Draper v Tragauer

the application which was dismissed 6 The amended application which was subject to the dismissal order of 22 July 2004 related to the Marleston property, to the MacDonald Park property, to the bankruptcy of Mr Draper, and (it appears) to some other conduct. The 13 orders for relief sought were as follows: '1. That the Official Receiver be made liable on the negligence and damages in dealing with the property situated at 5 George Street, Marleston, in South Australia Volume 3606 Folio 1 subject to a Mortgage No. 6402318 in favour of the National Australia Bank Limited and an order of the Federal Court No. 6676698 dated 27th January, 1989, which was superseded by a later order inserted thereon the Title Deeds. 2. That the Official Receiver is Personally liable for a $40,000 loss for refusing an offer by the applicants to sell the property and making a counterclaim that he wanted 100% of the proceeds of the sale and thus not being able to get in the assets of the Bankrupt to pay off the Bankrupts [sic] Debts. 3. The Official Receiver is personally liable for a loss of $41,114.75 additional to the above (2 above) because it is alleged that he interfered and conspired with the National Bank of Australia in order that they could put a foreclosure on the property. Before the applicants could sell the property Being [sic] the amount that was overstated in the Mortgage by the National Australia Bank 4. That the Official Receiver did not investigate the assets of the Bankrupt concerning the property at 5 George Street, Marleston, in South Australia in order to assess the extent of the assets of the Bankrupt in order to pay off the Bankrupts [sic] Debts and should be held personally liable for such negligence. 5. That the Official Receiver was negligent in not safeguarding B. O. Draper's share of the property at 5 George Street Marleston, in South Australia and should be held personally liable for negligence. 6. That the Registrar should not have accepted the petition for Bankruptcy from the Australian Society of Accountants as at the time of the petition the debt was Secured by a Mareeba [sic] on 5 George Street Marleston, in South Australia 7. That the Bankruptcy was maliciously procured by the Australian Society of Accountants as they procured on a secured debt 8. That the Official Receiver condoned the actions of the Australian Society of Accountants and should have refused to Register the Bankruptcy 9. That the Bankruptcy should be annulled under Section 154(1)(a) 10. That the Trustee in Bankruptcy should be held personally liable for condoning the illegal action on lot 202 Heaslip Road, MacDonald Park, in South Australia. 11. That the Bankrupt Estate of Keith Lawrence Draper should be immediately wound up 12. That the official Receiver nor did the Trustee in Bankruptcy ever have [sic] the right to a vesting order on the property situated at lot 202 Heaslip Road MacDonald Park in South Australia 13. A declaration pursuant to Section 30 of the Bankruptcy Act 1966 that the orders sought from 1-12 above against the respondents be given in the Applicants [sic] favour and that the interim orders given making the respondents comply to the applicants [sic] request'

7 The learned Magistrate recorded some apparently uncontentious facts. A sequestration order was made in respect of the estate of Mr Draper on 12 July 1989. The Official Trustee was appointed as the trustee of his bankrupt estate. On 18 March 2003 Bruce James Carter (Mr Carter) became the trustee of the bankrupt estate of Mr Draper. In the meantime, Mr Draper was discharged from bankruptcy on 25 July 1992 by operation of law, in accordance with s 149 of the Act.

8 The Official Receiver has queried in her responsive material why she should have been joined as a respondent to the proceedings at all. Mr Draper has not addressed that issue. The property of a bankrupt vests in the Official Trustee, unless some other trustee is appointed: s 58(1) of the Act. The allegations erroneously assert that the Official Receiver was the first trustee of Mr Draper's bankrupt estate. That is the premise underlying pars 1-5, 8 and 12 of the amended application. The premise should be corrected. The appellants accept that they should do so. As the action before the learned Magistrate proceeded on the basis that the Official Receiver was the trustee, it is however appropriate to consider the appeal as if the correct trustee - the Official Trustee - were named as the first respondent.

