Garrett v Cahill

(a) Procedural issues 7 First, Pagone J on 26 February 2015, made a vexatious litigant order against Mr Garrett under s 37AO(2) of the FCA Act in proceeding VID 600 of 2014 (Garrett v Commissioner of Taxation [2015] FCA 117). The order was made in the following terms: THE COURT DECLARES THAT: 1. The applicant is a person who has frequently instituted or conducted vexatious proceedings in Australian courts or tribunals. 2. By this proceeding the respondents are each persons against whom the applicant has instituted or conducted a vexatious proceeding. AND THE COURT ORDERS THAT: 3. The applicant is prohibited from: (a) instituting in his own name; or (b) causing others to institute; or (c) being concerned, whether directly or indirectly, in the institution of, any proceeding in any registry of the Federal Court of Australia against the Commissioner of Taxation, any Second Commissioner of Taxation, any Deputy Commissioner of Taxation, any person who is or was employed in the Australian Taxation Office as an "APS employee" within the meaning of the Public Service Act 1999 (Cth), or any agent or adviser of the Commissioner of Taxation without the leave of this Court. 4. The applicant is prohibited from: (a) instituting in his own name; or (b) causing others to institute; or (c) being concerned, whether directly or indirectly, in the institution of, any proceeding in any registry of the Federal Court of Australia without the leave of this Court. 8 Order 4 made by Pagone J refers to the "institution of", "instituting" and other verbal forms. The present appeal was instituted before that order was made. The order in form does not expressly refer to continuing a proceeding already begun before the order was made. In my view, although the appeal is a "proceeding", it is not caught by his Honour's order. 9 Nevertheless, given the scope of the term "proceeding", it can cover interlocutory applications made within the present appeal (see the definition of "proceeding" in s 4 of the FCA Act). 10 The appellant by an interlocutory application filed on 11 March 2015 pursuant to s 37AR of the FCA Act sought leave to institute an application to: (a) refer this appeal to arbitration; and (b) to file an amended proposed notice of appeal. 11 I refused leave in relation to the former application. It was misconceived. I granted leave in relation to the latter application, in the sense of allowing the appellant at least to pursue an application before me to amend his grounds of appeal. But I refuse that application to so amend his grounds of appeal. The proposed grounds are diffuse (for example, proposed grounds 1 to 6, 14 and 15) and misconceived (for example, proposed grounds 8, 13 and 16). In any event, the proposed grounds that have any conceivable substance (for example, proposed grounds 7, 9 to 12, and 17 to 19) add little to the existing grounds, which adequately embrace the real points sought to be made by the appellant. Accordingly, proceeding to hear and dispose of the present appeal on the basis of the existing notice of appeal will more than adequately enable the appellant to ventilate the issues that he seeks to address. The appellant's grounds of appeal are set out in an annexure to these reasons. 12 The appellant by a further interlocutory application filed on 22 March 2015 pursuant to s 37AR sought leave to institute an application to adjourn the hearing of this appeal so that pleadings could be ordered and parties added. It was not clear whether such pleadings and the addition of parties was sought in the proceeding before me or elsewhere. On any view, the application was misconceived given that the proceedings before me solely deal with an appeal from his Honour's decision. I refused leave to proceed with it. 13 Second, I have now dealt with four matters involving the appellant being: (a) three leave to appeal proceedings (VID 730 of 2014, VID 731 of 2014 and VID 732 of 2014); and (b) this appeal. 14 On 26 March 2015, I raised with the appellant that I might make an order pursuant to s 37AO(2)(c) ancillary to the order made by Pagone J on 26 February 2015, such that the appellant be prevented from filing any further material in this Court and in the Registry of this Court otherwise than by post. I will return to this matter later.

