Agresta v Taylor

Facts 9 The applicant is an undischarged bankrupt, following a sequestration order made against him in June 2010. 10 The respondent was the trustee of the applicant's bankrupt estate from the making of the sequestration order until March 2014. In March 2014, the Official Trustee replaced the respondent as trustee.

Circumstances leading to dismissal of District Court proceedings 11 The applicant does not dispute the primary judge's account of the relevant factual background. Relevantly, during 2009, a company represented by the applicant and called Phoenix Commercial Enterprises Pty Ltd ("Phoenix") entered into an agreement with the owners of a property in Mosman, David Kidd and Odele Smith ("owners"), in connection with the carrying out of building work. The owners subsequently entered into a building contract with another company associated with the applicant, Escon Pty Ltd ("Escon"). The arrangements between Escon as builder and the owners as clients were made after the applicant had been declared bankrupt. Disputes between the applicant, Phoenix, Escon and the owners led to proceedings in the Consumer, Trader and Tenancy Tribunal ("CTTT"). The CTTT proceedings were between Escon, represented by the applicant, and the owners. On 19 March 2013, the CTTT decided that Escon could not succeed in its claims against the owners. 12 On 2 June 2013, the applicant entered into a deed with Escon ("first Escon deed"). The deed provided relevantly: 1. AGREEMENTS 1.1 [Escon] and Mr Agresta agree that on execution of this Deed Mr Agresta will pay to [Escon] the amount of ten dollars ($10) which [Escon] and Mr Agresta on signing this Deed acknowledge that Mr Agresta paid to [Escon]. 1.2 [Escon] and Mr Agresta agree that [Escon] is not or to be held liable for any action commenced or pursued by Mr Agresta and any liability or debt incurred pursuant to any action taken by Mr Agresta is a a debt solely due and payable by Mr Agresta and no debt is due or payable by [Escon]. 2. ASSIGNMENT 2.1 In consideration of the amount set out in sub-paragraph 1.1 and the matter in sub-paragraph 1.2, [Escon] assigns to Ferdinando Agresta absolutely: (a) all of [Escon's] rights, title, interest, capacity and/or chose in action regarding the Applications and the contract dated 17 November 2010 a copy of which is attached to this Deed and the Tax Invoice dated 2 August 2012 that remains unpaid by [the owners] a copy of which is attached to this Deed; and (b) all rights to any costs, interest amount and damages payable by anyone pursuant to any action taken by Mr Agresta regarding the matter set out in sub-paragraph 2.1(a). 13 On 11 June 2013, the applicant commenced the District Court proceeding appealing against the CTTT's decision. The other party to the District Court proceeding as commenced was the CTTT. Subsequently, the applicant caused the owners to be substituted for the CTTT as defendants to the proceeding. 14 The applicant did not inform the respondent of the commencement of the District Court proceeding. The respondent received notice of the proceeding from the solicitors for the owners on 19 July 2013. 15 On 24 July 2013, the respondent swore an affidavit in the District Court proceeding in which he deposed to the following matters: a. the bankruptcy of the applicant and the respondent's appointment as his trustee in bankruptcy; b. that, as an uncharged bankrupt, the applicant required the respondent's consent in order to commence any proceedings that would relate to his divisible property or provable debts; c. that all of the applicant's property was vested in him pursuant to s 58(1) and s 116(1) of the Bankruptcy Act; d. that the respondent had not consented and did not consent to the District Court proceeding being brought by the applicant; e. that the respondent had seen a copy of the first Escon deed, that the applicant did not have the power to enter into that deed and take an assignment of the rights of Escon (if any) without the respondent's consent or approval, and that the respondent did not and had not consented to or approved the assignment referred to in that deed; f. that, to the extent that the first Escon deed was effective, it was property that vested in the respondent pursuant to s 58(1) and s 116(1) of the Bankruptcy Act. 16 On 25 July 2013, the respondent attended a directions hearing in the District Court proceeding, and executed a consent order by which the District Court proceeding was dismissed ("consent order"). Although the matter had been listed for directions at 2.00 pm that day, the District Court changed the time of the directions hearing to 9.30 am. The applicant was not present when the consent order was made because he understood the matter to be listed at 2.00 pm.

