HIS HONOUR: Michael Stankovic sues Charles Hockey for professional negligence. Mr Hockey is Mr Stankovic's former solicitor. He alleges that Mr Hockey was negligent and breached his retainer in several specified respects when acting for him in proceedings in the Federal Magistrates Court following sequestration of Mr Stankovic's estate. Mr Stankovic alleges that Mr Hockey's defaults caused him loss and damage said to amount to $35M.
For the reasons that follow, I consider that Mr Stankovic's claims are entirely without foundation and should be dismissed with costs.
[2]
Background
Prior to the sequestration of his estate in bankruptcy, Mr Stankovic was together with his former wife the registered proprietor of land in Kellyville in the Hills Shire. The Baulkham Hills Shire Council commenced proceedings against Mr Stankovic and his former wife in the Land and Environment Court seeking orders that the property be cleaned up and that they cease keeping pigs. Several judgments in those proceedings were published between 2005 and 2010. Although he contests the validity of the order that was made against him and the circumstances in which it was made, Mr Stankovic became indebted to the Council in respect of legal costs incurred in those proceedings. This is necessarily referred to below in more detail.
On 26 May 2008, the Council filed a creditor's petition in the Federal Magistrates Court, presumably based upon a failure by Mr Stankovic to comply with a bankruptcy notice demanding payment of the costs in question. On 28 April 2008, Kent Attorneys filed a notice of appearance as a supporting creditor in those proceedings. Kent Attorneys claimed approximately $240,000 in professional costs for acting for Mr Stankovic in the Land and Environment Court in his long running dispute with the Council. A sequestration order was made against Mr Stankovic on 12 May 2009, but despite the terms of s 37 of the Bankruptcy Act 1966, the proceedings were somehow stayed for 21 days until 2 June 2009. Messrs Van Der Velde and Cronan were in due course appointed as Mr Stankovic's bankruptcy trustees. The precise terms of the orders made by Federal Magistrate Raphael on 12 May 2009 were as follows:
Pursuant to s 33(1)(6) of the Bankruptcy Act 1966 I amend the name of the petitioning creditor to "The Hills Shire Council."
A sequestration order be made against the estate of Milovan Stankovic.
All proceedings under this order are stayed for a period of 21 days.
The applicant creditor's costs (including any reserved costs) be taxed (in accordance with the Federal Magistrates Court (Bankruptcy) Rules 2006) and paid from the estate of the respondent debtor in accordance with the Act.
Liberty to apply on 2 days notice.
On 20 May 2009, Mr Stankovic commenced separate proceedings in the Federal Magistrates Court by way of application seeking an annulment of his bankruptcy. Federal Magistrate Barnes made orders in both proceedings on 29 May 2009. Both the creditor's petition and the annulment proceedings were listed for 2 June 2009. That date was 21 days from the date of the sequestration order and corresponded with the last day of the stay ordered by Federal Magistrate Raphael.
On that day, Mr Hockey appeared before Registrar Hedge apparently on behalf of Mr Stankovic. Mr Stankovic maintains that he had not even met Mr Hockey at that stage and that Mr Hockey accordingly had no instructions from him either to appear or to consent to the making of orders of any sort. In the events that occurred the Registrar made the following orders in the creditor's petition:
Any application made (orally) by [Mr Stankovic] be dismissed.
[Mr Stankovic] pay the applicant's costs of 29 May 2009 and 2 June 2009 as taxed or agreed.
Mr K Gourlie appeared on that occasion for the Council. Mr T Orlizki appeared for Kent Attorneys as a substitute creditor. Each signed the general short minutes of order that contained these two orders. Mr Hockey signed them as the solicitor appearing for Mr Stankovic.
The annulment proceedings commenced by Mr Stankovic on 20 May 2009 came back before the Federal Magistrates Court on 28 July 2009. Mr Stankovic had attempted without success in the meantime to raise a loan to pay his creditors. The proceedings were on that occasion adjourned to 8 September 2009 when they were further adjourned to 13 October 2009. On that day Mr Hockey appeared for Mr Stankovic. Mr Stankovic does not dispute that on this occasion Mr Hockey did so with instructions from him. The court ordered that Mr Stankovic's annulment application should be dismissed. Mr Stankovic makes no complaint in these proceedings about what occurred on that day.
Mr Stankovic alleges in these proceedings that Mr Hockey acted on 1 and 2 June 2009 without instructions from him and that the dismissal of his oral application for an annulment was correspondingly arranged or consented to by Mr Hockey entirely without authorisation of any kind. Mr Stankovic alleges that Mr Hockey was therefore negligent and breached his duty of care to Mr Stankovic in a number of specified respects. He alleges that he sustained significant losses as a consequence.
Mr Stankovic has appeared without a lawyer in these proceedings although his pleadings reflect the likelihood that he had some professional assistance at one time. The relevant document is the fourth amended statement of claim filed on 6 March 2015. It is for presently relevant purposes in the following terms:
"3. On 1 June 2009, Charles Hockey filed a notice of appearance in the Federal Magistrates Court of Australia stating that he was the legal representative of Milovan Stankovic…in the matter of the Baulkham Hills Shire Council v Milovan Stankovic…
4. On 2 June 2009, Charles Hockey attended the Federal magistrates Court of Australia, allegedly still claiming to be the plaintiff's legal representative, and signed general short minutes of order. Such short minutes consented to the Court dismissal of the plaintiff's annulment application made on 29 May 2009 before federal Magistrate Barnes that the sequestration order made and stayed for 21 days by Federal Magistrate Raphael on 12 may 2009 to pay the judgment debtor to pay a sum of $25,000 and which was paid within time.
5. On 2 June 2009, the defendant Charles Hockey negligently advised the Court that the plaintiff had consented to this dismissal of the application for sequestration [sic, annulment].
