Winn v Yeo and Rambaldi as Former Trustees of the Estate of Goodwin (A Bankrupt)
[2017] FCCA 2528
•19 October 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| WINN v YEO & RAMBALDI AS FORMER TRUSTEES OF THE ESTATE OF GOODWIN (A BANKRUPT) | [2017] FCCA 2528 |
| Catchwords: BANKRUPTCY – claim by the only creditor that the trustees breached various duties by compromising litigation on certain terms – no basis for claims under ss.176 and 178 of the Bankruptcy Act 1966 (Cth) – case dismissed. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.176, 178 Bankruptcy Regulations 1996 (Cth) |
| Cases cited: Adsett v Berlouis (1992) 37 FCR 201 |
| Applicant: | JULENE WINN |
| Respondents: | ANDREW REGINALD YEO & GESS MICHAEL RAMBALDI AS FORMER TRUSTEES OF THE ESTATE OF RODERICK JAMES GOODWIN, (A BANKRUPT) |
| File Number: | MLG 1860 of 2014 |
| Judgment of: | Judge Wilson |
| Hearing date: | 19 August 2016, 13 October 2016 & 26 April 2017 |
| Date of Last Submission: | 6 October 2017 |
| Delivered at: | Melbourne |
| Delivered on: | 19 October 2017 |
REPRESENTATION
| Applicant in person |
| Counsel for the Respondents: | Mr P. Fary |
| Solicitors for the Respondents: | Gadens Lawyers |
ORDERS
The further amended application filed on 24 June 2015 is dismissed.
The applicant pay the costs of the respondents as agreed or in default of agreement as taxed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 1860 of 2014
| JULENE WINN |
Applicant
And
| ANDREW REGINALD YEO & GESS MICHAEL RAMBALDI AS FORMER TRUSTEES OF THE ESTATE OF RODERICK JAMES GOODWIN (A BANKRUPT) |
Respondents
REASONS FOR JUDGMENT
Introduction
In this proceeding, the applicant sought (among other relief) orders requiring the respondents to repay to the bankrupt estate of
Roderick James Goodwin that they administered –
a)$101,795.63 pursuant to s.178(1) of the Bankruptcy Act 1966 (Cth) (“the Act”); and
b)$693,230.00 pursuant to s.176(2)(a) of the Act.
The respondents had been appointed trustees of the bankrupt estate of Mr Goodwin on 31 July 2012. They were removed as trustees of that estate on 23 April 2014.
At its core, in this case the applicant contended that the trustees wrongfully appropriated their fees and paid their solicitors’ fees from the only asset realised out of the administration of the bankrupt estate of Mr Goodwin. She further said that the trustees wrongfully failed to explore selling real estate owned by Mr Goodwin and if they had,
a sum upwards of $690,000.00 would have been thereby derived.
The respondents denied any wrongdoing in the conduct of the administration of the bankrupt estate of Mr Goodwin. They denied they were liable to the applicant for the sums claimed or at all.
Synopsis
For the reasons that follow, I dismiss this proceeding. In my judgment, the applicant’s claims founded upon a breach of s.178(1) or s176(2)(a) of the Act failed.
Relevant factual setting
Prior to orders being made for the sequestration of his estate,
Mr Goodwin owned and operated a business styled “Rod Goodwin Photography and Design”. He ran that business from premises at
1231 Hoddle Street East Melbourne (“the property”), the registered proprietors of which were Mr Goodwin and one Briggita Annaliese Soloniewicz as joint proprietors. Mr Goodwin and Ms Soloniewicz became registered proprietors of the property on 30 March 1983.
The applicant retained Mr Goodwin in July 2000 (at a time when no sequestration order had been made against him) to perform services for her in the nature of layout and design work. According to the applicant, the retainer between the applicant and Mr Goodwin ended badly.
The applicant asserted that Mr Goodwin thereafter defamed her in response to which she issued a proceeding for damages in the
County Court of Victoria in August 2003. The applicant entered judgment in default of defence on 21 made 2007 with damages to be assessed. On 24 October 2008 the County Court heard argument on the assessment of damages and on that day awarded the sum of $34,900.00 in favour of the applicant against Mr Goodwin.
According to the trustees, in May 2012 the applicant contacted Mr Yeo asking him to consent to act as trustee in the event of a sequestration order being made against Mr Goodwin’s estate. Mr Yeo and
Mr Rambaldi provided their consent to act as trustees shortly after the creditor’s petition was filed.
On 18 may 2012 the applicant filed a creditor’s petition and a sequestration order was made on 31 July 2012.
The applicant was the only unsecured creditor in the administration of Mr Goodwin’s estate, to the extent of $46,889.00.
The respondents to this litigation were appointed as Mr Goodwin’s trustees on 31 July 2012.
Backtracking in the chronology on 9 February 2007 Mr Goodwin transferred his interest in the property to Ms Soloniewicz for natural love and affection and consequently, Ms Soloniewicz became the sole registered proprietor of the property.
The trustees undertook various investigations and determined that
Mr Goodwin transferred his interest in the property at a time when he faced judgment being awarded against him and that Mr Goodwin effected the transfer of his interest to Ms Soloniewicz with the intention of placing the bankrupt’s interests in the property beyond the reach of his creditors.
Mr Rambaldi formed the view that a public examination of the bankrupt was likely to be beneficial to his investigations. Mr Rambaldi estimated that the costs of such an examination were in the vicinity of $10,000.00 - $20,000.00. He sought an expression of interest from creditors as to whether or not creditors were willing to provide a limited indemnity to Mr Rambaldi to meet the costs of a public examination of the bankrupt and of Ms Soloniewicz.
The trustees prepared a report to creditors dated 30 November 2012. The following important matters emerged from that report –
a)the bankrupt’s assets totalled $8,248.00;
b)the bankrupt’s liabilities totalled $46,889.00;
c)the sum of $4,264.00 owed by the applicant to Mr Goodwin was included as a receivable in the assets of Mr Goodwin but that sum had been assessed as being unrecoverable;
d)to the date of the report to creditors, the trustees had incurred remuneration totalling $40,866.00 made up of $23,168.00 in the period July to September 2012 and $17,698.00 in the period September to November 2012; and
e)the trustees provided to creditors the following remuneration approval notices –
i)21 September 2012 – $23,168.00;
ii)21 September 2012 – $25,484.80;
iii)21 September 2012 - $50,000;
iv)21 September 2012 – $55,000.00;
v)30 November 2012 – $40,866; and
vi)30 November 2012 – $44,952.60.
The applicant voted in favour of the proposal to pay the trustees $23,168.00, $40,866.00 and $50,000.00.
After conducting a public examination of the bankrupt and of
Ms Soloniewicz on 7 March 2013 and after issuing a proceeding against Ms Soloniewicz in September 2013, the trustees settled that proceeding with Ms Soloniewicz on 19 February 2014. Under the terms of settlement, Ms Soloniewicz agreed to pay the trustees $155,000.00 on certain terms.
The applicant filed a proof of debt for $107,540.61. She did that prior to the settlement between the trustees and Ms Soloniewicz.
The applicant’s proof of debt was made up of the judgment debt in the defamation proceeding, $46,889.00, together with what she asserted were costs of that proceeding of $59,650.43. Those costs were not taxed.
