Kimber v Clark in his capacity as trustee of the property of Kimber

The need for the extension of time 6 The time within which a notice of appeal from a final judgment may be filed of right is 28 days after the date on which the order was made pursuant to r 36.03(a) of the Federal Court Rules 2011. The time within which an application for leave to appeal from an interlocutory judgment, such as the Circuit Court's summary dismissal, can be filed is 14 days after the date on which the order was made pursuant to r 35.13(a). 7 The Registry accepted the leave application that Ms Kimber filed on 29 December 2021 and the extension application filed on 12 January 2022. 8 Ms Kimber filed her application in a case on 4 October 2021 and filed the amended application on 8 October 2021. She asserted in submissions to me that she had filed them at that stage in order to avoid the need to appeal by seeking to have his Honour set aside the substantive orders and decision on the basis that she alleged, namely that they had been obtained by fraud. 9 Ms Kimber did not lead any evidence that she had attempted to file a notice of appeal or application for leave to appeal from the recusal decision or the substantive orders and decision any earlier than 18 November 2021 when, she told me, she did so in a combined application for an extension of time and leave to appeal from those decisions, together with the summary dismissal. The Registry appears to have rejected those documents on 13 December 2021. There is no evidence of the reasons for the rejection. She said that she lodged the leave application and the extension application on 23 December 2021. 10 The substantive orders and decision appear to have been final orders that required Ms Kimber to give possession of the unit and allowed the trustees to sell it. Ms Kimber should have filed a notice of appeal from the substantive orders and recusal decision no later than 5 October 2021. Thus, by 18 November 2021, she was nearly a month and a half out of time. I do not think the Registry's delay of nearly four weeks in rejecting the 18 November 2021 application can be attributed to Ms Kimber's default. However, she has not explained her subsequent delay of nearly two weeks, except to say that she was suffering from COVID-19. 11 Ms Kimber said that she filed the extension application at the same time as the leave application. There is no evidence of this and the Court's electronic file indicated that the leave application was filed at 3:11 pm on 29 December 2021 and accepted on 30 December 2021 while the extension application was filed at 1:57 am on 12 January 2022. 12 Even assuming in Ms Kimber's favour that she filed an extension application together with the leave application on 23 December 2021, she delayed over 6 weeks from 5 October 2021 before filing the combined application, which was rejected on 13 December 2021. Moreover, even after the summary dismissal, she did not file, within 14 days of 27 October 2021, the combined application or seek to file a notice of appeal from the substantive orders and decision and recusal decision until 18 November 2021. That was 8 days later than the 14-day period, beginning on 27 October 2021, in which she had to file the leave and extension applications. 13 I explained to Ms Kimber at the outset of the hearing that the issues she had to address were, first, to explain her delay, second, to establish each relevant decision was erroneous or that there was a reasonable basis to argue that it was and, thirdly, that she would suffer substantial injustice if leave to appeal or an extension of time were not granted. That is because an application for an extension of time challenges a respondent's vested right to obtain the benefit of the judgment that is the subject of the appeal, as Brennan CJ and McHugh J explained in Jackamarra v Krakouer (1998) 195 CLR 516 at 519-520 [3]-[4]; and see also at 539-543 [66] per Kirby J. The Court deals with such applications in the way that each of their Honours said had been adopted by Lord Denning MR in Regina v Secretary of State for the Home Department; Ex parte Mehta [1975] 1 WLR 1087 at 1091E-F (and see also FFM20 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2021] FCAFC 156 at [19] per Rares, Stewart and Abraham JJ), namely: We often like to know the outline of the case. If it appears to be a case which is strong on the merits and which ought to be heard, in fairness to the parties, we may think it is proper that the case should be allowed to proceed, and we extend the time accordingly. If it appears to be a flimsy case and weak on the merits, we may not extend the time. We never go into much detail on the merits, but we do like to know something about the case before deciding whether or not to extend the time. 14 The principles that govern the grant of leave to appeal are well established, as McHugh, Kirby and Callinan JJ said in Bienstein v Bienstein (2003) 195 ALR 225 at 231 [29], namely: An applicant for leave must establish that the decision in question is attended with sufficient doubt to warrant the grant of leave. The applicant must also show that substantial injustice will result from a refusal of leave to appeal.

