Lauren Kay Cordes v Dr Peter Ironside Pty Ltd
[2009] QCA 302
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- Unreported Judgment
- Appeal Determined (QCA)
- Lauren Kay Cordes v Dr Peter Ironside Pty Ltd[2009] QCA 302
- Add to List
Lauren Kay Cordes v Dr Peter Ironside Pty Ltd[2009] QCA 302
Reported at [2010] 2 Qd R 235
Lauren Kay Cordes v Dr Peter Ironside Pty Ltd[2009] QCA 302
Reported at [2010] 2 Qd R 235
SUPREME COURT OF QUEENSLAND
PARTIES: | |
FILE NO/S: | SC No 3747 of 2008 |
Court of Appeal | |
PROCEEDING: | General Civil Appeal |
ORIGINATING COURT: | |
DELIVERED ON: | 9 October 2009 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 28 July 2009 |
JUDGES: | Holmes and Chesterman JJA and Mullins J Joint reasons for judgment of Holmes and Chesterman JJA; separate reasons of Mullins J, concurring as to the order made |
ORDER: | Appeal dismissed with costs |
CATCHWORDS: | Bankruptcy – bankruptcy courts – jurisdiction and powers of court – generally – where primary judge ordered a stay of appellant’s Supreme Court action on the basis that it came within the jurisdiction in bankruptcy which s 27 of the Bankruptcy Act 1966 (Cth) vests exclusively in the Federal Court and Federal Magistrates Court – where appellant’s action required determinations against title of her trustee in bankruptcy to property – whether appellant’s action fell within exclusive jurisdiction in bankruptcy Estoppel – former adjudication and matters of record or quasi oF record – former adjudication – judgment inter partes – res judicata – whether cause of action the same – where in her Supreme Court action appellant raised issues which had been determined in proceedings in the Federal Magistrates Court – where primary judge rejected an argument for the stay that a res judicata or issue estoppel arose, for want of privity of parties – where on appeal third respondent contended that argument should have succeeded – whether Federal Magistrates Court’s judgment created a res judicata or issue estoppel, barring appellant’s Supreme Court action Bankruptcy Act 1966 (Cth), s 27, s 31 Banks v Ferrari [2000] NSWSC 874, cited Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853, cited Denby (as T’ee in Bankruptcy of the Estate of S S Wing Tam) [2002] QSC 117, cited Do Carmo v Ford Excavations Pty Ltd (1984) 154 CLR 234; [1984] HCA 17, applied Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22, applied Geia v Palm Island Aboriginal Council [2001] 1 Qd R 245; [1999] QCA 389, cited Gleeson v J Wippell & Co [1977] 1 WLR 510, cited Jackson v Goldsmith (1950) 81 CLR 446; [1950] HCA 22, applied Mango Boulevard P/L v Spencer & Ors [2008] QCA 274, cited Meriton Apartments Pty Ltd & Anor v Industrial Court of New South Wales & Anor (2008) 251 ALR 19; [2008] FCAFC 172, considered Ramsay v Pigram (1968) 118 CLR 271; [1968] HCA 34, cited Scott v Bagshaw (2000) 99 FCR 573; [2000] FCA 816, applied Sutherland v Brien & Anor (1999) 149 FLR 321; [1999] NSWSC 155, cited |
COUNSEL: | The appellant appeared on her own behalf R Galloway for the first and second respondents D Morgan for the third respondent C D Coulsen for the fourth respondent |
SOLICITORS: | The appellant appeared on her own behalf Bell Dixon Butler for the first and second respondents Thynne & Macartney for the third respondent Holman Webb Lawyers Brisbane for the fourth respondent |
[1] HOLMES AND CHESTERMAN JJA: The appellant, who was made bankrupt on her own petition in 2006, appeals against a permanent stay of her Supreme Court proceeding against the respondents. The action concerned a property at Moggill, formerly registered in her name, as well as some chattels. The stay was granted by the learned judge at first instance on the basis that the relief claimed in it required determinations against the title of the appellant’s trustee in bankruptcy and thus fell within the exclusive jurisdiction in bankruptcy conferred by s 27(1) of the Bankruptcy Act 1966 (Cth) on the Federal Court and the Federal Magistrates Court. The learned judge rejected a second argument for the stay, that an issue estoppel or a res judicata arose by reason of the determination by the Federal Magistrates Court of the same questions as were raised in the Supreme Court proceeding.
[2] The appellant’s notice of appeal, amended by leave, contained the following grounds:
“1/ The principal grounds supporting the appeal contends that - there was an error of law in the Order staying the proceeding file no 3747/2008 in the Supreme Court, which does have Jurisdiction to hear and determine the proceeding before them because it was not a proceeding, ‘under or by virtue of’ the Bankruptcy Act 1966 (Cth) within the definition of Bankruptcy in s 5 (1), but rather a proceeding which invoked the Supreme Courts well established jurisdiction, to determine and declare rights to property and make orders to its destination. Section 27 (1) of the Act did not deprive the Supreme Court of jurisdiction to hear and determine the proceedings. (Sutherland v Brien 1999 149 FLR 321 NSWSC 155 (Austin J).
Further to this the Interlocutory Orders of 11/11/2008 and 18/2/2009 precluded the hearing of the application for the Summary Judgment and oral application to remove the caveat upon the plaintiff’s claim at the commencement of trial, where no application to grant leave was made in compliance with the orders dated 18/2/09 and rule 470 or approved, resulting in a denial of Natural Justice and Judicial procedural fairness to the plaintiff.
2/ Her Honor erred in awarding 100% of the costs against the plaintiff when the appellant was 100% successful in defending the summary judgment application made against her on the issue of estoppel.
In the alternative the parties should have made application under the Jurisdiction of Courts Cross Vesting Act and costs should have been ‘costs in proceedings’”
[3] During the hearing of the appeal, the third respondent was given leave to, and duly did, file a notice of contention contending that the decision should be upheld on the ground, in essence, that the argument as to issue estoppel or res judicata ought to have succeeded.
