Whiteman v Deputy Commissioner of Taxation

1. The application for an extension of time filed on 16 August 2021 be dismissed.
2. The costs payable personally by the applicant to the respondent pursuant to order 4 of the orders made 11 April 2022 be fixed in the sum of $4,764.31.
3. The applicant personally pay the respondent's costs of the proceeding, excluding the costs fixed by order 2 above, fixed in the sum of $9,757.78. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

WHEELAHAN J: 1 On 18 August 2017, a judge of this court gave summary judgment against the applicant in respect of unpaid taxation related liabilities in the sum of $8,453,699.99. Judgment was given pursuant to an application by the Deputy Commissioner of Taxation under r 26.01 of the Federal Court Rules 2011 (Cth). 2 Almost four years later, on 16 August 2021, the applicant filed an application under r 36.05 of the Federal Court Rules 2011 (Cth) for an extension of time within which to appeal the orders made in August 2017. In fact, leave to appeal the order for summary judgment is likely required on the ground that the order pursuant to r 26.01 was interlocutory: Federal Court of Australia Act 1976 (Cth), s 24(1D)(b); Fokas v Mansfield as Trustee of the Bankrupt Estate of Maria Fokas (No 2) [2020] FCA 30 at [29] and the cases cited therein. On the assumption that leave to appeal is required, the time for filing an application for leave to appeal under r 35.13 was 14 days from the date on which judgment was pronounced, however that time could be extended under r 35.14. 3 On 3 September 2021, a sequestration order was made in relation to the applicant's estate by a registrar of the Federal Circuit and Family Court of Australia. Upon the making of the sequestration order, by operation of s 60(2) of the Bankruptcy Act 1966 (Cth), the application for an extension of time within which to appeal the order for summary judgment was stayed until the trustee in bankruptcy made an election, in writing, to prosecute or discontinue the application. 4 The applicant sought a review of the registrar's order in the Federal Circuit and Family Court of Australia (Div 2), following which, on 12 October 2021 a judge of that court affirmed the sequestration order. The applicant has filed a notice of appeal in this court in respect of the affirmation of the sequestration order, and that appeal is yet to be heard. 5 On 19 January 2022, the solicitor for the trustee of the applicant's estate stated in writing that the trustee "elected to discontinue the appeal in proceeding number VID 465/2021", which I treat as including an election to discontinue the application for an extension of time. 6 On 4 February 2022, in compliance with orders of the court, the Deputy Commissioner filed and served on the applicant submissions on the question whether the application for an extension of time should be stayed or dismissed. The Deputy Commissioner submitted that the application should be dismissed with costs. Accordingly, the primary question to be determined at present is whether the application should be stayed or dismissed. A subsidiary question is that of costs. 7 On 9 February 2022, I made orders giving the applicant an opportunity to file written submissions in response to those of the Deputy Commissioner, and fixed the application for hearing on 11 April 2022. The applicant did not file submissions in accordance with those orders, but appeared at the hearing and sought an adjournment of the hearing for four weeks. I adjourned the hearing until 9 May 2022, and made orders extending the time within which the applicant could file written submissions in response. I also made orders that the applicant personally pay the Deputy Commissioner's costs of the adjournment in an amount to be fixed, and that the Deputy Commissioner provide a schedule setting out the costs it claimed in that respect. In accordance with those orders, on 26 April 2022, the Deputy Commissioner filed a further schedule of costs and disbursements. 8 The court received two sets of submissions from the applicant dated 2 May 2022. The tenor of those submissions was directed to the suggested merits of the application for an extension of time and to the a foreshadowed application for leave to commence an appeal, and not to the issues raised by the Deputy Commissioner, which concerned the applicant's standing to continue the application. It is unnecessary that I say anything further about the applicant's written submissions. 