Sol Theo v Official Trustee in Bankruptcy & Ors [1997] FCA 319 (28 April 1997)

CATCHWORDS

PRACTICE & PROCEDURE - Costs of interlocutory proceedings - exercise of appellate jurisdiction by single judge under s.25(2) and Order 52 r.10 - absence of right of appeal - indemnity costs and litigant in person.

Federal Court of Australia Act 1976 , ss. 24(1A), 25(2)(a)

Federal Court Rules, Order 52 r.10

Blair v Curran [1939] HCA 23; (1939) 62 CLR 464

Reid v Nairn (1985) 60 ALR 419

General Motors Holden's Limited v Noack (Smithers, Lockhart and Neaves JJ, unreported 7 March 1986)

Thomas Borthwick & Sons (Pacific Holdings) Ltd v Trade Practices Commission (1988) 18 FCR 424

Currie v The Queen (Burchett, Miles and O'Loughlin JJ, unreported, 6 November 1992)

SOL THEO -V- THE OFFICIAL TRUSTEE IN BANKRUPTCY & ORS

QG 182 of 1996

QG 216 of 1996

Burchett, Drummond and Mansfield JJ

Brisbane

28 April 1997

IN THE FEDERAL COURT OF AUSTRALIA )

) No. QG 182 of 1996

QUEENSLAND DISTRICT REGISTRY ) No. QG 216 of 1996

GENERAL DIVISION

BETWEEN: SOL THEO

Appellant

AND: THE OFFICIAL TRUSTEE IN BANKRUPTCY

First Respondent

AND: ANTHONY JAMES BENNETT and KENNETH PHILP

Second Respondents

CORAM: Burchett, Drummond and Mansfield JJ

PLACE: Brisbane

DATE: 28 April 1997

MINUTE OF ORDERS OF THE COURT

THE COURT ORDERS THAT:

(1) Each of the motion for leave to appeal in respect of the interlocutory orders made by Kiefel J on 20 December 1996 and the motion "for clarification orders in regard to the Full Court of the Federal Court of Australia order of the 7.11.96 and in particular, paragraph 5 of the relevant orders and the whole page of the same Court's findings (page No. 22)" be dismissed;

(2) Sol Theo pay the costs of the Official Trustee in Bankruptcy, Official Receiver in Bankruptcy, and Anthony James Bennett and Kenneth Philp.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA )

) No. QG 182 of 1996

QUEENSLAND DISTRICT REGISTRY ) No. QG 216 of 1996

GENERAL DIVISION

BETWEEN: SOL THEO

Appellant

AND: THE OFFICIAL TRUSTEE IN BANKRUPTCY

First Respondent

AND: ANTHONY JAMES BENNETT and KENNETH PHILP

Second Respondents

CORAM: Burchett, Drummond and Mansfield JJ

PLACE: Brisbane

DATE: 28 April 1997

REASONS FOR JUDGMENT

BURCHETT J:

The reasons I am about to deliver are the reasons of the Court. Two notices of motion are before the Court. By one, Mr Theo, who appears in person, moves for leave to appeal in respect of interlocutory orders made by Kiefel J on 20 December 1996. By the other, he moves "for clarification orders in regard to the Full Court of the Federal Court of Australia order of the 7.11.96 and in particular, paragraph 5 of the relevant orders and the whole page of the same Court's findings (page No. 22)."

There is a background to these motions. As a result of investigations by the Australian Taxation Office in 1983 and 1984, amended assessments of income tax issued against Mr Theo on the assets betterment basis, being subsequently confirmed in substance by the Administrative Appeals Tribunal. While his taxation liabilities were still in question, Mr Theo and his wife, on 27 December 1984, entered into transactions the effect of which was to transfer his half interest in certain lands to her. Then, on 19 October 1990, Mr Theo became bankrupt on his own petition. The sole creditor to prove in his estate was the Commissioner of Taxation, in an amount of $86,975-00. Sometime in 1993, notices issued under s. 139ZQ of the Bankruptcy Act 1966 , by the terms of which Mrs Theo was required to pay just over $100,000-00 on the basis that the transfers were fraudulent dispositions void against Mr Theo's trustee under s. 121 of the Bankruptcy Act. In proceedings brought against the Official Trustee by Mr Theo and the trustees of a trust known as the S. Theo Family Trust, orders were sought under s. 139ZS of the Bankruptcy Act setting aside the notices. The matter was heard by Cooper J, who delivered judgment on 24 August 1995, when he found that the transactions by which Mr Theo disposed of his interest in the lands were entered into in order to defraud his creditors, and that Mrs Theo was not a purchaser for valuable consideration. He concluded that the lands were held beneficially by Mr and Mrs Theo as joint owners. But he also decided that the notices under s. 139ZQ were invalid, and should be set aside. He made it plain that he thought the situation was "amenable to the operation of s. 121 of the Act", but that, of course, was not a question that was before him. Although the notices were set aside, he ordered Mr Theo to pay 80% of the Official Receiver's costs. An appeal against that costs order was dismissed by a Full Court on 23 November 1995.

