Maher v Commonwealth Bank of Australia

Cross Applicant AND: DENNIS MAHER and

THE OFFICIAL TRUSTEE IN BANKRUPTCY (as the Former Trustee of the bankrupt estate of Dennis Maher)

REASONS FOR JUDGMENT 1 This action was called on for hearing on Monday, 2 February 2004. Mr Maher, the applicant and the cross-respondent, failed to appear. The respondents, other than the Registrar of Titles who had not participated in the action, did appear. They asked for the action to be dismissed. The order was made with costs. The cross-claim by the first respondent, the Commonwealth Bank, was heard on 4 and 5 February 2004. Mr Maher also did not appear at the trial of the cross-claim. At its conclusion judgment was entered against him for possession of the property at 384 Spencer Street, Melbourne with costs. 2 Mr Maher now applies for the judgments given on 2 and 5 February 2004 to be set aside. He also seeks an order that a new trial be granted. His application is opposed. In Evans v Bartland [1937] AC 473, 482 Lord Russell said that a judge who was called upon to consider such an application (here it is brought under O 32 r 2(2)) must consider two issues, viz (1) whether there is some purpose in setting aside the judgment: there will be none if the claim sought to be prosecuted or defended (as the case may be) is hopeless; and (2) how it came about that the applicant was bound by a regularly obtained judgment. In the same case Lord Wright said (at 489) that the principal consideration was whether the applicant had a case with merits to which the court should pay heed. It did not matter that the case is weak because, as Winneke P explained in Lau v Citic Australia Commodity Trading Pty Ltd [1999] VSCA 34 at [8] "that is not to say that, when all the facts are exposed, it [in that case a defence] will not turn out to be a good one." 3 I do not propose to describe at length the basis of Mr Maher's claims or the bank's cross-claim. They have already been dealt with in several judgments: see Maher v Commonwealth Bank of Australia (unreported, Finkelstein J, 26 September 2001); Maher v Commonwealth Banking Corporation [2002] FCAFC 104; Maher v Commonwealth Bank of Australia (unreported, Finkelstein J, 5 February 2004). For present purposes it is sufficient to note that Mr Maher claimed possession of the Spencer Street property under a lease from the registered proprietor, one Mr Taylor. He alleged that the bank, which holds a mortgage over the property, wrongfully interfered with his possession of the property and his personal chattels located at the property. He sued in trespass and conversion and also included a claim under the Trade Practices Act 1975 (Cth) (which explains how the case came to the Federal Court). The bank cross-claimed for possession. Its case was founded on Mr Taylor's default under the loan secured by the mortgage. 4 It is necessary briefly to survey the conduct of this action. Some of the background already appears in the earlier judgment of Maher v Commonwealth Bank of Australia (unreported, Finkelstein J, 30 January 2004). Unfortunately, a little repetition is necessary. When the action commenced Mr Maher was acting on his own behalf. From time to time thereafter he had the benefit of legal advice and, on occasion, counsel appeared for him at interlocutory hearings. In mid August 2002 counsel was appointed under O 80 to act for Mr Maher. Soon the case was ready for trial. In June 2003 it was set down to begin on 5 August 2003. On 1 August 2003, Mr Maher asked for the trial date to be vacated. He said he needed a solicitor to provide him with assistance. The trial date was vacated and, in September 2003, the trial was fixed to begin on 2 February 2004. 5 In late December 2003 Mr Maher's counsel informed me that he would not appear at the trial. At the same time Mr Maher dispensed with the services of his solicitor. It then appeared that Mr Maher would run the case on his own. However, in mid January 2004 Mr Maher requested the appointment of another pro bono counsel. In support of his application he advised the Registrar that his previous counsel "sought to be excused on account of his daily commitments". This was simply not true. When pressed, Mr Maher conceded that "discussions with [counsel] relating to without prejudice negotiations displayed a fundamental difference in the approach to the case such that both [he and counsel] lost confidence in each other." I declined to take steps that would result in Mr Maher obtaining further pro bono assistance. Mr Maher was advised of this in writing on 22 January 2004. 