6. At no time, including on 1 or 2 June 2009, was the defendant instructed to withdraw the plaintiff's annulment application.
7. On 25 May 2009, the plaintiff paid the sum of about $25,000 to the only petitioning creditor in the matter…being the Baulkham Hills Shire Council as per the order by Federal magistrate Raphael on 12 May 2009.
8. On or about 10 June 2009 the plaintiff spoke to the defendant who did not advise him that his annulment application was dismissed.
9. At no time did the defendant advise the plaintiff that his annulment application had been dismissed by consent."
Mr Stankovic's particulars of negligence and breach of duty assert that Mr Hockey failed in generic respects to heed his concerns or report regularly to him. Somewhat curiously, none of the specified particulars asserts that Mr Hockey acted without instructions on 1 or 2 June 2009. Mr Stankovic does, however, allege that Mr Hockey should in effect have realised, or investigated the possibility, that the proceedings in the Land and Environment Court had been dismissed by Lloyd J and that their reinstatement at a later time by a different judge was invalid. That is important from Mr Stankovic's position because the costs order upon which the Council relied in its bankruptcy notice, and which supported the making of the sequestration order, was made in the Land and Environment Court proceedings after their dismissal by Lloyd J. Mr Stankovic has consistently and repetitively asserted that his bankruptcy was invalid as a result. (This approach by Mr Stankovic somewhat stubbornly continues to ignore the fact, as explained by Pain J on 14 March 2005, that even though the proceedings had earlier been dismissed by Lloyd J on 16 February 2005 for want of prosecution, the Council was entitled to have them reinstated under the Land and Environment Court Rules 1996 Pt 15 rules 3 and 9, and that a timely application by the Council to do so had been made.)
Before proceeding further, it becomes important to understand Mr Hockey's version of what occurred with respect to the events of 1 and 2 June 2009 and up to at least 13 October 2009. In this respect I observe that although Mr Hockey served an affidavit upon Mr Stankovic sworn 1 September 2015, it was not read. This is in large part because Mr Stankovic somewhat incautiously took the step of calling Mr Hockey in his own case. Mr Lloyd of counsel for Mr Hockey was therefore able, in ways about which I cautioned Mr Stankovic beforehand, to cross-examine his client and to elicit the material to which Mr Hockey had previously deposed.
Mr Hockey said that Mr Stankovic attended his office on the morning of 1 June 2009. He came with Wayne Lawrence, who was Mr Hockey's former client. According to Mr Hockey, Mr Stankovic told him that he had been made bankrupt and that he wanted the bankruptcy annulled. Mr Hockey said that he attended the Federal Court on the afternoon of 1 June 2009 and filed an appearance. Mr Stankovic came back the following day and they walked to court together.
Mr Hockey said that he was later advised by the legal representatives of the Council, in Mr Stankovic's presence, that it was owed about $30,000 in rates in addition to the costs claimed in the bankruptcy notice. The representative of Kent Attorneys also advised Mr Hockey that it proposed to be substituted as the creditor as it was owed approximately $240,000 in legal fees incurred when previously acting for Mr Stankovic. Mr Hockey then proceeded to tell Mr Stankovic that he could not get an annulment because he still owed money to the Council and Kent Attorneys who would not agree to an annulment unless they were paid.
Mr Hockey said that prior to going to court on 2 June 2009, he did not know that Mr Stankovic had applied to annul his bankruptcy. He learned about the details of this from Mr Stankovic at court on that day. Mr Hockey said that he advised Mr Stankovic that he should consent to his oral application to annul the bankruptcy made in the creditor's petition being dismissed and to stand over his formal annulment application for a month. Mr Hockey said that Mr Stankovic agreed to that proposal.
That is what occurred. The other parties agreed to orders proposed by Mr Hockey. These were reduced to short minutes of order, which Mr Hockey said were shown to Mr Stankovic beforehand.
Following this court appearance, Mr Hockey and Mr Stankovic returned to Mr Hockey's office. Mr Hockey advised Mr Stankovic that he should go to the trustees' office and complete a statement of affairs. Mr Stankovic did this shortly afterwards. His statement of affairs is referred to below in more detail.
On or about 12 October 2009, which was the day before the annulment proceedings were due back in court, Mr Hockey spoke to Mr Stankovic and informed him that the court would not be inclined to grant him any further adjournments unless he could demonstrate a capacity to discharge any outstanding obligations to his creditors. Legal costs were also mounting unnecessarily and to no good effect if some prospect of paying all his debts could not be identified. Mr Hockey said he told Mr Stankovic that he should agree to have his annulment proceedings dismissed and that he could make another application later once he was able to borrow sufficient funds to pay his creditors and his wife agreed to sign a mortgage for that purpose. Mr Hockey said that Mr Stankovic agreed to that course.
When the annulment proceedings came back to the Court on 13 October 2009, Mr Hockey appeared for Mr Stankovic and withdrew his application.
On or about 18 October 2009, Mr Stankovic instructed Mr Hockey to represent him in the Family Court. In that context Mr Hockey settled Mr Stankovic's affidavits in chief and in reply to his wife's affidavit. He also appeared on numerous occasions before Justice Watts.
Some time prior to 18 March 2010, Mr Stankovic contacted Mr Hockey in order to discuss his continuing retainer. At his office on 18 March 2010, Mr Hockey told Mr Stankovic that if he wanted him to continue to act for him in the Family Court proceedings he would have to sign an authority before Mr Hockey could brief a barrister to appear. Mr Hockey said that Mr Stankovic took some documents and left.
