Young v Hughes Trueman Pty Ltd

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FEDERAL COURT OF AUSTRALIA

Young v Hughes Trueman Pty Ltd [2017] FCA 470

File number(s): NSD 556 of 2017
Judge(s): FARRELL J
Date of judgment: 9 May 2017
Catchwords: BANKRUPTCY – application under s 33(1)(c) of the Bankruptcy Act 1966 (Cth) to extend time specified in s 60(3) of the Bankruptcy Act 1966 (Cth) for trustee to elect to prosecute or discontinue litigation – where trustee neither objects to nor supports extension – where no satisfactory explanation for trustee’s delay in making an election within original 28 day period – where current litigation has no reasonable prospects of success – whether prejudice would be caused by granting or refusing an extension – application dismissed
Legislation: Bankruptcy Act 1966 (Cth) ss 33(1)(c), 60(2), 60(3)
Cases cited:

Abeyratne v Trkulja [1998] FCA 1676; 90 FCR 253

Hughes Trueman Pty Ltd v Young [2017] FCCA 468

Newman v Bain [2013] FCA 558; 213 FCR 370

Reichel v Magrath (1889) 14 App Cas 665

Young v Hones [2014] NSWCA 337

Young v Hones [2015] HCASL 73

Young v Hones [2017] HCASL 27

Young v Hones (No 2) [2014] NSWCA 338

Young v Hones (No 3) [2014] NSWSC 499

Young v Hughes Trueman Pty Ltd [2016] FCA 1176

Young v King [2016] NSWCA 282

Young v King [2017] HCASL 28

Young v King (No 2) [2009] NSWLEC 125

Young v King (No 3) [2012] NSWLEC 42

Young v King (No 4) [2012] NSWLEC 236

Young v King (No 6) [2015] NSWLEC 111

Young v King (No 8) [2015] NSWLEC 187

Young v King (No 9) [2016] NSWLEC 4
Date of hearing: 20, 21 and 28 April 2017
Date of last submissions: 28 April 2017
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Category: Catchwords
Number of paragraphs: 52
Solicitor for the Applicant: Mr R Newell, L.C. Muriniti & Associates
Counsel for the Respondents: Mr S Gray
Solicitor for the Respondents: Kennedys
Table of Corrections
12 May 2017 The following words have been removed from the last sentence of paragraph 47: “and her application for costs against the Kings and 16 non-parties”.

ORDERS

NSD 556 of 2017
BETWEEN:

MARGO YOUNG

Applicant
AND:

HUGHES TRUEMAN PTY LTD

First Respondent

STEPHEN JOHN PERRENS

Second Respondent

JUDGE:

FARRELL J

DATE OF ORDER:

1 MAY 2017

THE COURT ORDERS THAT:

1.The application for an extension of time for the trustee to make an election under s 60(3) of the Bankruptcy Act 1966 (Cth) is dismissed.

2.The respondents’ costs be paid from the appellant’s bankrupt estate.

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


REASONS FOR JUDGMENT

FARRELL J:

  1. On 23 March 2017, a sequestration order was made in relation to Mrs Margo Young’s estate in the Federal Circuit Court of Australia: see Hughes Trueman Pty Ltd v Young [2017] FCCA 468. The debt on the basis of which the sequestration order was made was a lump sum order…

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Details
Case
[2017] FCA 470
Decision Date

CaseChat Overview and Summary

In Young v Hughes Trueman Pty Ltd, the applicant, Mrs Young, sought an extension of time for her trustee to elect to prosecute or discontinue litigation pursuant to section 33(1)(c) of the Bankruptcy Act 1966 (Cth). The trustee had neither objected to nor supported the extension, and no satisfactory explanation was provided for the delay in making an election within the original 28-day period. Additionally, the notified litigation had no reasonable prospects of success. The court had to decide whether prejudice would result from granting or refusing the extension.

The court found that the trustee had not provided a satisfactory reason for the delay in making an election. The trustee had chosen not to appear at the hearing of Mrs Young's application for an extension of time specified in s 60(3) or to support it expressly. The court also determined that none of the notified litigation had any reasonable prospect of success. Consequently, the application for an extension of time for the trustee to make an election under s 60(3) of the Bankruptcy Act 1966 (Cth) was dismissed. The court further ordered that the respondents' costs be paid from the appellant's bankrupt estate.

