Gomez v Carrafa

Background facts 8 The following facts are largely drawn from the primary judgment and are uncontroversial. 9 The applicant was made the subject of a sequestration order in August 2014 and the respondent was appointed as her trustee in bankruptcy (PJ [2]). Mrs Gomez was discharged from her bankruptcy in September 2017 (PJ [2]). 10 On 9 June 2020, the applicant commenced the proceeding below in the Supreme Court of Victoria (as proceeding S ECI 2020 02533) (PJ [2]). However, the proceeding was transferred to this Court pursuant to orders made on 13 October 2020 (PJ [2]). 11 On 22 October 2020, the applicant filed in this Court a copy of the statement of claim from the Supreme Court proceeding. The applicant's primary claim against the respondent was for malicious prosecution in respect of criminal charges that were laid against the applicant in about 2018 and subsequently withdrawn. Those charges were laid by the Commonwealth Director of Public Prosecutions (CDPP), with the Australian Financial Security Authority (AFSA) as informant. 12 The applicant has been given numerous opportunities to re-plead. On 23 February 2021, Anastassiou J made orders which gave leave to the applicant to file and serve any proposed amended statement of claim by 24 March 2021 (PJ [3]). On 29 June 2021, Anastassiou J gave leave to file and serve any further amended statement of claim by 27 July 2021 and adjourned an application by the respondent to strike out the extant statement of claim (PJ [3]). On 28 July 2021, orders were made extending the time to file and serve the amended statement of claim to 2 August 2021 (PJ [4]). On 4 February 2022, various orders were made, including one requiring the respondent to file and serve any amended strike out application by 4 March 2022 (PJ [4]). 13 On 5 July 2022, following a case management hearing, the primary judge struck out the applicant's statement of claim and, relevantly, ordered that any further interlocutory application by the applicant for leave to amend be filed and served by no later than 2 August 2022 (PJ [5]-[6]). 14 On 5 August 2022, the applicant filed an application for leave to amend in accordance with the form of the proposed amended statement of claim that was attached to her affidavit made on 1 August 2022 (PJ [7]). 15 The respondent sought orders that all iterations of the statement of claim advanced by the applicant be struck out, that leave to further amend be refused and that the proceeding be dismissed with costs (PJ [8]). 16 The applicant's application for leave to amend, and the respondent's application for striking out and dismissal, were heard by the primary judge on 23 August 2022. His Honour made orders on that day refusing the application for leave to amend and dismissing the proceeding.

Reasons of the primary judge 17 The primary judge described the claims sought to be made by the applicant in the proposed statement of claim, and the legal elements of the claims, in the following manner (at [16]-[30]): 16 I have carefully considered the proposed amended statement of claim that is now the subject of the application for leave to amend by Mrs Gomez. It seeks, on my analysis, to articulate four claims. The first and primary claim is for malicious prosecution, the central element of which is the preferring of charges by the Australian Financial Security Authority (AFSA) as initiated by the Commonwealth Director of Public Prosecutions (CDPP) on 18 July 2018 which proceeding was subsequently discontinued. Secondly, breach of statutory and fiduciary duties by the respondent in his capacity as trustee in bankruptcy. Thirdly, abuse of process. And, fourthly, that which is described as official misconduct, but which I have interpreted to mean misfeasance in public office. 17 The central contention that underpins each of these claims is that it was wrong for the prosecuting authority to assert that Mrs Gomez dealt unlawfully with otherwise divisible property in her bankrupt estate before the presentation of the creditor's petition in that she concealed or otherwise dealt with such property contrary to sections 265(3), 265(4), 265(7), or 266(1), of the Bankruptcy Act 1966 (Cth). On her contention, such property was subject to what is known as an equity of exoneration in favour of her husband which extended over joint matrimonial assets, primarily real property, and with the consequence that there was no, or little, divisible property left for the benefit of the creditors of the bankrupt estate. 18 It follows from that broad contention that, if made out, she could not have wrongly dealt with otherwise divisible property. The reason is that an equity of exoneration, when it applies in bankruptcy, operates to charge the bankrupt's interest in the property with an equity in favour of another to the extent of the equitable obligation to indemnify that other person: see, in particular, the Full Court decision in Parsons v McBain (2001) 109 FCR 120; [2001] FCA 376, particularly at [21], Black CJ, Kiefel and Finkelstein JJ. The property is not then divisible amongst creditors generally because it is charged and must be held by the trustee subject to it. 19 Mrs Gomez insists that she provided all information relevant to the claim to her trustee which he failed to disclose to AFSA, with the consequence that the prosecution was brought on a false or, at least, an incomplete factual basis. That contention of Mrs Gomez, as now sought to be framed involves two steps: (1) if the facts had been disclosed to AFSA by the respondent, it was clear that the prosecution would not have been commenced; and (2) once these facts were given by her to the CDPP the error was discovered and the prosecution was discontinued. 20 Central to those claims are four sub-contentions that the respondent acted firstly, without properly investigating the claimed equity of exoneration; secondly, by knowingly failing to provide available evidence to AFSA; thirdly, maliciously towards Mrs Gomez; and, fourthly, that, deliberately and dishonestly, the respondent was the actor in procuring a prosecution of her that was unjustified in the circumstances. 