6 Mr Maher's immediate response was to file a motion returnable on Friday 30 January 2004 in which he sought, among other things, the following relief: "1. The appellant appeals from the whole of the decision of Justice Finkelstein given on 22nd January 2004 at Melbourne[.] 2. … 3. A stay of the proceeding until there has been a determination of the appeal. 4. That the Federal Court appoint a pro-bono barrister and solicitor in accordance with Order 80 to assist the Applicant in the forthcoming trial. …" The motion was listed before a judge who ordered that it be dismissed. 7 Later the same day Mr Maher made an application to adjourn the trial. He said that he was suffering from physical disabilities which prevented him from sitting or standing for any length of time and that he would be unable to present his case effectively without the assistance of counsel. I declined to grant the adjournment. This was followed by a discussion about how the case would proceed on Monday 2 February 2004 (the day of the trial). 8 On the morning of 2 February 2004 Mr Maher sent a facsimile transmission to my associate. That transmission read: "I refer to a Notice of Motion seeking Leave to Appeal from His Honour Justices Finkelstein decision given on the 22nd and 30th of January 2004 and an unsworn affidavit faxed to the Registry this morning. As the abovementioned matter is listed before His Honour at 11am this day, I seek an indulgence of His Honour in delaying the matter until this application has been determined. I apologize for any inconvenience that I may have caused His Honour. I have notified the other respondents via facsimile transmission to. [sic]" 9 The case was called on at 11.07 am. Mr Maher did not appear. Counsel for the bank, Mr Shepherd, informed me that approximately 25 minutes earlier Mr Maher had sent his instructing solicitor copies of a draft notice of appeal, a draft notice of motion and part of an affidavit under cover of a note which read: "Please find by way of service, notice of motion and affidavit (jurat) returnable Monday, 2 February 2004 before his Honour North J at approximately 10.30 am." Mr Maher was called outside court, as were the witnesses upon whom Mr Maher had served subpoenae to attend. There was no response to the call. (As an aside I should mention that during his submissions on the motion to set aside the judgments Mr Maher told me that he had made arrangements for the attendance of his witnesses on 2 February 2004. He also (wrongly) asserted that those witnesses attended on the same day and were sent away without giving evidence). 10 I told counsel that I would stand the matter down for 20 minutes and that his instructing solicitor should ascertain whether Mr Maher was in another court. The hearing resumed at 11.33am. Mr Shepherd then told me that his instructing solicitor could not find Mr Maher. At this point Mr Maher's application was dismissed with costs. 11 The matter was then stood down until 12.15pm when it was anticipated the hearing of the cross-claim might commence. When the hearing resumed Mr Maher appeared. He informed me that he had just then filed an appeal against my refusal to grant the adjournment. He did not, however, explain his failure to attend at 11.00am. I enquired whether Mr Maher intended to defend the cross-claim. He indicated that he would. Accordingly, I adjourned the hearing of the cross-claim to 10.00am on 4 February 2004. I told Mr Maher that if he "[did not] show up the case will proceed undefended". 