Mr Stankovic subsequently filed an application without reference to Mr Hockey in the Family Court seeking an order that his former wife be required to sign a mortgage over their Kellyville property. Shortly after 29 March 2010, Mr Stankovic arrived unannounced at Mr Hockey's office. Mr Hockey advised Mr Stankovic that he should not have filed that application without discussing it with him first. After a discussion about the fact that Mr Stankovic had not by then been able to arrange for any finance to pay creditors, or a mortgage to present to his wife to sign, Mr Hockey informed Mr Stankovic that he could no longer act for him.
According to Mr Hockey, Mr Stankovic became agitated and was escorted from the premises. Mr Hockey ceased thereafter to act for him in any capacity.
[3]
Findings
For a number of reasons to which I will shortly refer, Mr Stankovic's claim is wholly misconceived. However, in the way of things, it is a fundamental part of Mr Stankovic's case that he never instructed Mr Hockey to act or to appear for him at any time before 3 June 2009 at the earliest and that all of his subsequent difficulties are the result of what Mr Hockey did on 1 and 2 June 2009. Even though at one level this dispute gives rise to a false issue, or at least an issue of minor significance, it has clearly preoccupied Mr Stankovic, almost to the point of obsession. It therefore requires resolution by me.
In my opinion, Mr Hockey was instructed by Mr Stankovic on 1 June 2009. There are a number of things that lead me to this conclusion.
First, it seems to me to be inconceivable that Mr Hockey would, or somehow could, have attended the Federal Court registry to file an appearance for a client he had never met, with respect to proceedings in which he had no interest, and (presumably) for no fee. It is a necessary element of Mr Stankovic's complaints that that is precisely what occurred, and yet he offers no plausible explanation of how or why such an extraordinary thing might have taken place. Both Mr Hockey and Mr Stankovic agree that they had never met before 1 June 2009 and were strangers both professionally and in every other sense. I am not prepared to accept that Mr Hockey in effect turned up out of nowhere to hijack Mr Stankovic's interests in the Federal Magistrates Court litigation against him. Lest there be any doubt about it, I entirely accept Mr Hockey's evidence about what occurred. I reject Mr Stankovic's evidence to the contrary. I do not accept that Mr Stankovic is merely mistaken in his recollections but find that he was actively attempting to mislead me by knowingly giving false evidence about this.
Secondly, Mr Stankovic executed a costs agreement with Mr Hockey covering the performance of legal work in the Federal Magistrates Court. That document is dated 1 June 2009. Mr Stankovic does not appear to deny that his signature is on the document. It is witnessed by Mr Hockey. The agreement defines the work anticipated to be performed by Mr Hockey as the bankruptcy proceedings between Mr Stankovic and the Baulkham Hills Shire Council, including advising generally and appearing on an annulment application, and liaising with the trustee.
Mr Stankovic was asked questions about the costs agreement and how and when his signature came to be inscribed upon it. His evidence about that is as follows:
"LLOYD: I want to suggest to you that on 1 June 2009 you signed a costs agreement in the form starting at page 123 -
A. Yeah.
Q. --in the presence of Mr Hockey.
A. The second - I looking for that signature, and that is totally wrong. It's never happen.
HIS HONOUR: Sorry, what's totally wrong?
LLOYD: What is totally wrong?
A. I never meet Hockey on 1 June.
HIS HONOUR: So I understand it - I'm sorry to interrupt, Mr Lloyd - your signature appears on the document at page 130. Is that right?
A. Yes, it appear there, but I never meet him.
Q. When did you sign that document?
A. Whatever that Charles Hockey put the date there.
Q. 1 June?
A. Well, if he put there, but never meet him, your Honour, because 29 was a Friday
Q. No, all I want to know is - if you signed that document - what day do you say you signed it?
A. Well, it's printed on top 1 June, but I never meet him.
Q. No, I don't care about when you met him. I'm asking you what day -
A. The day here say it is 1 June.
Q. Is that the day you signed it?
A. That's the day what is here, but I never meet him. How he create that, I don't know.
Q. I don't think you're listening to my question. What day -
A. 1 June.
Q. Please, what day do you say you signed the document?
A. What according here, 1 June.
Q. No, what day do you say you signed it?
A. I really can't remember, your Honour.
Q. Thank you.
A. I can't remember, because -
Q. That's all right. You can't remember.
A. --29 was a Friday. So it just cannot be that on Monday he called me and I accepted that he to go to put the short minutes of order.
Q. All I want to know is if you -
A. Sorry, your Honour, but that's - I try my best.
Q. Okay, you can't remember.
…
LLOYD: You met Mr Hockey on 1 June 2009 and had a conference with him.
A. No, never.
Q. And on 1 June 2009 you signed the document that I've shown you headed Costs Agreement.
A. That costs agreement is still again - it's happen like..(not transcribable)..that he start to work for me on 1 June. That is creation from him. Never happen."
That evidence does not assist Mr Stankovic who has in my view dishonestly resorted to the sanctuary of an imperfect recollection. It is difficult to reconcile his adamant and unqualified statements that he never met Mr Hockey on 1 June 2009 with the plain terms of the costs agreement that he accepts he executed and which bears that date. I find that Mr Stankovic executed the costs agreement in Mr Hockey's office on 1 June 2009 in Mr Hockey's presence. Mr Hockey gave evidence that that is what occurred and I accept it without qualification. I reject any suggestion by Mr Stankovic that Mr Hockey is lying about what occurred.
Thirdly, Mr Stankovic swore an affidavit in proceedings between him and The Hills Shire Council on 3 December 2012 that contained the following depositions:
"9 After my unsuccessful attempt to have the bankruptcy set aside or dismissed on 29 May 2009 I engaged Mr Charles Hockey to act for me when the matter was brought back before the Court on 2 June 2009.
