By Notice of Motion filed on 2 June 2023, Riva NSW Pty Ltd ("Riva"), and possibly Mr Ferella, sought relief in nine paragraphs in proceedings brought by Riva and Mr Ferella against the Official Trustee in Bankruptcy ("Official Trustee"). I here refer to "possibly Mr Ferella" because the Notice of Motion appears to be signed by Mr Ferella as authorised officer of Riva, and that implies that the application was not brought on his own behalf, but on Riva's behalf. I will refer below to "Riva" but in doing so leave open the possibility that the claim is also brought by Mr Ferella.
First, Riva seeks an order to extend the time to bring the Notice of Motion under r 1.12 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"). Second, Riva seeks an order to bring the Notice of Motion under UCPR r 36.15(1) in the alternative. It will not be necessary to determine these applications given the findings I reach below.
Third, Riva seeks an order to bring the Notice of Motion pursuant to s 9 of the Vexatious Proceedings Act 2008 (NSW) ("Act"), although that language does not appear to correspond to the terms of that section. In submissions, Mr Maroya, who appears for Riva, submits that that order should be understood as an application for leave under s 13 of the Act, although it is not such an application in terms. I will assume, without deciding, that Riva seeks to bring an application for leave for the purposes of that section, although it does not say so.
Next, three orders are sought, which are arguably of a substantive character, that orders of Kunc J made on 4 March 2022 be set aside, or stayed, or "varied accordingly", although the variation sought is not identified. Two orders are then sought which are directed to the continuance and amendment of the proceedings in which the Notice of Motion is brought, namely that Riva be granted leave and permitted to continue those proceedings on the basis of an Amended Statement of Claim of 7 February 2022, where Riva has been prevented from doing so by orders made by Kunc J, and that it be permitted further to amend that Statement of Claim as noted below; and the Defendant be directed to file a Defence to the Amended Statement of Claim. An order was also sought that the Court make such further or other orders as it thinks fit.
By way of background to the application, in his judgment delivered on 22 February 2022 ([2022] NSWSC 153) Kunc J conducted an extensive review of the history of proceedings between the parties and held that these proceedings should be stayed and that orders under the Act be made against Riva and against Mr Ferella. Kunc J ordered that, pursuant to the Act, the proceedings be permanently stayed, and pursuant to s 7(b) of the Act, Mr Ferella be prohibited from instituting or conducting any proceedings against the Official Trustee, in his own name or in the names of Mr Ferella or Riva. It is common ground, and Mr Maroya accepts, that the Notice of Motion dated 2 June 2023 constitutes such proceedings, at least brought in the name of Riva, for the purposes of s 4 of the Act. It is also plain that Mr Ferella is conducting the proceedings on Riva's behalf for the purposes of those orders.
[3]
Evidence led by the parties
Turning now to the evidence which is relied on in the application, Riva relies on Mr Ferella's affidavit dated 19 May 2023, which indicates that the affidavit was made in support of an application for leave to continue these proceedings on the basis of the Amended Statement of Claim of 7 February 2022, as further amended. I pause there to note that that introductory reference to the purpose of the application does not refer to any application for leave to bring the Notice of Motion under s 13 of the Act. Mr Ferella goes on to indicate that, at least in Riva's view, or Mr Ferella's view, Riva was denied procedural fairness, natural justice and was prejudiced as a consequence of the conduct of the proceedings before Kunc J. He then elaborates at length upon that proposition and goes on to refer to the "erroneous findings" and decisions of Kunc J. I bear in mind, of course, that I do not exercise an appellate jurisdiction in respect of the orders made by Kunc J, but that is ultimately not a matter that needs to be addressed further given the findings that I reach below. Mr Ferella goes on to indicate that Riva has filed a notice of intention to appeal and it appears that Riva is proceeding with an appeal against the decision of Kunc J in parallel with this application.