Events following dismissal of District Court proceeding 17 On 20 September 2013, the applicant commenced the proceeding below. 18 In November 2013, the creditors of the applicant (who appear to be members of the applicant's family including his son, Joel Agresta) passed the following resolution at a creditors' meeting: [The appellant] entered into, held at all material time and continues to hold the Deeded dated 2 July 2013 [sic] between [Escon] and [the appellant] in trust for Joel Agresta. As such the Deed was not and is not property divisible amongst the creditors of [the appellant]. The [respondent] is not authorised to make any decisions or take any action regarding the deed. 19 On 26 February 2014, the applicant entered into a second deed with Escon which provided: RECITALS: A. By agreement made on 2 June 2013 the parties agreed to do all things that another party from time to time reasonably requires to effect, perfect or complete the provisions of the Deed made on 2 June 2013 and to execute all such documents. B. Mr Agresta seeks to have the Deed dated 2 June 2013 amended to effect, perfect or complete the provisions of the Deed. C. On and prior to 2 June 2013 [Escon] knew that Mr Agresta was a bankrupt and was to hold the Deed in trust for Mr Joel Agresta. D. The parties have agreed that the Deed dated 2 June 2013 is amended by any variation as hereinafter appears with an amendments effective as at 2 June 2013. … RECITALS: A. On and prior to 2 June 2013 [Escon] knew that Mr Agresta was a bankrupt and was to hold the Deed in trust for Mr Joel Agresta. B. [Escon] lodged two (2) applications (the "Applications") with the Consumer, Trader & Tenancy Tribunal (the "CTTT"). The Applications are identified as CTTT File No: HB 12/46759 and HB 13/19233 respectively. C. A question [Escon] put to the CTTT for adjudication and determination was thus: "Did the Project Manager have the authority to act for the Consumer?" D. The answer to that question required the CTTT to determine: "Who was the Project Manager?" E. The Respondent to the Applications claimed that Mr Agresta was the Project Manager. F. Mr Agresta denied and continues to deny the Respondent's claims and says that Phoenix Commercial Enterprises Pty Ltd ("Phoenix") was the Project Manager. G. As at the date of this Deed the CTTT has not determined whether Phoenix or Mr Agresta was the Project Manager. H. Until the second question is determined it may be inferred that Mr Agresta was the Project Manager. I. Mr Agresta is seeking a determination to the second question and such other questions that may arise. J. [Escon] does not have the time or the financial capacity to pursue the Applications or proceedings regarding the Applications. K. The parties have agreed to enter into this Deed to enable Mr Agresta to pursue the Applications and to take whatever action Mr Agresta decides regarding the Applications and to formalise arrangements SUBJECT TO [Escon] incurring NO LIABILITY or debt arising from any action taken by Mr Agresta or by Mr Joel Agresta. … 1. AGREEMENTS 1.1 [Escon] and Mr Agresta acknowledge and agree that Mr Agresta paid to the Company the amount of ten dollars ($10) on execution of the Deed. 1.2 [Escon] and Mr Agresta agree that [Escon] is not or to be held liable for any action commenced or pursued by Mr Agresta or by Mr Joel Agresta and any liability or debt incurred pursuant to any action taken by Mr Agresta is a debt solely due and payable by Mr Joel Agresta and no debt is due or payable by [Escon] or by Mr Agresta. 2. ASSIGNMENT 2.1 In consideration of the amount set out in sub-paragraph 1.1 and the matter in sub-paragraph 1.2, [Escon] assigns to Mr Agresta absolutely: (a) all of [Escon's] rights, title, interest, capacity and/or chose in action regarding the Applications and the contract dated 17 November 2010 a copy of which is attached to this Deed and the Tax Invoice dated 2 August 2012 that remains unpaid by [the owners] a copy of which is attached to this Deed; and (b) all rights to any costs, interest amount and damages payable by anyone pursuant to any action taken by Agresta regarding the matter set out in sub-paragraph 2.1(a). … 4.2 Any rights, title, interest, capacity and/or chose in action is to be pursued by Agresta in his own name or as may be otherwise required at law. 4.3 The parties acknowledge and agree that Mr Agresta holds the Deed in trust for Mr Joel Agresta. 20 The applicant took no steps to stay or set aside the order dismissing the District Court proceeding, or to claim the same relief in fresh proceedings.

