Frost v Bovaird

Federal Court of Australia (Full Court)|2014-03-07|Before: Perram J, Katzmann JJ

The appeal be dismissed.
The appellants pay the respondents' costs of the appeal as agreed or taxed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 2125 of 2013

LEON LEWIS MACGILLIVRAY BOVAIRD IN HIS CAPACITY AS EXECUTOR OF THE ESTATE OF THE LATE MONICA CATHERINE BOVAIRD

JUDGES: JAGOT, BARKER, KATZMANN JJ DATE: 7 MARCH 2014 PLACE: SYDNEY

THE APPEAL 1 There are three issues in this appeal which the respondents conveniently identified as follows: 1 Whether, on the proper construction of s.249 of the Bankruptcy Act 1966 (Cth) ("the Act"), where leave has been granted to "proceed" with a claim, any later step requires a fresh grant of leave? 2 Whether, on the proper interpretation of Perram J's orders made on 31 May 2011, the application to amend the Statement of Claim falls within the grant of leave already conferred? 3 In the alternative to the foregoing, whether the Full Court should consider the proposed amendments and, if so, whether they are arguable? 2 Before considering the issues, it is necessary to understand some of the background to the dispute between the parties. The Bovairds' written submissions provide a convenient summary of the essential circumstances: 4. This appeal is part of a long-running dispute between 2 branches of a family that had its genesis in an agreement between sister (Monica) and brother (Maxwell), now both deceased. At present, the main characters are the next generation: Monica's son, Leon Bovaird, in his own right and also as the executor of his late mother's estate; Maxwell's son and daughter, and Mr Bovaird's cousins, Alan Frost and Diana Fallon, sometimes in their own right and sometimes as the executors of their late father's estate. It is convenient to refer to the branches and the individuals making them up, in all their various capacities as the Bovairds and the Frosts respectively. 5. The Bovairds sued the Frosts and a Frost-related family company in the Supreme Court of New South Wales in 3 separate actions heard together, alleging breach of contract and seeking family provision out of the estate of the late Maxwell Frost (the Bovaird v Frost Proceedings). In 2009, Brereton J gave judgment in favour of Monica for about $1.24 million plus costs. Shortly thereafter, the Frosts petitioned the Federal Magistrates Court to place the estate of the late Maxwell Frost into bankruptcy. 6. In 2009, the Bovairds brought an appeal (the Bovaird v Frost Appeal) and in 2010 they also sued the Frosts in the Supreme Court of New South Wales alleging devastavit (the Devastavit Proceedings). The present appeal to this Court arises from an application in those latter proceedings, by the Bovairds, to amend their Statement of Claim. 7. In Federal Court proceedings NSD 1394 and 1395 of 2009 [Bovaird v Trustee of the Bankrupt Estate of Frost [2010] FCA 1159 or the Leave Proceedings], Perram J, inter alia, granted leave to the Bovairds to proceed with the Devastavit Proceedings. His Honour ordered in this respect: [The Bovairds are] granted leave, nunc pro tunc, to proceed with [the Devastavit Proceedings]. 8. The Frosts and the Bovairds each appealed various orders of Perram J but in doing so did not challenge that order. 9. On 24 April 2013, Basten JA (sitting alone) dismissed the Bovaird v Frost Appeal in its entirety, without any hearing on the merits. … 11. Later in 2013, the Bovairds moved to amend their claim in the Devastavit Proceedings. The Frosts asserted that the Bovairds required the leave of this Court to pursue that amendment. The Bovairds thought otherwise, and that engendered the proceedings at first instance to which this appeal now relates. 3 With one exception, we propose to adopt the terms used in these submissions. The exception is the Devastavit Proceedings. Devastavit is a Latin word meaning "he has laid waste". In law it means a mismanagement of a deceased estate by the legal personal representatives of the estate squandering or misapplying the assets in the estate. For this reason, like Perram J in his judgment in the Leave Proceedings, we will refer to the Devastavit Proceedings as the Waste Proceedings. 4 The Frosts contend that the primary judge was wrong to hold that, having granted leave to bring the Waste Proceedings, the Bovairds did not need leave to amend their statement of claim in those proceedings (Bovaird v Frost [2013] FCA 974). They maintain that his Honour should have found that another grant of leave was required - either by reason of s 249(3) of the Bankruptcy Act 1966 (Cth) (the Act) or the terms of the original order - and then, should have refused the application for leave in whole or, at the least, in part. 5 In support of this contention the Frosts relied in part on an observation by Basten JA in the Court of Appeal of New South Wales (Bovaird v Frost [2013] NSWCA 91 at [15]): The solicitor for the appellants claimed in his affidavit that he had instructions to "amend the devastavit proceedings" to allege that, but for the acts of devastavit, the estate would not have been insolvent and accordingly the costs of the bankruptcy would not have been incurred. No estimate of those costs was provided, but it is apparent from the judgment of Perram J that the appellants would be required to return to the Federal Court to obtain leave in order to make a further claim in the devastavit proceedings.