The recusal decision 15 Ms Kimber contended to Judge Driver and me that his Honour should have recused himself on two bases, namely, first, that on 28 May 2018 in earlier bankruptcy proceedings (SYG931 of 2016) (the 2016 proceeding), his Honour had ordered Ms Kimber to pay 25 per cent of the petitioning creditor's costs when dismissing the previous creditor's petition near the end of its two year life under s 52(4) of the Bankruptcy Act. Secondly, she argued that because there was a dispute about the justification for the 2019 costs order, made by Judge Cameron, Judge Driver should have recused himself. 16 Ms Kimber did not articulate any basis before me as to why Judge Driver's costs order in the 2016 proceeding or any controversy over the 2019 costs order, which was made by a different judge, might have led a fair-minded person to think that his Honour might not have been able to bring an impartial mind to the resolution of the subsequent proceedings last year on their legal and factual merits. 17 In Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 at 345 [7]-[8] per Gleeson CJ, McHugh, Gummow and Hayne JJ, their Honours stated a test for recusal that involves, first, ascertaining whether there is a real, and not remote, possibility that the judge might not decide the case on its legal and factual merits and, secondly, the articulation of a logical connection between that matter and the asserted deviation from the course of deciding a case on its merits; that is, impartially. They added (at 345 [8]): The bare assertion that a judge (or juror) has an "interest" in litigation, or an interest in a party to it, will be of no assistance until the nature of the interest, and the asserted connection with the possibility of departure from impartial decision making, is articulated. Only then can the reasonableness of the asserted apprehension of bias be assessed. 18 I am unpersuaded there was any arguable error in his Honour's reasons for refusing to recuse himself or that Ms Kimber would suffer any substantial injustice if leave to appeal from the recusal decision were refused, particularly in light of my conclusions in respect of her application for leave to appeal from the substantive orders and decision.

The Substantive Orders and Decision 19 The trustees had challenged the owners' claim to rely on the 2019 costs order as a debt provable in Ms Kimber's bankruptcy based on the decision in Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52. Judge Cameron made the following orders on 23 August 2019: 1. The creditor's petition be dismissed. 2. The applicant creditor's costs of these proceedings (including reserved costs) as agreed or taxed be paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 with the same priority as if a sequestration order had been made pursuant to the petition presented by the applicant creditor on 28 September 2018. 20 On 18 May 2021, Judge Driver had ordered that Ms Kimber, the owners and the trustees engage in conciliation in respect of the trustees' application. That application sought orders that his Honour would have to consider making in the hearing listed for 7 September 2021, including orders for the possession and sale of the unit, and to what extent the 2019 costs order created a debt provable in the bankruptcy. His Honour referred Ms Kimber for pro bono assistance but, unfortunately, that did not eventuate. His Honour set the issues down for determination on 7 September 2021 if not otherwise resolved. 21 On 15 June 2021, a Registrar gave notice to the owners and the trustees that he estimated, under r 40.20(3) of the Federal Court Rules, that the owners' costs, if taxed, would produce a certificate of taxation for $87,100. The trustees were concerned that Ms Kimber should be informed of the Registrar's estimate and be given the opportunity to object under r 40.21, as a party interested or a person affected. The trustees themselves objected to the estimate and paid $2000 into the Litigants' Fund as security for the costs of the taxation in accordance with r 40.21(1)(b). Ms Kimber also sought to file an objection but did not pay any security. 22 Subsequently, another Registrar conducted the conciliation process in which Ms Kimber, the owners and the trustees participated by remote access. Ms Kimber appears to have been left on the sidelines and uninvolved in the negotiations during the conciliation which, counsel for the trustees informed me, failed to resolve matters. 