[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
[2]
Judgment
THE COURT: Mr Prabhakar Charan and Mrs Usha Wati Charan seek leave to appeal from the summary dismissal of proceedings brought by them in the Equity Division of this Court, on the application of the three defendants, who are the bank, the former trustee in bankruptcy of their son Mr Prashant Charan, and the former trustees in bankruptcy of Mrs Charan.
The statement of claim filed on 9 April 2019 appears to have been drafted without the assistance of a legal practitioner. It was verified, as was required by the rules given the nature of the allegations. In addition to the allegations concerning the former bankruptcy of Mr Prashant Charan and Mrs Usha Charan, it alleged that the first plaintiff, Mr Prabhakar Charan was an undischarged bankrupt, stating:
"I am the first plaintiff making the affidavit in the capacity of an undischarged bankrupt exercising my right pursuant to section 116(2)(g) of the Bankruptcy Act 1966 for the personal wrong done to me which caused the loss of my properties."
The statement of claim made allegations concerning the acquisition of land at Holsworthy in 1999 and Casula in 2003 on which residential construction commenced. Part of the costs of acquisition and construction were paid using monies borrowed and secured by mortgages over the properties.
One portion of the pleading alleged that on 16 November 2006 Mr Prashant Charan was made bankrupt, and his trustee in bankruptcy lodged a caveat over the Casula land. It is said that the trustee in bankruptcy maintained that caveat for six years improperly, contrary to duties alleged to flow from s 19 of the Bankruptcy Act 1966 (Cth) and Schedule 4A of the Bankruptcy Regulations 1996 (Cth), as a result of which "the Plaintiff would not have lost his two properties and all the court proceedings that followed would not have occurred" (paragraphs 35-47). "[A]ll the court proceedings that followed" is a reference to the litigation which was considered by the primary judge in the decision from which leave to appeal is sought, to which reference will be made below.
Another complaint alleged is that on 6 June 2012 a sequestration order was made against the estate of Mrs Usha Charan. It is alleged that her trustees in bankruptcy owed duties to act in good faith and to exercise reasonable skill care and prudence, and that that statutory duty and fiduciary obligation were breached when they declined to contribute to the mortgage repayment or other outgoings, despite having seized all rental income (paragraphs 59-64).
Other claims are made based on breach of contract, "collusion", knowing receipt and assistance, fraudulent concealment, breach of trust, promissory estoppel, misleading and deceptive conduct, unconscionable conduct, and breach of the duties owed by a mortgagee exercising a power of sale.
It is not necessary to summarise the allegations in any more detail, save to note two things.
1. First, the allegations confine themselves to the period 1999-2013. No fewer than four separate proceedings were commenced in the Supreme Court by either or both of the applicants between 2014 and 2019.
2. Secondly, the allegations in the pleading closely resemble allegations in earlier pleadings filed by either or both of the applicants in separate proceedings. For example, paragraphs 35-47 which deal with Mr Prashant Charan's bankruptcy and the repeated requests to remove a caveat lodged by the trustee over the Casula land which were refused by the trustee in breach of duty closely resemble paragraphs 14-29 of a statement of claim filed on 9 December 2014 by Mr Charan which was summarily dismissed by McDougall J nearly five years ago: Charan v Commonwealth Bank of Australia [2015] NSWSC 411. Likewise, the claim that the third respondents wrongfully seized rent but refused to make mortgage repayments is repeated at paragraphs 36-40 of that 2014 pleading.
The first proceeding commenced in the Supreme Court between the parties was summarily dismissed by White J on 8 October 2014. Mr Charan was the sole plaintiff, but he was represented by counsel. The second of those proceedings, which had been commenced by both applicants, was summarily dismissed by McDougall J on 27 March 2015. His Honour explained the course he had taken as follows at [54]-[55]:
"I should add that because Mr and Mrs Charan are self-represented, I have taken the course of dealing in some detail with each of their pleaded claims. However, in my view, it is equally correct to say, as put for the Bank, that:
(1) to the extent that the claims for relief made by Mr Charan (and I repeat that only he made any claims for relief) related to the Casula land, he has not sought any relief directed to vindicating his claimed equitable interest in that land; and
(2) by reason of decisions in the earlier proceedings to which I have referred, including proceedings in the Federal Magistrates Court, the possession proceedings in this Court and the earlier proceedings dismissed by White J, the plaintiffs are estopped from asserting all the claims, except perhaps the conspiracy case, which are now alleged in the statement of claim.
