Smits v Loel

Federal Court of Australia|2015-02-13|Before: Rangiah J, Reeves J

An application for extension of time to seek leave to appeal 1 On 10 December 2014, on the application of the respondents, Rangiah J dismissed Mr Smits' proceeding under r 26.01(1)(d) of the Federal Court Rules 2011 (Cth) (the Rules), determining that it was an abuse of process because "the relief sought by Smits against Loel, Pioneer and Lillas & Loel involve[d] either a direct or collateral attack on the processes and orders of the Supreme Court": Smits v Loel [2014] FCA 1341 (Smits 2014) at [90]. 2 Mr Smits filed a notice of appeal from that judgment on 31 December 2014. 3 However, in early January 2015, the Registry alerted Mr Smits to the possibility that the judgment of Rangiah J may have been an interlocutory judgment, in which case Mr Smits had no right of appeal and instead he would need to apply for leave to appeal. 4 Accordingly, on 3 February 2015, Mr Smits filed an application for an extension of time to seek leave to appeal. 5 By that time, Mr Smits' application for leave to appeal was 19 days out of time: the time period set by r 35.13 of the Rules is 14 days after the judgment was pronounced, but in calculating that period r 1.61(5) of the Rules excludes the period from 24 December to 14 January (inclusive) each year, so the abovementioned period therefore expired on 15 January 2015. 6 The Registry was, in my view, correct in its opinion that the judgment of Rangiah J was an interlocutory judgment. As Mortimer J explained (correctly, in my respectful opinion) in Shaw v MAB Corporation Pty Ltd (2014) 220 FCR 425; [2014] FCA 62 (Shaw 2014) at [46], a judgment under r 26.01, based on a finding of abuse of process, does not finally determine the rights of the parties and is therefore interlocutory. This contrasts with a judgment under that rule based on an issue estoppel or res judicata. It also contrasts with a decision made on an application for summary judgment under s 31A of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act), which is deemed to be an interlocutory judgment under s 24(1D)(b) of the Federal Court Act.

The applicable tests 7 The Court has discretion to extend the time for taking any step fixed by the Rules, including the filing of an application for leave to appeal: r 1.39. The factors that are commonly taken into account in determining whether to exercise that discretion are that there must be a satisfactory explanation for the delay in filing the application and the application must have such prospects of success as not to render the extension of time an exercise in futility: see Sharman License Holdings Ltd v Universal Music Aust Pty Ltd [2005] FCA 802 (Sharman License Holdings) at [20] per Lindgren J. 8 The Court also has discretion to grant leave to appeal from an interlocutory judgment: s 24(1A) of the Federal Court Act. The usual factors bearing upon the exercise of that discretion are that the decision of the primary judge must be attended with sufficient doubt to warrant its being reconsidered by an appellate court and that substantial injustice would result if leave were to be refused, supposing the decision to have been wrong: see Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-400; and, more recently, Cement Australia Pty Ltd v Australian Competition and Consumer Commission (2010) 187 FCR 261; [2010] FCAFC 101 at [20]. 9 The application for extension of time to file an application for leave to appeal requires consideration of the prospects of success in the application for leave to appeal, which application, in turn, requires consideration of the prospects of success in the appeal. Given this, it follows that, in practical terms, both applications engage the former question; specifically, whether the primary judge's decision is attended with sufficient doubt to warrant its being reconsidered by an appellate court: see Sharman License Holdings at [20] per Lindgren J. Because I have ultimately concluded that there is no sufficient doubt in the correctness of the decision of Rangiah J to warrant leave to appeal being granted, it is not necessary for me to consider the other discretionary factors pertinent to each application as identified in [7] and [8] above: that is, whether there is a satisfactory explanation for the delay in filing the application for an extension of time and whether substantial injustice would result if the application for leave to appeal were refused. 10 I have set out below my reasons for reaching this conclusion: in that exercise, it is convenient to begin with a description of the background to Mr Smits' proceedings.