On 2 February 2014 the trustees’ solicitors provided their invoice
for services rendered over the period 17 September 2012 to
21 February 2014. The total amount claimed was $44,886.68.
On 24 February 2014 the trustees wrote to the applicant pointing out that they were unfunded, that they had previously sought funding from the applicant and that she had refused to provide it. The trustees mentioned that after a full day’s mediation, a conditional settlement had been reached involving Ms Soloniewicz paying the trustees $155,000.00 in full satisfaction of the trustees’ claims against her. In the letter of 24 February 2014 the trustees also wrote the following –
A dividend to unsecured creditors appears unlikely (or minimal at best), based on the settlement at $155,000. Based upon the information presently available to me, and the absence of an indemnity or creditor funding for my costs of the litigation,
I intend to settle the proceeding on the terms of the conditional settlement.[1]
[1] Exhibit “ARY-32” to the affidavit of Andrew Reginald Yeo sworn 19 February 2015.
Shortly before midday on 24 February 2014, the applicant sent an email to the trustees. That email was inflammatory. In several numbered paragraphs the applicant variously asserted that –
a)she was the only creditor and was “in a very good position” as her claim was well exceeded by the value of the bankrupt estate;
b)funding to bring the litigation should have been sought from the Attorney-General;
c)the case would not cost $80,000.00;
d)
any settlement for $155,000.00 represented a
“gross[undervalue]” of the land because, according to the applicant, the land was worth over $750,000.00;
e)the trustees’ duty was to recoup debts to the creditor (her); and
f)she wanted to be paid from any proceeds of settlement.[2]
[2] Exhibit “JW27” to the affidavit of Julene Winn sworn on 8 July 2015.
Before addressing the trustees’ response, two important issues arose from that email. First, while it was true that the applicant was the only creditor in the bankrupt estate and that generally a trustee’s obligation was to endeavour to realise the bankrupt’s assets and to distribute the proceeds thereof to creditors, there was no absolute duty on the trustees to do so still less was there a duty to do so where only one creditor emerged in the bankruptcy. To hold otherwise would be to impose a duty in law that compelled the trustees to work, essentially in an unqualified way, solely for the benefit of that one creditor. That is not law.
Second, the trustees made it plain in their letter to the applicant that the trustees were unfunded. It was presumptuous in the extreme for the applicant to gainsay the trustees’ willingness (described by her as their “duty”) to litigate the case when they were unfunded and for the applicant to expect that she would be paid (inferentially, in full) from any proceeds of sale.
Be that as it may, at the close of business on 24 February 2014 Mr Yeo and two members of his staff telephoned the applicant. The substance of the matters discussed between them was recorded in a file note dated 25 February 2014 that Mr Yeo exhibited to his affidavit sworn
19 February 2015. During that conversation, the applicant pointed out that the possibility of her receiving no dividend was not what she expected. The file note recorded that during the conversation the applicant said “this is a very strong case” and that from all the precedent cases and authorities she had examined, she had “never seen one of these … cases lose”.[3]
[3] Exhibit “ARY-33” to the affidavit of Andrew Reginald Yeo sworn 19 February 2015.
Pausing there, Mr Yeo was a very experienced trustee in bankruptcy. The applicant was a barrister of one month’s standing. On the balance of probabilities, it was more likely that Mr Yeo’s cautious assessment of the risks of litigation was correct than was the applicant’s assessment. In addition, the applicant was far from objective as she was the only creditor who stood to gain anything if the litigation, with all its attendant risks, was commenced. The lack of objectivity was evident from her use of pejorative terms during the conversation such as
“the transfer(between Mr Goodwin and Ms Soloniewicz) to defeat creditors was an act of fraud” and “the bankrupt and another fellow had conspired to avoid paying her” and that those two “had defrauded her from 2002 to 2006”.[4] Even accepting that her use of the word fraud and conspiracy may have been emotionally charged, her conversation illustrated that she lacked objectivity when communicating with
Mr Yeo and that she did not bring a balanced mind to bear in her approach to the bankruptcy nor did she bring a proper legal assessment of the situation.
[4] Ibid.
Returning to the telephone conversation on 24 February 2014, Mr Yeo told the applicant he was willing to run the litigation so long as the trustees received indemnity funding to do so. Mr Yeo told the applicant that she could provide the funding. The applicant told Mr Yeo that $80,000.00 was excessive and that “nobody would pay that amount for that type of trial”.[5] Mr Yeo told the applicant she was not likely to receive an amount reasonably close to her full claim based on figures as they were then current. Mr Yeo said the estimated cost of $80,000.00 were likely to cover only part of the costs of any proceeding against Ms Soloniewicz and that it was possible that an adverse costs order could be made, despite the precedents the applicant mentioned.
[5] Exhibit “ARY-33” to the affidavit of Andrew Reginald Yeo sworn 19 February 2015.
It should be recorded that during that telephone conversation,
the applicant mentioned she had examined legal precedents of similar cases to the case the trustees proposed bringing against
Ms Soloniewicz. She said they had “never been long cases and have never taken the full three days at trial”.[6] She said the facts of the proposed litigation were “fairly simple”.[7] At this stage let me record that the applicant’s assessment of the conduct of the litigation was extremely poor. In this case, she prolonged the litigation unreasonably in the manner mentioned below. She conducted this case appallingly. Her assessment of the likely complexity, strength and merits of the case involving the trustees and Ms Soloniewicz were woefully inadequate. She was not qualified to assess that the proposed litigation was
“fairly simple”.
[6] Ibid.
[7] Ibid.
Later that day, at nearly 6.00 p.m., the applicant emailed one of the trustees’ staff members. She said two things of importance in that email of 5:49 p.m. on 24 February 2014. First –
I am very amazed at any settlement for $155,000 when the trustee is entitled to claim $300,000 of Goodwin’s property and I am owed $100,000 (error in original).
Second –
It may be that if (Pitcher Partners) can’t, someone else will run the case more cheaply than $80,000. I wish to have the opportunity to explore the option, if necessary.[8]
[8] Exhibit “ARY-33” to the affidavit of Andrew Reginald Yeo sworn 19 February 2015.
A first-blush examination of that email might lead a reader to the view that the trustees were answerable solely to the applicant. They were not. The applicant’s follow-up email sent at 8:43 a.m. the following morning, 25 February 2014, was equally direct. She sent an email to another staff member at Pitcher Partners because she said she had received no reply to her 5:49 p.m. email the day earlier and that she required a reply that morning.
Shortly after midday on 25 February 2014, the applicant sent one of the trustees’ staff members an email in which the applicant’s attitude to the trustees became more aggressive. She stated that she sought 75% to 100% of the debt due to her. She said that with assets of over $300,000.00 available, it ought to have been possible for the trustees’ firm and her to be paid in full. Then she added, threateningly –
If the trustee causes loss to the estate, the trustee is liable to compensate for loss he caused to a creditor. In this case, my loss would be $107,000 (error in original).
That sum of $107,000.00 included costs that had not been taxed.
Later on the same day, at 4.04 p.m. the applicant sent an email to a different member of the trustees’ staff requiring the provision of the proposed terms of settlement.
At 11.52 a.m. the following day, 26 February 2014, the applicant sent an email to the same staff member as the one to whom she sent the 4.04 p.m. email. It was direct –
This matter needs to be addressed.[9]
[9] Ibid.
