Wakim v Official Trustee in Bankruptcy

REASONS FOR JUDGMENT 1 On 20 February 2001 Einfeld J gave judgment for the respondents in three proceedings (George Wakim v HIH Casualty & General Insurance Ltd & Ors [2001] FCA 103). These were George Wakim v HIH Casualty & General Insurance Ltd (NG 981 of 1993), George Wakim v Peter J McNally and Terrence J McNally trading as "Lobban McNally & Harney" (NG 65 of 1994) and George Wakim v The Official Trustee in Bankruptcy (NG 8252 of 1997). These reasons for judgment relate to applications for an extension of time in which to appeal in respect of the decisions adverse to Mr Wakim in the McNally and The Official Trustee in Bankruptcy proceedings (those applications for extension are respectively N 282 of 2001 and N 279 of 2001). There is also an application for an extension of time in relation to the decision adverse to Mr Wakim in the HIH proceeding (application for extension N 281 of 2001), but that matter is complicated by the appointment of a liquidator to the successful respondent HIH Casualty & General Insurance Ltd ("HIH") and these reasons for judgment do not relate to that application. 2 The litigation has had a lengthy history which I will not repeat, although it is necessary to say something briefly about the background facts. The story begins with the suffering of personal injury by Mr Wakim when, apparently, he was employed by the partnership of Tedros Nader and his wife Nawal Nader. Mr Wakim obtained a judgment in the Supreme Court of New South Wales against Mr Nader for $786,801.45. On 9 October 1985 Mr Nader filed a debtor's petition in bankruptcy, and became a bankrupt on 18 October 1985 when a Deputy Registrar of this Court accepted the petition. The Official Trustee in Bankruptcy ("the Trustee") became trustee of Mr Nader's bankrupt estate. 3 A question arose as to any entitlement of the Trustee to recover, in substance for the benefit of Mr Wakim, any amount from the partner Mrs Nader. A deed was entered into between the Official Receiver on behalf of the Trustee and Mr Wakim on 19 May 1987, which provided for the commencement and maintenance of certain litigation by the Trustee for the benefit of the bankrupt estate and payment of the proceeds to Mr Wakim in exchange for his undertaking to indemnify the Trustee for its legal costs. The Trustee's solicitors were the firm "Lobban McNally & Harney", to which I will refer simply as "Mr McNally". The solicitors took advice from the late Mr Cholmondeley Darvall QC, who apparently advised, at least at the time of the advice, that the Trustee was not entitled to recover from Mrs Nader. The Trustee and Mr McNally acted on that advice and a claim against her was not pursued. 4 In the proceedings before Einfeld J, Mr Wakim sued Mr Darvall QC, Mr McNally and the Trustee, alleging various breaches of duty by them. After the commencement of the proceeding against Mr Darvall, but prior to the hearing, Mr Darvall died, and his insurer, HIH, was substituted as respondent for Mr Darvall in proceeding NG 981 of 1993. 5 On Tuesday 20 February 2001, the day on which Einfeld J delivered reasons for judgment, Mr Wakim instructed Mr Hurley, solicitor, to appeal against all three unfavourable decisions. Mr Wakim was funded by the Legal Aid Commission in the proceedings. On the hearing before me of the applications for an extension of time in which to file a notice of appeal, the testimony of Mr Wakim and Mr Hurley was that Mr Wakim's instructions were "firm" and were simply to appeal. Indeed, the effect of the evidence is that Mr Wakim's instructions were to appeal, whatever legal advice might be given as to the prospects of success. 6 It was irresponsible of Mr Wakim to give those instructions to Mr Hurley and it was irresponsible of Mr Hurley to accept them. It is an easy thing for a litigant who is not at risk as to costs to give such instructions. Part of the problem which later beset Mr Hurley is that he was apparently seeking to assist Mr Wakim, without appreciating that by accepting instructions in the unqualified form in which Mr Wakim's were given he placed himself in a position of great difficulty. It would have been a different matter if, for example, he had made clear to Mr Wakim that he could not accept those instructions but would act for Mr Wakim for the limited purpose of applying for legal aid to obtain an advice as to the prospects of an appeal. But the fact remains that Mr Wakim gave unqualified instructions on 20 February and Mr Hurley accepted them. 7 Three days later, on Friday 23 February, Mr Hurley wrote to the Legal Aid Commission of New South Wales ("Legal Aid") seeking funding to obtain an advice as to prospects of success. It was put by the respondents against the grant of the extension of time that, in effect, this was not a necessary step in view of the unqualified nature of the instructions given and accepted on 20 February. I do not agree. Notwithstanding the unqualified nature of those instructions, it was prudent for Mr Hurley to seek funding to obtain the advice. In any event he did so with the knowledge and acquiescence of Mr Wakim. To the extent necessary, there was a variation of the initial instructions. 8 On Sunday 25 February Mr Hurley read the reasons for judgment of Einfeld J and had a conference with Mr Wakim. 