CTHFCAFC

Bhagat v Global Custodians Ltd

[2002] FCAFC 51

Federal Court of Australia (Full Court)|2002-01-01|Before: Beaumont J, Marshall JJ

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Source facts

Court

Federal Court of Australia (Full Court)

Decision date

2002-01-01

Before

Beaumont J, Marshall JJ

Source

Original judgment source is linked above.

Judgment (64 paragraphs)

[1]

THE COURT ORDERS THAT:

The application for leave to appeal is refused. 2. The applicant pay the costs of this application which costs are to be taxed in default of agreement. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

[2]

APPLICATION FOR LEAVE TO APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

[3]

THE COURT 1 The applicant, Hari Bhagat ("Mr Bhagat"), an unrepresented litigant, applied to a judge of this Court, Beaumont J, to set aside a Bankruptcy Notice. In the alternative, he sought an extension of time within which to comply with the requirements of the Notice. His application to set aside the Bankruptcy Notice was unsuccessful and he now seeks the leave of this Court to appeal against the dismissal of his application. 2 Mr Bhagat's application for an extension of time was based upon his claim that he would be able to obtain sufficient funds from overseas to discharge the judgment debt. That ground was rejected by Beaumont J in the Court below and, as it was not advanced by Mr Bhagat in his submissions before this Court, it can be put to one side. In passing however, it might be noted that a judgment debtor may, in some circumstances, obtain an extension of time within which to comply with a Bankruptcy Notice on the ground that he or she has a genuine expectation that funds from an identified source will shortly be available of a size that will be sufficient to meet the judgment debt. Mr Bhagat did not, however, adduce any such evidence before Beaumont J.

[4]

THE bankruptcy notice 3 The Bankruptcy Notice, which was served on 9 May 2001, required Mr Bhagat, within twenty-one days after service of the Notice, to pay the amount of the judgment debt or to make an arrangement to the satisfaction of the judgment creditor for settlement of the debt. However, as Mr Bhagat had filed his application to set aside the Bankruptcy Notice on 24 May 2001 (being within the twenty-one day period), a Deputy Registrar of the Court, on that day, extended the time for compliance with the Notice until 12 June 2001. In support of his application to set aside the Bankruptcy Notice, Mr Bhagat alleged, inter alia, that he had a counter-claim, set-off or cross demand against his judgment creditor that he could not have set up in various actions that the judgment creditor had instituted against him. He also alleged that the judgment that had been entered against him had been obtained as a result of the fraud of the judgment creditor. 4 The Bankruptcy Notice was based upon an unpaid judgment debt which debt was incurred in the following circumstances. In Action No 3398 of 1998 in the Equity Division of the Supreme Court of New South Wales, Mr Bhagat had sued a number of defendants, one of whom was the judgment creditor in these proceedings, Global Custodians Ltd ("Global"). Mr Bhagat had sought, inter alia, damages from Global for the tort of abuse of process. However, Global was successful before Young J on 13 April 2000 in obtaining an order summarily dismissing Mr Bhagat's claim against it; it also obtained an order that Mr Bhagat pay its costs on an indemnity basis. Those costs were subsequently taxed in the sum of $64,689.93 and on 1 May 2001, a judgment was entered in Global's favour in that sum with effect from 13 April 2000. 5 Mr Bhagat unsuccessfully sought leave to appeal to the New South Wales Court of Appeal against the order for the summary dismissal of his claim. He is presently seeking special leave to appeal to the High Court. 6 Mr Bhagat's application to set aside the Bankruptcy Notice came before a Deputy Registrar again on 12 June 2001 and, on that day, by consent, time for compliance was extended to 24 July 2001. This second extension of time was granted in the expectation that, by that date, the New South Wales Court of Appeal would have dealt with Mr Bhagat's application to appeal against the decision of Young J (including the order for indemnity costs upon which the Bankruptcy Notice was based). In fact, the Court of Appeal dismissed Mr Bhagat's application on 16 July 2001. 7 On 4 July 2001, Mr Bhagat filed a second application attacking the Bankruptcy Notice. It is not clear from a reading of this document whether or not it was intended by Mr Bhagat to be an amended application. It covered substantially the same grounds as those that were contained in the first application but it added some further allegations. It asserted, for example, that the filing of the Bankruptcy Notice was an abuse of the process of the Court for the reason that Global knew that Mr Bhagat had, prior to its filing, lodged his application for leave to appeal to the New South Wales Court of Appeal. There was no substance in that complaint. The filing of the application for leave to appeal could not, and did not, constitute a fetter on Global's rights to proceed to take action on its judgment. Mr Bhagat had not sought a stay of execution of the judgment pending the disposition of his application for leave to appeal. 8 In par 7 of the second application the following assertion appeared: "The impecuniosity of the Judgment Debtor has been caused by the misconduct of the Respondent and its officers and former officers and by its related and controlling, and former related and controlling, entities and their officers."