At 3.49 p.m. on 26 February 2014 Ms Angelopoulos of the trustees’ office sent an email to the applicant in which she told the applicant that the trustees had until 6 March 2014 to elect not to proceed with the terms of settlement and the trustees would only consider not proceeding with such a settlement if the creditors provided appropriate security to proceed with the litigation against Ms Soloniewicz.
Ms Angelopoulos told the applicant that not proceeding with the settlement was a commercial risk for the trustees. She also told the applicant that minimal, if any, return was to be expected. Ms Angelopoulos stated that half of the value of the land was being pursued ($300,000.00) so even if successful in any litigation,
the applicant’s debt would not be paid in full.
On Saturday 1 March 2014 at 11.00 a.m. the applicant sent an email to Mr Innis Cull of ICA Lawyers (“ICA”). That email was unhelpful on one reading and positively destructive on another. In that email the applicant made repeated references to the bankrupt’s fraud. She alleged that Mr Cull had overlooked all evidence she provided and that she contended the evidence revealed reportable offences. She asserted that Mr Cull had done nothing to address the bankrupt’s fraud. As a deliberate insult to Mr Yeo, the applicant wrote the following –
One does not appoint a trustee to enable a trustee to make a profit and to be left with the full debt still owing while the trustee waltzes off with $155,000. It is a position of trust and certain representations have been made to me which will need to be carried out. If he couldn’t do the job, he should not have accepted the appointment.[10]
[10] Exhibit “ARY-33” to the affidavit of Andrew Reginald Yeo sworn 19 February 2015.
The applicant’s email dated 1 March 2014 concluded in an equally unpalatable manner –
Further, I am doing a PhD on trustees’ administrations and Goodwin’s is one of the case studies included in my thesis.
You can expect that all aspects of the administration, advice, settlement, offences to be fully disclosed in the public interest.
I await your apology and retraction of material that offends me. You may recall that my case against Goodwin was one of defamation. Your conduct needs to be above that base level.[11]
[11] Ibid.
That email was threatening. It was uncalled for. It was inappropriate.
It reflected how the applicant believed that she had the power to control the trustees in their administration of the bankruptcy. It introduced the spectre of defamation litigation against Mr Cull who was doing no more than his job as the trustees’ solicitor.
In an email dated 4 March 2014, the applicant told Mr Cull that she viewed the request for litigation funding as being “indicative of a very smelly arrangement”.[12] There was no basis for that pejorative statement. The trustees had been requesting litigation funding from the applicant for some time to that point in time. Far from a request for litigation funding being “smelly”, it was a routine practice among insolvency practitioners.
[12] Exhibit “ARY-33” to the affidavit of Andrew Reginald Yeo sworn 19 February 2015.
A more illustrative reflection of the venom that pervaded the interaction between the applicant and Mr Cull was given in the applicant’s email to Mr Cull dated 4 March 2014 at 9.20 p.m.
It is worthwhile reciting it verbatim –
You have a completely erroneous view of the trustee’s duty to creditors.
It is not for a trustee to take an adversarial approach to a creditor, particularly if that conduct is in order to short change a creditor. His is a position of trust to collect debts on behalf of creditors.
… it is inappropriate for you to be making judgments about me or decisions on behalf of me.[13]
[13] Ibid.
Nowhere in the material that I read in connection with this litigation did I read, see or hear anything said or done by Mr Cull, ICA or the trustees that was in the nature of a judgment about the applicant.
That email reflected the applicant’s distorted perspective of the facts of this case.
On 5 March 2014 a great deal of correspondence passed between the trustees and the applicant. Some of it was in the form of emails while others were in letter form. One letter of that date from the applicant to Mr Yeo was a vitriolic exposition by the applicant headed
“Final Notice”. One sentence of that letter read as follows –
I am appalled at the attitude displayed towards me by Mr Cull which amounts to belligerence and insult in an undisguised attempt to get rid of me so no payment of the debt to me has to be made.[14]
[14] Exhibit “ARY-33” to the affidavit of Andrew Reginald Yeo sworn 19 February 2015.
Such an irrational, ill-considered proposition was unsupported by the facts of the case. It must be remembered one of the most compelling issues in this case was the applicant’s persistent refusal to indemnify the trustees in relation to the costs of any litigation involving
Ms Soloniewicz.
In her letter dated 5 March 2014 the applicant accused Mr Yeo of entering into the settlement with Ms Soloniewicz based on his financial interests only, being a breach of a trustee’s duty.
That was a serious allegation, to be made only after careful consideration of the facts. I was not convinced the applicant had a proper basis of making the allegation of breach of trust.
Little point is served in addressing seriatim each point urged in her
5 March 2014 letter. It raised matters that were not fairly arguable and instead represented the applicant’s response to her perceived affront by Mr Cull. The applicant did not behave rationally in this litigation so far as I was able to observe.
On 5 March 2014 the trustees’ solicitors provided a written reply to the applicant’s emails. In the letter from ICA to the applicant, ICA provided a breakdown of the costs estimate of $80,000.00. They took issue with many of the applicant’s other assertions and repeated,
yet again, that the trustees sought indemnity funding from the applicant failing which the terms of settlement would become unconditional by
6 March 2014.
The letter from ICA was sent as an email attachment at 1.20 p.m. on
5 March 2014.[15]
[15] Ibid.
At 3.33 p.m. on 5 March 2014 the applicant sent ICA an email that read as follows –
I am not insolvent.
I caution you about making defamatory statements.[16]
[16] Exhibit “ARY-33” to the affidavit of Andrew Reginald Yeo sworn 19 February 2015.
It was readily apparent that by 5 March 2014 the applicant and the trustees were locked in an impasse, but on some basis allegedly defamatory. The applicant’s reaction to the letter from ICA was unfounded. Rather than addressing the critical issue of the applicant providing funding, as the trustees had repeatedly asked, the applicant hijacked the discussions and converted them to personal insinuations that ICA had somehow defamed the applicant. Not only was that course of conduct very unhelpful in the administration of the bankruptcy but it injected personal antipathy into what should have been a proper professional interaction between the trustees and a creditor. It converted their relationship into one where the trustees were dealing with an unreasonable, unduly sensitive creditor who behaved very badly in response to the reasonable, proper requests from the trustees, especially those relating to the settlement proposal, a matter that should have been uppermost in the applicant’s attention.
The personal enmity continued when, at 4.27 p.m. on 5 March 2014, the applicant sent another email to ICA the details of which were startling, having regard to the following facts –
a)to that point in time and after the mediation, the trustees had secured the best proposal then available;
b)the proposal became unconditional on 6 March 2014, the next day;
c)if the proposal was to be rejected and the only creditor who benefited by any alteration of the proposal was the applicant, litigation against Ms Soloniewicz was the inevitable consequence;
d)if litigation was commenced, its cost to the trustees was reasonably estimated at $80,000.00;
e)there was no certainty that any such litigation was less than three days duration as the applicant asserted;
f)litigation, if it was to be issued, required the applicant to provide indemnity funding;
g)the applicant persistently dismissed the proposal to provide litigation funding; and
h)the trustees were experienced in the administration of bankruptcy matters whereas the applicant had no relevant experience either in litigation of the sort contemplated or in the administration of bankruptcy.
