May v AAI Insurance Formerly known as Vero Insurance

REASONS FOR JUDGMENT 1 There are two matters before the court for hearing today. The first relates to an application for an extension of time filed on 12 February 2014 in respect of orders that were made by Foster J on 12 December 2013. The application for an extension of time is accompanied by a draft notice of appeal. The draft notice of appeal sets out the following four proposed grounds of appeal: (a) denial of procedural fairness; (b) denial of natural justice; (c) irrelevant considerations taken into account; and (d) error in the facts. 2 The proposed notice of appeal also seeks to have Foster J's judgment in May v Vero Insurance Limited [2013] FCA 1388 (Foster J's Judgment) set aside together with the bankruptcy notice to which it relates. 3 The second set of proceedings relates to what is described as an interlocutory application filed on 25 February 2014 by Mr May. That so called interlocutory application seeks to have set aside orders made by the Registrar on 12 February 2014. At the commencement of the hearing Mr May said that he preferred the second of his applications to be dealt with first, on the basis that its outcome would also determine his application for an extension of time. 4 In support of his interlocutory application to have the sequestration order set aside, Mr May relied on an affidavit sworn by him on 13 February 2014. He also relied upon his written submissions dated 12 March 2014. In response, the respondent relied upon an affidavit of Stefanie Madonna sworn on 12 March 2014. That affidavit was relied upon by the respondent in both applications being heard today. 5 Mr May confirmed that his interlocutory application was, in substance, an application to have the Court review the sequestration order under s 35A(5) of the Federal Court of Australia Act 1976 (Cth) and r 3.11 of the current Federal Court Rules 2011 (Cth). There is no issue that the application was made within the 21 day period applicable to such matters. 6 Mr May's affidavit reveals that the burden or thrust of his complaint concerning the sequestration order relates to Cowdroy J's judgment in May v Vero Insurance Ltd [2012] FCA 727 (Cowdroy J's Judgment) given on 9 July 2012 at an earlier stage of these proceedings. It is necessary, therefore, to retrace the procedural history of the dispute between the parties in this Court which also, as will shortly emerge, has spilled over to the District Court. The matters I am about to describe are based on various earlier judgments given by other Judges of the Court. 7 On 6 December 2011, the respondent brought proceedings in the District Court against Mr May claiming a sum of $362,076.27, pursuant to an indemnity relating to a home owner's warranty insurance policy in favour of a building company, which was associated with Mr May called Belltree Constructions Pty Limited. Mr May defended the District Court proceedings and argued that the insurance policy was illegal under the Insurance Act 1973 (Cth) (Insurance Act). He also sought to have those proceedings in the District Court transferred to this Court. The District Court refused to make any such transfer order. 8 Mr May then brought proceedings in this Court by way of an originating application filed on 7 March 2012. The respondent sought to have those proceedings struck out. After hearing argument, on 9 July 2012, Cowdroy J struck out the pleadings on the basis that they constituted an abuse of process because, in short, they paralleled the proceedings which were then on foot in the District Court. 9 It should be noted at this point that the proceedings which Mr May commenced in the Federal Court included a claim for $1 million in damages. The claim was un-particularised in the pleadings, save for the matters which are set out at [14] of Cowdroy J's reasons for judgment. In short, they involved an allegation that the respondent was in breach of conditions applicable to it under the Insurance Act. 10 At the time of Cowdroy J's Judgment, Mr May had not filed a cross-claim in the District Court. His Honour indicated at [34] of his judgment that the proceedings in this Court constituted an abuse of process because of the vexatious character of having parallel proceedings on foot in two different courts at the same time. Paragraph 34 of Cowdroy J's Judgment is set out below: Had there been any limitation upon the jurisdiction of the District Court which would operate to prevent any possible relief being granted to Mr May, the dual proceedings would not be regarded as vexatious. However this is not the case. The Court is satisfied that in these circumstances the proceedings initiated in this Court by Mr May constitute an abuse of process. 