Shaw v Official Trustee in Bankruptcy of the Australian Financial Security Authority

Introduction 1 These reasons relate to two interlocutory applications seeking to stay proceedings NSD 9 of 2022 and NSD 42 of 2022 in the appellate jurisdiction of this Court pending the determination of proceedings VID 361 of 2021 in the original jurisdiction of the Court in which the relief sought includes the making of a vexatious proceedings order under s 37AO of the Federal Court of Australia Act 1976 (Cth) (FCA Act) (VPO proceedings). 2 The applicant on the stay applications is the Official Trustee in Bankruptcy, the respondent in both the appellate proceedings. The Trustee is represented by Counsel in these applications. The respondent in each of the stay applications is John Shaw, a bankrupt, who is the moving party in the appellate proceedings. Mr Shaw is self-represented. 3 The appellate proceedings are comprised of NSD 9 of 22, an appeal from Shaw v The Official Trustee in Bankruptcy of the Australian Financial Security Authority (No 3) [2021] FCA 1569 (Shaw No 3), and NSD 42 of 2022, an application for an extension of time and for leave to appeal from interlocutory decisions made in the course of the substantive proceedings. I will refer to proceedings NSD 9 of 22 and NSD 42 of 2022 together as the appellate proceedings. 4 For the reasons that follow, I am satisfied that it is desirable and in the interests of justice that the appellate proceedings are temporarily stayed pending the determination of the VPO proceedings, VID 361 of 2021.

Procedural history 5 On 11 June 2014, Mr Shaw was declared bankrupt and a sequestration order was made. The Trustee, a body corporate created under the Bankruptcy Act 1966 (Cth) that administers bankruptcies and other personal insolvency arrangements, became trustee over Mr Shaw's bankrupt estate and took control of his property: Yarranova Pty Ltd v Shaw (No 2) [2014] FCA 616. An appeal from those orders was dismissed on 12 December 2014: Shaw v Yarranova Pty Ltd [2014] FCAFC 171. The Trustee has a statutory role that is undertaken by Australian Financial Security Authority (AFSA), an agency of the Commonwealth executive. AFSA provides personnel and resources that allow the Trustee to perform its role. 6 On 19 October 2019, Mr Shaw commenced proceedings NSD 1690 of 2019 which give rise to the two appellate proceedings that are the subject of the present stay applications. In essence, Mr Shaw sought an enquiry into the conduct of the Trustee in the administration of his bankrupt estate with a view to obtaining compensation for loss and damage alleged to arise from breach of duty by the Trustee. Mr Shaw's complaints against the Trustee included that the Trustee acted negligently, unconscionably and unreasonably in respect of the sale of three properties formerly owned by Mr Shaw and which vested in the Trustee upon Mr Shaw becoming bankrupt. 7 Proceedings NSD 1690 of 2019 were heard before Wigney J on 8 and 9 October and 25 November 2020 and 20 April 2021. 8 On 9 October 2020, the Court dismissed an interlocutory application by Mr Shaw in the proceedings NSD 1690 of 2019 in which he sought orders striking out parts of the Trustee's defence, summary judgment and an injunction restraining the Trustee's solicitor from participating in "ongoing matters relating to the administration of [his] estate": Shaw v The Official Trustee in Bankruptcy of the Australian Financial Security Authority (No 2) [2020] FCA 1575 (Shaw No 2). 9 During the hearing on 9 October 2020, Mr Shaw caused a subpoena to be issued to AFSA seeking production of documents relating to AFSA's administration of bankrupt estates. The documents subpoenaed included an AFSA manual and AFSA guidance documents. The Trustee moved to set aside the subpoena on the basis that the documents the subject of the subpoena were irrelevant and the subpoena was an abuse of process. The Trustee's application was heard on 25 November 2020 at which time the Court set aside the subpoena, made an order for limited production by the Trustee and granted leave to Mr Shaw to reopen his case for the purpose of tendering any documents produced by the Trustee. 10 On 22 January 2021, Mr Shaw filed an interlocutory application by which he sought to "reopen [the] hearing, [admit] fresh evidence and review…orders made on [9 October 2020] and [25 November 2020]". Mr Shaw also sought to (i) re-examine a witness; (ii) restrain the solicitors for the Trustee on the basis of an alleged conflict of interest; (iii) leave to amend his pleadings; and (iv) obtain orders for production and an extension of time to file and serve his final submissions. Mr Shaw's application was heard on 20 April 2021 and the Court reserved judgment. 11 After the conclusion of the hearing in proceedings NSD 1690 of 2019, and while the decision was reserved, several relevant things happened. 