National Australia Bank Limited v Freeman

REASONS FOR JUDGMENT 1 This is an application filed on 3 June 2005 by the National Australia Bank ("the Bank"), the first applicant, and supported by Mr Freeman's Trustees in Bankruptcy, Matthew Leslie Joiner and Phillip Gregory Jefferson ("the Trustees") for orders pursuant to Order 21 rule 2 of the Federal Court Rules that the respondent, Mr Lynton Noel Charles Freeman, be declared vexatious and be required to obtain the Court's leave before commencing any further proceedings. 2 The applicants seek orders as follows: '1. An order pursuant to Order 21 Rule 2 of the Federal Court Rules that the respondent, Mr Lynton Noel Charles Freeman (A Bankrupt) be declared a vexatious litigant and shall not, without the leave of the Court, commence in this Court any proceedings against the National Australia Bank Limited ACN 004 044 937 ("Bank") and Matthew Leslie Joiner and Philip Gregory Jefferson or any of their servants, officers, agents or employees, the respondent's trustees in bankruptcy, other than an appeal against this order. 2. Any proceeding initiated by Mr Lynton Noel Charles Freeman in this Court against the trustees in bankruptcy or the Bank, prior to the making of this order, shall not be continued by Mr Lynton Noel Freeman without the leave of the Court, other than an appeal against this order. 3. The respondent shall serve upon the applicants any proposed application for leave of the Court to institute any proceedings against the applicants at least three clear working days prior to the application being filed in Court. 4. Any such application by the respondent shall be made and determined ex parte, unless the applicants seek to be heard in relation to that application. 5. The respondent pay the applicants' cost of an[d] incidental to this application . 6. Such further or other orders as the Court thinks fit.' (Original emphasis) 3 This application ispart of extensive saga of litigation between the Bank, Mr Freemanand the Trustees. The saga has its origins in a mediation between the Bank and Mr Freeman conducted before the late Mr R R Douglas QC (as he then was) in December 1997, at which Mr Freeman was represented by counsel and solicitors. 4 As a result of the mediation, the Bank and Mr Freeman executed an agreement on 4 December 1997 ("the mediation agreement"). The mediation agreement led to the establishment by the Bank of a bill facility of $1,020,000 in favour of Mr Freeman which was due for repayment on 6 April 1998. By the mediation agreement, Mr Freeman agreed to use his best endeavours to refinance the Bank's debt or to sell the property 'Glassford Vale' by 4 March 1998. Settlement of any sale or refinancing was to be effected by 6 April 1998. The mediation agreement contained a provision (Cl 9.1) under which Mr Freeman released the Bank from claims which he had or might have had against the Bank in respect of a wide range of matters. 5 Mr Freeman was unable to refinance the Bank's debt, or sell 'Glassford Vale'. On 14 May 1998 the Bank commenced proceedings (No 4013 of 1998) in the Queensland Supreme Court for possession of 'Glassford Vale' (which had been mortgaged to the Bank), and for moneys owing under the expired bill facility. 6 The proceedings were heard before Ambrose J over a period of four days in September 2000, when Mr Freeman was represented by counsel. On 11 October 2000 Ambrose J gave judgment for the Bank for possession of 'Glassford Vale', and for the sum of $1,427,890.08 and indemnity costs. His Honour: + rejected Mr Freeman´s case that he was mentally incompetent when the mediation agreement was concluded; + found that the release was effective to release the Bank from all of the claims made by Mr Freeman in his counter claim; and + held that in any event Mr Freeman had no real prospect of success in establishing those claims. 7 On 2 November 2001 Mr Freeman unsuccessfully appealed to the Court of Appeal from the decision of Ambrose J (No 9718 of 2000). In the reasons for judgment of White J, [2001] QCA 473 her Honour concluded: 'There is no substance in any of the grounds of appeal raised by the appellant in the extensive written submissions or in his oral submissions.' 8 On 14 March 2003 the High Court refused special leave to appeal from the decision of the Court of Appeal. One of the matters relied upon in argument by counsel for Mr Freeman at the special leave application was an alleged failure on the part of the Bank to give proper discovery, a matter which had not been raised in the Court of Appeal. Special leave toappeal was refused by the High Court because no arguable error had been demonstrated in the courts below. 