5.6.3 Are the proceedings an abuse of process?
97 In Ferella (Inquiry No. 2) Yates J held among other things that:
173 The [Official Trustee] had a sound basis for concluding that Agusta was not the trustee of the Cavallino Unit Trust. This position was vindicated in the Supreme Court proceedings. The [Official Trustee] also had a clear interest in defending its position in that regard. It had a very real interest in ensuring that the Point Piper funds, on the assumption they were a trust asset, were paid to the person properly entitled to be trustee, rather than being paid away to a stranger to the trust who was not bound by the terms of the trust. After all, [Gustavo and Angelo Ferella's] units in the Cavallino Unit Trust comprised part of their bankrupt estates. Also, Agusta had asserted a right to claim damages against the respondent. It is to be remembered in this connection that, at this time, no other person in the interests of the Ferella family was then claiming to be the trustee of the Cavallino Unit Trust. The [Official Trustee] was entitled to defend itself and the bankrupt estates against that claim, when it had sound reason to believe that Agusta had no standing to bring such a claim.
174 But perhaps more importantly for present purposes, the [Official Trustee] had a sound basis for claiming that, if the Point Piper land had been a trust asset, it was entitled to exercise a right to be indemnified out of the Point Piper funds and to assert a lien over those funds to secure that indemnity, whoever the trustee of any proven trust may have been. Once again, this conclusion was vindicated in the Supreme Court proceedings. The then plaintiffs in those proceedings ultimately came to accept, as a general proposition, that the [Official Trustee] was entitled to be indemnified out of the Point Piper funds and to assert a lien over them in respect of debts proved in the bankruptcies that had been incurred by [Gustavo and Angelo Ferella] as trust debts. This was a significant change in position by [Gustavo and Angelo Ferella] and the entities associated with them. However, this change in position was adopted only shortly before the commencement of the hearing of the Supreme Court proceedings in February 2008. In fact, it was only during the course of the hearing of those proceedings that [Agusta and Riva] came to accept that that entitlement existed in relation to a number of debts that had been proved in the bankruptcies. At all other times, the [Gustavo and Angelo Ferella] had steadfastly maintained the position that Agusta alone was entitled to all the Point Piper funds and that none of the debts which had been proved in the applicants' bankruptcies should be paid from those funds.
98 Those findings formed part of the ratio for the decision by Yates J to refuse to order an inquiry into questions 1, 2 and 4 (see at [37]-[40] above) and constitute a finding that the steps taken by the Official Trustee to protect his interests as such in the land were warranted in the circumstances. Those steps included the lodging of the caveats to protect the trustee's asserted equitable interest in the land under s 58(1) and (2) of the Act.
99 The appellants submit that the only relevant finding is that the Official Trustee had no interest in the land, apparently based upon the assumption that in Ferella (Inquiry) (No.2), Yates J considered "the question of impropriety of the present respondent in connection with the proceedings before Nicholas J and the NSW Court of Appeal which … does not arise in these proceedings except in so far as it may bear upon the credit of witnesses." However, that assumption is wrong. In making the findings to which I have referred, Yates J comprehensively examined the circumstances in which the refinancing of the Point Piper property fell through and the reasonableness of the Official Trustee's conduct leading up to the Supreme Court proceedings, as well as his conduct in defending those proceedings (see Ferella (Inquiry) (No. 2) especially at [55]-[152]). This included consideration of complaints by Angelo Ferella that the Official Trustee had prejudiced attempts being made to refinance the Point Piper land by lodging the further caveat (at [58]) and the reasonableness of the Official Trustee's doubt that the Point Piper land was a trust asset having regard to the confusing picture presented by the documentation and information provided to him from time to time - all matters which the applicants seek to put in issue in these proceedings.
100 It may readily be accepted that s 179 of the Act is not a vehicle for pressing claims for common law damages, as French J said in Macchia and as the Official Trustee accepted. It may well be, therefore, that in some circumstances, it would not be an abuse of process for a bankrupt to institute proceedings for damages notwithstanding that the Court in earlier proceedings did not consider that an inquiry into the Official Trustee's conduct was warranted. Nonetheless in the circumstances of this case, I consider that the attempt to re-litigate these issues are relevant to the question of whether the appellants' claims have any reasonable prospects of success or constitute an abuse of process, as the Official Trustee submitted.
