Massalski v The Owners SP 90255 & Ors [2023] NSWSC 190 | Case summary

Supreme Court of NSW|2023-02-15|Before: Garling J, Chen J

JUDGMENT

On 1 February 2023, Chen J ordered that the proceedings against each of the second and third defendants be dismissed. He made consequential orders including orders touching on the service of the proceedings on the first defendant. He stood the proceedings over for further directions.
His Honour's reasons can be found in Massalski v The Owners SP 90255 & Ors [2023] NSWSC 23.
The proceedings came before me on 15 February 2023 in my capacity as the Duty Judge, having been referred by the Common Law Registrar. As a consequence of what transpired on that day, I adjourned the matter to 16 February 2023 for further directions.
On 16 February 2023, I reserved my judgment but permitted the plaintiff to file, by 21 February 2023, any further submissions that she wished to make.
Those submissions have been filed. I would not be assisted by any further oral hearing of these proceedings.
For the reasons which follow, I would order that the proceedings be dismissed.

Background of these Proceedings

These proceedings were commenced by a Statement of Claim filed on 6 April 2022. The plaintiff represented herself. She sued three defendants. She described the type of claim as being: "Fraud; intentional tort for causing injury to the title of the property and conspiracy to prevent the Plaintiff from obtaining remedies to rectify such injury and from realising her asset."
She claimed the following relief: "1. That pursuant to Section 135, of the Strata Schemes Development Act 2015, the Strata Plan SP 90255 be terminated. 2. That the Second Defendant and Third Defendant be ordered to refund the money that was paid by [the purchasers] for Lot 2, within the strata scheme SP 90255, to enable restoration of a Torrens Title to the property. 3 That [the] Second Defendant [do] all things necessary to register all documents required for the folio to be updated to reflect termination of the strata scheme and restoration of the Torrens title, to be registered in the name of [the plaintiff] and [the second defendant], as tenants in common in a fee simply in equal shares. 4. Damages. 5. Costs."
The first defendant named was The Owners Strata Plan 90255 ("the Owners Corporation"). The plaintiff's Statement of Claim pleads that the Strata Plan is: "… a strata scheme, registered on the title of the property at 29 Bangalow Street, Ettalong Beach in the State of New South Wales."
I am informed by the plaintiff, and accept, that the Statement of Claim has never been served on the Owners Corporation. No Notice of Appearance has been filed by the Owners Corporation. The plaintiff contends in her Statement of Claim that: "The strata scheme is not managed, there was never a general meeting of the [Owners Corporation] held, and nobody is performing the functions of the Executive Committee."
The second defendant is a person who was formerly the spouse of the plaintiff. The plaintiff and he have been in extensive litigation which resulted in final orders being made by the Deputy Chief Justice of the Family Court, on 24 December 2019. Those orders and his Honour's reasons are to be found at Massalski v Riley [2019] FamCA 1013.
Further orders were made by Harper J in the Family Court of Australia on 5 August 2022.
Amongst other things, his Honour ordered that all extant applications instituted by the plaintiff in the Family Court proceedings be dismissed and that she be prohibited from instituting any proceedings in any Court having jurisdiction under the Family Law Act 1975 (Cth) in relation to the second defendant without leave first being granted.
His Honour also ordered the appointment of Mr John Vouris as the Receiver of the income and property of the plaintiff. The orders noted in particular that the Receiver was to receive the property, being the strata lot at 29A Bangalow Street, Ettalong Beach. The plaintiff was required to deliver up vacant possession of that property to the Receiver.
The third defendant was the real estate agent who acted on the sale of 29B Bangalow Street, Ettalong Beach, to the purchasers.
As earlier indicated, Chen J, for the reasons which he gave, dismissed the proceedings against the second and third defendants. The proceedings only remain on foot against the first defendant Owners Corporation.
There was no application before his Honour by the first defendant, or on its behalf, to dispose of the proceedings against the first defendant.