9 On 11 March 2002 Mr Freeman commenced proceedings against the Bank in the Supreme Court of Queensland (No 2339 of 2002) seeking damages for the sale of his property 'Glassford Vale' at an alleged undervalue. The property had been sold by Receivers appointed by the Bank in July 2001, hence one of the issues in the proceedings was whether the Bank was responsible for any default on the part of the Receivers who were deemed by the mortgage documents to be the agents of the Bank. 10 The first proceedings in the Federal Court began on 18 January 2001 when the Bank issued a Creditor's Petition against Mr Freeman based upon the failure of Mr Freeman to comply with a warrant of execution issued by the Supreme Court on 31 October 2000. In dismissing a notice of motion filed by Mr Freeman seeking further discovery from the Bank, I noted: 'In this case, Mr Freeman is seeking to re-litigate the question of whether he owes a debt to the National Australia Bank.' 11 On 12 March 2002 I made a sequestration order in relation to Mr Freeman's estate on the application of the Bank. I held that a prima facie case of fraud, or collusion, or miscarriage of justice had not been made out, so as to impeach the judgment of Ambrose J. I also found that any claim by Mr Freeman asserting a sale of the mortgaged property at an undervalue was a claim against the Receivers, and not against the Bank. On 9 April 2002 I stayed the sequestration order pending an appeal to the Full Court. 12 On 7 May 2002 Muir J dismissed an application by the Bank for summary dismissal of proceedings No 2339 of 2002, upon the basis that there was a triable issue as to whether the Bank had intermeddled in the Receivers' sale so as to render it liable for any default on the part of the Receivers. 13 On 26 August 2003 the Full Court of the Federal Court (French, Cooper, R D Nicholson JJ) dismissed Mr Freeman's appeal from the making of the sequestration order. Mr Freeman unsuccessfully sought to adducefurther evidence before the Full Court, which the Court declined to receive because it could have been placed before the Court when the sequestration order was made. 14 On 27 August 2003 Mr Freeman commenced further proceedings in the Queensland Supreme Court under Rule 668 of the Uniform Civil Procedure Rules 1999 (Qld) seeking orders setting aside the judgment in action SC4013 of 1998 on the basis of fresh evidence. The application was heard and dismissed by de Jersey CJ on 15 October 2003 on the ground that Mr Freeman did not have standing to pursue the application in view of his bankruptcy. 15 On 14 October 2003, the Trustees elected not to adopt Mr Freeman's proceedings against the Bank. On 31 October 2003, Mr Freeman filed a motion seeking to compel the Trustees to commence actions against the Bank. I declined to make any orders on the motion. I then noted: 'While this court has, on the present motions, been subjected to a considerable volume of material, most of it is directed at issues which are not central to the applications which Mr Freeman wishes the court to consider today or the orders he wishes the court to make. Much of the material seeks to re-canvass the question of whether the judgment of Ambrose J was correct, and whether the consequential proceedings in the Court of Appeal, in the High Court, the making of a sequestration order, and the unsuccessful appeal from the making of that order are consequently tainted.' 16 Mr Freeman appealed to the Full Federal Court, who dismissed his appeal on 1 December 2004. Their Honours (Lee, Merkel and Hely JJ) noted: 'The appellant [Mr Freeman] placed a large volume of material before us which was primarily directed towards establishing that the decision of Ambrose J was wrong, … there was little focus on the issues…' 17 On 6 February 2004 Dowsett J rejected an application made by Mr Freeman under s 153B of the Act to annul the sequestration order of 12 March 2002. An appeal to the Full Federal Court was stayed on 7 May 2004, pending the payment by Mr Freeman of $5000 as security for the Bank's costs. In my reasons in staying the appeal pending the provision of security, I said: 'In my judgment there is no question of legal principle involved in the appeal from the judgment of Dowsett J. … As the submissions by Mr Freeman on his own behalf … confirm, what he is seeking to do is to demonstrate what he has been unsuccessful in demonstrating thus far in many proceedings, namely that decisions in favour of the National Australia Bank from the time of the first trial before Ambrose J and in successive proceedings, have been erroneously determined in favour of the bank and adversely to Mr Freeman.' 18 An application for leave to appeal the security for costs order was dismissed by Tamberlin J on 7 July 2005. 