101 First, contrary to the applicants' submissions, it is apparent the underlying issues which the applicants seek to raise in this proceeding correspond with those which Gustavo and Angelo Ferella asked the Court to inquire into in the Inquiry Proceedings. Nicholas J having examined comprehensively those issues, found the Trustee's conduct to have been warranted and sound (leaving aside the CGT issue). For example, the allegations made at [32(j), (k), (l) and (m)] of the statement of claim essentially mirror the grounds on which an inquiry into questions 1, 2 and 4 were sought before Yates J.
102 Secondly, the pleadings contradict the findings by Yates J in Ferella (Inquiry No. 2), including the key allegation that the Official Trustee had actual notice at the time of the matters alleged at [24] of the statement of claim when it lodged the caveats and made the representations (see above at [17]).
103 Thirdly, no new material is said to have come to light which might warrant revisiting the findings by Yates J. The allegation that representations made by the Official Trustee are to be inferred "to the effect the land was vested in the [Official Trustee]" (statement of claim at [18]) is contradicted by all of the known material, including the fact that the Official Trustee made no such allegation in the Supreme Court or Inquiry proceedings (including in the correspondence considered by Yates J in his reasons in Ferella (Inquiry) (No. 2)) and the findings in Agusta (SC) (2008) that Gustavo and Angelo Ferella remained the registered proprietors of the land until the mortgagee sale on 11 April 2006 (see above at [32]); see also s 58(2) of the Act (explained at [67] above). Moreover, the only representation pleaded at [17] of the statement of claim which is directly attributed to the Official Trustee as opposed to representations made by others, was not to the effect that the land was vested in the Official Trustee; rather it is consistent with the Official Trustee seeking on 3 March 2006 to protect the interests of creditors in circumstances where there was then a real possibility that the land was held beneficially by Gustavo and Angelo Ferella and not as trustees, as Yates J found in Ferella (Inquiry) (No. 2) at [57].
104 Fourthly, Riva and Gustavo and Angelo Ferella accepted in the Supreme Court proceedings the entitlement of the Official Trustee to be indemnified generally speaking from the Point Piper funds (see above at [36(6)] and [97]).
105 Fifthly, as early as 4 March 2006 Angelo Ferella wrote on behalf of the Cavallino Trust to Mr Madden at Official Trustee alleging that the Trust had been prejudiced in its attempts to finance the land by the actions of the Official Trustee in lodging the first caveat and threatening to sue for damages (Ferella (Inquiry No. 2) at [59]). Yet these proceedings were not instituted until 2015.
106 In the sixth place, the applicants submit that, having regard to the importance of upholding public confidence in line with contemporary values:
In the present case, it has to be observed that a family, two members of whom had their bankrupt estates administrated by the [Official Trustee], are seeking relief against what they say was erroneous and very high handed conduct by a Commonwealth statutory body in the face of information which indicated the wrong approach was being taken. The inequality of positions is very substantial. It is submitted that contemporary values are likely to be very much opposed to the use of technical arguments to deny access to justice by the Applicants.
107 However, those submissions take no account of the lack of any merit in the allegations raised in the statement of claim as a matter of law and otherwise on the available materials for the reasons earlier explained, nor of the significant delay in instituting the proceedings well past the statutory limitations period. Equally, the submission that there is no prejudice occasioned by the delay cannot be accepted. Rather, as McHugh J explained for example, in Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 at 551:
The enactment of time limitations has been driven by the general perception that "[w]here there is delay the whole quality of justice deteriorates". Sometimes the deterioration in quality is palpable, as in the case where a crucial witness is dead or an important document has been destroyed. But sometimes, perhaps more often than we realise, the deterioration in quality is not recognisable even by the parties. Prejudice may exist without the parties or anybody else realising that it exists. As the United States Supreme Court pointed out in Barker v Wingo, "what has been forgotten can rarely be shown". So, it must often happen that important, perhaps decisive, evidence has disappeared without anybody now "knowing" that it ever existed. Similarly, it must often happen that time will diminish the significance of a known fact or circumstance because its relationship to the cause of action is no longer as apparent as it was when the cause of action arose. A verdict may appear well based on the evidence given in the proceedings but, if the tribunal of fact had all the evidence concerning the matter, an opposite result may have ensued. The longer the delay in commencing proceedings, the more likely it is that the case will be decided on less evidence than was available to the parties at the time that the cause of action arose.
108 As McLelland CJ in Equity also explained in Watson v Foxman and Others (1995) 49 NSWLR 315 at 319:
…human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
109 None of these matters are mere technicalities and no basis exists for doubting compliance with the Commonwealth's Model Litigant Principles. In all of the circumstances, therefore, I consider that the proceedings constitute an abuse of process, being proceedings that are vexatious and oppressive.