It is plain enough that Mr Ferella's first affidavit is directed to a substantive application, seeking to determine the correctness or otherwise of the decision of Kunc J; to advance a case that that decision is incorrect and should be varied or set aside, consistent with the relief sought in the Notice of Motion; and to be permitted to pursue these proceedings in amended and expanded form. That affidavit is not framed as supporting only an application for leave to bring the Notice of Motion filed on 2 June 2023, as distinct from supporting the substantive relief sought by it.
By a second affidavit dated 9 June 2023, Mr Ferella referred to amendments which Riva (or Mr Ferella) proposed to make to the Statement of Claim, apparently since the version which was before Kunc J, and he annexes an Amended Statement of Claim. That Amended Statement of Claim is in turn marked up with several smaller amendments and several larger amendments, including particulars purportedly provided as to allegations of, variously, slander of title, malice, fraudulent concealment, perjury, conspiracy to defraud and so on. Those particulars largely take the form of conclusory assertions of misconduct, as distinct from a pleading of material facts, quite apart from any question whether such matters could properly be raised by way of particulars rather than a pleading of material facts. Again, I need not determine that question given the findings that I reach below on other grounds.
The Official Trustee was required, by the way in which Riva and Mr Ferella conducted the application, to respond by evidence and by submissions directed to the substantive relief sought, in respect of the continuance and amendment of the proceedings, not merely to an application for leave to file the Notice of Motion. The evidence (Ex R1) led by the Official Trustee includes a detailed comparison of statements of claim in the form in which they took in proceedings brought by Riva in 2015, 2021, and 2022. Plainly, that evidence was led in responding to the substantive application that was brought in the Notice of Motion, for an order that Riva be granted leave and permitted to continue the proceedings on the basis of the Amended Statement of Claim, as further amended in the form set out in Mr Ferella's second affidavit.
[4]
Whether the Notice of Motion has already been dismissed by s 13 of the Act
These matters highlight a difficulty which my Associate drew to the parties' attention as a matter that may need to be addressed by submissions today, and which now has been addressed as a preliminary matter in respect of the application. By emails dated 25 July 2023, my Associate drew the parties attention to several authorities to which I refer below, and identified the following matters as to which I invited submissions:
"(a) whether, as Mr Maroya's submissions appears to accept, the notice of motion filed on 2 June 2023 is a "proceeding" for the purposes of s 4 of the [Vexatious Proceedings] Act 2008 [(NSW)], being an interlocutory application in connection with civil proceedings;
(b) whether the relief sought in paragraphs 4-8, or alternatively the relief sought in paragraphs 7-8, was relief in the proceedings for which prior leave was required; and
(c) if so, for the reasons noted by Bell P in Kostov [v the Director of Public Prosecutions (NSW) [2022] NSWCA 73, and [2022] NSWCA 94], the notice of motion was initially stayed and then taken to be dismissed 28 days after it was filed, on or about 30 June 2023, so that an application for leave cannot now be made in the course of this application."
Before turning to address those matters, I should first note that Mr Maroya put in submissions that the Notice of Motion, while it records that it was filed on 2 June 2023, may not have in fact been filed until a later date, on 8 June 2023, because the Registrar initially did not accept it and later accepted it for filing. It is not necessary for me to go behind the filing date recorded on the Notice of Motion, namely 2 June 2023, where nothing turns on that matter. Whether the Notice of Motion was filed on 2 June 2023 or 8 June 2023, the 28 day period specified in s 13 of the Act, to which I refer below, has now expired.
I should also set out the relevant provisions of the Act, and refer to some of the authorities which have considered their application. Relevantly, s 4 of the Act defines the term "proceedings" as including, in paragraph (d), "any interlocutory proceedings or applications, or procedural applications, taken in connection with or incidental to civil proceedings…" Mr Maroya rightly accepts the obvious, that the Notice of Motion dated 2 June 2023 filed by Riva, is a "proceeding" for the purposes of s 4 of the Act, because it is an interlocutory proceeding or application filed in connection with the substantive civil proceedings, that had been stayed by the orders made by Kunc J.