The next event in the history of the matter was the bringing by the Official Trustee of an application under s. 121 of the Bankruptcy Act in relation to the same lands. On that application, evidence was not again led of the circumstances under which the transfers were executed by Mr Theo and title was taken by Mrs Theo. The Official Trustee simply relied on the findings that had been made by Cooper J in the earlier proceeding. It was claimed that each of these created an issue estoppel. That submission was accepted by Heerey J, who heard the matter, and on 1 August 1996 orders were made appointing trustees for sale, on the basis that Mr Theo had not effectively divested himself of his 50% interest in the lands, because his attempt to do so was fraudulent. An appeal was brought from the orders made by Heerey J, and was allowed by a Full Court (Black CJ, Sackville and Finn JJ) on 7 November 1996. The reason why the appeal succeeded was that the relevant findings made by Cooper J did not found any issue estoppel. That was because they were not "matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion"; they were not matters "the existence of which [was] necessarily decided by the prior judgment, decree or order"; and they were not "facts which [were] necessary steps to the decision - so cardinal to it that without them it [could] not stand". See Blair v Curran [1939] HCA 23; (1939) 62 CLR 464 at 531, 532 (per Dixon J), 510 (per Starke J). As a result, although the application to Cooper J, beyond question, had squarely raised the issue of fraud, and that issue had been determined against Mr and Mrs Theo, they were again successful in defeating the Official Trustee's claim, this time on the ground that the method of proof by way of issue estoppel was not available since Cooper J's clear finding was not "legally indispensable to [his] conclusion" (ibid, at 532), which depended simply on the invalidity of the notices under s. 139ZQ.

The background to the present motions having been explained, it is now possible to understand what they involve. During the pendency of the appeal to the Full Court from the decision of Heerey J, Mr Theo sought to obtain a stay of the orders appointing trustees for sale. It may perhaps be doubted whether he had appropriate standing to do so, since on his case he had validly transferred the lands into the name of his wife, to hold on behalf of the family trust to which reference has been made. At all events, an application for a stay of the orders made by Heerey J on 1 August 1996 was heard by Kiefel J on 2 September 1996. What her Honour described as the "main point" on which Mr Theo based that application was the misconceived proposition that the orders related to the whole of the property, whereas the Official Trustee had been held entitled only to the bankrupt's half share. The application for a stay was dismissed with costs.

However, the matter came back before Kiefel J on 3 October 1996, when her Honour gave a direction the effect of which was to hold matters in statu quo until the determination of the appeal. Various ancillary orders were made, and Mr Theo was ordered to pay the costs of the trustees for sale of the day 3 October 1996 and of an earlier day, 30 September 1996.

When the matter reached the Full Court on 7 November 1996, the Court had before it, in addition to the appeal against the orders made by Heerey J, an application for leave to appeal from the interlocutory orders of Kiefel J, described in the Court's reasons as orders "refusing a stay". The orders made by the Full Court on that day included the allowance of the appeal, the setting aside of declarations and orders made by Heerey J, the dismissal of the Official Trustee's application, orders requiring the Official Trustee to pay Mr Theo's costs of the hearing at first instance and of the appeal, and an order numbered five, expressed in the following terms:

"The application for leave to appeal from the orders of Kiefel J refusing a stay be dismissed."

The only order made by Kiefel J refusing a stay in terms was made on 2 September 1996, although the order of 3 October 1996 dealt with the same issue by a grant of relief that was less than a complete stay.

Perhaps not surprisingly, the reasons of the Full Court delivered on 7 November 1996 deal with the application for leave to appeal quite tersely. Having allowed the appeal, their Honours said (at p. 22 of their judgment):

"The application for leave to appeal from the orders of Kiefel J refusing a stay is refused on the basis that it is unnecessary in view of the other orders we have made."

Although the Full Court referred to "orders", in the plural, made by Kiefel J, it seems to have been understood that the refusal of leave to appeal related to the orders made on 2 September 1996, and did not relate to the orders made on 3 October 1996. Mr Theo made a further application, this time for leave to appeal against the lastmentioned orders, which came before Kiefel J, at a directions hearing, on 20 December 1996. But Mr Theo had apparently had second thoughts, and after some debate during the hearing, he consented to the dismissal of his application. He had initially sought to withdraw it, and he raised no objection to its being dealt with by Kiefel J. On the contrary, he asked her Honour to deal with it, and his belated objection now is without substance, and was not pursued in oral argument. An order was made refusing him leave to appeal from the orders of 3 October 1996, but "reserving only the question as to costs between the Official Trustee and Mr Theo". (As to the reservation, the transcript makes it clear that the costs to which it related were costs of the application for leave to appeal.)