(b) Evidence before Judge Burchardt 15 The evidence filed by the appellant that was before his Honour consisted of two affidavits, being an affidavit sworn on 11 August 2014 and a second affidavit wrongly dated 11 August 2014, but sworn on 20 October 2014. The affidavit contained various assertions concerning HC Legal Pty Ltd (in liquidation) (HCL) previously trading as Hambros & Cahill Lawyers. HCL was registered as an incorporated practice. Peter Hambros and the respondent were joint legal practitioner directors. 16 The respondent in opposition filed an affidavit sworn by him on 24 October 2014. In the respondent's affidavit, some useful background was set out at [8] and [13] to [27] in the following terms: 8. Garrett has made a number of claims and allegations against me in his affidavits made 11 August 2014 and 20 October 2014 and filed in this proceeding. I deny those claims and state that I do not owe him any money in my personal capacity. After reading Garrett's affidavit, it appears to me that Garrett is seeking to set off the amount owed to me under the Bankruptcy Notice against: a. an alleged debt owed by me to him in his capacity as a purported controller of property of HCL (the validity of his appointment as a company controller will be addressed below); b. alleged debts owed to him by HCL, a company: i. that was wound up by order the Federal Circuit Court on 26 April 2013; and ii. of which I was a joint director with Mr Peter Hambros; and c. an alleged debt owed to him by me and Mr Hambros jointly. … HC Legal Pty Ltd (in liq) trading as Hambros & Cahill Lawyers 13. On or about 12 October 2005, HCL was registered as an incorporated practice trading as Hambros & Cahill Lawyers. Both Mr Peter Hambros and I were joint legal practitioner directors of HCL. 14. On or about 4 April 2013, HCL ceased trading as a result of a falling out between the joint directors of HCL. 15. On 26 April 2013, HCL was wound up as a result of an application filed by the Deputy Commissioner of Taxation for the winding up of the company. Mr Wayne Lamb of Worrells was appointed Liquidator. Retainers between HCL and Garrett 16. Between August 2011 and September 2012, the Garrett Entities retained HCL to act on their behalf in several matters. Mr Hambros, who specialises in commercial law, had the care and conduct of most of Garrett Entities' commercial matters. 17. During the retainer, HCL provided legal services to the Garrett Entities and duly issued tax invoices for these services. 18. Most of these tax invoices were duly paid to HCL by the Garrett Entities in tranches of payment amounting to a total of $310,000. 19. For the entirety of HCL's retainer with Garrett, he had only ever paid for work in arrears and never in advance. Garrett has erroneously maintained in his affidavits filed in this proceeding that the payments amounting to $310,000 was paid to be held in trust for works to be undertaken by the firm, which is incorrect. 20. In Garrett's affidavits, he made references to the sum of $400,000. I believe that this figure comprises of the $310,000 that was paid to HCL for the provision of legal services as outlined above and another payment made to HCL by the Garrett Entities on or about 6 April 2012 for the sum of $90,000. This payment was made pursuant to a settlement that one of the Garrett Entities, Sanctuary Australasia Pty Ltd, entered into with another party in a Supreme Court proceeding. Despite specific advice to Garrett to pay the sum of $90,000 directly to that party with a bank cheque, Garrett on his own accord caused Sanctuary Australasia Pty Ltd to deposit the money into the operating account of HCL. As a result of the money being placed in the operating account, there was no time for it to be moved into the trust account prior to settlement. Consequently, the money was withdrawn on the same day it was deposited and transferred to that other party immediately to satisfy the terms of settlement. 21. Neither Garrett nor the Garrett Entities have paid anything to me personally at all material times. Legal Services Commissioner - Complaint lodged by Garrett 22. Subsequent to the termination of the retainers, on or about 19 November 2012, the Garrett Entities made a complaint to the LSC against me, Peter Hambros and HCL, alleging that HCL had failed to account for the sum of $400,000 that they paid and requesting a proper accounting of the payments made. 23. Although the complaint was also addressed to Mr Hambros, it does not appear that Mr Hambros had at any stage assisted the LSC with its investigation. This is notwithstanding that he acted predominantly in the Garrett Entities' matters. Due to the acrimonious falling out with Mr Hambros, I was unable to contact him to obtain information to assist the LSC with its investigation. 24. Despite that, I assisted the LSC with its investigation to the best of my ability. Specifically, I advised them that: a. Garrett 's allegation that the money he paid to HCL was trust money is misconceived. b. It is inherently implausible for the Garrett Entities to assert that the payment was made to HCL by way of provision in respect of legal work to be undertaken when, prior to him making the payment, a substantial amount of legal work had already been undertaken by HCL for which tax invoices were issued by HCL to the Garrett Entities. 25. I believe that Garrett has also made a claim against the Fidelity Fund. 26. On 31 March 2014, the LSC made a decision dismissing the complaint against me on the basis that the payment of the $400,000 was properly accounted for and that Commissioner was not satisfied that there was a reasonable likelihood that the VCAT would find me guilty of professional misconduct or unsatisfactory professional conduct. 27. On 17 September 2014, the LSC wrote to me and advised me that: a. "an aspect of the above complaint was not properly investigated [by the LSC]. That aspect relates to the payment of $5,000 allegedly made by Holy Grail Hospitality Pty Ltd''; b. "the investigation of this aspect is re-opened"; and requested that I provide further explanation to them specifically about this payment of $5,000. 17 I have set out these paragraphs as they provide some useful background to the later discussion of some of the appellant's grounds of appeal. Moreover, such paragraphs were an important part of the evidentiary framework that his Honour considered when dealing with the assertions made by the appellant concerning s 40(1)(g) and his Honour's findings as to a lack of mutuality.