Second, s 9 of the Act, which is invoked by paragraph 3 of the Notice of Motion, provides that an authorised Court may, by order, vary or set aside a vexatious proceedings order that the Court has made. Plainly, Riva seeks such an order in this application.
I should also refer to s 13 of the Act. That section relevantly provides that:
(1) If an authorised Court makes a vexatious proceedings order prohibiting a person from instituting proceedings:
(a) the person may not institute proceedings of the kind to which the order relates without the leave of an appropriate authorised Court under section 16, and
(b) another person may not, acting in concert with the person, institute proceedings without the leave of an appropriate authorised Court under section 16.
(2) If proceedings are instituted in contravention of subsection (1), the proceedings are stayed until they are dismissed (or taken to be dismissed) under this section.
(3) Any proceedings that are stayed by subsection (2) are taken to be dismissed by the Court or Tribunal in which they were instituted on the expiry of the period of 28 days after the proceedings were first instituted, unless the proceedings are dismissed under subsection (4).
I pause to recognise that s 13(3) of the Act is a self-actuating provision. It provides, without reserving any discretion to the Court, and without need for any order of the Court, that proceedings instituted in contravention of the section are dismissed within the 28 day period if they have not first been dismissed by a previous order made by the Court.
Section 14 of the Act in turn provides the requirements for an application for leave to bring proceedings, and s 16 for the matters relevant to whether such leave should be granted.
[5]
Applicable case law
The scope of s 13 of the Act has been addressed in the case law. In Nina Zepinic v Chateau Constructions (Aust) Ltd [2020] NSWSC 86 ("Zepinic 1"), Robb J considered the scope of that section, where Mr Zepinic had brought a notice of motion at a time that he was subject to an order under the Act, and held that s 13 of the Act had been triggered, with the consequence that the notice of motion was stayed by the force of the Act, and then dismissed by force of the Act 28 days after the notice of motion was filed. Robb J then went on to observe that he had explained to Mr Zepinic that:
"If he wishes to seek relief of the sort contained in the motion or amended notice of motion, it is essential that he first seek leave in the specific manner required by s 13 of the [Act]. If he does not do that, the [Act] will have effect of its own force and it will be inevitable that any proceeding he commences will be dismissed. It has been explained that it is not a matter for the discretion of the Court". [emphasis added]
It is important to note Robb J's observation that s 13 of the Act contemplates that a person who is the subject of an order under the Act may not institute proceedings without "first seek[ing] leave" in the specified manner. Notwithstanding Mr Maroya's submission to the contrary, it seems to me that that is the proper construction of the section, where the section is a prohibition on instituting proceedings without the leave of the Court, and that prohibition can only be avoided by, as Robb J noted, first obtaining that leave. The section does not contemplate an application which both seeks the leave and seeks substantive relief, with the consequence that a defendant would be required to address both the leave application and the substantive relief application at the same time. I return to that matter below.
In a second decision, Zepinic v Chateau Constructions (Aust) Ltd [2020] NSWSC 408 ("Zepinic 2"), Lindsay J referred to the observations of Robb J in Zepinic 1, and applied those observations in a similar case where an application had been brought by Mr Zepinic without leave.
In Kostov v the Director of Public Prosecutions (NSW) [2020] NSWCA 73, in the first of two decisions dealing with that matter, Bell P (as the Chief Justice then was, sitting as a single judge in the Court of Appeal) drew Ms Kostov's attention to s 13 of the Act and observed (at [9]) that he considered it necessary, before dealing with the substantive application, to allow the parties an opportunity to make submissions by reference to s 13 of the Act as to whether Ms Kostov required leave "prior to the institution" of the relevant proceedings and what the consequences of a failure to obtain that leave might be. It will be noted that Bell P also there proceeded on the basis that leave would be required prior to the commencement of the substantive application. Bell P also there observed (at [13]) that:
"It would not be appropriate, in my opinion, for any such application [for leave] to be made in the course of these proceedings, as Ms Kostov suggested in her oral submissions in the course of the directions hearing. This is for the reason that, if leave was required to institute these proceedings and was not obtained, the effect of s 13(2) and (3) of the Act is that these proceedings were initially stayed and then taken to have been dismissed 28 days after their filing."