21 A contention that looms large in the proposed pleading is that the respondent had in his possession certain court books that Mrs Gomez had provided to him in connection with a bankruptcy proceeding brought by the trustee in the Federal Circuit Court against her husband for the recovery of divisible property in proceeding MLG 2642 of 2014, but that the trustee, in turn, failed to provide that material to AFSA and only chose to provide court books that he had prepared for that proceeding which, one infers, were only favourable to the case that the prosecution sought to make out. 22 Mrs Gomez contends that the material in her books, together with other documents she had provided or was prepared to provide to the trustee, established that her husband did have the benefit of the equity of exoneration as claimed. 23 The elements essential to prove a case of malicious prosecution, which I take from A v New South Wales at [1], Gleeson CJ, Gummow, Kirby, Hayne, Heydon and Crennan JJ, are, firstly, that a proceeding of a criminal character was initiated against the plaintiff by the defendant; secondly, that the prosecution was terminated in favour of the plaintiff; thirdly, that the defendant in initiating or maintaining the prosecution acted with malice; and, fourthly, that the defendant acted without reasonable and proper cause. 24 Establishment of each of those elements is essential. As to the first, the prima facie difficulty is that the proceeding was initiated not by the respondent, but by the CDPP and named AFSA as the informant or complainant. However, as the authorities demonstrate, that is not a fatal difficulty if Mrs Gomez can identify a case in her pleading that the respondent was actively instrumental in causing the prosecution to be commenced or maintained. 25 As to that, it must be asserted and pleaded that the respondent is the person who played the active role in causing the proceeding to be commenced: see Commonwealth Life Assurance Society v Brain (1935) 53 CLR 343 at 379, Dixon J, and A v New South Wales at [34] where the plurality speak to the undertaking of an active role in instigating the prosecution. 26 Those elements may be difficult to establish on the evidence where AFSA and the CDPP were responsible for the prosecution, but that is not the issue before me. The question is whether the pleading identifies the material facts to ultimately make good that contention if the case proceeds to a trial. There is no issue in this case about the second element. As to the third element, malice, it must be pleaded explicitly, though it may be a matter of inference drawn from explicitly pleaded facts that the respondent acted with malice which is clear from A v New South Wales at [93]. 27 The final element, that is, acting without reasonable and proper cause, requires proof of the absence of honest belief that the person charged is probably guilty of the offence: see A v New South Wales at [58]. Pausing there, that is an onus which falls on Mrs Gomez. That is not something that the respondent has to establish. 18 The primary judge concluded that the applicant's proposed pleading was materially defective in numerous respects in that it failed to plead in a satisfactory way, by identifying each of the material facts, that which is required to establish the tort of malicious prosecution (PJ [28]). The primary judge considered each of the claims sought to be made and found that the allegations made were in the form of argument, submissions and conclusions which failed to identify material facts it supported (see generally PJ [29]-[48]). 19 By reason of those defects in the pleading, the primary judge concluded that the proposed pleading was likely to cause prejudice, embarrassment or delay in that it failed to grapple with the essential elements of the claims and failed to disclose a reasonable cause of action in respect of each of the four claims sought to be agitated (PJ [49]). For that reason, his Honour refused the application for leave to amend (PJ [50]). 20 The primary judge then considered whether the proceeding should be dismissed. His Honour concluded that it was appropriate to make that order, reasoning as follows (PJ [51]-[53]): 51 It is a significant thing and a serious step for a judge to shut a litigant out in a summary way without giving the person a fair opportunity of agitating his or her case in this Court. However, in my view, Mrs Gomez has had more than sufficient opportunity and indulgence to plead her case. I am positively not satisfied, having regard to the history of the proceeding that I have summarised and the detailed pleading that I have sought to summarise, that by a grant of any further period within which to formulate a new pleading Mrs Gomez will manage to plead a claim that is not further liable to be struck out. 52 These are very serious allegations that have vexed the respondent since 9 June 2020. In my view, the point has arrived where the administration of justice fairly and efficiently requires an order that the proceeding be dismissed, notwithstanding that this will preclude Mrs Gomez from agitating her grievances in this Court. I am satisfied by reference to the entire history of the proceeding that no reasonable opportunity to reframe the case by further amendments is likely to cure the defective character of the claim: see Polar Aviation Pty Ltd v Civil Aviation Safety Authority [2012] 203 FCR 325; [2012] FCAFC 97, particularly at [42] to [46], Perram, Dodds-Streeton and Griffiths JJ. 53 I also have regard to section 31A of the Federal Court of Australia Act which (though not directly relevant) speaks to summary termination where, inter alia, there is no reasonable prospect of successfully prosecuting a claim. Finally, I have regard to section 37P of the Act. In this case the Court, in my view, has afforded significant and sufficient opportunities to allow Mrs Gomez to plead a case that complies with the basic rules of pleading. What is now apparent is that the facts can rise no higher than as set out in the last iteration of her pleading, and, for the reasons I have given, there is no reasonable prospect that those facts, if accepted, can support the causes of action upon which Mrs Gomez relies.