Background
[4] In 2003, the appellant acquired the property at Moggill which was the subject of proceedings in this Court and the Federal Magistrates Court. It was registered in her name, but in subsequent Family Court proceedings it was treated as matrimonial property; orders were made in respect of it in that Court on 29 April 2005. It seems reasonable to assume that those orders included one declaring the appellant’s entitlement to the property, since in June 2005 she contracted to sell it to the first respondent, Dr Peter Ironside Pty Ltd (“the company”), for $400,000. The contract provided for the property to be leased back to the appellant. The second respondent, Dr Peter Ironside, the appellant’s then brother-in-law, was a principal of the company. Before any transfer was effected, the company executed a handwritten memorandum of transfer of a “fee simple life estate” in the property to the appellant in trust for her son. After execution of that document, a memorandum of transfer giving effect to the earlier contract for sale by the appellant to the company was registered. The handwritten transfer back to the appellant of the “fee simple life estate” remained unregistered. The company borrowed from the third respondent, the National Australia Bank Limited, on the security of the mortgage over the property.
[5] The property at Moggill then became the subject of Family Court proceedings between Dr Ironside and the appellant’s sister in which both the appellant and the fourth respondent, her trustee in bankruptcy, intervened. Issues in relation to the property were settled by the signing by all parties of an agreement titled “Heads of Agreement” (“the Family Court agreement”). Under that agreement, the appellant abandoned any claim to the property and it was agreed, inter alia, that Dr Peter Ironside and the company would do all things necessary to transfer the property to the trustee in bankruptcy to allow him to sell it.
[6] Shortly after, however, the appellant commenced proceedings in this Court seeking, inter alia, to have the property reconveyed to her, and the trustee in bankruptcy brought an application in the Federal Magistrates Court seeking declarations that the legal and beneficial ownership of the property vested in him and that the Family Court agreement was valid and enforceable.
The Supreme Court action
[7] The action in this Court was commenced in April 2008. The parties named in the claim were the appellant, “Lauren Kay Cordes as trustee for Alexander George”; the company; Dr Ironside; the National Australia Bank; and (by later inclusion) the trustee in bankruptcy. (An attempt by the appellant to join her sister, the ex-wife of Dr Ironside, was unsuccessful.) In her statement of claim (as amended), the appellant pleaded that she had created a trust in 1998 in favour of her infant son, Alexander George, and had settled the Moggill property on him by means of a “signed trust deed” on 16 February 2003.
[8] The pleading as to the arrangement between Dr Ironside, the company and the appellant is very difficult to understand. The thrust of it seems to be that the company was to pay $400,000 and the Moggill property, subject to an existing mortgage to the National Australia Bank, was to be transferred to it, but leased back to the appellant. Strangely, the tenancy agreement also provided that she and her son were to retain a life interest in the property. At the same time, however, the arrangement was conditional on the company’s holding the property in trust for her son, and undertaking to transfer it back to the appellant at any time she wished.
[9] The appellant went on to plead that unconscionably, in breach of trust and in breach of their agreement, Dr Ironside and the company refused to reconvey the property, used it as security for loans in the amount of $2 million, lodged a caveat on the title, and entered the Family Court agreement with the trustee in bankruptcy. The National Australia Bank was joined as an accessory to their breach of trust. Against the trustee in bankruptcy, it was pleaded that he knowingly assisted in the breach of the trust by failing to reconvey the property and asserting his interest in it. The appellant alleged that she had signed the Family Court agreement under duress.
[10] By way of relief, the appellant sought orders setting aside the sale agreement, the transfer of the property to the company and the mortgage to the National Australia Bank, with removal of the caveat and the mortgage, and orders that the Moggill property be reconveyed to her “in fee simple and life estate” and the land title register corrected accordingly. In the alternative, she asked for declarations that the transfer, mortgage and Family Court agreement were invalid, and an order for specific performance of the agreement between her, the company and Dr Ironside, by way of a registered transfer of the property to her. In addition, she sought damages against Dr Ironside, the company, and the National Australia Bank.
[11] Part of the statement of claim concerned chattels seized by the trustee in bankruptcy. They included a horse and a motor vehicle, both of which the appellant said were owned by her sister, who had agreed to give the appellant “life use” of them. The trustee in bankruptcy had also seized a horse float, some smaller personal items belonging to the appellant and a rocking horse belonging to the appellant’s son. The appellant pleaded that the trustee executed warrants (one assumes for the purpose of recovering property), in the process “breach[ing] legal privilege”, resulting in “valuable stolen jewellery and damages to the Moggill property”. A further allegation is that the trustee refused to allow her to take action to set aside a costs assessment notice, in respect of legal fees which were the cause of her bankruptcy, and but for which she could achieve a discharge.
[12] The appellant sought specific performance of the agreement to allow the appellant life use of the horse and vehicle, the setting aside of the consent orders made for transfer of that property to the trustee with a declaration that it remain vested in her sister, not the trustee, and return of the rocking horse. At the hearing before the learned primary judge, however, in order to deflect the argument about bankruptcy jurisdiction, the appellant disavowed other forms of relief sought in the statement of claim. They were: a declaration that the Moggill property did not vest in the trustee in bankruptcy; declarations that the vehicle and the horse float vested in her (the former as trust property, the latter as “tools of trade”); declarations that warrants were illegally executed and that a solicitor for the trustee in bankruptcy “breached legal privilege”; a declaration that she “be discharged” in February 2009, three years after she became bankrupt; an order for return of her personal items; damages resulting from the seizure of assets; the setting aside of the costs assessment notice which had caused her bankruptcy; and a declaration that she was illegally detained (the connection of which to the pleading is obscure).