12 First, on 18 March 2021, Mr Shaw commenced proceedings QUD 127 of 2021 in the Queensland Registry of this Court against ten employees of AFSA alleging breaches of fiduciary duty, misfeasance in public office, malicious prosecution and unconscionable conduct under s 13 of the Public Service Act 1999 (Cth) and ss 19 and 134 of the Bankruptcy Act (AFSA proceedings). Mr Shaw sought letters of apology, damages, exemplary damages and costs. On 7 October 2021, the AFSA proceedings were temporarily stayed pending the outcome of proceedings NSD 1690 of 2019 (including with respect to any appeal): Shaw v Singh [2021] FCA 1207 (Collier J). Collier J considered there to be an extensive overlap between the issues the subject of Mr Shaw's claims in both proceedings NSD 1690 of 2019 and the AFSA proceedings, notwithstanding that in the first proceedings Mr Shaw claimed against the Trustee whereas in the second proceedings Mr Shaw claimed against various employees of the Trustee. Both proceedings concerned conduct alleged in effect to amount to breaches of various statutory and fiduciary duties owed by the Trustee in relation to the disposal of various properties formerly owned by Mr Shaw. As noted, at the time the AFSA proceedings were temporarily stayed the decision in proceedings NSD 1690 of 2019 was reserved. 13 Secondly, on 2 July 2021, the Trustee commenced proceedings the VPO proceedings in the Victorian Registry of this Court. The relief the Trustee seeks in the VPO proceedings relevantly includes: 1. An order that pursuant to s 37AO(2) of the Federal Court of Australia Act 1976 (Cth) that the respondent be prohibited from instituting any proceeding in this Court without leave of the Court. 2. An order that any extant proceeding instituted in this Court by the respondent prior to this order be dismissed, or alternatively be stayed pending leave of the Court to continue the proceeding pursuant to order 1. 14 As events have unfolded, the appellate proceedings that are the subject of the present application, while not on foot at the time the VPO proceedings were commenced, will answer the description of being extant proceedings at the time relief in the VPO proceedings falls to be determined within prayer 2 extracted above. 15 On 28 September 2021, a timetable was set down for the preparation of the VPO proceedings for hearing. On 21 October 2021, the Trustee filed a document that articulated the grounds relied upon in support of its application. A date for the hearing of the VPO proceedings had not been allocated at the time of hearing the present application and an application to reallocate the proceedings to the Queensland Registry had not been determined, see further at [20] below. 16 The grounds upon which the Trustee seeks a vexatious proceedings order is that Mr Shaw is a person who has frequently instituted or conducted vexatious proceedings in Australian Courts within the meaning of s 37AO of the FCA Act in that Mr Shaw has instituted or conducts proceedings that agitate the same or similar issues; instituted or conducted proceedings which are habitual, repetitive and persistent; and/or had disregard to the merits prior to instituting proceedings. It is relevant in the context of the present stay applications that, in its grounds of application in the VPO proceedings, the Trustee particularises proceedings NSD 1690 of 2019 as: (1) one of the proceedings that it contends are vexatious proceedings that Mr Shaw has instituted and/or conducted against the Trustee; (2) one of the several proceedings or applications in which Mr Shaw has sought the same or similar relief - namely, an order restraining the Trustee's solicitor from acting - in a way that is habitual, repetitive and persistent and with a disregard for the merits prior to instituting the proceedings; and (3) one of the several proceedings or applications in which Mr Shaw has sought the same or similar relief - namely, an order for an inquiry in relation to allegations of improper conduct on the part of the Trustee or AFSA employees undertaking the Trustee's work in respect of the administration of his bankrupt estate - in a way that is habitual, repetitive and persistent and with a disregard for the merits prior to instituting the proceedings. 17 On 17 November 2021, Mr Shaw lodged for filing with the Registry an interlocutory application in the VPO proceedings seeking an order under r 30.01 of the Federal Court Rules 2011 (Cth) for a hearing of separate questions arising in the proceeding. In the alternative, Mr Shaw sought summary dismissal of the VPO proceedings on the basis that the proceedings were an abuse of process. Further and in the alternative, Mr Shaw sought further and better particulars of grounds of the Trustee's claim. Mr Shaw's interlocutory application was accepted for filing on 9 February 2022 and is yet to be determined. 