In conclusion, the court dismissed the application for an extension of time for the trustee to make an election under s 60(3) of the Bankruptcy Act 1966 (Cth). The decision was based on the lack of a satisfactory explanation for the delay in making an election and the absence of reasonable prospects of success for the notified litigation. Additionally, the court ordered that the respondents' costs be paid from the appellant's bankrupt estate.

Orders

Orders of the court

1. The application for an extension of time for the trustee to make an election under s 60(3) of the Bankruptcy Act 1966 (Cth) is dismissed.

2. The respondents’ costs be paid from the appellant’s bankrupt estate.

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

Background

Background to the litigation

The basis asserted by Mrs Young for those motions is that the “conspiracy allegation” has not been litigated in Young v King (No 6), despite repeated submissions by those opposing Mrs Young to that effect. The primary submissions are (as written, footnotes omitted) that: “A conspiracy was never litigated in Young v King no. 6. An examination of the judgment reveals that there was no pleading referred to and no submission which spoke of conspiracy. For the most part, the references to conspiracy were rhetorical utterances quoted by His Honour which fell from the counsel for the Kings. There is no suggestion in the judgment that Mrs Young was alleging a conspiracy or that such a case was before the court”. … In August 2015, Mrs Young brought an application for costs against 18 parties said to be involved in a conspiracy to shift the burden of drainage to her land from the Kings land … Those parties were said to be acting in the interests of the Council and the Council’s agenda. … The conspiracy had resulted in seriously misleading matters being put to the Chief Justice of the Court resulting in a consent dismissal. … Motions to dismiss [Mrs Young’s costs application] were brought by 18 parties. The evidence apart from that already before the court in no. 6 was not read. The motions were dismissed in No 8 and No 9 on the basis that they amount to a (relitigation) abuse of process. In Young v King No’s 8 and Young v King No. 9, Justice Sheahan set out the principles but did not apply them to the facts. The process of application to the facts is a dense matter as the authorities show (see [29] to [30] in Young v King No. 8). The matters are on appeal for that reason alone. But more fundamental is the seemingly straightforward proposition that there cannot be a relitigation of a matter that has never been litigated. … There is no judgement in the LEC which has anything to say about the evidence in connection with the alleged conspiracy … The matter was appealed to the High Court. The High court gave inadequate reasons and on that basis there is proposed a further appeal … In the premises, it may be said that the conspiracy allegation has never been litigated and the evidence never been the subject of consideration. This alone disposes of a suggestion that it would be futile to allow the extension of time. However, it is also submitted that Mrs Young or her trustee must succeed on appeal. … [I]n circumstances such as those, and leaving aside what was actually alleged in Young v King no.6, the High Court has said that (a priori) there cannot be a suggested abuse of process. The relevant authority is Michael Wilson Partners v Nichols. The relevant learning in that case appears at [106] to [110] … Further, given the quantum of money involved, which has been estimated at more than $3,000,000, the recovery is of vital significance to the Applicant. It would be perverse in the known circumstances to describe the Applicant’s desire to protect her recovery of costs as futile … Finally, anything which compromises her position leaves her vulnerable to losing her home. The application is not for a stay pending the appeal. But it has the effect (without any prejudice to anyone) to assist in protecting the subject-matter of the appeal”.BACKGROUNDAppeal against the sequestration order and application for stay

