Official Trustee in Bankruptcy v Gargan

Official Trustee in Bankruptcy v Gargan - [2009] FCA 398 - FCA 2009 case summary — Zoe

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Principles relating to vexatious litigants 2 A comprehensive explanation of what makes a proceeding vexatious is difficult to proffer for the boundary between the persistent and over-zealous on the one hand, and the vexatious on the other, may at times be indistinct. However, the following principles are, at least, well-established. First, the making of such an order is an extreme remedy depriving its object of recourse to the enforcement of the law which is every citizen's ordinary right. It is, therefore, not lightly to be made. 3 Secondly, the purpose of the order is not to impose condign punishment for past litigious misdeeds; it serves instead to shield both the public, whose individual members might be molested by vexatious proceedings, and the Court itself, whose limited resources and needs must be carefully managed and protected from the expense, burden and inconvenience of baseless and repetitious suits. 4 Thirdly, as might naturally be expected, such a severe power is not enlivened by the mere single occurrence of a vexatious claim. To err is human and transient lapses of judgment, even serious ones, may be found in the most reasonable of places. Instead, the power to make the order is conditional upon the litigant having commenced not only a single vexatious proceeding but also upon having commenced similar such proceedings in this Court or in other Australian courts. 5 Fourthly, the qualities of vexation to which O 21 is addressed are to be found, as the terms of r 1(1) show, in the commencement by the litigant of proceedings which lack reasonable grounds and where the litigant's institution of such proceedings may fairly be said to be both habitual and persistent. 6 Fifthly, whether a proceeding is instituted without reasonable grounds is a different question to, although not wholly disconnected from, the inquiry into a proceeding's legal merits. The wheat, no doubt, must be separated from the chaff but in this area the question is whether what is before the Court contains any wheat at all. Although, often enough, no great guidance is obtained by exchanging one formula of words with another, it will be usually of some assistance, limited perhaps, to ask whether the issues brought to the Court for determination are manifestly hopeless or devoid of merit. It is, in that context, important to distinguish the difficult from the ridiculous and the unlikely from the hopeless. 7 Sixthly, although the ways in which unreasonable grounds may manifest themselves are myriad, one form often to be found in the baggage of the vexatious is a failure, often a refusal, to understand the principles of finality of litigation which rescue court and litigant alike from a Samsara of past forensic encounters. 8 Seventhly, it is the related quality of repetition which underpins, in part, a need for the institution of the proceedings to deserve the appellations habitual and persistent. The litigant's conduct will be habitual where the commencement of proceedings occurs as a matter of course when appropriate conditions for their commencement are present as was explained by Roden J in Attorney-General v Wentworth (1988) 14 NSWLR 481 at 492. That formulation may not wholly explain the litigant who commences proceedings on any occasion and without the presence of any conditions, whether appropriate or otherwise. In such cases, the idea of constant repetition driven by habit and symptomatic of an inability not to engage in the behaviour may be more useful. Persistence, on the other hand, generally suggests stubborn determination but, in the context of the vexatious, carries with it the capacity to endure failure beyond the point at which a rational person would abandon the field. 9 Eighthly, each of these notions - the want of reasonable grounds, habitual institution and persistent institution - are to be gauged objectively. But this does not mean that a litigant's own protestation as to his or her own mental state is irrelevant; frequently enough, the vexatious are betrayed out of their own mouths. Rather, the need for objective determination protects courts from the vexatious litigant who is genuinely, but misguidedly, persuaded as to the correctness of his or her own conduct. 10 Ninthly, the power to make the order arises when proceedings commenced in the way described are found to exist. But the notion of a proceeding is a broad one including a substantive proceeding directed at the attainment of final relief and collateral applications within such a proceeding; further, it extends outside the proceeding itself and embraces appeals therefrom and applications which, whilst not made in the proceeding, are properly to be seen as collateral thereto - so much flows from the definition of proceeding in s 4 of the Federal Court of Australia Act 1976 (Cth). 11 Tenthly, other proceedings commenced before bodies which are not courts, such as the Administrative Appeals Tribunal, are not directly pertinent to the existence of the power but may nevertheless throw light on the vexatious nature of proceedings before the Court; so too, the existence of a body of such administrative litigation may have relevance to the question of whether the Court's power to make the order, once enlivened, should be exercised. 12 Finally, once it is concluded that the Court's power to prevent a litigant from commencing or pursuing proceedings has been enlivened, the considerations germane to the exercise of that power are unconfined. However, the factors which will be relevant are informed by the protective purpose which the order serves. Where a litigant displays insight into their previous litigious history this will, no doubt, be relevant for it will suggest - although not determine - a diminution in the risk posed to the public. On the other hand, the manner in which a litigant conducts herself in her affairs generally is also capable of throwing light on whether the commencement of further vexatious proceedings is likely. Those general affairs include the litigant's defence to the proceedings by which the order restraining him is sought. Because of the protective nature of the jurisdiction it is also relevant to know the extent of the damage and inconvenience the litigant's forays into the courts have caused, pecuniary or otherwise. 13 It is in light of those principles that Mr Gargan's particular circumstances must be considered.

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Mr Gargan's litigious history 14 Mr Con Karantonis gave evidence on the Official Trustee's application. He is a solicitor in the employ of the Australian Government Solicitor and is one of the solicitors responsible for the day to day conduct of the application by the Official Trustee against Mr Gargan. Between August and December 2008, Mr Karantonis carried out searches of various litigation databases to identify cases in which Mr Gargan was, or had been, a party and which, in Mr Karantonis' opinion, were relevant to the question of whether Mr Gargan had commenced vexatious proceedings. He identified 20 cases which he thought answered that description. Those cases were put in evidence. Mr Karantonis was not cross-examined and I accept his evidence. 15 As will become apparent, the cases identified by Mr Karantonis are by no means the complete set of all of Mr Gargan's suits. However, they are sufficient to establish the central themes of the litigation commenced by him. 16 The events which have resulted in the present application by the Official Trustee have their seeds in a partnership between Mr Gargan and his brother, Mr John Gargan, in the early 1980s. As a partnership they decided to convert to freehold a property in Queensland known as Springmount. It was their intention to subdivide the property and to develop it. However, in circumstances not presently material, the partnership came to an end. A deed of dissolution of partnership was entered into in September 1984. 17 In 1990 Mr John Gargan commenced proceedings in the Supreme Court of Queensland against Mr Gargan seeking specific performance of the deed of dissolution and declarations that certain land held by Mr Gargan were held on trust for his brother, that is, Mr John Gargan. 18 I am relieved from setting out the details of Mr Gargan's litigious exploits in Queensland prior to 2 May 2000 by the careful and patient reasons for judgment given by Holmes J in Lohe v Gargan [2000] QSC 140 in which his Honour acceded to Mr Lohe's application to have Mr Gargan declared vexatious pursuant to s 3(1) of the Vexatious Litigants Act 1981 (Qld). It is a tribute to Mr Gargan's litigious enthusiasm that his Honour's explication of the litigation between 1990 and 2000 occupies some 68 paragraphs. There is no point in my seeking to paraphrase those reasons but because of their importance for present purposes I will set out the relevant parts in full. Supreme Court Action No 101 of 1990

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19 It might be noted for completeness that Mr Gargan was declared vexatious in Queensland on 22 May 2000 by Holmes J. This does not, however, appear to have sated his appetite for curial proceedings. In evidence before me was a transcript of argument before Heydon J of an application by Mr Gargan for the issue of a writ of prohibition against Lindgren J, a judge of this Court, and Driver FM, a federal magistrate. The writ was sought in relation to judgments which can be found in Teese v Clinch [2003] FCA 274 and Teese v Clinch [2002] FMCA 205. Mr Gargan was not a party to those proceedings and took no part in them. In the Federal Court, Ms Teese appeared for herself and sought an extension of time in which to appeal from a sequestration order made against her by Driver FM at the suit of her former solicitors. In the Federal Magistrates Court, it is apparent that Mr Gargan appeared for Ms Teese in his capacity, apparently, as a "law student". Lindgren J, unremarkably, declined to expand the time for appeal and dismissed the application. It was in respect of that step that Mr Gargan - bereft of any interest in the outcome of Ms Teese's proceeding - sought to bring a proceeding in his own name in the High Court. His arguments before Heydon J may be summarised as follows: (a) Mr Gargan had standing to pursue the application by reason of s 303 of the Bankruptcy Act 1966 (Cth); (b) Lindgren J and Driver FM had abused their offices and as such were liable to be tried on indictment under s 142.2 of the Criminal Code; (c) Heydon J could not grant an order nisi absolute because the High Court could only convene with a panel of five (or perhaps three) Justices; (d) the International Covenant on Civil and Political Rights formed part of the domestic law of Australia; (e) section 86 of the Bankruptcy Act 1966 (Cth)and the High Court's decision in Gye v McIntyre (1991) 171 CLR 609required an account to be taken in relation to mutual dealings. 20 Heydon J dismissed the application holding that there was no prima facie case in relation to any of the arguments advanced by Mr Gargan. In my opinion, each of the arguments advanced by Mr Gargan on that application wholly lacked reasonable grounds. As to point (a), s 303 of the Bankruptcy Act 1966 (Cth)provides: Applications to Court