10. On 2 June 2009 my application to have the sequestration order set aside came back before Registrar Hedge at the Federal Magistrates Court. Mr Hockey acted for me and told me not to attend, so I was not present. Mr Hockey signed short minutes of order along with Mr Kim Gourlie for the Hills Shire Council and Mr Tom Orlizki for Kent Lawyers, an alleged creditor, consenting to the dismissal of my application…I did not instruct Mr Hockey to sign those [short minutes] nor would I have ever consented to the terms in them…
11. I made another application to have the sequestration order/bankruptcy annulled after my first application was dismissed. On 13 October 2009 Mr Hockey again signed general short minutes of order stating that 'the applicant's annulment application be dismissed.' I was not present in court and was unaware of those proceedings. I did not instruct him to sign these nor did I consent to the terms of those orders…"
Mr Stankovic was cross-examined about this inconsistency as follows:
"LLOYD: Is what's set out in paragraph 9 true?
A. 'On 29 I engaged Mr Hockey to act for me, which this matter was brought back before the Court on 2 June.' That is there. It is true what is there, but I did not - how this is created, and I did not engage him on 29. On 29 I was in the Court by myself.
Q. No, Mr Stankovic, what you're saying in these words in paragraph 9 was that after you appeared on 29 May you engaged Mr Hockey to act when the matter was brought back before the Court on 2 June. Is that true?
A. No, according how is written here it is, but it's not true because I did not engage him. I did not engage him.
HIS HONOUR: Why did you swear that it was?
A. Well, your Honour, sometime - this is a massive writing and been done I think in Melbourne. I - and I have to read them here, send them back, and so and so, and sometime you just miss out that, but I did not engage Hockey to ask for me for that. It's not -
LLOYD: Where do you think the person who prepared this affidavit would have got that information from then?
A. He could get information actually that I give them that Charles Hockey was on - in 1st - on 1 June he went and put the appearance that he is my lawyer, and 2 June he went to open the door to go on 2 June and to act as my lawyer. I never engage. That's why I wanted, your Honour, to subpoena that time.
Q. Can you answer my question, though?
A. Yes. I didn't - I really don't know. He must get from this document.
HIS HONOUR: Just so that you understand the trouble -
A. This he must get from this document, your Honour.
Q. Just so that you understand what's engaging my mind at the moment, I'm just wanting to know how somebody in Melbourne, shortly before 3 December 2012, could prepare a document on your behalf that contains paragraphs 9 and 10 if that information didn't come from you. Can you help?
A. That information could come only from this paper what I may hand up for them, that Charles Hockey went on 2 June, on 1 and 2 June, and what Charles Hockey, you know, sign on 2 June they put in correspondence, so I did not know for three years, till 2012, what he did it. I only find out in 2012 that he went in the Court and asked my application to be adjourn, to be dismiss with the consent. If he did not done, I would still have my property today.
Q. When in 2012 do you say you found that out?
A. I find out - I try to get in the file in the Federal Court and the registrar said - I said I want to -
Q. No, no. When in 2012 do you say you found that out?
A. I can't remember the date, but a fellow Michael Woods was with me on level 17 and we went to the file and discover that something been put on 2 and 1 June in the file, and we find that, what Hockey did it.
HIS HONOUR: Yes, Mr Lloyd.
LLOYD: Had you finished?
A. Yes.
Q. Let me put this to you. The reason that the words in paragraph 9 that you engaged Mr Hockey to act for you when the matter was in court on 2 June 2009 are in this affidavit is because that's what you told your lawyer or your solicitor had happened, and so he included them.
A. No. All is by this paper. They include it by - I supply them that paper in 2012, not before, because I did not know what happen - what Hockey and three lawyer did that on 1 and 2 June. I did not - or has been hidden in correspondence and registrar did not ever before that to give me anything what is in correspondence. They said, 'You are not allowed to see that.'
Q. And the reason you swore this affidavit, including paragraph 9, is because it was true?
A. Well, it's what is there.
Q. It's true?
A. But it's not by me in saying. Only by see this paper.
Q. You see, isn't this the problem -
HIS HONOUR: Just hold on a second. In fairness, I think we need to identify what Mr Stankovic is referring to when he refers to 'this paper'.
Q. Is that the bundle you have in your hand?
A. That is a bundle I may pass to -
Q. No. Just listen to me. You've said that the reason it's in the affidavit is because it's been extracted, presumably, by your then solicitor from what's in 'this paper'.
A. Yes.
Q. And that's what you're holding up.
A. Yes.
Q. Show that to Mr Lloyd.
A. And including this.
Q. Right.
A. Including that.
Q. Yes.
A. It's written by Hockey.
Q. Yes, I know what it is. I just want it to be clear on the record.
HIS HONOUR: You see that, Mr Lloyd?
LLOYD: Yes, your Honour. Thank you, your Honour.
HIS HONOUR: Let me see those. Mr Lloyd, because I think I understand the manner in which Mr Stankovic relies on these, I would anticipate, if he were represented, he would want to tender these. I think the documents should be tendered.
LLOYD: I'm content to the tender, your Honour. I'm content to deal with it either way - if your Honour could invite Mr Stankovic to do it or, if he doesn't, I will.
HIS HONOUR: Do you want me to take notice of these documents?
WITNESS: Yes, your Honour."
Mr Stankovic contended that the affidavit in question was prepared by a solicitor in Melbourne and that the matters referred to in the quoted paragraphs were, in essence, included without his instructions or knowledge. Mr Stankovic maintained that the documents that became exhibit "A" were the probable source of the information included in the affidavit by the solicitor.
There are at least three problems with that. The first is that the documents contain no reference to whether Mr Stankovic was or was not present at court on any particular occasion. The source of that information could only have been Mr Stankovic. The second is that I have found that Mr Stankovic was present at court on 2 June 2009 so any assertion anywhere to the contrary is likely to have come directly from him in support of his claim that Mr Hockey acted without instructions. The third is that Mr Stankovic swore to the truth of the matters in these paragraphs in any event and has not in my view satisfactorily explained why I should not treat his present evidence about how the affidavit came to contain this material as a lie.