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

It is necessary for Mrs Young to be able to demonstrate that the notified litigation has merit in order to justify a further extension of the time in s 60(3). However, I am not satisfied that any of the notified litigation has any reasonable prospect of success.Costs Decisions In Young v King (No 8), Sheahan J observed at [2]:The consistent claim put to the Court by Young over the years has been that the 2004 decision and orders worked an injustice against her, as a result of an “unlawful means conspiracy” involving the Kings, Warringah Council, and a range of others, devised by the Council from at least 2001, and aimed at forcing an easement and drainage works onto her land. His Honour went on to say at [18]-[31]:18 The central argument is that Young’s broad costs NOM is an “abuse of process”, as it is “not a proper resort to the Court’s costs jurisdiction”, and “seeks to re-litigate issues decided or barred” by judgment No. 6.19 It fails the test in General Steel Industries Inc v Commissioner for Railways(NSW) (1964) 112 CLR 125 (per Barwick CJ), in that the court can be satisfied that it cannot succeed, and that it would amount to a “collateral attack” on judgment No 6, against which Young has appealed.20 The costs argument against non-parties “threatens to become new and costly satellite litigation”, contrary to the principles in Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300 (see McColl JA at [92]).21 The purpose of a costs order is to compensate a successful party for the expense of conducting the proceedings, not to punish an unsuccessful party: see Latoudis v Casey (1990) 170 CLR 534, and Oshlack v Richmond River Council (1998) 193 CLR 72.22 Nor is its purpose to compensate for loss caused by substantive wrongdoing: Harrison v Schipp [2001] NSWCA 13.23 Costs orders against non-parties are generally “inappropriate”. To achieve one, the circumstances need to be “exceptional” and the court must be satisfied that considerations of justice require it: see Knight v FP Special Assets Ltd (1992) 174 CLR 178, at 192 and 203.24 A clear interest in the subject, and an active role in the conduct of proceedings, would appear to be required (eg. solicitor, insurer, funder, director, receiver): FPM Constructions v City of Blue Mountains [2005] NSWCA 340.25 It is sometimes said that the party against whom costs are claimed has to be “the effective litigant”. In the present case, Mr Newell says Council is the “real party”, aided and abetted by the other respondents (T30.11.15, P59, LL24–25). Orders were entered which ought not have been entered had the respondents done their duty to the Court and not “flagrantly misconducted themselves” (T30.11.15, p58, LL14–16).26 The respondent Griffiths, and the witnesses against whom Young claims, enjoy immunity under the principles in Young v Hones (No 2) [2013] NSWSC 1249, which were not disturbed on appeal by the Court of Appeal (Young v Hones [2014] NSWCA 337). (See Dr Berveling’s submissions, at paras 7 to 12, 12.B and 12.C.)27 Mr Faulkner specifically submits (par 33) that Young’s proposed costs order has nothing to do with the conduct of her two applications to set aside the 2004 orders. The arguments raised by Young in her affidavit and submissions in support of her costs NOM of 20 August 2015 were among those I rejected in judgment No 6, and Mr Newell admitted before the Registrar that the allegations in the present motion are “in essence the same” (T10.9.15, p12, L29).28 I agree with Mr Faulkner and other counsel that there is no basis for an order that the presently moving parties should pay Young’s costs of those applications.29 The issues she raises now have been raised, argued and dealt with by the Court, and, if there were others she wanted to raise, she should [have] taken the ample opportunity she was given to do so. As I warned her in 2012 (in judgment No 4 [2012] NSWLEC 236, at [26]):Regrettably for Mrs Young, in respect of costs, the High Court has said on many occasions that a party is bound by the conduct of litigation by its legal representatives – eg, University of Wollongong v Metwally (No 2) [1985] HCA 28; (1985) 60 ALR 68, at 71, and Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1; see also the judgment of this court in Bankstown City Council v Mohamed El Dana [2009] NSWLEC 68, at [44]-[55].30 Mr Faulkner relied also in this regard on the principles in Hunter v Chief Constable of the West Midlands Police [1982] AC 529, as applied in Australian estoppel-type cases, such as Rippon v Chilcotin Pty Ltd (“Rippon”) (2001) 53 NSWLR 198 (per Handley JA, with whom Mason P and Heydon JA agreed).31 In Rippon, Handley JA set out the key principles (at [31] – [32]):31 In Haines v Australian Broadcasting Corporation [(1995) 43 NSWLR 404] Hunt CJ at CL distilled the following statement of principle from the authorities:“There are obviously limitations to striking out pleadings or causes of action as an abuse of process upon the basis stated in Reichel v Magrath [(1889) 14 APP CAS 665] … The issue determined in the earlier case which is sought to be litigated in the later case must be one which the party propounding it in the latter lost in the former … It must be an issue which was necessarily determined in the earlier case, and one of importance to the final result. It must have been properly argued — by which I mean that … the tribunal which decided it was an appropriate one to do so, that the parties were appropriate contradictors and that the issue was regarded by them as one of importance … In normal circumstances, the decision disposing of the issue must have been a final one … There may also be circumstances in which, notwithstanding the absence of an appeal, it is clear that the earlier decision has overlooked some binding authority, or that it has caused the unsuccessful party a manifest injustice … all the circumstances of the determination in the earlier case may be considered … .”32 In State Bank of New South Wales Ltd v Stenhouse Ltd (1997) Aust Torts Reports 81–423 (64,077) at 64,089, another case involving abuse of process in seeking to re-litigate an issue, Giles CJ Comm D said:“… The guiding considerations are oppression and unfairness to the other party to the litigation and concern for the integrity of the system of administration of justice, and amongst the matters to which regard may be had are —(a)the importance of the issue in and to the earlier proceedings, including whether it is an evidentiary issue or ultimate issue;(b) the opportunity available and taken to fully litigate the issue;(c) the terms and finality of the finding as to the issue;(d)the identity between the relevant issues in the two proceedings;(e) any plea of fresh evidence, including the nature and significance of the evidence and the reason why it was not part of the earlier proceedings; …(f)the extent of the oppression and unfairness to the other party if the issue is relitigated and the impact of the relitigation upon the principle of finality of judicial determination and public confidence in the administration of justice; and(g)an overall balancing of justice to the alleged abuser against the matters supportive of abuse of process.”