The proposed grounds of appeal and the contentions of the applicant 21 The applicant's draft notice of appeal stated the following proposed grounds of appeal (emphasis in original): 1. Whether the primary judge has applied the correct principles in his conclusion (para 24 and 36-39) that the malicious prosecution was 'initiated not by the respondent'. 2. Whether the primary judge has correctly applied the principles of the definition of 'actively instrumental' in reaching the conclusion that the malicious prosecution was 'initiated not by the respondent'? 3. Whether the primary judge erred by not addressing, on the face of the record, the reply provided by the applicant to his question in para 32? 4. Has the primary judge erred in para 34, 36 and 48 by applying stringent and technical pleading rules by expecting that the facts stated in the pleadings paras 10 - 29 needs to be repeated for each of the pleading paras such as 52 - 57? 5. Has the primary judge erred in his conclusion in para 41 that "the respondent cannot demonstrate that he believed in his guilt" by ignoring the pleading paras 21, 23, 49, 53, 78.2 and others? 6. Similarly, for paras 43-44 and 46, has the primary judge erred requiring stringent and technical pleading rules by expecting that facts be repeated under every assertion in the pleadings. 7. Has the primary judge erred in para 44, by implying that the trustee does not have an obligation to act honestly and impartially towards the bankrupt when referring matters to AFSA and the CDPP? 8. Has the primary judge failed to acknowledge that the respondent being dishonest and misleading AFSA and the CDPP is 'knowledge of invalidity' or abusing the power given to the respondent? 9. Whether the pleadings are truly unclear such that the respondent does not know the case he has to meet? 22 The applicant's affidavit largely repeated the above grounds of appeal, with some minor additions. 23 The applicant's submissions did not elaborate on the proposed grounds of appeal in any material way. In particular, the submissions did not identify any error in the primary judge's statement of legal principles, whether in respect of the rules of pleading or the elements of the causes of action sought to be relied on by the applicant in the pleading. The applicant's written submissions contained the following contentions: 6. … in the current case, the trial judge's supposed findings of deficiency in the applicant's pleadings were predominantly based and derived from his conclusions in paragraphs 24, 36-39. 7. The trial judge's conclusions in these paragraphs 24, 36-39 were not supported by any authorities. 8. Conversely, numerous authorities exist to contradict these conclusions. 9. No reasoning was given by the trial judge as to why these other contrary authorities were disregarded in his decision. 10. It is this reasoning that the trial judge had employed in arriving at such a conclusion which is being questioned in this appeal. 11. The question stands as to whether the trial judge had made an error-in-law in paragraphs 24 and 36-29, being the predominant reasons given for his conclusion of 'failure to disclose a cause of action'. 24 The applicant did not identify any authorities that were being referred to in those paragraphs.