(c) New evidence 18 The appellant has put before me voluminous material that was not before his Honour, but which he has sought to rely upon pursuant to s 27 of the FCA Act; he has sought leave accordingly. 19 First, he has sought to put before me voluminous material that was before me in the other three leave to appeal applications that I have heard, being VID 730 of 2014, VID 731 of 2014 and VID 732 of 2014. I will grant leave to rely on such material, but I will make the following observations. Such material is largely irrelevant to the issues that I have to deal with. Further, and relatedly, even if the material was peripherally relevant, it would not have been likely to have altered his Honour's decision. Nevertheless, it is more convenient to receive it rather than to reject it, and even though the appellant has given little adequate explanation as to why most of that material had not been placed before his Honour. 20 Second, the appellant has sought to put before me various other bundles of material filed separately in the present proceeding. One such bundle ("Bundle Documents No 2") sought to address the sale of assets of HCL and contained various company searches for that company. Another bundle ("Bundle Documents No 3 Bona Fide Counterclaim") sought to attach documents in the nature of a writ and statement of claim filed in the Supreme Court of Victoria in proceedings instituted on 19 March 2015. This material has some relevance to whether the appellant has a counterclaim against the respondent. Obviously, it was not before his Honour, but I will allow the appellant to rely upon it. Nevertheless, such material consists of mere assertion only. It would not have changed his Honour's decision. It would not have established to his Honour's satisfaction the elements of s 40(1)(g) of the Act. 21 Third, the appellant has also filed affidavits sworn on 6 March and 16 March 2015. Again, much of the content of these affidavits contain new evidence. I will allow the appellant to rely upon this material. But in any event, it does not establish that his Honour was in error in his treatment of s 40(1)(g) or the conclusions that he reached. The appellant also sought to place before me and to rely upon an affidavit sworn 1 June 2014 (the date was wrongly identified by the appellant as 21 July) that had been sworn in a Supreme Court proceeding that the appellant had taken against the Legal Services Commissioner (LSC). Again, this was not before his Honour. I will allow the appellant to rely upon it, but again it does not advance his case.

II: Grounds of appeal 22 It is now appropriate to address the grounds of appeal. The principal grounds are grounds 3 and 4.

(a) Adjournment (ground 3) 23 The appellant asserted that his Honour was in error in refusing an adjournment. 24 His Honour at [4] to [18] set out the background to the adjournment application and his reasons which were in the following terms: 4. The matter was set down for trial by orders made on 9 September 2014. Those orders set the matter down "with an agreed hearing estimate of one day". 5. Thereafter, on 24 September 2014, Mr Garrett wrote to my associate, seeking further time in which to file his materials, (notwithstanding that there had been no objection taken to the posited date of 23 September 2014 on 9 September 2014) because of his involvement in other related proceedings. 6. The respondent agreed that the applicant could file his material on 7 October 2014. On 24 October 2014 Mr Garrett wrote again to my associate, pointing out inter alia that he had suggested in the previous hearing that the matter would take more than one day. He went on to say that the time required for the hearing would be more likely to take three to four days and would involve extensive cross-examination of deponents of behalf of the respondent. This application was objected to by the respondent. It should be noted that transcript of the proceeding on 9 September 2014 shows that Mr Garrett had then asserted a half day estimate. 7. On 31 October 2014, Mr Garrett again emailed my chambers, foreshadowing an intention to apply to adjourn the trial because "one day is insufficient to allow for the proper cross examination of Mr Cahill and go behind the Bankruptcy Notice and the conduct of Mr Cahill and his previous partner Mr Hambros (a bankrupt)". 8. The applicant, in fact, filed an enormous tranche of material on 21 October 2014. The affidavit was only five pages, but the accompanying materials run to many hundreds of pages. It is a credit to the respondent that he was able to file his responding affidavit on 24 October 2014. 9. I had caused the parties to be made aware that I would propose to take the application for an adjournment at the start of the proceeding. Mr Garrett addressed the Court first. In an endeavour to assist him in his submissions, I referred Mr Garrett to Australian Bankruptcy Law and Practice, McDonald, Henry and Meek, sixth edition at 40.1.340 and read out the text thereof, which explained what is meant by the requirement of a debtor to "satisfy the Court" to establish a counter claim, set off or cross demand under s.40(1)(g) of the Bankruptcy Act 1966 ("the Act"). I pointed out that cross-examination was not, in these circumstances, appropriate. 