The critical issue of the conditional settlement becoming unconditional was wholly ignored when, at 4.27 p.m. on 5 March 2014 the applicant addressed and emailed Mr Cull of ICA in the following terms –
Unless I received by 5 pm today a retraction of all material published to any party that states or implies that I am insolvent, and a commitment not to further publish to any party any material that states or implies that I am insolvent, I will act to institute a proceeding in libel against you.[17]
[17] Exhibit “ARY-33” to the affidavit of Andrew Reginald Yeo sworn 19 February 2015.
The applicant remained silent on the question of the settlement agreement for the day of 6 March 2014.
On 7 March 2016 ICA wrote to the applicant informing her that she had not deposited any funds with the trustees on account of indemnity funding and as a consequence, the settlement agreement with
Ms Soloniewicz had become unconditional.
On Sunday 9 March 2014 at 7.03 p.m. the applicant sent an email to the trustees asking for answers to five discrete questions said to have arisen from Mr Yeo’s 24 February 2014 letter. The questions addressed such issues as the 1979 purchase price for the land, whether
Ms Soloniewicz inherited money and other irrelevant issues. Unsurprisingly, Mr Yeo did not respond.
On 11 March 2014 the applicant prepared and sent to the trustees a proposed creditor’s resolution for the removal of the trustees.
In a responding email dated 17 March 2014 Mr Yeo informed the applicant that he had been out of his office for the majority of the previous week. The applicant, the day earlier, sent an email to Mr Yeo. It read as follows, verbatim –
Mr Yeo
You were served with a s 64 (1) (b) request / s 64 (1) (a) creditors resolution directing you to convene a meeting of creditors on the afternoon of 17 March 2014 by telephone conference for a vote for the removal of the trustees, Andrew Yeo and Gess Rambaldi, from the administration of the bankrupt estate of Roderick James Goodwin VIC 2629 / 2012.
A copy of that request / resolution was forwarded to AFSA for their records at the time when it was served on you.
Pursuant to Bankruptcy Act 1996 s 64 (1) the convening of that meeting is mandatory.
You have failed to respond.
Nevertheless, I will expect to receive that required Notice of Meeting / agenda tomorrow morning and have planned for the meeting by telephone conference to proceed after 1 pm on Monday 17 March 2014.
My telephone number is (omitted).
A replacement trustee will be appointed by the creditor.
I note that you:
- are in serious breach of the Bankruptcy Act 1996;
- have treated the direction for a Creditors Meeting with contempt;
- have failed to respond in any way, and your staff – Simone Martin and Tash Angelopoulos – have also failed to receipt the emails copied to them;
- have continued to incur unnecessary fees after the Direction for the Creditors Meeting for your removal;
- have taken very hasty, and unnecessary, action before the Creditors Meeting, to undermine the actions of the replacement trustee.
Yours faithfully,
Julene Winn
Creditor[18]
[18] Exhibit “ARY-36” to the affidavit of Andrew Reginald Yeo sworn 19 February 2015.
Many of the matters recorded in the bullet points at the end of the email were baseless.
The applicant filed a complaint against the trustees with
Australian Financial Security Authority (“AFSA”).
The sum that Ms Soloniewicz agreed to pay, $155,000.00, was duly paid and on 18 March 2014 it was deposited into the trustees’ account earmarked to the bankrupt estate of Goodwin. Various withdrawals were made against the sum of $155,000.00 including the sum of $45,434.60 by the trustees’ solicitors together with an amount of $101,795.63. After other modest sums and charges were met,
the amount recovered from Ms Soloniewicz was exhausted.
On 31 March 2014 the applicant proposed a creditor’s resolution for the removal of the trustees under s.181 of the Act. The applicant voted in favour of her own resolution.
In July 2014 the applicant agitated with the Insolvency and Trustee Service whether the trustees had entered into a proper costs agreement with the trustees’ solicitors, ICA. On 18 July 2014 AFSA sent the applicant an email stating that they were unable to locate the costs agreement between the trustees and ICA.
In her affidavit sworn 12 September 2014 the applicant alleged that she sought an order that the trustees repay to the estate the sum of $156,000.95.
In her affidavit sworn 8 July 2015 the applicant’s evidence was more in the nature of the submission of legal propositions than of fact. I have addressed her legal propositions below.
The changing nature of the applicant’s claims
On 24 June 2015 the applicant filed a further amended application. That amended application effected a far-reaching enlargement of the case. It is as well to set it out verbatim –
1. Pursuant to Bankruptcy Act 1966 (‘BA’)
s178 (1) ors30 (1) (b) it be declared that the respondent’srepay to the estate of Roderick James Goodwin the sum of $156,000.95conduct in relation to settlement of their s121 claim MLG 1417 / 2013 is in breach of their duty under:a) BA:
(i) s19 (d): by refusal to give the creditor information about the transaction;
(ii) s19 (f): by failure to act to recover the transferred property or its value;
(iii) s19 (j): by incurring unnecessary, high fees and costs prior to settlement:
(iv) s19 (k): by failure to effect commercially sound actions and decisions;
b) Bankruptcy Regulations 1996 (‘BR’) Schedule 4A:
(i) 2.2: by withholding information from and giving incorrect and misleading information to the creditor:
(ii) 2.11: by undertaking a settlement in their own financial interest and for the value of their fees and their lawyer’s costs;
c) misleading and deceptive to the creditor;d) unconscionable to the creditor;2. Pursuant to BA s30 it be declared that the Respondents breached their duty under:
a) BA s166: by failure to give notice to the creditor of payments to their lawyer;
b) BA s171 (2): by failure to obtain receipts for payments made to their lawyer;
c) BR:
(i) Reg 8.12C(1): by failure to issue remuneration claim notices when their remuneration claimed reached the fixed amount;
(ii) Reg 8.12C (4) (c): by failure to explain the variations in amounts set out in the remuneration approval notices;
(iii) Reg 8.12C(5): by failure to advise of a right to review of remuneration;
d) BR Schedule 4A:
(i) 2.12(a) and (b): by failure to record decisions regarding assets on the file;
(ii) 2.16 (a) and (b): by failure to keep proper records describing, and evidence of time spend on, work done;
(iii) 2.17 (2): by failure to keep a record of every material decision, and supporting evidence relied upon, on the file;
e) BR Schedule 4A:
(i) 2.6 (h) (i): by failure, after a search showed the bankrupt had not disclosed assets, to make enquires of:
i. National Australia Bank regarding the loan in 1983 to Roderick Goodwin on purchase of 1231 Hoddle Street East Melbourne (‘the property’) and his mortgage repayments from 1983 to 2007;
ii. the owner of a Daimler, a second vehicle registered to the bankrupt;
(ii) 2.6 (h) (ii): by failure to explain to the creditor why such enquiries were considered unnecessary;
(iii) 2.6 (i): by failure to make enquiries into the dissipation of the bankrupt’s monies after service of the creditor’s petition;
f) BR Schedule 4A 2.10: by failure to obtain independent expert advice to assess:
(i) the trustee’s interest in the property;
(ii) the value of the property;
g) BA s19 (1) (f): by failure to take appropriate steps to recover the property;
h) BA s19 (1) (i): by failure to refer the bankrupt’s offences against BA;
i) BA s173 (1): by failure to keep a full and correct record of the administration;
j) BR Schedule 4A:
(i) 2.7(1): by failure to consider the creditor’s views and evidence relevant to investigation of the bankrupt’s assets;
(ii) 2.7(2): by failure to inform creditor of outcomes of enquiries;
k) BA s19(1)(d): by failure / refusal to inform the creditor about the administration:
l) BR Schedule 4A 2.2(1):
(i) by failure to act impartially;
(ii) by making statements and signing documents known to be incorrect and misleading;
m) BA s64 (1) (b) and s177(1): by refusal, when directed, to convene a creditors meeting to remove the trustees;
n) BA:
(i) s164(1): by failure to divide remuneration with the replacement trustee; (a) as agreed between them and (b) endorsed by creditors resolution:
(ii) s164 (2)
(a) and(c): by failure to give a copy of their account to the creditoro) BA s19 (1) (j): by failure to administer efficiently by avoiding unnecessary costs;
p) BA s19(1) (k): by failure to administer in a commercially sound way;
q) BR Schedule 4 2.13 (a): by failure to incur only necessary and reasonable trustees’ fees and legal costs;
2.13 (b) by failure to obtain, before incurring legal costs, the estimate of costs and failure to decide whether undisclosed, unlimited legal costs were appropriate to the administration;
r) BR Schedule 4 2.15: by failure to ensure that tasks required, or able, to be done by trustees / staff were not unnecessarily done by their lawyer;
s) BR Schedule 4 3.4: by failure to admit or reject the creditor’s proof of debt;
t) their common law duty to maximise return from the assets of the estate and to maximise satisfaction of the creditor’s claim;
3. Pursuant to BA s178(1) or s30 (1)(b) or s176 (2)(c), the respondents repay $147,714.87 to the bankrupt estate of Roderick James Goodwin VIC 2629 /2012 (comprising $101,795.63 they paid to themselves and $45,434.60 they paid to ICA Lawyers);
4. Pursuant to BA s176(2) (a), the respondents make good the loss of
$524,999.05$107,540.60, to the bankrupt estate;5. Pursuant to s 30, the respondents provide a Final Remuneration Claim Notice of all fees claimed to the applicant within seven days;
6. Pursuant to s 30, the costs of ICA Lawyers be reviewed by the Inspector-General or assessed by the Victorian Supreme Court Costs Court;
7. The Respondents pay the Applicant’s costs of and incidental to the application.[19]
[19] Amended application filed 24 June 2015.