9 In addition, the appellants accept that, with one qualification, their claims relate to the conduct or the alleged conduct of the Official Trustee as trustee of the bankrupt estate of Mr Draper. That observation applies to the claims in the amended application, and to the claims in the further amended application (including the proposed further amendment foreshadowed by the documents filed in the proceedings in the Federal Magistrates Court on 20 August 2004 and on 24 November 2004). There is no claim (actual or foreshadowed) against Mr Carter that he acted wrongfully in relation to the procuring of the bankruptcy order, or that he acted wrongfully in relation to the MacDonald Park property, or that he acted wrongfully in relation to the Marleston property. The foreshadowed claims for damages are not pursued against him. Mr Carter is simply a respondent because, as trustee of the bankrupt estate of Mr Draper since 18 March 2003, he is a necessary respondent to the claims that at the time of the bankruptcy, and since, Mr Draper has had no beneficial interest in the MacDonald Park property and so that (if that assertion is found to be correct) appropriate consequential orders may be made.

10 The amended application was supported by some affidavit material from the appellants. It is convenient at this point briefly to note certain of the claims in it. That will help to understand the claims and how they were addressed by the learned Magistrate.

11 At the time of the sequestration order, Mr Draper and Ms Draper were jointly registered as joint tenants of the MacDonald Park property. They had purchased the MacDonald Park property on 5 July 1989. It was funded with a loan of $40,000, jointly borrowed from the South Australian Public Service Savings and Loans Society, secured by a first mortgage, and by vendor finance of $8000 secured by a second mortgage, over the MacDonald Park property. The total purchase price was about $48,000. The deposit and the acquisition costs are said to have been provided only by Ms Draper. The appellants' affidavits indicate that it was their intention at the time of the purchase that the MacDonald Park property should be held solely for the benefit of Ms Draper, but that the principal financier required the property to be held as a joint tenancy. It is also asserted in affidavits that Ms Draper then paid all mortgage payments and outgoings, and paid for all improvements involving the construction of a shed for $14,000 and of a garage for $6000. The mortgages were paid out by 28 June 1996.

12 As the MacDonald Park property was registered in the joint names of Mr Draper and Ms Draper, the effect of Mr Draper's bankruptcy was to sever the joint tenancy. They became tenants in common: s 58 of the Bankruptcy Act, and see Sistrom v Urh (1992) 40 FCR 550; Re Prestia, Australia and New Zealand Banking Group Ltd v Prestia [2001] FCA 792 at [23] - [24] per Hely J. On 16 November 1989, the Official Trustee as the trustee of the bankrupt estate of Mr Draper became registered as the holder of Mr Draper's interest in the MacDonald Park property. That position has remained to the present time, save for Mr Carter having become the trustee. The appellants assert, in the circumstances, that notwithstanding the legal title, the beneficial interest in the MacDonald Park property at all times was held solely by Ms Draper and so was not part of the estate of the bankrupt. They also assert that it is unconscionable for the Official Trustee to have delayed up to now to exercise any dominion over the MacDonald Park property, during which time Ms Draper has paid off the mortgages, improved the property, and whilst the effluxion of time has led to its value being dramatically increased. They claim that, at the time of the bankruptcy, there was no equity in the MacDonald Park property at all. The delay in realising the property in the circumstances is said to be unconscionable.

13 The Marleston property was not registered in the name of Mr Draper at the time of the sequestration order. It was apparently transferred from the joint names of the appellants to Ms Draper on 27 August 1987. On 12 July 1987, a costs order had been made against Mr Draper in a proceeding, and that costs order ultimately led to the sequestration order. The trustee considered that an interest in the Marleston property may have constituted part of the estate of Mr Draper. It is alleged that, somehow, Mr Draper came to procure a proposed sale of the Marleston property for $110,000, and offered to the trustee, that the claim of the trustee that it was part of his bankrupt estate be resolved on a 50/50 basis. The affidavits assert that, at the time, the Marleston property was subject to a mortgage to the value of about $70,000, so that he was proposing that $20,000 of the beneficial interest of $40,000 be paid to the trustee. The trustee did not accept that proposal. The appellants claim that somehow, because that proposal was not accepted, Ms Draper was unable to realise the property in the way in which she had intended and suffered a loss. Subsequently, on a date which is unclear, the mortgagee realised the Marleston property because of outstanding liability under the mortgage and it realised only $70,000. The appellants claim therefore that they suffered a loss of $40,000.

14 The grounds of appeal were intended to be expressed in the amended notice of appeal filed on 5 October 2004. However, the appellants (without leave) filed a further amended notice of appeal on 29 November 2004. Each of those documents said that the appeal was from the whole of the judgment of 22 July 2004 'where his Honour dismissed the orders 1 to 5 inclusively'. Mr Draper said in oral submissions, when that limiting expression was pointed out to him, that it was not intended. The appellants wanted to appeal from the dismissal of each of the orders numbered 1 to 13 in the amended application. Counsel for the respondents did not oppose the appeal proceeding as a challenge in the dismissal of all 13 grounds in the amended application. Despite the document of 29 November 2004 omitting what was previously par 19 of the grounds of appeal, Mr Draper also said the appellants wanted to maintain that ground of appeal. Counsel for the respondents also did not oppose that course.

15 The document of 29 November 2004 also added a new par 9 concerning the 'summary dismissal' of the claim to have the bankruptcy of Mr Draper annulled. Counsel for the respondents opposed that part of the proposed further amended notice of appeal of 29 November 2004 because it did not relate to a matter the learned Magistrate was called upon to decide, and because in any event on the material it had no prospects of success. As I think it is arguable that the point was raised by the amended application, I will give leave to amend the amended notice of appeal by adding that ground.

16 The appellants are clearly not legally trained. Their documents filed in this appeal (and in the proceedings in the Federal Magistrates Court) should be read in that context. It is also understandable that, given the elapse of time and the evident vehemence with which Mr Draper on behalf of the appellants believes that the appellants have been wronged, their documents may be discursive and firmly, if not sometimes inappropriately, expressed. It is nevertheless necessary that the documents they have filed be comprehensible. If they are not, it does not do justice either to the appellants or to the respondents for the Court and the parties to be left to speculate about what is intended to be alleged. Such speculation may be erroneous. It is the responsibility of all parties in the proceedings to state in the application or other documents the material facts alleged so that the opposing parties may clearly understand the case they have to meet, and so that the Court may deal fairly with issues arising from those documents and may conduct the hearing, including making rulings as to the admissibility of evidence, according to law.

17 I have approached the amended notice of appeal and the further (proposed) amended notice of appeal, together with the appellants' written submissions, in that light. I have also endeavoured to identify clearly what it is that the appellants now seek to claim against the respondents, in part by questions asked of Mr Draper in the course of the hearing. Their present claims (as I now understand them) may be contrasted with the claims as expressed in the amended application which were dismissed on 22 July 2004. In an endeavour to facilitate the further conduct of the proceedings by the appellants in the Federal Magistrates Court, I have also endeavoured briefly to set out below my understanding of their present claims and some of the steps which they will have to take at or prior to the further hearing of that application on 14 February 2004. My observations are not intended to provide them with legal advice as to how their claims should be conducted. That is a matter for them. They are simply perhaps to give them a focus which they presently do not have. My observations do not, and could not, give any indication as to the merits of any of their claims. Nor, of course, are my observations intended to suggest to or direct the learned Federal Magistrate in any way as to how he might conduct the proceedings.

18 I turn to address the matters raised on the appeal.

19 The learned Magistrate identified pars 1-5 and 10 of the orders sought on the amended application as being a claim for damages for negligence in the conduct of the Official Receiver (it should be the Official Trustee) in relation to the Marleston property, although his Honour recognised that par 3 may also allege a claim based upon a tortious conspiracy (see e.g. Crofter Hand Woven Harris Tweed Co Ltd v Veitah [1942] AC 435) and that par 2 is expressed so generally as not to indicate clearly whether any other cause of action, or whether any other foundation for the relief claimed, is made. The learned Magistrate then concluded that those causes of action do not lie within the jurisdiction of the Federal Magistrates Court.