19 On 11 March 2005, Mr Freeman filed an application seeking an order that the Trustees assign to him two actions commenced by him in the Supreme Court prior to his bankruptcy. The application was dismissed by Tamberlin J on 6 May 2005. A subsequent appeal to the Full Federal Court (Spender, Kiefel, Dowsett JJ) was dismissed on 8 August 2005. 20 As noted above, this application seeking orders pursuant to O 21 r 2 that Mr Freeman be declared vexatious and be required to obtain the Court's leave before commencing any further proceedings was filed on 3 June 2005, after the dismissal of Mr Freeman's application by Tamberlin J on 6 May 2005, and before the dismissal of Mr Freeman's appeal by the Full Court on 8 August 2005. 21 Order 21 rule 2 provides: 'Where any person (in this rule called the vexatious litigant) habitually and persistently and without any reasonable ground institutes a vexatious proceeding against any person (in this rule called the person aggrieved) in the Court, the Court may, on application by the person aggrieved, order that the vexatious litigant shall not, without leave of the Court, institute any proceeding against the person aggrieved in the Court and that any proceeding instituted by the vexatious litigant against the person aggrieved in the Court before the making of the order shall not be continued by him without leave of the Court.' 22 Section 4 of the Federal Court of Australia Act 1974 (Cth) ("the Act") defines "proceeding" as: 'a proceeding in a court ... and includes an incidental proceeding in the course of, or in connexion with, a proceeding, and also includes an appeal;' 23 The commencement of a new proceeding, the institution of a motion in an existing matter and the institution of an appeal are all separate 'proceedings' within the meaning of the term: Ramsay v Skyring (1999) 164 ALR 378 at [59] ("Skyring"). Mr Freeman has commenced ten such proceedings in this Court concerning the first applicant and at least six such proceedings concerning the second applicant. They have all been dismissed with costs, except one against the Bank which was stayed and except what Mr Freeman describes as a Cross Claim in this proceeding, to which reference will be later made. 24 The applicants' material identifies numerous other proceedings instituted by Mr Freeman in the Supreme Court of Queensland, the Queensland Court of Appeal, the High Court of Australia, the Magistrates Court of Queensland and the District Court of Queensland. While 'court' for the purposes of O 21 r 2 is defined in s 4 of the Act to mean 'the Federal Court of Australia', it has been held that, in considering whether proceedings brought in this Court are vexatious, regard may be had to proceedings in other courts where they have involved the authoritative determination of an issue sought to be revisited in this Court: Skyring at [54]. 25 Whether Mr Freeman has habitually and persistently brought a vexatious proceeding is a matter of fact: (Skyring at [55]; Commonwealth Bank v Heinrich [2003] FCA 540 at [5] ("Heinrich"). In Skyring, Sackville J adopted the test explained by Roden J in Attorney-General v Wentworth (1988) 14 NSWLR 481 at 492: ' "Habitually" suggests that the institution of such proceedings occurs as a matter of course, or almost automatically, when the appropriate conditions (whatever they may be) exist; "persistently" suggests determination, and continuing in the face of difficulty or opposition, with a degree of stubbornness.' 26 The question of whether the legal proceedings are in fact 'vexatious' or 'instituted without reasonable cause' is also an objective one. It is immaterial whether Mr Freeman believes in the justice of his argument or whether he understands that the argument has been authoritatively rejected. Continual attempts to re-litigate matters raised and rejected on previous occasions constitutes an abuse of process and have been found to satisfy the tests of 'vexatious' or 'instituted without reasonable cause' within the meaning of O 21 (Skyring at [57]; Horvarth v Commonwealth Bank of Australia [1999] FCA 504 at [102], [105]; Heinrich at [42]-[43]; Granich & Associates v Yap [2004] FCA 1567 at [9]). 27 The material before the Court demonstrates that Mr Freeman has made, and continues to make, strenuous efforts to re-ventilate in this Court the matters which have been determined against him on a number of occasions, both in this Court and in the Supreme Court of Queensland. This is nowhere more plainly demonstrated than by the "Defence and Cross Claim" filed on 8 August 2005 in this proceeding. 28 It is necessary to refer to that document extensively, if only to demonstrate the continuing attempt by Mr Freeman to challenge findings and orders made adversely to him in previous litigation and which have been conclusively determined. 