Leaving aside the various statutory bases of the relief claimed,
in essence the applicant claimed in her further amended application –
a)payment of $147,714.87 to the bankrupt estate of Mr Goodwin; and
b)an order that the trustees make good an alleged loss of $107,540.60.
During the trial of this proceeding, Mr Fary of counsel for the trustees told me that the trustees had encountered difficulties with the way the applicant’s case unfolded so the trustees’ solicitors served a request for further and better particulars of the further amended application.
By response dated 11 November 2015, the applicant addressed each legal and factual basis of her further amended claim. Mr Fary informed me that the parties had, in effect, agreed that the applicant’s document dated 11 November 2015 would stand akin to a statement of claim.
In her affidavit sworn 8 July 2015 the applicant identified a large number of what she said were breaches by the trustees of obligations of trustees under the Act. That affidavit ran for 34 pages. Rather than addressing those issues at this juncture, below I have addressed the applicant’s contentions as well as the trustees’ responses in the context of each allegation made by the applicant.
In support of her claims in this proceeding, the applicant relied on a document of 17 pages entitled “Applicant’s outline of submissions”.
In terms of monetary relief, the applicant referred in those written submissions to a claim for –
a)$101,795.63; and
b)the trustees to make good the loss to the bankrupt’s estate of $693,230.00.
The applicant contended in her written submissions that the trustees had not filed –
a)grounds of opposition to her second further amended application filed 8 July 2015;
b)affidavit material in response to the applicant’s second further amended application; or
c)any response to the 34 alleged breaches of duty advanced by the applicant.
Before analysing the claims advanced in this case, it is necessary to say a little about the applicant.
Some observations concerning the applicant
The applicant gave evidence before me during which time I had an opportunity to carefully assess her as a witness in terms of not only what she said but how she said it. She appeared in person as well.
She was cross-examined by Mr Fary.
As the trial judge I enjoyed all the advantages identified by Kirby ACJ (as his Honour then was prior to his Honour’s appointment to the
High Court of Australia) in Galea v Galea[20] namely –
(a) hearing the evidence in its entirety;
(b)hearing and seeing the evidence in context, chronologically and logically advanced;
(c)having time during adjournments as well as during the running of the case to reflect upon the evidence and to weigh it against all other evidence while fresh;
(d)hearing and seeing interruptions, hesitations and delays in the giving of testimony; and
(e)observing body language.
[20] (1990) 19 NSWLR 263
In AKD16 v Minister for Immigration and Border Protection[21] I wrote at length about witness demeanour and conclusions that can be legitimately drawn from demeanour.
[21] (2016) 315 FLR 228
In cross-examination the applicant reluctantly admitted to having been a bankrupt herself. She also told me she was a barrister, practising at the Queensland Bar. But when she was pressed about the details of her career as a legal practitioner she said she had been admitted to practise in Victoria, then she took an extended period of time out of the law, returned, relocated to Brisbane and had been in active practice as a barrister in Queensland for about a month. That explained her presentation of the case. The applicant was in fact a litigant in person. But it was a mistake to attribute to her the forensic and advocacy skills of a barrister.
As a witness, the applicant was very difficult. When cross-examined she fought with Mr Fary, often disputing the relevance of the question put to her. She did not answer questions freely, preferring instead to anticipate where she believed the question was going. On several occasions I had to remind the applicant that it was not for her to determine relevance and that she was required to answer proper questions. She had to be forced to concede that she had been adjudged a bankrupt. In answer to many questions she mingled her answers partly with factual material and largely with a submission about her legal position on point.
I did not find the applicant to be an impressive witness. As an advocate in her own cause, she was not a helpful advocate either.
With that lamentably long narrative of the factual issues in this case,
let me now turn to the legal issues.
Claim under s.178 of the Act
The applicant sought a very large sum from the trustees and she relied on the provisions of s.178(1) of the Act as the basis of her claim.
Two things must be said at once about s.178 of the Act.
First, the bringing of any claim in pursuance of that section is subject to a very tight timing limitation under s.178(2) of the Act.
The application must be made not later than 60 days after the day on which the person (here, the applicant) became aware of the trustee’s act, omission or decision. In the passages below I have concluded that the applicant did not comply with that timing requirement.
Second, any person affected by an act, omission or decision of the trustee may apply to the court and the court has power to make such order as the court considers just and equitable. The specific persons named as having the ability to apply to the court in that section are
“the bankrupt, a creditor or any other person affected”by an act, omission or decision of the trustee. The applicant, being the sole creditor in Mr Goodwin’s bankruptcy had standing to bring this application. She was expressly named as a person entitled to apply by reason of her status as a creditor in the bankrupt estate of Mr Goodwin. Self-evidently, she as the sole creditor was a person affected by the decision of the trustees in compromising the litigation with
Ms Soloniewicz.
Section 178 of the Act confers power of widespread application.
As Justice Branson held in Wilson v Commonwealth[22] (“Wilson”), a person affected by an act, omission or decision of the trustee is entitled to apply to the court even if no allegation of error or misconduct on the trustee’s part is made.
[22] [1999] FCA 219.