[6]

9 The service of the Bankruptcy Notice placed Mr Bhagat at risk of committing an act of bankruptcy. Paragraph 40(1)(g) of the Bankruptcy Act 1966 (Cth) ("the Bankruptcy Act") provides that a debtor commits an act of bankruptcy: "(g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not: (i) where the notice was served in Australia - within the time specified in the notice; or (ii) where the notice was served elsewhere - within the time fixed for the purpose by the order giving leave to effect the service; comply with the requirements of the notice or satisfy the court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained;" 10 Subsection 41(7) of the Bankruptcy Act deals with the subjects of counter-claims, set‑offs and cross demands and it is relevant to these proceedings to recite its provisions: "Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has applied to the Court for an order setting aside the bankruptcy notice on the ground that the debtor has such a counter-claim, set-off or cross demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter-claim, set-off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied." 11 Mr Bhagat's application was heard before Beaumont J on 24 July 2001. On that day, as has already been noted, his Honour declined to set aside the Bankruptcy Notice, but he made the following orders: "1. An extension of time be granted to the judgment debtor for compliance with the Bankruptcy Notice up to and including 14 August 2001. 2. Liberty be reserved for the judgment debtor to apply to the Full Court, or to a single judge exercising appellate jurisdiction, for any further extension of time in connection with any appeal. 3. The judgment debtor pay the judgment creditor's costs of the application to extend time and/or to set aside the Bankruptcy Notice."

[10]

12 Mr Bhagat is a vigorous litigant. He told the Court that he is presently engaged in over thirty separate sets of legal proceedings, many, and perhaps most, of which directly or indirectly involve the judgment creditor. Fortunately, it will not be necessary for the Court to examine all those proceedings, but it will be necessary, because of the numerous documents to which Mr Bhagat took us, to refer to some of them. Some indication of the intensity with which these proceedings were litigated may be gauged from the fact that the judgment creditor, notwithstanding that it was the respondent to Mr Bhagat's application for leave to appeal, prepared the Appeal Book and lodged no less that seven volumes of various materials comprising, in all, 2528 pages. Mr Bhagat was not, however, satisfied that the Court would be sufficiently benefited by this generous amount of material: he filed a further 4353 pages of pleadings, affidavits and exhibits to affidavits which he had extracted from his many pieces of litigation. (That number does not include the several documents that Mr Bhagat handed up during the course of his submissions). It transpired, during the course of the hearing, that the greater part of the material that had been included in the Appeal Book had not been before the primary judge and should not have been placed before this Court. This application had been rushed into the November 2001 Full Court hearings on short notice and without the benefit of a Deputy Registrar exercising control over the contents of the Appeal Book. The proliferation of paper in this application shows that there is a need for such control, particularly in those cases where a party is unrepresented. 13 In the proceedings before Beaumont J, Mr Bhagat read his two affidavits of 4 and 17 July 2001: (we will return to the contents of these affidavits later in our reasons). He tendered a copy of his statement of claim in Action No 3406 of 2001 in the Supreme Court of New South Wales and he also tendered an Ordinary Summons for Leave to Appeal to the New South Wales Court of Appeal from the decision of Young J in which his Honour had summarily dismissed Mr Bhagat's claim against Global. That was the limit of the evidentiary material that Mr Bhagat placed before Beaumont J in the Court below. However, partly because Mr Bhagat was an unrepresented litigant, partly because he complained that he had not been accorded natural justice in the hearing in the Court below and partly because the respondent's solicitors were equally responsible for filing superfluous material, the Court has had regard - not to all the material that was filed but - to all the material that was referred to by one or other of the parties during the course of submissions.

[11]