The mortgages and the seven Supreme Court proceedings 11 Rangiah J began his reasons for judgment by describing the parties to Mr Smits' substantive proceedings as follows: 3 The applicant, Leonardus Gerardus Smits ("Smits"), is a former solicitor. Smits was the sole director and shareholder of a company known as Zonebar Pty Ltd ("Zonebar"). Along with his wife, Smits was also a director of Togito Pty Ltd ("Togito"). Neither Zonebar nor Togito is a party to the present application, although Smits pleads that Zonebar has assigned its rights of action against the first and second respondents to him. 4 The first respondent, James Beresford Loel ("Loel"), is the sole director of the second respondent, Pioneer Investments (Aust) Pty Ltd ("Pioneer"). He is also a principal of the third respondent, Lillas & Loel Lawyers Pty Ltd ("Lillas & Loel"). I will refer to these parties collectively as "the respondents". 5 Loel also worked as a consultant for the fourth respondent, J M O'Connor and Company ("J M O'Connor"). J M O'Connor has taken no part in this proceeding. (Emphasis added) 12 Mr Smits' originating application was characterised by Rangiah J as "dense and difficult to navigate" such that it was "difficult to categorise the relief sought in a coherent or logical fashion": Smits 2014 at [6]. Nonetheless, his Honour was able to extract the following summary of the relief sought in it: 7 Against Loel and Pioneer, Smits seeks declarations and damages for breaches of various sections of the Trade Practices Act 1974 (Cth) ('the TPA') and for breach of duty and deceit and various orders aimed at undoing or negating a deed of settlement and orders made by the Supreme Court of Queensland ("the Supreme Court"). 8 Against Lillas & Loel, Smits seeks orders declaring void a deed that assigns the benefit of costs orders from Pioneer to Lillas & Loel. 9 Against J M O'Connor, Smits seeks the repayment of moneys said to have been paid out of J M O'Connor's trust account without authorisation. (Emphasis added) 13 The central issues that arise in Mr Smits' proceedings were succinctly stated by Rangiah J in the following terms (Smits 2014 at [10]): … whether, prior to Smits' acquisition of certain mortgages over real property, those mortgages had been "abandoned" by the assignor; and whether Loel acted fraudulently, misleadingly or in breach of fiduciary or other duty in failing to disclose the abandonment. The respondents deny that there was anything to disclose because there was no such abandonment. 14 The mortgages at the centre of these central issues came into existence in the following circumstances (as described in Smits 2014 at [12]-[15]): The real property concerned was a block of land at Yeppoon in northern Queensland which was owned by a company called Ammbar Pty Ltd (Ammbar); Ammbar had unsuccessfully attempted to develop the Yeppoon land; Receivers were appointed to Ammbar in November 2004 and a winding up order was made in relation to it in December 2005; During the intervening period (in 2005), Mr Loel was acting as a solicitor for a director of Ammbar and, at the same time, he was also acting as the solicitor for Mr Smits in other legal matters; Mr Loel invited Mr Smits and his friend Mr Kevin Richard Shirlaw (Shirlaw) to become involved with the Yeppoon land; Shirlaw became involved in his personal capacity and also as the receiver and manager of the company called Ostabridge Pty Ltd (Ostabridge); By November 2005, Ammbar had granted nine mortgages over the Yeppoon land to various parties. 15 From November 2005, no less than seven proceedings, including one appeal (the details of each are emphasised below), were commenced in the Supreme Court of Queensland which directly or indirectly related to the nine mortgages Ammbar had granted. The so-called "abandonment" issue (see the issues described in [13] above) was identified during the determination of the second of those proceedings. The background to the first two sets of proceedings and the emergence of the "abandonment" issue was described by his Honour in the following terms: 16 By Declaration of Trust dated 11 November 2005, Shirlaw (in his capacity as an individual and as receiver and manager of Ostabridge) as trustee was to acquire mortgages 702987988 ("the first mortgage") and 704246070 ("the second mortgage") and hold them on trust for Smits, Pioneer and Shirlaw (the beneficiaries) as tenants in common in equal shares. Shirlaw became the registered holder of the first and second mortgages on 14 November 2005 for consideration of $1,006,901. 17 On 18 November 2005, Shirlaw commenced proceeding BS 9791 of 2005 in the Supreme Court seeking leave to exercise his power of sale as mortgagee. Helman J granted leave by consent on 28 November 2005 on the undertaking of Shirlaw to pay the proceeds of sale into an interest bearing account in the names of Shirlaw, the receivers, Jefferson and Joiner, and Business Bridging Finance Pty Ltd. 18 Shirlaw entered into a contract for the sale of the Yeppoon land to Zonebar for approximately $3.4 million. Settlement occurred on 23 December 2005, with Zonebar paying approximately $1.9 million of the purchase price. It appears that the remaining $1.5 million was never paid. Shirlaw received proceeds of $1,868,112.32 once the costs of sale were deducted. It appears that $1,368,112.32 of the proceeds was used as consideration for the transfer of mortgages 703494840, 704544382, 707227959 and 709100851 to Shirlaw. The net proceeds of the sale, an amount of $500,000, were transferred into a joint account in purported compliance with the order of Helman J. 19 On 23 June 2006, in proceeding BS 336 of 2006 Holmes J determined a priority dispute between the various mortgagees and the receivers: Jefferson v Shirlaw [2007] 1 Qd R 162. The parties to this proceeding were the receivers of Ammbar, Shirlaw and Ostabridge and a number other mortgage holders. Neither Smits nor Loel were parties, although it appears that Loel acted for Shirlaw and Ostabridge as a solicitor with J M O'Connor. Her Honour found that the receivers' claim ranked subsequent to mortgages 703570735, 703494840, 704544382, 707227959 and 709100851. The first and second mortgages were not part of the orders made in this proceeding. Holmes J said at [5]: "[Shirlaw and Ostabridge] seek to have the receivers' claims dismissed and a declaration made that in effect postpones the priority of the receivers' claims to their rights under the third to sixth registered mortgages; they have abandoned any claim under the first and second mortgages." 20 The respondents claim that the "abandonment" described by Holmes J was simply a decision by Shirlaw and Ostabridge not to press for particular relief in the proceeding, not an abandonment generally of rights in relation to the first and second mortgages. (Emphasis added) 16 Mr Smits was a party to each of the third to fifth (inclusive) sets of Supreme Court proceedings that were subsequently issued in relation to some of the mortgages. Two of these proceedings were settled in mid 2007 when a Deed of Settlement was executed and consent orders were made in the Supreme Court, at least partly based thereon. Again, it is convenient to set out his Honour's record of this particular stage of the factual background to the substantive proceedings as follows: 21 Shirlaw (in his two capacities) as assignor and Smits as assignee executed a Deed of Assignment on 31 July 2006. Shirlaw assigned to Smits his right, title and interest in the second mortgage and the Declaration of Trust of 11 November 2005. On the same date, Shirlaw (again in both capacities) transferred the first and second mortgages and the other mortgages he had acquired to Smits for consideration of $100,000. In the present proceeding, Smits claims that he entered into these transactions without knowledge of the "abandonment" of the first and second mortgages. 