29 Mr Freeman asserts in pars 12 and 13 of his "Defence": '12. The Respondent claims by Cross Claim (Counter Claim) the First Applicants by their deep pockets and culture have sought to use the Court system to obtain an advantage, avoiding justice and equity, and deceiving the Respondent. 13. The Second Applicants obtaining an advantage from the actions of the First Respondent and seeking to proceed matters in the Court instead of making decisions in the Bankruptcy.' 30 What is called the "Cross Claim" is as follows: '1.( a) The Respondent claims the First and Second Applicant's, rely on misleading statements, that have affected the respondent and that these statements have tainted the whole proceedings. (b) And a series of supporting actions and statements to continue the ruse. … Further or alternatively; 2. The Respondent claims by the discovery of fresh evidence since the trial of S4013/98 on the twenty-fifth September, 2000; and the Federal Court hearing of the twenty-eighth February, 2002; and 3. The Respondent claims the First Applicant by this Application; is a. Not being honest with the Court, and b. Not acting with due propriety, c. and is acting to obstruct and defeat the administration of justice. 4. The Respondent claims the Second Defendant by his actions defined as a 'modus operandi' and other actions has supported the first defendant in his actions and has unconscionably taken advantage of the first defendant's actions above. 5. That in order to defeat justice and support this application the Applicant's have used; a. false and illegal accounting. Particulars; (i) Quantum of Debt in S4013/98 is incorrect but stated to be correct in the Supreme Court of Queensland Court of Appeal by the First Applicant's counsel on the thirty-first August, 2001. (ii) The First respondent issued bank statements to disguise the above on the twenty-sixth February, 2001; and (iii) To avoid a Mediation under the Guidelines and in accordance with the First respondent's stated policies on 'shadow ledgers'. To avoid the heads of Misleading and Deceptive Conduct and Waiver and Estoppel, and others. (iv) The Second Applicant has not taken into account recoveries by the first applicant since 28th February, 2002. (v) The First Applicant has used the processes of maintaining more than one account in the Respondent's name to deceive the respondent and be in a position to make claims against the respondent, not discovered to the respondent during the court process. b. Withheld vital documents from discovery. Particulars; (i) The First respondent withheld valuations and denied they were relevant or existed, by Affidavit and Appearance; (ii) Supreme Court of Queensland on the seventh May, 2002 · Herron Todd White dated on or about third August, 2000. · Herron Todd White dated on or about fifth March, 2001 (iii) The Federal Court of Australia on the sixth September, 2001 and twenty-eighth February, 2002. · Herron Todd White dated on or about third August, 2000. · Herron Todd White dated on or about fifth March, 2001. (iv) The Federal Court of Appeal on the Tenth December, 2001 · Herron Todd White on or about third August, 2000 · Herron Todd White on or about fifth March, 2001 (v) The Lending Manuals and Procedures of the First Applicant by Affidavit on the fourteenth, August, 2001 and appearance on the sixteenth September, 2001 and the tenth December, 2001 and twenty-eighth February, 2002. (vi) The First Applicant making a submission to the Banking Code of Practice describing information from the Manuals directly relevant to the proceedings on the fourteenth August, 2001. (vii) The First Applicant by this misleading information, avoiding the heads of Misleading and Deceptive Conduct, Waiver and Estoppel; · The first applicant had agreed to settle for $500,000 on the fourth March, 1998 but arranged his accounting to unlawfully avoid the functions of the Bills of Exchange Act. · The first applicant not recording a payment of $2205 to the account claimed to be the Bills Account for the issue of a new Bill or to carry the account until settlement. (viii) The First Applicant being aware the heads at 2b.