9 On Monday 5 March Mr Hurley telephoned the Registry of the Court to check the time permitted for an appeal. Previously Mr Hurley had believed that this was a period of 28 days from the date of Einfeld J's decision, a period which would expire on 20 March 2001, but the Registry of the Court made it clear that the period was only 21 days: see Federal Court Rules O 52 subr 15(1). Accordingly, as from Monday 5 March, Mr Hurley knew that Mr Wakim had only until 13 March, a further eight days, in which to file a notice of appeal. 10 On Wednesday 7 March Legal Aid replied to Mr Hurley's letter of 23 February, approving of the briefing of Mr Graves SC for advice as to whether Mr Wakim had "reasonable prospects of success". Mr Hurley received that letter the next day, Thursday 8 March. On the same day, 8 March, he briefed Mr Graves SC with a copy of Einfeld J's judgment. Mr Hurley did not, however, have possession of the papers relating to the substantive proceeding. Apparently they were held by Mr Robert Crawford, solicitor, of Watson and Watson. In any event, Mr Graves SC had only Einfeld J's reasons for judgement on which to base his advice. On Friday 9 March, however, he conferred with Mr Ogborne of counsel, who had been junior counsel on the hearing before his Honour. 11 On Friday 9 March only four days remained for the filing of a notice of appeal. Mr Hurley was conscious of the fact that the settling of a notice of appeal would have to be undertaken by counsel, depending on the final form of Mr Graves' advice. Being concerned about this, Mr Hurley telephoned Mr Graves and then Mr Ogborne, who said he would require $1000 if he was to settle a notice of appeal. This information was relayed to Mr Wakim. 12 On Monday 12 March the advice of Mr Graves SC was provided to Mr Hurley. Mr Graves emphasised the time constraints under which he had been operating. He expressed the opinion, on the basis of his reading of the reasons for judgment, that Einfeld J's finding of no breach of duty by McNally or the Trustee did not expose error. He also remarked in this connection that Mr Ogborne of counsel had not been able to point him to some matter, not present in the reasons, which would bear upon the determination of those questions. 13 In relation to the proceeding against HIH, Mr Graves remarked that Einfeld J had found a breach of duty but no loss flowing from the breach. He expressed the opinion that his Honour had erred and that there were "good prospects of success" for Mr Wakim in an appeal in that case. 14 This was not the end of matters in relation to the McNally and Trustee cases. Mr Hurley faxed a copy of Mr Graves' advice to Legal Aid and briefed Mr Ogborne to settle a notice of appeal. (Mr Wakim had obtained a promise from his brother to provide the $1000 - apparently Mr Hurley was put in funds by Mr Wakim in this amount later.) 15 On Tuesday 13 March, a little after 5.00 pm (according to the facsimile record), Mr Hurley received from Mr Ogborne a draft notice of appeal. It was a single notice of appeal which related to all three proceedings at first instance. Mr Hurley promptly faxed a single notice of appeal to the Court Registry instituted as in the three proceedings at first instance and bearing their numbers. He was not aware that O 1 subr 5A(7) of the Federal Court Rules provides that a document sent by facsimile transmission, if accepted for filing in the registry, is taken to have been filed, if the document is received after 4.30 pm on a day when the Registry is open for business, on the next day when the Registry is open for business. Accordingly, if accepted, the notice of appeal would be taken to have been filed on 14 March - one day late. 16 On Thursday 15 March a Deputy District Registrar wrote to Mr Hurley pointing out that in fact the notice of appeal was defective and could not be accepted since it related to all three proceedings at first instance. The letter also referred to other defects in the form which had been faxed to the Registry. Mr Hurley then set about dividing up the form of notice of appeal prepared by Mr Ogborne into three separate notices of appeal. 17 On Thursday 22 March Mr Hurley filed three applications which commenced proceedings N 279 of 2001 (George Wakim v The Official Trustee in Bankruptcy), N 281 of 2001 (George Wakim v HIH Casualty & General Insurance Ltd) and N 282 of 2001 (George Wakim v Peter J McNally and Terrence J McNally trading as Lobban McNally & Harney). In each case the application sought an extension of time in which to serve a notice of appeal. 18 On 3 April 2000 a written advice was obtained from Mr Jonathan Simpkins SC, not by Mr Hurley but by Mr Crawford, solicitor, on behalf of Mr Wakim. At least, 3 April 2001 was the date borne by Mr Simpkins' written advice. It seems that Mr Simpkins was able to be more thoroughly briefed than Mr Graves SC had been, no doubt because Mr Crawford had been in possession of papers relating to the proceedings at first instance which had not been available to Mr Hurley, or, through him, to Mr Graves SC. In any event, Mr Simpkins' advice was to the effect that there were "fair prospects of success" in all three matters. 