As to the second point: it might have been simpler to go through the reasons of White J and show, in greater detail than I have done by reference to the caveat claim, why effectively his Honour either decided the very issue that the parties now seek to reargue or decided issues that could and should have been raised in conjunction with those which the plaintiffs now seek to argue (or reargue). But it seemed to me, as I have said, to be more appropriate, taking into account the self-represented status of the plaintiffs, to deal with the merits (to the extent that there are any) of the claims that they plead."
Mrs Charan was granted leave at the commencement of the hearing, without any opposition from the respondents, and in accordance with what had occurred before the primary judge, to appear for herself and on behalf of her husband. She was asked whether there was any aspect of the 2019 pleading which did not substantially repeat matters which had already been alleged in other proceedings brought by them in the last 6 years. Although she submitted that the earlier litigation had been wrongly dismissed, she did not say that there was anything which was new.
During the course of the hearing, the second and third respondents supplied the submissions which had been made to the primary judge, and a table which identified the passages of the 2019 pleading which substantially repeated portions of pleadings which had been summarily dismissed.
The written submissions at first instance also make it clear that there were two independent bases on which the defendants had sought summary judgment before the primary judge.
1. The first was that the claims did not fall within the exception in s 116(2)(g) of the Bankruptcy Act for damages or compensation for "personal injury or wrong done to the bankrupt". Rather any such claims vested in the current trustee in bankruptcy (in the case of the first applicant) or in the former trustees in bankruptcy (in the case of the second applicant).
2. The second was that the claims had already been the subject of earlier proceedings, all of which had been determined adversely to the applicants.
The defendants' application for summary dismissal came before the primary judge on 13 September 2019. His Honour reserved and delivered judgment on 23 September 2019: Charan v Commonwealth Bank of Australia [2019] NSWSC 1245. His Honour referred to a series of judgments against either or both of the plaintiffs, in the Supreme Court, the Court of Appeal and the High Court, arising out of the same events, namely, the loss of the lands at Holsworthy and Casula. His Honour said at [4]-[6]:
"The legal and commercial objective of each of the four proceedings has been the same. In the first claim (2014/196642), Mr Charan sought 'reversion' of the Holsworthy land or damages representing its value. In the second claim (2014/361879), Mr and Mrs Charan sought 'compensation for wrongful possession and sale' of the Holsworthy and Casula lands. In the third claim (2016/318834), Mr Charan sought orders to 'set aside the mortgagee power of sale to reconvey the two lands to the plaintiff' or 'compensation for the loss of the lands at the current market value'.
In relation to the first claim, White J (as he then was), held that Mr Charan's pleaded claim revealed no arguable cause of action and summarily dismissed the proceeding. In relation to the second claim, McDougall J held that 'each and every one of the claims pleaded is utterly unsustainable'. In relation to the third claim, Darke J summarily dismissed the proceeding. He held that 'the plaintiff's conduct in bringing these proceedings, which is, in effect, the third time these claims have been advanced in this Court, amounts to an abuse of process'.
All these judgments arise out of the same substratum of facts. Each judgment represents considerable judicial diligence and thoroughness. If it were not for one supposed point of distinction which I address below, I would have no hesitation in promptly dismissing this proceeding on the same grounds on which McDougall J and Darke J relied."
The "point of distinction" to which the primary judge referred was addressed at [8]-[17]. It was framed by his Honour at [8]-[9] as follows:
"The point of distinction on which Mr and Mrs Charan rely in this proceeding is that their pleaded claims for relief include 'compensation for personal wrong done resulting in the loss of properties'. This is the basis on which they seek to justify this further attempt to litigate the loss of their properties. I allowed Mrs Charan to be the advocate for herself and her husband. She said the personal wrong issue was the 'core issue which the defendants are relying on'. It is a marginally new perspective on old facts. But it is legally and factually unsustainable.