Relief sought in the proceeding below 21 By an amended application filed on 11 December 2013, the applicant sought orders: 1. setting aside: a. the decision made on or about 24 July 2013 by [the respondent] regarding the application by Mr Agresta filed on 18 July 2013 in the District Court proceeding; b. any act and decision made by [the respondent] regarding the Escon deed; c. the decision made on or about 25 July 2013 by [the respondent] regarding the consent order; and d. the consent order; and 2. transferring to the Supreme Court of New South Wales, or alternatively, remitting to the District Court, the District Court proceeding for listing and directions. 22 At [10] of the judgment below, the primary judge referred to other relief sought by the applicant at the hearing in the proceeding below. Those aspects of the applicant's claim are not relevant to the proposed appeal. 23 At [41] and following, the primary judge addressed other matters raised by the applicant during the hearing, which are mainly irrelevant to the proposed appeal. Of relevance to grounds 6 to 10 of the proposed notice of appeal, the primary judge referred at [44] to written submissions made by the applicant containing allegations against the owners, and inviting the Court to locate within the file of the CTTT certain affidavits of the owners and make serious findings against them.

Respondent's conduct 24 The primary judge noted that the provision which founded the applicant's application for relief was s 178(1) of the Bankruptcy Act. The applicant does not dispute that this provision is the relevant source of the Court's power to grant relief. 25 At [22], the primary judge concluded that there was only one properly arguable issue in the proceeding, namely whether it is just and equitable for any order to be made under s 178(1) "in respect of the act of the respondent of entering into the consent orders to dismiss the District Court proceedings". 26 Before this Court, the applicant did not dispute the correctness of that conclusion. 27 At [23], her Honour referred to the applicant's contention that the assignment to him of the choses in action vested in Escon under the first Escon deed was in his capacity as trustee for his son, Joel Agresta. The applicant's case was that all rights against the owners which Escon held were vested in the applicant as trustee for his son and did not form part of the applicant's property vested in the respondent. 28 At [26], her Honour found that the asserted trust did not exist for nine reasons she set out at [27] to [36]. It followed (at [36]) from the conclusion that there was no trust, that the property under the first Escon deed was after-acquired property within the meaning of s 116(1)(a) of the Bankruptcy Act which vested in the respondent as trustee by operation of s 58(1)(b) of that Act. 29 It also followed (at [36]) that: a. the applicant was not entitled to bring the District Court proceeding without the respondent's consent; and b. by s 134 of the Bankrutpcy Act, there was vested in the respondent as trustee the rights to "compromise any debt claimed to be due to the bankruptcy or any claim by the bankrupt" and "bring, institute or defend any action or other legal proceeding relating to the administration of the estate" (s 134(1)(e),(j)). 30 The proposed notice of appeal did not take issue with her Honour's reasons concerning any of the conclusions set out above. However, in his written submissions, the applicant contended that, by reason of certain matters including the operation of the s 12 of the Conveyancing Act 1919 (NSW) ("Conveyancing Act"), and the form of the notices of assignment, the assignment was effectual in law. The notices of assignment referred to the asserted trust. The submission seemed to be that, if the primary judge had considered the question of the effectiveness of the assignment, then she would have been driven to conclude from the notices of assignment that the asserted trust had been created. 31 As to the trustee's conduct in procuring the dismissal of the District Court proceeding, her Honour said (at [36] and [37]): [36]…As the respondent submitted, these powers [ss 134(1)(e) and 134(1)(j)] are to be exercised to best achieve the maximum return to creditors and surplus to the bankrupt. Nothing in the evidence in this matter suggests that the decision the respondent made, to have the District Court proceedings dismissed, was other than the correct and preferable decision in all of the circumstances. Nothing would support the conclusion that it would be just and equitable to set aside the decision of the respondent to enter into the consent orders to dismiss the District Court proceedings or otherwise to make any of the orders the applicant seeks. To the contrary the reasons the respondent gave for having acted to consent to the dismissal of the District Court proceedings on the basis of no order as to costs provide compelling evidence of the wisdom of this course. The respondent said he had made his decision taking into consideration: (a) The rights acquired under the Deed by the Applicant vested in me pursuant to Section 58 of the Act. (b) The Applicant's bankrupt estate had no funds. If I was joined as a party to the District Court proceedings there was the potential for the bankrupt estate and me personally to be exposed to adverse cost orders. (c) Without legal advice, I had no appreciation as to the likelihood of the success or otherwise of the Appeal. (d) It appeared to me that clause 1.2 of the Deed provided for an indemnity to Escon from any claims arising from any action commenced by the Applicant. [37] The applicant's submissions, to the effect that the respondent should have approached a litigation funder for funding to determine the prospects of success of the District Court proceedings, are not persuasive. There was no proper basis for the respondent to do anything other than what he did. The applicant's conduct in commencing the District Court proceedings was improper. There was nothing to suggest any substance in the proceedings. There were no funds available. Pursuing litigation funding is fanciful speculation after the event.