Ratio Decidendi

Legal Principle Established

I accept that these are relevant considerations for the disposition of this application.CONSIDERATION In submissions, Mr Newell challenged the appropriateness of the respondents attending and resisting the orders sought by Mrs Young. On an application which would otherwise be ex parte but which clearly affects the interests of all creditors of Mrs Young’s bankrupt estate, it is entirely appropriate that the Court be assisted by a contradictor.Is there an adequate reason for delay? The Court was offered no reason, let alone a satisfactory one, for the trustee’s delay in making an election in relation to the litigation notified to it by the Kennedys letter. There is no evidence that the trustee, rather than the bankrupt, seeks more time to consider the LEC Costs Appeals or the Show Cause Application. The trustee chose not to appear at the hearing of Mrs Young’s application for an extension of the time specified in s 60(3) or to support it expressly. The trustee has simply raised no objection when pressed with the bankrupt’s proposal that the trustee be given a further 28 days from 1 May 2017 to consider its position; 32 days having then passed since the date of the Kennedys letter. There is no indication that the trustee has turned its mind to how long it might, in fact, require to decide how or whether it will make an election in relation to the notified litigation. Mr Muriniti’s email to Mr Rowland would suggest that no materials had been provided by Mrs Young’s advisors to the trustee at the time that Mrs Young’s application for an extension of the time in s 60(3) was set down for hearing on 28 April 2017, which was more than 28 days after the Kennedys letter. These matters weigh against the grant of an extension of time.Merit of the notified litigation It is necessary for Mrs Young to be able to demonstrate that the notified litigation has merit in order to justify a further extension of the time in s 60(3). However, I am not satisfied that any of the notified litigation has any reasonable prospect of success.Costs Decisions In Young v King (No 8), Sheahan J observed at [2]:The consistent claim put to the Court by Young over the years has been that the 2004 decision and orders worked an injustice against her, as a result of an “unlawful means conspiracy” involving the Kings, Warringah Council, and a range of others, devised by the Council from at least 2001, and aimed at forcing an easement and drainage works onto her land. His Honour went on to say at [18]-[31]:18 The central argument is that Young’s broad costs NOM is an “abuse of process”, as it is “not a proper resort to the Court’s costs jurisdiction”, and “seeks to re-litigate issues decided or barred” by judgment No. 6.19 It fails the test in General Steel Industries Inc v Commissioner for Railways(NSW) (1964) 112 CLR 125 (per Barwick CJ), in that the court can be satisfied that it cannot succeed, and that it would amount to a “collateral attack” on judgment No 6, against which Young has appealed.20 The costs argument against non-parties “threatens to become new and costly satellite litigation”, contrary to the principles in Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300 (see McColl JA at [92]).21 The purpose of a costs order is to compensate a successful party for the expense of conducting the proceedings, not to punish an unsuccessful party: see Latoudis v Casey (1990) 170 CLR 534, and Oshlack v Richmond River Council (1998) 193 CLR 72.22 Nor is its purpose to compensate for loss caused by substantive wrongdoing: Harrison v Schipp [2001] NSWCA 13.23 Costs orders against non-parties are generally “inappropriate”. To achieve one, the circumstances need to be “exceptional” and the court must be satisfied that considerations of justice require it: see Knight v FP Special Assets Ltd (1992) 174 CLR 178, at 192 and 203.24 A clear interest in the subject, and an active role in the conduct of proceedings, would appear to be required (eg. solicitor, insurer, funder, director, receiver): FPM Constructions v City of Blue Mountains [2005] NSWCA 340.25 It is sometimes said that the party against whom costs are claimed has to be “the effective litigant”. In the present case, Mr Newell says Council is the “real party”, aided and abetted by the other respondents (T30.11.15, P59, LL24–25). Orders were entered which ought not have been entered had the respondents done their duty to the Court and not “flagrantly misconducted themselves” (T30.11.15, p58, LL14–16).26 The respondent Griffiths, and the witnesses against whom Young claims, enjoy immunity under the principles in Young v Hones (No 2) [2013] NSWSC 1249, which were not disturbed on appeal by the Court of Appeal (Young v Hones [2014] NSWCA 337). (See Dr Berveling’s submissions, at paras 7 to 12, 12.B and 12.C.)27 Mr Faulkner specifically submits (par 33) that Young’s proposed costs order has nothing to do with the conduct of her two applications to set aside the 2004 orders. The arguments raised by Young in her affidavit and submissions in support of her costs NOM of 20 August 2015 were among those I rejected in judgment No 6, and Mr Newell admitted before the Registrar that the allegations in the present motion are “in essence the same” (T10.9.15, p12, L29).28 I agree with Mr Faulkner and other counsel that there is no basis for an order that the presently moving parties should pay Young’s costs of those applications.29 The issues she raises now have been raised, argued and dealt with by the Court, and, if there were others she wanted to raise, she should [have] taken the ample opportunity she was given to do so. As I warned her in 2012 (in judgment No 4 [2012] NSWLEC 236, at [26]):Regrettably for Mrs Young, in respect of costs, the High Court has said on many occasions that a party is bound by the conduct of litigation by its legal representatives – eg, University of Wollongong v Metwally (No 2) [1985] HCA 28; (1985) 60 ALR 68, at 71, and Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1; see also the judgment of this court in Bankstown City Council v Mohamed El Dana [2009] NSWLEC 68, at [44]-[55].30 Mr Faulkner relied also in this regard on the principles in Hunter v Chief Constable of the West Midlands Police [1982] AC 529, as applied in Australian estoppel-type cases, such as Rippon v Chilcotin Pty Ltd (“Rippon”) (2001) 53 NSWLR 198 (per Handley JA, with whom Mason P and Heydon JA agreed).31 In Rippon, Handley JA set out the key principles (at [31] – [32]):31 In Haines v Australian Broadcasting Corporation [(1995) 43 NSWLR 404] Hunt CJ at CL distilled the following statement of principle from the authorities:“There are obviously limitations to striking out pleadings or causes of action as an abuse of process upon the basis stated in Reichel v Magrath [(1889) 14 APP CAS 665] … The issue determined in the earlier case which is sought to be litigated in the later case must be one which the party propounding it in the latter lost in the former … It must be an issue which was necessarily determined in the earlier case, and one of importance to the final result. It must have been properly argued — by which I mean that … the tribunal which decided it was an appropriate one to do so, that the parties were appropriate contradictors and that the issue was regarded by them as one of importance … In normal circumstances, the decision disposing of the issue must have been a final one … There may also be circumstances in which, notwithstanding the absence of an appeal, it is clear that the earlier decision has overlooked some binding authority, or that it has caused the unsuccessful party a manifest injustice … all the circumstances of the determination in the earlier case may be considered … .”32 In State Bank of New South Wales Ltd v Stenhouse Ltd (1997) Aust Torts Reports 81–423 (64,077) at 64,089, another case involving abuse of process in seeking to re-litigate an issue, Giles CJ Comm D said:“… The guiding considerations are oppression and unfairness to the other party to the litigation and concern for the integrity of the system of administration of justice, and amongst the matters to which regard may be had are —(a)the importance of the issue in and to the earlier proceedings, including whether it is an evidentiary issue or ultimate issue;(b) the opportunity available and taken to fully litigate the issue;(c) the terms and finality of the finding as to the issue;(d)the identity between the relevant issues in the two proceedings;(e) any plea of fresh evidence, including the nature and significance of the evidence and the reason why it was not part of the earlier proceedings; …(f)the extent of the oppression and unfairness to the other party if the issue is relitigated and the impact of the relitigation upon the principle of finality of judicial determination and public confidence in the administration of justice; and(g)an overall balancing of justice to the alleged abuser against the matters supportive of abuse of process.”