12 On the morning of 4 February 2004 my associate received the following communication from Mr Maher: "Would you kindly advise His Honour Justice Finkelstein that I am requesting an adjournment of today's hearing of the Cross Application and unable to attend today due to my medical problem. I will provide later in the day a medical certificate confirming this and will be attendance tomorrow." I will be defending the Cross claim vigorously, I would like to draw to His Honour and enclosed is a copy of the covering letter forwarded by Ryrie Bridges Solicitor and draw attention to the last paragraph, and say that I do not have that affidavit that is referred to. If it is on the Court file a copy is requested. A copy of this correspondence will be forwarded to Ryrie Bridge Solicitor, perhaps they may provide a copy if it has been filed. [sic]" That morning Mr Maher also sent a facsimile to the Registry which read: "Would you please advise His Honour Justice Finkelstein that I am unable to attend the hearing of the Cross claim matter at 10am today on account of a medical condition. That I have by facsimile transmission advised His Honours Associate. Thank you for your kind assistance in this matter. [sic]" 13 The case was called on at 10.03am. I provided copies of the correspondence to Mr Shepherd. I told him that in the circumstances I would allow him to call witnesses to give oral evidence but that I would then adjourn the case until the following day. I told Mr Shepherd that if Mr Maher appeared the next day it might be necessary to recall the witnesses. Two witnesses then gave evidence and the hearing was adjourned to 5 February 2004. 14 On the morning of 5 February 2004 my associate received the following facsimile from Mr Maher: "Would you please advise His Honour Justice Finkelstein that I am not in a position to attend Court this morning and I humbly seek from the Court an indulgence of requesting a further adjournment of today's hearing of the Cross Application medical problem. Enclosed herewith are the medical certificates confirming Wednesday the 4th and today 5th February 2004. [sic]" Each of the two enclosed medical certificates was from Foundation Health Care. One concerned Mr Maher's failure to attend court on 4 February 2004. The certificate recorded that Mr Maher had presented with "Illness". It stated that he was "medically unfit to attend court from 04/02/04". The second certificate stated that Mr Maher had been seen by the doctor at 7.45pm on 4 February 2004 presenting with "Illness". The doctor certified that Mr Maher was "unfit to attend court from 05/02/04". 15 When the hearing resumed at 9.50am I informed the parties about the facsimile. I said that I would hear the case but required an undertaking from the bank that if it obtained judgment on its cross-claim it would not perfect that judgment for a short period. I requested this undertaking on the incorrect assumption that Mr Maher would be unable to apply for a judgment to be set aside if the order had been passed and entered. The trial then proceeded and, at its conclusion, the bank obtained judgment. Less than an hour after I had delivered judgment, Mr Maher sent the following further facsimile to my associate: "Would you kindly advise His Honour Justice Finkelstein that I have been in contact with a Solicitor Mr Danial Isakow Level 2, 200 Queen Street, Melbourne, telephone no. 9606-0477 after an hours telephone discussion Mr. Isakow indicated to me he is willing to assist with the matter, but would require some short amount of time to come to grips with the matter. I humbly seek from this Honourable Court as a litigant in person, an indulgence in requesting a further adjournment of today's hearing of the Cross Application for a period some 14 days. I apologize for any inconvenience caused. A copy of this correspondence will be forwarded to Ryrie Bridge Solicitor. [sic]" Later that day my associate sent a facsimile to Mr Maher advising him of the outcome of the hearing on the cross-claim. 16 Mr Maher's motion to set aside the judgments was first returned on 6 February 2004. On that day I briefly outlined to Mr Maher what he needed to establish if he were to succeed on his motion. I referred him to a passage from a relevant text. I told Mr Maher that it would be necessary for him to obtain an affidavit from his treating doctor or, if the doctor was unwilling to swear an affidavit, Mr Maher could require his attendance by subpoena. The application was then adjourned. It was heard on 17 February 2004. Mr Maher relied upon several affidavits sworn by him and a further medical certificate in support of his motion. The certificate stated: "I have issued Mr. D. Maher with a certificate stating he was unable to attend court due to "illness". This latter term refers to