District Court's jurisdiction 32 Before the primary judge, the applicant contended that the District Court did not have jurisdiction to make the consent orders dismissing the District Court proceeding because, in doing so, the Court was deciding a matter in bankruptcy which was a matter within the exclusive jurisdiction of this Court. At [38], the primary judge rejected this contention for the following reasons: a. The applicant himself commenced the proceeding on the basis that it did not involve anything to do with his bankruptcy; b. The District Court proceeding as constituted "said nothing about the Bankruptcy Act"; c. The trustee simply exercised his powers under s 134(1) of the Bankruptcy Act to compromise the proceeding; d. The District Court had the right to control its own process and to decide what to do with the proceeding before it irrespective of the fact that the respondent's conduct involved an exercise of power under the Bankruptcy Act. In this regard, her Honour applied the reasoning of Branson J in Meriton Apartments Pty Ltd v Industrial Court of New South Wales (2008) 171 FCR 380 at [8] and [18].

Allegations against the owners 33 Concerning the applicant's request to locate certain affidavits of the owners and to make serious findings against them, the primary judge said (at [44]): The impropriety of this course should be obvious. First, this proceeding is not an appeal against the decisions of the CTTT, despite the applicant's attempts to make it so. Second, and as noted, [the owners] are not parties to this proceeding. Third, the fact that this Court's Registry acceded to the applicant's request and obtained the CTTT file from the CTTT does not mean that the CTTT's file is before this Court. This is not a matter of this Court "shutting its eyes" to anything, as the applicant alleged. It is a matter of the applicant inappropriately attempting to appeal against the decision of the CTTT to this Court.

Applicant's proposed grounds of appeal and submissions 34 The applicant did not make either written or oral submissions in support of any of the grounds set out in the proposed notice of appeal.

District Court's jurisdiction (grounds 1 to 4 of proposed notice of appeal) 35 The first four of the applicant's proposed grounds of appeal are directed to the primary judge's conclusion that the District Court had jurisdiction to make the orders dismissing the District Court proceedings. They are that the primary judge erred in: 1. holding that the grant of exclusive jurisdiction in bankruptcy to the Federal Court and the Federal Magistrates meant that the District Court exceeded its jurisdiction in determining the application brought by the respondent "on a matter in bankruptcy being that title to the Deed entered into by the bankrupt vested with the trustee"; 2. failing to find that the District Court had no jurisdiction to determine the application brought by the respondent "on a matter in bankruptcy being that title to the Deed entered into by the bankrupt vested with the trustee"; 3. holding that the District Court in making the consent order had to make a decision "on a matter in bankruptcy being that title to the Deed vested with the trustee and in so doing exceeded its jurisdiction" for which the Federal Court and Federal Magistrates Court had exclusive jurisdiction; 4. failing to find that the consent order could not have been made without a prior decision regarding a matter in bankruptcy being that the title to the Deed entered into by the bankrupt vested with the trustee and in making that decision the District Court exceeded its jurisdiction as the Federal Court and Federal Magistrates Court had exclusive jurisdiction for making such decision. 36 The primary judge was plainly correct to conclude for the reasons given that the District Court had jurisdiction to make the consent order. Ordinarily, a court ought to make any consent orders request by competent and interested parties to the proceedings if the orders are within the court's jurisdiction and otherwise appropriate: ACCC v Real Estate Institute of Western Australia (1999) 161 ALR 79. It was not an exercise of jurisdiction in bankruptcy for the District Court to determine that the respondent was such a competent and interested party. Equally, the District Court had jurisdiction to set aside the consent order, which jurisdiction the applicant did not invoke. 37 These grounds of appeal have no prospects of success.