Bell P there left open the possibility that Ms Kostov could bring an application to vary or set aside the vexatious proceedings order as a preliminary step to bringing the relevant proceedings, or seek leave under the Act, to bring the proceedings.
In a second decision, Kostov v The Director of Public Prosecutions (NSW) (No 2) [2020] NSWCA 94 ("Kostov 2"), Bell P further considered the relevant issues, with the aid of the submissions from the Director of Public Prosecutions (NSW) and the Attorney General of NSW, which had intervened in the proceedings given the issues of public importance which they raised. Bell P referred to Beazley P's explanation of the operation of the Act in De Varda v Austin [2018] NSWCA 263, and her observation (at [29]) that once an order had been made under the Act:
"It was necessary for the applicants to seek the leave of the Supreme Court before instituting any proceedings that were constrained by the terms of the [v]exatious [p]roceedings order". [emphasis added]
Bell P there noted that the consequence of Ms Kostov not seeking leave prior to commencing proceedings was dictated by s 13(3) of the Act, namely that the proceedings were taken to have been dismissed. It seems to me that, with respect, that proposition must be narrowed. Section 13(3) of the Act is directed to proceedings that are stayed by s 13(2) of the Act. Proceedings are stayed by s 13(2) of the Act if they are instituted in contravention of s 13(1) of the Act. Section 13(1) is directed to the institution of proceedings "without the leave" of the relevant Court, and it seems to me, as a matter of the proper construction of that section, that that is a requirement that leave has been granted, not merely that leave has been applied for, where that application has not been determined. I again return to the question below.
Bell P there left open the question whether leave could be sought from the Court and granted nunc pro tunc. I also leave open that question, at least in a case where leave was granted (and not merely sought) within the 28 day period before proceedings were dismissed by the operation of s 13 of the Act. It seems to me that it may not be possible, and would generally not be appropriate to grant such leave, nunc pro tunc, after the proceedings have already been dismissed by the operation of the Act.
Bell P also there noted that, consistent with De Varda v Austin above, Ms Kostov's failure to have "first obtained leave to commence" the proceedings had contravened s 13(1) of the Act and that, as no leave was "sought or granted" within 28 days of the institution of the proceedings, they were dismissed by reason of s 13(3) of the Act. Again, it seems to me that the reference to leave being "sought" in the second sentence of that observation should be narrowed where, as Bell P rightly noted in the first sentence of that observation, the requirement of s 13(1) of the Act is directed to whether leave has been granted, not whether it has been sought.
In further proceedings in Application of Vito Zepinic (No 2) [2020] NSWSC 693, Kunc J in turn reviewed the relevant sections, referred to the observation of Lindsay J in Zepinic 2 and also referred to the decision of Bell P in Kostov 2. His Honour there found that a further application brought by notice of motion was in the same category as that dealt with by Zepinic 2, because, first, the proceedings were "proceedings" for the purposes of s 13(1)(a) of the Act, where they were proceedings of the kind to which the vexatious proceedings order related; second, they constituted "proceedings" within the meaning of s 4(d) of the Act; and, third, Mr Zepinic had instituted such proceedings within the meaning of s 13 of the Act. Here, similarly, it is common ground that the Notice of Motion is a proceeding of the kind to which the vexatious proceedings order relates; second, Mr Maroya accepts that the Notice of Motion constitutes "proceedings" within the meaning of s 4(d) of the Act; and, third, it is plain enough that at least Riva, and possibly Mr Ferella, has "instituted" the proceedings within the meaning of s 13 of the Act, by filing the Notice of Motion, for the reasons noted by Kunc J in Application of Vito Zepinic at [22].