the history of the litigation 14 At this stage in our reasons it may be of assistance to give a brief summary of some of the litigation in which Mr Bhagat has been involved and how it came to pass that Global was able to obtain its judgment against him. Mr Bhagat's involvement in most, if not all, of the litigation to which he is presently a party, can, as we understand the position, be traced back to a series of property trusts which can conveniently be described as the "Estate Mortgage Trusts": (they are now known as the "Tyndall Investment Trust" after having, for a time, been described as the "Meridian Investment Trust"). In November 1993, through a mechanism known as a "unit swap", the unit holders in the Estate Mortgage Trusts became unit holders in a new Trust, the "Meridian Investment Trust"; that trust then became the sole unit holder in the Estate Mortgage Trusts. However, as a matter of convenience we will continue to refer to them as the "Estate Mortgage Trusts". 15 The litigation that has been commenced by Mr Bhagat arose, initially, as a result of his dissatisfaction with the manner in which the administration and management of those trusts had been conducted. The Estate Mortgage Trusts, which had solicited funds for units in the Trusts from the general public, had lent those funds to third parties primarily for property development. The Trusts were managed by Estate Mortgage Managers Ltd and the trustee of each trust was Burns Philp Trustee Co Ltd ("Burns Philp"). The Estate Mortgage Trusts encountered financial difficulties and, as a result, Burns Philp removed Estate Mortgage Managers Ltd as manager. Initially, Burns Philp took over management of the Trusts through its agent, Macquarie Investment Management Ltd, but in about October 1990, Burns Philp appointed Global Funds Management (NSW) Ltd (now known as Tyndall Funds Management (NSW) Ltd) ("Tyndall Funds") as the new manager. Tyndall Funds and the judgment creditor, Global, are associated companies and are both wholly owned subsidiaries of Tyndall Australia Ltd. 16 On 7 November 1990, Burns Philp was replaced as trustee by two partners of the accounting firm, Arthur Andersen, by virtue of an order of the Supreme Court of New South Wales. Shortly thereafter a provisional liquidator of Burns Philp was appointed. Meanwhile, in and about June 1990, many people who had invested in the Estate Mortgage Trusts were expressing concern about their money. There were many small investors in those trusts, including many pensioners. A Mr van Breugel in Melbourne and Mr Bhagat in Sydney concerned themselves in organising unit holders into groups with a view to instituting recovery actions. Separate meetings of unit holders were held in Melbourne on 8 July and in Sydney on 22 July 1990. 17 At the Sydney meeting amounts of $100 were collected as a fighting fund from many people. The moneys that were collected at that meeting were the subject of a trust deed of which Mr Bhagat was the settlor; it was executed on 25 July 1990 and was known as the "Estate Mortgage Fighting Fund Trust" ("the Fighting Fund Trust"). It has been said that, as a result of the Sydney meeting, a fund of about $2.5m was raised and that the Fighting Fund Trust has approximately 18,000 beneficiaries who, in the main, are elderly pensioners. 18 It seems that the Sydney and Melbourne parties fell out almost immediately. On 22 July, a few days after the Sydney meeting, Mr Bhagat told Mr van Breugel that he did not consider that the New South Wales Fighting Fund Trust was a party to the national committee that had been organised as a result of the meeting of unit holders that had been held in Melbourne. There then followed some in-fighting that involved Mr Bhagat but we do not consider that it is necessary to detail the various events that then took place. It is, in our opinion, sufficient to note that Mr Bhagat purported to use his powers as the settlor of the Fighting Fund Trust so that the rights of a beneficiary to assign his or her interest in the trust were restricted. The significance of this observation rests upon one of the specific findings that Young J made in his reasons for judgment that were published on 13 April 2000 - a finding that Mr Bhagat disputed and continues to dispute. Young J found that a Mr Jack Speight and his wife, Mrs Jessie Speight, paid $100 to the Fighting Fund Trust on the occasion of the Sydney meeting and thereby became beneficiaries of that Trust. His Honour also held, contrary to Mr Bhagat's contentions, that a Mr and Mrs Greenlees had also contributed $100 to the same fund and had likewise became beneficiaries of that Trust. On 17 February and 30 May 1998, Mr and Mrs Speight and Mr and Mrs Greenlees respectively, executed a deed of assignment of their interest in the Fighting Fund Trust to Global and Global used those assignments as its platform to seek declaratory orders in the New South Wales Supreme Court that it was entitled to inspect all books of account of the Fighting Fund Trust. A decision to take that action had come about because Tyndall Funds, in its capacity as trustee of the Estate Mortgage Trusts, had been receiving complaints from its unit holders who had contributed to the Fighting Fund Trust. In order to investigate those complaints, it arranged for Global to take the assignments from the Speights, and later, from the Greenlees, of their respective interests as beneficiaries in the Fighting Fund Trust. 19 On 22 May 1998, Global commenced proceedings in Action No 2539 of 1998 in the Equity Division of the Supreme Court of New South Wales ("the Account Proceedings") against the trustees of the Fighting Fund Trust. Global had become, at that time, the effective administrator of the Estate Mortgage Trusts and it was by virtue of that position that it claimed to be interested in the control and disposition of the funds that had been raised at the Sydney meeting. The orders sought by Global included, as we have noted, an order that Global be permitted to inspect the accounts of the Fighting Fund Trust, but those proceedings had also been commenced by Global in the expectation that orders might be made requiring the trustees of the Fighting Fund Trust to account for the funds that had been raised at the Sydney meeting. It is relevant to emphasise that when Global instituted those proceedings it only named the trustees of the Fighting Fund Trust as the defendants - it did not name Mr Bhagat. Mr Bhagat was joined as a defendant in those proceedings on a later date as a result of his application to the New South Wales Supreme Court. It is incongruous, to say the least, that Mr Bhagat should repeatedly claim that Global instituted the Account Proceedings to distract him from the prosecution of other proceedings that he had initiated, when Global had not named him as a defendant and he had become a defendant of his own volition. 20 Mr Bhagat disputed Global's right to inspect the books of the Fighting Fund Trust and continues to challenge the role that Global has played since it took the assignments from the Speights and the Greenlees. As Young J observed [par 30]: "Mr Bhagat has been [Global's] very vocal opponent in various pieces of litigation now before the Court." 21 Global was only partially successful in the Account Proceedings before Young J. His Honour was satisfied on the evidence that Mr and Mrs Speight and Mr and Mrs Greenlees were beneficiaries of the Fighting Fund Trust. He was also satisfied that the deeds of assignment that the Speights and the Greenlees had executed in favour of Global were valid but he made an important and restrictive qualification to the effect that the assignment only operated [par 58]: "… so that the rights the Speights otherwise had to the ultimate distribution from the fund is now held by them in trust for the plaintiff." (ie Global) "It does not operate so as to permit the plaintiff to maintain these proceedings."