18 On 17 December 2021, judgment was delivered and final orders were made dismissing proceedings NSD 1690 of 2019 and dismissing Mr Shaw's interlocutory application filed 22 January 2021: Shaw No 3. 19 On 10 January 2022, Mr Shaw commenced the two appellate proceedings, outlined at [3] above. NSD 9 of 2022 is an appeal from the final orders made in Shaw No 3 in which the Court found that Mr Shaw failed to demonstrate any error or misconduct on the part of the Trustee, and found that there was no basis for ordering the Trustee to compensate or reimburse the estate for any losses or expenses incurred, or for ordering an inquiry into the Trustee's conduct. As mentioned above, at the same time, the Court also dismissed Mr Shaw's interlocutory application to reopen and delivered reasons for that decision. NSD 42 of 2022 is an application for an extension of time and leave to appeal from various interlocutory decisions of Wigney J in the course of proceedings NSD 1690 of 2019, namely the dismissal of Mr Shaw's strike out and summary dismissal application described at [8] above, the orders made by his Honour in respect of the subpoena to AFSA which are the subject of Shaw No 2, and his Honour's rejection of Mr Shaw's application to restrain the Trustee's solicitors from acting. 20 On 25 February 2022, the Trustee filed the present interlocutory applications, seeking identical orders in each of the appellate proceedings, being an order pursuant to r 1.32 of the Rules and/or s 23 of the FCA Act that the appellate proceedings be stayed until the determination of the VPO proceedings. At that time, it appeared that the VPO proceedings would be heard on 22 March 2022. That hearing was vacated due to the unavailability of the Court. At the time the present stay applications were heard, it appeared that the VPO proceedings were unlikely to be heard for some time. Post the hearing of the stay applications, the Registry has confirmed that the VPO proceedings will be reallocated within the Court with a view to the proceedings being determined sooner than was otherwise anticipated.

Stay application 21 Rule 1.32 of the Rules provides that the Court may make an order that the Court considers appropriate in the interests of justice. 22 Section 23 of the FCA Act provides that: The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate. 23 The Court has jurisdiction temporarily to stay proceedings in the interest of justice, as a matter of judicial discretion. The general principles are well-established: Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) v Oswal [2011] FCA 424 at [8]-[22] (McKerracher J), approved in Oswal v Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) [2011] FCAFC 117; 85 ACSR 531, 537 at [29] (Mansfield and Foster JJ, with whom Dowsett J agreed at 552 [109]); Apotex Pty Ltd v Les Laboratoires Servier (No 6) [2012] FCA 745 at [6] to [16] (Bennett J); Porter, in the matter of Slater (No 2) [2020] FCA 1547 at [29] - [31] (Markovic J). 24 In exercising the available discretion, each case turns on its own facts. As Bennett J observed in Apotex (at [16]), little direct assistance is gained from analysing other cases, save than to observe that some general principles apply when two proceedings form the basis for an application for a stay of one of them, including the right of an applicant to have its proceedings determined. The burden is on the applicant contending for the stay to show that it is just and convenient to interfere with the other party's ordinary rights. The Court will look to the factors that, generally, balance the advantages and disadvantages to each party and to the Court. A stay will be appropriate where there are two separate proceedings between the same parties with related subject matter and where the hearing of one of the proceedings may dispose of the need for the second. Another factor which is relevant for the Court to consider in exercising the discretion to temporarily stay one proceeding until another is determined is the risk of inconsistent findings in the two proceedings in respect of related or overlapping subject matter. The Court may exercise its discretion where the interests of justice would be served by a stay of the proceedings: Clorox Australia Pty Ltd v International Consolidated Business Pty Ltd [2005] FCA 1135; 66 IPR 506, 507 to 508 at [5] (Sunberg J). 25 The overarching purpose of the civil practice and procedure provisions in s 37M of the FCA Act must also be borne in mind. While the authorities concerning the exercise of the Court's discretion to stay proceedings have generally focussed on s 23 of the FCA Act, s 37M is also relevant. In exercising its discretion, the Court will consider the efficiency and costs implications involved in the duplication of proceedings, including with respect to the efficient use of the administrative resources available to the Court: Porter at [30]; Apotex at [8] to [10].