22 On 1 August 2006, Pioneer commenced proceeding BS 6354 of 2006 in the Supreme Court against Zonebar, Shirlaw, Ostabridge, and Smits. The proceeding was brought to establish the interest Pioneer claimed in a caveat that it had lodged over the title to the Yeppoon land. Pioneer sought orders rectifying the title over the land. It appears that when funds were advanced to Zonebar to acquire the land, the second mortgage was removed from the register. The orders were sought to in effect reinstate the second mortgage; such orders being consistent with what was contemplated at settlement. 23 Pioneer also sought orders concerning the payment of the net proceeds of the sale of the Yeppoon land, the amount of $500,000. It contended that the $500,000 was held by Shirlaw on trust for Pioneer, Shirlaw and Smits. On 17 October 2006, de Jersey CJ ordered that the amount be paid into the trust account of Morgan Conley Solicitors to be invested by them in the names of Smits and Pioneer to abide the outcome of proceeding BS 6354 of 2006 or earlier order. 24 Matters unravelled further. On 22 November 2006, Pioneer commenced proceeding BS 10163 of 2006 against Smits. On 7 December 2006, Smits commenced proceeding BS 10707 of 2006 against Loel for damages for negligence and breach of fiduciary duty in respect of the mortgages and other transactions concerning the Yeppoon land. 25 Smits and Loel commenced negotiations with a view to settling all outstanding disputes and proceedings between them. On 13 June 2007, a Deed of Settlement ("the Deed of Settlement") between Pioneer and Loel on the one hand, and Zonebar and Smits on the other hand, was executed. The Deed of Settlement provided, inter alia, for the following: • Zonebar was to provide one lot in the Yeppoon land to Pioneer for a notional consideration of $200,000. • The parties to the Deed agreed to sign consent orders in proceedings BS 6354 of 2006 and BS 10707 of 2006 as set out in the Schedule to the Deed. The consent orders were to provide for the order of de Jersey CJ to be vacated on the basis of an agreement that part of the $500,000 plus accretions be paid to Smits and the balance to Pioneer. The consent orders were also to contain undertakings reflecting some aspects of the terms of settlement. • Smits was to assign his rights and interests in a costs order made by Holmes J against the receivers on 7 August 2006 to Pioneer in proceeding BS 336 of 2006. • Proceedings BS 6354 of 2006 and BS 10707 of 2006 would be discontinued with each party bearing its own costs. • The parties mutually agreed to forbearances to sue. 26 The consent orders described above were made by Chesterman J in proceeding BS 6354 of 2006 on 13 June 2007. The terms of the order were: "Upon the Plaintiff undertaking to: (a) assign absolutely to the Third Defendant for valuable consideration all rights, interests, estates, claims and choses in action asserted in these proceedings by the Plaintiff and otherwise arising out of or with respect to the subject matter of these proceedings. (b) admit that there was no Joint Venture as alleged by the Plaintiff in the pleading or otherwise in respect Lot 200 on SP 199666 [sic] at Yeppoon in the state of Queensland. Then subject to the plaintiff strictly complying with the terms of settlement the Third Defendant abandons his claim to the fund invested in the trust account of Morgan Conley Solicitors the subject of the orders of De Jersey CJ made 23 October 2006. THE ORDER OF THE COURT IS THAT: 1. caveat Nos. 709658190 and 710590745 be removed from the Register of Titles; 2. the orders of De Jersey CJ made 23 October 2006, and the orders of Muir J 18 December 2006, 28 February and 1 March 2007 and Chesterman J made 11 May 2007 be vacated and the parties be released from any associated undertakings; 3. the hearing date to be commenced 9 August 2007 be vacated; 4. the moneys held in this Honourable Court pursuant to the orders of Justice Fryberg in BS9791/05 made on 19 September 2006 and also pursuant to the orders of Justice Philippides made on 18 October 2006 in this proceeding, together with any accretions thereon, be paid to the plaintiff; 5. the application for costs assessment filed 23 April 2007 be dismissed with no order as to costs; 6. the Plaintiff be granted leave to discontinue the proceedings with no order as to costs." 27 A dispute arose as to payment of the money held by Morgan Conley in its trust account. On 2 August 2007, White J made a consent order in proceeding BS 6354 of 2006 which provided: "1. The moneys held in the trust account of Morgan Conley on behalf of (Pioneer and Smits) being $500,000.00 plus accretions of $31,679.91 ('the trust fund') be paid out in the following order and priority; (a) The sum of $22,000.00 be paid to the applicant/trustee's for his costs of and incidental to the holding of the trust fund; (b) The sum of $176,590.00 to (Smits); (c) An amount equivalent to 156590/500000 of the accretions of $31,679.91 be paid to (Smits); (d) The balance of the trust fund be paid to (Pioneer), payable to James Conomos Lawyers." (Emphasis added) 17 The sixth and seventh sets of Supreme Court proceedings related to a dispute between Togito (see [11(3)] above) and Pioneer, and another, concerning some of the mortgages. Togito was unsuccessful at trial and on appeal in those proceedings. The details of those proceedings were recorded by his Honour as follows: 29 On 6 June 2008, Togito commenced proceeding BS 5325 of 2008 against Pioneer and James Conomos ("Conomos") in the Supreme Court. The day before the Deed of Settlement was executed, Smits had assigned to Togito his rights and interests in the various mortgages. Togito was not a party to the Deed of Settlement and accordingly was not bound by any forbearance to sue. Smits was added as the third defendant by counterclaim. 30 Conomos had acted for Pioneer in proceeding BS 6354 of 2006. Part of the money in Morgan Conley's trust account was paid to Conomos' trust account under terms of the Deed of Settlement and White J's order of 2 August 2007. Togito claimed that Conomos had wrongly disbursed those funds to Pioneer and himself. 31 Margaret Wilson J dismissed both Togito's claim against Pioneer and Conomos and Pioneer's counterclaim for fraudulent misrepresentation against Togito and Smits: Togito Pty Ltd v Pioneer Investments (Aust) Pty Ltd & Ors [2010] QSC 421. Her Honour ordered that Togito and Smits pay the costs of the claim and that Pioneer pay the costs of the counterclaim. Togito appealed from the judgment of Margaret Wilson J in proceeding CA 159 of 2011. The appeal was dismissed and Togito was ordered to pay costs. (Emphasis added) 18 In addition to Mr Smits' proceedings in this Court, there is one other set of proceedings that was commenced in a federal court. It was commenced in the Federal Circuit Court. Nonetheless, it had its genesis in the costs orders that were made in the Supreme Court during the course of the Togito proceedings described above. His Honour described the details of that proceeding and the costs orders that gave rise to it as follows: 32 On 26 September 2013, a Deputy Registrar of the Supreme Court ordered that Togito and Smits pay Pioneer's costs arising from BS 5325 of 2008 in the sum of $237,415.83. In reliance on that order, on 14 October 2013, Lillas & Loel caused a bankruptcy notice and a Deed of Assignment between Pioneer and Lillas & Loel dated 29 July 2011 to be served on Smits. The Deed of Assignment had assigned the benefit of the costs order to Lillas & Loel. 33 In response, Smits commenced proceeding BRG 985 of 2013 on 31 October 2013 in the Federal Circuit Court of Australia ("the Circuit Court") seeking orders that, inter alia, the bankruptcy notice be set aside, that the bankruptcy notice is an abuse of process and that the purported Deed of Assignment is invalid due to want of compliance with s 199 of the Property Law Act 1974 (Qld). The Circuit Court proceeding remains on foot. The present proceeding was commenced on the same date. (Emphasis added)