23 Shortly after the conciliation concluded, on 25 August 2021, the owners and trustees entered into terms of settlement. The terms provided that their efficacy was subject to approval by Judge Driver. The terms largely reflected the substantive orders that his Honour made on 7 and 10 September 2021. 24 And, as Judge Driver recorded in his reasons, the terms sought to resolve the dispute as to the power of Judge Cameron to make the 2019 costs order, and as to whether it could be a debt provable in the bankruptcy because of Foots 234 CLR 52. 25 On 7 September 2021, the trustees applied to his Honour, orally and pursuant to written submissions that they had filed on 31 August 2021, for orders that the Court give them advice that they would be justified in consenting to orders so as to give effect to the terms that reflected those that his Honour came to make, including in respect of the taxation certificate. The owners did not file any evidence or oppose the relief that the trustees sought on 7 September 2021, but Ms Kimber did oppose it with vigour. 26 Judge Driver noted that Ms Kimber had sought to go behind the various judgment debts that she had been found to owe to the owners. His Honour noted that the trustees contended that, but for the settlement with the owners, the 2019 costs order should have been set aside. His Honour observed that the hearing of such an application would occasion further delay and expense and could result, as I also tried to point out to Ms Kimber, in the creation of a judgment debt presently payable by her, rather than being a debt admissible to proof in her current bankrupt estate. If it were a provable debt it could not later be used as a judgment debt enforceable against her now or later, over the next 12 years, after she is discharged from bankruptcy. 27 His Honour noted that the terms, if approved, would make the $75,000 taxed 2019 costs order payable to the owners in priority to the trustees' remuneration. Judge Driver also noted that the terms included quantifying $132,925 as the balance owing in respect of the disputed claims in the owners' proof of debt for as yet untaxed or unassessed costs orders. He observed that formal taxation and assessment of those costs would involve further expense, and that the overall agreed sum appeared to be a reasonable compromise, after taking into account Ms Kimber's opposition to that resolution. Judge Driver found (at [33]-[34]): Ms Kimber has been engaged upon a dispute which appears to go back at least as far as 2013 and has involved litigation in this Court and the Federal Court over many years. It is, perhaps, the most extreme example I have encountered of legal costs growing out of all proportion with the original dispute over unpaid strata levies. Ms Kimber has pursued what she sees as her right in the successive acts of litigation, but without a positive outcome. As has been seen in other cases of this nature, the legal costs grew and grew. Ultimately, Ms Kimber was bankrupted on her own petition which gave rise to part of the problem, which the parties invited the Court to address in relation to the legal costs of the final creditors petition proceedings. The case is, to my mind, a sorry tale. The trustees, however, have a job to do and the administration of the estate needs to be brought to a close. If the outstanding legal costs are not dealt with under a proof of debt in the administration of the bankrupt estate, at least part of them, but nevertheless a significant amount, could be pursued personally against Ms Kimber. She may be willing to undertake that contest, but the Court must take a broader perspective. I have listened to her submissions and I have considered the evidence, and it does not deter me from my view that the appropriate course is for the Court to take action now to endorse the agreement between the trustees and the Owners Corporation to enable the bankrupt administration to be completed. 28 As occurs not infrequently, Ms Kimber has found herself in her present unfortunate position because of a dispute over a small debt that the owners claimed and which she contested. Perceptions of principle, rather than compromise, then obscured the search for a timely and inexpensive resolution. The ensuing resort to litigation has led Ms Kimber to being made bankrupt as she approached retirement. I agree with what Barker and Derrington JJ said of her at Kimber v The Owners - Strata Plan No 48216 [2018] FCAFC 181 at [31]: She is clearly a very intelligent and articulate person even though, not unnaturally, she is occasionally emotional in relation to the issues which are the subject of this litigation.