10. The cross-examination aspect of Mr Garrett's earlier correspondence was not, so far as I recall it, in any event, pressed in any significant way. Rather, Mr Garrett said that he was seeking the adjournment to obtain legal representation. He said he had contacted a lawyer two weeks ago, but that lawyer had been to China and would be returning shortly. That lawyer had agreed to act for him. This would assist Mr Garrett in the application he wished to pursue, pursuant to s.588M of the Corporations Act 2001. He had also sent to the Victorian Civil and Administrative Tribunal ("VCAT"), the previous day, his proposed revised statement of claim, and he tendered exhibit A1, being his letter to the Tribunal and the statement of claim. 11. Mr Garrett requested that the matter be adjourned, pending the determination of his claim with VCAT. He said that two weeks was all that was necessary for him to be in a position to proceed and that most of his materials were now filed. 12. Counsel for the respondent opposed the application. He submitted that the further material about the applicant's proposed cross claim (as I will describe it) could be dealt with at the hearing. Counsel referred to the timetable set on 9 September 2014 and submitted there was no explanation why legal representation was being sought so late. He submitted that the Court should infer that the reason was to abort the proceeding. He further submitted that it was not necessary to await the outcome of the VCAT proceeding in any event. 13. I indicated to the parties, following these arguments, that I was not prepared to adjourn the proceeding and would give my reasons in my decision. These are those reasons. 14. First, a timetable was set on 9 September 2014, without objection of any significance from the applicant at the time, which culminated in a trial in November 2014. The VCAT proceeding to which Mr Garrett referred has been underway for some considerable period of time and was a matter of which he well knew in September 2014. He also well knew of his apparent other commitments in legal arenas. 15. The fact is that Mr Garrett has filed hundreds of pages of materials, and it seemed to me that even on a brief acquaintance with his second and very large affidavit (the matter was stood down for over an hour while it was photocopied), that Mr Garrett had had all the opportunity he could fairly be described as requiring, both to put materials before the Court and to prepare his case. 16. The High Court has made it clear in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 that case management principles are not irrelevant to considerations of such matters as an adjournment application. This Court's time is extremely heavily listed and any adjournment of the proceeding would not have been for a period of two weeks, but more likely for some considerable number of months. 17. Furthermore, bankruptcy matters are of their nature, in my view, generally attended by a measure of urgency. This arises from public policy considerations to do with the undesirability of insolvent persons continuing to carry on their affairs as though they were solvent. Conversely, if a person is being asserted to be a bankrupt when they are clearly solvent or otherwise have a defence to the proceeding, it is important that the impugned party be released from the proceeding as soon as practicable. 18. In all the circumstances, and bearing in mind the nature of the test to be applied, it seemed to me that Mr Garrett was in a perfectly appropriate position to pursue his application on the day and accordingly, I declined to adjourn. 25 In my view his Honour fairly dealt with the adjournment application. The appellant had been granted more than adequate time to prepare and put forward his material and to obtain legal representation. Proper grounds for an adjournment had not been substantiated. 26 The appellant has not shown any error in his Honour's exercise of discretion to refuse the adjournment (see House v The King (1936) 55 CLR 499 at 504 to 505 per Dixon, Evatt and McTiernan JJ). 27 The exercise of discretion was a matter for his Honour and the appellant bears a heavy onus in establishing that the discretion miscarried. The appellant has not discharged that onus. 28 Further, his Honour no doubt took into account what had been said in Sali v SPC Ltd (1993) 116 ALR 625 at 629 per Brennan, Deane and McHugh JJ: In determining whether to grant an adjournment, the judge of a busy court is entitled to consider the effect of an adjournment on court resources and the competing claims by litigants in other cases awaiting hearing in the court as well as the interests of the parties. As Deane J pointed out in Squire v Rogers ((1979) 27 ALR 330 at 337) this "may require knowledge of the working of the listing system of the particular court or judge and the importance in the proper working of that system of adherence to dates fixed for hearing". What might be perceived as an injustice to a party when considered only in the context of an action between parties may not be so when considered in a context which includes the claims of other litigants and the public interest in achieving the most efficient use of court resources. Such observations well apply to the nature and volume of proceedings that the Federal Circuit Court is required to efficiently hear and adjudicate upon. 29 Further, the principles discussed in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 are of no assistance to the appellant in the present case. 30 There is no substance to the appellant's complaint concerning his Honour's failure to adjourn.

(b) Section 40(1)(g) (ground 4) 31 The appellant's central challenge to the bankruptcy notice and the main grounds of his appeal before me concerned s 40(1)(g) and his Honour's approach and application thereof. Ground 4 of the notice of appeal is not well expressed and raises a diffuse and disjointed series of matters. Nevertheless, during the course of the submissions before me, various key points were able to be distilled and were the subject of the appellant's focus. 32 Essentially the appellant raised before his Honour and again before me various so called counter-claims, "set-offs" and the like that he said that he had against the respondent. 33 Several general propositions should be stated at the outset. 34 First, there is little doubt that his Honour applied the correct principles. 35 The appellant was required to demonstrate more than mere assertion. The appellant was required to establish that he had a bona fide claim with sufficient prospects such that he had a prima facie case or one with a fair chance of success (see Re Gould; ex parte Skinner (1983) 72 FLR 393; Ebert v Union Trustee Co of Australia Ltd (1960) 104 CLR 346). 36 A "prima facie" case may be established even if the debtor has not adduced evidence which would be admissible on a final hearing (see Re Glew; Glew v Harrowell of Hunt & Hunt Lawyers (2003) 198 ALR 331; [2003] FCA 373 at [9] and the authorities there cited). But the claim must be of sufficient substance (Re Glew at [12] and Luck v University of Southern Queensland [2015] FCA 286 at [22]). More generally, in order for the Court to be satisfied of the asserted entitlement to recover from the creditor, the nature of the task to be performed requires weighing up considerations as to the legal and factual merit of the claim and also considering the justice of allowing the bankruptcy proceedings to go ahead (in the present case, to allow the bankruptcy notice to have its operative effect thereby creating an act of bankruptcy from non-compliance) or requiring them to await the determination of the claim (Guss v Johnstone (2000) 171 ALR 598; [2000] HCA 26 at [40]). For completeness, I should say that the test in terms of analysing a counterclaim in the context of s 40(1)(g) has some analogy with how a counterclaim might be analysed in the context of a creditor's petition where a debtor sought to invoke s 52(2)(b) (see Stratton v Bowles (No 2) [2015] FCA 43 at [39] to [42]). But there are differences in the legal formulation. Moreover, that latter context might have different outcomes for other reasons. For example, the evidence before the Court on the hearing of the petition as to the relevant counterclaim may be different (and perhaps stronger) as compared with the evidence before the Court dealing with the earlier proceeding to set aside the bankruptcy notice. Further, if an adjournment is sought by the debtor of the petition, a lesser forensic threshold in considering the justification for the adjournment may apply than that seeking to justify a dismissal of the petition; moreover, the adjournment question would arise more generally under s 33(1) (see Endresz v Australian Securities and Investments Commission (No 2) [2015] FCAFC 33 at [36] to [38]). 37 His Honour correctly applied the relevant principles applicable to s 40(1)(g). Accepting for the moment that the appellant was asserting bona fide claims, on the material before his Honour the appellant did not establish that any of his claims had such sufficient prospects of success as were required for the purposes of s 40(1)(g). 38 The appellant sought to place before me new material that was not before his Honour in order to overcome any evidentiary deficiencies that had been before his Honour. But such material was for the most part in the nature of assertion, rather than material demonstrating that any of his envisaged claims had sufficient substance. There was no justifiable reason given to me as to why most of that material had not been placed before his Honour. In any event, if such material had been before his Honour, it would not have changed the result. True it is that some of the material was newly created, such as for the new Supreme Court proceeding that the appellant had recently launched. But there is no adequate reason why such proceedings could not have been instituted earlier. In any event, such material raised little more than yet further untested and unsubstantiated assertions on the part of the appellant. 39 Second, many if not all of the claims as had been articulated by the appellant before his Honour were claims not of the appellant in his personal capacity but claims made by him in other capacities or indeed claims of other entities. Further, they were claims made against entities other than the respondent in his personal capacity for the most part. They did not satisfy the relevant principle of mutuality as they were not claims or debts between the parties in the same right on both sides (see his Honour's reasons at [49] to [55], James v Abrahams (1981) 34 ALR 657 at 666 to 668 per Fisher J and Stec v Orfanos [1999] FCA 457 generally). 40 Before me, the appellant sought to reformulate his claims against the respondent in an attempt to get around this lack of mutuality aspect. So, for example, the appellant has now brought a proceeding against the respondent and others in the Supreme Court of Victoria for professional negligence claiming substantial damages. This is a new claim. In any event, it is unsubstantiated. As I have said earlier, it was not before his Honour. In any event, if it had been, it did not rise beyond mere assertion, let alone satisfy the principles that I have set out above. Another example has been an attempt made by the appellant to convert one or more of his claims that he originally asserted in his capacity as trustee against the respondent to a claim or claims in his personal capacity. I will elaborate shortly on this aspect. But at the time of service of the bankruptcy notice and during the time for compliance therewith, there was no mutuality in respect of such claims. 41 Let me turn to the specific claims raised by the appellant that he asserts he had and has against the respondent.

Claims against HCL 42 The appellant has asserted that he has and had claims against HCL for repayment of moneys. His Honour dealt with this at [21] to [31] of his reasons. 43 As first put, such claims did not satisfy the mutuality requirement. They were claims against HCL. 44 As the argument developed, they were put as claims by Mr Garrett against the respondent as one of HCL's principals. As put to his Honour below, this did not rise higher than assertion. Further, the basis continued to shift. His Honour explained at [24] to [30]: 24. On any view of the matter, Mr Garrett paid a not insubstantial amount of money to HCL in the sum of at least $310,000. A further $90,000 was paid to HCL, but HCL say that this was paid to them mistakenly by the applicant, and indeed against their advice, and was immediately applied to settle a totally unrelated set of legal proceedings in which Mr Garrett, who has clearly been a significant litigator over the years, was involved. 25. As recorded in the decision of Murphy J in HC Legal Pty Ltd v Deputy Commissioner of Taxation [2013] FCA 45 (exhibited as AMG-13 to Mr Garrett's affidavit sworn 11 August 2014), HCL executed a management rights legal services purchase deed with an entity which I will refer to as Holy Grail (one of the large number of companies controlled by Mr Garrett, and which at that time, according to him, was trustee of his relevant family trust) for the exclusive rights to provide legal services to Mr Garrett's associated entities. The figure proposed to be paid, inclusive of GST of four and a half million dollars, was $49.5 million. That money was to be paid pursuant to a vendor finance agreement between Holy Grail and HCL which his Honour records at [9] of his judgment, but I note that repayment was limited to 60 per cent of the distributable EBIT in any payment period. 26. It seems reasonably clear, at least for present purposes, that no money passed hands in terms of being loaned to HCL nor is there any suggestion in any of the materials that any monies were actually repaid. What did, of course, happen, was that a GST credit of some four and a half million dollars was created in HCL's favour, and as Murphy J records, in excess of $4,491,000 was paid by the Commissioner in February 2012 to HCL's operating account. 27. According to counsel for HCL, those funds were utilised inter alia to make two loans to the two directors, Mr Hambros and Mr Cahill, of $2 million each, although his Honour recorded that it was asserted that each director had paid back $350,000 of those loans. 28. The Commissioner's concern regarding the transaction and the claim for credits was, as his Honour said, "immediately apparent" and the proceeding before Murphy J involved a statutory demand for the $4.9 million, plus penalties, to be repaid. 29. Mr Garrett has formulated his claims and demands in a variety of different ways from time to time. At times, it has been a claim for the repayment of the $400,000 to which I have already referred (in paragraph 24). At times, it is that amount less the $90,000 allegedly disbursed to settle another matter. At times, it has been a sum of $20,000 advanced by various entities (part of the $310,000) and at times, it appears to be a $5,000 payment made by Holy Grail, which was the subject of particular consideration by the Legal Services Commissioner. At further times, Mr Garrett has sought repayment of the entire GST credit originally paid by the Australian Taxation Office, or all the loans of some $2 million advanced to each of the two directors, Mr Hambros and Mr Cahill. At other times again, he has sought repayment of the full $49,500,000. 30. In November 2012, Mr Garrett made a complaint to the Legal Services Commissioner about Mr Cahill, Mr Hambros and HCL in respect of the $400,000 paid by the Garrett entities to HCL. On 31 March 2014, the Commissioner dismissed the complaint (see FMC-2 to the affidavit of Mr Cahill sworn 24 October 2014), although subsequently, the investigation was reopened in respect of the $5,000 payment made by Holy Grail. That aspect of the controversy between the parties, as best I construe matter, is not concluded. I note that Mr Cahill has deposed that that amount of money would have been applied to the general commercial matters in which his former partner, Mr Hambros, had care and conduct of the matter. Mr Cahill's affidavit deposes that he has no direct appreciation of these matters, save that this would have been for work already performed before the money was paid. 45 None of these assertions justified any claim against the respondent, let alone satisfied mutuality; see also the extracts from the evidence that I have set out at [16] above. 46 The appellant asserted before me that recently the Legal Services Commissioner had found that his claim against the respondent and/or HCL, at least for $5000, had been established. The LSC's letter of 16 February 2015 said that the LSC had made no final decision, but that "my preliminary recommendation is that the $5000 paid by you to HC Legal Pty Ltd was trust money as it was paid in advance of a bill being issued" [my emphasis]. In my view, this does not substantiate real prospects of success of a claim by the appellant against the respondent personally. Further, this did not establish a claim for repayment of the $5,000 as such; to so characterise this amount as "trust money" did not then entail that it could not be applied to legal fees when the services were provided. Moreover, of course, it was not evidence before his Honour. Further, the LSC's position rose no higher than a "preliminary recommendation". It does not show any substantive claim at the relevant time. 47 The appellant also asserted before me that in relation to his asserted claims against the respondent in his capacity as trustee of one of his family trusts (Family Trust No 4) that he had orally announced and passed before his Honour (in the appellant's capacity as trustee) a resolution which assigned those choses in action to himself in his capacity as a beneficiary so that at the time of the hearing before his Honour they were his personal claims and that, accordingly, mutuality was satisfied. Putting to one side whether such a course could be effective, my review of the transcript is that the appellant did no such thing (see also the affidavit of Mengkuang Cheong, the then solicitor of the respondent, sworn 30 March 2015, who deposes that no such oral resolution or declaration was made before his Honour). At most, the appellant said before his Honour (see T 55) that "as trustee I can make a distribution" and "I could also distribute the claim." Apparently, the appellant subsequently purported to so assign (see minutes of meeting of an "extraordinary meeting" of the Andrew Garrett Family Trust No 4 purportedly dated 7 November 2014). But putting to one side whether this now gets around the mutuality problem, it is still not established (and in my view, was not established before his Honour) that this claim whether for $400,000, $310,000 or even $5,000 had such sufficient prospects of success as were required to be shown for the purposes of s 40(1)(g). 48 Generally, his Honour rejected the appellant's arguments on the grounds that the relevant claims lacked mutuality (see his reasons at [51] to [54]). On the claimant side, the relevant claim, if it existed, was held at most by the appellant in his capacity as a trustee or a related entity acting as trustee. Further, on the other side, HCL rather than the respondent was the counterparty. Moreover, on the evidence there was no substance to the claim for $400,000 or $310,000 against HCL (see the description in his Honour's reasons at [24] and [29]). Further, no error is established in his Honour's finding at [52] that there was no $49.5 million advanced to HCL. And finally as to the claim for $5,000, its substantiality was not justified to the requisite level for the purposes of s 40(1)(g) (see [46] above) in any event. 49 Finally on this aspect, the appellant had brought separate proceedings against the respondent in VCAT which had been struck out on 3 October 2014. His Honour discussed the VCAT proceedings at [39] and [40]. There is no error in that description. The proceedings sought an order against the respondent for repayment of the $310,000 earlier referred to. First, these were just allegations. Second, query the jurisdiction of VCAT to so order such a repayment. But more generally, they did not establish the threshold required under s 40(1)(g) nor overcome the mutuality problem.

Claim in professional negligence 50 The appellant has sought to develop before me the argument that he personally has a claim against the respondent for damages for professional negligence and in relation to a miscellany of other causes of action. 51 This is now the subject of a Supreme Court of Victoria proceeding recently filed after his Honour's judgment (Garrett v Cahill & Anor SCI-2015-01232, filed on 19 March 2015). 52 The appellant's assertions and the filing of such a proceeding does not of itself establish that the requirements of s 40(1)(g) were met at the time of the bankruptcy notice and during the period for its compliance. Further, there is no evidence by which it could be said that this claim has any substantive merit. 53 No error has been demonstrated.

Claim by appellant as "controller" of HCL 54 The appellant has asserted that he was a "controller" of HCL and that as controller he was owed money by the respondent because the respondent owed money to HCL and/or HCL had claims against the respondent. 55 In relation to the controller question, his Honour addressed this at [44] in the following terms: 44. It is clear that Mr Garrett purported to appoint himself as controller of HCL and he has held himself out in that capacity on a number of occasions. There is, however, a very serious difficulty with this assertion. The materials filed in the case show, as the liquidator sets out in correspondence, that the charge on which Mr Garrett relies was never signed by the company before it was placed into liquidation. It was, therefore, never a perfected security and Mr Garrett's purported self appointment was clearly lacking in power. It was also, in any event, not registered within the timeframe under the relevant legislation and never became a security interest for that reason also. It appears to be uncontested (it is asserted and has not been denied by Mr Garrett) that Mr Garrett is, in any event, disqualified from being a company director until 2015. I am not quite sure whether this would operate upon circumstances of being a controller of a company in your personal capacity, but it is yet another difficulty that Mr Garrett faces. 56 Clearly, his Honour did not accept that the appellant was a controller. On the evidence before his Honour, the deed of charge had not been signed by the directors of HCL and nor had the security interest been registered within the time frame specified by the relevant statutory requirement. Further, the charge was in favour, apparently, of a related entity of the appellant who had purported to appoint the appellant as a controller of HCL. No error has been demonstrated in his Honour's approach; moreover, the embellishments sought to be raised in the proposed amended grounds 9 to 12 had no substance. But even if the appellant was a controller, that would not demonstrate sufficient mutuality. If the respondent owed money to HCL or HCL had a claim against the respondent (assuming this for the sake of the argument), by the appellant being the controller, he would not be acting in a personal capacity but rather taking control of assets of HCL who would be seized of the chose in action. There would be no mutuality. Such a conclusion is also reinforced if Garrett's appointor was strictly a separate entity. In any event, such a claim fails at the threshold. It is not established that the appellant was a valid controller in law. 57 Related to this argument is the appellant's misconceived argument concerning set off. 58 The appellant asserted before me that, somehow, he had exercised a right of set off. The steps in this argument appeared to be the following. First, it was said that the respondent owed HCL a sum of money. Second, it was then said that he, the appellant, was a "controller" of property of HCL. Third, and accordingly, it was said that the respondent owed the appellant personally this debt. Fourth, it was then said that he could and did set off this debt against the sum owed by the appellant to the respondent under the bankruptcy notice. Assume the first step for the moment. The second step was disputed and in essence found against the appellant. The third step was misconceived. The fourth step accordingly failed.

Other claims 59 There were other asserted claims that were even more misconceived. For example, the appellant has asserted that he is entitled to cause proceedings to be brought against the respondent as a former director of HCL, seeking to invoke ss 588M and 588T of the Corporations Act 2001 (Cth). This is an innovative suggestion, with considerable legal hurdles and forensic challenges. Likewise the appellant sought to raise before me a potential claim that could be brought invoking s 592(6). But in any event the appellant's assertions did not satisfy the relevant threshold for s 40(1)(g) that I described earlier in terms of the evidence before his Honour. All such other claims were based on assertion without any substance. 60 Finally, after the hearing had concluded, the appellant filed, uninvited, supplementary submissions dated 29 March 2015 concerning the merits of the appeal. At the end of the hearing, I had invited the appellant to consider whether I should make an ancillary order to the vexatious litigant order made by Pagone J concerning the filing of material, but I had not invited further submissions on the merits of the appeal. These submissions in any event did not raise any new substantive point. I have put these submissions to one side.

(c) General 61 Finally, grounds 1, 2 and 5 have no additional meaningful content beyond what I have dealt with in detail concerning ground 4. For completeness, grounds 4a, 4i and 4j are misconceived; grounds 4b, 4c and 4d were not made out on the material before his Honour; the trust assertions set out in grounds 4e, 4f, 4g and 4h were not made out on any material that was before his Honour; moreover, even if such points were good, they hardly overcame the mutuality issue discussed earlier; ground 4k was not made out, but in any event would not overcome the mutuality problem; relatedly, the assertion in ground 4m was not made out; as for ground 4l, his Honour's findings at [25] and [52] concerning the illusory nature of the "Vendor Finance Loans" have not been impugned, but in any event would not overcome the mutuality problem.

(d) Conclusion 62 The appellant has not challenged the costs order the subject of the bankruptcy notice. Further, the appellant has not paid the sum demanded. 63 As to s 40(1)(g), the appellant has not demonstrated any error in his Honour's determination, whether on the material before his Honour or on or including the "new" evidence. 64 The appellant's appeal will be dismissed with costs.