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23 There was no conceivable basis upon which either Lindgren J or Driver FM could have committed these offences in dealing with Ms Teese's application. The allegation was not only wholly baseless but scandalous and was one which ought never to have been made. 24 As to point (c), a single Justice has always been permitted to exercise the original jurisdiction of the High Court: see s 15 of the Judiciary Act 1903 (Cth). 25 As to point (d), the International Covenant on Civil and Political Rights does not form part of the domestic law of Australia. It is true that it is a schedule to the Human Rights and Equal Opportunity Commission Act 1986 (Cth) but that Act gives it no direct force. It is true also that a federal court may, in deciding whether to admit improperly or illegally obtained evidence, take into account whether the impropriety or illegal behaviour was inconsistent with any right of a person recognised by the Covenant: s 138(3)(f) of the Evidence Act 1995 (Cth). That, however, falls a long way short of the treaty forming part of the domestic law of Australia. This was established some time ago: see Minogue v Williams (2000) 60 ALD 366 at 372-373 [21]-[25] per Ryan, Merkel and Goldberg JJ; Minogue v Human Rights and Equal Opportunity Commission (1999) 84 FCR 438 at 447-448 per Sackville, North and Kenny JJ; Dietrich v R (1992) 177 CLR 292 at 305-306 per Mason CJ and McHugh J, 321 per Brennan J, 348-349 per Dawson J and 359-360 per Toohey J. 26 As to point (e), leaving to one side the correctness of the proposition, it is simply impossible to identify how it might have supported the argument being advanced by Mr Gargan. Heydon J concluded as follows: In my opinion, neither an order nisi nor a direction under Order 55 rule 34 ought to be made because there is no sufficient prima facie case to grant either form of relief. The grounds asserted for the grant of the order nisi set out various matters of complaint about the proceedings before the magistrate and the proceedings before Justice Lindgren. Whether or not there is any force in those matters of complaint are questions which a party to those proceedings could complain of on appeal against Justice Lindgren's orders.

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27 The proceeding before Heydon J was heard on 2 June 2003. On 27 October 2003 - that is within a period of a few short months - Adams J of the Supreme Court of New South Wales delivered judgment in Gargan v Scott (unreported) striking out Mr Gargan's claims against Mr Scott and the Commonwealth Bank for damages said to be payable by virtue of alleged breaches of s 43 of the Crimes Act 1914 (Cth) and s 134.2 of the Criminal Code. He sought these from Mr Scott and the Commonwealth Bank on the basis of s 4B of the Crimes Act 1914 (Cth) which allows a court to order that a fine or pecuniary penalty be paid by a person who has been convicted of an offence against a law of the Commonwealth punishable by imprisonment. His entitlement to bring such a suit was conferred, so Mr Gargan said, by s 14 of the Criminal Procedure Act 1986 (NSW) which is a common informer provision. He again pursued the argument that s 86 of the Bankruptcy Act 1966 (Cth) required mutual set-offs. Adams J recorded that the claims arose out of the bankrupt estate of Mr Heinrich and that Mr Gargan conceded that he had no interest whatsoever in that estate. Adams J found, unsurprisingly, that Mr Gargan's proceeding was "a gross abuse" of process (at [4]). I agree. 28 That occurred on 27 October 2003. Three weeks later Mr Gargan appeared before O'Keefe J in the Supreme Court of New South Wales seeking a writ of habeas corpus in respect of a Mr Russell Bickford. Mr Bickford was convicted at the District Court at Penrith of one count of assault with intent to rob. Mr Gargan joined to the proceedings the New South Wales Director of Public Prosecutions and the Governor of Silverwater Correctional Centre. Mr Gargan sought damages in the sum of $165,000 pursuant, so it was said, to the Crimes Act 1914 (Cth) - the very argument held to have been a gross abuse of process by Adams J only a few weeks before. The reasons for judgment of O'Keefe J have been published as Gargan v Director of Public Prosecutions [2004] NSWSC 10. 