[6]
Whether proceedings may be commenced where leave is sought but has not been obtained
It remains to consider whether, as Mr Maroya submits, there is a distinction between the application brought by Riva, and possibly Mr Ferella, and the applications brought in the cases to which I have referred, in which s 13 of the Act has brought about the dismissal of the applications by its own force. Mr Maroya submits that such a distinction exists because Riva brings an application for leave under s 13 of the Act, which he submits should be implied into the Notice of Motion, although it is not present on the face of the Notice of Motion, and that application implicitly qualified the relief that was sought by the balance of the Notice of Motion, and contemplated that such leave would be obtained before the matters addressed in the balance of the Notice of Motion were addressed. As I noted above, I have assumed, without deciding that such leave is sought.
Mr Maroya submits, conversely, that it could not have been the legislative intention that a separate application for leave was required, prior to bringing the substantive application, for the purposes of avoiding a contravention of s 13 of the Act. I do not accept that submission, as a matter of construction of the section, read in accordance with its language and its statutory purpose. It seems to me that the prohibition in s 13(1) of the Act, on its proper construction, applies to instituting proceedings of the kind to which the order relates "without the leave" of an appropriate authorised Court. That leave is not obtained by instituting such proceedings and at the same time bringing an application for such leave which has not yet been granted. In other words, on its proper construction, that section contemplates that the proceedings may only be brought after leave has been obtained, not in parallel with an application for such leave.
That conclusion follows, it seems to me, from the language of that section, which refers to "without leave" not to "without an application for leave". Second, reading the section in its statutory context, it is readily understandable that the legislature would have prohibited the institution of proceedings without leave having been obtained, rather than without leave having been applied for. Otherwise, the defendant in an application which both sought leave and substantive relief would be exposed to the costs of preparing the evidence necessary to respond to the application for substantive relief, without the Court having ever determined that such leave would be granted. That appears to have occurred here, so far as the Official Trustee has incurred the costs of preparing a detailed comparison of the Statements of Claim, without the Court first having determined that there was a basis for the grant of leave for Riva or Mr Ferella to seek substantive relief to permit the filing of the Amended Statement of Claim or an order for the filing of the Defence.
Mr Maroya submits that the Court cannot reason from a policy consideration of that kind in order to construe the section. It seems to me that the Court can, in construing the words of the section as they appear, have regard to the statutory purpose to which they are directed, and that statutory purpose includes preventing the position that a defendant would be exposed to the costs of responding to a substantive application brought by a vexatious litigant without the Court first having been determined an application for leave to bring that application in that litigant's favour. There is nothing surprising in that result, where it is consistent with the position which exists, for example, where an application for leave to bring an appeal is in some circumstances required, before a substantive appeal is brought. It is no less oppressive for a defendant to have to incur the costs and stress of meeting a vexatious application for substantive relief, where leave was sought at the same time as seeking that substantive relief and later refused, than where that vexatious application was not combined with an application for leave. That oppression is only avoided where leave is granted, having regard to the merit of the application, not where it is merely sought.
For these reasons, it seems to me that the position here is indistinguishable from that which existed in the several decisions which I have noted above. I will, consistent with the order made by Robb J in Zepinic 1, and followed in the subsequent cases, make an order which recognises the effect of s 13 of the Act, operating in accordance with its terms, rather than involving any act of the Court beyond the recognition of the effect of the section.
[7]
Orders
Accordingly, I make the following orders, and will then hear the parties as to costs:
(1) Declare that the Notice of Motion filed on 2 June 2023 by Riva NSW Pty Ltd, and possibly Mr Ferella, is a proceeding to which sections 13(2) and (3) of the Vexatious Proceedings Act 2008 (NSW) applies.
(2) Declare that the Notice of Motion filed on 2 June 2023 has been dismissed by force of s 13(3) of the Vexatious Proceedings Act 2008 (NSW).
[8]
Costs
The question now arises as to the costs orders that should be made in respect of the dismissal of the Notice of Motion filed on 2 June 2023. The Official Trustee in Bankruptcy does not seek costs on an indemnity basis but seeks an order for costs on the ordinary basis against both Riva and Mr Ferella. It notes that there are applications on foot in respect of costs in other matters and does not seek an order barring the commencement of further proceedings by Riva or Mr Ferella, until the costs of these proceedings are paid, of the kind noted in my decision in Sheridan v Colin Biggers & Paisley [2019] NSWSC 621.
