BANKRUPTCY AND INSOLVENCY – application by bankrupt for removal of trustee pursuant to s 90-15 of Schedule 2 of the Bankruptcy Act 1966 (Cth) – where applicant alleges that respondent breached trustees’ duties by breaching s 116(2), acting in bad faith and in conflict of interest – principles governing removal of trustee in bankruptcy – applicant’s application dismissed with costs
DISCOVERY – application by applicant for discovery – whether applicant’s allegations supported by evidence – whether documents sought relate to live issue – where applicant seeks discovery in fishing exercise – application refused
PRACTICE AND PROCEDURE – application by applicant for injunctive relief and order for preservation of property – whether applicant has prima facie case – where applicant’s evidence fails to disclose any arguable case – application refused
PRACTICE AND PROCEDURE – application by respondent for summary judgment against applicant pursuant to r 26.01(1) of the Federal Court Rules 2011 (Cth) – whether applicant has reasonable prospect of success – whether reasonable cause of action disclosed –summary judgment given against applicant
Legislation:
Bankruptcy Act 1966 (Cth) ss 19, 19(1), 54(1), 60(2), 60(3), 60(4), 116(2), 265(1)(CA), Sch 2 ss 5-15(a), 90-15, 90-15(1), 90-15(2)(b), 90-15(3), 90-20 and 90-20(1)(a)
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Storry v Clout [2024] FCA 1274
Case
[2024] FCA 1274
Decision Date
CaseChat Overview and Summary
In the case of Storry v Clout, the Full Court of the Federal Court of Australia considered a substantive application by the bankrupt, Storry, for the removal of the trustee of her estate, Clout, and a number of interlocutory applications. The court dismissed Storry’s substantive application and all interlocutory applications, awarding costs to Clout. The substantive application was dismissed on the basis that Storry had not demonstrated that Clout had breached his duties as trustee by abandoning Queensland Civil and Administrative Tribunal (QCAT) proceedings, deceiving the court, or acting in bad faith or conflict of interest. The interlocutory applications included an application for an injunction and an order for the preservation of property, an application for discovery, and an application for summary judgment. These applications were dismissed because Storry had not established a prima facie case, the discovery application was considered to be a fishing exercise, and there was no reasonable prospect of Storry succeeding in her substantive application. The court concluded that Storry's allegations were not supported by sufficient evidence and that the discovery application was not relevant to the live issues in the case.
The court emphasised the importance of the principles against allowing discovery for a fishing exercise, stating that there must be sufficient definition of the issues to enable the court to see that the documents sought on discovery relate to a live issue. The court held that Storry's allegations did not meet this standard and that the discovery application was therefore refused. The court also considered the application for summary judgment, which was dismissed because there was no reasonable prospect of Storry succeeding in her substantive application. The court concluded that Storry had not established a reasonable cause of action and that there was no basis for granting summary judgment in her favour.
Orders
Orders of the court
1. The applicant’s interlocutory application filed on 15 February 2024 seeking relief including an injunction and an order for the preservation of property is dismissed.
2. The applicant’s oral interlocutory application for discovery is dismissed.
3. The applicant’s Originating Application filed on 26 October 2023 is dismissed.
4. The applicant pay the respondent’s costs of the proceedings.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
For the reasons that follow, the applicant’s interlocutory applications will be refused and her substantive application dismissed.Factual and procedural background It is necessary to outline some of the lengthy and complex factual and procedural background of the matter before considering the relevant statutory framework, the parties’ applications and submissions.Bankruptcy proceedings On 28 July 2016, the applicant was involved in a motor vehicle collision and was issued with a traffic infringement notice for the offence of failing to give way to a vehicle at an intersection with a stop sign. The applicant contested the infringement notice in the Magistrates Court of Queensland but was convicted and fined. The applicant then instituted a series of appeal proceedings but was unsuccessful: see Storry v Commissioner of Police [2017] QDC 282; Storry v Commissioner of Police [2018] QCA 291; Storry v Commissioner of Police & Anor [2022] HCASL 41. The owner of the other motor vehicle involved in the collision proceeded (by his insurer) with a civil claim against the applicant for the property damage caused to his vehicle. On 4 December 2020, judgment was given against the applicant in the amount of approximately $39,500. The applicant filed an appeal against the decision, which was dismissed on 16 February 2021. The applicant subsequently filed an application for a stay of the orders of 16 February 