Finally, Mr Hockey gave evidence that Mr Stankovic came to see him on 1 June 2009 with Wayne Lawrence. Mr Hockey deposed to that in his 1 September 2015 affidavit that was forwarded to Mr Stankovic under cover of Kennedys' letter dated 2 September 2015. At least from as early as September 2015, therefore, Mr Stankovic was or should have been aware that Mr Hockey asserted that Mr Lawrence was someone who could confirm what Mr Hockey said had occurred. Mr Stankovic agreed before me that he had Mr Lawrence's contact details, had in fact spoken to him on the phone during the course of the hearing, and by implication could have called him to give evidence in his case.
I raised with Mr Stankovic the question of why in the circumstances I should not infer from his failure to call Mr Lawrence that nothing he could have said would have assisted Mr Stankovic. Having regard to the fact that Mr Stankovic is unrepresented, it is arguable that his response to this inquiry should not be given too much significance. On the other hand, Mr Stankovic is unfortunately no stranger to litigation and in the normal course of events would in my opinion have been alive to the fact that Mr Lawrence could have contradicted Mr Hockey if what Mr Stankovic said was true. I am therefore considerably troubled that Mr Lawrence's absence does give rise to the inference in question.
It seems also to be clear that Mr Lawrence was relevantly in Mr Stankovic's camp in the way that concept is understood in this context. For example, Mr Stankovic mentioned him in the following evidence:
"Q. By 12 May 2009 you had not met Charles Hockey?
A. Well, I really don't know why Charles Hockey - what he claim. He come on 1 June 2009 without I even to know. He come to the Court, but we can talk that later.
Q. Let me put this proposition to you, Mr Stankovic. You hadn't asked Mr Hockey to do any legal work for you at all in relation to any of your disputes anywhere as at 12 May 2009?
A. On 12 May 2009 he was not with me in the Court. I was representing myself, and only his friend Lawrence was with me there, so what that mean…
…
Q. It's right, isn't it, that you attended court and appeared for yourself before Barnes FM on 29 May?
A. That's correct, and why Lawrence was that time with me and not Charles Hockey, and 29 was on Friday.
…
Q. Sorry, Mr Stankovic, you mentioned to his Honour a number of times that there's some significance to the fact that 29 May was a Friday.
A. Well, I checked that, and maybe I'm wrong, but that's - that we check again. I think 29 of 2012 was a Friday.
Q. It's 2009. Does that affect your view about what day of the week it was.
A. Well, if it's two thousand and whatever was the possession order - 2009 or 2012, I can't remember, but I checked that and I see that 29 was a Friday and 29 Hockey was not with me, only his friend Lawrence was there.
…
Q. Do you agree that at some point on or after 2 June 2009 Mr Hockey told you you need to fill out a statement of affairs?
A. Hockey did not tell me that. Somebody else told me that.
HIS HONOUR: Who told you that?
A. His friend.
LLOYD: Mr Lawrence?
A. Yes.
…
Q. Mr Lawrence to your knowledge had been trying to find someone who would lend you some money, hadn't he?
A. Yes, that's correct, yes, and Hockey knew about that.
…
Q. You knew that an attempt had been made by Mr Lawrence on your behalf to secure some finance -
A. No, this is Wayne Lawrence - behind Wayne Lawrence, not him. Wayne Lawrence involved in all that.
Q. Whoever -
A. Did Wayne Lawrence contact him or so, I never discuss anything with Lawrence about that.
Q. Is what you're saying that the borrower was going to be Wayne Lawrence but the funds would be secured against your property?
A. Something like that, yes.
Q. And it was a $1.2 million loan. Correct?
A. Yes."
Mr Lawrence would appear to have been a former client of Mr Hockey. Even on Mr Stankovic's evidence, however, Mr Lawrence came to be helping Mr Stankovic, including going to court with him, before both Mr Stankovic and Mr Hockey say they had met. It seems evident in these circumstances that Mr Lawrence was someone who Mr Stankovic might reasonably have been able to secure as a witness if he had thought it would assist his case.
In summary, to the extent that Mr Stankovic maintains that he had never met or instructed Mr Hockey by 1 or 2 June 2009, or that Mr Hockey acted on his own account as some kind of officious intermeddler, I reject it.
[4]
Discussion
Although Mr Stankovic is clearly preoccupied with maintaining that Mr Hockey acted without reference to him, his more understandable and significant concern (at least on one view) is that the Council obtained its costs order invalidly, because the proceedings in question had been dismissed by Lloyd J and that they were not properly capable of reinstatement thereafter. This issue was considered by Foster J in his decision in Milovan Stankovic v The Hills Shire Council [2013] FCA 652. That case concerned a claim by Mr Stankovic for orders that his bankruptcy be annulled and that the Kellyville property be restored to him, or in the alternative that the respondents, who included Mr Hockey, pay him $35M in damages. Foster J summarised Mr Stankovic's contentions in this respect at [97] as follows:
"[97] Mr Stankovic's main contentions may be summarised as follows:
(a) On 16 February 2005, the L & E Court dismissed the L & E Court proceedings. Those proceedings were never reinstated. The orders made by Pain J on 14 March 2005 (including Order 8 being the costs order made against Mr Stankovic) were therefore of no effect and null and void. For these reasons, there was no judgment which could properly found the bankruptcy notice issued against him and no proper basis for the making of the sequestration order against his estate. All events that followed the dismissal of the L & E Court proceedings on 16 February 2005 were of no effect.