(vii) were not mediated and a Mediation Deed dated fourth December, 1997 was the basis of the judgment in S4013/98 and the Appeal CA 9438/00 and the Bankruptcy. (ix) Withheld his Banker's Books including diary entries from fourth March, 1998 to thirtieth June, 1998. (x) Withheld and denied evidence of the receiver's actions on behalf of the first Applicant. c. Vital documents have initially been with held and eventually provided, at a much later stage, however the delay is an advantage to the first applicant or second applicant and a complete disadvantage to the respondent. Particulars; (i) Valuation of Herron Todd White on or about third August, 2000 (ii) Valuation of Herron Todd White dated fifth March, 2001. (iii) Bank Statements and incorrect evidence of debt affecting the Respondent and public policy. d. Documents produced by the first defendant during the course of business and litigation were fabricated or meant to create a ruse. (i) Farm Management Account Agreement dated on or about twenty-second July, 1996 (ii) Credit Report of the respondent completed on or about thirtieth August, 1996 (iii) Budget of the Respondent completed by the first applicant on or about the twenty-eighth October, 1996. (iv) Credit Report and instructions to Rural Finance Assistant of the sixth November, 1996. (v) Letter of the third December, 1996 (vi) Diary notes of February, 1997. (vii) Credit Report of the eighteenth February, 1997. (viii) Diary note and letter of the first May, 1997 (ix) Mediation Agreement of November, 1997 (x) Mediation Deed of fourth December, 1997 (xi) Bill Facility documentation of the nineteenth December, 1997 (xii) Notice of no further issuance of Bills dated seventh April, 1998 (xiii) Fax to the Rural Finance Assistant at Bundaberg thirtieth April, 1998 (xiv) Bank Statements numbered 160, 161, 162, dated twenty-sixth February, 2001. (xv) Certificate of Debt at Trial in S4013/98 and the Statement attached. (xvi) Affidavit of Philip Fuhrman Luck dated twentieth August, 2002. · clauses 1(b)(c) · debt calculation · notional debt calculation (xvii) Affidavit of Philip Fuhrman Luck dated twenty-fifth September, 2000. (xviii) Affidavit of Emma Costello dated fourteenth August, 2001. (xix) Written Submissions of counsel Pedan to the Federal Court of the twenty-eighth February, 2002. e. Documents fabricated or incorrect from the Second Applicant used in litigation giving a false impression to the creditors and/or others. Particulars (i) Creditor's Reports (ii) Affidavit in the S 178 Application heard 31st August, 2003 in the Federal Court at Brisbane. (iii) Offer of a compromise to the Respondent dated third March, 2005. f. Bank witnesses both current and former employees gave false information to the Court. Particulars; (i) Bank Officer Alder ; at the trial of S4013/98 and constructed a misleading document (Budget twenty-eighth October, 1996) used at Mediation on the fourth December, 1997 (ii) Bank Officer Luck ; at Mediation at trial on the twenty-fifth September, 2000 and in the Federal Court on the twentieth August, 2002. (iii) Solicitor Costello ; in letter and Affidavit of the fourteenth August, 2001. (iv) Bank Officer Werder; At Mediation on the fourth December, 1997, at Trial on the twenty-fifth September, 2000. 6. The Judgment of Ambrose B on the eleventh October, 2000 did not investigate any of this evidence. His Honour for separate Reasons at clause 93 accepted the First Applicants evidence. Applying the Release in the Mediation Deed of the fourth December, 1997. 7. His Honour Ambrose J. made factual mistakes in finding the Respondent an unreliable witness; a. By not recognising the Cattle Sale dockets at Exhibit 36 of the Trial Record and using the fact they were not produced against the Respondent. b. By failing to recognise the Respondent's Medical Symptoms but identified the symptoms readily recognised by others in his company at the Mediation of the fourth December, 1997. A future identification of the disease Negative Coagulated Staphylococcus creating Delta Horse Toxin in the Respondents body gave the same symptoms as HH described. c. The Supreme Court of Appeal did not disturb the findings of credibility for the same reasons as the learned Judge Ambrose B. d. The Applicant's have knowingly relied on these false findings of fact affecting the credibility of the respondent in every Court. e. The Federal Court on sixth February, 2004 finding the Respondent was affected in June. 1998 but not taking into consideration the whole of the judgment of Ambrose. B. f. The same Court avoided the findings of credibility on the cattle sale dockets exhibit 36 stating it did not have jurisdiction to make a decision. … 8. In this instance the First Applicant by agreement with the Registrar of the Supreme Court of Appeal, had removed the Cattle Sale dockets at Exhibit 36 from the Court of Appeal Record Book and had inserted in the Index of the Record Book a notation that the dockets were available in the Registry. 9. In this situation the principle in Reynell v Sprye prevails and there is no necessity for putting the Respondent to proof. The First Applicant has known of the primary act, causing the loss of credibility and continued actions in all courts allowing those Courts to rely on facts known to be incorrect by the Firsts Applicant and judgments one could reasonably expect to be put aside by the correct jurisdiction. 10. In late July and August. 