• deformity of left hip with [indiscernible] shortening.
• severe pain right hip due to degenerative arthritic changes which illness he was suffering from severe pain in both hips." In one affidavit Mr Maher said that he had been unable to obtain an affidavit from his doctor "as he will not be returning [to] the Clayton Medical Centre until 9.00am Monday the 16th February 2004". He said that he would "attend the Medical Centre to obtain same and file and serve before 4.30pm that day". At the hearing Mr Maher explained that he had not been able to obtain an affidavit from the doctor. He said: "Well, I would object to the fact, Your Honour, in the basis of a litigant in person asking a doctor to do an affidavit. For me to even prepare it or try to do that is well out of my sphere. This is what we've been discussing out over pro bono. I think it would be highly irregular if I was even to try and do that. It could be looked upon as though I was doing something outside my jurisdiction and that I could be frowned upon maybe by the Law Institute or whatever." I reject these statements. They are simply instances of Mr Maher's willingness to say anything that will suit his purpose. 17 With this history in mind, I am in no doubt that Mr Maher made a deliberate decision not to attend the hearing on Monday 2 February 2004 in the expectation that the case would not go on in his absence and that he would thereby obtain the adjournment he was refused on the preceding Friday. I am convinced that Mr Maher intended to take whatever steps were necessary to defer the hearing while he continued his attempts to obtain pro bono counsel. 18 Moreover, I simply do not accept Mr Maher's claim that he was physically unable to attend the hearing on 4 or 5 February 2004. The medical certificates are unconvincing. And, I suspect that Mr Maher did not obtain an affidavit from his doctor, or secure his attendance by subpoena, because the doctor's evidence would not have assisted his cause. 19 Mr Maher's cavalier attitude is inexcusable. There is no reason why a person who is hell-bent on delaying a proceeding in this way should be indulged. I suspect that if a new trial is ordered and Mr Maher still does not have counsel to assist him, he will renew his efforts to have the trial delayed. Tempted as I am to simply dismiss his motion out of hand, I accept that the more important consideration is to determine whether his own claim or his defence of the bank's claim has any merit. If either has merit then it is best left to go to trial. Mr Maher can be suitably punished by an appropriate order in relation to costs, although even that may not put an end to his humbug. 20 Mr Maher's claim does have some merit. It is true that once I was of the view that it was a hopeless case. However, the Full Court in Maher v Commonwealth Banking Corporation [2002] FCAFC 104 thought otherwise. It held (at [22]-[23]) that Mr Maher, who could be a tenant at sufferance, may maintain an action in trespass by virtue of his possession. It cited Halsbury's Laws of England, 4th ed, vol 27.1, 1981 at [176], footnote 1 as authority. The case referred to in the footnote (Graham v Peat (1801) 1 East 224; 102 ER 95) is authority for the proposition for which it is cited, provided the proposition is understood to mean that a tenant at sufferance can only maintain the action against a wrongdoer. A tenant at sufferance could maintain trespass against the real owner if he is forcibly ejected without any previous demand of possession: Harrison v Murrell (1837) 8 C&P 134; 173 ER 430; Cole's Ejectment, 1857, 456. (For this purpose I would treat a mortgagee entitled to possession following a default as being in the same position as the real owner). And in that event the proper action is for assault and battery rather than trespass, because once the true owner takes possession he becomes the legal possessor: Jones v Chapman (1849) 2 Exch 803, 821; 154 ER 717, 724; Randall v Stevens (1853) 2 E&B 641, at 649-651; 118 ER 907, 910-911. Be that as it may, having regard to the view of the Full Court there is a matter that should go to trial. 21 On the other hand, I am of opinion that Mr Maher has no defence to the bank's claim for possession. There is, therefore, no point in reopening the cross-claim. I will explain why his defence cannot be sustained. Mr Maher's rights over the property are dependent upon his lease from Mr Taylor. He says that the lease was granted on 15 March 1995 for a term of five years. At that time Mr Maher was an undischarged bankrupt. It follows that immediately upon the execution of the lease it passed to his trustee in bankruptcy. That is the effect of s 58(1)(b) of the Bankruptcy Act 1966 (Cth). In Reeves v Davies [1921] 2 KB 486 Lord Sterndale MR said in relation to similar legislation (at 490): "I base my judgment simply upon this, that where by statute the interest of the tenant of a house has been entirely divested or taken away from him and vested in his trustee by operation of law, the tenant has no more interest in the property than any passer-by in the street, and has no right to intervene. The fact that the trustee disclaims the lease in my opinion makes no difference." It follows that a bankrupt has no interest whatsoever in the property immediately upon him being divested of it pursuant to s 58(1)(b). 22 Two things flow from this. The first is that Mr Maher's allegation that he exercised the option to renew the lease in late 1999 cannot stand because the option was not his to exercise. Second, if instead of exercising the option Mr Maher had, after his bankruptcy, entered into a new lease with Mr Taylor (a case which has not been put), such lease would not bind the bank because it had not given its written consent to it: Transfer of Land Act 1958 (Vic), s 66(2). 