Freeman v NAB[2006] QCA 260

SUPREME COURT OF QUEENSLAND

1. McMURDO P:  The applicant, Mr Freeman, filed an application in this Court on 2 March 2006 for an order under the Uniform Civil Procedure Rules 1999 (Qld) ("UCPR") r 668 to set aside an order made by the Chief Justice sitting in the Trial Division on 15 October 2003.  He also applies to amend his notice of appeal in Appeal No 219 of 2006, an appeal from an order of Muir J in the Trial Division of 12 December 2005.^[1]  That appeal is presently listed for hearing in this Court on 21 July 2006.  Mr Freeman no longer wishes to pursue his application to delay the hearing of the UCPR r 668 application until after the determination of his appeal to the Full Federal Court from an order of Spender J declaring him to be a vexatious litigant in the Federal Court.^[2]  That appeal was in any case dismissed on 19 May 2006.^[3]

2. The respondent, National Australia Bank Limited ("the bank"), resists the application under UCPR r 668 and objects only to the amendments to the notice of appeal in Appeal No 219 of 2006 which seek to impugn the order of the Chief Justice of 15 October 2003.

The history of the litigation between the parties

3. To bring an application directly to this Court under UCPR r 668 rather than to the Trial Division at first instance is unusual but so too is the history of the litigation between the parties. Their original dispute was first mediated in 1997 and resulted in a Deed of Mediation under which the bank provided Mr Freeman with a bill facility with a limit of $1,020,000. His obligations under the bill facility were secured by mortgages over his grazing property and by stock mortgages over his cattle. Mr Freeman released the bank and its officers and agents from all his claims other than those provided for under the Deed.  The bank later commenced proceedings for monies it alleged Mr Freeman owed it and for recovery of possession of the secured property under the default provisions of the mortgages.  Mr Freeman counter‑claimed for damages for misleading and deceptive conduct and negligence and sought to have the Deed of Mediation set aside, relying on his alleged mental incapacity when he entered into it.  In 2000 the bank was successful in both its claim and Mr Freeman's counter‑claim before Ambrose J.^[4]  Mr Freeman's appeal to this Court from that decision was dismissed with costs.^[5]  Mr Freeman's application for special leave to appeal to the High Court of Australia from that decision was also refused with costs because "no arguable error [was] demonstrated in any of the reasoning of the courts below".^[6]

4. Meanwhile, the bank petitioned the Federal Court of Australia for Mr Freeman's bankruptcy which he resisted on grounds including fraud. He unsuccessfully applied for discovery of documents.^[7]  On 12 March 2002, Spender J made a sequestration order under the Bankruptcy Act 1966 (Cth) against Mr Freeman's estate.^[8]  This order was stayed pending an appeal to the Full Court of the Federal Court which was subsequently dismissed with costs.^[9]

5. The next day, 27 August 2003, Mr Freeman applied to the Supreme Court under UCPR r 668 to have the orders of Ambrose J on 11 October 2000^[10] and the Court of Appeal on 2 November 2001^[11] set aside and to have his case retried on the basis of fresh or further evidence.  The trustee of Mr Freeman's bankrupt estate on 14 October 2003 wrote to the bank's solicitors noting that under s 60 Bankruptcy Act the trustee was required to decide by 10 October 2003 whether he would prosecute or discontinue Mr Freeman's Supreme Court application;  not having made any election, he considered that the proceedings had been abandoned pursuant to s 60(3).  On 15 October 2003 the Chief Justice dismissed Mr Freeman's application because he did not have standing to pursue it.^[12]  There has been no appeal to this Court from that order.

6. On 31 October 2003 Mr Freeman appealed to the Federal Court from his trustee's decision not to continue with his Supreme Court application under UCPR r 668 and sought orders to compel his trustee to prosecute the proceeding because of new evidence. The Federal Court dismissed his application.^[13]  Mr Freeman's application for leave to appeal to the Full Federal Court from that order was also dismissed.^[14]  On 6 February 2004 Mr Freeman unsuccessfully applied to the Federal Court to annul the sequestration order against his estate.^[15]

7. On 6 July 2005 Mr Freeman commenced a claim in the Trial Division of the Supreme Court against the bank for damages arising from the 1997 mediation and his subsequent litigation with the bank. He sought over $15M as damages for loss of land, livestock and other property and reputation and also claimed damages for malicious prosecution by the bank. This claim for malicious prosecution related to Mr Freeman's acquittal in a criminal trial on charges of stealing cattle belonging to the bank under the terms of the mortgage.  The bank applied to have these claims dismissed and to have Mr Freeman declared a vexatious litigant.  On 12 December 2005 Muir J struck out the property claim as an abuse of process and vexatious, first, because it sought to reagitate issues previously decided by the court;  second, because it was a cause of action vested in Mr Freeman's trustee in bankruptcy and remained so vested despite his discharge from bankruptcy;  and third, because the claims had their foundation in the losses occasioned to Mr Freeman resulting from the determinations in the decision in the trial before Ambrose J^[16] and the subsequent appeals from that decision.  Muir J also dismissed the malicious prosecution claim under UCPR r 293 (summary judgment for defendant) and in any case considered it liable to be struck out as an abuse of process or vexatious under UCPR r 171.  The judge considered that to succeed in his claim against the bank Mr Freeman would have had to demonstrate that the prosecution was brought by the bank rather than by the Crown and that it was instituted without reasonable or probable cause.  Muir J found that Mr Freeman had no real prospects of establishing these matters.^[17]  As I have noted, Mr Freeman has appealed to this Court from Muir J's orders;  that appeal is presently listed for hearing on 21 July 2006.