9 At the adjourned hearing on 9 May 2022, the applicant raised several further matters which were not the subject of his written submissions and which can be briefly addressed. First, the applicant sought to amend his application having regard to the need to seek an extension of time within which to seek leave to commence an appeal. I informed the applicant that I would treat the application for an extension of time within which to appeal as embracing a foreshadowed application for an extension of time within which to seek leave to appeal. I informed the applicant that this defect in the application would not be material to the court's consideration of the matter, so there was no need to make a formal amendment. Second, the applicant foreshadowed other amendments that he proposed to make to the application, including to rely upon s 60(4) of the Bankruptcy Act, but these proposed amendments were not articulated. The applicant made some vague references to personal wrongs done to him by the Deputy Commissioner. When given the opportunity to clarify the submission, the applicant did not do so. Third, the applicant relied upon an affidavit sworn by him on the morning of the hearing, and that affidavit was received into evidence without objection from the Deputy Commissioner. I sought and obtained an undertaking from the applicant that he would file the affidavit. The affidavit that the applicant filed was not in the same form as the copy he provided to the court, or which was given to counsel for the Deputy Commissioner during the hearing, in that the annexures in the affidavit that was filed were more extensive. Upon my chambers drawing this feature of the filed affidavit to the attention of the parties by email, the solicitors for the Deputy Commissioner stated that, subject to questions of relevance and weight, there was no objection to the court acting on the applicant's affidavit as filed. 10 Towards the end of the hearing, the applicant sought a further adjournment because he claimed that he did not understand what was taking place. I heard the application but refused it on the grounds that, first, the submissions made by the Deputy Commissioner had been clearly articulated in the written submissions filed on 4 February 2022, and second, the applicant had had ample time, including by reason of the adjournment granted on 11 April 2022, to consider the submissions. 11 It is appropriate to consider first the applicant's submission that the application could be amended to be brought within the operation of s 60(4) of the Bankruptcy Act. Section 60(4) provides - (4) Notwithstanding anything contained in this section, a bankrupt may continue, in his or her own name, an action commenced by him or her before he or she became a bankrupt in respect of: (a) any personal injury or wrong done to the bankrupt, his or her spouse or de facto partner or a member of his or her family; or (b) the death of his or her spouse or de facto partner or of a member of his or her family. 12 The applicant complained of "wrongs" allegedly committed by or with the authority of the Deputy Commissioner. In his affidavit, for example, there are complaints about the Deputy Commissioner's conduct in investigations and litigation, including a failure to abide by the Model Litigant Rules and engaging in deliberately unfair conduct to exploit its privileged position in breach of the "Australian Charter of Human Rights" and other alleged common law rights. The applicant also complained about the primary judge's refusal to grant a stay. Though the applicant did not clearly make this connection, the best view of the arguments that he advances appears to be that the action is in respect of these "wrongs". 13 Subsection 60(4) of the Bankruptcy Act has the effect of exempting some actions from the operation of s 60(2). It complements s 116(2)(g), which relevantly excludes damages or compensation for personal injury or wrong done to the bankrupt from the property divisible among the creditors: Randall v Deputy Commissioner of Taxation and Another [2008] FCA 1939; 174 FCR 441 at [38]-[40] (Lander J). The phrase "personal injury or wrong" is informed by a long history of interpretation, which was summarised by Edelman J in Duckworth v Water Corporation [2012] WASC 30; 261 FLR 185 at [83]-[89]. 14 Considering the substance of the matter, including by reference to the proceeding from which an appeal is sought (see, Luck v Chief Executive Officer of Centrelink [2017] FCAFC 92; 251 FCR 295 at [22] (Barker, Moshinsky and O'Callaghan JJ)), the present action does not meet the statutory criteria of s 60(4)(a). The present action is an application for an extension of time within which to seek leave to appeal orders given by summary judgment for a liquidated debt in favour of the Deputy Commissioner arising from the applicant's unpaid tax related liabilities. The underlying relief to which the application is directed is that summary judgment for debt be set aside. That relief is not "estimated by immediate reference to pain felt by the bankrupt in respect of his mind, body or character and without reference to his rights of property", as is a key characteristic of an action to which s 