THE PRIMARY JUDGE'S REASONS 6 The primary judge correctly described the Waste Proceedings as proceedings "in respect of a debt provable in the administration" within the meaning of s 249(3) of the Act. Section 249(3) reads: Except as provided by this Act, after an order has been made for the administration of the estate of a deceased person under this Part, it is not competent for a creditor: (a) to enforce any remedy against the estate in respect of a debt provable in the administration; or (b) except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceedings in respect of such a debt or take any fresh step in such a proceeding. 7 As the primary judge recorded at [3], referring to the Bovairds as the "judgment creditors": The judgment creditors deny that they need leave but have brought the application in case a different view is ultimately reached in the Supreme Court. 8 At [4] - [5] the primary judge explained: [4] What constitutes a "fresh step" in provisions such as s 249(3) has often enough been considered. See, for example: Gertig v Davies (2003) 85 SASR 226 at 237, 238, 239; Fraser Property Developments Pty Ltd v Sommerfeld (No.2) (2005) 2 Qd R 404 at 406, 409. However, that question does not arise in this case because there is no debate (if s 249(3) applies in the current circumstances) that the judgment creditors' proposed application to amend their statement of claim would be the taking of a fresh step. [5] Put another way, there is no doubt that the proposed amendment application is the taking of a fresh step. The judgment creditors' argument is not that it is not such a step, but rather, that s 249(3) does not apply at all because of the prior grant leave so that the fact that it is a "fresh step" is irrelevant. 9 At [6] - [8] the primary judge rejected an argument advanced for the Frosts that a "fresh step" could be seen as the equivalent of any step "which was of sufficient significance such that the nature of the case was being altered" (at [6]). At [8] the primary judge succinctly explained, the "concepts of freshness and substantiality are quite distinct". 10 At [9] the primary judge noted that the prohibition on taking a fresh step is subject to the exemption of leave. Accordingly, as the primary judge put it: This directs attention of course to the terms of the earlier grant of leave. If, in terms, it is limited to taking particular steps then, naturally, those terms must be given their effect. But if, on the other hand, the leave granted is ambulatory or otherwise unlimited this will not be so. 11 Having identified the leave he granted on 3 May 2011 ("[t]he applicant is granted leave, nunc pro tunc, to proceed with Supreme Court of New South Wales Equity Division proceedings number 2010/41888"), the primary judge observed at [11] - [12] as follows: 11 This was not limited to identified steps or even causes of action but was at large. The grant of leave could have been limited to pursuit of the claims disclosed in the statement of claim but it was not. If that had been done, the terms upon which leave had been granted would mean that an application for leave to amend the proceedings would require the leave of this Court. But the grant of leave was not, in my opinion, so expressed. 12 I do not accept that a general grant of leave to pursue a proceeding is implicitly to be limited to the claims as they are pleaded at the time the leave is granted. 12 In respect of the statement of Basten JA in Bovaird v Frost [2013] NSWCA 91 at [15] (set out above), the primary judge drew attention to the fact that in his earlier judgment leading to the grant of leave (Bovaird v Trustee of the Bankrupt Estate of Frost (2010) 118 ALD 263; [2010] FCA 1159 at [26]), he had foreshadowed conditions "which will require the creditors to undertake not to oppose any application by the trustee to be joined to the devastavit proceedings and also to undertake to keep the trustee informed of the orders which are to be sought", and that undertaking had been proffered as required, when the leave was granted (at [14]). Nevertheless, at [15], the primary judge said he did not: perceive in the reasons given by me at [26], the orders made on 3 May 2011 or the undertakings received that day from the judgment creditors any indication that the Court's grant of leave was limited to pursuit of the proceedings in the form they were in on 3 May 2011. Indeed, that the Court required and received an undertaking from the judgment creditors that they would notify the trustee if different relief was sought is inimical to that suggestion. It shows that further approaches to this Court were not contemplated and that the trustee was to serve as the party monitoring developments in the devastavit proceedings. 