Trustee in Bankruptcy

On 1 December 2022, the plaintiff was declared a bankrupt, and a Trustee in Bankruptcy, Mr Barnden, was appointed to the plaintiff's estate.
On 22 December 2022, at which time Chen J had completed the hearing of the proceedings before him but had not yet delivered judgment, the Trustee in Bankruptcy advised his Honour that the Trustee had elected to allow the bankrupt to proceed with the proceedings. Accordingly, his Honour was able to, and did, deliver his judgment.

The Duty List

The matter came before me in the Duty List when counsel for the Receiver made an application that the whole of the proceedings which remained after Chen J's judgment, be dismissed. Chen J was satisfied that each of the claims against the second and third defendants constituted an abuse of process.
Part of the argument raised by the second defendant about the nature of the proceedings involved a consideration as to whether the claim seeking to terminate the strata scheme constituted an abuse of process or otherwise failed to disclose a triable issue.
The second defendant argued that such a claim was an abuse of process because it was in conflict with what had been ordered by the Deputy Chief Justice of the Family Court, and in conflict with the orders for the appointment of the Receiver. As well, it was put that there was no pleaded basis for the grant of the relief sought with respect to the Owners Corporation.
Chen J considered those arguments, commencing at [78] of his reasons. In the course of those reasons, his Honour said, amongst other things: "87. It is, however, unnecessary to dwell further upon what is alleged in these paragraphs because a clear statement of intent lies in what the plaintiff has specifically alleged in SOC, par 23: "[23] There is no other solution now, but to terminate the strata scheme and to order the second and third defendant to refund the money that they received … so the title of the property could be restored to a Torrens title. The property will then be able to be returned to the Family Court to be dealt with according to law and equity. (Underlining added)." 88. This paragraph expressly identifies the purpose of the plaintiff in pursuing this claim - to have the matter "returned" to the Family Court for further determination, and I find that is the purpose of the claim. … 89. In my view, having regard to the plaintiff's purpose in seeking the relief that she does, it would bring the administration of justice into disrepute to allow the plaintiff to do this: the express purpose for the claim for relief under s 135 of the [Strata Schemes Development Act 2015] by her is not based upon a bona fide reason, but to use it as a means to ventilate grievances - that she has aired in other proceedings - about the subdivision plans and concerns about building defects so as to have the matter "returned" to the Family Court for further determination. It follows that I consider commencement of the proceedings seeking the relief to constitute an abuse of process. It should not be allowed to continue."
As there was no motion filed other than those filed by the second and third defendants, his Honour did not dismiss the whole of the proceedings.
When that matter came before me, counsel for the Receiver took the Court to the judgment of Chen J. He submitted that the whole of the proceedings which remained were an abuse of process, and ought be summarily dismissed.
The Trustee in Bankruptcy, who also appeared, indicated that his client in light of the reasons of Chen J, and having heard the submissions of the Receiver, was minded to revoke his consent for the continuation of the proceedings.
In those circumstances, I directed the Trustee to within 24 hours formally inform the Court, and the plaintiff, of any decision which he wished to make with respect to the revocation of his consent to the continuation of the proceedings. The matter was adjourned and relisted for the following day.
At that time, the Trustee formally informed the Court that he had revoked his consent to the continuation of the proceedings.
I then gave the plaintiff an opportunity to file any further submissions in writing because she submitted that she had been caught by surprise. The plaintiff has filed further written submissions in accordance with the directions made by the Court.