How the abandonment issue and the fraud allegations were pleaded 19 Mr Smits' statement of claim was described by his Honour as "confusing, some allegations overlap, some are repetitive and some appear superfluous": Smits 2014 at [34]. Nonetheless, his Honour proceeded to identify how the central issues (see at [13] above) were pleaded in the statement of claim, as follows: 38 The amended statement of claim then deals with the so-called abandonment in the following terms: "18. In or about March 2006, Shirlaw, acting upon the advice of Loel, as a partner of [J M O'Connor], and without the knowledge of consent of the Smits, by deed or other instrument, and further or alternatively by conduct, abandoned any and all his rights (as Trustee under the Declaration of Trust) in relation to: (a) any said monies payable as aforesaid by Ammbar; (b) the Mortgages; and/or (c) any of the proceeds of sale of the Land ('Abandonment'). Particulars The Abandonment of these rights was admitted by Shirlaw in paragraph 16 of the Amended Statement in Reply filed by John M O'Connor & Company and signed by Loel on behalf of Shirlaw in Supreme Court proceedings BS336 of 2006, the affidavit by James Beresford Loel sworn on 24 April 2006 and allegedly filed in those proceedings, and a letter dated 2 May 2006 from John M O'Connor & Company (by James Loel) sent to Shirlaw. Further particulars will be provided following disclosure." (Errors and emphasis in original) 39 The amended statement of claim alleges that "none of the documents or facts referred to in the Particulars … nor the existence of the Abandonment was disclosed to Smits by Loel, nor by Shirlaw". Such non-disclosure is said to be in breach of fiduciary duties and to constitute unconscionable conduct and misleading and deceptive conduct in contravention of the TPA and the Competition and Consumer Act 2010 (Cth) ('the CCA') (which came into force approximately five years after the alleged abandonment). Smits further alleges that he did not discover the abandonment until June 2011, around the time of the appeal from the decision of Margaret Wilson J. 40 The amended statement of claim pleads that by two written assignments and a transfer executed by Smits and Shirlaw on 18 April 2005 and 31 July 2006, Smits "purchased all interests held by Shirlaw in any capacity inter alia in respect of the Mortgages, the said Contract of Sale and the said Trust Assets, including those related to the said Trust Ledger and as against [J M O'Connor] for consideration [of] $1,363,816.79", and that it was an implied term of those agreements that Shirlaw held title to "the Mortgages and the associated rights". The amended statement of claim alleges that by reason of the abandonment, Shirlaw, Pioneer and Smits did not have such title or any such rights. Smits alleges that Loel, Pioneer and Shirlaw "knew or ought to have known, turned a blind eye to or recklessly disregarded that state of affairs". Smits alleges that he assumed and was entitled to assume and likely to assume that Shirlaw did hold title to the mortgages and that the mortgages and the rights under the mortgages were valuable. Smits pleads that he did not know and had no reason to suspect the abandonment. He would not have proceeded with the purchase if he had been made aware of the abandonment. 41 The amended statement of claim pleads that: Smits relied upon Loel as the sole legal advisor to the joint venturers to advise as to "material changes in relation to the Mortgages"; that it was reasonably foreseeable that Smits would suffer economic loss if Loel, Pioneer or Shirlaw failed to take reasonable steps to correct the assumption that Smits was entitled to make; and that Loel, Pioneer and Shirlaw owed "duties of care, disclosure, trust and [duties] fiduciary in character to Smits". 20 Later in his reasons for judgment, Rangiah J identified the detriment Mr Smits claimed to have suffered by the failure to disclose the abandonment, some of which was connected with the proceedings in the Supreme Court described above. His Honour did so in the following terms: 43 The amended statement of claim alleges that as a result of the failure to disclose the abandonment, Smits and Zonebar suffered the following detriment: "(a) Smits entered into and completed the Purchase from Shirlaw; (b) Smits and Zonebar defended themselves in Proceedings BS 6354/2006 in the Supreme Court commenced by Pioneer on 1 August 2006; (c) Smits and Zonebar entered into a Deed of Settlement, including a Deed of Assignment in respect of the Mortgages dated 13 June 2007 with Loel and Pioneer … and Smits as assignee executed a Deed of Assignment in respect of Pioneer's interests under the Mortgages on 13 June 2007; (d) Smits consented to and procured the consent of Togito to Orders made in favour of Pioneer by Justice White on 2 August 2007 in Proceedings BS 6354/2006; and (e) Smits and Togito commenced and maintained Proceedings BS5325 of 2008 in the Supreme Court against Pioneer and James Conomos and the Appeal against the Judgment handed down by Justice Wilson in those Proceedings: Togito Pty Ltd v Pioneer Investments (Aust) Pty Ltd [2010] SCQ 421." (Errors and emphasis in original) 44 The amended statement of claim then alleges that if the abandonment had been disclosed Smits would not have entered the Deed of Settlement and would not have consented to the orders made by Chesterman J and White J. 45 Smits pleads that he was required to institute the present proceeding because of the service of the bankruptcy notice by Lillas & Loel for the purposes of, inter alia, s 40(1)(g) of the Bankruptcy Act 1966 (Cth). 21 As to the allegations of fraud, Rangiah J identified the following parts of Mr Smits' statement of claim: 42 The amended statement of claim alleges that Loel and Pioneer, by representing: "in their pleadings filed as from 1 August 2006 in Proceedings BS 6354/2006, 10707/2006 [and] 5325/2008 … represented dishonestly to Smits and the Supreme Court that the subject Mortgage rights were subsisting, continued to be governed by the Declaration of Trust and that Pioneer continued to be one of three beneficial owners as co tenants of those rights." Such conduct is alleged to be: "dishonest, in breach of fiduciary duty and misleading, deceptive and unconscionable conduct in trade or commerce in contravention of the said sections of the TPA and the CCA respectively and deceitful in equity." It can be seen that Smits alleges that Loel and Pioneer perpetrated a fraud on the Supreme Court. 22 Finally, Rangiah J detailed the relief Mr Smits had sought in his originating application. While his Honour later summarised that relief (Smits 2014 at [63]-[64]), since his Honour's dispositive reasoning (see at [23] below) contains a number of references to particular paragraphs and parts of the relief sought, it is appropriate to set it out in full, as follows: 47 The originating application claims the following orders against Loel and Pioneer: (a) An Order declaring that they engaged in misleading, deceptive and unconscionable conduct in trade or commerce in respective contraventions of Sections 52, 65A, 51 AA, 51AB, 51 AC and 75B of the Trade Practices Act 1974 (Cth) ('TPA'), as re enacted in Sections 18-22 of Schedule 2 ("ACL") and Section 75B of the Competition and Consumer Act 2010 (Cth) ('CCA') by not disclosing the Abandonment referred to in the Statement of Claim to the Applicant in respect of former Mortgages Rd. Nos. 702987988 and 704246070 as from about March 2005 and that they took unfair advantage of such silence in the conduct of inter alia Proceedings Nos. 6354/2006, 10707/2006 and 5325 /2008 and in relation to the negotiation, execution, implementation and enforcement of the said Deed of Settlement dated 13 June 2007 and made between inter alia those parties. (b) An Order in the equitable jurisdiction of this Honourable Court or under Section/s 237, 238 and 243 of the ACL or sections 82 and/or 87 of the TPA declaring Clause 3.2 (b) of and Item 3 of the Schedule 3 to the Deed of Settlement dated 13 June 2007 between James Beresford Loel, Pioneer Investments (Aust.) Pty Limited, Zonebar Pty Limited and Leonardus Gerardus Smits to be void as to any payment required to be made to Pioneer Investments (Aust.) Pty Ltd or James Conomos Lawyers Trust Account or varying the Contract embodied in that Deed in such a manner as is specified in the Order. (c) Further or alternatively, compensation or damages for losses pleaded in the Statement of Claim pursuant to the Sections referred to in paragraph (b) above. (d) An Order under Uniform Civil Procedure Rules 1999 (Qld), Rule 667 (2)(b) or Rule 668 setting aside the Final Orders made by Justice Wilson in Supreme Court Proceedings 5325/2008 and to re-pay the costs of and paid by the Applicant in relation to those Proceedings on an indemnity basis. (e) An Order under Uniform Civil Procedure Rules 1999 (Qld), Rule 667(2)(b) or Rule 668 setting aside the Final Orders made by the Court of Appeal in Proceedings No 159 of 2011 and to re-pay the costs of and paid by the Appellants on an indemnity basis. (f) An order that they refund to the Applicant the moneys paid to James Conomos Lawyers and/or Pioneer Investments (Aust.) Pty Ltd pursuant to the Orders made by Justice White on 2 August 2007 in Proceedings 6354/2006 (which amounted to $432,040.32 inclusive of interest as at 6 January 2010-the date of the Appeal) and all costs paid by the Applicant and /or Zonebar Pty Limited of those Proceedings and the Appeal. (g) Further or alternatively to the above, equitable compensation or damages. (h) Alternatively to the above, compensation pursuant to Rule 900(4) of the Uniform Civil Procedure Rules 1999 (Qld). (i) An Order that they pay damages to the Applicant, as agreed or assessed on enquiry by the Registrar, for breach of duty, deceit, and/or contraventions of the sections referred to in paragraph (a) above arising from the said misleading, deceptive and unconscionable conduct through the non disclosures of the Abandonment of rights in respect of Mortgages Rd. Nos. 702987988 and 704246070 between March 2005 and July 2011 to the Applicant.. (j) An Order setting aside or varying as specified in the Order, the Orders made on 2 August 2007 by Justice White in the Supreme Court in Proceedings 6354/2006 in so far as the Orders required the payment of any moneys to Pioneer Investments (Aust.) Pty Ltd. (k) An Order directing the refund or repayment of such moneys to the Applicant. (l) An Order to pay the costs of the Applicant incurred of and incidental in Proceedings 6354 /2006 and 1017/2007 on an indemnity basis. (m) Orders for damages under Section 244 of the Supreme Court act 1995 (Qld) in respect of the said breaches. (n) An Order declaring that the Applicant is entitled to set off, cross claim or cross demand any amounts ordered to be paid hereunder as against any amounts ordered to be paid by the Supreme Court by the Applicant to the Second or Third Respondent as Costs in relation to Proceedings No 5325 in the Supreme Court. (o) Such other orders, declarations and relief as this Honourable Court deems fit in the premises. (p) An Order that interest be paid on all amounts found to be payable to the Applicant pursuant to section 47 of the Supreme Court Act 1995 (Qld), section 60 of the Civil Liability Act 2003 (Qld) or any succeeding enactment or based upon equitable compensation. (q) Costs on an indemnity basis. (Errors and emphasis in original) 48 The originating application claims the following relief against Lillas & Loel: (a) That the Deed of Assignment purportedly dated 29 July 2011 and made between itself and Pioneer Investments (Aust.) Pty Ltd be declared to be void or unenforceable in the premises. (b) Alternatively that it is bound by the said orders made against Pioneer Investments (Aust.) Pty Ltd so as to estop enforcement of that Deed; (c) An Order declaring that the Applicant is entitled to set off, cross claim or cross demand any liabilities ordered to be paid hereunder as against any amounts ordered to be paid by the Applicant to it on 26 September 2013 by the Deputy Registrar in Proceedings 5325 of 2008 in the Supreme Court of Queensland. (d) Alternatively, an Order vacating that Order. (e) Such other orders, declarations and relief as this Honourable Court deems fit in the premises. (f) Costs on an indemnity basis. 49 Finally, the originating application seeks the following declarations and orders against J M O'Connor: (a) To re-pay to the Applicant the amounts stated in paragraph 2, less the amount referred to in paragraph 8 of the Statement of Claim on account of breaches of trust, breaches of implied conditions of the Retainer Agreement and/or misappropriation of such amounts. (b) Such other orders, declarations and relief as this Honourable Court deems fit in the premises. (c) Costs on an indemnity basis. (d) An Order that interest be paid on all amounts found to be the Applicant pursuant to section 47 of the Supreme Court Act 1995 (Qld), section 60 of the Civil Liability Act 2003 (Qld) or any succeeding enactment based upon equitable compensation. (Errors in original)