29 The basis for the issue of the writ of habeas corpus was a contention that the jury in Mr Bickford's trial had "separated" - that is, had not been confined at all times together - after they had retired to consider their verdict. This was said to be contrary to the common law requirement that a jury remain sequestered. However, s 54(1)(b) of the Jury Act 1977 (NSW) expressly permitted separation of the jury to occur after sequestering. Mr Gargan's answer to that was that s 54(1)(b) was constitutionally invalid. Its invalidity was said to flow from an alleged inconsistency with the Juries Detention Act 1897 (Imp) 60 Vict, c 18. That Act was repealed by the Criminal Justice Act 1948 (Imp) 11 & 12 Geo 6, c 58 which led O'Keefe J to conclude that s 54(1)(b) was valid. In the course of putting this argument Mr Gargan apparently made a submission that the Australia Act 1986 (Cth) was invalid. O'Keefe J was unable to understand where this proposition fit in the balance of Mr Gargan's argument but, in any event, rejected the argument upon which the submission rested, which was that the letters patent issued to the Governor-General on 21 August 1984 were invalid because they bore the letters "LS" rather than the Great Seal of Australia. As his Honour noted, the letters "LS" merely indicated where the seal had been placed. 30 O'Keefe J went on to conclude that s 54(1)(b) did not infringe the principle in Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51. This was an inevitable conclusion since the High Court had concluded that s 54(1)(b) did not infringe s 80 of the Constitution in Brownlee v The Queen (2001) 207 CLR 278. He declined, as unavailable, Mr Gargan's invitation not to follow Brownlee. 31 Mr Gargan advanced a number of additional arguments in support of the allegation that s 54(1)(b) was invalid. These included, first, an argument based on the scriptures and, more particularly, on Matthew Ch 18 v 20 and John Ch 5 v 26-27. This argument O'Keefe J rejected on the somewhat restrained basis that it was out of line with the mainstream of current constitutional theory. Secondly, he argued that the Coronation Oath Act 1688, 1 Wm & M, c 6, required the sovereign to uphold the gospels. O'Keefe J rejected this argument on the basis that the oath administered to the present Queen was not the oath prescribed by that Act. Thirdly, he argued that s 54(1)(b) promoted feelings of ill will in the hearts and minds of the people of New South Wales. O'Keefe J rejected this argument for want of any apparent doctrinal foundation. Finally, Mr Gargan submitted that s 54(1)(b) was contrary to the common law, the laws of other States as well as Commonwealth provisions. O'Keefe J found this to be empty of relevance in light of Brownlee. Accordingly, his Honour held that s 54(1)(b) was valid and declined the issue of the writ of habeas corpus which had been sought. Mr Gargan was ordered to pay the costs of the proceedings. 32 Judgment in the proceedings before O'Keefe J was given on 28 January 2004. Three weeks later Mr Gargan found himself before Greg James J in Gargan v Woodgate [2004] NSWSC 177. It is important to recall Mr Gargan's tryst before Heydon J in which he sought the issue of a writ of prohibition directed to Lindgren J of this Court. That application, it will be recalled, related to the bankruptcy of a Ms Teese. Mr Woodgate was her trustee in bankruptcy. Mr Gargan sought to have Mr Woodgate charged with failing to take account of mutual dealings between Ms Teese and her creditors, for seeking to pervert the course of justice before Driver FM and by doing the same before Kirby J (of the Supreme Court) by the filing of an unspecified notice of motion. He relied - again - on s 134.2 of the Criminal Code and sought also to rely upon a common informer provision contained in the Fines and Forfeitures to the Crown Act 1670, 22 & 23 Car 2, c 22, as well as the Criminal Procedure Act 1986 (NSW). Again, he sought to place reliance upon s 4B of the Crimes Act 1914 (Cth) (which authorised the imposition of a fine) despite the fact, as Mr Gargan must have known, that the very same argument had been dismissed by Adams J only three months before and described by that judge as a gross abuse of process. 