11 The upshot of the hearing before Cowdroy J was that the applicant's statement of claim and amended statement of claim in this Court were struck out in their entirety. Mr May subsequently sought to appeal the decision of Cowdroy J. He did so, however, out of time and, therefore, had to file an application to extend time. In May v Vero Insurance Limited [2012] FCA 1385, Flick J dismissed the application to extend time. He did so on three grounds which, in broad terms, are as follows: (1) the applicant had failed to file an affidavit explaining his delay; (2) there was no error in the reasons of Cowdroy J; and (3) there was no substance in any of the grounds which were relied upon by Mr May in the draft notice of appeal attached to his application for an extension of time. 12 It might be noted that those proposed grounds of appeal are very similar to the proposed grounds of appeal in respect of the application for an extension of time to appeal Foster J's Judgment. Just as Cowdroy J had done, Flick J ordered Mr May to pay the respondent's costs. Those costs were subsequently assessed and were the subject of certificates of taxation. It is the amount of those costs, as assessed, which form the basis for the subsequent bankruptcy notice which was obtained in relation to Mr May. 13 Mr May sought to have the bankruptcy notice set aside, but he was unsuccessful in that application before Registrar Hannigan on 30 October 2013. Mr May subsequently appealed that decision of Registrar Hannigan, and Foster J gave judgment on 12 December 2013 in respect of that appeal for review of the Registrar's refusal to set aside the bankruptcy notice. 14 In Foster J's Judgment, his Honour understood the applicant's complaint to relate to the cross-claim that he had brought in the District Court in the amount of $1 million. Foster J described that cross-claim as a counter claim, set off or cross demand which was relevant to the amount of the costs which formed the subject of the bankruptcy notice. The essence of his Honour's reasons for dismissing the application for review are set out at [16] as follows: On the evidence before me, the applicant failed to make good his contentions concerning his Cross Claim in the District Court. He did not establish that that Cross-Claim has sufficient substance to justify an order setting aside the Bankruptcy Notice. The only material before me concerning that Cross-Claim was a description of it and a copy of the pleading. The applicant needed to show much more in order to justify an order setting aside the Bankruptcy Notice. At the very least he needed to adduce sufficient evidence directed to the merits of the Cross-Claim as would have allowed the Court to conclude that the asserted Counter-Claim, set-off or Cross Demand had enough substance to warrant the making of the order which he sought. In addition, there is the difficulty created by fact that the judgment debt relied upon by the respondent in the Bankruptcy Notice (being a costs order which has now been quantified) does not relate directly or at all to the subject matter of the applicant's Cross-Claim in the District Court. 15 Subsequent to Foster J's Judgment, the respondent filed a creditor's petition on 11 November 2013, which was ultimately considered by Registrar Hannigan on 12 February 2014. The Registrar made the sequestration order which is the subject of the applicant's second application. On the same day that the sequestration order was made, Mr May filed his application seeking an extension of time in relation to Foster J's Judgment. Subsequent to that date, on 25 February 2014, Mr May filed his interlocutory application seeking a review of the sequestration order. 16 In accordance with Mr May's request, it is convenient to deal first with his challenge to the sequestration order. Mr May confirmed in oral argument that the burden of his complaint goes back to the error which he says Cowdroy J made in [34] of his Honour's reasons for judgment, to the effect that there was no relevant limitation upon the District Court's jurisdiction which would prevent the District Court from granting equivalent relief to that which he sought in his Federal Court proceeding. Mr May complains that that is in error because of the $750,000 limit on the District Court's civil jurisdiction. 17 There are a number of difficulties which are presented by this central matter of grievance as far as Mr May is concerned. The first relates to the fact that he sought an extension of time to appeal Cowdroy J's Judgment and that extension was refused. Secondly, and for completeness, Mr May accepts that he did not raise before Flick J the central grievance which he now agitates arising from [34] of Cowdroy J's Judgment. He says - and I accept - that he was not aware at the time of the hearing before Flick J that there was such a jurisdictional limit. 18 There is, however, also a further difficulty in relation to this matter. It concerns the operation of s 51 of the District Court Act 1973 (NSW) (District Court Act), which deals with that court acquiring jurisdiction in excess of the $750,000 limit in various ways which are provided for in that provision. Section 51 is in the following terms: 51 Consent jurisdiction (1) This section applies to an action or cross-claim that, but for this section, the Court would not have jurisdiction to hear and dispose of by reason only of the fact that the amount claimed exceeds the jurisdictional limit of the Court as at the time the action was commenced. (2) The Court has, and may exercise, jurisdiction to hear and dispose of an action or cross-claim to which this section applies: (a) if a party to the action or cross-claim files a memorandum of consent in respect of the action or cross-claim, or (b) if no objection to the