The dispositive reasoning 23 In deciding to dismiss Mr Smits' substantive proceedings, Rangiah J made the following observations and/or drew these conclusions: (a) the power to dismiss a proceeding for abuse of process is an exceptional power which ought to be very sparingly exercised and only in exceptional circumstances: Smits 2014 at [66]; (b) it is an abuse of process to bring a proceeding in order to make a collateral attack upon an unappealed decision of a Court, or upon a decision which, having been appealed, has been affirmed: Stergiou v McGrail (unreported, Full Court of the Federal Court, Burchett, Ryan and Gummow JJ, 22 April 1994): Smits 2014 at [67]; (c) it is also an abuse of process to bring a proceeding in a Court that is foredoomed to fail: Walton v Gardiner (1993) 177 CLR 378 at 393: Smits 2014 at [74]; (d) both Jessup J as primary judge (see Shaw v MAB Corporation Pty Ltd [2013] FCA 1231 (Shaw 2013) at [44]) and Mortimer J on the leave to appeal application (see Shaw 2014 at [60]) ruled that the Federal Court did not have the power to set aside orders made by the Supreme Court of a State even if such orders were allegedly obtained by fraud: Smits 2014 at [68]-[72] and [75]; (e) that principle applies with even more force, in this case, because Mr Smits was seeking to make a direct attack on at least three orders of the Supreme Court of Queensland: Smits 2014 at [73]; (f) the decision of Northrop J in Re Baxter; Ex parte Official Receiver v Baxter (1986) 10 FCR 398 at 401, to the effect that this Court did not have the jurisdiction or power to set aside an order of the Family Court, applies analogously to orders of a State Supreme Court: Smits 2014 at [76]; (g) s 118 of the Constitution prevents the Federal Court from challenging directly the judgment of a State Supreme Court, or ordering collateral relief in relation to the enforcement of a judgment of such a Court: Birdon Pty Ltd v Houben Marine Pty Ltd (2011) 197 FCR 25 at [96] per Keane CJ [sic - Rares J]: Smits 2014 at [77]; (h) accordingly, "[t]o the extent that the originating application seeks that orders of the Supreme Court be set aside, this Court has no power to make such orders and those aspects of the proceeding are also an abuse of process for that reason": Smits 2014 at [78]; (i) the relief sought in paragraph 1(a) of Mr Smits' originating application improperly seeks to make a collateral attack on the processes of the Supreme Court of Queensland. It does not avail Mr Smits to submit that Loel's alleged fraud "preceded and was independent of the proceedings themselves (but that the actions taken by [Mr] Smits following the fraud were influenced by the fraud)" because Mr Smits' originating application alleges in paragraph 1(a) that the fraudulent conduct occurred "in the conduct of" the proceedings concerned: Smits 2014 at [79] and [80]; (j) to the extent that the relief in paragraph 1(a) of Mr Smits' originating application seeks to set aside the Deed of Settlement that, too, involves a collateral attack on the orders of the Supreme Court of Queensland because the terms of that Deed, at least in part, formed the basis of subsequent consent orders, including undertakings, made in the Supreme Court of Queensland and thus "the parties' obligations under the Deed of Settlement have, at least in part, merged in the Supreme Court's orders": Smits 2014 at [82]-[85]; (k) each of the other orders sought by Mr Smits in his originating application involves either a collateral, or a direct attack, on the orders and processes of the Supreme Court of Queensland, or are inextricably linked thereto and, since "[t]he use of the Federal Court and its procedures for this purpose would bring the administration of justice into disrepute", the substantive proceedings are an abuse of process: Smits 2014 at [86]-[90]; (l) the Federal Court has no jurisdiction under the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) to grant relief under the Uniform Civil Procedure Rules 1999 (Qld) as sought in Mr Smits' originating application: Smits 2014 at [91]; and (m) it is unnecessary to consider the alternative basis for Mr Loel's application, namely that Mr Smits lacked any reasonable prospects of successfully prosecuting the proceeding: Smits 2014 at [92].