33 Unsurprisingly, Greg James J dismissed this application with indemnity costs and suggested that consideration be given by the Attorneys-General for New South Wales and the Commonwealth to applying to have Mr Gargan declared a vexatious litigant. 34 On 22 December 2003 the Commonwealth Bank filed a creditor's petition against Mr Gargan. That petition was acceded to on 4 June 2004 by Hely J in Commonwealth Bank of Australia v Gargan (2004) 140 FCR 1. His Honour's reasons for judgment reveal that prior to making the applications before Adams and Greg James JJ, Mr Gargan had sought to have the Commonwealth Bank charged before the Magistrate's Court at Canberra in the Australian Capital Territory. That application was apparently dismissed by a magistrate on 5 August 2003 - that is, between 2 June 2003 when Heydon J in the High Court refused to issue a writ of prohibition to Lindgren J on the basis that the arguments advanced had no prospects of success, and 27 October 2003 when Adams J described the very same argument as a gross abuse of process. The magistrate ordered Mr Gargan to pay the Commonwealth Bank's costs of the proceedings assessed at $2,000. The Bank sought to have Mr Gargan meet that costs order and subsequently issued a bankruptcy notice with which he did not comply. 35 Upon the presentation by the Bank of its creditor's petition, Mr Gargan applied by motion to have the petition determined by a jury. The basis for this was an argument in the following terms: Under Protestant Christian law, the only legitimate judge since 1297 is Jesus Christ, present in a jury of 12 in accordance with Mathew 18: Paragraphs 15-20, the Bible, and enacted into Constitutional law by the Magna Carta.

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36 Hely J dismissed the application noting that Mr Gargan's scriptural argument had already been rejected by O'Keefe J in Gargan v Director of Public Prosecutions [2004] NSWSC 10: see Gargan v Commonwealth Bank of Australia [2004] FCA 641 at [5]. 37 Mr Gargan also sought to have Hely J disqualify himself on the basis that the Commonwealth owned shares in the Commonwealth Bank of Australia, an argument that Hely J confessed had eluded him. He also sought the requisition of a jury on the basis that part of his complaint involved conduct by the legal profession and that Hely J, himself a former barrister, might not give him a fair hearing. Hely J did not agree. 38 The petition itself was heard on 17 May 2004 by Hely J sitting without a jury. Mr Gargan opposed the making of the sequestration order. Significantly, for present purposes his grounds for doing so were that: (a) the petition was an abuse of process because the Commonwealth Bank of Australia was required to give an account of mutual dealings; (b) he was entitled to recover an equal share with the Commonwealth in respect of liquidated penalties for crimes against the laws of the Commonwealth; (c) the right to fines included treble damages due under the Fines and Forfeitures to the Crown Act 1670 for the Commonwealth Bank of Australia's alleged unlawful conduct, being a sum of at least $4,000,090; (d) the offence committed by the Commonwealth Bank of Australia was a breach of s 43 of the Crimes Act 1914 (Cth) constituted by it seeking to make Mr Gargan bankrupt when it had not taken account of the mutual dealings between the Commonwealth Bank of Australia and each of Ms Teese and Mr Heinrich. 39 Hely J dismissed these arguments noting that each had been described as an abuse of process by Adams J and Greg James J. During the course of the hearing it became apparent that Mr Gargan had also recently commenced proceedings in the Supreme Court of Tasmania seeking to have the Commonwealth Bank of Australia charged with offences against s 43 of the Crimes Act 1914 (Cth). Inevitably, Hely J made the sequestration order sought. That occurred on 17 May 2004. 