(b) On 12 May 2009, Raphael FM stayed all proceedings under the sequestration order made by him on that day for a period of 21 days. The Certificate of Appointment in respect of the trustees dated 18 May 2009 was issued by the Official Receiver within that 21 day stay period. The issue of that Certificate was a proceeding '... under the sequestration order ...' within the terms of that order and within the meaning of s 52(3) of the Bankruptcy Act. For that reason, it was a 'false' instrument and of no effect.
(c) As at 12 May 2009 and also as at 2 June 2009, Kent was not a creditor of Mr Stankovic because it had rendered fees and disbursements otherwise than in accordance with the operative costs agreement between Mr Stankovic and Kent. Also, Kent had not by then had their fees and disbursements assessed and quantified in accordance with the requirements of the LPA.
(d) When, on 2 June 2009, he agreed to orders in proceeding SYG 1333 of 2008 and the first annulment proceeding and on 13 October 2009 in the first annulment proceeding on behalf of Mr Stankovic, Charles Hockey did so without instructions from Mr Stankovic or by doing so acted contrary to Mr Stankovic's instructions.
(e) All of the lawyers involved on behalf of the Council, the trustees and Kent have conspired together to defraud Mr Stankovic. The object of this alleged conspiracy was to deprive Mr Stankovic of the property.
(f) Mr Stankovic was solvent at all times from 2004 until 12 May 2009. He was solvent when the sequestration order was made.
(g) When proper regard is had to the matters in sub pars (a), (c) and (f), Mr Stankovic should never have been made bankrupt. Furthermore, the conduct of the respondent parties has rendered them liable to him in damages under the ACL. The main allegations summarised above have some prospect of being upheld by the Court at a final hearing. This proceeding should not be summarily terminated."
Foster J dealt with Mr Stankovic's contentions at [122] - [127] as follows:
"[122] For Mr Stankovic ultimately to succeed in obtaining an annulment of his bankruptcy, he must satisfy the Court that the sequestration order ought not to have been made and he must persuade the Court to exercise its discretion in his favour.
[123] Mr Stankovic relies upon the matters in sub pars (a), (c) and (f) of [97] above as the reasons why a sequestration order against his estate ought not to have been made on 12 May 2009. That is, he argues that:
(a) This Court should look behind the costs order made by the L & E Court on 22 March 2005 and the default judgment entered in the Hornsby Local Court in 2007 and conclude that Mr Stankovic was never truly liable to the Council for the amount claimed in the relevant bankruptcy notice.
(b) Kent was not truly a creditor of Mr Stankovic on 12 May 2009 and could not have been substituted on that day as the petitioning creditor in the Creditor's Petition originally filed by the Council.
(c) In any event, Mr Stankovic was solvent when the sequestration order was made.
[124] As to Mr Stankovic's contention summarised at [123(a)] above, in my judgment, Mr Stankovic has no prospect of establishing at a final hearing of his annulment application that this Court ought to and would look behind the costs order made against him by the L & E Court on 22 March 2005 or that this Court ought to and would look behind the Local Court judgment in 2007 which gave effect to the assessment of those costs in accordance with the relevant assessment processes in operation at the time. My reasons for reaching this conclusion are:
(a) As at 16 February 2005, the date when Lloyd J made the order dismissing the L & E Court proceedings, the operative rules of Court in the L & E Court were the Land and Environment Court Rules 1996. Under those Rules, the Court was given a specific power to dismiss a proceeding in the L & E Court for want of prosecution (see Pt 12.2). In addition, those Rules provided that a judge might, on terms, set aside or vary an order of the Court given or made because the applicant has failed to prosecute the proceedings or has failed to appear at the time and place fixed for the hearing (Pt 15.3(1)). Part 15.3(2) of those Rules provided that any application seeking to engage the provisions of Pt 15.3(1) was required to be made within 28 days of the date upon which the Registrar provided the parties with a copy of the minute required to be made under rule 4. In addition, a very broad general power to set aside or vary an order made by the Court was given to the Court by Pt 15.9 of the Rules. In particular, the Court was empowered to set aside or vary an order if the order was made in the absence of a party, whether or not that party was in default, or if the order was interlocutory.
(b) The order made by Lloyd J dismissing the L & E Court proceeding was interlocutory.
(c) When proper regard is had to the matters referred to in sub pars (a) and (b) above, it is clear beyond argument that the L & E Court had ample power to set aside or vary the order for dismissal made by Lloyd J on 16 February 2005, even after that order was entered. It had all of the powers under its Rules which I have described at subpar (a) above and also probably had an inherent power to regulate its own processes in all relevant respects.
(d) The evidence before me does not specifically reveal, one way or the other, whether a judge of the L & E Court actually made an order setting aside the order for dismissal made by Lloyd J. Certainly, Mr Stankovic did not prove that no such order was ever made. However, at all times on and after 22 February 2005, both the L & E Court and the parties to the L & E Court proceedings (including Mr Stankovic) proceeded upon the basis that the order made by Lloyd J on 16 February 2005 had been set aside or was no longer in effect and upon the basis that the substantive application filed by the Council in the L & E Court needed to be heard and determined by that Court. That is why, on 4 March 2005, the L & E Court fixed 14 March 2005 as the hearing date for the Council's application and that is why Pain J heard and determined that application on 14 March 2005. Mr Stankovic did not take exception to the L & E Court proceeding in this fashion at the time nor did he raise for some considerable time thereafter the contention which he now makes before me to the effect that, at all times on and from 16 February 2005, the L & E Court proceedings were no longer in existence and had been finalised.
(e) Mr Stankovic took steps to attack the costs order made by Pain J by bringing the motion to which I have referred at [35] above. Her Honour disposed of that motion on 19 December 2008. I have discussed her Honour's reasons at [36]-[39] above.
