costs incurred by Smits and Zonebar in respect of those proceedings. ·Compensation or damages for the various contraventions of the TPA and the CCA and for breach of duty and deceit. As against Lillas & Loel, Smits seeks a declaration that the Deed of Assignment dated 29 July 2011 between Lillas & Loel and Pioneer be declared void or an order that Lillas & Loel be estopped from enforcing that Deed.