The errors relied upon by Mr Smits 24 The notice of appeal Mr Smits filed on 31 December 2014 alleged that Rangiah J committed four errors and failed to take account of seven matters that he should have. All but the last of the four alleged errors were cross-referenced to paragraphs of his Honour's reasons for judgment. Thus, Rangiah J is alleged to have committed errors in making the following findings: (i) That the Federal Court did not have power to set aside orders of the Supreme Court [76]. (ii) That in the proceedings the appellant was seeking to set aside orders of the Supreme Court [79]. (iii) That the appellant's claim for declarations [81] and damages [87] in respect of the alleged fraud in the Supreme Court proceedings from the Federal Court is an abuse of process and/or amount to a collateral attack on orders of the Supreme Court [85], [81], [90]. (iv) That it was appropriate to enter summary judgment in the pleaded case of fraudulent, misleading, deceptive and unconscionable conduct by the respondents. 25 The seven matters his Honour allegedly failed to take account of are as follows: (a) That the correct principle is that "fraud unravels all" and under the principles of comity the Court ought not to allow the orders of the Supreme Court to be used as an instrument of fraud. (b) That the impugned conduct of the respondents was not litigated in the Supreme Court. (c) That the relief claimed by the appellant was not an abuse of process not being an attack on the orders of the Supreme Court per se, either directly or collaterally but rather an attack upon the dishonest conduct in obtaining them and that for the present purposes the said orders should be treated as a nullity, as the Supreme Court was misled in the making of such orders. (d) That in so far as the application should be seen as an attack upon the orders (which is denied) that part of the relief sought was separable [sic - severable] from the application. (e) In the alternative, the court had jurisdiction to cross vest the proceedings and in the interests of justice ought to have done so on its own volition. (f) Lillas and Loel Pty. Ltd. was not a party to the Supreme Court proceedings and its alleged assignment has to be seen as a sham as pleaded and there is no justification for granting it summary judgment on any basis. (g) The proceedings were brought in the Federal court of Australia as they were engaging federal laws and the Supreme Court proceedings concerned a number of third parties who were not joined in the Federal Court proceedings and Lillas and Loel Pty. Ltd. was not joined in the Supreme Court of NSW proceedings .