20 In my judgment, his Honour has correctly categorised the nature of the cause or causes of action raised in pars 1-5 and 10 of the amended application. They are tortious claims based upon alleged conduct of the Official Trustee in relation to the Marleston property. The appellants, in their discursive amended notice of appeal, describe the cause of action not as negligence but as 'tortuous (sic) acts referred to number 2 in GROUNDS above'. Paragraph 2 under the heading 'GROUNDS' refers to a tort of an unspecified nature, and a contempt of court in proceeding to seek a sequestration order. (There is now a separate proceeding in this Court alleging contempt of court). Negligence is a tort. Pars 1-5 and 10 of the amended application allege 'negligence' and that the Official Receiver was 'negligent' and identify to some degree conduct which, if proved, could be part of a claim of conduct which might make out a cause of action in negligence. There is no other tortious label which I think is more appropriately given to pars 1-5 of the amended application.

21 The Federal Magistrates Court has such jurisdiction as is vested in it by laws made by the Parliament either by express provision, or by the application of s 15C of the Acts Interpretation Act 1901 (Cth) (the AI Act): see s 10 Federal Magistrates Act 1999 (Cth) (the FM Act). There is no enactment which gives it jurisdiction generally to hear and determine claims at common law, whether for negligence or for conspiracy. It is not suggested s 15C of the AI Act operates to create that jurisdiction. It was not suggested that pars 1-5 and 10 of the amended application fall within the accrued jurisdiction of the Federal Magistrates Court because they are issues arising in the one justiciable matter in which that court otherwise has jurisdiction, or that they give rise to a matter that is associated with a matter in which that court has jurisdiction: see s 18 of the FM Act. Those concepts are discussed in e.g. Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457; Fencott v Muller (1983) 152 CLR 570, Stack v Coast Securitie (No 9) Pty Ltd (1983) 154 CLR 261; Re Wakim; Ex parte McNally (1999) 198 CLR 511. It was not suggested, in this matter, that the Federal Magistrates Court had jurisdiction to entertain a common law tortious claim because the respondent, or one of them, was a person who occupied a statutory office under the Act.

22 For those reasons, the learned Magistrate has not been shown to have erred in concluding that the claims made in pars 1-5 and 10 of the amended application were not within the jurisdiction of that court.

23 Paragraphs 6-8 of the amended application were dealt with together by the learned Magistrate. They concern the validity of the bankruptcy petition which led to the sequestration order because (it is asserted) the petitioning creditor was secured by a Mareva injunction over the Marleston property in respect of its debt.

24 The learned Magistrate properly treated that question as having been decided by von Doussa J in Re Draper; Ex parte Australian Society of Accountants (unreported, 12 July 1989). Interlocutory injunctions had been granted by Fisher J in January 1989 separately restraining Mr Draper from disposing of his assets other than in the normal course of business or for the purpose of ordinary living expenses, and against Ms Draper restraining her from dealing with her interest in the Marleston property. It was argued that the restraining orders, secured at the instance of the Australian Society of Accountants(the ASA) its debt so that s 44 of the Act did not permit the ASA to present the petition. That contention was directly rejected (see at pp 4-5 of the judgment). The learned Magistrate properly regarded himself as bound by that decision.

25 In my judgment, nothing has been put by the appellants to suggest that the learned Magistrate erred in his consideration of pars 6-8 of the amended application. He was correct to conclude that the claim was so clearly unarguable as to be summarily dismissed.

26 Paragraph 11 of the amended application, sought the winding up of the bankrupt estate of Mr Draper. The learned Magistrate correctly identified par 11 as referring to a consequence of some other order made in relation to some other part of the claims. If the bankruptcy were annulled, the annulment would mean the estate of Mr Draper would no longer be held by a trustee in bankruptcy. If a determination were made that his bankrupt estate did not include any equitable interest in the MacDonald Park property, then no equitable interest in that property would be part of his bankrupt estate. It was suggested that his interest in the MacDonald Park property is now the only remaining asset in his bankrupt estate; if that were so, effectively there would be no residual bankrupt estate. Plainly par 11 does not itself allege facts which themselves may support a course of action different from those already discussed, nor itself identify some separate cause of action. In my judgment, par 11 was properly dealt with by the learned Federal Magistrate. Similarly, par 13 of the amended application is derivative from, or dependent upon, the appellants succeeding in some one or more of the other claims in the amended application. Apart from identifying s 30 of the Act as a possible source of power for the Federal Magistrates Court to make the other orders sought, it does not identify a separate cause of action relied upon or allege further facts which might support one or more of the other causes of action. In my view, the learned Magistrate correctly regarded pars 11 and 13 of the amended application as standing or falling with the other paragraphs of the amended application.

27 Paragraph 9 of the amended application sought the annulment of the sequestration order. The annulment was sought under s 153B of the Act, although in the amended application reference is wrongly made to s 154(1)(a). The amended application was supported by an affidavit of the appellants sworn on 9 March 2004 and by an affidavit of Mr Draper sworn on 14 January 2004. The former does not refer to the grounds upon which annulment of the bankruptcy is sought. The latter relates in part and only briefly to the annulment of Mr Draper's bankruptcy. It appears to suggest the sequestration order should not have been made because the petitioning creditor, the ASA, was not entitled to use the acronym CPA or the words Certified Practising Accountant. It also appears to suggest that issue was somehow raised unsuccessfully in an appeal to the High Court where a 'monumental error' was made.

28 The issue has been decided adversely to Mr Draper by von Doussa J in dismissing an application to set aside the bankruptcy notice based upon the costs order: Re Draper; Ex parte Australian Society of Accountants (unreported, 3 February 1989, at pp 7-13). An appeal from that decision was dismissed by the Full Court (Fisher, Wilcox and French JJ) on 3 May 1989, although it appears that Mr Draper did not attend the hearing. In his judgment, von Doussa J also refers to decisions of Woodward J in Federation of Australian Accountants v Australian Society of Accountants (1987) 9 ATPR 40-796 on 12 June 1987 at pp 4-5 and 10; and by Jenkinson J in an unreported ruling on 15 December 1987 refusing to grant a stay of the judgment upon which the bankruptcy notice served on Mr Draper was based. The appellants' material suggests it was the subject of an application for special leave to appeal to the High Court from the judgment on which the bankruptcy notice was based, heard in about March 1989 and presumably the decision of the High Court to which Mr Draper refers in his vague affidavit of 14 January 2004. All of those decisions apparently rejected the same contention.

29 The learned Magistrate speculated (as the appellants' material did not clearly identify the basis) that par 9 of the amended application was based upon the ASA being a secured creditor. He correctly concluded that there was no arguable prospect of that contention succeeding as it had already been decided adversely to the appellants. My review of the material before the learned Magistrate leads to my speculation that Mr Draper is also seeking to revive that issue about the status of he original judgment upon which the bankruptcy notice was founded because the ASA used the acronym CPA. That, too, has been decided adversely to Mr Draper.

30 I agree with the learned Magistrate that the material available does not disclose any facts which, taken at their face value, could lead to the Court making an order under s 153B of the Act annulling the sequestration order.

31 Finally, it is necessary to consider how the learned Magistrate addressed par 12 of the amended application. The short point is that Mr Draper was registered as a joint tenant of the MacDonald Park property. It may be that his interest was legal only, and that he had no beneficial interest in the MacDonald Park property. That is an issue which he seeks to have determined by the further amended application listed for hearing on 14 February 2005. But s 58 of the Act clearly operated so that his interest in the MacDonald Park property (whatever its extent) vested in the Official Trustee upon the making of the sequestration order. In my judgment the learned Magistrate was correct to conclude on that basis that there was no real prospect on the material before him of the appellants establishing an entitlement to an order in terms of par 12 of the amended application.

32 The learned Magistrate recognised that there was evidence adduced by the appellants which might, if accepted, support their claim that at all times the equitable interest in the MacDonald Park property lay solely with Ms Draper. His Honour also recognised that there was evidence which, if accepted, might require at least some form of accounting as between the trustee (now Mr Carter) and Ms Draper in respect of the payments made by Ms Draper in respect of the MacDonald Park property. He did not need to decide those issues on the form of the amended application, and he did not do so. His Honour recognised that there may be some foundation for those claims and so permitted the further amendment of the amended application. They are issues which may now arise at the further hearing.