23 Mr Maher contends that the lease did not devolve on his trustee as divisible property because it has the character of` exempt property. Section 116(2) of the Bankruptcy Act exempts certain property from that which is divisible among a bankrupt's creditors. A lease of a household residence is not property falling within any exemption. Mr Maher also suggests that the trustee in bankruptcy may have abandoned the property in his favour. Edmonds Judd v Official Assignee [1999] NZCA 283, [21]-[22] discusses this as a theoretical possibility. In that case the Official Assignee conceded that he could abandon property owned by the bankrupt which was considered to be worthless. To do so he would have to sufficiently manifest an intention to abandon the property. Despite this concession, the Court of Appeal said that it was questionable whether there is room for a non-statutory abandonment to sit alongside a statutory right of disclaimer. Whatever be the true position, Mr Maher's argument would fail on two counts. First, an "abandonment" of a lease is, in effect, a surrender: Foa's General Law of Landlord and Tenant, 8th ed, 1957 at 629-633. Second, the effect of an abandonment or surrender by the trustee results in the whole of the bankrupt's former interest in the property revesting in the lessor. In Reeves v Davies (supra) at 491 Younger LJ made this observation in relation to a disclaimer. An abandonment (or surrender) would produce the same result. Third, the evidence which Mr Maher has filed does not disclose a case for abandonment by the trustee. 24 Following Mr Taylor's default and the service of the requisite notice under s 76 of the Transfer of Land Act the bank was entitled to eject Mr Taylor, and any person claiming through him, without any further notice to quit or demand for possession: Roby v Maisey (1828) 8 B&C 767; 108 ER 1228; Fisher v Giles (1829) 5 Bing 421; 130 ER 1123; Commonwealth Bank of Australia v Figgins Holdings Pty Ltd [1994] 2 VR 505, 510-511. The reason for this is that after default Mr Taylor was at most a tenant at sufferance to the bank who could be treated, at the bank's election, as either a tenant or as a trespasser: Roby v Maisey (supra); City Mutual Life Assurance Society Ltd v Lance Creek Meat Works Pty Ltd [1976] VR 1, 10. Moreover, while a mortgagee may be bound by a tenant of the mortgagor holding a lease granted before the mortgage (see s 42(2)(e) of the Transfer of Land Act; United Starr-Bowkett Co-operative Building Society v Clyne [1968] 1 NSWR 134, 139; see as to general law land: Moss v Gallimore (1779) 1 Doug KB 279; 99 ER 182; Rogers v Humphreys (1835) 4 AD & E 299, 313; 111 ER 799, 804;), the mortgagee may recover in ejectment, without giving notice to quit, against a tenant who claims under a lease from the mortgagor granted after the mortgage and without the consent of the mortgagee: Keech v Hall (1778) 1 Doug KB 21; 99 ER 17; Weaver v Belcher (1803) 3 East 449; 102 ER 669; Dudley & District Benefit Society v Emerson [1949] Ch 707, 714; Wilson v Kelly [1957] VR 147, 149; Taylor v Ellis [1960] Ch 368, 374-375; Quennell v Maltby [1979] 1 WLR 318, 323; Commonwealth v Orr (1981) 37 ALR 653 at 655-656, 661-662; Commonwealth Bank of Australia v Baranyay [1993] 1 VR 589, 599. The reason is obvious. A tenant to the mortgagor whose tenancy does not predate the mortgage cannot be in a better position than the mortgagor himself. This would not mean that Mr Maher is without legal recourse. At least in theory Mr Maher could redeem the mortgage: Tarn v Turner (1888) 39 Ch D 456, 462-463; compare: Re Australia and New Zealand Banking Group Ltd [1993] 2 Qd R 477; P Butt, 'Can a lessee of Torrens title land redeem a mortgage given by the landlord?' (1994) 68 ALJ, 899. Alternatively, he could pursue a claim against Mr Taylor: see Keech v Hall (supra); Britannia Building Society v Earl [1990] 1 WLR 422, 425 citing Fisher and Lightwood's Law of Mortgage, 10th ed, 1988, 358. 25 Finally the issue of costs must be dealt with. It goes without saying that Mr Maher will be required to pay the costs of this motion as well as the costs thrown away if he is allowed to reinstate his claim. If I were to do no more than to make an order for costs against Mr Maher and, in due course, Mr Maher fails in his claims, the respondents will get nothing. Mr Maher would effectively secure his objective of delaying the trial at no cost to himself. This is an injustice I will not permit. I will only set aside the judgment given on 2 February 2004 if within 14 days Mr Maher pays $2,000 to the bank and the second and third respondents on account of their costs (they claim $4996 but the costs are likely to tax out at far less) and $450 to the Official Trustee in discharge of his costs (which are said to total $974). I appreciate that these amounts are far less than the actual costs thrown away and that, on one view, this case demands that all of those parties' costs should be paid as the condition upon which the judgment should be set aside. On the other hand, to take that course would impose too onerous a burden on Mr Maher, although if such a burden were imposed upon him he could hardly complain in the circumstances. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.

Associate: Dated: 16 March 2004 Applicant and First Cross Respondent in person.

Counsel for the 1st, 2nd & 3rd Respondents and the Cross Applicant: R.D. Shepherd

Solicitor for the 1st, 2nd & 3rd Respondents and the Cross Applicant: Ryrie Bridges

Appearing for the 5th Respondent and Second Cross Respondent: M. O'Brien

Solicitor for the 5th Respondent and Second Cross Respondent: Aitken Walker & Strachan

Date of Hearing: 17 February 2004

Date of Judgment: 16 March 2004