The 2019 costs order 29 The owners argued that the 2019 costs order was somehow valid and that Foots 243 CLR 52 could be distinguished on the basis that it is not a bankruptcy case but a commercial case. 30 That argument was spurious and ignored the ratio decidendi, at which Gleeson CJ, Gummow, Hayne and Crennan JJ arrived in Foots 234 CLR at 76 [67]. They held that an order for costs made only after a bankruptcy had already intervened was not a liability arising from an obligation incurred before the bankruptcy and was not a provable debt, so that the stay of proceedings in s 58(3) of the Bankruptcy Act did not apply to the enforcement of the costs order. 31 Moreover, I am of opinion that there is nothing in the Bankruptcy Act, including s 109, that appears to support the making of the 2019 costs order in the form that it took. The 2019 costs order purported, retrospectively, to impose a liability on Ms Kimber's bankrupt estate, that had come into existence on the acceptance of her debtor's petition. The Act made her estate available to pay dividends to her creditors who had provable debts as at 22 August 2019 within the meaning of s 82 of the Act. The power under s 109(1)(a) to award costs in respect of the creditor's petition, and to give them priority in a bankruptcy, would apply only if the Court could have accepted the creditor's petition and made orders on 23 August 2019. That power could not be used to create any debt provable in Ms Kimber's pre-existing bankruptcy that had occurred on 22 August 2019, when the Official Receiver accepted her debtor's petition. The owners were not the petitioning creditor in that bankruptcy. The Circuit Court had no power to accept the creditor's petition once Ms Kimber became bankrupt on her own petition. And, when Judge Cameron made the 2019 costs order, he had no power to affect the existing bankrupt estate when dismissing the creditor's petition. In Clyne v Deputy Commissioner of Taxation (1984) 154 CLR 589 at 594, Gibbs CJ, Murphy, Brennan and Dawson JJ held that: it is not possible for the court … to make a sequestration order while the bankruptcy which resulted from the acceptance of the debtor's petition continues to exist. Before the court can make a sequestration order, it must be satisfied that "the debt or debts on which the petitioning creditor relies is or are still owing": s 52(1)(c). But since the debtor was already bankrupt when the petition came to be heard, the remedies against the person and property formerly available to the Deputy Commissioner had been taken away and there was substituted a right to prove against the estate which had become vested in Mr Andrew as trustee. (emphasis added) 32 However, Judge Driver was faced with the difficulty that the 2019 costs order had not been set aside. Ms Kimber was aggrieved by the amount of the compromise at $75,000, and intended to contest the quantification of the 2019 costs order whether her estate or she was liable to pay the taxed amount or not. He took what might be described as a "practical", rather than strictly legal course, and sought to eschew yet more litigation that was unlikely to benefit Ms Kimber or the owners. Ms Kimber felt that she had not been able to engage effectively in the conciliation. However, she has not demonstrated that the compromise in the amount of the $75,000 costs if payable by her estate, not her, under the certificate of taxation was not open to the trustees or that his Honour made any error in advising they would be justified in agreeing to that, on the assumption that he had power to do so. 33 Ms Kimber has established that the part of the substantive orders and decision that gave priority to the 2019 costs order as a provable debt in her bankruptcy was likely to be erroneous. But she has not persuaded me that any, let alone any substantial, injustice would result from a refusal to grant her leave to appeal against that part of the substantive orders, particularly in circumstances where the owners are her major unsecured creditor. Of course, had I been persuaded Ms Kimber should have been granted leave to appeal against the 2019 costs order and that appeal succeeded, she would not have been bound by the compromise because the certificate of taxation would have been set aside. But then, she would have been liable potentially for any costs that could be taxed against her on the dismissal of the creditor's petition on 23 August 2019. That dismissal occurred because she had rendered the creditor's petition moot by causing her own debtor's petition to be accepted.