Consideration 25 In my view, the decision of the primary judge is not attended with sufficient doubt to justify its reconsideration on appeal, applying the test stated in Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-399 (Sheppard, Burchett and Heerey JJ). To the contrary, I consider that the applicant's proposed grounds of appeal have no prospect of success. 26 The proposed grounds of appeal are not expressed clearly and are framed as questions rather than contentions of error. However, looking to the substance of each proposed ground, the following observations can be made. 27 The first proposed ground of appeal asks whether the primary judge applied the correct principles in his conclusion (at PJ [24] and [36]-[39]) that the malicious prosecution was "initiated not by the respondent". The ground appears to challenge the primary judge's statement of the first limb of the test articulated in A v New South Wales (2007) 230 CLR 500 at [1] (Gleeson CJ, Gummow, Kirby, Hayne, Heydon and Crennan JJ): whether proceedings were initiated by the respondent against the applicant. The applicant does not identify any arguable error in the primary judge's statement of the applicable principles. Further, and more significantly, the applicant fails to appreciate that the primary judge acknowledged that a claim for malicious prosecution can be maintained against a person who does not initiate the proceeding but is actively instrumental in causing the prosecution to be commenced or maintained (PJ [24]). 28 The second proposed ground of appeal asks whether the primary judge correctly applied the principles of the definition of "actively instrumental" in reaching the conclusion that the malicious prosecution was "initiated not by the respondent". The ground appears to challenge the primary judge's application of the principles relating to whether a party is "actively instrumental" in initiating or maintaining a prosecution. However, the applicant does not identify where the primary judge erred in his application of the principles. His Honour correctly observed that it must be pleaded that the respondent is the person who played the active role in causing the proceeding to be commenced, relying upon Commonwealth Life Assurance Society v Brain (1935) 53 CLR 343 at 379 per Dixon J and A v New South Wales at [34]. 29 The third proposed ground of appeal asks whether the primary judge erred by not addressing "on the face of the record" the reply provided by the applicant to his question at PJ [32]. The difficulty with the ground is that the applicant has not identified the content of the asserted reply. At PJ [32], the primary judge recorded that he raised with the applicant at the hearing the failure to identify the information being referred to at paragraphs 18 to 23 of the statement of claim, and that the applicant failed to identify the information being relied on. The proposed ground of appeal fails to identify any arguable error on the part of the primary judge. 30 The fourth proposed ground of appeal asks whether the primary judge applied "stringent and technical pleading rules" in PJ [34], [36] and [48] by applying stringent and technical pleading rules by expecting that the facts stated in the pleading at paragraphs 10 to 29 need to be repeated for each of the pleading paragraphs such as 52 to 57. The proposed ground misstates the reasoning of the primary judge. The primary judge was not insisting upon repetition of material facts; the primary judge found that material facts were not pleaded at all. No arguable error is identified. 31 The fifth proposed ground of appeal is misconceived. It asks whether the primary judge erred in his conclusion at PJ [41] that "the respondent cannot demonstrate that he believed in his guilt" by ignoring paragraphs 21, 23, 49, 53, 78.2 of the pleading. The primary judge concluded that the pleading was defective because it reversed the onus of proof (PJ [42]). There is no arguable error in that conclusion. 32 The sixth proposed ground of appeal asks whether the primary judge erred at PJ [43], [44] and [46] in applying stringent and technical pleading rules by expecting that facts be repeated under every assertion in the pleadings. Again, the proposed ground misstates the reasoning of the primary judge. The primary judge was not insisting upon repetition of material facts; the primary judge found that material facts were not pleaded at all. 33 The seventh proposed ground of appeal asks whether the primary judge erred at PJ [44] by implying that the trustee does not have an obligation to act honestly and impartially towards the bankrupt when referring matters to AFSA and the CDPP. At PJ [44], the primary judge considered Part G of the statement of claim. Part G contains a single allegation (supported by a number of subsidiary or supporting allegations) that "AFSA's duties in offence referrals are very similar to that of the DPP than to that of a police officer". The allegation is entirely disconnected with any relief available to the applicant. The applicant has not demonstrated any arguable error in the primary judge's observation that the pleading does not allege facts establishing a relevant duty in favour of the applicant. 34 The eighth proposed ground of appeal asks whether the primary judge failed to acknowledge that the respondent being dishonest and misleading AFSA and the CDPP is "knowledge of invalidity" or abusing the power given to the respondent. The ground appears to relate to the primary judge's consideration of Part I of the statement of claim titled "Official Misconduct" and which the primary judge inferred is intended to be a reference to the tort of misfeasance in public office (PJ [47]). The primary judge observed that the tort requires a conscious mal-administration rather than careless mal-administration; there must be knowledge of invalidity or excess of power (PJ [48]). The primary judge found that the pleading wholly failed to grapple with those requirements. The applicant has not shown an arguable ground of error in that conclusion. 35 The ninth proposed ground of appeal asks whether the pleadings are truly unclear such that the respondent does not know the case he has to meet. It is apparent from the primary judge's detailed reasons that his Honour concluded that the pleadings were wholly deficient in alleging material facts in support of any coherent cause of action against the respondent. The applicant has not identified any arguable error in that conclusion.

Conclusion 36 For the above reasons, I consider that the proposed grounds of appeal have no prospect of success. The application for an extension of time is therefore refused with costs. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Bryan.