The motion for leave to appeal against the order made by Kiefel J on 20 December 1996 refusing leave to appeal encounters insuperable obstacles, and not only because the order was made on his own application. The jurisdiction which her Honour was exercising was that conferred by a combination of s. 24(1A) and s. 25(2)(a) of the Federal Court of Australia Act 1976. That is appellate jurisdiction, although exercised in a limited category of cases by a single judge, being empowered to do so by special provisions - the provisions cited. It has been decided by a line of cases that where an application is made to a single judge in reliance on s. 25(2) and the appropriate rule of court (Order 52 rule 10), there is no right of appeal from the decision of the judge, nor is there any remaining right to make an application directly to a Full Court: Reid v Nairn (1985) 60 ALR 419 at 421, 425-426; General Motors Holden's Limited v Noack (Smithers, Lockhart and Neaves JJ, unreported, 7 March 1986); Thomas Borthwick & Sons (Pacific Holdings) Ltd v Trade Practices Commission (1988) 18 FCR 424; Currie v The Queen (Burchett, Miles and O'Loughlin JJ, unreported, 6 November 1992). Accordingly, the motion for leave to appeal in respect of the orders made by Kiefel J on 20 December 1996 must be dismissed as incompetent, and Mr Theo should be ordered to pay the costs of the Official Trustee. It should be added that, in any event, no case was made out for leave. Mr Theo appears to think the success of his appeal requires any interlocutory order against him in respect of costs to be set aside. That is simply not so, and nothing has been put before us to suggest error in the original exercise of discretion. It was open to Kiefel J to make, in her discretion, interlocutory orders for costs against any party, and the ultimate success or failure of any party could not be said necessarily to affect any such interlocutory orders that had been made. Indeed, quite frequently, a party who is ultimately successful remains bound to pay costs, even substantial costs, under earlier interlocutory orders.

The other motion before the Court raises a different question. What the applicant is really asserting is that the Full Court, which refused his application for leave on 7 November 1996, made a mistake, and he is asking this Full Court to say so. But we have no jurisdiction to hear an appeal from an earlier Full Court. That, if it chooses to do so, is a matter for the High Court of Australia, should it grant special leave to appeal. The orders of the Full Court have been duly entered. Of course, it retains certain limited powers of correction of errors under the slip rule. But there is no reason to think that anything of that nature occurred in the present case. A grant of leave to appeal against what was simply an exercise of discretion by a judge at first instance in relation to a costs order would be a comparatively rare event. Kiefel J was certainly aware on 2 September 1996 that it was possible the appeal might succeed; she nevertheless thought that in the circumstances, the application for a stay having been brought on a misconceived basis, Mr Theo should be ordered to pay the costs of it. In such a case, the success of the appeal does not lead to the conclusion that there should be leave to bring yet another appeal against her Honour's exercise of discretion. Mr Theo's ultimate escape, by virtue of the Official Trustee's mistakes, from the consequences of the findings of fraud made against him by Cooper J does not in this case entitle him to be permitted to go back for his hat. It should not be overlooked that the Full Court, in refusing the Official Trustee a remittal of the principal proceeding for rehearing, expressly exercised a discretion on the basis that "the point has been reached where an end must be brought to this litigation". That statement in the Court's reasons was followed, almost immediately, by its refusal of leave to Mr Theo. Although the Court commented that its orders made the allowance of a stay "unnecessary", there is no reason to think it had changed its mind about the need for finality, and no reason to think it saw anything to question in Kiefel J's exercise of her discretion. Nor was there any convincing ground to see it as unjust that Mr Theo, who had in two substantial proceedings profited by legal errors on the part of the Official Trustee, should himself be held to a costs order made in an application which he had based inappropriately upon a proposition not sustainable in law.

I will just add a couple of matters. First, Mr Theo has filed by leave an affidavit in which he deposes to not having received the respondent's written submissions within the time fixed by a direction given by Spender J. This is disputed by the respondents' counsel. Mr Theo, however, has presented his argument in support of his applications before this Court. He has not suggested that the late delivery of the written submissions has prejudiced him in presenting his own argument. It is therefore unnecessary to consider further Mr Theo's complaint about this matter.

Next, an application has been made, after the delivery of the reasons of the Court, for costs orders on an indemnity basis in favour of the Official Trustee, Official Receiver, and also (but on the ordinary basis) in favour of the trustees for sale whose entitlement to costs was attacked by the motions. To the extent that any doubt may be raised, the Court notes that the attendance of counsel for the trustees for sale, as well as for the Official Trustee and Official Receiver, was in those circumstances fully justified. However, the Court is not prepared to order costs on an indemnity basis. A litigant in person should not too readily be punished for mere mistakes of a legal nature. At the same time, Mr Theo should understand that unreasonable persistence in claims already dealt with could place him in the position where such an order would become appropriate.

The orders of the Court are that each of the motions dealt with in the reasons delivered on behalf of the Court be dismissed and that Sol Theo pay the costs of the Official Trustee in Bankruptcy, Official Receiver in Bankruptcy, and Anthony James Bennett and Kenneth Philp.

I certify that this and the preceding eight (8) pages are a true copy of the Reasons for Judgment of the Court.

Associate:

Date: 1 May 1997

Appellant: Appellant appeared in person

Counsel for the 1st Respondent: Mr P.E. Hack

Solicitor for the 1st Respondent: Australian Government Solicitor

Counsel for the 2nd Respondents: Mr P.L. O'Shea

Solicitors for the 2nd

Respondents: Bennett & Philp

Date of hearing: 28 April 1997