13 In response to the Frosts' reliance on the observations of Basten JA, the primary judge said at [16]: It is not obvious to me that this aspect of the matter was the subject of full argument before Basten JA or that the terms of the judgment creditors' undertaking to keep the trustee informed of any alterations to the relief claimed were the subject of developed submission. I do not read his Honour as expressing a concluded view. But to the extent that his Honour suggests that my earlier order required this Court to be approached prior to an amendment application being made, I must respectfully disagree. 14 The primary judge thus concluded that leave was not required and dismissed the application (at [17]). 15 His Honour then dealt with the alternative application of the Frosts to vary the leave that had been granted so as to preclude "an application to amend paragraphs 16C-16G, 20H-20S, 9A, 12A, 16A, 20B-20G, 20T-20W, 22B, 22C, 22D, 22E-L and certain aspects of the relief claimed" (at [19]). The primary judge reasoned that this application should be refused as: - (i) "the concern of this Court, as a court of bankruptcy, is not to superintend the behaviour of the parties to litigation relating to provable debts. Rather, it is to ensure that the conduct of that kind of litigation is in the interests of the creditors as a whole" (at [20]), (ii) "the primary concern of the Court is the capacity of the proposed suit to prejudice unreasonably the assets of the estate" (at [21]), (iii) the opinion of the trustee as dominus litus is of importance for it is he or she who is best positioned to assess the effect on the estate of the suit (at [22]), (iv) "in this case the trustee does not oppose the grant of leave. This suggests, but does not conclusively prove, that the proposed amendments pose no threat to the estate" (at [23]), (v) the Frosts' complaints about the amended pleading "relate to the adequacy of the pleading from a legal perspective" (at [23]), and (vi) there is "a contingent risk that the pursuit of the amendment application may ultimately expose the estate to a future claim for indemnity from the executors" (at [25]). However, the primary judge continued: 26 If the claims which the judgment creditors now wish to pursue are as hopeless as the executors allege then the judgment creditors are unlikely to get leave to amend to raise them. The contingent costs risk to the estate therefore is most likely limited to the costs of the executors in resisting the amendment application. Since on that hypothesis the executors are likely to enjoy the benefit of a costs order in their favour this suggests that the extent of the potential liability is probably limited to the difference between the party-party costs recoverable from the judgment creditors and the executors' actual costs of the application. There will also be an increased exposure if the judgment creditors turn out to be insolvent. In any event, the exposure of the estate, if the executors are ultimately allowed their indemnity, will be modest. 27 I acknowledge the imperfection of this calculus. It excludes from consideration the possibility that the proposed claims, whilst not being strong, are nevertheless of sufficient merit to justify amendment. That scenario might open a larger potential liability for the estate. I did not apprehend, however, that this complex idea was what the executors' submissions were directed at. 28 Even if such a submission had been made, I do not think that the material I have before me would allow me to make the kind of fine judgment which would be necessary to assess such a subtle submission. 29 Given then that the argument advanced was that the proposed amendments did not warrant a grant of leave it seems to me that the estate is unlikely to suffer any real harm if that question is left to the Supreme Court. 30 This is significant because it is that Court which should control these kinds of decisions. It is not the role of a bankruptcy court to supervise the procedural steps of other courts who should be left, in an ordinary case, to deal with those issues. In this case, a better way of proceeding would have been for the judgment creditors to apply in the Supreme Court for leave to amend. If they were successful and if the executors believed such a case threatened the estate then the executors could have applied to this Court to remould the leave. 16 The primary judge thus dismissed the application to vary the leave (at [31]).