33 For those reasons, the appeal is dismissed. The appellants must pay the costs of the appeal.

34 I have not dealt in detail with each of the contentions put by the appellants in their oral submissions, in their amended notice of appeal or their document entitled further amended notice of appeal dated 29 November 2004 (both of which are largely in the nature of submissions), or in their written submissions dated 5 October 2004. I have considered each of those documents, and have endeavoured to elicit what points are made and what points are immediately relevant to the consideration of this appeal. Much of those documents is merely assertive, and does not deal directly with the reasons why the orders sought in the amended application were dismissed. Some contain unfounded allegations, at least on the evidentiary material before the learned Magistrate, and sometimes in extravagant language.

35 In an endeavour to focus the appellants' attention on the further hearing, I note that:

(1) the further amended application filed on 5 August 2004 is the document currently before the Federal Magistrates Court and listed for hearing on 14 February 2005; (2) that document seeks orders relating to the nature of the bankrupt estate of Mr Draper, namely whether his bankrupt estate included any equitable interest in the MacDonald Park property at the time of the sequestration order; (3) that document may be read as pursuing the alternative claim, if Mr Draper's bankrupt estate included half the equitable interest in the MacDonald Park property, that on some basis the trustee should account to Ms Draper for monies paid by her towards the improvement of the MacDonald Park property and towards the payment of outgoings including mortgage capital and interest payments on it before any present entitlement to one half of the MacDonald Park property; (4) that document may also be read as pursuing the further alternative claim, if Mr Draper's bankrupt estate included half the equitable interest in the MacDonald Park property, that on some basis the conduct of the trustee entitles the appellants to an order that the trustee should be estopped from asserting that entitlement; (5) those claims are, in reality, made against the Official Trustee so the Official Trustee should be substituted as the first respondent in lieu of the Official Receiver; (6) those claims involve Mr Carter only because he is now the trustee of the bankrupt estate of Mr Draper and so effective orders can be made (if any of those claims succeed); Mr Carter is not alleged to have been involved in the conduct giving rise to those claims; (7) the further amended application also seeks an order annulling the sequestration order made in respect of the estate of Mr Draper, but unless there are further and different grounds for pursuing that order it would seem that claim has been summarily dismissed by the learned Magistrate and his decision has been upheld by this judgment on appeal; (8) in addition, if it is sought to annul the sequestration order, it would be necessary for the petitioning creditor to be served with the application: see r 35.03 of the Federal Magistrates Court Rules; (9) the appellants also seek to amend the further amended application by adding what is par 8 of the documents called further amended application filed on 20 August 2004 and further further amended application dated 24 November 2004, and they will need leave to do so; (10) the application for leave to amend the further amended application of 5 August 2004 to pursue claims for damages will require consideration, inter alia, of whether the Federal Magistrates Court has jurisdiction to entertain those claims or either of them in its accrued jurisdiction (the claim arising from conduct in relation to the Marleston property will not necessarily fall into the same category as that in relation to the MacDonald Park property); (11) the application for leave to amend the amended application may also involve consideration of whether the affidavits of the appellants (or other material adduced by them) fairly puts the Official Trustee on notice as to the case to be met and presents an arguable case for the claims or either of them succeeding; (12) the claims so sought to be made by the proposed amendment are against Official Trustee only, and Mr Carter is not alleged to have been involved in the conduct giving rise to those claims; (13) the claims so sought to be made by the proposed amendment involve claims that the Official Trustee should pay damages - (a) in respect of conduct in relation to the MacDonald Park property, and (b) in respect of conduct in relation to the Marleston property.

36 The formal orders are: (1) Leave to the appellants to amend the amended notice of appeal dated 5 October 2004 by: (a) deleting '5' twice appearing in par 1 thereof and substituting '13' (b) adding as par 20 on page 9 that part of the document entitled 'Further Amended Notice of Appeal Pursuant to Order made by Mansfield J in September 2004' and filed on 29 November 2004 designated as paragraph 9. (2) The appeal is dismissed. (3) The appellants pay to the respondents costs of the appeal.

I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.

Counsel for the Appellants: The appellants appeared in person by the male appellant.

Solicitor for the First Respondent: Gretsas Chrzaszcz

Counsel for the Second Respondent: P Britten-Jones

Solicitor for the Second Respondent: Cowell Clarke

Date of Hearing: 23 November and 15 December 2004

Date of Judgment: 22 December 2004