60(4) applies: Cox v Journeuax (No 2) [1935] HCA 48; 52 CLR 713 at 721 (Dixon J). Properly characterised, the application and any appeal are concerned with engaging the court's appellate jurisdiction so as to allege error in the orders for summary judgment, and in turn the dismissal of the applicant's interlocutory application for a stay of the proceeding. The application is not directed to any action seeking any remedy such as damages or compensation in respect of pain felt by the applicant in respect of his body, mind or character. And the kinds of conduct complained of are not wrongs as that term is used in s 60(4): see, in similar circumstances, Garrett v Federal Commissioner of Taxation and Others [2015] FCA 665; 233 FCR 226 at [39] (Kenny J). 15 There being no dispute or ambiguity about the trustee's election, the principal issue is whether dismissing the application could cause the applicant some unfairness in creating a res judicata or issue estoppel which would prevent him from prosecuting an appeal if, for example, the sequestration order is set aside on appeal, or his bankruptcy otherwise comes to an end: see Bendigo Bank v Demaria [2001] VSC 218 at [35]-[36] (McDonald J), citing Milane v The President of the Shire of Heidelberg [1928] VLR 52 at 53 (Irvine CJ). 16 The application for an extension of time is interlocutory. It follows that the dismissal of such an application would not give rise to a res judicata or issue estoppel. This quality makes the present case unlike Bendigo Bank v Demaria, where a cross-claim commenced by a person who subsequently became bankrupt was stayed rather than dismissed. A cross-claim, unlike an application for an extension of time, is a substantive proceeding with final consequences. Relatedly, unlike substantive actions, there are no issues around the expiry of limitation periods for the commencement of an application for an extension of time within which to seek leave to appeal, which would prevent the applicant from applying again for an extension of time upon proper material. Where a substantive action is on foot, there may be good reasons to stay an action to avoid unfairness that may otherwise arise. Those reasons do not apply to the application to hand: see also Savage v Australian Unity Funds Management Ltd [2011] NSWCA 270 at [25]-[26] (Young JA). 17 In any event, the application is inutile. Putting to one side that it is an application for an extension of time within which to apply for leave to commence an appeal, the applicant cannot commence an appeal whilst bankrupt. He would simply have no standing to carry on the proceeding: Cummins v Claremont Petroleum NL [1996] HCA 19; 185 CLR 124 at 139 (Brennan CJ, Gaudron and McHugh JJ). 18 In the circumstances, and in the interests of finality of litigation, it is appropriate to dismiss the applicant's application for an extension of time. The ordinary course is that costs should follow the event. The applicant opposed the costs orders sought, but there was no coherent reason advanced as to why costs should not follow the event. The applicant should pay the Deputy Commissioner's costs of his application for an extension of time, including the Deputy Commissioner's present application. Costs orders made in circumstances such as these are to be made against the bankrupt personally, and are not provable in the bankruptcy: Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; 234 CLR 52 at [67] (Gleeson CJ, Gummow, Hayne and Crennan JJ), and s 82 of the Bankruptcy Act. 19 The Deputy Commissioner sought the costs of the adjournment on 11 April 2022 to be fixed in the sum of $4,764.31, and costs of the balance of the proceeding fixed in the sum of $9,757.78, exclusive of GST. The applicant submitted that the costs claimed were excessive. Each claim for costs made by the Deputy Commissioner was supported by a schedule of costs and disbursements that included on an item-by-item basis the costs that were claimed with reference to the corresponding scale item pursuant to schedule 3 of the Federal Court Rules 2011. I have reviewed each item claimed. The items claimed correspond to steps that were necessary to be taken as an incident of the nature of the application and the adjournment, or were otherwise taken pursuant to orders of the court. The solicitors' costs are claimed at scale, but for one entry which seems to have identified the incorrect scale item and consequently claimed $11 more than allowed. If the correct scale item is applied, no costs claimed exceed the scale. Some of the solicitors' time-based rates are claimed at less than the maximum allowable by the scale, and counsel's fees appear to be reasonable. I am therefore satisfied that the costs claimed were fairly and reasonably incurred: see the definition of costs as between party and party in the Dictionary to the Federal Court Rules.