(f) Mr Stankovic has never appealed or sought leave to appeal from the costs order made against him by Pain J on 22 March 2005 nor has he ever appealed or sought leave to appeal from the order which her Honour made on 19 December 2008 dismissing his application for an order that the L & E Court should set aside that costs order.
(g) Mr Stankovic has never taken any steps to attack or set aside the Local Court judgment giving effect to the quantification of that costs order. That judgment is now impregnable.
(h) Mr Stankovic took no steps to set aside the Bankruptcy Notice issued by the Council based upon the costs order and that Local Court judgment.
[125] As to the contention summarised at [123(b)] above, while it is true that Kent had not had its fees and disbursements assessed as at 12 May 2009 and while it is also true that, as at that date, Mr Stankovic may have been able to compel such an assessment, neither of these circumstances leads to the conclusion that Kent was not a creditor of Mr Stankovic as at 12 May 2009. In any event, because the Council had an impregnable judgment for an amount in excess of the relevant threshold amount for bankruptcy purposes as at 12 May 2009 and given that it was the applicant in the Creditor's Petition, the precise status of Kent as at that date is of no present significance. The simple fact is that the Council was appropriately placed to seek a sequestration order against Mr Stankovic's estate on that day and was justified in doing so.
[126] As to the contention referred to in [123(c)] above, Mr Stankovic has not added to the evidentiary material that was before Raphael FM on 12 May 2009 as to his financial position as at that date. It is, of course, true that, as at 12 May 2009, the value of Mr Stankovic's assets exceeded by a substantial amount the quantum of his liabilities. Nonetheless, he was unable to establish to the satisfaction of Raphael FM that he was capable of meeting his liabilities as and when they fell due. Raphael FM approached his consideration of the question of solvency in an entirely orthodox and appropriate manner. The conclusion which he reached was certainly open to him and was, in my view, correct in any event. Mr Stankovic has no prospect of establishing to the satisfaction of the Court that the sequestration order ought not to have been made on the ground that he was solvent as at 12 May 2009.
[127] For the reasons explained at [121]-[126] above, I have come to the conclusion that Mr Stankovic has no prospect and certainly no reasonable prospect of meeting the threshold requirement for annulment specified in s 153B of the Bankruptcy Act, namely, that the Court would be satisfied at the final hearing that the sequestration order ought not to have been made. That conclusion necessarily leads to the further conclusion that his annulment application has no prospect and certainly no reasonable prospect of succeeding."
Mr Stankovic's currently pleaded particulars of negligence against Mr Hockey include the following:
"(d) Failed to conduct proper and accurate investigations into the law and the facts as asserted in the instructions of the plaintiff.
(e) Failed to raise the issue of law, to wit, that the Land and Environment Court decision of Lloyd J was a final order and that matter number 41243 of 2004 was finally dismissed for want of prosecution.
…
(g) Failed to accurately state to the plaintiff the nature and extent of the land and Environment Court as well as the regulations and rules of that court."
The burden of Mr Stankovic's complaint is that Mr Hockey should have in some unexplained way become aware that the costs judgment upon which the Council relied to support the issue of its bankruptcy notice was invalid or flawed so that his sequestration order could be somehow challenged or set aside. There are a number of obvious responses to these allegations.
First, Mr Hockey said he was never instructed to do so. This is not surprising as by my reckoning Mr Stankovic never appears to have formulated this concern until sometime well after Mr Hockey terminated his relationship with Mr Stankovic. So much is clear from the fact that Mr Stankovic did not raise any such issue with Federal Magistrate Raphael on 12 May 2009 when the creditor's petition came before him. Nor is there any reference to it thereafter in the Federal Magistrates Court proceedings and judgments that have been drawn to my attention.
Secondly, Mr Stankovic has not given any evidence that he instructed Mr Hockey to examine this question or that he provided him with any information or instructions about what occurred in the Land and Environment Court proceedings from which it might reasonably be inferred that Mr Hockey was or should have been on notice of such a potential problem and taken steps to pursue it.
Thirdly, as appears from the reasons for judgment of Federal Magistrate Barnes on 5 June 2009, Mr Stankovic had been concerned to "set aside" his bankruptcy, not upon the basis that the judgment for costs supporting the bankruptcy notice was invalid but upon the basis that he had paid the amount claimed. Nowhere in her Honour's reasons is there anything at all suggesting or implying that Mr Stankovic was then alive to an argument that the costs judgment was vulnerable.
Fourthly, even if for some reason Mr Hockey should be taken to have owed a duty of the type contended for, I can see no basis for concluding that proceedings to challenge the validity of the costs order would have produced any result that was different from the conclusions reached by Foster J. Accepting for the sake of argument that Mr Hockey breached the duty alleged, Mr Stankovic would not have been in any different position. He would not have been able to obtain an annulment of his bankruptcy or avoid the consequences of the sequestration order upon the basis that the costs judgment was invalid. Mr Hockey could not have been negligent by failing to raise or to draw Mr Stankovic's attention to a legal argument that was without merit and doomed to fail.
[5]
Damages and causation of loss
Mr Stankovic has not provided any evidence to quantify his claimed losses. I accept that he was once the registered proprietor with his former wife of a property at Kellyville that was itself valuable. It is not in dispute that the property had development potential and that it was worth many millions of dollars. It was sold on 14 September 2010 for $6.7M. It was encumbered by a mortgage of only $100,000 and there were no other creditors with a secured interest in it.
The fact that this property was ultimately sold to pay creditors may on one view amount to a loss. Mr Hockey contends, however, that Mr Stankovic neither suffered any compensable loss as the result of his bankruptcy nor was any alleged loss caused by anything that Mr Hockey did or failed to do. Mr Hockey reasoned as follows.