Certain authority has held that relief under s.178 of the Act is not necessarily predicated upon the trustee having done anything wrong before enlivening the court’s jurisdiction. Gray v Clout[23] (“Gray”) stands for that proposition. Nor is it necessary under s.178 of the Act for the court to limit itself to matters considered by the trustee as the discretion under s.178 is wide enough to permit consideration by the court of matters not raised before the trustee. Frost v Sheahan[24] (“Frost”) held as much.
[23] (1990) 27 FCR 141.
[24] [2008] FCA 1073.
[25] [2001] FCA 7 at [31].
Prior to the enactment of s.178 in its current form, the court would not interfere in matters concerning the exercise of commercial judgment and discretion of trustees, a point addressed by French J (as the
Chief Justice of the High Court of Australia then was) in
Macchia v Nilant[25](“Macchia”). Long-standing English authority of the 19th century held that the court would not interfere unless the trustee was acting in a way that was “so utterly unreasonable and absurd that no reasonable man could so act”. That was taken from the observations of the Court of Appeal (Jessel MR, Brett and Holker LJJ) in Re Peters; Ex parte Lloyd.[26]
[26] (1882) 47 LT 64, 65.
Legislative amendments to the Act eventually took the form of s.148 of the 1924 Bankruptcy Act. The operation of that piece of legislation
was the subject of work undertaken by a committee chaired by
Sir Thomas Clyne and which reported in 1962 having completed its Review of the Bankruptcy Law of the Commonwealth. Section 178 was introduced into the 1966 Bankruptcy Act. By reason of the wording of s.178 of the Act, no longer was it necessary for the applicant for relief to be “aggrieved” and instead, the applicant had to be “affected by the act, omission or decision” about which complaint was made. As French J pointed out in Macchia, application of the section was no longer limited to cases in which the trustee’s
decision was absurd or unreasonable or taken in bad faith.
In Re Tindall; Ex parte Official Receiver[27] Deane J held that the differences in the wording of s.148 of the 1924 Act and s.178 of the 1966 Act were critical. Deane J spoke of s.178 of the Act conferring on the court the “widest possible discretion as to the appropriate order which should be made in the particular case”.[28] The observations of Deane J about the width of the discretion under s.178 of the Act were approved by the Full Court of the Federal Court of Australia in
Re Dingle & Cockerill; Westpac Banking Corporation v Worrell.[29]
A differently constituted Full Court of the Federal Court of Australia similarly approved Deane J’s comments about the width of s.178 of the Act in McGoldrick v Official Trustee in Bankruptcy[30] (“McGoldrick”).
[27] (1977) 30 FLR 6, 9.
[28] Ibid.
[29] (1993) 47 FCR 478, 485.
[30] (1993) 47 FCR 547, 552.
Of s.178 of the Act, the High Court of Australia in Cummings v Claremont Petroleum NL[31] held that it confers “a supervisory jurisdiction over the conduct of the trustee”.[32] French J in Macchia said that s.178 confers a power to “in substance” review the decision of the trustee.[33] That power is necessarily judicial, as was held in
Re Wheeler; Ex parte Wheeler.[34]
[31] (1996) 185 CLR 124.
[32] (1996) 185 CLR 124, 133.
[33] [2001] FCA 7 at [38].
[34] (1994) 54 FCR 166, 170.
The observations of Pincus J in Gray remain good law so that for the purposes of s.178 of the Act, it remains unnecessary, for the enlivening of the court’s jurisdiction, to find that the trustee has done anything wrong.
In this case, the applicant asserted that the trustees breached a variety of duties. Whether s.178 of the Act can be enlivened to
pursue such a claim was considered by French J in Macchia. There,
his Honour held that a trustee’s duties are to administer the estate in accordance with the Act and rules “in the interests of the creditors and the bankrupt”.[35] Citing Adsett v Berlouis[36] (“Adsett”), French J in Macchia held as follows –
It is the trustee’s obligation to administer the estate so as to maximise the return from its assets and so maximise the return to creditors and any possible surplus to the bankrupt – Adsett v Berlouis.[37]
[35] [2001] FCA 7 at [43].
[36] (1992) 37 FCR 201.
[37] [2001] FCA 7 at [43].
French J addressed whether s.178 of the Act could be utilised to make good any loss the estate had sustained. His Honour held as follows –
Where a trustee has been guilty of a breach of duty in relation to the bankrupt's estate or affairs the Court may make an order, under s176, directing the trustee to make good any loss the estate has sustained because of that breach of duty. Such an order could also no doubt be made under s178.[38]
[38] Ibid.
Citing the observations of Branson J in Wilson, French J held in Macchia that s.178 of the Act does not create a cause of action which sounds in damages. Importantly, his Honour held as follows –
The history and purposes of s178 stamp it, like s179, as a supervisory provision in relation to the discharge of the trustee's duties under the Act. It provides what is in substance a power to review acts, omissions or decisions of the trustee. It does not provide a basis upon which a bankrupt can claim damages generally for any alleged breach of duty by the trustee.[39]
[39] [2001] FCA 7 at [46].
Helpful observations on the operation of s.178 of the Act were made by Besanko J in Frost where his Honour set out five numbered propositions of relevant legal principles governing applications under s.178 of the Act.[40] Those five points were embraced by the Full Court of the Federal Court in Frost v Sheahan.[41]
[40] [2008] FCA 1073 at [34].
[41] [2009] FCAFC 20.
In Chase v Donnelly,[42] Allsop J (as the Chief Justice then was) held that in an application under s.178 of the Act, due weight should be given to not interfering with the day-to-day administration of the estate. Any such undue interference might make the role and work of the trustee unmanageable.
[42] [2002] FCA 1565.
The applicant at all times bore the onus of showing the existence of a ground on which the trustees’ administration ought to be reviewed,
as was held in Healey v Prentice (No 2)[43] (“Healey”).
[43] [2000] FCA 1598.
Section 178 of the Act is predicated upon the court considering what order is just and equitable. Relief can be refused on the basis that it would be unjust and inequitable to permit an applicant to have the benefit of an order overturning the trustee’s decision due to a lengthy and unexplained delay in seeking s.178 relief, and the entitlement of the bankrupt and his trustee to expect “closure” after discharge from bankruptcy.
In Health Insurance Commission v Trustee in Bankruptcy of the Estate of Alekozoglou,[44] Marshall J held that s.178 of the Act does not require the court to form any concluded view on whether the trustee was wrong, as a matter of law, to have done what the trustee did. In that case, the alleged error was refusing to accept the withdrawal of a proof of debt. In that case, the Health Insurance Commission sought to prove a debt and received two dividends. The fact of receipt of two dividends and the distribution of a final dividend rendered it unjust and inequitable to permit the Health Insurance Commission to have the benefit of an order overturning the trustee’s decision. The delay in making the application also counted against the Health Insurance Commission. Marshall J refused the application made under s.178 of the Act.
[44] [2003] FCA 848.
Section 178 of the Act requires the applicant to apply under that section within 60 days from the date when the applicant became aware of the act, omission or decision complained of. That said, the court possesses a discretion under s.33(1) of the Act to extend that time limit, a point considered by Jagot J in Kerr v Bechara.[45]
[45] [2015] FCA 284.
In this case, the applicant filed her application to commence this proceeding on 12 September 2014. In paragraph 1 of the application she sought an order, pursuant to s.178, that the respondents “repay to the estate of Roderick James Goodwin the sum of $156,000.95”.