Ms Kimber's interest in the unit under s 116(2)(g) 34 Because the legal title in the unit vested in the trustees upon Ms Kimber becoming bankrupt, she retained an interest in only so much of it as ss 116(2)(g), (n), and (2D), (3) and (4) excluded from being property divisible among her creditors. Relevantly s 116 provides: (1) Subject to this Act: (a) all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him or her, or has devolved or devolves on him or her, after the commencement of the bankruptcy and before his or her discharge; and … is property divisible amongst the creditors of the bankrupt. (2) Subsection (1) does not extend to the following property: (g) any right of the bankrupt to recover damages or compensation: (i) for personal injury or wrong done to the bankrupt, the spouse or de facto partner of the bankrupt or a member of the family of the bankrupt; or (ii) in respect of the death of the spouse or de facto partner of the bankrupt or a member of the family of the bankrupt; and any damages or compensation recovered by the bankrupt (whether before or after he or she became a bankrupt) in respect of such an injury or wrong or the death of such a person; Note: See also subsection 5(6). … (n) property to which, by virtue of subsection (3), this paragraph applies; … (2D) In subsections (3) and (4): exempt loan money, in relation to a particular time, means so much of the principal sum of a loan to the bankrupt, or to the bankrupt and another person or other persons, as was repaid, before that time, out of exempt money. exempt money means money of any of the following kinds: (a) an amount to which subsection (1) does not extend because of subparagraph (2)(d)(ii) or (iv); (b) damages or compensation of a kind referred to in paragraph (2)(g); (c) amounts covered by paragraph (2)(k), (l), (m), (ma) or (mb). outlay, in relation to property, in relation to a particular time, means all of the following: (a) the money paid for the purchase, or used in the acquisition, of the property; (b) the money paid before that time in respect of the extensions, alterations and improvements, if any, of the property constructed or made since that purchase or acquisition. protected money, in relation to a particular time, means: (a) exempt money; or (b) exempt loan money in relation to that time. (3) Where, at any time, the whole, or substantially the whole, of the money paid for the purchase, or used in the acquisition, of particular property is protected money, paragraph (2)(n) applies to the property. (4) Where, as at the time when the trustee realises particular property to which paragraph (2)(n) does not apply, the outlay in relation to the property is in part protected money and in part other money, the trustee shall pay to the bankrupt so much of the proceeds of realising the property as can fairly be attributed to that protected money. (emphasis added) 35 Judge Driver made no findings and gave no reasons for accepting that Ms Kimber's purported interest in the unit, that resulted from her investment of a District Court of New South Wales arbitration award of $55,602.15 she received in August 2002 from her personal injuries claim, was worth 25 per cent of the unit. Her award appeared to have been exempt money and protected money that she outlaid in the acquisition of the unit within the meaning of s 116(2D) and (4). 36 The evidence before his Honour was that the purchase price of the unit was $192,500 and Ms Kimber financed the acquisition with a bank loan of $150,000 secured by a mortgage. Ms Kimber said in her submissions that she intended to invest the award for her future. The question then arises as to how his Honour was satisfied that the trustees could value the amount that could be fairly attributed to the protected money pursuant to s 116(4). At first blush, 25 per cent appears to be less than the 29 or 30 per cent proportion of the total purchase price that the contribution of the award could be found to represent. Accordingly, I am satisfied that there is a reasonable argument that his Honour erred, first, in failing to give any reasons for accepting the 25 per cent figure or explaining how he arrived at it and, secondly, that it may be less than that which Ms Kimber was entitled. 37 Next, the order of priorities for the disposition of the proceeds of sale in orders 6 and 11, allowed the trustees to deduct not just the costs of the sale, but also any arrears of levies due to the owners from 23 August 2019 and other charges, together with the mortgage, before arriving at the net proceeds of sale that would then be distributable, including to Ms Kimber under s 116(2)(g) and (4). In addition, order 11 would appear to affect the status of the protected money. In my opinion, there is also an arguable issue as to the correct way that those priorities should be calculated in respect of liabilities that the trustees may have incurred since their appointment and whether the trial judge was correct to do so by reducing the net proceeds of sale, having regard to the command of s 116(4). I am satisfied that this question merits a grant of leave to appeal in respect of declaration 2 and orders 6 and 11. 38 Ms Kimber also raised her concerns about the way in which her relationship with the owners had evolved over the years of their disputes. She contested the ability of the solicitors who appeared for the owners at the hearing yesterday and today to do so in the absence of a resolution under the Strata Schemes Management Act 2015 (NSW) authorising that to occur. However, I am satisfied on the evidence that, because their estimate of legal costs and expenses was less than $10,000, and the matter was urgent by reason of the immediate setting down of the leave and extension applications for hearing, the solicitors are able to appear on behalf of the owners, on the basis that their appointment will be subject to approval or ratification in a general meeting that has been called later in February 2022.

