Rambaldi v Woodward

REASONS FOR JUDGMENT 1 Before the court is an application for leave to appeal from an interlocutory judgment of a single Judge of the court made on 13 December 2012 in a proceeding brought by the trustees of the bankrupt estate of John Edward Atkinson against his former wife Kim Cherie Woodward. As explained in the reasons of the primary Judge, the applicants in that proceeding, who are the applicants on the present application for leave to appeal, claim from the former Mrs Atkinson, the now-respondent both in the main proceeding and in the present application, an interest of up to 50 per cent in a property situated at 41 Roseville Avenue, Roseville, or the proceeds of the sale thereof, based on trust; alternatively, they applied for an order under s 139EA of the Bankruptcy Act (1966) (Cth) ("Bankruptcy Act"). 2 The main proceeding was commenced on 21 January 2011. Various steps had been taken down to 29 May 2012, when her Honour made, amongst other orders, an order that the proceeding be fixed for hearing on 6 March 2013 with an estimate of two days. The application of which the primary Judge disposed on 13 December 2012 was for an amendment to the basis of the applicants' claim against the respondent to introduce reliance upon s 120 of the Bankruptcy Act. They sought to bring into their claim the proposition that transfers made to the respondent by the bankrupt within the period to which that section relates were voidable as against themselves. Those payments were in the nature of repayments, of interest at least, and possibly also, to some extent, principal, on a bank loan obtained by the respondent which was secured by a mortgage in her name. 3 The primary Judge rejected the application for amendment. Her Honour did so substantially for case management reasons, emphasising the period of time during which the main proceeding had been in the list of the court, the extent of the preparation, both legal and evidentiary, which would be required of the respondent if the amendment were allowed, the proximity of the date fixed for the hearing of the proceeding, and the intervention of what she described as the legal vacation between the date upon which she heard the applicant's application for amendment and the date which had been fixed for the commencement of the trial. In a relatively short section of her reasons in which she explained her thinking in these respects, the primary Judge said: 36. The principles relevant to amendment, were discussed by the High Court in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 ("AON"), were uncontroversial. In AON, the High Court recognised that there was no automatic entitlement to raise an arguable issue by amendment subject to the payment of costs. The plurality expressly accepted that the payment of costs, even on an indemnity basis, may not compensate for the adverse effects of the delay, including the strain imposed by pendant litigation on litigants (particularly personal litigants) and on court lists (at [100]-[101]). 37. The proceeding was commenced in January 2011 and thus had been on foot for approximately two years. The trial date had been fixed for seven months. The proceeding has a history of considerable delay, repeated non compliance with orders and extension of time for preparation. Points of claim, which the applicants were ordered, by consent, to file by 23 November 2012 were provided to the respondent and filed only at the hearing of the application and the agreed statement of facts has not yet been filed. 38. While the applicants submitted that the proposed new claim of transfer at an undervalue under s 120 of the Act would largely depend on the evidence already filed in relation to the existing claims, the respondent contended, reasonably in my view, that it would widen the issues in dispute and entail substantial additional preparation and evidence on her part. 39. The application to amend was filed very close to the commencement of the legal vacation, excluding which, there was little more than one month until the trial was due to commence. Further, the respondent, who was not expert in insolvency law, had employment obligations and significant family responsibilities. I considered that the maintenance of the existing trial date would deprive the respondent of a reasonable time to complete the steps and further preparation which the amendment would entail, particularly when combined with discharging her employment and parental responsibilities. 40. If amendment were allowed, adherence to the trial date would unfairly compromise the respondent's ability to prepare. The amendment would also potentially increase the time required for trial which could independently jeopardise the existing trial date. Accordingly, leave to amend would, in the circumstances, almost certainly lead to vacation of the trial date, thereby prolonging litigation which has already been on foot for some time. 4 In the hearing before me today the applicants commenced by submitting that I should exercise my discretion to refer their application for leave to appeal to a Full Court pursuant to s 25(2)(e) of the Federal Court of Australia Act (1976). I am not persuaded that the application for leave has any characteristic or feature which would make it either necessary or appropriate that it not be heard and determined by a single Judge, as contemplated by that provision. 