Boensch v Pascoe

Judgment

1. LEEMING JA: The parties to this appeal are Mr Franz Boensch and his former trustee in bankruptcy, Mr Scott Darren Pascoe. Mr Boensch has purported to appeal to this Court from the decision of the primary judge given on 10 December 2015 following a three day hearing dismissing Mr Boensch's claim under s 74P of the Real Property Act 1900 (NSW): Franz Boensch as trustee of the Boensch Trust v Scott Darren Pascoe [2015] NSWSC 1882. Mr Boensch has filed an application for a stay, while Mr Pascoe has sought security for costs. There were at one stage (it is not clear whether there continue to be) disputes about amending the notice of appeal and a notice to produce. However, notwithstanding both parties' enthusiasm for making applications in this Court, not to mention at least 17 decisions in other courts, it appears that until late last week, following a letter sent from my chambers, neither had given attention to whether s 7 of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) applied such that the appeal lay to the Full Court of the Federal Court. The parties agreed that that threshold question should be determined first, and I had the benefit of helpful written and oral submissions on the question.
2. The issue arises as follows. A sequestration order was made on 23 August 2005, and Mr Pascoe was appointed as Mr Boensch's trustee in bankruptcy. In July 2005, Mr Boensch had lodged a Deed of Trust declaring himself trustee of land at Rydalmere in Sydney and requested the Registrar-General to record a caveat in respect of that land. On about 17 August 2005 such a caveat was recorded. Shortly after his appointment as trustee in bankruptcy, Mr Pascoe caused to be lodged another caveat in respect of the same land. Mr Pascoe's caveat asserted a "Legal Interest pursuant to the Bankruptcy Act 1966", said to arise from the following facts: "On 23 August 2005 a Sequestration Order was made against Franz Boensch and Scott Daren Pascoe was appointed Trustee. Pursuant to the operation of sections 156A(3) and 58(1)(a) of the Bankruptcy Act 1966 property of the bankrupt vests in the Trustee."
3. Subsequently, the parties disputed whether (a) Mr Boensch had validly created a trust and (b) whether any such trust was void against Mr Pascoe by reason of s 121 of the Bankruptcy Act 1966 (Cth). There was evidence that junior counsel retained by the trustee in bankruptcy had given advice that it was a "lay down misere" that the purported trust would be set aside. That advice turned out to be unduly optimistic. The trustee in bankruptcy's claims were dismissed by the Federal Magistrates Court of Australia, from which the Full Court of the Federal Court dismissed an appeal: Pascoe v Boensch [2008] FCAFC 147. An application for special leave was dismissed 12 March 2009: Pascoe v Boensch [2009] HCASL 61.
4. The caveat lodged by the trustee in bankruptcy ultimately lapsed in September 2009. In the meantime, Mr Boensch had, repeatedly, asked for it to be withdrawn. In 2012, Mr Boensch commenced proceedings in the Equity Division of the Supreme Court of New South Wales claiming that Mr Pascoe had lodged and maintained the caveat without reasonable cause within the meaning of s 79P of the Real Property Act.
5. As noted at the outset, the primary judge dismissed the proceedings. Shortly prior to the hearing, and by consent, three questions were identified for separate determination. Those questions were as follows: 1. Did the defendant lodge Caveat AB721857 over property situated at XXXX Road, Rydalmere (Caveat) without reasonable cause within the meaning of section 74P(1) of the Real Property Act 1900 (NSW) (Act)? 2. Did the defendant, without reasonable cause within the meaning of s 74P(1) of the Act, refuse or fail to withdraw the Caveat after being requested to do so? 3. If the answer to Question 2 above is "Yes", on what date should the defendant have withdrawn the Caveat?
6. It was common ground before me that the ratio of his Honour's decision was to be found in [107]: "In my opinion, Mr Pascoe had a caveatable interest in the Rydalmere property by virtue of s 58(1)(a) of the Bankruptcy Act. Moreover, he claimed such interest in the caveat he lodged. That caveatable interest subsisted throughout the life of the caveat. In those circumstances, it seems to me that it cannot be said that Mr Pascoe lodged the caveat, or refused or failed to withdraw the caveat, without reasonable cause within the meaning of s 74P(1) of the Act (see Beca Developments Pty Limited v Idameneo (No 92) Pty Limited (supra) at 475A per Clarke JA)."
7. His Honour observed that that was "sufficient to dispose of the separate questions in a manner favourable to Mr Pascoe". However, his Honour proceeded to make factual findings and concluded that Mr Boensch had not established that, at any relevant time, Mr Pascoe's belief as to the existence of a caveatable interest was not based on reasonable grounds: at [131].
8. The amended notice of appeal contains no fewer than 28 grounds. Some are squarely directed to what the primary judge held was the consequence of s 58 of the Bankruptcy Act in [107] reproduced above. To use the example which was the subject of submissions during the hearing, ground 8 provides: "The primary judge erred by finding that, as a general principle, the trustee in bankruptcy of a registered proprietor of land under the Real Property Act 1900 has a caveatable interest in the property by reason of s 58 of the Bankruptcy Act 1966, even if the registered proprietor holds the title on trust for other persons, on the authority of Lewis v Condon ..."
9. Other grounds asserting error in relation to the legal consequences of s 58 include grounds 9, 12, 13, 16 and 20. This was entirely unsurprising. The appeal had to fail unless appellable error were demonstrated in what had been said at [107].
10. As this Court reiterated in Eberstaller v Poulos [2014] NSWCA 211; 87 NSWLR 394 at [20], it is vital to determine at the outset whether a court whose jurisdiction is sought to be invoked in fact has jurisdiction. The same point was made in Obeid v R [2015] NSWCCA 309 at [9]. Where a party seeks to bring an appeal from a decision of a single judge of the Supreme Court of a State or Territory, and especially where the litigation involves the federal statutes identified in the Schedule to the Jurisdiction of Courts (Cross-vesting) Act (which include the Bankruptcy Act 1966, the Family Law Act 1975 and various federal statutes dealing with intellectual property, among others), it will be essential to bear in mind the provisions of s 7(3) and (5). Those subsections provide as follows: "(3) Where it appears that the only matters for determination in a proceeding by way of an appeal from a decision of a single judge of the Supreme Court of a State or Territory are matters other than matters arising under an Act specified in the Schedule, that proceeding shall be instituted only in, and shall be determined only by, the Full Court of the Supreme Court of that State or Territory. … (5) Subject to subsections (7) and (8), where it appears that a matter for determination in a proceeding by way of an appeal from a decision of a single judge of the Supreme Court of a State or Territory (not being a proceeding to which subsection (6) applies) is a matter arising under an Act specified in the Schedule, that proceeding shall be instituted only in, and shall be determined only by: (a) the Full Court of the Federal Court or of the Family Court, as the case requires; or (b) with special leave of the High Court, the High Court."
11. It will be seen that both subsections presuppose that an appeal may contain a number of "matters for determination". If it appears that the "only matters for determination" are matters which do not arise under an Act in the Schedule, an appeal from a decision of a single judge lies to the Full Court of the Supreme Court. However, where it appears that "a matter for determination" in an appeal is a matter arising under an Act specified in the Schedule, then the dual prohibitions in s 7(5) apply. The appellant is prohibited from instituting an appeal other than in an appropriate federal court, and a State or Territory court is prohibited from determining an appeal, should an appeal be instituted in a non-federal court in contravention of the first prohibition.
12. To those prohibitions, exceptions are provided in subsections (7) and (8) as follows: "(7) Where: (a) the Full Court of the Supreme Court of a State or Territory commences to hear a proceeding by way of an appeal; and (b) before the Court determines the proceeding, it appears to the Court that the proceeding is a proceeding to which subsection (5) applies; the Court shall, unless the interests of justice require that the Court proceed to determine the proceeding, transfer the proceeding to the Full Court of the Federal Court or of the Family Court, as the case requires. (8) Where the Full Court of the Supreme Court of a State or Territory: (a) determines a proceeding to which subsection (5) applies as mentioned in subsection (7); or (b) through inadvertence, determines a proceeding to which subsection (5) applies; nothing in this section invalidates the decision of that court."
13. It was not suggested that either of those subsections applied at present. On no view does a single Judge of Appeal have power to commence to hear an appeal.
14. This is a plain case. The inevitable challenge to the dispositive reasoning at [107] means that there is a matter for determination in the appeal which is a matter arising under the Bankruptcy Act. Further, the various grounds of appeal which assert that the primary judge erred in the construction and effect he gave to s 58 confirm that there are matters for determination which are matters arising under the Bankruptcy Act. None of this should come as any surprise, given that the sole basis for the caveatable interest asserted by the trustee in bankruptcy was, on the face of the caveat, the Bankruptcy Act. Contrary to Mr Boensch's submissions, this was not a case where the Bankruptcy Act was merely "lurking in the background"; cf Felton v Mulligan (1971) 124 CLR 367 at 388.
15. It follows that there is a matter for determination arising under the Bankruptcy Act. Mr Boensch should not have instituted his appeal in this Court, and this Court should not determine the appeal.
16. Mr Boensch sought to avoid the operation of s 7(5) by claiming that there was a "jurisdictional fact" which needed to be determined at the outset, and which, if it were determined favourably to him, would mean that the Bankruptcy Act questions did not arise. He submitted that a primary submission in the appeal was what was said to be the departure from the questions identified for separate determination and the more expansive approach taken by the primary judge resulting in the conclusion at [107]. It was said that that submission emerged from grounds 1, 2 and 14. Ground 2 has been deleted in the amended notice of appeal, and the submission does not, in my respectful opinion, emerge clearly from the other two grounds, although the written submissions filed in support of the appeal do make the point. Accepting that the primary submission will be as put by Mr Boensch, it was said that the "first preliminary question" was: "Whether Mr Pascoe was entitled to raise, as a new question which determines his liability to pay compensation under s 74P(1) of the RP Act, the question whether he had a caveatable interest in the property represented by an equitable interest arising under s 58 of the Bankruptcy Act despite s 116(2)(a) of the Bankruptcy Act and the events which have occurred."