The application in the Federal Magistrates Court
[13] In November 2008, the trustee in bankruptcy brought his application in the Federal Magistrates Court. In it he sought declarations that the Family Court agreement remained valid and enforceable, and that legal and beneficial ownership of the Moggill property vested in him subject to the mortgage. The Federal Magistrate gave summary judgment on the application under s 17A of the Federal Magistrates Act 1999 (Cth), which permits judgment to be given in a proceeding where the court is satisfied that the defendant has no reasonable prospect of success. He made the declarations sought by the trustee in bankruptcy.
Relevant provisions of the Bankruptcy Act 1966 (Cth)
[14] It is useful before turning to the primary judgment to mention some provisions of the Bankruptcy Act relevant to questions of jurisdiction. The definition of jurisdiction in bankruptcy in s 5 of the Bankruptcy Act is not very illuminating; it “means any jurisdiction … under or by virtue of this Act”. Jurisdiction in bankruptcy under the Act was originally vested in the Federal Court and in the Supreme Courts of the States and Territories. The Bankruptcy Legislation Amendment Act 1996 (Cth) amended s 27(1) so as to confer exclusive jurisdiction in bankruptcy on the Federal Court, later extended to the Federal Magistrates Court. (In speaking of jurisdiction, we will refer to the two courts compendiously as the Federal Court.)
[15] The explanatory memorandum to the Bankruptcy Legislation Amendment Bill 1996 (Cth), which had introduced the amended section, said:
“To preserve the situation that creditor’s [sic] petitions are dealt with in the Federal Court, the Bill proposes amendments to the Act to give that Court jurisdiction in bankruptcy exclusive of the jurisdiction of courts other than the High Court under the Constitution …
Bankruptcy matters will still be able to be dealt with by Supreme Courts of the States and the Northern Territory under the Jurisdiction of Courts (Cross-Vesting) Act 1987 in appropriate cases. Further, provisions which enable trustees to take action in courts of competent jurisdiction for the recovery of debts from bankrupts and other persons … will be unaffected …”[1]
[16] Section 27 is in these terms:
“(1)The Federal Court and the Federal Magistrates Court have concurrent jurisdiction in bankruptcy, and that jurisdiction is exclusive of the jurisdiction of all courts other than:
(a)the jurisdiction of the High Court under section 75 of the Constitution; or
(b)the jurisdiction of the Family Court under section 35 or 35A of this Act.”
[17] Section 31(1) of the Act does not confer jurisdiction; it simply lists the matters which the Federal Court must hear in open court. Relevant here are its opening phrase, “In exercising jurisdiction under this Act …”, and the inclusion in the list of matters to be heard, in the exercise of that jurisdiction, in open court, of:
“…
(e)applications to set aside or avoid a charge, charging order, settlement, disposition, conveyance, transfer security or payment;
…
(f)applications to declare for or against the title of the trustee to any property;
… .”
The judgment at first instance
[18] The learned primary judge reviewed the history of the matter and the content of the pleadings. She identified the first issue before her as whether the matters the appellant raised in her statement of claim fell within the matters in s 31(1) of the Bankruptcy Act so as to constitute an exercise of the jurisdiction under s 27 of that Act. Her Honour concluded that the appellant’s claim for relief required a determination of title in the Moggill property, the horse and the car against the title of the trustee in bankruptcy and that the issues arising in the pleadings fell within the exclusive jurisdiction of the Federal Court or the Federal Magistrates Court under s 27(1).
[19] The learned judge also considered the question of issue estoppel. She accepted that the same issues were raised in the proceedings before her as those in the Federal Magistrates Court but she was not satisfied that privity of parties had been established, because whereas in the Supreme Court the appellant sued as trustee for her son, he was not a party to the proceedings in the Federal Magistrates Court. However, on the basis of her conclusion as to the exclusive jurisdiction of the Federal Court and Federal Magistrates Court, she stayed the proceedings.
The significance of earlier interlocutory orders in the Supreme Court
[20] The appellant began by asserting that the learned primary judge was not at liberty to entertain the application by the National Australia Bank and the trustee in bankruptcy for a stay because of previous orders and statements of the Court, which had effectively precluded the respondents from making any further application or, in particular, raising questions as to jurisdiction. Pointing to orders made by Dutney J, Martin J, Byrne SJA, and Fryberg J, the appellant sought to rely on various sympathetic judicial observations she said had been made on those occasions, including some questioning by Fryberg J, in the course of discussion with counsel, of the Federal Magistrate’s reasoning on the trust question. And, she said, orders setting down, first, separate questions arising from her action for hearing, and then the trial of the action, showed that the various judges concerned had rejected the respondents’ applications for summary judgment as unmeritorious. Finally, an order of Fryberg J that any application pending trial be made to him precluded the primary judge from dealing with the respondents’ application.
[21] The notion that there had been some form of ruling made in the appellant’s favour in the Supreme Court before the primary judge came to grant the stay at issue here can quickly be dispelled. An examination of the relevant orders reveals the following. On 9 May 2008, Dutney J adjourned the trustee in bankruptcy’s application, brought in the appellant’s proceedings, to be joined and for various other orders. On 16 July 2008, Martin J adjourned an application by Dr Ironside and the company for summary judgment and alternative relief, with an order that material be filed and served. On 5 September 2008, Martin J dismissed an application to join the State of Queensland as a party and ordered that questions as to whether there existed a trust and whether there had been a gift under it of the Moggill property be determined as separate questions.
[22] On 11 November 2008, Martin J joined the trustee in bankruptcy as a party with an undertaking from him, the company, Dr Ironside and the National Australia Bank not to take any steps. On 8 January 2009, Byrne SJA listed the application for determination of the separate questions before Fryberg J. On 18 February 2009, Fryberg J discharged the order for hearing of the separate questions, having concluded that it was inutile, and ordered that the action proceed as if the parties had signed and filed a request for trial date, with the reservation that any application under UCPR 470 be brought on before him in the first instance. In due course, then, the matter came on before the primary judge for trial.