3.1 Issue 1 - whether fresh grant of leave required under s 249(3)? 17 The Frosts argued that "Basten JA's statement at [15] should…be taken as a properly considered statement by the Court of Appeal as to the meaning of the earlier judgment of Perram J". We reject the argument. 18 First, Basten JA was dealing with an appeal from orders made in the Supreme Court by Brereton J in the Bovaird v Frost Proceedings. Insofar as Perram J's grant of leave was relevant, Basten JA's statement was limited to the terms of the grant of the leave. He did not hear argument about the proper construction of s 249(3)(b) of the Act and was not exercising jurisdiction under that section (Green v Schneller (2001) 189 ALR 464; [2001] NSWSC 897 at [29] and [30]). The question which was squarely before the primary judge (the proper construction of s 249(3)(b)) was not an issue in the Court of Appeal. Accordingly, Basten JA's statement was no more than an obiter dictum. 19 Second, the language that Basten JA used in [15] ("it is apparent from the judgment of Perram J") indicates that his Honour was making an observation, rather than expressing a concluded view, on a matter he did not have to decide. 20 Third, and as the Bovairds submitted, no observation of Basten JA about the scope of Perram J's orders in an appeal from Brereton J could bind this Court exercising jurisdiction under s 249(3) of the Act. 21 The Frosts' submissions about the "practical difficulty" that might arise from "this difference of opinion between the two courts" overlook a fundamental fact. There is one judgment (of Basten JA) which contains a passing observation and another judgment (of this Court) which conclusively determines the issue unless set aside on appeal. There is thus no "difference of opinion" between the courts. No question of "deferral" by a Registrar of the Supreme Court of New South Wales to an opinion of a Judge of Appeal of that Court can arise. The primary judge's judgment is the only binding judgment. Accordingly, there is no "potential stalemate" as the Frosts claimed. 22 For the same reasons, the Frosts' submission that, consistent with authority (Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485; [1993] HCA 15 and Tillman v Attorney-General (NSW) (2007) 70 NSWLR 448; [2007] NSWCA 327), the primary judge should have followed the decision of the Court of Appeal cannot be accepted. This is not a case where an intermediate court of appeal in one jurisdiction decided an issue and a first instance court in another jurisdiction was confronted by the same issue. Here, as we have explained, there is no relevant inconsistency and it was not necessary for the primary judge to be satisfied that the intermediate court of appeal's view was plainly wrong. 23 Contrary to the submissions for the Frosts, there is no meaningful analogy with the circumstances considered in Repatriation Commission v Nation (1995) 57 FCR 25. Melnik v Melnik (2005) 144 FCR 141; [2005] FCAFC 160 at [48] is also not authority to the contrary. The Full Court's observation at [148], which may be read as consistent with the Frosts' argument, was made in passing in the absence of argument about the proper construction of s 249(3)(b). 24 Moreover, for reasons cogently expressed in the written submissions for the Bovairds, we are persuaded that the primary judge's conclusion was correct. As the Bovairds put it: 17. The language of that section, properly understood, directs attention to 2 possible circumstances: first, where the bankruptcy precedes the commencement of the proceedings and, secondly, where it occurs during the pendency of the proceedings. In the first situation, a grant of leave is required to "commence" proceedings; in the second leave is required to take "any fresh step". The section does not, require, however, a fresh grant of leave once leave has been given to commence proceedings. 18. Neither the Bankruptcy Act 1883 (UK) nor the Bankruptcy Act 1914 (UK) required a grant of leave to take a "fresh step" in proceedings. By 1898 it was well established that the English legislation did not engage proceedings already commenced: Re Wray [1887] 36 Ch D 138; Re Berry; Duffield v Williams [1896] 1 Ch D 939. In Australia, the inclusion of the phrase "fresh step" stemmed from s.10(3) of the Bankruptcy Act 1898 (NSW). Those words then formed the basis of s.60(2) of the Bankruptcy Act 1924 (Cth) and in turn ss.58(3) and 249(3) of the present Act. The mischief that was intended to be remedied by the 1898 New South Wales legislation and its federal successors was the lacuna that arose in relation to proceedings that were extant when the bankruptcy commenced. So understood s.249 of the present Act expanded the Court's supervisory jurisdiction to a class of case that was characterised by a temporal element - namely, its date of commencement having regard to the commencement of the bankruptcy. The background to the legislation does not suggest that the legislation was intended to require the Court to superintend the taking of every step in a case against the estate. 