5 The questions which arise on the application for leave are whether the decision of the primary Judge is attended by sufficient doubt to warrant its being reconsidered by the Full Court, and whether substantial injustice would result if leave to appeal were refused, supposing the decision of her Honour to be wrong: Décor Corporation Pty Ltd v Dart Industries Incorporated (1991) 33 FCR 397 at 398-399. With respect to the first of those two questions, the starting point is, of course, that the primary Judge's judgment was given in the exercise of the discretion of the court, and concerned a matter of practice and procedure, as to which the Full Court would be especially circumspect before interfering: Adam P Brown Male Fashions Pty Ltd v Philip Morris (1981) 148 CLR 170 at 177. 6 In the submissions made on behalf of the applicants today, no respect in which her Honour was said to have been conspicuously in error was referred to. Rather, counsel for the applicants emphasised a number of respects in which her Honour was said to have failed to give appropriate weight to certain things, placed an emphasis upon certain factors which was either greater or less than was reasonable in the circumstances or failed to take account of some considerations which, according to the applicants, would have militated in favour of a different result. It was not put that there was any legal rule or principle under Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 which had been ignored or misapplied by the primary Judge such as to vitiate the exercise of her Honour's discretion. 7 It was submitted on behalf of the applicants, for instance, that the primary Judge had failed to have regard to the importance to the applicants of the amendments that would introduce the claim proposed to be made under s 120 of the Bankruptcy Act. It is true, that in the passage to which I have referred, her Honour did not advert to the importance of the claim under s 120, but in my view that was implicit. A submission made on the present application on behalf of the applicants is that an Anshun estoppel would, or at least would probably, arise if the applicants, on a later occasion and in separate proceedings, sought to rely upon s 120 to avoid the payments made by the bankrupt to the mortgage account of the respondent. I am disposed to think that an argument based on such an estoppel would have considerable prospects of succeeding, but the difficulty is that this consideration was not, at least explicitly, advanced before the primary Judge by the applicants. To the extent that the applicants' allegation that the primary Judge failed to have regard to the importance of the amendments is based upon the Anshun estoppel point, her Honour clearly could not be criticised for having failed to found her reasons upon it. 8 It is also said on behalf of the applicants that the primary Judge failed to weigh the competing factors, in particular the importance of the amendments to the applicants and the need to do justice between the parties. For my own part, I cannot see any sign of such a failure in the reasons given by her Honour on 13 December 2012. As I say, I think that the primary Judge took it as a given that the claim under s 120 would be a significant and important part of the applicants' case, and said nothing in disposing of their application to amend to depreciate the importance or the significance of such a claim. Nonetheless, as I have said, for reasons which were substantially concerned with case management, her Honour was not persuaded that the amendment should be made. 9 It is also said on behalf of the applicants that the primary Judge placed an unreasonable emphasis on the personal situation of the respondent being, as she was, a litigant in person. This was, I surmise, a reference by the applicants to paras 38 and 39 of her Honour's reasons, as I have set them out above. In para 38, her Honour accepted the reasonableness of the respondent's contention that the amendment would widen the issues in dispute and entail substantial additional preparation and evidence on her part. It was emphatically submitted on behalf of the applicants on the present application that there was no evidentiary or other basis upon which her Honour could have taken such a view. They said that, in the nature of things, the evidence would be no different if the claim under s 120 were introduced into the case. They said that the payments made by the bankrupt to the respondent's mortgage account would inevitably be part of the evidentiary material upon which at least the trust issues of the case would be determined, and that all that was being proposed was to give a different, and alternative, legal characterisation to the significance of those payments. 10 It is true that her Honour was not presented with affidavit or other evidence with respect to the additional factual material which the respondent would need to put before the court under an amended case. However, the way in which her Honour proceeded in this respect was really a matter of very fine procedure in her own discretion. As it happens, the respondent foreshadowed that her case would be that she gave consideration for the transfers which were made to her mortgage account of the kind referred to in para (b) of s 120(1). Although she was not at the relevant times cohabitating with the bankrupt, she lived in the subject property with the children of the marriage, and she tells me that, pursuant to an arrangement with the bankrupt, she was providing for domestic expenses, including the expenses of raising the children, in consideration for the bankrupt paying sums due under the mortgage. She said to her Honour that over the period to which the payments to the banks related (and here I quote from page 26 of the transcript): One can anticipate the domestic receipts covering utilities, household repairs, maintenance, school and education expenses, medical receipts, groceries - it's going to be an extraordinary volume of material and I do have that, my material in my possession and I will be intending to rely on it. Her Honour appeared to accept the respondent's say-so in that regard, and at the level of fact it is not intuitively unlikely that expenses of those kinds would have been incurred, and that proof of them in point of detail would require substantial preparation. 