[23] The learned judge was not in any way bound by the previous observations and procedural orders of other judges of the Court. Fryberg J’s order, designed, no doubt, to limit the number of judges exposed to the complications of the case, could have no effect on the primary judge’s exercise of her powers. More importantly, none of the previous orders or comments had any bearing on the primary judge’s power and duty to determine the fundamental question of whether she had jurisdiction to proceed with a trial of the appellant’s action.
Exclusive jurisdiction under s 27(1)
[24] More deserving of serious consideration is the appellant’s contention that the learned primary judge erred in holding that the issues arising in the Supreme Court proceedings fell within the exclusive jurisdiction of the Federal Court under s 27(1) of the Bankruptcy Act. The appellant did not cavil with the proposition that success in her action would necessarily entail a finding against the title of the trustee in bankruptcy to property. That concession is appropriate: the appellant’s action asserted rights in relation to the Moggill property on the basis of an interest as trustee which was inconsistent with the title which the trustee in bankruptcy claimed. Similarly, there was a clear issue as to whether the chattels had vested in the trustee in bankruptcy or in the appellant’s sister, her son or herself.
[25] The appellant argued, however, that the learned judge (and other courts) had erred in attaching any significance to the reference in s 31(1)(f) to “applications to declare for or against the title of the trustee”, because that section was a purely procedural provision and could shed no light on what fell within the exclusive jurisdiction of the Federal Court. Her action was not brought “under or by virtue of” the Bankruptcy Act. The claim itself did not originate under the Bankruptcy Act, and there was no reference to the Act in the pleadings. The proceedings were not brought by a bankrupt (the appellant asserted she was now discharged) and, in any case, they were not brought by her personally, but as trustee or litigation guardian for her son. She relied on the explanatory memorandum to the Bankruptcy Legislation Amendment Bill 1996 and on a series of cases, including, most notably, Sutherland v Brien & Anor,[2] to support her argument that the Supreme Court retained jurisdiction.
[26] Sutherland v Brien & Anor was a decision of a single judge of the New South Wales Supreme Court, Austin J. A company administrator, on the one hand, and trustees in bankruptcy, on the other, sought competing declarations and orders as to the fate of funds held by the administrator. The bankrupt had been a director of the relevant company, and he and his wife had secured its debts by a guarantee and mortgage; the funds in question were the proceeds of realisation of the mortgaged property. At issue was whether the deeds of guarantee and mortgage that the bankrupt and his wife had executed were void as against the trustees in bankruptcy under s 120 of the Bankruptcy Act.
[27] Neither party asserted that s 27(1) had deprived the Supreme Court of jurisdiction to deal with the proceedings. Nonetheless, Austin J considered the issue. He characterised the proceedings thus:
“Although the legal issue to be determined in the proceedings relates to the proper construction and application of a section of the Bankruptcy Act, the proceedings themselves are not ‘proceedings under or by virtue of’ the Bankruptcy Act. Rather, they are proceedings which invoke the Court’s well-established jurisdiction to determine and declare rights to property and make orders as to its destination.”[3]
Accordingly, they did not fall within the definition of “bankruptcy”, nor within the “jurisdiction in bankruptcy” which s 27(1) vested exclusively in the Federal Court. They were to be contrasted with proceedings such as a creditor’s petition for a sequestration order, where the Court exercised a statutory jurisdiction conferred by a particular provision of the Bankruptcy Act. Austin J noted that he had been referred to the explanatory memorandum for the 1996 amending Bill, but made no comment in respect of it, other than to say it was unnecessary to resolve the division between bankruptcy proceedings within the Federal Court’s exclusive jurisdiction and proceedings cross-vested to State courts. He was not referred to any possible significance of the reference in s 31(1) to exercise of jurisdiction under the Act.
[28] The appellant also relied on this Court’s decision in Geia v Palm Island Aboriginal Council,[4] in which the question was whether a bankrupt’s wrongful dismissal action was properly dismissed on the ground that it had vested in his trustee in bankruptcy. This Court rejected a view taken in the English cases, that whether the action vested in the trustee depended on whether the breach of the employment contract occurred before or after bankruptcy. After reaching that conclusion, the Court went on to observe that there had been no suggestion that it lacked jurisdiction to decide the point, notwithstanding the exclusive jurisdiction now granted the Federal Court by the amended s 27. The explanatory memorandum to the 1996 Bill, in attributing the relevant amendment to the desire to preserve the Federal Court’s power to deal with creditors’ petitions, seemed strangely limited. (We similarly have found the explanatory memorandum unhelpful at best.) The Court continued:
“The Federal Court plainly would have jurisdiction, under s. 31(1)(f), to decide the issue which we are determining. But our decision and that made by the learned District Court judge are not in proceedings of a kind which are, by any specific provision of the Bankruptcy Act 1966, required to be brought in the Federal Court. That Act does not give the Federal Court power to dismiss an action brought in a State court by a bankrupt, purporting to exercise a cause of action which the Bankruptcy Act vests in the trustee.”[5]
[29] The next in the appellant’s series of authorities was Banks v Ferrari,[6] a single judge decision on an appeal against a magistrate’s decision against the plaintiff in an action for detinue. The defendants had successfully mounted a defence of jus tertii, saying that the goods had vested in the trustee in bankruptcy. The plaintiff pointed to documents provided by the trustee in bankruptcy disavowing any intention to claim the goods and submitted that the defence should have been struck out on the basis that the local courts lacked the jurisdiction “to rule on matters of fact or law in bankruptcy”. Dowd J took the view that the magistrate’s determination involved no more than the determination of a factual issue as to whether the trustee in bankruptcy had disclaimed the assets.
[30] If Sutherland v Brien, Geia, and Banks v Ferrari were the last word on the topic, the appellant undoubtedly would be in a stronger position. But the Federal Court has also considered the matter in Scott v Bagshaw[7] and Meriton Apartments Pty Ltd & Anor v Industrial Court of New South Wales & Anor,[8] taking a wide view of the exclusive jurisdiction conferred by s 27(1). Unlike Sutherland v Brien and Banks v Ferrari, these were decisions at appellate level, and both were decided after Geia, although its later citation in the Queensland Reports might suggest otherwise.