8. As I have noted, in the Federal Court on 22 December 2005 Mr Freeman was declared to be a vexatious litigant.^[18]  His appeal to the Full Federal Court from that order has been dismissed.^[19]  Mr Freeman was also declared a vexatious litigant in the Supreme Court on 5 May 2006^[20] but that order does not affect the present applications.

The application under UCPR r 668

9. UCPR r 668 relevantly provides that an order may be set aside if facts arising after an order is made entitle a person against whom the order is made to be relieved from it or if facts are discovered after an order is made that if discovered in time would have entitled the person against whom the order is made to an order or decision in the person's favour or to a different order.

10. Mr Freeman applies to this Court under that rule to set aside the order of the Chief Justice of 15 October 2003^[21] refusing his application to set aside the orders of Ambrose J of 11 October 2000.^[22]  The Chief Justice refused the application because, as an undischarged bankrupt, Mr Freeman had no relevant interest in the proceedings the subject of his application:  Cummings v Claremont Petroleum NL.^[23]  The Chief Justice noted that alternatively the interest was property of the bankrupt as defined by s 5(1) Bankruptcy Act and vested in the trustee by s 58(1)(a).^[24]  The Chief Justice considered that because Mr Freeman's trustee in bankruptcy had not elected to pursue the present proceedings under the Bankruptcy Act and regarded them abandoned pursuant to s 60(3) Bankruptcy Act, it followed that Mr Freeman did not have the standing to pursue the application which was therefore dismissed.

11. Mr Freeman contends that he is entitled to make this application when s 58(1) is read together with s 116 and s 126 Bankruptcy Act because it relates to after‑acquired property which vests in him, not the trustee.

12. In essence, Mr Freeman now wants to revisit the decision of Ambrose J^[25] and this Court's dismissal of the appeal from that decision.^[26]  He wishes to raise further evidence as to the state of his health at the time of the mediation.  His contentions include that the bank acted fraudulently in not crediting government subsidy money into his facility with the bank and that the bank manipulated bank statements through not correctly recording items such as credit interest.  He contends that the bank received money for the sale of cattle after the bankruptcy and did not use this money to reduce the debt to his trustee in bankruptcy.  He once more seeks to go behind the sequestration order, alleging fraud on the part of the bank.  He has canvassed most, if not all these matters in his many previous court hearings.

13. The Chief Justice was correct in finding that Mr Freeman had no standing to bring the application before him: see Cummings^[27] and Evans v Hi-Fert Pty Ltd.^[28]  Section 126 Bankruptcy Act applies what is known as the rule in Cohen v Mitchell^[29] by qualifying the property of the trustee under the bankruptcy to the extent of protecting those dealing with the bankrupt in good faith and for valuable consideration in respect of property acquired by the bankrupt on or after the day on which he or she became a bankrupt.  Section 126 does not have the effect that after‑acquired property of the bankrupt belongs to the bankrupt until the bankrupt's trustee claims it:  see In re Pascoe.^[30]  Nor is the position changed because Mr Freeman is now discharged from his bankruptcy:  see Stone v Ace-IRM Insurance Broking Pty Ltd;^[31]  Daemar v Industrial Commission of New South Wales [No 2].^[32]  Were it otherwise, the very purpose of the bankruptcy in protecting the interest of creditors would be defeated.  Unlike in Stone, there is no suggestion in the present case that the trustee intended to assign any right of action to Mr Freeman, even were it not abandoned under s 60(3) Bankruptcy Act.

14. Mr Freeman's contention that the Chief Justice did not have jurisdiction to refuse his application under UCPR r 668 because exclusive jurisdiction in bankruptcy matters vested in the Federal Court and the Federal Magistrates Court under s 27 Bankruptcy Act is nonsensical.  If this Court lacked jurisdiction to hear his application under this Court's UCPR, then clearly the application should have been refused on that basis.

15. Just as Mr Freeman had no standing to make the application under UCPR r 668 to the Chief Justice, he has no standing to make the present application to this Court. It follows that it is unnecessary to deal with its merits, which appear in any case most unpromising.

16. Mr Freeman's application to this Court under UCPR r 668 should be refused with costs.

The application to amend the notice of appeal in Appeal No 219 of 2006

17. For these reasons it would be futile to allow Mr Freeman to amend his notice of appeal in Appeal No 219 of 2006 insofar as it concerns his failed application to this Court under UCPR r 668. The bank does not otherwise oppose the amendments sought. I would give Mr Freeman leave to file an amended notice of appeal in Appeal No 219 of 2006 in the terms set out in his amended notice of appeal at pages A005 to A012 of his material in his application for leave to amend the notice of appeal, save for paragraphs R(iv);  Q;  R;  S(iii) and (iv) and T(iii).

18. Orders

1. The application under UCPR r 668 is refused with costs to be assessed.

2. The applicant is given leave to amend his notice of appeal in Appeal No 219 of 2006 in accordance with his amended notice of appeal on pages A005 to A012 of his bundle of material supporting his application for leave to amend that notice of appeal, other than paragraphs R(iv);  Q;  R;  S(iii) and (iv) and T(iii) on pages 4 and 5 of that amended notice of appeal.

19. WHITE J:  I have read the reasons for judgment of the President and agree with the orders which she proposes for the reasons that she has given.

20. PHILIPPIDES J:  I have had the advantage of reading the reasons for judgment of McMurdo P and I agree with the orders proposed.