It was none too easy to know what “act, omission or decision” of the trustees (or one or other of them) was contemplated by the applicant in reference to a claim for $156,000.95.
In her affidavit made 23 January 2014 and filed in support of the application by which the applicant commenced this proceeding,
the applicant did not identify the specific “act, omission or decision” on which she relied in seeking to invoke s.178 of the Act when alleging that the respondents were required to repay the bankrupt estate the sum of $156,000.95.
A fair reading of that affidavit showed that the applicant was dissatisfied with a number of aspects of the way the trustees had administered the estate of Mr Goodwin. They included the following –
a)the fees the trustees rendered that the applicant asserted were duplicated and which included work that was not done, as she alleged in paragraph 8;
b)
the trustees’ request to be provided with a limited indemnity,
as she deposed in paragraph 13;
c)
her concerns about the trustees’ actions on the level of fees,
as the applicant deposed in paragraph 16;
d)her assertion that ICA had, since 2013, done much of the work of the trustees such as correspondence and that such work done by ICA was “within the capacity and duties of the trustees” as deposed in paragraph 17;
e)the applicant’s assertion that on 24 February 2014 she realised that she “had been seriously misled”;[46]
f)her assertion that the trustees did not apply for funding under s.304 of the Act, as alleged in paragraph 28 of her affidavit;
g)
the trustees’ refusal to convene a meeting at her request,
as alleged in paragraph 33 of her affidavit; and
h)the trustees’ settlement of a compromise with Ms Soloniewicz as alleged in paragraph 37 of her affidavit.
[46] Affidavit of Julene Winn sworn 24 January 2014 at [26].
To the extent that the applicant attributed any of the acts recorded in the immediately preceding paragraph to being an “act, omission or decision” of the trustees, the applicant did not attribute a date to the relevant act so it was not possible to be satisfied that the applicant brought any such claim under s.178(1) of the Act within the 60-day period limited by s.178(2) of the Act.
The applicant made very significant alterations to her contentions in the claims she advanced in this case by her amended application filed
27 January 2015. In essence, in her amended application the applicant raised in terms, for the first time, that she sought a declaration under s.178 of the Act that the trustees’ conduct in settling the litigation with Ms Soloniewicz was in breach of the Act, was in breach of the trustees’ duties, was misleading and deceptive to the creditor and was unconscionable to the creditor. Pursuant to s.178(1) of the Act the applicant sought orders compelling the trustees to repay the sum (a different sum this time) of $147,714.87. That sum and the basis on which s.178 of the Act were said to have been enlivened differed to the terms of paragraph 1 of the application by which this proceeding was commenced.
In other words, by that amendment the applicant made an unexplained but very considerable change of direction in the conduct of this case.
The applicant’s application changed yet again in the document styled “further amended application” filed 24 June 2015. In her further amended application the applicant sought in paragraph 3 an order under s.178 or under s.30(1)(b) or under s.176(2)(c) of the Act that the trustees repay $147,714.87 to the bankrupt estate of Mr Goodwin made up of $101,795.63 the trustees allegedly “paid to themselves” and $45,434.60 the trustees allegedly paid to ICA.
In her written submissions filed in support of her contentions at the trial of this proceeding, the applicant relied on s.178 of the Act for review of the trustees’ acts of –
a)paying ICA the sum of $45,434.60 on 20 March 2014; and
b)withdrawing the sum of $101,795.63 reinstate on 20 March 2014.
As the case was lastly cast, the applicant relied on two acts of the trustees when invoking s.178 of the Act. The two acts occurred on
20 March 2014, she said. One related to the trustees paying $45,434.60 to their solicitors ICA. The other related to the trustees appropriating $101,795.63 on account of their fees.
Pausing at that point, the following is a fair distillation of the way the applicant cast her case under s.178 of the Act, at least at trial –
a)the “act, omission or decision” of the trustees was not identified in her application filed on 12 September 2014;
b)
in her amended application filed on 27 January 2015, the
“act, omission or decision”on which she relied was the trustees’ “conduct in relation to the settlement” of proceeding
MLG1417/2013;
c)
in her further amended application filed 24 June 2015, the
“act, omission or decision”was the trustees’ payment of $101,795.63 to themselves on 20 March 2014 and their payment of $45,434.60 to ICA, also on 20 March 2014.
In the final iteration of the claim made under s.178 of the Act,
it seemed tolerably clear that the applicant went to trial in this case making various factual and legal contentions in relation to two payments, both made on 20 March 2014.
Section 178(2) of the Act gave the applicant 60 days of becoming aware of the trustees’ act, omission or decision within which to commence this proceeding. The applicant commenced this proceeding on 12 September 2014 so 60 days prior to that was 12 July 2014.
The applicant had not complied with s.178(2) of the Act if she became aware of the two payments made 20 March 2014 any earlier than
12 July 2014. In my view she had.
According to paragraph 75 of the affidavit of Mr Yeo sworn
19 February 2015, especially the document marked as exhibit
“ARY-43” to that affidavit, Mr Yeo provided a circular to creditors to the applicant dated 26 March 2014. The original of exhibit “ARY-43” was posted to the applicant on 31 March 2014. In the ordinary course of postal delivery, a document posted to her on 31 March 2014 would be taken to have arrived at her address in Strathpine, Queensland a few days after postage. Even allowing a week for delivery, the applicant is to be taken as having received the documents the trustee posted on
31 March 2014 on about 7 April 2014.
Among the documents posted to the applicant on 31 March 2014 was a document entitled “Summary of receipts and payments 31 July 2012 to 24 March 2014”. It was a short document. It read as follows –
RECEIPTS
TOTAL (AUD)
Cash at Bank
1,000.00
Antecedent transaction recoveries
155,000.00
Bank Interest
0.31
156,000.31
PAYMENTS
Realisation Charge (ITSA)
7,329.00
Trustee’s Remuneration
87,698.79
Trustees Expenses
4,842.69
Agents/Valuers Fees (1)
400.00
Legal Disbursements – No GST
410.00
Legal Fees (1)
39,262.30
Legal Disbursements
1,669.15
Petitioning Creditor Cost
1,001.08
Net Receipts/(Payments)
$142,613.01
$13,387.30
GST Receivable/(Payable)
$13,387.30
Cash on Hand
$0.00
The trustees’ remuneration, expenses, disbursements, legal fees and legal disbursements were part of amounts applied in disbursing the amount received from Ms Soloniewicz of $155,000.00.
In other words, on a date in very early April 2014 and not later than
7 April 2014 the applicant must be taken to have received that document. Rule 6.12(a) of the Federal Circuit Court Rules2001 (Cth) make provision for deemed receipt of documents posted.
That document brought to the applicant’s knowledge and the applicant thereby became aware of the application of funds that were recovered by the trustees. Those funds included the amounts the applicant sought in this proceeding. In other words, the applicant was aware of the application of funds of which she complained in this case by
7 April 2014. Under s.178(2) of the Act the applicant had until
7 June within which to bring this proceeding. She commenced this litigation on 12 September 2014, more than three months out of time.
The applicant did not comply with s.178(2) of the Act.
In the applicant’s email to Mr Cull of ICA on 1 March 2014,
the applicant wrote the following terms –
Further, I am doing a PhD on trustees’ administrations and Goodwin’s is one of the case studies included in my thesis.[47]
[47] Exhibit “ARY-39” to the affidavit of Andrew Reginald Yeo sworn 19 February 2015.