[31] The issue in Scott v Bagshaw was whether jurisdiction under the Bankruptcy Act arose at all where a trustee of a family trust had asserted a claim to an equitable charge in his favour over properties of which the bankrupt and his wife (who was not bankrupt) were joint proprietors. The Full Federal Court, in a unanimous judgment, explained that s 31(1)(f) served to elucidate what fell within “bankruptcy” as the term is defined in s 5(1) and used in s 27(1). It was obvious from s 31(1)(f), the Court said, that its drafter intended that applications with the effect of declaring for or against the title of the trustee in bankruptcy to property would fall within the concept of jurisdiction in bankruptcy. On the face of the pleadings, the claim was one to realise the equitable charge; there was no reference to any section of the Bankruptcy Act and the matter could proceed to judgment without any reference to the Act. But, the Court said, to the extent that the orders sought would establish title in the appellant, they must have a “necessary adverse effect” on the title of the trustees in bankruptcy. That was a matter falling within the jurisdiction in bankruptcy. The decision in Sutherland v Brien was to be distinguished; in light of s 31(1)(f), it could not be said in the instant case that the proceeding was not “‘under or by virtue of’ the Act”.[9]
[32] The appellant relied on the decision of Muir J in Denby (as T’ee in Bankruptcy of the Estate of S S Wing Tam),[10] although, in fact, his Honour followed Scott v Bagshaw in that case. There, the trustee in bankruptcy sought to recover as a preference a payment made by the bankrupt. The defendant applied for the dismissal of the claim for want of jurisdiction on the ground that the proceedings were “under or by virtue of” the Bankruptcy Act and thus within the exclusive jurisdiction of the Federal Court and the Federal Magistrates Court. Examining the question, Muir J observed,
“On one view of s 31(1) the approach in Scott v Bagshaw attaches to an essentially procedural provision a significance never intended by the legislature.”[11]
[33] That, of course, is the view the appellant urges, perhaps misled by the commentary in McDonald, Henry & Meek, Australian Bankruptcy Law and Practice.[12] Rather surprisingly, it notes Re Denby, firstly under the heading, “Cases of exclusive jurisdiction”, and then again under the heading, “Cases of non-exclusive jurisdiction”. At the first reference, it says, correctly, that Muir J held that the trustee’s claim, as, in substance, an application to avoid a disposition, fell within s 31(1)(e) and was outside the Supreme Court’s jurisdiction. Under the second heading, however, the work cites the decision as authority for the proposition that
“[t]he reference to certain matters … as being heard in exercise of ‘jurisdiction under this Act’ in s 31(1) does not have any effect on whether matters are within the exclusive jurisdiction of the Federal and Federal Magistrates Courts, because that provision is ‘an essentially procedural provision’.”
[34] That passage, to which the appellant referred the Court, omits the crucial words “on one view”, which clearly indicate that Muir J was reviewing one possible argument, not expressing a concluded view; and although it goes on to give the paragraph references for his Honour’s subsequent reasoning, it omits any mention of its content. In fact, his Honour concluded that before the 1996 amendment, it was implicit in the wording of s 31(1) that matters within sub-paragraphs (e) and (f) fell within the exercise of jurisdiction in bankruptcy, a jurisdiction which after the amendment became exclusive to the Federal Court. But it is not surprising that the appellant here (who is unrepresented) gained the opposite impression from the text.
[35] In Meriton Apartments Pty Ltd & Anor v Industrial Court of New South Wales & Anor, a trustee in bankruptcy had purported to assign to the bankrupt his right to continue proceedings under the Industrial Relations Act 1996 (NSW). The first question for the Federal Court, answered in the affirmative, was whether the Industrial Court had jurisdiction to determine whether the trustee in bankruptcy was to be deemed to have abandoned the action within the meaning of s 60(3) of the Bankruptcy Act. Branson and Greenwood JJ went a step further, concluding that the Industrial Court’s recognition of the trustee’s entitlement to assign the right to prosecute the proceedings did not involve the exercise of jurisdiction in bankruptcy.
[36] Both Greenwood J and Perram J examined the exclusive jurisdiction conferred by s 27(1). Both concluded that it was not limited to instances where the Bankruptcy Act impliedly or expressly conferred a power. Greenwood J reached that view because of the breadth of the words “under or by virtue of” in the definition of bankruptcy jurisdiction. Nonetheless, while the definition conveyed a wide jurisdiction (of which s 31(1)(f) provided an indication), it had not been regarded as extending to any exercise of general jurisdiction by a court in which the operation or application of a provision of the Bankruptcy Act was raised.[13] He drew a distinction between a State court’s exercise of its jurisdiction to determine whether a plaintiff had properly engaged that court’s jurisdiction, having regard to the operation of provisions of the Bankruptcy Act, and, on the other hand, the exercise of a jurisdiction “under or by virtue of” the Bankruptcy Act. Branson J similarly observed that a State court’s mere recognition of the Act’s effect, necessary in order to determine the status of proceedings or the standing of parties before it, did not amount to exercising jurisdiction “under or by virtue of” the Act.[14]
[37] Perram J undertook an examination of the Act’s history which convinced him that the substitution of the word “means” for “includes” when the Bankruptcy Act 1924 was repealed and the Bankruptcy Act 1966 was enacted was not intended to narrow the definition’s embrace; so that it continued to encompass traditional notions of bankruptcy jurisdiction as well as express or implied conferral of jurisdiction by the Act. Questions affecting the position of a trustee, including determination of the trustee’s title to a right of action were part of jurisdiction in bankruptcy, as s 31(1)(f) served to demonstrate. Since the question of whether the assignment was valid determined the title of the trustee to the right of action, any such question was within the exclusive jurisdiction of the Federal Court. Indeed, it followed, Perram J said, that Sutherland v Brien was wrong: the proceedings there had involved the declaration of rights to property; and it did not suffice to say that proceedings were not “proceedings under or by virtue of the Bankruptcy Act”. That was at odds with “the longstanding concept of jurisdiction in bankruptcy”.[15]
[38] Although the paths of reasoning in the judgments of Greenwood J and Perram J in Meriton Apartments are not identical, and the contemplated scope of bankruptcy jurisdiction is correspondingly different, both firmly endorse the conclusion in Scott v Bagshaw, that decisions involving findings for or against the trustee in bankruptcy’s title to property fall within the jurisdiction of the Federal Court. This Court should not depart from an appellate decision of the Federal Court unless convinced that its interpretation is wrong.[16] The conclusion that s 31(1)(f) provides an example of bankruptcy jurisdiction is not obviously flawed. There is no reason not to follow Scott v Bagshaw.