[14]

the affidavits of 4 and 17 july 2001 25 Before turning to the proposed grounds of appeal, we summarise the information that was contained in Mr Bhagat's two affidavits of 4 and 17 July 2001; they represented the greater part of the evidentiary material that Mr Bhagat placed before the learned primary judge. The first of those affidavits consisted of thirty-five pages, much of which was devoted to the subjective observations of Mr Bhagat and his interpretation of historical events. For example, he referred to numerous items of correspondence that had emanated from the office of Global; he alleged that letters had been sent to the Fighting Fund Trust unit holders "naming and denigrating the complainant". It can be assumed that "the complainant" was Mr Bhagat but there is no allegation that the "naming and denigrating" was false or that Mr Bhagat suffered in some way from the falsity of the assertion. Another example of an irrelevancy is to be found in par 26 of the affidavit. It is there claimed that a named person, a solicitor, took an assignment of the interest of another named person in the Fighting Fund Trust. Mr Bhagat then alleged that the solicitor "was paid for his services by" certain unnamed conspirators who were said to be officers of Global. That, however, was the end of that particular allegation. Although there were later references to an assignment, nowhere was there any information that could constitute evidence that would support the existence of a cause of action against Global. Counsel for Global, in his written submissions, drew particular attention to the contents of subpars 39(a) and (b) of Mr Bhagat's affidavit. Each subparagraph contained assertions of various acts that were said to have been committed "fraudulently", but both subparagraphs were wholly deficient in that they failed to assert facts that could be said to give rise to the allegations of fraud. 26 However, of the many deficiencies that appear in the affidavit, the greatest of them, and the one that goes to the core of Mr Bhagat's complaints, is that dealing with Global's knowledge about the Speights and the Greenlees. Mr Bhagat has never deviated from his primary allegation that Global knew that the Speights and the Greenlees were not beneficiaries of the Fighting Fund Trust. However, nowhere in his affidavit does Mr Bhagat address the evidence that would or might establish that Global knew, or ought to have known, that Mr and Mrs Speight and Mr and Mrs Greenlees were not beneficiaries of that Trust. 27 Mr Bhagat's second affidavit - that of 17 July 2001 - did not carry the matter any further. It deposed to the fact that Global had been aware, at the time that it caused the Bankruptcy Notice to be issued, that Mr Bhagat had applied for leave to appeal from the decision of Young J. It exhibited a copy of the statement of claim which Mr Bhagat had filed in the Supreme Court of New South Wales in Action No 3406 of 2001 in which he asserted that the decision of Young J had been obtained by fraud and it contained Mr Bhagat's statement that he intended to apply to the High Court for special leave to appeal against the decision of the New South Wales Court of Appeal. Nothing in that affidavit constituted evidentiary material that would assist Mr Bhagat in discharging the onus that the law places on a judgment debtor who seeks to have a Bankruptcy Notice set aside. 28 Counsel for Global submitted, and in our opinion correctly so, that the evidence that was placed before the primary judge by Mr Bhagat was inadequate; it was insufficient to justify any inquiry by a judge in bankruptcy. That alone is sufficient to reject the application for leave to appeal but in order that there be no misunderstanding on Mr Bhagat's part, we feel it appropriate to stress that the additional material that has been filed by the parties, and to which we were referred during the course of argument, did not contain any information that would assist Mr Bhagat to overcome the deficiencies in the submissions that he had made in the Court below.

[17]

"I reserve liberty for Mr Bhagat to apply to the Full Court, or to a single Judge exercising appellate jurisdiction for any further extension of time in connection with any appeal." 30 The subject of an extension of time also appeared in subpar 12(13) of Mr Bhagat's affidavit that was also filed on 13 August 2001; it was in the following terms: "That pursuant to the inherent jurisdiction of the Federal Court, to prevent a travesty of justice, the time for compliance with the Bankruptcy Notice NN1018/01 be extended pursuant to s 41(6A) of the Act or alternatively s 41(7) of the Act." 31 In his Notice of Motion that he filed on 7 November 2001, Mr Bhagat sought an order from this Court that it "deems this application as supplementary to the application filed on 13 August 2001 …". Attached to the November notice of motion was a document of three pages which contained further grounds of appeal. When this matter was called over on 13 November 2001 before the Judge in charge of the Full Court list, his Honour had some difficulty in identifying the proposed grounds of appeal upon which Mr Bhagat intended to rely in the event of this Court granting him leave to appeal. At first, Mr Bhagat agreed that his grounds of appeal were those that were set out in par 12 of his affidavit that was filed on 13 August 2001. Later however, Mr Bhagat told his Honour that he also wished to rely on aspects of his notice of motion that had been filed on 7 November. Ultimately, his Honour directed Mr Bhagat "to file in Court a draft Notice of Appeal …". No doubt, his Honour intended, by his direction, to ensure that there was one document before this Court that contained the consolidated grounds of appeal. Such a document was filed by Mr Bhagat on 20 November 2001. As no objection was raised by counsel for the respondent, the Court received Mr Bhagat's draft notice of appeal. It then directed that the parties argue the grounds contained in the draft notice as part of Mr Bhagat's application for leave to appeal against the decision of Beaumont J.

[24]

36 Mr Bhagat had been given ample opportunity by his Honour to formulate his arguments. His Honour had endeavoured to assist Mr Bhagat in the presentation of his case by pressing him to particularise his complaints and to identify his evidence in support of his complaints but to no avail. The transcript of the proceedings before his Honour shows that Mr Bhagat, far from particularising his complaints, merely repetitively asserted bald statements to the effect that the Speights and the Greenlees had never been beneficiaries of the Fighting Fund Trust and that Global's actions against him had been commenced for "the collateral purpose " of distracting Mr Bhagat from pursuing his lawful claims against Global. We are of the opinion that his Honour gave Mr Bhagat sufficient time and consideration within which to develop his arguments. In any event, as Beaumont J pointedly said in his reasons for judgment: "… it is not apparent how any failure, if there was a failure, by the Speights to make the contribution of $100 can be relied upon as fraud on the part of the judgment creditor [Global]." 37 Mr Bhagat's third ground of appeal was to the effect that he had filed his first application to set aside the Bankruptcy Notice "before the expiration of the time fixed for compliance ..." He sought a declaratory order that he had, before the expiration of the time fixed for compliance with the requirements of the Bankruptcy Notice, applied to the Court for an order setting aside the Bankruptcy Notice on the ground that he had an appropriate counter-claim, set-off or cross demand. His assertion was true; he had made such an application within the appropriate period of time. But that fact does not constitute a ground of appeal. It merely meant that Mr Bhagat, as a judgment debtor, reacted to the service of the Bankruptcy Notice in time sufficient to assert his statutory right to challenge the Bankruptcy Notice. There is no utility in this Court making an order in the terms sought by Mr Bhagat. 38 Mr Bhagat's fourth ground of appeal is difficult to understand. He referred to "a counter-claim, set-off or cross demand in excess of that claimed in the Bankruptcy Notice by reason of Supreme Court proceedings No 3354/1999". However, he then proceeded to complain that his application had been filed: "… under pressure of time, as a litigant in person without legal representation and therefore at a significant disadvantage."

[26]

39 In grounds 5 and 6 of his draft Notice of Appeal, Mr Bhagat pleaded that the documents that he had filed in May 2001 had activated the provisions of subs 41(7) of the Bankruptcy Act and that, as a result, it had not been necessary for the Deputy District Registrar to grant the extensions of time that were in fact granted to Mr Bhagat. Whilst all of this was true, it did not amount to error on the part of the learned primary judge, nor does it otherwise constitute a reason for this Court to intervene; those events did not in any way constitute a hardship to Mr Bhagat nor did they, in any way, prejudice him in the preparation of his submissions in the Court below. 40 In his seventh ground of appeal Mr Bhagat claimed that Beaumont J: "… did not determine … whether the Court was not satisfied that the applicant had a counter-claim, set-off or cross demand by reason of Supreme Court proceedings No 3354/1999 and No 3406/2001 …". 41 The following extract from his Honour's reasons for judgment shows that there was no substance in that ground of appeal: "As I have mentioned, the judgment debtor bears the onus in this connection, either by way of establishing a reasonable basis for undermining the order for costs made in April 2000 or, alternatively, as a basis for satisfying the Court that he has a cross claim for damages in an amount equal to or exceeding the sum specified in the bankruptcy notice which cross claim could not have been set up in the proceedings leading to the judgment for costs. I am not persuaded that the judgment debtor has discharged the onus he must bear …" [par 11] 42 In his eighth ground of appeal, Mr Bhagat claimed that the order of Beaumont J, in which he extended the time for compliance with the Bankruptcy Notice until 14 August 2001 was "otiose". Mr Bhagat was quite wrong. His Honour had heard and determined, adversely to the interests of Mr Bhagat, his application to set aside the Bankruptcy Notice. Unless a further extension of time within which to comply with the terms of the Bankruptcy Notice was granted, time would be running against Mr Bhagat and he was at risk of committing an act of bankruptcy. Mr Bhagat has failed to understand that, in making that order, Beaumont J was giving Mr Bhagat a further opportunity to advance his cause. He has also failed to understand the limited value of Beaumont J's orders as is apparent from his third ground of appeal; he there claimed that the contents of subpar 12(13) of his affidavit that was filed on 13 August 2001 amounted to an application for a further extension of time. Even if that should be the case, as to which we need not express an opinion, the time for compliance had only been extended to 14 August. It was incumbent on Mr Bhagat, before that date, not only to file an appropriate application, but also to obtain a further order of the Court extending the time for compliance. Even though Mr Bhagat may have filed an application for an extension within the time specified, he did not obtain the appropriate order to extend time for compliance.

[27]