The first alleged error 26 Dealing first with Mr Smits' first alleged error (that in [24(i)] above), it is cross-referenced to [76] of his Honour's reasons for judgment. The contents of that paragraph are summarised at [23(f)] above. Mr Smits has not explained anywhere in his draft notice of appeal or submissions why the authority cited in that paragraph is incorrect, inapplicable or distinguishable, nor why his Honour's conclusion that the principle stated in that authority was not analogously applicable to an order of a Supreme Court. Having considered that paragraph unaided by any explanation from Mr Smits, I am unable to detect any error in it. 27 It is possible that Mr Smits intended to cross-reference this alleged error to [75] of his Honour's reasons for judgment and thereby raise an issue about the decision in Shaw 2013 that was contained in his written and oral submissions. In case that is so, I will deal with this first alleged error on this alternative basis. As I understand this aspect of Mr Smits' submissions, he claims that his Honour should not have relied on the decision in Shaw 2013 because that decision is distinguishable. In his written submissions, Mr Smits identified the following reasons for distinguishing Shaw 2013: (a) Shaw 2013 was based on an Anshun estoppel and no such issue arose in Mr Smits' present proceedings because he did not become aware of the respondents' alleged fraudulent conduct until June 2011, after the relevant Supreme Court proceedings were completed. (b) The central alleged misconduct in Shaw 2013 occurred in the conduct of the proceedings before the Supreme Court whereas Mr Smit claimed he was not making such allegations in his present proceedings because the respondents' fraudulent conduct "preceded and was independent of the proceedings themselves". (c) At the time of the Shaw 2013 decision, there were still cases between the parties pending in the Supreme Court and that is not the case with Mr Smits' present proceedings. 28 As to Mr Smits' first ground for distinguishing the decision in Shaw 2013, he is correct in saying that that decision was partly based on "an abuse of process in the Anshun sense": see Shaw 2013 at [42]. However, immediately after making this finding, Jessup J then turned to consider the issue at a more general level. His Honour began that consideration by quoting from the decision of McHugh J in Rogers v R (1994) 181 CLR 251 (Rogers v R) at 286, as follows (Shaw 2013 at [43]): Although the categories of abuse of procedure remain open, abuses of procedure usually fall into one of three categories: (1) the court's procedures are invoked for an illegitimate purpose; (2) the use of the court's procedures is unjustifiably oppressive to one of the parties; or (3) the use of the court's procedures would bring the administration of justice into disrepute. 29 In the immediately following paragraph (Shaw 2013 at [44]), his Honour then made a number of observations about: the nature of the allegations made by the applicant in that case; the fact that those allegations related to conduct which was alleged to have taken place in the conduct of the proceedings; and the inevitability of the Supreme Court orders being set aside if the allegations made by the applicant were proved to be well-founded. Following these observations, his Honour said: "But the Federal Court does not have power to grant any such relief, and none is sought." Rather, his Honour noted, that: … what is sought is a series of declarations about the conduct of the respondents in relation to the original proceeding, and damages on account of the applicant having been subjected to the orders made by the Supreme Court. 30 His Honour then concluded (Shaw 2013 at [44]): The matter needs only to be viewed in this way for it to be clear that the use of the Federal Court and its procedures in this way would bring the administration of justice into disrepute, and very seriously so. 31 As Mortimer J remarked in Shaw 2014 at [56], while Jessup J did not mention the likelihood of conflicting judgments, the fact he had that vice in mind was apparent from his reasons. A similar observation can be made about his Honour's conclusion above. While he did not expressly refer back to the third category of abuse of process identified by McHugh J in Rogers v R, it is quite apparent from his reasons that it was that category of abuse of process that he had in mind. 32 It follows from this that Shaw 2013 was not based solely on an Anshun-type abuse of process, but instead was also based upon the third category of abuse of process identified by McHugh J: bringing the administration of justice into disrepute. 33 It is worth adding that Mr Smits' present proceedings do not just involve collateral attacks on the orders made by the Supreme Court. They also involve direct attacks on those orders, as Rangiah J pointed out in his reasons for judgment as follows (Smits 2014 at [73]): One point of difference between Shaw and the present case is that in Shaw the applicant did not seek orders setting aside orders made by a Supreme Court. Smits does. To that extent, this proceeding is a direct attack on orders of the Supreme Court of Queensland, not merely a collateral one. Paragraph 1(d) of the originating application seeks an order setting aside the final orders made by Margaret Wilson J in BS 5325 of 2008. Paragraph 1(e) seeks an order setting aside orders made by the Court of Appeal in CA 159 of 2011. Paragraph 1(j) seeks an order setting aside or varying the orders of White J made on 2 August 2007. To the extent that the originating application seeks such orders, the proceeding brings the administration of justice into disrepute and is an abuse of process. 34 I do not therefore consider Shaw 2013 is distinguishable on Mr Smits' first ground. 35 The second ground for distinguishing Shaw 2013 was also put to Rangiah J in similar terms. His Honour dealt with it by pointing out that Mr Smits had, in fact, alleged in the present proceedings that the impugned conduct of the respondents had occurred in the course of the proceedings before the Supreme Court. His Honour said (Smits 2014 at [80]): In his written submissions, Smits asserts that he does not make allegations about conduct said to have taken place "in the course of conduct of those proceedings", but is alleging that the fraud preceded and was independent of the proceedings themselves (but that the actions taken by Smits following the fraud were influenced by the fraud). However, the relief sought in paragraph 1(a) of the originating application is in its terms aimed at conduct said to have occurred "in the conduct of" the relevant proceedings. In addition, the amended statement of claim specifically pleads that Loel and Pioneer, by failing to disclose the abandonment in their pleadings in proceedings BS 6354 of 2006, BS 10707 of 2006 and BS 5325 of 2008 made dishonest representations to Smits and the Supreme Court. Thus, Smits alleges that Loel and Pioneer engaged in a fraud on the Supreme Court in the conduct of those proceedings. 36 Beyond making a bald allegation of error, Mr Smits did not explain why any of his Honour's observations above were affected by error. One only needs to read the relief sought by Mr Smits in the present proceedings (see at [22] above), together with the pertinent parts of his statement of claim (see at [21] above), to see that his Honour was quite correct. I therefore do not consider Shaw 2013 is distinguishable on Mr Smits' second ground. 37 As to the third ground for distinguishing Shaw 2013, while it is factually correct, I do not see how it affects the application of the principles illuminated by Jessup J in that decision relating to that category of abuse of process which involves bringing the administration of justice into disrepute. Certainly Mr Smits had not explained why it makes the decision in Shaw 2013 distinguishable in the present proceedings. I do not therefore consider it provides any basis for distinguishing Shaw 2013. 38 Since none of the three grounds for distinguishing Shaw 2013 has been made out, I do not consider there is any merit in Mr Smits' first alleged error, even if it is considered on this alternative basis.