Adding the language of 'personal wrong' to the claims for relief, is simply a late attempt by the plaintiffs to bring their existing claim within the exceptions set out in Sections 60(4) and 116(2)(g) of the Bankruptcy Act 1966 (Cth) (the Act). This is necessary (if it is available) because such causes of action as the plaintiffs may have in the circumstances, are causes of action that would have vested in the respective trustees in bankruptcy."
The primary judge stated that the provisions which preserved certain rights to persons who are made bankrupt explained the way in which the allegation had been framed, and that the "fulcrum on which the supposed 'personal wrong' hinges is the same substantive complaint that formed the basis of the previous three proceedings in this court": at [12]. His Honour rejected the submission that the claim was for a personal injury or wrong. After dealing with some authorities, he said that the claims arose from actions connected with the bank's enforcement process, which were not excluded from the effect of the sequestration order.
His Honour also stated that the litigation was an attempt to relitigate earlier proceedings, and that it would be "an abuse of process and not in the interests of justice to allow the plaintiffs to go over this ground".
On a fair reading of the reasons his Honour acceded to both aspects of the defendants' submissions. Even if that is not so, it is clear that if leave is granted, both aspects - whether the applicants have standing, and whether they are barred from relitigating points previously litigated by them - will confront the success of any appeal.
As well as dismissing the claim, his Honour also made special costs orders and an order preventing the commencement of further proceedings arising out of, or in connection with, the subject matter of this proceeding without leave and until the costs had been paid. Although the Court raised questions about aspects of the latter orders during the hearing of the application for leave, no part of the applicants' written or oral submissions took issue with those orders. This Court's orders should not be understood as an implicit endorsement of those orders, which on one view purported to extend to the commencement of proceedings in any court until payment had been made by a person who remained in bankruptcy. It was suggested at one stage by solicitors for the bank that order 4 prevented the filing of the application for leave to appeal from that order. The Registrar expressed the contrary view, the matter was not taken any further, and when the hearing in this Court occurred, any suggestion that the order applied to the application itself was disavowed.
[3]
Consideration
The pleading which was summarily dismissed refers to the status of Mr Prabhakar Charan as an undischarged bankrupt, and Mrs Usha Charan as a former bankrupt, and makes complaints about former trustees in bankruptcy breaching duties said to be owed under the Bankruptcy Act. Further, the defendants relied upon the vesting effected by the Bankruptcy Act of such rights as the plaintiffs had in their trustees in bankruptcy as an answer to the entirety of the claim.
It seems probable that the primary judge was exercising "jurisdiction in bankruptcy", although it is not necessary for us to express a concluded view on this. Section 27 of the Bankruptcy Act confers "jurisdiction in bankruptcy" upon the Federal Court of Australia and the Federal Circuit Court of Australia. That conferral of jurisdiction is now expressed to be exclusive. (Formerly, ss 27 and 28 had conferred such jurisdiction upon the State Supreme Courts, but that was repealed in 1996.)
That does not mean that the Supreme Court lacked jurisdiction to hear and determine the application to strike out the proceeding. The position was explained by Gleeson JA in In the matter of Galtari Pty Ltd (in liq) [2018] NSWSC 917 at [35]-[36]:
"If a proceeding engages the jurisdiction "in bankruptcy" within the meaning of s 27 of the Bankruptcy Act, this does not mean the Supreme Court is "wholly deprived of jurisdiction": Tonbul Baykal v Terry Van Der Velde as trustee for the bankrupt estate of Hakan Tandogan [2017] NSWSC 36 (Tonbul Baykal) at [13]. This is because of the operation of the Cross-vesting Act, s 4(1), which relevantly provides:
(1) Where:
(a) the Federal Court or the Family Court has jurisdiction with respect to a civil matter, whether that jurisdiction was or is conferred before or after the commencement of this Act; and
(b) the Supreme Court of a State or Territory would not, apart from this section, have jurisdiction with respect to that matter;
then:
(c) in the case of the Supreme Court of a State (other than the Supreme Court of the Australian Capital Territory and the Supreme Court of the Northern Territory) - that court is invested with federal jurisdiction with respect to that matter …" (Emphasis added).