Consent orders a nullity (grounds 5 and 6 of proposed notice of appeal) 38 Grounds 5 and 6 of the applicant's proposed grounds of appeal are that the primary judge erred in either not holding,1 or failing to find that the consent order "is a nullity and of no force or effect and is set aside". 39 The primary judge's reasons did not address the question whether the consent order was a "nullity" or "of no force or effect". The applicant's written submissions in the proceeding below contended that the consent order was "invalid and of no effect" because the District Court did not have jurisdiction to make the order. Since the primary judge was correct to conclude that the District Court had jurisdiction, the premise of the applicant's contention is not made out. Accordingly, these grounds raise no question of any appellable error on the part of the primary judge.

Failure to refer the owners to the DPP (grounds 7 to 10 of proposed notice of appeal) 40 Grounds 7 to 10 of the applicant's proposed grounds of appeal allege that the primary judge erred in failing to find that the owners made false affidavits, and in failing to make orders referring the affidavits together with other material for the Director of Public Prosecutions for the purpose of considering whether either of them should be prosecuted for making a false affidavit.2 41 As noted above, the applicant did not make any submissions to support those grounds of appeal. I did not locate any evidence that the primary judge was asked to make findings and orders of the kind which it is suggested that the primary judge should have made (and erred in failing to make). 42 In any event, as the primary judge observed in relation to other orders sought affecting the owners, their absence as parties to the proceedings made it at the least inappropriate to make such orders. 43 Accordingly, the applicant should not be permitted to bring an appeal based on grounds 7 to 10.

Other matters raised in the applicant's submissions 44 Although they are not referred to in the proposed notice of appeal, I deal with other matters raised by the applicant below.

Potential of District Court proceedings to have adverse effect on bankrupt's estate 45 The applicant argued that the primary judge fell into error by not appreciating that the applicant could not become liable to pay any amount of money, even if ordered to do so by the District Court, given the terms of the first Escon deed, as amended by the second Escon deed. The argument was directed to the reasoning at [36] of the decision below, set out in paragraph 31 above. At paragraph 9 of his written submissions, the applicant said that, by reason of the assignment under the deed: …[the applicant] was not liable for any debt arising from any action pursued by the [applicant]. Hence, there could never be any drain on the [applicant's] estate. 46 This contention is plainly flawed because the deed was made between the applicant and Escon. The owners were not parties to the deed and could not be prevented by it from obtaining a costs order against the applicant in the District Court proceeding.