40 On 18 July 2005 Mr Gargan commenced proceedings against the Commonwealth of Australia and Telstra Corporation Limited. Mr Gargan sought an order for judgment against the Commonwealth in the sum of $5,387,013,767 on the basis that the Commonwealth had accepted liability in that sum as an endorsee on a bill of exchange. The application was heard by Brereton J on 3 November 2005. The alleged bill of exchange was in evidence. It was not signed by the Commonwealth. Mr Gargan was not a party to it but it did bear the signature of a notary public who had witnessed the signature of the issuer. Brereton J rejected Mr Gargan's argument that the notary had endorsed the bill on the Commonwealth's behalf for the reason that s 28(1) of the Bills of Exchange Act 1909 (Cth) provides that a person is not liable as drawer, endorser or accepter of a bill if she has not signed as such. The notary public having signed as witness and not as endorser, Brereton J concluded that the Commonwealth could not be liable on the bill. In any event, his Honour noted that any such rights as Mr Gargan might have had would have vested in his trustee in bankruptcy. Mr Gargan also asked Brereton J to stay a costs order made by the Supreme Court of Queensland against unrelated parties - that is, not against Mr Gargan - which his Honour declined to do. The application was dismissed with costs. 41 For completeness, it should be noted that I appeared as counsel for Telstra Corporation Limited in that proceeding. I raised this with the parties in the present proceeding both prior to and during the hearing. I was told by Mr Gargan that he had no objection to my sitting: cf. Smits v Roach (2006) 227 CLR 423 at 439-442 [43]-[47] per Gleeson CJ, Heydon and Crennan JJ, 445 [61] per Gummow and Hayne JJ. 42 As a consequence of his bankruptcy Mr Gargan was required to file a statement of affairs by the Official Trustee. This he failed to do. The Official Trustee then sought to prosecute Mr Gargan for his failure to do so. An information was laid before the Local Court by the New South Wales Director of Public Prosecutions. Mr Gargan challenged the jurisdiction of the Local Court to deal with the matter which was rejected by Magistrate Dillon on 18 July 2005. Mr Gargan then commenced proceedings in the Supreme Court of New South Wales naming Magistrate Dillon and the Official Trustee in Bankruptcy as defendants. He sought to vindicate his jurisdictional challenge. The application was heard by Barrett J who on 4 November 2005 dismissed it: see Gargan v Magistrate Dillon [2005] NSWSC 1106. Barrett J summarised Mr Gargan's points thus (at [8]): In so far as they can be gathered from the statement of claim itself and discursive and voluminous written submissions filed by the plaintiff, as supplemented by oral submissions, a number of propositions of law are seen by the plaintiff as underpinning the claims in the statement of claim. The main propositions appear to be as follows:

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Is the Court's power under Order 21 rule 1 enlivened? 51 I am satisfied that commencement by Mr Gargan of the proceeding before me against Kippin was the institution of a vexatious proceeding. Each of the claims in it was doomed to fail. The claims relating to the annulment of his first bankruptcy and the position of the Official Trustee had been the subject of multiple adverse findings over a decade before. There was no conceivable rational basis for disinterring these claims. The claims based on the common informer provisions had likewise been described, more than once, as an abuse of process. 52 It is then necessary to determine whether Mr Gargan has habitually, persistently and without reasonable cause instituted other vexatious proceedings in this Court or other Australian courts. The answer to that question must be yes. In light of the determination of Thomas J in the Supreme Court of Queensland that it was Mr Gargan who was liable to his brother, and not the other way around, all of his subsequent attempts in this Court to disturb that conclusion were made without reasonable grounds. The repetitive arguments placed successively before Drummond J, the Full Court, Kiefel J and Spender J demonstrate a stubborn refusal to accept reality justifying, clearly in my view, the epithet persistent. They also show an inclination to commence proceedings on a more or less constant basis thus deserving the sobriquet habitual. 53 The intermeddling in the affairs of Ms Teese and Mr Heinrich is to be approached the same way. The commencement of the proceedings before Heydon J was entirely unreasonable. The proceedings before Adams J and Greg James J showed a persistent assertion of the same common informer argument. Despite losing that argument repeatedly, Mr Gargan remained unmoved. The proceedings before O'Keefe J and the application to Hely J for a jury fall into the same class. Each of the proceedings before Brereton J, Barrett J and Balla DCJ were of the same character as was Mr Gargan's application to me to convene a jury.

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