19 I make no comment, of course, about the correctness of either the advice of Mr Graves SC or that of Mr Simpkins SC. 20 The applications which Mr Hurley had filed on 22 March seeking, in each case, an extension of time for the filing of a notice of appeal, were returnable on 12 April. Surprisingly, the applications were not promptly served. In fact, they were not served until 11 April. On that date Mr Hurley served them on the solicitors who had represented the respondents in the proceedings at first instance. Again, surprisingly, although served on 11 April, they were served under cover of a letter from Mr Hurley's firm dated 6 April. There is an affidavit by Tania Maree Noonan, solicitor, employed by Mallesons Stephen Jaques, the solicitors for Mr McNally, to the effect that the first that was known of any intention by Mr Wakim to appeal was when her firm received the copy of the application for the extension of time on 11 April. That was nearly a month after the last day allowed by the rules for the filing of a notice of appeal - 13 March. 21 Order 52 subr 15(1) of the Federal Court Rules provides that a notice of appeal is to be filed and served within 21 days after, relevantly, the date when the judgment appealed from was pronounced or within such further time as is allowed by the court or a judge upon application made by motion upon notice filed within that 21 day period. 22 But subr 15(2) provides: "Notwithstanding anything in the preceding subrule, the Court or a Judge for special reasons may at any time give leave to file and serve a notice of appeal." 23 The question is whether "special reasons" are demonstrated in this case. The delay here was due to Mr Hurley's erroneous understanding: · that there was a 28 day period rather than a 21 day period for the filing and service of a notice of appeal; · that a notice sent by fax to the Registry after 4.30 pm on any day was, if accepted, deemed filed on that day; and · that a single notice of appeal could be filed in respect of the decisions in three proceedings at first instance. A 28 day period would have expired on 20 March. The applications for the extension of time were not made by that date either - they were filed two days later on 22 March. 24 The question of the proper treatment of the failure to file a notice of appeal within the time allowed by the rules where the failure is due to a misunderstanding on the part of the intending appellant's solicitor, was discussed in Jess v Scott (1986) 12 FCR 187. The Full Court there rejected a view that the erroneous understanding of the intending appellant's solicitor could not constitute "special reasons". 25 To my mind the most striking elements of the present case are that Mr Wakim does now have a written advice of senior counsel indicating that he has reasonable prospects of success in all three proposed appeals. There is no prejudice to the respondents other than, of course, the prejudice of having to respond to an appeal to which they would not be required to respond if an order extending time were not made. This, however, is not the kind of prejudice which is ordinarily telling in a case of the present kind. 26 I have much sympathy with the respondents' positions. It may be that they will be put to considerable cost and trouble by appeals by Mr Wakim, that they will succeed in having his appeals dismissed, yet not be able to recover their costs from him. But ordinarily Mr Wakim would have had a right to pursue an appeal if notices of appeal in appropriate form had been filed by 13 March. Indeed, if he had filed his notices of appeal by that date and not served them until the day before the return date on the notices of appeal, he nonetheless would have been in time. 27 I think that "special reasons" are, in all the circumstances, established in this case, and that an extension of time should be granted. 28 On the question of costs, however, I think Mr Hurley as well as Mr Wakim must bear some responsibility for the costs: Mr Wakim must do so because of the irresponsible instructions initially given, and Mr Hurley, because of the succession of blunders he made. Accordingly, I propose to make the usual order that Mr Wakim pay the respondents' costs of the applications for the extension of time and that Mr Hurley pay one half of the respondents' costs, on the basis, of course, that the respondents recover only the total amount of the costs. 29 In proceeding N 279 of 2001, the Court orders that: (1) The applicant have leave to file and serve today a notice of appeal from the judgment given by Einfeld J on 20 February 2001 in proceeding NG 8252 of 1997; (2) The applicant pay the respondent's costs of the application for leave to file the notice of appeal out of time; (3) Brett William Hurley pay the respondent one half of the costs referred to in order 2, but so that the respondent will recover no more in all than the amount referred to in order 2. 30 In proceeding N 282 of 2001, the Court orders that: (1) The applicant have leave to file and serve today a notice of appeal from the judgment given by Einfeld J on 20 February 2001 in proceeding NG 65 of 1994; (2) The applicant pay the respondents' costs of the application for leave to file the notice of appeal out of time; (3) Brett William Hurley pay the respondents one half of the costs referred to in order 2, but so that the respondents will recover no more in all than the amount referred to in order 2. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.