The second alleged error 39 Turning, then, to Mr Smits' second alleged error (that in [24(ii)] above). It, too, is cross-referenced to a paragraph of his Honour's reasons for judgment that does not appear to contain a finding that corresponds to the alleged error. The paragraph of his Honour's reasons for judgment that appears to me to come the closest to a finding of the kind described is [73]. That paragraph of his Honour's reasons is already set out at [33] above. If I am correct in this assumption, Mr Smits has not given any explanation in his submissions as to why it is that Rangiah J was in error when he concluded that Mr Smits was indeed seeking to set aside various orders of the Supreme Court. The paragraphs of Mr Smits' originating application identified by his Honour plainly seek such orders. I am unable to detect any error in this aspect of his Honour's judgment.

The third alleged error 40 The third of Mr Smits' alleged errors is cross-referenced to various paragraphs of his Honour's reasons for judgment which relate to the Deed of Settlement and the consent orders that were partly based thereon, the background to which is explained at [16] above. The effect of those paragraphs of his Honour's reasons for judgment is summarised at [23(j)] above. There, his Honour concluded that the declarations Mr Smits had sought in relation to the Deed of Settlement (to have certain clauses declared void, for compensation for the payments made under it, and for an order that Loel and Pioneer refund the monies that were paid under the consent orders that followed) involved a collateral attack on the Supreme Court orders concerned. His Honour expressed his conclusion on this matter in the following terms (Smits 2014 at [84]-[85]): 84 The Deed of Settlement required the parties to consent to particular orders. The parties agreed that those orders would incorporate undertakings to the Supreme Court. The undertakings were given and a consent order made by Chesterman J on 13 June 2007 incorporated the undertakings. The undertakings are enforceable. The consent order and the Deed of Settlement are inextricably linked. Indeed, the order refers specifically to "the terms of settlement." 85 The Deed of Settlement cannot be set aside or treated as void when the parties' obligations under the Deed of Settlement have, at least in part, merged in the Supreme Court's orders. The orders sought in the originating application attack the Deed of Settlement on the basis of fraud and are necessarily linked to the paragraphs of the originating application that seek to have orders of the Supreme Court set aside on the same basis. Paragraphs 1(a), (b), (c), (f) and (k) amount to a collateral attack on the consent orders made by Chesterman J and by White J. 41 Yet again, Mr Smits has not explained why the observations made by his Honour and the conclusions he reached in these paragraphs of his reasons for judgment, are in error. Having examined those paragraphs, I consider his Honour's reasoning process is cogent: since the consent orders were made in the Supreme Court based in part on the Deed of Settlement and Mr Smits made certain payments under those orders, in seeking to set aside parts of the Deed of Settlement and to claim compensation for the payments so made, Mr Smits is plainly making a collateral attack on those orders. I do not therefore consider there is any merit in Mr Smits' third alleged error.

The fourth alleged error 42 The fourth and final error Mr Smits has identified is simply a general complaint about his Honour's judgment. It does not raise any specific error in the reasons for judgment and does not provide a basis for contending that his Honour's judgment is attended with sufficient doubt to justify it being considered by an appellate court.

The seven matters allegedly failed to account for 43 As with his four alleged errors, Mr Smits has provided no explanation as to why it is that any of the seven matters his Honour allegedly failed to take into account involved appealable error sufficient to justify leave to appeal being granted to him. He has provided no authority for the "principles of comity" mentioned in paragraph (a). Moreover, for the reasons given in both Shaw 2013 and Shaw 2014, it would be the antithesis of comity for this Court to set aside the orders of the Supreme Court in the circumstances raised by Mr Smits' proceedings in this Court. 44 As to paragraph (b), if Mr Smits' allegations are well-founded, they should be litigated in, and thereby brought to the attention of, the court whose processes and orders were allegedly tainted by them, namely the Supreme Court. The fact Mr Smits has chosen not to do that does not provide a basis for permitting him to do so in this Court. 45 The allegation of error in paragraph (c) has already been dealt with adequately above. 46 It is difficult to understand exactly what Mr Smits means by paragraph (d). If he wished to amend his originating application, or his statement of claim, to delete those parts that involve a direct or collateral attack on the orders of the Supreme Court, it was open to him to make such an application before his Honour. He did not do so. As it happened, in oral submissions before me, his counsel began by stating that Mr Smits did not pursue the offending paragraphs of the relief sought in his originating application. However, a short time later he resiled from that position entirely. Since Mr Smits' ultimate position before me was to maintain his claim to all the relief sought in his originating application, without himself deleting or severing any parts of it, it is impossible to see how his Honour made any error by proceeding on the same basis. 47 As to paragraph (e), in oral submissions Mr Smits' counsel confirmed that he had not made any application to cross-vest these proceedings before Rangiah J. In the absence of such an application, given that all parties were, and have been, represented by competent lawyers throughout, it is difficult to see what "interests of justice" would justify the Court making such an order of its own motion. Certainly Mr Smits did not identify any. While I am mentioning cross-vesting, it is worth noting that Mr Smits did seek to rely on the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) to seek certain relief under the Uniform Civil Procedure Rules 1999 (Qld). "For completeness", his Honour rejected that submission at [91] of his reasons for judgment. Mr Smits does not seek to challenge that finding. 48 Like the error identified in [24(iv)] above, paragraphs (f) and (g) contain general complaints about his Honour's judgment and other aspects of the proceedings. They do not speak of any specific error in his Honour's reasons for judgment. The comments I have made in [42] above therefore apply with equal force to these two paragraphs. It is unnecessary to reiterate those comments here.

Conclusion 49 For these reasons, I do not consider that Mr Smits has established that his Honour's judgment is attended with sufficient doubt to justify it being reconsidered by an appellate court. Since this conclusion is fatal to the success of Mr Smits' application for leave to appeal, it would be futile to grant him an extension of time to make that application. His application for an extension of time to seek leave to appeal must therefore be dismissed. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves.

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Supreme Court Act 1995(Qld)

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