The summary dismissal 39 Ms Kimber argued before Judge Driver on 27 October 2021 that all of the orders that he made on 7 and 10 September 2021 had been obtained by fraud. His Honour said that he gave Ms Kimber the opportunity to address him for about one hour before asking the lawyers for the trustees and the owners for any submissions, which they gave briefly. He said that he had listened in vain for anything new from Ms Kimber to substantiate her allegations that the orders of 7 and 10 September 2021 had been obtained by fraud. Rather, his Honour noted, Ms Kimber had sought to relitigate the long history of her disputes with the owners going back to 2013, including the bankruptcy proceedings that resulted, first, in the Official Receiver issuing bankruptcy notices against her that had come twice before Full Courts, and, secondly, in the issue of the creditor's petitions. His Honour said that the amended application was nothing more than an attempt to continue that longstanding dispute and that (at [8] and [9]): It would be disadvantageous, both to Ms Kimber and her creditors, for the matters which have already been litigated to exhaustion since 2013, to be further litigated. Regrettably, however, it is plain from Ms Kimber's oral submissions that if she is not satisfied with the outcome of her latest application she anticipates taking further proceedings. There is, in my view, no substance in the amended application in a case filed on 8 October 2021, and it should be dismissed summarily, I so order. 40 His Honour determined that, in order to prevent further unnecessary and vexatious proceedings and allow the trustees to complete the administration of Ms Kimber's estate, he should order that no further application be made by Ms Kimber relating to the administration of her estate under the Bankruptcy Act, except by leave of the Court. 41 Ms Kimber's argument to me as to why the summary dismissal was erroneous was a further demonstration of the correctness of his Honour's assessment. I am unable to perceive any basis on which it can be alleged that the judgments of which she seeks to complain were obtained by fraud. No doubt Ms Kimber feels very strongly that the owners have behaved in their litigation and enforcement proceedings against her in a way that she perceives, at least, is inappropriate and, in her view, much worse. However, her perception is different to discharging the legal onus of establishing that prior orders have been obtained by fraud. Ms Kimber was able to put arguments to the courts in the past to expose what she said was the error or alleged misdeeds of the owners and the courts have taken those arguments into account where relevant and supportable. 42 As I listened to her argument, having earlier read her evidence in support on the summary dismissal, it simply repeated what I perceived she has asserted repeatedly from my reading of the judgments of Judge Driver and the affidavit material before him, together with the reasons of the Full Court in Kimber [2018] FCAFC 181. 43 For these reasons, I am not satisfied there is any arguable error in the summary dismissal or that his Honour's attempt to limit Ms Kimber's ability to approach the Circuit Court, having regard to the previous litigation there, was inappropriate in relation to the further conduct of her bankruptcy. Indeed, as Ms Kimber told me, when I put to her that the risk of setting aside the certificate of taxation was that she would be able to be pursued in respect of that claimed debt or a debt based on an order for costs of the creditor's petition that Judge Cameron dismissed on 23 August 2019, if one were made, and she would lose the protection that she currently has from the 2019 costs order being a provable debt, she indicated she did not care because she was going to fight any orders that the owners sought to recover moneys from her, come what may. 44 While her anger and changes in her life that these disputes have brought about may be understandable from a human perspective, they do not justify the use of the Circuit Court's time in the way that Ms Kimber is likely to use it without, at least, the ability of that Court to assess the apparent merit of any further claims that she may wish to bring.

Conclusion 45 For these reasons, I am of opinion that there should be a limited grant of leave to appeal against declaration 2 and orders 6 and 11 made by Judge Driver on 7 September 2021. In my opinion, it is in the interests of justice that Ms Kimber be referred for pro bono assistance under r 4.12 so that she can be represented by counsel with experience in the field to present arguments on this issue and her interests can be properly argued on a sound legal basis. 46 Otherwise I will dismiss the leave application and order that the extension application be dismissed. I will order that the stay of proceedings on orders 3 to 11 made on 7 September 2021 be extended up to and including the hearing and determination of the appeal and that any further extension of the stay be in the discretion of the Full Court or a judge. I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Rares.