19. Such a construction would give rise to profound practical difficulties, having regard to the undoubted width of the expression "fresh step". No obvious legislative purpose is served if a Plaintiff was required to make formal amendments to an originating process or give particulars of the Statement of Claim. On the other hand, the practical difficulties in obtaining a grant of leave in the context of on-going litigation, or in the course of a trial, need not be spelt out. Such a construction would lead to absurd consequences that would infringe the so-called golden rule of statutory construction: see J J Richards & Sons Pty Limited v Fair Work Australia [2012] FCAFC 53; (2012) 201 FCR 297 at [50]. 20. On the true construction of s.249(3), a grant of leave to commence "legal proceedings" carries with it permission to take the steps which follow from the filing of the originating process - including amendments. The expression "legal proceedings" encompasses the steps that take a legal claim from its commencement to its conclusion at trial. Equally, the expression does not direct attention to a particular iteration of an originating process; an amended pleading is filed in the same "proceedings" as that which was the subject of a grant of leave. 21. The appellants do not point to any authority that directly supports their construction of s.249. There is, on the other hand, reasoning - founded on the analogous provisions of the Corporations Act - that leave under s.500 was not required in order to prosecute an appeal where that had been an earlier grant under s.471B: Mernda Developments v Alamanda [2011] VSCA 392; (2011) 86 ACSR 277 at [53]-[55]. There is no difference in substance between the leave provisions of the Corporations Act and the Act; with respect, this Court ought not to depart from the Victorian Court of Appeal's judgment, as a matter of comity, unless it considered that it was plainly wrong. 25 We agree. The natural and ordinary meaning of the words "such a proceeding" in s 294(3) is a proceeding which was commenced without the leave of the Court. The earlier forms of the equivalent provisions in the Bankruptcy Act 1924 (Cth) (s 60(2)) and the Bankruptcy Act 1898 (NSW) (s 10(3)) are consistent with this conclusion. Nothing in the legislative history indicates an intention to change the position from that which existed under those statutory schemes. 26 We do not accept the Frosts' argument that there is a "peculiar asymmetry" resulting from this construction so that one general grant of leave will suffice for the commencement of proceedings whereas leave for each and every fresh step is required if the proceedings have commenced before the bankruptcy order. In both cases the leave is to be granted "on such terms as the Court thinks fit". Accordingly, in both cases the leave may be as general or as confined as appears appropriate in the particular circumstances of the case. The real peculiarity, it seems to us, would result from the Frosts' construction. On that construction, despite a general grant of leave "to proceed with Supreme Court of New South Wales Equity Division proceedings number 2010/41888", the Bovairds would be required to seek and obtain leave for every fresh step in the proceeding, be it amending the statement of claim, filing a reply to a defence, filing a defence to a cross-claim, applying for discovery, applying to vacate the hearing date or the like. The suggested restriction of "fresh step" to a "substantial" step or a step capable of having a material effect on the position of the estate, as the primary judge concluded, is not supported by the legislative text and does not change the fact that the Frosts' construction would appear to increase the prospects of waste to the estate, being the very result they say they want to avoid. 27 In any case, the primary judge accepted that what was proposed was a "fresh step". That is not the point. The point is that, given the earlier grant of leave, the exemption in s 249(3) had been engaged. It follows that the Frosts' submission that s 249(3) is mandatory and cannot be avoided by fashioning an order that obviates the need to obtain leave for the taking of a "fresh step" must be rejected. It assumes the Frosts' erroneous construction of s 249(3) is correct and thus advances the matter no further. For the same reason the further submission that the grant of leave must be "read down" to accord with s 249(3) must also be rejected. 28 Issue 1, accordingly, must be answered "No".

3.2 Issue 2 - whether application falls within existing grant of leave? 29 The Frosts also contended that the primary judge erred in concluding that the application to amend the statement of claim was authorised by the earlier grant of leave. 30 First, they submitted that the conclusion involves an unnatural interpretation of the grant of leave. They maintained that "the Supreme Court proceedings …" the subject of the earlier order referred only to the proceedings pleaded in the statement of claim at the time leave was granted. Second, they submitted that clear words in the reasons for judgment would be required to construe the grant of leave as extending to pleadings "that could be amended in any manner at any time and to any extent at all". Third, they submitted that the prospect that the trustee might be joined, to which the primary judge referred at [14] and [15], was immaterial because the proposed amendments were unknown at that time and, even if the trustee had been joined, the "proceeding" would concern the existing allegations. 31 None of these submissions are persuasive. The primary judge's interpretation of the leave he granted accords with the natural meaning of the words used. There is no warrant for attempting to construe the grant of leave by reference to anything other than the terms of the grant. The submission that clear words would be needed in the judgment to construe the grant of leave in the way the primary judge did is unsupported by any authority. While it was common ground that regard could be had to the judgment for the purposes of construing the order, it may equally be said that clear words would be needed to confine an apparently general grant of leave to pursue the proceedings in the Supreme Court so as to exclude any substantial amendment application with which the Supreme Court is best placed to deal. Finally, the role of the trustee is relevant because, as the primary judge said, it is the trustee who is "to serve as the party monitoring developments in the devastavit proceedings". 32 It follows that issue 2 must be answered "Yes".