Mr Maroya accepts that an order for costs should be made against Riva so far as it is, he submits, the applicant on the Notice of Motion. He submits that there is no basis to extend an order for costs to Mr Ferella, notwithstanding that he signed the application brought by Riva as its authorised officer and, it is common ground, is the sole director of Riva. He submits that the fact that Mr Ferella is the human agent who acted for Riva, in Riva bringing the Notice of Motion, is not an exceptional aspect of the proceedings, and does not support an extension of an order for costs that can be made against Riva, as the unsuccessful applicant, to an order for costs against Mr Ferella.
Mr Lynch, who appears for the Official Trustee, points to Mr Ferella's role in conducting the proceedings and, significantly, to the fact that those proceedings were, as I have found, conducted by Mr Ferella on Riva's behalf in contravention of s 13 of the Act. Mr Maroya responds by referring to Mr Ferella's affidavit dated 19 May 2023, which referred to an application for leave to continue the proceedings on the basis of the Amended Statement of Claim. However, that affidavit was not directed, in that observation, to an application for leave to bring the Notice of Motion, as distinct from an application for leave to continue the substantive proceedings.
The circumstances in which an order for costs should be made against a director who brings proceedings on behalf of a company are dealt with in the case law. The question whether the Court should make a costs order against a director who carries on proceedings on behalf of a company is determined by reference to the factors identified by the High Court in Knight v FP Special Assets Ltd [1992] 174 CLR 178; [1992] HCA 28, including whether the non-party has played an active part in the conduct of the litigation and has an interest in its subject matter. In FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340 at [210], Basten JA (with whom Beazley and Giles JJA agreed) noted that the exceptions to the general rule that an order for costs is only made against a party to the litigation should not be allowed to expand so as to undermine the rule itself, and noted relevant factors including that the unsuccessful party was the moving party and whether the conduct of the litigation was unreasonable. In May v Christodoulou [2011] NSWCA 75 at [102]-[103], Sackville AJA in turn observed that a relevant question was whether the non-party or director had engaged in conduct that was so inappropriate that a costs order should be made against him and Handley AJA (in the minority) regarded the fact that a director's involvement had prolonged the proceedings as relevant to the exercise of the discretion. I reviewed the relevant authorities in Redman v JTS Investment Holdings Pty Ltd [2012] NSWSC 1575 at [6], and that review was approved by Hallen J in Tanamerah Estates Pty Ltd v Tibra Capital Pty Ltd (No 2) [2013] NSWSC 616 at [70], in ordering costs against a director who had there conducted the proceedings on the company's behalf.
Here, having regard to the matters identified by the High Court in Knight v FP Special Assets Ltd above, it is apparent that Mr Ferella has played an active part in the conduct of the application for Riva, so far as he signed the Notice of Motion as its authorised officer; was the deponent of the two affidavits which are relied on in respect of the application; appears to have instructed Mr Maroya in respect of the conduct of the proceedings today; and, presumably, has an interest in its subject matter. It seems to me that the conduct of the litigation was unreasonable, and it seems to me difficult to avoid that conclusion where I have found that the form of the Notice of Motion was in contravention of s 13 of the Act. It is not to the point that, in that respect, Mr Ferella may not have recognised that contravention, because the contravention of the Act nonetheless took place and Mr Ferella's involvement in it exposed the Official Trustee to costs that would otherwise not have been incurred.
For these reasons, I am satisfied that a third party costs order should be made. I order that Riva NSW Pty Ltd and Mr Ferella jointly and severally pay the costs of the Official Trustee in Bankruptcy of and incidental to the Notice of Motion filed on 2 June 2023 on an ordinary basis, as agreed or as assessed.
[9]
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Decision last updated: 03 August 2023