[39] This case falls squarely within what was described in Scott v Bagshaw: the orders the appellant seeks, to the extent that they recognise title in her, as trustee or otherwise, must have a “necessary adverse effect on the title” of the trustee in bankruptcy. That case makes it clear that it is irrelevant whether one of the parties to the proceeding is a bankrupt or a trustee in bankruptcy, and it is unnecessary that any particular section of the Bankruptcy Act be invoked. As Barrett J observed in Green v Schneller & Anor,[17] the general jurisdiction “to determine and declare rights to property” referred to by Austin J in Sutherland v Brien must give way to the Federal Court’s exclusive jurisdiction to determine “applications to declare for or against the title of the trustee to any property”.
[40] Insofar as Geia might imply that exclusive jurisdiction is confined to those matters required by a “specific provision of the Bankruptcy Act 1966 … to be brought in the Federal Court”, one must, in following Scott v Bagshaw, accept that that would be too restrictive an approach. But Scott v Bagshaw and Meriton Apartments present no conflict with the result reached in Geia: that a State court had the power to determine whether it had jurisdiction or whether its jurisdiction was excluded by that of the Federal Court, as opposed to actually exercising the Federal Court’s jurisdiction. Similarly, it was within the learned primary judge’s power here to determine whether she had jurisdiction to embark on the trial; but, on the conclusion she correctly reached, she lacked the jurisdiction to do so. The issues in question in the appellant’s action necessarily involved a finding for or against the title of the trustee in bankruptcy, and fell within the exclusive jurisdiction of the Federal Court.
Res judicata and issue estoppel
[41] There is another ground on which the appeal should be dismissed. It is the one raised by the notice of contention. It is, as we mentioned, that the judgment of the Federal Magistrates Court has given rise to a res judicata, or issue estoppel, so that the appellant is precluded from prosecuting her claim for relief with respect to the Moggill property in the Supreme Court.
[42] The Federal Magistrates Court summarised its findings:
“181.The Trustee seeks declarations that various property claimed by the (appellant) to be held by her in trust beneficially for her son is in fact (held) beneficially … by others on trust for her.
...
185.Dealing with each of the (appellant’s) claims I find:
(a)No enforceable disposition by the (appellant) in favour of any trust has been effected by the incorporation of any provision in any will.
(b)The Trust purported to have been created on 1 May 2002 ... to settle the Pullenvale property upon trust for the (appellant’s) son failed for want of certainty and form and ... any equitable claim ... was extinguished by (her) transfer of that property to a third party.
(c)The Trust purported to have been created on 5 December 2003 ... to settle the Moggill property upon trust for the (appellant’s) son failed for want of certainty and form and in any event any equitable claim ... was extinguished by (her) transfer of that property to a third party, (the company).
(d)The Trust purported to have been created by the agreement entered into between the (appellant) and (the company) in June 2005, if it ever existed, failed because the Trust was never registered and (the company) became the registered proprietor without notation concerning any trust ...
(e)The circumstances of the proceeding do not support any basis for finding a resulting, constructive or implied trust in respect of the Moggill land or any other real property.”
[43] The court then ordered:
“193.Declare that as at 24 February 2006 the legal and beneficial ownership of Lot 13 on SP145714, County of Stanley, Parish of Moggill, Title reference 50440445 vests in … (the) trustee of the bankrupt estate.”
“The bankrupt” is a reference to the appellant.
[44] The principle is not in doubt. It was explained in the judgment of Fullagar J in Jackson v Goldsmith:[18]
“The rule as to res judicata can be stated sufficiently for present purposes by saying that, where an action has been brought and judgment has been entered in that action, no other proceedings can thereafter be maintained on the same cause of action. ... It is a broad rule of public policy based on the principles expressed in the maxims (it is in the interest of the State that law suits not be protracted) and (it is a rule of law that a man shall not be twice vexed for one and the same cause).
The rule as to issue estoppel is ... that parties and privies are ‘precluded from contending to the contrary of that point, or matter of fact, which having been once distinctly put in issue by them ... has been, on such issue joined, solemnly found against them.’ ... The same rule was concisely stated by Dixon J. in Blair v. Curran ... where his Honour said:- ‘A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies.’
It is unnecessary here to discuss these two principles further beyond noting two points.
In the first place, if A sues B to judgment and in subsequent proceedings between them a plea of res judicata is raised, the primary question will be whether the cause of action in the later proceedings is the same as that which was litigated in the former proceedings. ...
In the second place, it follows from the very nature of the difference between the plea of res judicata and the plea of issue estoppel that different materials are relevant in each case. Where the plea is of res judicata, only the actual record is relevant. Where the plea is of issue estoppel, any material may be looked at which will show what issues were raised and decided.”