Court's jurisdiction has been raised by any of the parties prior to 3 months before the trial of the action commences. (3) For the purposes of subsection (1): (a) the jurisdictional limit of the Court in relation to an action commenced before 1 July 1993 is taken to be $100,000, and (b) the jurisdictional limit of the Court in relation to an action commenced on or after 1 July 1993 but before 18 July 1997 is taken to be $250,000. (4) The maximum amount for which judgment may be given in relation to an action or cross-claim that is dealt with pursuant to subsection (2) (b) is an amount equivalent to 50 per cent above the jurisdictional limit of the Court as at the time the action was commenced. (5) This section does not apply in relation to an action referred to in section 44(1)(c). (6) Nothing in this section limits the operation of section 140 of the Civil Procedure Act 2005. (7) In this section, memorandum of consent in relation to an action or cross-claim means a document signed by each party to the action or cross-claim, or the party's Australian legal practitioner, in which it is stated that each of those parties consents to the action or cross-claim being tried in the Court and is aware that, unless the document is filed, the Court will not have jurisdiction to dispose of the action or cross-claim. 19 As is evident from that provision, notwithstanding that there is a $750,000 limit on the District Court's jurisdiction, the District Court can have and may exercise jurisdiction to hear and dispose of a cross-claim to which the section applies in two circumstances. 20 The first is where there is a memorandum of consent between the parties in which they effectively agree that, despite the limit being exceeded, the Court should proceed to determine the relevant cross-claim. The second is where no objection has been taken by any of the parties to the Court exercising jurisdiction in those circumstances, where no objection has been raised in the three month period prior to the commencement of the trial. In circumstances where no objection is raised, s 51(4) of the District Court Act provides that the maximum amount for which the District Court can give judgment in relation to, relevantly, a cross-claim is an amount equivalent to 50 per cent above the jurisdictional limit of the Court as at the time the action was commenced. 21 If that provision was to be engaged, it would have the effect of enabling the District Court to deal with Mr May's cross-claim, notwithstanding that it is in the amount of $1 million. 22 Another relevant matter in this context relates to the fact that, while it is undisputed that Mr May filed a cross-claim in the District Court on 2 August 2013 and has subsequently filed an amended cross-claim, he has not put before this Court any evidence or other material to indicate that his cross-claim has any substance. That is a matter which was emphasised in Foster J's Judgment. The position remains unchanged in the applications before me. 23 For the reasons I have given above, I do not consider that it is now open to Mr May to seek to agitate an error in respect of Cowdroy J's Judgment. In describing the matter as an error, I do not mean to suggest that there was, in fact, any such error in his Honour's judgment and, in particular, in [34] thereof. It is important to note that at the time his Honour made references to the District Court's jurisdiction, he did so in circumstances where there was no cross-claim in the District Court. And it might also be noted that, although there is no reference in his Honour's judgment to s 51 of the District Court Act, his Honour may well have been aware of those provisions. 24 I was informed by the bar table today that no memorandum of consent has to date been filed in the District Court proceedings and that, in fact, the proceedings have effectively stalled pending the outcome of the various matters in this Court. My impression is that notwithstanding that there is a reference in [27] of Cowdroy J's reasons for judgment to the District Court proceedings having reached a stage where there was a call over imminent for a hearing date to be allocated, in fact, the proceedings are relatively undeveloped largely because of the events taking place in this Court. 25 I can see no error in the sequestration order which was made by the Registrar. 26 For the reasons I have given above, I do not consider that it is open to Mr May to effectively circumvent the fact that his application to extend time to appeal Cowdroy J's Judgment was unsuccessful. For these reasons, I would dismiss the interlocutory application challenging the sequestration order. I should also note that no further material or arguments have been advanced to suggest that the making of the sequestration order was wrong or otherwise incorrect by reference to any matter apart from the jurisdictional issue stemming from [34] of Cowdroy J's reasons for judgment. 27 As noted above, Mr May accepted that the fate of his application to extend time vis À vis Foster J's orders would be determined by the outcome of his challenge to the sequestration order. In those circumstances, I must also dismiss his application for an extension of time. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Griffiths.