(e) Other matters 65 This is the fourth proceeding that I have dealt with involving the appellant. 66 In the four proceedings that have been before me, the appellant has filed, without discernment or restraint, voluminous material, most of which has been irrelevant to the precise issues that needed to be considered. The Court and the Registry have been flooded with such extraneous material. The following statistics of the material filed or sought to be filed in the four proceedings that have been before me exemplify the point: VID 49/2015 - Garrett v Francis Michael Cahill Lodgments Documents Pages 26 84 14,645 VID730/2014 - Garrett v Stephen James Duncan Lodgments Documents Pages 21 45 6,626 VID731/2014 - Garrett v Make Wine Pty Ltd Lodgments Documents Pages 17 45 5,831 VID732/2014 - Garrett v Peter Ivan Macks Lodgments Documents Pages 16 50 7,031

67 I raised with the appellant at the hearing on 27 March 2015 my intention to consider making an order that any future filings of the appellant be by post with, accordingly, no electronic filings or filings by physical attendance at the Registry permitted. Such an order would be likely to stem the tide of what the appellant has inappropriately sought to file electronically. It would also reduce the time taken by the Registry staff of this Court to deal with his physical attendances and ameliorate other issues. I am entitled to make such an order under s 37AO(2)(c) of the FCA Act. I gave the appellant the opportunity to address me on whether I should make such an order. 68 But after hearing from the appellant on 31 March 2015 and indicating with some emphasis my concern about the volume of largely irrelevant material that he has filed in this and other proceedings, in all the circumstances I have decided not to make such an order at present. But the appellant is on notice that if he persists with such conduct, such an order is likely to be made in other proceedings. I certify that the preceding sixty-eight (68) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Beach.

Associate: Dated: 15 April 2015 ANNEXURE Grounds of appeal

1. Whether it was "reasonable" for His Honour to make the findings and orders as a matter of law in failing to consider the factual and legal merits of the case to investigate the Respondent described in the Submissions and the Affidavit Materials filed.
2. Whether His Honour was bound by Statute to consider all of the evidence filed in the proceeding as a matter of law pursuant to the provisions of the Federal Court Act and the Federal Court Rules.
3. Whether His Honour was unreasonable in failing to adjourn the application upon the application of the Applicant in order to bring a solicitor onto the file as a matter of Procedural Fairness and Natural Justice.
4. Whether His Honour erred as a question of law to reasonably exercise the discretion of the Court in failing to find that; a. The Court should of its own motion exercise the provisions of the Jurisdiction of Courts (Cross Vesting) Act 1987 (Cth) and make findings under the relevant Statutes including the Legal Profession Act 2004 (Cth) ("the LPA") of professional misconduct, and b. The Respondent and Peter Hambros were trading HC Legal Pty Ltd (In Liquidation)(Controller Appointed) ("HCL") while insolvent and is personally liable to the Applicant pursuant to s588M of the Corporations Act 2001 (Cth) ("the CA") c. On the basis that the actions of the Respondents are a breach of s592(6) of the CA then the Respondent is "Absolutely Liable" in accordance with s592(6A) of the CA and s6.2 of the Criminal Code 1995 (Cth) ("the Code"), and d. The Loan from HCL to the Respondent and Peter Ham bros were a sham and should be set aside, and e. The money transferred from the account of the Respondent prior to transfer had the characteristic of Moneys paid into Trust, and f. The moneys, subject of the alleged loans, retained the characteristics of trust Moneys in the hands of the Respondent and Peter Hambros, and g. The Trust Moneys were comprised of; i. The Part A Trust Moneys of $310,000, and ii. The Part B Trust Moneys of $4,500,000. h. The Trust Moneys were the property of the Trustee of the Andrew Garrett Family Trust No 4, and i. The Moneys subject of the alleged loans were obtained by the Respondent and Peter Hambros insofar as it is property of the respondent is property obtained by deception and a breach of s81 and s82 of the Crimes Act 1958 (Vic), the Crimes Act 1914 (Cth) and s134.1 and s134.2 of the Criminal Code 1995 (Cth) j. The affidavit materials filed by the Respondent were intended to mislead and deceive the Learned Court as to the true nature of the Trust Moneys and were i. a breach of s81 and s82 of the Crimes Act 1958 (Vic), the Crimes Act 1914 (Cth) and s134.1 and s134.2 of the Criminal Code 1995 (Cth), and ii. a breach of the duty of the respondent as an officer of the Court k. That the Respondent was personally liable to the Applicant in his capacity as Trustee of the Andrew Garrett Family Trust No 4 for the payment of the Trust Moneys, and l. That the Respondent was personally liable to the Applicant for the Vendor Finance Loans made to HCL and HCLegal (Services) Pty Ltd and the invoice issued to Dynamic Legal Pty Ltd as a consequence of; i. Trading while insolvent, and ii. Vicarious liability pursuant to s2.2.7.19 of the LPA, and iii. Personal Liability pursuant to s7.2.12 of the LPA, and m. On the date of the Hearing the Applicant in his capacity as Trustee of AGFT 4 distributed to himself as a General Beneficiary of AGFT 4 the whole amount of the quantum of the Claim of the Bankruptcy Notice plus costs and set the claim off. n. That there is a genuine "Bona Fide Dispute" between the Respondent and the Plaintiff.
5. Whether His Honour acted reasonably and has failed as a matter of natural justice and procedural fairness to deliver complete justice.