It might fairly be inferred that in her doctoral studies the applicant had encountered s.178(2) of the Act. No explanation for the delay in bringing her application was given by her. No application to grant an extension of time was sought.
Even if sought, I would refuse any such application for an extension of time. The applicant has bedevilled the trustees by this litigation for quite long enough. Her conduct in this case was deplorable. Had the trustees sought it, I would have favourably considered an application to declare the applicant a vexatious litigant.
That was sufficient to dispose of the applicant’s claim under s.178 of the Act. The claim was made outside of the time prescribed by s.178(2).
Lest it be said hereafter that the applicant’s claim under s.178(1) of the Act was not considered on its merits, I have set out below my assessments of the merits of her claim under that section.
Counsel for the trustee complained, quite properly, that the applicant had closed her case, she brought no application to re-open and she did not say why it was in the interests of justice that Mr Messenya should be allowed to give whatever evidence she sought to adduce from him.
Ms Curnow, the AGS solicitor who represented Mr Messenya, said she had received no prior communication from the applicant why
Mr Messenya was being called in the first place. At the end of the third day of the trial, I refused the applicant leave to call Mr Messenya.
Ms Curnow sought costs under r.15A.11 and I granted Ms Curnow leave to file submissions in relation to costs.
At the end of the third day of the trial of this proceeding, the applicant had questioned two witnesses called by the trustees, those being
Mr Yeo and Mr Cull. She indicated she wanted to apply to reopen her case so as to adduce evidence from Mr Messenya. Counsel for the trustees agreed to submit Mr Cull for the applicant’s questioning without the need for a formal application to be made to reopen her case. I asked the applicant why she needed to reopen the case to adduce evidence from Mr Messenya. She said that about the time the trustees settled their litigation with Mr Goodwin and Ms Soloniewicz, a complaint was lodged with AFSA and from the end of February until 24 February 2014, AFSA was involved with the trustees. She said she wanted Mr Messenya to tell the court of his involvement, although she said nothing of the details she wanted to ask him so I was no better informed about why she said she needed evidence from Mr Messenya or to which precise point it went.
The applicant also said she did not understand what closing a case meant. The following exchange took place –
HIS HONOUR: Well, what is that you want to extract from the witness?
MS WINN: A complaint was lodged to AFSA around the time when the trustee effected a settlement without my prior knowledge. AFSA were contacted to assist me to obtain some facts and some documents. And AFSA was involved from the end of February until about 24 April in communications with Mr Yeo and I seek to have Mr Messenya give his evidence to the court.
HIS HONOUR: Why? What’s this going to, because there is material presently before me that deals with the involvement of AFSA. In fact, paragraph 71 of Mr Yeo’s affidavit, in fact, speaks of communications on 18 March 2014 between Mr Messenya and you, so ‑ ‑ ‑
MS WINN: Your Honour, that’s Mr Yeo’s version and I think it would be beneficial to the court in this matter to have the evidence of the person at AFSA who was dealing with the trustee during that two month period.
HIS HONOUR: The question is not whether it would be of benefit to me. I’m not conducting a Royal Commission here. I’m determining the rights as between you and the trustee. You’ve had an abundance of time to put on the evidence that you wish to lead in this case. This case has – it began in August of last year. It was heard again in October of last year and here we are on the third day. So the case has spanned more than eight months, more like 10 months, and in that time you have had any number of opportunities to adduce the evidence that you have wished to rely on. On top of that, on 19 August you told me that you closed your case. So I’m struggling to understand at a factual level, to say nothing of the authorities on the point, why I should allow you to reopen this case that has been going for long enough. It was estimated to take half a day and it has now taken three full days.
MS WINN: Your Honour, on the first occasion Mr Yeo didn’t attend. He had a creditor’s meeting, so the court adjourned it.
He wasn’t available for a considerable period of time.
HIS HONOUR: But it has gone for three days. That’s the bottom line. It shouldn’t have gone that long. And within that period of time you’ve had more than enough opportunities to get your house in order, to say nothing of the fact that you closed your case and told me that that was the end of your evidence on 19 August.
MS WINN: Well, I think I’ve misunderstood whether you meant the end of my evidence or the end of my opening.
HIS HONOUR: Ms Winn, you’re a barrister. You should know what closing your case means. I don’t accept what you say.[68]
[68] Transcript of proceedings, 26 April 2017 at pp.91-92.
The applicant said Mr Messenya’s evidence was “extremely valuable” (her words) and that without his evidence her case would be hampered to the point that she was prevented from being able to bring her case. Aside from the outlandish nature of that submission, in reality the applicant was engaging in a fishing expedition with Mr Messenya as she had no actual knowledge of what evidence he proposed to give,
let alone how that evidence would have assisted her case. Counsel for the trustees made submissions that indicated that the applicant had said nothing to show that it was in the interests of justice to give her leave to reopen her case. I refused her leave to reopen her case.
I then gave directions for dates by which the parties were to file submissions. Those directions included directions for AGS to file submissions in relation to the representative of AFSA. Subsequently, AGS indicated that it did not press an application for costs.
The applicant did not file final submissions in accordance with my orders. Instead, despite my having ruled against her on her application to reopen she formally applied by application in a case to reopen. She did not advance grounds that were meaningfully different to those she advanced on day three of the trial. More particularly, she did not explain why she had not adduced the evidence she sought to lead if allowed to reopen in the orderly running of the trial. She said in an affidavit accompanying her reopening application that ill-health had prevented her from preparing final address submissions on time. That was a curious submission because it was readily apparent from the material filed in relation to that application that she had been engaged in litigation in other jurisdictions at the time she should have been preparing her final submissions in this case.
The trustees opposed the applicant’s application to reopen and they opposed the grant of any extension of time for the applicant to file her final submissions.
I invited the applicant, if she wished, to travel from Brisbane to Melbourne in order to argue whether she should have any extension of time to file final submissions. She declined that invitation.
The trustees filed written submissions in accordance with the time specified in my orders dated 26 April 2017.
In the passages above I have addressed how, as a matter of law, trustees are not required to follow the dictates of creditors or even of a single creditor as was the applicant in this case.
It seemed to me that very early in the administration of this estate the applicant formed an unshakeable view about the trustees’ handling of the administration. She micromanaged the trustees’ work. She
second-guessed almost every step they took. She took the view that the trustees were working for her and her alone and that she simply had to benefit financially from the administration. The applicant ignored the fact that the trustees were independent professional officers of the court who owed duties to persons beyond the applicant. She formed an irrational and unsupportable view that she had to take a large amount from the $155,000.00 raised from the settlement of the litigation involving Ms Soloniewicz. The applicant ignored how the trustees were entitled to be paid for their work, as were the trustees’ solicitors entitled to be paid for their work.
The applicant put the trustees to very considerable inconvenience in this litigation. Her application altered in the course of this litigation. She ran the case herself, as was her right, but in the process she compromised objectivity and clear judgment. Any litigant must possess clear judgment at all times when conducting litigation in this court.
The formal order is that this proceeding is dismissed.
I order the applicant to pay the costs of the trustees.
I certify that the preceding one hundred and ninety-seven (197) paragraphs are a true copy of the reasons for judgment of Judge Wilson
Date: 19 October 2017
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