2021, which was dismissed on 26 October 2021. The applicant also filed an application for a stay of the orders of 4 December 2020, which was dismissed on 7 December 2021: see Storry v Weir [2022] FCA 362 at [8]–[13]; Storry v Weir [2023] QCA 4 at [2]–[3]. The applicant did not pay the judgment sum and was subsequently served with a Bankruptcy Notice. On 14 December 2021, a creditor’s petition was filed seeking a sequestration order against the applicant’s estate: see Weir v Storry [2022] FedCFamC2G 183. On 11 March 2022, the applicant filed an appeal in the District Court (BD589/22) against the decision to dismiss her application for a stay of the orders of 4 December 2020: see Storry v Weir [2022] FCA 362 at [15]. On 18 March 2022, a sequestration order was made against the applicant and the respondent became the trustee of her estate: Weir v Storry [2022] FedCFamC2G 183. The applicant again instituted a series of appeal proceedings but was unsuccessful: Storry v Weir [2022] FCA 794; Storry v Weir(No 2) [2022] FCA 1360; Storry v Weir [2022] FCA 1484; Storry v Weir [2023] HCASL 183. On 21 March 2022, the lawyers for the motor vehicle insurer wrote to the respondent, seeking his election to either prosecute or discontinue the appeal proceeding before the District Court (BD589/22). On 23 March 2022, the respondent elected to discontinue the proceeding. On 19 October 2023, the applicant sent two emails to the respondent, requesting that he elect to prosecute the discontinued District Court proceeding.QCAT proceedings In 2016, the applicant took over her late father’s real estate business, known as Anthony Storry Real Estate. The applicant subsequently established a company, Storry Real Estate Pty Ltd, to operate the business: see Storry v Chief Executive of the Office of Fair Trading, Department of Justice and Attorney-General [2021] QCA 30 at [6]–[7].
Evidence
Evidence Before The Court
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Decision
Reasons for decision
The Full Court then explained the principle against allowing discovery for a “fishing” exercise at [110]–[112]: The principle against allowing discovery for the purpose of “fishing” was also referred to by Wilcox J in Nestle Australia Ltd v Commissioner of Taxation (1986) 10 FCR 78 at 82.Wilcox J went on, at 83, to refer to the decisions in WA Pines Pty Ltd v Bannerman (1980) 41 FLR 175 and Lloyd v Costigan (No 2) (1983) 82 FLR 104. The effect of those authorities is that it is not open to an applicant to make a bare allegation that a decision was made without any basis and then use the process of discovery to find out if the allegation has foundation.There must be sufficient definition of the issues to enable the Court to see that the documents sought on discovery relate to a live issue; there must at least be something from which the Court can see that there is a real issue the proof of which would be assisted by discovery; Nestle at 83; Murchison v Keating at 344–345.(Emphasis added. See also Nestle Australia Ltd v Commissioner of Taxation (1986) 10 FCR 78 at 82–83; Matson v Attorney-General [2020] FCA 1558 at [372].) These principles are applicable to the application for discovery in the present proceeding. The applicant’s substantive application seeks an order removing the respondent as the trustee of her estate on the basis that the respondent:(1)breached s 116(2) of the Bankruptcy Act by abandoning the QCAT proceedings and deceiving the Court by giving evidence relating to the OFT’s claim against her estate;(2)caused the OFT to institute disciplinary proceedings against the applicant due to his breach of s 116(2) of the Bankruptcy Act;(3)by his breach of s 116(2), impacted on the ability of her late father’s estate to be finalised and caused the Commonwealth Director of Public Prosecutions (CDPP) to institute proceedings against her;(4)acted in bad faith by electing to discontinue the District Court proceeding; and(5)is acting in conflict of interest by seeking fees to adjudicate the claims against her estate instead of allowing the District Court proceeding to continue. The applicant’s proposed scope of discovery is as follows:1.All documents provided to Mr Clout by the Office of Fair Trading and Crown Law in for the claims of Galpen, Norman and Kambos prior to submitting the information to the Court attached to an affidavit as claims.2.All documents providing when Mr Clout knew of the amounts contained in the Trust Account of Anthony Storry Real Estate, what adjudication was used to determine the claims and when was the amounts and through whom were the amounts paid to Galpen, Norman and Kambos.3.The respondent provide documents were [sic] he has provided reasons why he has not elected to hear the claims and strike out application in QCAT to(a)QCAT(b)Office of Fair Trading(c)Crown Law(d)The Department of Justice and Attorney General.(e)All communications with Julie Williams and the Office of David Clout and the Office of Fair Trading.4.The Respondent provide document of funds he knew would belong to the applicant from the trust account Storry Real Estate PTY LTD under the receivership of BRI Ferrier.5.The Respondent provide documents when and how He became aware that there was a legacy owing to the applicant and the predated sequestration order. A amount of $25,000.