Trustee's submissions 26 The Trustee seeks to stay the appellate proceedings on the basis that the interests of justice would be served by its grant. The Trustee submits that judgment in favour of the Trustee in the VPO proceedings will affect the appellate proceedings because the orders, if made, would apply to all existing proceeding commenced by Mr Shaw as at the date the order is made. Importantly, this includes the appellate proceedings. The Trustee further submits that, if the appellate proceedings are allowed to continue prior to the determination of the VPO proceedings, the Trustee may unnecessarily incur costs of participating in and defending the appellate proceedings in circumstances where the Court in the VPO proceedings may find that proceedings NSD 1690 of 2019 have been commenced and/or conducted vexatiously, as contended by the Trustee. The Trustee did not file evidence in relation to prejudice, relying instead on submissions as to the potential for wasted costs if the appellate proceedings are not temporarily stayed. 27 The Trustee further argued that the appellate proceedings should be stayed because of the risk of inconsistent findings. The Trustee submits that if the appellate proceedings are not stayed temporarily, there is a risk of inconsistent findings being made by an Appeal Court and the Court in the VPO proceedings in relation to matters that are substantially the same, notwithstanding that the matters fall to be considered in different contexts in the appellate proceedings and the VPO proceedings. 28 The Trustee did not make any submission directed to the merit, or otherwise, of the grounds of appeal or the merits of the application for extension of time and leave to appeal.

Mr Shaw's submissions 29 Mr Shaw submits that the stay applications are premature and should not be determined until after his interlocutory application in the VPO proceedings is determined. Mr Shaw submits that the stay applications are an abuse of process, contrary to the principles of natural justice insofar as the Court is being required, in considering the stay applications, to pre-determine the outcome of the VPO proceedings, which are subject to an extant strike out application. That submission appears to be based on a misapprehension that the appellate proceedings could only be stayed if the Court was satisfied that the underlying proceedings - that is, NSD 1690 of 2019 - were conducted vexatiously or were otherwise unmeritorious. 30 Mr Shaw did not file evidence as to prejudice. He submits that any stay of the appellate proceedings, if granted, would unfairly prejudice his defence of the VPO proceedings. Again, Mr Shaw's submission appears to be predicated on the misapprehension that to stay the proceedings would necessarily involve the Court concluding that he had commenced and/or conducted proceedings NSD 1690 of 2019 in a manner that was vexatious. 31 Mr Shaw further submits that to stay the proceedings pending the outcome of the VPO proceedings would involve lengthy delay, which he estimates could be as long as two years, before the VPO proceedings are heard. Mr Shaw submits that this potential delay must be weighed against the fact that he is 64 years of age.

Trustee's submissions in reply 32 In response to Mr Shaw's submissions on delay, the Trustee submits that the relief sought by Mr Shaw in the proceedings NSD 1690 of 2019 is varied but is, in essence, compensation for loss and damage. Further, it submits that if Mr Shaw is successful on appeal, and ultimately in obtaining an award of compensation for the alleged loss and damage, that award would attract interest and in the usual course, costs would follow the event. As such, it is the Trustee's position that the prejudice of which Mr Shaw complains is not an impediment to the grant of a temporary stay of each of the appellate proceedings when weighed against the prejudice to the Trustee and the risk of inconsistent findings in the appellate proceedings and the VPO proceedings.