17. Mr Boensch went further, and said that in the event that that preliminary question was decided favourably to him, this Court was the only Court with jurisdiction to determine the appeal.
18. I do not agree with most aspects of this submission. First, whether or not s 7(5) is engaged does not turn upon any question as to the order in which the issues on appeal are determined. To the contrary, it is necessary to look at all the issues arising on appeal, before they are determined; if one of them is a matter arising under the Bankruptcy Act, the section applies. It seems to me that Mr Boensch's submission collides at this threshold point with the distinction evident in s 7(3) and (5).
19. Secondly, I cannot see how the appellate court can be obliged to determine the issues arising on appeal in the way for which Mr Boensch contends. That may be an appropriate and efficient course to take, but it is not one which can be dictated by Mr Boensch.
20. Thirdly, and more fundamentally, the question whether a matter for determination in an appeal is a matter arising under the Bankruptcy Act cannot turn upon the outcome of one or more of the grounds of appeal. It turns instead on the nature of the appellant's claims in the appeal. It is basal that, where jurisdiction turns on the subject matter of a dispute, what matters is the nature of the litigant's claim, as opposed to its strength or otherwise. That was the point of Owen Dixon KC's example in 1927 of the Swan Hill tramp, arrested for vagrancy, who claimed that he was engaged in interstate commerce and could not be obstructed: "His objection may be constitutional nonsense, but his case is at once one of Federal jurisdiction": Royal Commission on the Constitution of the Commonwealth, Minutes of Evidence, 13 December 1927, p 788. This has, so far as I am aware, never been doubted. As Allsop J (as his Honour then was) said in Macteldir Pty Limited v Dimovski [2005] FCA 1528; 226 ALR 773 at [36], with reference to authority, "It is a fundamental tenet of federal jurisdiction that once a federal claim is made, even a bad one, and even one that is abandoned, or struck out, the whole matter in which that claim is made is, and remains, federal jurisdiction".
21. Fourthly, the same authorities establish that, contrary to Mr Boensch's submission, even if the issues squarely arising under the Bankruptcy Act are not determined by the appellate court, or are determined favourably to him, there is nonetheless a matter within the jurisdiction of the Full Court of the Federal Court.
22. To be clear about it, the foregoing should not be read as requiring there to be a claim squarely based on a federal statute in the Schedule to the Jurisdiction of Courts (Cross-vesting) Act in order for s 7(5) to apply. There are other ways in which an appeal may involve a matter arising under a federal statute: see for example Bramco Electronics Pty Ltd v ATF Mining Electrics Pty Ltd [2013] NSWCA 392; 86 NSWLR 392. However, I regard the present proceeding to be a clear case, in light of the directness of the challenge to the reasoning based on s 58 of the Bankruptcy Act. Finally, nothing in the foregoing should be read as any indication of the strength or weakness of the grounds of appeal.
23. For those reasons, the appeal must be dismissed. Both parties accepted that I had power to do so sitting as a single Judge of Appeal, pursuant to s 46(2)(b) of the Supreme Court Act 1970 (NSW), something which accords with what was determined in Macatangay v State of New South Wales (No 2) [2009] NSWCA 272 at [15]. In Zeiher v Holder [2014] NSWCA 334; 289 FLR 314, the President made such an order in comparable circumstances.
24. There was a subsidiary dispute as to costs. Mr Pascoe sought an order that the appeal be dismissed with costs, and pointed to the comparable orders that were made in Eberstaller v Poulos and Grace v Grace [2014] NSWCA 86; 85 NSWLR 688. He submitted that r 51.41(2) of the UCPR did not apply, either directly or by analogy. That rule provides that where an appeal is dismissed as incompetent without prompt objection by the respondent, the respondent is not entitled to costs, unless the court orders otherwise. Mr Boensch observed that there would "undoubtedly" be an appeal to the Full Court of the Federal Court and that most of the work which had been undertaken to date would be relevant to that appeal. He observed that Mr Pascoe had not raised the question of jurisdiction, that it was only when the Court raised the point last Friday afternoon that Mr Pascoe embraced the argument, and sought a more limited costs order.
25. I consider that Mr Boensch's submission has force. It accords with the purpose underlying r 51.41(2), that threshold questions be raised promptly, with a sanction as to costs if that does not occur. Although there will undoubtedly be cases where an appeal commenced contrary to s 7(5) should be dismissed with costs, the present case is one where the point is clear, but was entirely unnoticed by both parties, each of whom brought a series of applications in this Court. The ultimate question is what is fair, having regard to the parties' responsibility in incurring costs: Commonwealth of Australia v Gretton [2008] NSWCA 117 at [85] and [121]. I do not consider that it would be fair for Mr Boensch to bear not only his own costs, but also those incurred by Mr Pascoe, in relation to the unadjudicated issues (both interlocutory and raised by the notice of appeal), when neither party attended to the prohibitions imposed by s 7(5). In all the circumstances, I propose to limit the costs order against Mr Boensch to the costs of the question of jurisdiction on which he failed.
26. Accordingly, I order that the appeal be dismissed, with Mr Boensch to pay the costs of the question of jurisdiction.