[45] The plea was said by Spencer Bower, Turner and Handley in their work, Res Judicata[19] to have:
“... a two-fold operation. It estops the parties to a decision from afterwards controverting any issue thereby decided and it bars the party who has obtained relief from seeking it again. The distinction was explained by Diplock LJ in Thoday v Thoday (1964 P 181 at 197-8):
‘... Cause of action estoppel ... prevents a party to an action from asserting or denying, as against the other party, the existence of the particular cause of action, the non-existence or existence of which has been determined by a court of competent jurisdiction in previous litigation between the same parties. If the cause of action was determined to exist, i.e. judgment was given upon it, it is said to be merged in the judgment. ... If it was determined not to exist, the unsuccessful plaintiff can no longer assert that it does; he is estopped per rem judicatem’.”
[46] Before a res judicata may arise the judgment which is said to give rise to it must have been pronounced by a court of competent jurisdiction, that is a court which had jurisdiction to determine the suit and give judgment. As well the cause of action in the second proceeding must be the same as that litigated to judgment in the first.
[47] There is no doubt that the Federal Magistrates Court was competent to make the declaration with respect to the appellant’s property as between her and her trustee in bankruptcy. Section 27 of the Bankruptcy Act is explicit in its conferral of bankruptcy jurisdiction on the Federal Magistrates Court.
[48] It is equally clear that the cause of action which the appellant wishes to prosecute in the Supreme Court is identical to one of the causes of action litigated in the Federal Magistrates Court. A cause of action is “every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the Court”: see Read v Brown.[20] Wilson J in Do Carmo v Ford Excavations Pty Ltd described “the concept of a cause of action” as “the fact or combination of facts which gives rise to a right to sue”.[21]
[49] The trustee in bankruptcy was the applicant in the Federal Magistrates Court proceedings. He sought declarations that the appellant’s interest in the Moggill property had vested in him as trustee in bankruptcy, and that there was no trust of the property in favour of her infant son. The constituent fact in the trustee in bankruptcy’s cause of action was that any right which the appellant enjoyed over the Moggill property was not held in trust for her son. The legal consequence of the fact is that the right passed on bankruptcy to the trustee in bankruptcy. The Federal Magistrate so found and made a declaration giving effect to the finding. The appellant defended the application. She contended she held her rights in the Moggill property in trust for her son.
[50] There is no doubt that the issues in the two proceedings are identical. The appellant’s amended statement of claim in the Supreme Court was produced to the Federal Magistrate who directed that the pleadings filed in the Supreme Court be adopted as the pleadings in the Federal Magistrates Court. Indeed the copy of the amended statement of claim produced on appeal is entitled both in the Supreme Court and in the Federal Magistrates Court.
[51] As we mentioned the pleading is difficult. The facts alleged are not well expressed. The statement of claim, drafted by the lay appellant, is both prolix and complicated. There are many apparently irrelevant inclusions. It does, however, sufficiently appear that the appellant asserts that she transferred the Moggill property to the company pursuant to a colourable transaction which she seeks to have set aside, and further asserts that the property was acquired by her in trust for her son and that on its reconveyance she will hold it on the same trust. It is beyond doubt that she claims a right to the fee simple of the Moggill property as trustee for her son. She expressly resists the trustee in bankruptcy’s claim to the property. Among the orders sought by the appellant is:
“That the Moggill property be reconveyed to the plaintiff in fee simple and life estate.”
[52] The appellant’s action in the Supreme Court therefore asserts the truth of the defence she unsuccessfully advanced in the Federal Magistrates Court in opposition to the trustee in bankruptcy’s cause of action. She asks for a judgment directly contrary in effect to that made by the Federal Magistrates Court.
[53] The trial judge accepted these points. Her Honour was satisfied that the Federal Magistrates Court was “clearly a court of competent jurisdiction to decide” the issues before it, and that “in the present case the same issues are raised”. However, she declined to hold that the judgment gave rise to an issue estoppel because she was not satisfied that the same parties were “involved in the two sets of proceedings”. Her Honour explained:
“In the proceedings in this Court (the appellant) sues as ‘Trustee’ for her minor son. I can see no evidence that (the appellant’s) son was a party to the proceedings in the Federal Magistrates Court. As Spencer Bower, Turner and Handley state in their text ... it is essential not only that the parties to both proceedings are the same, but that ,the onus is on the person asserting the estoppel to establish identity or privity.’”
[54] The applicant in the Federal Magistrates Court was William John Fletcher as trustee for the bankrupt estate of Lauren Kay George. The first respondent was Lauren Kay George. (The appellant uses both Cordes and George as her surname.) There is no reference to the appellant’s son in the designation of the parties in that proceeding.
[55] In the Supreme Court the plaintiff is described as “Lauren Kay Cordes as trustee for Alexander William George”. The trustee in bankruptcy is the fourth defendant.
[56] The trial judge appears to have thought that the infant, Alexander William George, was a party to the Supreme Court proceeding but had not been a party to the Federal Magistrates Court proceeding so that there was no identity of parties.
[57] Paragraph 2 of the amended statement of claim alleges:
“(a)At all material times the Plaintiff:
(i)was the trustee of the trust;
(ii)acted in her capacity as trustee;
(vi)Litigates this matter in accordance with her duties as trustee representative of a trust estate or in the alternative litigation representative guardian in accordance with rule 95 of the UCPR”.
The twenty-second order sought in the prayer for relief is that the first and second respondents pay costs “to the applicant trustee”.
[58] The child, Alexander George, is not a party to the proceedings in this Court and if the trial judge thought otherwise, she was, with respect, mistaken. The plaintiff is the appellant who sues in her capacity as trustee for her son. The inclusion of the son’s name in the entitlement of the action did not make him a plaintiff. The words “as trustee for A W George” signify only that the suit is brought on behalf of a trust estate of which A W George is the beneficiary. They do no more than show the (trustee) capacity in which the appellant sues and the identity of the trust. Indeed the infant beneficiary would not be a proper party because:
“It is the role of a trustee to sue and be sued in respect of the property held in trust ... . The trustee represents all beneficiaries who, except in particular circumstances, are not proper parties to such proceedings.”