From an inspection of his statement of affairs it is apparent that Mr Stankovic owed unsecured creditors something in the order of $717,000. That included $246,000 owed to Rodney Kent for legal fees. Mr Stankovic declared that his statement of affairs was accurate on 13 July 2009.
Also in his statement of affairs, Mr Stankovic declared that he was in receipt of a disability support pension and that it was his only then current source of income. Mr Hockey and Mr Lawrence would appear to have attempted to obtain finance for him to discharge his creditors. The evidence suggests that Mr Stankovic sought to raise as much as $1.5M for this purpose without success. Mr Hockey argued that in the absence of any demonstrated ability to secure finance in effect to enable Mr Stankovic to retain the property for the purposes of developing it, it was inevitable that it would be sold by his trustee on behalf of his creditors. Mr Stankovic's difficult financial position was described in some detail in Mr Hockey's letter to him dated 16 March 2010. Mr Stankovic did not take issue with the accuracy of the matters to which that letter refers.
Mr Stankovic's former wife was also entitled to some interest in the property. The precise extent of that interest in not disclosed on the evidence before me. There were proceedings current in the Family Court when Mr Hockey was acting for Mr Stankovic. Indeed, he was retained to represent Mr Stankovic in that litigation. Mr Stankovic would in all likelihood have had to accommodate the value of his wife's interest in the property. The evidence does not reveal that she was willing at any stage either to sign a mortgage for the purposes of raising capital to pay off Mr Stankovic's unsecured creditors or that she was otherwise willing to postpone receipt of her share of the proceeds of sale. The net proceeds of sale of the property were ultimately paid into a solicitor's account by order of the Family Court pending distribution between Mr Stankovic and his former wife in accordance with orders made in that court: see Sresbodan & Sresbodan and Ors [2015] FamCA 515.
Mr Stankovic's case is that Mr Hockey had no instructions to act for him until sometime after 2 June 2009. By then the so-called stay granted by Federal Magistrate Raphael had expired. The consent orders entered into on 2 June 2009 dismissed an oral application made by Mr Stankovic, not his formal application for annulment that was not dismissed until 13 October 2009. The oral application was made on 29 May 2009 and sought either to set aside the bankruptcy notice or extend the stay granted on 12 May 2009. However, there was no legal basis for that application because there was no power to extend the stay: see Gould v Day [2002] FCA 66. To the extent that Mr Stankovic wanted to set aside the sequestration order made on 12 May 2009, the Court correctly noted on 29 May 2009 that there was no power to do so. If the consent order had not been made, or if Mr Hockey had not attended on 2 June 2009, the court would in all likelihood have made the same order. Any putative negligence by Mr Hockey in entering into that consent order without instructions or authority to do so would therefore not satisfy the "but for" causation test in s 5D(1)(a) of the Civil Liability Act 2002. It was probably inevitable that the order would have been made regardless of the conduct of Mr Hockey.
Even more fundamentally, Mr Stankovic's case is based upon a misconception about what happened on 2 June 2009. It is apparent that Mr Stankovic maintains or continues for some reason to believe that his annulment application was dismissed on that day. That is incorrect. His annulment application was not dismissed until 13 October 2009 by consent. Mr Stankovic pleads no cause of action and makes no pleaded complaint about anything done or not done by Mr Hockey on his behalf on that day. Even if he did, the dismissal of his annulment application was inevitable because he was not in a position to satisfy his unsecured creditors.
The extent of Mr Stankovic's misconception is revealed in the following passage of transcript during his cross-examination before me:
"Q. In fact, your annulment proceedings came back to the Court on 13 October 2009.
A. How can come back when it was dismissed on 2 June with consent?
Q. I want to put this proposition to you: that the day before your annulment proceedings were listed on 13 June Mr Hockey said to you that you couldn't show that you were able to pay out all of your debts and that you should agree to the annulment proceedings being dismissed.
A. He only said that my wife did not want to sign and there is no way to - and he said he will go in the Court by himself without me, but he went again with the same three people.
Q. And he said that you could file a further annulment application if your wife agrees to a mortgage and the mortgage documents are settled. He said that to you.
A. No, that is not discussed with him at all.
Q. I want to put to you that, after he said that to you, you agreed; that is to say, you agreed to have your annulment proceedings dismissed on 13 October 2009.
A. He said that he will go in court by himself and ask the Court, because there is no finance available, and he went again by himself. He ask me to go by himself, and the reason he ask to be by himself, because he was bringing with him the two other lawyers."
It is at least apparent from that evidence that Mr Stankovic was content for Mr Hockey to proceed to have the annulment application dismissed by consent on 13 October 2009. With the minor exception of what appears in paragraph 11 of the 3 December 2012 affidavit, there is no suggestion that what occurred was not in accordance with his instructions. In any event, Mr Stankovic incurred no losses between 2 June 2009 and 13 October 2009. Any losses that he might have suffered thereafter were wholly unconnected to any possible breach of duty or negligence by Mr Hockey. It was always open to Mr Stankovic to reapply to have his bankruptcy annulled if the circumstances could have supported it. Foster J rejected just such an application in 2012.
Finally, while Mr Stankovic's current statement of claim contains a reference to legal costs, no evidence has been led to support such a claim. There is also no evidence to support a claim for any loss allegedly occasioned from work performed by Mr Hockey in the Family Court litigation.
[6]
Conclusion
Mr Stankovic has clearly become irrationally preoccupied by what happened on 1 and 2 June 2009. He ascribes his present unfortunate position to those events. However, for any relevant legal purpose they are completely unconnected. Mr Stankovic has not demonstrated any breach of duty owed to him by Mr Hockey.
It follows in these circumstances that the proceedings should be dismissed with costs.
[7]
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Decision last updated: 08 February 2016