In other words, where the exclusive jurisdiction under s 27 of the Bankruptcy Act is engaged, the Supreme Courts are (re)invested with the relevant federal jurisdiction under s 4(1), because they would not otherwise have jurisdiction "in bankruptcy" but for the operation of that section."
The reasoning for mentioning this is that, as was pointed out in the written submissions filed by the second and third respondents, this has an important consequence for any appeal. As the Bankruptcy Act is one of the federal statutes listed in the Schedule to the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth), the prohibitions in s 7 apply. In particular, s 7(5) provides that:
"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."
Thus, for example, in Boensch v Pascoe [2016] NSWCA 191; 349 ALR 193 (which coincidentally involved one of the third respondents to the present proceeding), an appeal against a trustee in bankruptcy was dismissed for want of jurisdiction in accordance with s 7(5).
That is the first reason leave should be refused. Any appeal from the orders for summary dismissal of claims for breach of duties said to arise under the Bankruptcy Act and which were said not to be available by reason of the vesting effected by the Bankruptcy Act is a "proceeding by way of an appeal" in which "a matter for determination" is a matter arising under the Bankruptcy Act. The appeal for which leave is sought is one which engages s 7(5). It is required to be instituted in and determined by the Federal Court.
Secondly, even if an appeal lay to this Court, this is a clear case for refusing leave. No question of principle, or of public importance is involved. There has not been shown to be any injustice to the applicants which is reasonably clear, going beyond what is merely arguable: Jaycar Pty Ltd v Lombardo [2011] NSWCA 284 at [46]; Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164 at [33]. The summary of argument relied on by the applicants is not directed to the reasoning of the primary judge, nor to explaining why the applicants should be permitted to litigate once again substantially the same complaints which have been the subject of at least three proceedings in this Court. Despite efforts to direct Mrs Charan's attention to any complaints with the reasons of the primary judge, as opposed to her dissatisfaction with the outcome of the substantive dispute, she made no submissions directed to why his Honour had erred.
It is not disputed that the pleading which was summarily dismissed raises substantially the same issues as were:
1. dismissed by White J in proceedings commenced by the first applicant following a hearing when he was represented by counsel: Charan v Commonwealth Bank of Australia [2014] NSWSC 1473;
2. dismissed by McDougall J in proceedings commenced by both applicants: Charan v Commonwealth Bank of Australia [2015] NSWSC 411, from which leave to appeal was refused: Charan v Commonwealth Bank of Australia [2015] NSWCA 364; and
3. dismissed by Darke J in proceedings commenced by the first applicant, for whom the second applicant appeared with leave: Charan v Commonwealth Bank of Australia [2017] NSWSC 616, from which leave to appeal was refused: Charan v Commonwealth Bank of Australia [2017] NSWCA 209.
For those reasons, the summons seeking leave to appeal should be dismissed.
The second and third respondents sought costs against the second applicant on an indemnity basis. It is to be borne in mind that the second applicant appeared with leave for her husband in 2017 on a summons for leave to appeal in this Court. Following her husband's bankruptcy, an appeal lies to the Federal Court. It was entirely proper for the respondents to rely on that fact, and costs should follow the event. However, the fact that an unrepresented litigant mistakenly chose to bring her appeal to this Court, rather than the Federal Court, in ignorance of s 7(5) of the Jurisdiction of Courts (Cross-vesting) Act, is a good reason not to order indemnity costs. We also note that the necessity for reserving our decision arose because the respondents supplemented the white folder with an additional 130 pages of material on the day before the matter was listed for hearing, and further only provided the notice of motion and submissions before the primary judge during the hearing of the application. It is to be borne in mind that the parties are jointly responsible for ensuring that the White Folder is supplemented with material which is necessary to determine the application for leave.
In all those circumstances, while the second applicant should be ordered to pay the respondents' costs, there should not be an order for costs on an indemnity basis.
[4]
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Decision last updated: 18 February 2020