Discernment

The first matter which emerges from the plaintiff's further submissions is that the plaintiff does not accept that the reasoning of the Deputy Chief Justice of the Family Court was soundly factually based and seeks to contend that his Honour's decision, and its reasoning, did not resolve the financial relationship between the parties. She notes that she will seek to re-open the judgment of the Deputy Chief Justice of the Family Court: "… on the basis that his reasons misled the Supreme Court while there was no factual basis for making the conclusions that were made by [the Deputy Chief Justice]."
However, I note that the plaintiff has appealed against the judgment of the Deputy Chief Justice. The appeal was heard in October 2020 and May 2021. The Full Court delivered a judgment on 13 July 2021, in which it dismissed the appeal against the judgment and orders of the Deputy Chief Justice: see Massalski v Riley [2021] FamCAFC 116. One of the matters which the Full Court considered was whether there was any error in the reasoning and orders of the Deputy Chief Justice insofar as those orders did not finally resolve the financial relationship between the parties. The Full Court was not persuaded by the plaintiff's arguments to it that any error had been shown. Rather, it accepted the submission that: "… the primary judge complied with the provision to the fullest extent reasonably practicable in the circumstances …"
This submission does not advance the plaintiff's case here.
The second matter to be observed from the submissions is that the plaintiff makes plain that she is using these proceedings as a collateral attack on the decision of the Deputy Chief Justice which has been upheld by the Full Court of the Family Court. She says in paragraph 67, this: "It is contended that the common law action, where the Plaintiff wants to establish the right to the property to be registered in her name, unencumbered, or obtain other remedy that would repair the damage caused to the title by registration of the wrong strata plan …"
If anything, that submission confirms the conclusion of Chen J that the proceedings involving the Owners Corporation are an abuse of process.
Thirdly, the plaintiff submits that these proceedings do not constitute property of a kind which vests in the Trustee in Bankruptcy in s 58(1) of the Bankruptcy Act 1966 (Cth). In my view, that submission is incorrect.
Section 5 of the Bankruptcy Act defines property in the following terms: "Property means real or personal property of every description, whether situated in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to, any such real or personal property."
The proceedings brought by the plaintiff are a chose in action insofar as they remain unresolved. In that chose in action, the plaintiff claims relief by way of a series of orders which affect real estate. Although a chose in action (i.e., the Court proceedings) is not a stand-alone piece of valuable personal property, it is certainly based upon and includes any estate or claim for an estate arising out of or incident to real property.
There is simply no doubt that these proceedings are property within the meaning of the Bankruptcy Act. Accordingly, the Trustee is entitled to deal with that property and, in my view, is entitled to make the revocation which he has.
A sole issue remains to be determined, which is the appropriate form of relief.
The plaintiff submits that since she has appealed against the sequestration order in light of the Trustee's revocation of the election to continue the proceedings, the proceedings should be stayed until further order. The plaintiff draws attention to orders made in the Supreme Court of Victoria on 3 February 2023 by O'Meara J to a similar effect. She also draws attention to Morkaya v Parkinson; Parkinson v Morkaya [2010] NSWSC 1194, where at [7] Brereton J, in an ex tempore judgment, decided that proceedings before him should merely be stayed rather than dismissed to: "… preserve the possibility … that these proceedings could be resurrected … on the basis that if the bankruptcy is annulled, … then it would be open [to the bankrupt] to apply to this court to have the stay lifted."
However, the circumstances here are different from those considered by Brereton J in Morkaya. In that matter, there was reason to doubt the existence of the debt upon which the bankruptcy order was made, and the basis for that doubt had been factually placed before the Judge in the course of an earlier hearing. As well, there was no suggestion that any of the proceedings in Morkaya were an abuse of process. On the contrary, the principal proceedings which were stayed was for a claim by the bankrupt Ms Morkaya for an adjustment of property interests pursuant to the Property (Relationships) Act 1984 (NSW).
However, here, there is a clear finding by Chen J that the proceedings are an abuse of process (see [20] above). As well, since the proceedings have been on foot, the plaintiff has not served the Owners Corporation, nor has she made any attempt to join as defendants all those who may be interested in the Owners Corporation.

Conclusion

In light of the fact that I have concluded, consistently with the argument put to the Court by the Receiver that these proceedings are an abuse of process, and in the absence of the Trustee's consent to continue the proceedings, the only proper order is to dismiss them.

Orders

The orders of the Court are: 1. Note that by order dated 1 February 2023, the proceedings against the second and third defendants were dismissed pursuant to r 13.4 of the Uniform Civil Procedure Rules 2005. 2. Order pursuant to r 13.4 of the Uniform Civil Procedure Rules 2005, that the balance of the proceedings against the first defendant be, and hereby are, dismissed. 3. No order as to costs.

Amendments 13 March 2023 - Updating of solicitor's details for Receiver on coversheet DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 March 2023

Massalski v The Owners SP 90255 & Ors

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