fraud 43 Grounds 10 to 17 (inclusive) of Mr Bhagat's proposed grounds of appeal are directed to the alleged fraudulent assignment by the Speights to Global of their interests in the Fighting Fund Trust. (Curiously, the Greenlees were not mentioned in these grounds). The contents of these grounds of appeal are, in most respects, challenges to the findings of Young J. 44 Mr Bhagat had attempted to have the judgment of Young J set aside on the ground of fraud. He did so by filing an application in Action No 3398 of 1998, (that being the action in which the judgment had been recorded against him). Mr Bhagat's application was heard by Young J who came to the conclusion it had to fail because such an application could not be made in the current proceedings: it had to be the subject of separate (ie fresh) proceedings. Following upon that last mentioned decision, Mr Bhagat instituted fresh proceedings in the Supreme Court of New South Wales (Action No 3406 of 2001) naming Global, Mr and Mrs Speight, Mr and Mrs Greenlees and others as defendants. Mr Bhagat sought many orders, but the order that he sought - and which is of particular significance to this appeal - was: "An order that the judgment of Mr Justice Young delivered on 13 April 2000, in Supreme Court proceedings No 3398 of 1998, including the indemnity costs awarded to [Global], be set aside on grounds of fraud." 45 Meanwhile Mr Bhagat's application to set aside the Bankruptcy Notice had been brought on for hearing before Beaumont J. At that stage, Global had made an application in the New South Wales Supreme Court to have Mr Bhagat's claim in Action No 3406 of 2001 struck out. Although that application was ultimately successful, it had not been determined when Beaumont J considered the application to set aside the Bankruptcy Notice. 46 The issue of fraud was raised by Mr Bhagat before Beaumont J and it was pursued by Mr Bhagat on this application for leave to appeal. Beaumont J discussed Mr Bhagat's submissions on the subject, saying: "What is now put by [Mr Bhagat] is that this Court should have regard to the claims made in the fresh statement of claim in proceedings No. 3406/2001. It would not be appropriate, and I do not seek, to pre-empt any decision that Young J may make on 17 August 2001 on [Global's] application for summary dismissal of this proceeding. However, [Mr Bhagat] does bear an onus of satisfying me that there is at least some reasonable prospect of his establishing at least an arguable case that he will make out one or other of several possible causes of action. One such possible cause of action would be that the judgments given by Young J in March and April 2000 were obtained by the fraud of [Global]. The second possible cause of action … would be a claim for damages at common law for fraudulent misrepresentation or perhaps for some kind of malicious abuse of process." 47 His Honour was not, however, satisfied that Mr Bhagat had discharged the onus to which he had referred in his reasons; he made it clear that he was not persuaded that the judgment debtor had discharged the onus that he must bear to obtain an order to set aside the Bankruptcy Notice. As he described it: "… the focus of the judgment debtor's claim is concentrated upon his assertion that the contribution by the Speights was not received by the Trust …"

[29]

"… it by no means follows that this circumstance, even arguably, may be sheeted home to [Global] in terms of legal responsibility." 48 We think that Beaumont J took an overly generous view. We agree with the remarks of Young J when, on 2 July 2001, he dismissed the earlier application that Mr Bhagat had made in Action No 3398 of 1998 to have the judgment set aside on the ground of Global's fraud. In the course of his reasons for judgment, Young J emphasised the nature of the proceedings in Action No 3398 of 1998: they were by way of Global's application for summary dismissal of Mr Bhagat's claim. Referring to a submission by counsel for Global, his Honour agreed that the judgment on which the bankruptcy notice was grounded could not possibly be affected by any fraud. His Honour noted that: "… the bankruptcy notice was founded on an order for costs in 3398/98 made in the judgment to which I have just referred. In par 24 of the judgment I noted: 'As Mr Bhagat has submitted, I must decide the matter on the pleadings and assume, for the purpose of this application, that the facts pleaded in the statement of claim will be found to be true, including all necessary ancillary facts that flow from the pleaded facts.' Accordingly, there was no accepting of any facts other than those which Mr Bhagat himself had pleaded." 49 The remarks of Young J place the matter beyond doubt. The judgment debt arose, as a result of and flowed from, a consideration of the facts that were most favourable to Mr Bhagat. That conclusion clearly answered any possible suggestion of fraud on the part of the judgment creditor. 50 As we have already indicated, Mr Bhagat has continued to assert that the judgment of Young J should have been set aside on the ground that it was procured by fraud. He had sought other relief - in particular, substantial damages - but the accusation of fraud is and was the essence of his case. In Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 at 538‑539, Kirby P set out a number of principles which govern accusations of fraud such as those made by Mr Bhagat. What follows is a truncated version of his Honour's remarks followed by our comments on Mr Bhagat's claims:

[40]

Comment: For the reasons that we have already given, Mr Bhagat has failed to meet this test. 51 The position, so far as it applies to Mr Bhagat, can be summarised in these terms: · Young J found that the Speights were beneficiaries of the Fighting Fund Trust and that they were able to assign their interest in the Trust to Global; · Mr Bhagat has not accepted those findings but he was unable to convince the Court of Appeal that it should interfere with those findings; · Mr Bhagat has the right to ask a Bankruptcy Court to investigate those findings but he has failed to produce any material that would allow the Bankruptcy Court to interfere with the findings of Young J. 52 In determining whether a judge in bankruptcy should entertain an application to set aside a Bankruptcy Notice, the judgment debtor, if he or she is to discharge the necessary onus, must satisfy the Court that there is "a reasonable probability of success": In re A Debtor [1958] 1 Ch. 81 at 99 per Roxburgh J. There must be evidence "that the debtor had … some reasonable ground for bringing his action": Re Cox (1934) 7 ABC 98 at 100-101. In Vogwell v Vogwell (1939) 11 ABC 83, the question was asked whether it would be just to allow the proceedings which the debtor sought to agitate to proceed to a determination before the bankruptcy proceedings were allowed to continue. More recently, the exercise has been described in the High Court as a: "… weighing up of considerations as to the legal and factual merit of the claim relied upon by the debtor and the justice of allowing the bankruptcy proceedings to go ahead or requiring them to await the determination of the claim." Guss v Johnstone (2000) 171 ALR 598 at 606. 53 Counsel for Global submitted, quite correctly, that the mere production of a statement of claim in an action that pleads facts which, if proved, would support a claim, has long been held to be insufficient: "[a] statement of claim is no evidence of anything": In re Foster, Ex parte Basan (1885) 2 Morr 29 at 33 per Brett MR: see also Re Cox (supra) at 101 and Re Verma; Ex parte Deputy Commissioner of Taxation (1985) 4 FCR 181 at 187. It is not even sufficient for a debtor to file an affidavit which merely propounds a claim and states how the debtor proposes to establish it: Ebert v The Union Trustee Co of Australia Ltd (1960) 104 CLR 346 at 350. There is an obligation on the debtor to adduce evidence that provides reasonable grounds for the institution of proceedings Vogwell v Vogwell (supra) at 85 per Lathan CJ. The task that Mr Bhagat faced was an onerous task. He has raised serious allegations but has not placed before the Court the material (if indeed such material exists) that would justify a Bankruptcy Court from interfering with the judgment that founded the Bankruptcy Notice. 54 We do not consider that it is necessary to delve further into Mr Bhagat's allegations of fraud. It is sufficient to find that, on the material that has been presented to this Court, that the allegation of fraud by Mr Bhagat does not encourage us to go behind the judgment upon which the Bankruptcy Notice was based.

[51]

58 The question of costs is a discretionary matter but there are relevant guidelines which have evolved over a period of time in assessing when it might be appropriate to impose indemnity costs. In the first place the conduct of the relevant party is of the utmost importance. Was it so unsatisfactory that an indemnity costs order was appropriate?: Packer v Meagher (1984) 3 NSWLR 486. Woodward J in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd and Ors (1988) 81 ALR 397 at 401 ("Fountain Selected Meats") said: "I believe that it is appropriate to consider awarding "solicitor and client" or "indemnity costs", whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success." 59 In Fountain Selected Meats, the applicant was legally represented and the remarks of Woodward J are to be read with that fact in mind. It does not mean however that unrepresented litigants were intended to be wholly excluded from his Honour's observations. 60 Although subs 43(2) of the Federal Court of Australia Act 1976 (Cth) vests the award of costs "in the discretion of the Court or Judge", it is, of course, essential that the discretion be exercised judicially: Hughes v Western Australian Cricket Association Inc (1986) ATPR ¶40, 748 at 48,136 per Toohey J. See also Ruddock v Vadarlis [2001] FCA 1865 at (9) per Black CJ and French J. However, unless the applicant can point to some error on the part of the trial judge, it is not appropriate for an appellate court to interfere with the exercise of a discretionary power, even in those circumstances where the members of the appellate court are of the opinion that they might have reached an opposite conclusion if they, or one of them, had been the trial judge: House v The King (1936) 55 CLR 499 at 504-505. Mr Bhagat has complained that there was no evidence before Young J that would have justified Young J asserting that he had access to moneys in the Fighting Fund Trust to meet legal expenses. That may or may not be the case; Mr Bhagat's wife was one of the trustees of the Fighting Fund Trust; he was the settlor of the Fund and he had used his powers to change the trustees; he initiated the application that had him joined with the trustees as a co-defendant in the Accounts Proceedings. Those details may have been sufficient, in the opinion of Young J, to make the observation that he made. In any event, the existence of those facts are sufficient to prevent this Court from interfering with the decision that it was an appropriate case in which to order indemnity costs.

[58]

67 The alleged fraudulent assignments by the Speights and the Greenlees and the alleged fraudulent conduct by Global in obtaining an order of summary dismissal of Mr Bhagat's claim against it featured prominently in this pleading. However, as with other litigation to which we have earlier referred, Mr Bhagat's allegations against Global lack particularity and evidentiary support. Global's legal advisers were accused of fraudulent conduct on the ground that they, knowing that Mr Bhagat had lodged an application in the Court of Appeal for leave to appeal against the order for summary dismissal, nevertheless participated in the preparation and service of the Bankruptcy Notice. There is no substance in that allegation. The filing of an appeal or an application for leave to appeal does not constitute a stay of proceedings unless an order to that effect is made, for cause shown, by a court of competent jurisdiction. The preparation and service of the Bankruptcy Notice was, without more, blameless conduct. There then followed a personal attack on Young J in which Mr Bhagat accused him (inter alia) of "pervert[ing] the course of justice". He further alleged that his Honour "knowingly acted unlawfully and failed to act judicially in wilfully lying when on the bench …". The Director of Public Prosecutions is alleged to have "fraudulently [taken] over not in good faith" certain criminal prosecutions that Mr Bhagat had instituted against officers of Global and Young J. 68 The second claim upon which Mr Bhagat relied was that contained in Action No 20816 of 2001. He asserted in his affidavit of 19 October 2001 that the value of that claim against Global was $414,578.20 plus interest. In that action, Mr Bhagat claimed that various defendants conspired to cheat and defraud unit holders (including Mr Bhagat) of the Estate Mortgage Trusts. For the purposes of these proceedings, it is sufficient to note that the allegations that are contained in the statement of claim in Action No 20816 of 2001 have a degree of similarity with those that were struck down by Young J in Action No 3398 of 1998. For example, the alleged fraudulent assignment by the Speights to Global is repeated in subpar 21(b)(12). 69 The last of the three claims to which Mr Bhagat referred in his affidavit of 19 October 2001 was Action No 3354 of 1999. In that action he claimed that his loss of $5m had occurred because Global and others had instituted proceedings against him for a collateral purpose (which, so he said, amounted to an abuse of process) and that, as a result of the institution of proceedings against him, he had been unable to prosecute his proceedings "diligently". He further alleged that the institution of proceedings against him had prevented him: "… from discovering the complex fraud committed by the manager of MIT, a related party of [Global], with the same officers as [Global], in not distributing $198.265m to the unit holders for the accrued period ending 31 December 1997."

[59]

It was this alleged failure to distribute which, according to Mr Bhagat, led to his losses. 70 In par 57 of his affidavit of 4 July 2001, Mr Bhagat had listed numerous documents upon which he said he would rely in the proceedings before Beaumont J. One of them was, as he described it, "(19) Summons in Supreme Court Proceedings No 3354/1999". No other mention of those proceedings appeared in that affidavit and no mention of them was made in his later affidavit of 17 July 2001. Mr Bhagat did not attempt to tender the summons or any other pleading or affidavit in that action in the Court below. The summons in Action No 3354 of 1999 is now, however, part of the Appeal Book in these proceedings. It named Global, the Speights and the Greenlees as defendants and it pleaded that Global induced the remaining defendants to execute the respective deeds of assignments of their units in the Fighting Fund Trust: · when it knew or must have known, for the reasons that were particularised in the statement of claim that they were not beneficiaries in the Fighting Fund Trust; and · so that Global could commence proceedings against Mr Bhagat in Action No 2539 of 1998 "for a collateral purpose, in abuse of the Court …" 71 The expression just quoted - "for a collateral purpose, in abuse of the Court" - appeared several times in the statement of claim but was never identified or particularised. However, Mr Bhagat in his oral submissions claimed, if we have understood him correctly, that the collateral purpose was to distract him from efficiently prosecuting his litigation against Global and others in respect of the affairs of the Estate Mortgage Trusts and the Fighting Fund Trust. 72 Mr Bhagat further pleaded that the Speights and the Greenlees, in joining with Global as co-plaintiffs in Action No 2539 of 1998, ("the Account Proceedings") and in instituting separate proceedings against Mr Bhagat in Action No 3156 of 1999, did so for a collateral purpose and that the purpose amounted to an abuse of process. The "collateral purpose" was not identified by Mr Bhagat in this particular pleading but we assume from the material that has been placed before the Court that he was asserting the same collateral purpose as before ‑ that is, that the institution of the proceedings against him was intended to distract him and divert his attention and energies away from the proceedings that he had instituted. We do not consider it necessary to comment further on the inadequacy of the pleading in Action No 3354 of 1999 save to note that no causal connection between the conduct of the defendants and Mr Bhagat's alleged losses has been spelt out. It is, in our opinion, more relevant to these proceedings to note that the summons in this matter is but another pleading that has asserted substantially the same facts as have already been considered and rejected on two occasions by Young J and by the New South Wales Court of Appeal. 73 Mr Bhagat has been faced with an insuperable difficulty. A judgment had been obtained against him in Action No 3398 of 1998 in which proceedings he had been the plaintiff. For him to succeed in having the Bankruptcy Notice set aside, he had to establish that he had a counter-claim, set-off or cross demand against Global that he could not have set up in his Action No 3398 of 1998. What Mr Bhagat failed to do in the Court below and what he failed to do in this application, was to explain why his many proceedings against Global could not have been consolidated into one set of proceedings. Paragraph 40(1)(g) and subs 41(7) of the Bankruptcy Act exist for the benefit of a debtor who has had a judgment entered against him or her and who wants the Bankruptcy Court to have regard to the existence of a counter-claim, set-off or cross demand that the debtor could not have set up in the proceedings that concluded with that judgment. It might be possible for a plaintiff to resist a costs order in favour of a defendant by satisfying the Bankruptcy Court of the existence of some other claim that the plaintiff has against the successful defendant but it would be incumbent on the plaintiff to explain why the other claim could not have been part of the proceedings in which the defendant obtained the costs order. That was the flaw in Mr Bhagat's argument. He did not explain why it was that his many actions against Global could not have formed part of his claims in Action No 3398 of 1998. 74 The actions to which Mr Bhagat referred in his affidavit of 19 October 2001 and which we have briefly referred to were not the only actions that Mr Bhagat has instituted against Global. During the course of his submissions, Mr Bhagat handed up, without objection, a copy of his first further amended statement of claim in Action No 1848 of 1999. In that pleading, Mr Bhagat claimed that he was suing in his capacity as a unit holder of the Meridian Investment Trust and as a shareholder of Tyndall Australia Ltd and Guinnes Peat Group PLC; he named eleven defendants of which Global was the ninth named. He alleged in par 16 of his statement of claim in that action that the first nine named defendants had conspired to cheat and defraud the unit holders of the Meridian Investment Trust. However, as with the other actions, Mr Bhagat failed to show why this action could not have formed part of his claim against Global in Action No 3398 of 1998.

Bhagat v Global Custodians Ltd - [2002] FCAFC 51 - FCAFC 2002 case summary — Zoe