3.3 Issue 3 - whether amendments should be considered? 33 In view of the conclusions we have reached on the first two issues, it is strictly unnecessary to deal with this issue. For completeness, however, we will do so. 34 The Frosts submitted first that the primary judge erred by requiring a "direct" effect on the position of the estate at [24]. According to the Frosts, there is no such requirement in s 249(3). This impermissible gloss on s 249(3), it was said, led the primary judge to consider the potential or contingent impacts on the estate to be insufficient to warrant the variation of the leave as sought. Second, the Frosts submitted that the primary judge erred in excluding from consideration the possibility that the proposed amendments were sufficiently meritorious to warrant permitting them to be made even if not strong enough to be ultimately successful. It was submitted that this exclusion was wrong because the amendments might cause the executors and (if they are granted indemnity from the estate) the estate to incur "massive costs". As the written submissions for the Frosts put it, the fact that they, as executors, might succeed in resisting the application to amend "does not justify refusing to consider whether in the interests of the estate on a cost/benefit analysis that application should proceed at all". Accordingly, it was said the primary judge erred in "failing to exercise the bankruptcy court's supervisory jurisdiction with a view to confining the burden on the estate". 35 The problem with all of these submissions is that they do not accurately reflect the primary judge's reasons. 36 The primary judge did not articulate any proposition of law about the requirement for a direct impact on the estate and thus did not impose any impermissible gloss on s 249(3). His Honour correctly observed at [24] that, because the Full Court had not disturbed his conclusion that the trustee would not be justified in indemnifying the executors out of the estate in respect of the Waste Proceedings, the litigation would not directly affect the estate. This was nothing more than a statement of uncontroversial fact. His Honour did not say that a "direct effect" was required to be relevant under s 249(3). In any event, the primary judge recognised that the uncontroversial fact that the executors were not presently indemnified might change in the future. This is the "contingent risk" he identified at [25]. Far from ignoring or downplaying the significance of this contingent risk by erroneously requiring a direct effect, the primary judge carefully weighed the nature and extent of the contingent risk. His Honour acknowledged (at [27]) that the calculus for doing so was imperfect because it could not allow for amendments that were not so hopeless as to preclude the grant of leave to amend yet not so strong as ultimately to succeed. This remark shows that, far from refusing to consider the potential burden to the estate, his Honour was in fact undertaking that consideration, recognising the inevitable limits on his powers of prognostication. His Honour's observation (at [28]) concerning the paucity of the material before the Court did not involve any refusal to consider relevant matters or a failure to exercise the bankruptcy court's supervisory jurisdiction with a view to confining the burden on the estate. It was the only rational response in the circumstances. 37 The Bovairds's submissions about the observation at [28] should be accepted: 29. In considering the estate's contingent liability, Perram J postulated 2 possible hypotheses, the second of which was that the proposed claims, whilst not strong, were nonetheless of sufficient merit to justify amendment. He excluded this possibility from his first hypothesis but entertained it as the underlying assumption of the second. It is incorrect to submit…that his Honour entirely excluded this factor from his considerations. 30. In relation to this second hypothesis, Perram J considered that the appellants did not propound the specific contention recorded in the preceding paragraph. He was right in this regard…But, in all events, his Honour was right that he did not have material before him to assess such a contention; the affidavit of Mr Bates spoke to past costs, and did not attempt to provide an estimate of future costs at all - let alone on this second hypothesis. The costs/benefit analysis now invoked…could not be entertained by his Honour because the costs aspect of the equation was not the subject of evidence. 31. Perram J's judgment in this regard involved an exercise of discretion. He took into account the relevant considerations and applied the correct principles. There is no basis for intervention given the discretionary nature of his judgment: House v R (1936) 55 CLR 499. 38 The final matter is the Frosts' alternative argument that the primary judge should have varied the grant of leave under s 249(3) to exclude some of the proposed amendments. This argument must also be rejected. 39 One answer is that the submission can rise no higher than the more general submission that leave should be varied so as to exclude all of the proposed amendments. If there was no error in respect of that exercise of discretion, then there can be no error in not having excluded from the leave only some of the amendments. 40 Another answer is that the Frosts have not advanced any cogent reason to support the assertion of error by the primary judge in deciding that the merits, or otherwise, of the proposed amendments should be left to the Supreme Court. Analysis of their written submissions as to why leave should not be granted confirms the wisdom of this course. Each of the submissions invited consideration of the very issues the Supreme Court would have to consider to determine whether or not to grant leave to amend. 41 For example, the Frosts contended that the amendments in proposed paras 16A-16G involve a collateral attack on the decisions at both first instance and on appeal in the Bovaird v Frost proceedings. However, as the Bovairds submitted: The relevant test in devastavit is a different test from that applied by Brereton J. It is entirely consistent with his judgment that the Frosts have the benefit of the indemnity from the estate (under one set of legal principles) and that the Frosts are liable to the Bovairds for an amount equal to the indemnity (under legal principles relevant to devastavit): ASOC Relief Claimed [3]. The [Frosts] conflate the application of differing legal principles with their ultimate financial consequences. 42 The real point is that the Supreme Court is best placed to deal with these arguments. For this reason we do not propose to consider the individual submissions about each proposed amendment. There is no basis for the assertion of error by the primary judge and the arguments about individual amendments should not be entertained in this appeal. 43 In oral argument, the Frosts submitted that the primary judge erred in the exercise of his discretion in that, if the material did not allow the "kind of fine judgment" to which his Honour referred at [28], the leave necessarily had to be varied or withdrawn. This submission is outside the scope of the amended notice of appeal and, in any event, is without merit. Nor was the evidence "all one way" as the Frosts proposed. As noted already, the point his Honour was making (that there were limits to his powers of prognostication) was not only open but compelling. Recognising that those limits did not require the primary judge to vary or withdraw the leave, his refusal to do so involved no error. 44 For all these reasons issue 3 should be answered "No".

CONCLUSION 45 The appeal should be dismissed with costs. I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Jagot, Barker, Katzmann.

(UK) Bankruptcy Act 1898(NSW)

(UK) Bankruptcy Act 1924(Cth)

Bankruptcy Act 1898(NSW)

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