Consideration 33 I am persuaded that a temporary stay pending the determination of the VPO proceedings in the terms sought by the Trustee is warranted in each of the appellate proceedings. There are three key reasons for this. 34 First, I consider that there is a risk of inconsistent findings being made in respect of the matters in issue in the appellate proceedings and in that part of the VPO proceedings based on Mr Shaw's institution and conduct of proceedings NSD 1690 of 2019. The risk derives from the fact that the relief sought by the Trustee in the VPO proceedings will require the Court, in its original jurisdiction, to consider and decide whether the appellate proceedings should be dismissed or, alternatively, stayed pending leave being granted under s 37AR of the FCA Act. In its consideration of the Trustee's application in the VPO proceedings, it is likely that the Court will be required to assess and determine whether Mr Shaw's institution and conduct of proceedings NSD 1690 of 2019 (whether alone or in combination with other proceedings conducted by him), justifies the making of the orders sought by the Trustee in the VPO proceedings. It is in the interests of justice for the Court to avoid the prospect of inconsistent findings in relation to substantially similar issues, albeit arising in different contexts, and in different parts of the Court's jurisdiction. To permit the appellate proceedings to proceed concurrently with the VPO proceedings in which the Court will be required to assess whether the proceedings the subject of appeal were commenced or conducted vexatiously would not be a proportionate and efficient use of the Court's resources. 35 Secondly, balancing the relative prejudice as between the parties, in the circumstances of these proceedings, also favours granting the temporary stays. 36 The appellate proceedings are at a relatively early stage of preparation. The appellate proceedings have not been actively progressed since the Trustee filed the stay applications. The stay applications were filed expeditiously. At that time, the VPO proceedings were listed for hearing in the near future. In filing the stay applications, the Trustee was motivated to stem the potential for costs to be incurred in the appellate proceedings that would be wasted, and potentially irrecoverable given Mr Shaw is a bankrupt, if the Trustee succeeds in obtaining a vexatious proceedings order. By way of contrast, the relief sought by Mr Shaw in the appellate proceedings arising from NSD 1690 of 2019 is essentially for compensation for loss and damage. If Mr Shaw is ultimately successful in his claim for compensation for loss and damage, he will be entitled to interest. 37 During the hearing, Mr Shaw submitted that any delay arising from the determination of the appellate proceedings would be prejudicial to him due to his age and having regard to the lengthy history of his bankruptcy and the likely length of time any stay would be in place. Mr Shaw contended that the VPO proceedings may not be determined this year, or in fact, in the next two years due to the limited availability of the Court. Following the hearing and upon enquiries being made with the Registry, it appears that the VPO proceedings will be reallocated within the Court with a view to the VPO proceedings being listed for hearing before the appellate proceedings are likely to be heard in the ordinary course. I am satisfied that the likely length of the temporary stays of the appellate proceedings is unlikely to result in significant prejudice to Mr Shaw. 38 In the event that the Trustee succeeds in the VPO proceedings, there is a prospect that the appellate proceedings will be either dismissed, or alternatively, subjected to a requirement for leave to proceed. To obtain a grant of leave, an applicant is not obliged to demonstrate that the proceeding concerned must succeed, only that it is reasonably arguable and that it itself is not a vexatious proceeding: Crocker, in the matter of Crocker [2019] FCA 432 at [12] (Logan J); Mbuzi v Griffith University [2015] FCA 862 at [16] (Rangiah J). In considering whether leave ought to be granted under s 37AR(2) of the FCA Act in respect of an appeal, a Court will have regard to the merits of the grounds of appeal as if that appeal had been regularly instituted: see Fuller v Toms [2015] FCAFC 91; 234 FCR 535, 540 at [19] (Besanko, Logan and McKerracher JJ). In those circumstances, there is a risk that the relief sought by the Trustee in the VPO proceedings insofar as it is directed to the appellate proceedings may be circumvented if the appellate proceedings are not temporarily stayed. 39 I am conscious that Mr Shaw has an appeal as of right, that he has exercised in proceedings NSD 9 of 2021 and that while his appeal was necessarily instituted after the VPO proceedings were commenced, the primary proceedings (NSD 1690 of 2019) preceded the VPO proceedings. This is a factor that I have weighed in Mr Shaw's favour as counting against the grant of the temporary stays. However, this factor is outweighed by the other factors I have outlined above. 40 For these reasons, I am satisfied that the prejudice to the Trustee arising from the continuation of the appellate proceedings outweighs the prejudice to Mr Shaw occasioned by the grant of a temporary stay. 41 Finally, in finding that the Court's discretion should be exercised to grant a temporary stay of each of the appellate proceedings, I am mindful of the overarching purpose of the civil practice and procedure provisions. The objectives of the overarching purpose are served by the efficient use of judicial and administrative resources and the determination of disputes in a quick and inexpensive manner: ss 37M(1)(b) and (2)(b). In my view, to allow appellate proceedings from primary proceedings that are subject to an extant dispute as to whether those proceedings were commenced and or conducted vexatiously to be progressed ahead of the determination of that dispute would not be consistent with the overarching purpose. To my mind, it is this factor that weighs most heavily in the relatively unusual circumstances of the present stay applications. I am satisfied that the grant of the stay is consistent with the overarching purpose embodied in s37M of the FCA Act. 42 Accordingly, I will make an order that the appellate proceeding be temporarily stayed pending the outcome of the VPO proceedings. I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cheeseman.