The finding that the asserted trust did not exist 47 The applicant emphasised the operation of s 12 of the Conveyancing Act. His written submissions said: …there is no mention anywhere in the judgment that the Court below considered s 12 to the Conveyancing Act and thereby failed to consider the facts set out in paragraph 8 above. That was an error by the Court below. …the findings by the Court below at [27] to [35] to the judgment were not to the point of the effect of s 12 to that Act and to the consideration of whether the writing was effectual in law. In addition, by reason of s 12 to that Act, the Court below was not entitled to close its eyes to parts of the writing of the assignment to give a different meaning than that expressly intended by the assignor and assignee. That was an error by the Court below. 48 Paragraph 8 of the written submissions says that the applicant expressly relied on s 12 of the Conveyancing Act, and that the assignment to the applicant was effectual in law because the assignment was in writing and the owners had notice of the assignment. 49 Paragraphs [27] to [35] of the primary judge's reasons set out nine reasons for concluding that any property in the first Escon deed was not held on trust for Joel Agresta. Only the first of these reasons concerned the effect of the deed. Her Honour said: First, there is no reference to the existence of any trust in the deed as executed on 2 June 2013. If the applicant was accepting the assignment as trustee for his son then it would be expected that some reference to his status as trustee and his son's status as beneficiary would appear in the deed. 50 The primary judge did not find that there had been no valid assignment. Rather, her Honour focussed on whether or not a trust had been created, assuming the validity of the assignment. It was necessary to determine whether a trust had been created in order to decide whether the applicant's interest asserted in the District Court proceeding formed part of the bankrupt estate. 51 Whether the assignment was "effectual in law" was not a matter that the primary judge was required to determine in order to resolve the issues before her. 52 In particular, there was no error in the primary judge taking into account the absence of any reference to the alleged trust in the deed in reaching her conclusion, regardless of whether the deed was drafted by the applicant and without expert assistance. Her Honour did not close her eyes to any part of the writing of the assignment: on the applicant's case, the assignment was effected by the first Escon deed. 53 In arguing that the primary judge had closed her eyes to parts of "the writing of the assignment", the applicant may have been referring to the requirement in s 12 of the Conveyancing Act that notice in writing be given to the debtor in order that an assignment may be effectual in law. The applicant contended that the notice was given to the owners by letters dated 3 June 2013. Although dated 3 June 2013, were first included in the applicant's evidence in an affidavit made on 29 January 2014. The letters contain the following statement: I write to notify you …that the above contract, in its entirety, was assigned to me in accordance with the terms of a Deed dated 2 June 2013. In addition, I notify you that I hold, in its entirety, the assignment for Mr Joel Agresta. 54 The primary judge referred to the letters at [23] as evidence relied on by the applicant in support of the asserted trust. Her Honour described the letters as "correspondence alleged to have been sent to [the owners] notifying them of the assignment to the applicant as trustee for his son." 55 Except to the very limited extent set out above, the applicant does not challenge any of the nine reasons which her Honour gave for her conclusion that there was no trust. At [36], her Honour said that, when those nine matters were taken into account, "the conflicting evidence of the applicant and the terms of the minutes of the November 2013 meeting of creditors referring to the existence of the trust (set out at paragraph 19 above) carry little weight." 56 It was not necessary for the primary judge to address specifically every piece of evidence that may have been in the applicant's favour: cf Mitchell v Cullingral Pty Ltd [2012] NSWCA 389 at [2] (Allsop P, with whom McColl JA agreed), [116] (Campbell JA). In this case, the weight to be accorded the notices of assignment was inevitably affected by: a. the primary judge's fourth reason for concluding that there was no trust, namely, the unchallenged evidence of the respondent that at no time prior to the meeting of creditors on 4 November 2013 had the applicant or anyone else asserted that the deed was held on trust; and b. the primary judge's eighth reason, which was that the applicant did not make any assertion that he held the relevant rights as trustee in his affidavit in support of his originating application in this Court made on 20 September 2013. 57 There can be no suggestion that the primary judge acted upon a wrong principle, or allowed extraneous or irrelevant matters to guide or affect her. The primary judge did not mistake the facts: her Honour referred to the purported notices of the assignment "to the applicant as trustee for his son" at [23] of her reasons. Having regard to the weight of the factors the primary judge identified against the existence of a trust, and her Honour's conclusion that the applicant's conflicting evidence carried little weight when those factors were taken into account, in my opinion, there is no reasonable prospect that an appellate court would conclude that her Honour had failed to take into account a material consideration, or otherwise made an appellable error in finding that the asserted trust did not exist. 58 In those circumstances, I have concluded that the applicant has no reasonable prospects of success and leave to appeal should be refused. I certify that the preceding fifty-eight (58) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.

Associate: Dated: 23 September 2014

1. Ground 5 of the grounds of appeal in the proposed notice of appeal contains an obvious error. It states that the primary judge "erred in holding that the [consent order]…is a nullity…". Plainly, the primary judge did not make such a holding and the applicant's complaint can only be that she erred in not making such a holding. I have proceeded on the basis that ground 5 should be understood to allege that the primary judge "erred in not holding that the [consent order]…is a nullity…".
2. Grounds 7 and 9 of the grounds of appeal in the proposed notice of appeal contain similar errors to the error identified in ground 5. I have proceeded on the basis that grounds 7 and 9 should be understood to allege that the primary judge "erred in not holding" that the affidavits were false.