Per Muir JA in Mango Boulevard Pty Ltd v Spencer & Ors.[22]
[59] The reference to the appellant suing, in the alternative, as litigation guardian for her son must be ignored. The designation of the plaintiff makes it clear that it was the trustee, not the beneficiary who brought the action which would not have been properly constituted had the infant beneficiary been plaintiff. Moreover, the appellant is not competent to bring the action as litigation guardian. UCPR 93(1) provides inter alia that an infant may start a proceeding only by his litigation guardian. Subrule (3) provides that a litigation guardian who is not a solicitor may act only by a solicitor. The appellant is not a solicitor and acts and appears in person. She may not, therefore, be her son’s litigation guardian.
[60] The claim for costs to be paid to the “applicant trustee” is another indication that it is the appellant as trustee, not her son and beneficiary, who is the party.
[61] It follows that Alexander William George is not a party to the Supreme Court proceedings. His mother, as trustee of the disputed property, is the party. She was also a party to the Federal Magistrates Court proceedings. There is no doubt that the capacity in which the appellant was a party in the Federal Magistrates Court is the same as the capacity in which she sues in the Supreme Court. In both courts and in both proceedings the appellant is asserting the existence of a trust of the Moggill property of which she is trustee and her son is beneficiary. It could not be otherwise. The only basis on which the appellant could resist the trustee in bankruptcy’s claim in the Federal Magistrates Court was to contend that she had a right to the Moggill property which she held on trust. Any right of her own to the property must necessarily have vested in her trustee in bankruptcy.
[62] The requisite identity of parties exists.
[63] It would not matter if the infant beneficiary was a party in the Supreme Court though not in the federal proceedings.
[64] The reason is stated in Spencer Bower, Turner and Handley:[23]
“Res judicata estoppels operate for, or against, not only the parties, but those who are privy to them in blood, title or interest. Privies include any person who succeeds to the rights or liabilities of the party upon death or insolvency or who is otherwise identified in estate or interest. It is essential that the party to be estopped by privity must have some kind of interest, legal or beneficial, in the previous litigation or its subject matter.”
[65] Barwick CJ explained in Ramsay v Pigram:[24]
“… an estoppel is available to prevent the assertion ... of a matter of fact or of law in a sense contrary to that in which that precise matter has already been necessarily and directly decided by a competent tribunal ... between the same parties in the same respective interests or capacities, or between a privy of each, or between one of them and a privy of the other in each instance in the same interest or capacity.”
[66] If the appellant were a party in the Federal Magistrates Court (as she was) but her son was a party in the Supreme Court, there will still be a res judicata, or issue estoppel, if they were privies.
[67] In context that requires a privity of interest between them with respect to the cause of action determined in the Federal Magistrates Court. Lord Reid said in Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2):[25]
“It has always been said that there must be privity of blood, title or interest: here it would have to be privity of interest. That can arise in many ways, but it seems to me to be essential that the person now to be estopped from defending himself must have had some kind of interest in the previous litigation or its subject-matter.”
Lord Guest said:[26]
“Before a person can be privy to a party there must be community or privity of interest between them.”
[68] There can be no doubt that there is the requisite privity of interest between trustee and beneficiary in a suit to establish the trustee’s right to the trust property, held for the beneficiary. One can scarcely imagine a greater community of interest. Other judges have also thought so. In Churchill & Sim v Goddard [27] Lord Roche said:
“The ... Common Law ... had regard only to the parties to negotiable instruments, and it was only because equity intervened and later because equitable defences were admissible at law that it was a good answer to a suit on such an instrument that he who brought it was trustee for another against whom the person sued had a good answer.”
It was put more clearly by Megarry VC in Gleeson v J Wippell & Co:[28]
“Thus in relation to trust property I think there will normally be a sufficient privity between the trustees and their beneficiaries to make a decision that is binding on the trustees also binding on the beneficiaries, and vice versa.”
[69] This case is, we think, properly one of res judicata. The trustee in bankruptcy obtained judgment in the Federal Magistrates Court. His cause of action “was determined to exist and judgment was given upon it”. Therefore it merged in the judgment and the appellant may not now deny the trustee in bankruptcy’s right to the Moggill property. Her action, which seeks to do just that, cannot be allowed to proceed.
The costs order at first instance
[70] The appellant had argued that no costs order should have been made against her because she had successfully resisted the issue estoppel and res judicata arguments there while failing on the jurisdiction point; and because the respondents might instead have proceeded with a cross-vesting application instead of seeking a stay. Given that the respondents succeeded in their application for a stay, the order was properly made, regardless of the outcome on the issue estoppel/res judicata point; and the argument about how the respondents might have proceeded is irrelevant.
Order
[71] The appeal is dismissed with costs.
[72] MULLINS J: I agree with Holmes and Chesterman JJA.
Footnotes
[1] At paras 81-82.
[2] (1999) 149 FLR 321.
[3] At 323.
[4] [2001] 1 Qd R 245.
[5] At 253.
[6] [2000] NSWSC 874.
[7] (2000) 99 FCR 573.
[8] (2008) 171 FCR 380.
[9] (2000) 99 FCR 573 at 577.
[10] (2002) 2 ABC(NS) 449.
[11] At 454.
[12] Loose-leaf, McQuade and Gronow (eds), 6th ed, Thomson Reuters, Sydney, 2008) at [27.1.10].
[13] At 405.
[14] At 387.
[15] At 429.
[16] Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89.
[17] (2001) 189 ALR 464 at 469.
[18] (1950) 81 CLR 446 at 466-7.
[19] (3rd ed, 1996), 221.
[20] (1888) 22 QBD 128 at 131.
[21] (1984) 154 CLR 234 at 245.
[22] [2008] QCA 274 at [14].
[23] At 199.
[24] (1968) 118 CLR 271 at 276.
[25] [1967] 1 AC 853 at 910.
[26] At 936.
[27] [1937] 1 KB 92 at 103-10.
[28] [1977] 1 WLR 510 at 515.