1998 the First Respondent provided its procedures on viability and Productivity and Drought Interest Subsidy to an investigating Parliamentary Officer. These were at odds with the statements of Bank Officer Alder at Trial in S4013/98 and the Mediators evidence of the first applicants officers' statements at Mediation. · The Officers of the First Applicant at Mediation used part of the criteria supplied to the Parliamentary Officer but relied on Alder's falsely constructed budget of the twenty-eighth October, 1996 and incorrect figures. · After Trial and Appeal the regulatory process described by the Minister responsible confirmed the First Applicant's supplied procedure to the investigator. · The result from the supplied material was directly opposite to the case stated at Mediation and at Trial in S4013/98 by Mr. Alder and Bank Officer Werder, confirmed by the Supreme Court of Appeal on the second of November, 2001. 11. By these acts the Officers of the First Applicant directly concealed a known non conformity with the Commonwealth Acts and Regulations and the Queensland Acts, in force for Productivity and Drought Interest Subsidy at the time from the Respondent and the Court. …' 31 The orders that Mr Freeman seeks pursuant to the "Cross Claim" include: '2. The Court orders the Applicants by Notice of Motion by the Respondent, show cause why the Court should not abandon all claims for costs and fees against the Respondent by the First and Second Applicant. Further recover all fees for the Court forgiven by virtue of the operation of the Federal Court Act concessions to the Respondent, from the First Applicant and the Second Applicant as the Court directs. 3. That the Court Order the Applicants appear at a hearing brought by Notice of Motion, by the Respondent for the purpose of settling the losses and compensation that can be claimed under this cross cla[i]m by the respondent against the parties according to law. 4. That costs of the action be carried by the applicants' 32 The repeated commencement of proceedings and the making of appeals by Mr Freeman appear to be without regard to any assessment of his prospects, or of the existence of a legal basis for the order he seeks, given earlier legal failures to obtain similar orders. 33 In this proceeding alone, Mr Freeman has filed some 1500 pages of affidavit material, most of which is seeking to reargue that the decision of Ambrose J is wrong and that he is not indebted to the Bank but rather has a substantial claim against it. This is a matter was decided adversely to Mr Freeman in 2001 and which he has sought to challenge and re-challenge since that time in both this Court and the Supreme Court of Queensland. 34 Mr Freeman is now discharged from bankruptcy. He thus faces an imminent risk of future costs orders being enforced against him. As recent proceedings including the "Defence and Cross Claim" to this application indicate, unless prevented by the Court, Mr Freeman will continue with his Don Quixote quest against the Bank and the Trustees. 35 Proceedings seeking to revisit the orders of Ambrose J made after a contested trial at which Mr Freeman was represented, have been shown to be without reasonable grounds, and are vexatious. It is vexatious to seek to relitigate issues that have been authoritatively determined. 36 This is an appropriate case for the making of orders under O 21 r 2 of the Federal Court Rules. I am satisfied that Mr Freeman is a vexatious litigant. 37 I make the following orders: (1) Mr Freeman shall not, without the leave of the Court, commence in this Court any proceeding against the National Australia Bank Ltd ("the Bank") or against Matthew Leslie Joiner and Philip Gregory Jefferson, the respondent's Trustees in Bankruptcy ("the Trustees"), or both the Bank and the Trustees, or any of their servants, officers, agents or employees, other than an appeal against this order. (2) Any proceeding initiated by Mr Freeman in the Federal Court of Australia against the Bank or the Trustees prior to the making of this order shall not be continued by Mr Freeman without the leave of the Court, other than appeal against these orders. (3) Any application by Mr Freeman for leave of the Court to institute any proceedings against the Bank or the Trustees, or both, shall be served upon the Bank or the Trustees, as the case may be, at least three clear working days prior to the application for leave being filed in the Court. (4) Any such application by the respondent for leave shall be made and determined ex parte, unless the Bank or the Trustees seek to be heard in relation to the application for leave. (5) The respondent pay the costs of both applicants, of and incidental to this application. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Spender.