11 Whether expenses of that kind would suffice as consideration for the purpose of s 120 would, of course, be another question altogether. It may be that, if the applicants' amendment had been allowed, in due course it would have been held that expenses and outlays of this kind would not be consideration for the kind of payments which were made by the bankrupt, but the respondent was not able to conduct her case on the basis that she would necessarily lose that question of law. Her case was that payments of this kind should be treated as consideration, and she would have to have prepared her evidence accordingly. Different views may be taken, of course, about the strength or legitimacy of what the respondent said to her Honour in this regard, and about the appropriateness of her Honour receiving that indication instead of requiring it to be put on affidavit, but whatever view be taken, issues of this kind were pre-eminently within the discretion of her Honour on matters which related directly to the practical conduct of a proceeding which was before her. 12 As is apparent from the primary Judge's reasons set out above, her Honour did take note of the fact that the respondent was unrepresented, but I would not accept what the applicants now submit, namely, that she placed an unreasonable emphasis on the personal situation of the respondent. Had her Honour not based her reasons upon the circumstances as they existed in fact - which included the circumstance that the respondent was self-represented and would have to prepare her own case, albeit that she foreshadowed a requirement of some limited legal assistance - her Honour might well have been the subject of justifiable criticism. She took into account the respondent's circumstances, and how she would have to get her case ready for trial, but she did not, in my opinion, place unreasonable emphasis upon them. 13 The applicants also argued that the primary Judge placed more than appropriate emphasis upon the proximity of the trial in her determination of the application to amend. I must say that I have difficulty with this submission. The trial date had been fixed some months previously and at a time when it was still a long way off. Her Honour was well familiar with the difficulties facing the court in finding dates for the trial of actions, and was well entitled to place an importance upon the maintenance of the date which had been fixed. Indeed, as I understand the submission of counsel who appeared for the applicants before the primary Judge, the applicants themselves recognised the importance of maintaining the trial date if possible. 14 All things considered, I take the view that the prospect of the appeal succeeding, if leave were granted, is not a strong one. I am not persuaded that the discretionary judgment of the primary Judge is attended with sufficient doubt to warrant it being reconsidered by the Full Court. 15 The applicant's injustice case is based substantially upon the Anshun principle. They say that, although the application to amend came very late in the piece apropos the commencement of the trial, unless they have the opportunity to run the s 120 claim at this point the prospect is that they will be forever shut out from running that claim in the sense that, as I have indicated earlier, any later attempt to rely upon s 120 in relation to the same mortgage payments as are already part of the evidence in this case would be blocked by an argument based on Anshun. 16 That does not, however, justify the conclusion that substantial injustice would result if leave to appeal were refused. The concept of injustice is not one which is applied abstractly to the prospect of succeeding, or to the likelihood of detriment being encountered by a litigant on some future occasion, as a result of the disposition of the application for leave. Relevant to the question of injustice are the circumstances which led to the application to amend being made in the way, and when, it was. I have not heard any satisfactory explanation as to why the s 120 ground was not introduced into the applicants' case either from the outset or at a much earlier stage of the proceeding. As I have said, the proceeding has been in the list of the court for a period which is now more than two years and which, at the time when her Honour gave her judgment, was almost two years. 17 Particularly when the trial had been fixed as long ago as 29 May 2012, the circumstance that the applicants would forever lose their opportunity to advance a case under s 120 cannot be regarded as the cause of any injustice for them. The circumstance is, in my view, wholly explicable by the failure of the applicants and their advisers to turn their attention to the possibility of a case under s 120 in a timely way. The conclusion that substantial injustice would result for the applicants if leave to appeal were refused is, therefore, one which I could not reach in the circumstances of the present case. 18 For those reasons I refuse the application for leave. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup.