Beames v Khatri [2002] FCA 1381

FEDERAL COURT OF AUSTRALIA

Beames v Khatri [2002] FCA 1381 Bankruptcy Act 1966 (Cth) s 181, s 60 DOUGLAS MACLEOD BEAMES (A BANKRUPT) V RAJ KHATRI AND MORGAN LANE (TRUSTEE IN BANKRUPTCY) Q7017 OF 2002 KIEFEL J 6 NOVEMBER 2002 BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY Q7017 OF 2002

BETWEEN: DOUGLAS MACLEOD BEAMES (A BANKRUPT)

APPLICANT

AND: RAJ KHATRI AND MORGAN LANE (TRUSTEE IN BANKRUPTCY)

RESPONDENT

JUDGE: KIEFEL J

DATE OF ORDER: 6 NOVEMBER 2002

WHERE MADE: BRISBANE

THE COURT ORDERS THAT: 1. The proceedings be struck out. 2. The applicant pay the trustees' costs of the proceedings on an indemnity basis. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY Q7017 OF 2002

BETWEEN: DOUGLAS MACLEOD BEAMES (A BANKRUPT)

APPLICANT

AND: RAJ KHATRI AND MORGAN LANE (TRUSTEE IN BANKRUPTCY)

RESPONDENT

JUDGE: KIEFEL J

DATE: 6 NOVEMBER 2002

PLACE: BRISBANE

REASONS FOR JUDGMENT EX TEMPORE 1 On 30 May 2002 Federal Magistrate Baumann ordered that the applicant's estate be sequestrated. Mr P Aburn was appointed trustee of his estate. Subsequently Mr Khatri and Mr Lane were appointed trustees by a meeting of creditors on 18 July 2002. 2 The applicant seeks orders vesting all of his property in himself. That property is said to consist of various choses in action. He also seeks damages of up to $40,000,000 against the trustees for negligence or breach of duty, the removal of the trustees, and an order that he may continue any action abandoned by them. The trustees seek summary dismissal of the application and an order for the payment of their costs on an indemnity basis. 3 The applicant is involved in a number of Court proceedings. There are two principal pieces of litigation. The State of Queensland brought action against him some time ago. The action concerns whether or not he has built on Crown land at Norman Park. He counterclaimed in relation to his rights to the land in that litigation. He says that there are important questions involved in it which relate to the new system of land title in Queensland. The status of the litigation at the time he was made bankrupt was that the Court of Appeal had determined the matter against him. He later applied for special leave to the High Court and that application is outstanding. The State of Queensland gave notices to his trustee and also to the previous trustee. The notices no doubt relate to the counterclaim which he is pursuing by this avenue. There are other actions which are described as consequential upon this main litigation. He advises me that they cannot proceed unless he is granted special leave and succeeds on that appeal. 4 The other piece of litigation involves the Noosa Shire Council. The Council sought an injunction to restrain him entering upon certain lands said to be a reserve, Chaplin Park. He defended and counterclaimed in those proceedings. The counterclaim was struck out by consent. On 24 June 2002, Dodd DCJ gave leave to the Council to discontinue the action against him. What remained at that point was his foreshadowed claim for damages which he had suffered as a result of the interlocutory injunction. He was given leave to pursue that claim and directions were made for the filing of a statement of claim and the Council's response to it. Although the applicant described his right at this point as one to an assessment of damages, that does not appear to be correct. The litigation was at a point where he had a claim within the principal proceedings for damages, but the Council's liability for those damages in connexion with its injunction and the quantum of them had not been determined. There are other actions brought by a company called Cayman Quays Pty Ltd and Elroa Nominees Pty Ltd in connexion with the same land, but these are consequential upon the principal proceedings. It is not in any event clear what benefit the applicant was to gain from those proceedings. Notice was also given to the former trustee in relation to pursuing the claim in these proceedings. I was advised the trustee did not pursue the matter. 5 I was advised that notices were given with respect to some of the litigation in which the applicant is involved. However, the applicant's submissions centered largely upon the two principal pieces of litigation. 6 The applicant's submissions, in addition to outlining the importance of the litigation involving the State of Queensland, focused upon what was said at the meeting of creditors at the time when the new trustees were appointed. Attention was also given to the subsequent decision of the trustees' conveyed in a letter of 25 July 2002, that no action would be taken by the trustees and no consent given to the continuance of proceedings or fresh proceedings until they were put in funds to the extent of $10,000. This was to enable an independent legal review of each action. The trustees say that they have no funds and all investigations and actions are being funded by them and their partners. There would not at this stage appear to be assets in the estate, putting to one side the question of the value of the actions themselves. The applicant has not supplied the trustee with any documentation in relation to the litigation despite being required to do so. 7 The point sought to be made by the applicant concerning what was said at the meeting of creditors was not easy to discern. He points to the minutes which disclose that the trustees told the meeting that they had the resources to manage the estate and he said that his point was that the creditors were led to believe that they had such resources. This would seem to me to be a way of saying that the trustees should have taken up both the actions concerning the Noosa Shire Council and the matter involving the State of Queensland. 8 The applicant pointed to a part of the meeting where the sum of $12,000 was discussed. It may be that the applicant believes that was a sum somehow to be set aside for the trustees to spend on investigations into his actions. He certainly says that what was said in this regard affects or colours the conduct of the trustees. The context of the discussion is however, a capping of the trustees' fees. 9 The applicant also complains of the trustees' conduct in requiring him to put them in funds. How this was said to reflect upon the trustees' credit or proprietary was not clear to me. There was an attempt by the applicant to connect the requirement for funding to the $12,000 referred to at the meeting of creditors, but this would seem to me to proceed from a misunderstanding of what was discussed at the meeting. The monies were not earmarked and available for the assessment of litigation. 10 When pressed for a basis for the orders sought, the applicant extended his submissions to allegations of misconduct on the part of the trustees. He alleged that they took part in a scheme to disable him. That conduct was described as not proceeding with the litigation, allowing the mortgagee to sell the Norman Park land and allowing the State of Queensland to win, where what they were doing involved illegality. 11 It is plain that the applicant cannot understand why the former trustee and the current trustees will not pursue the litigation. Regrettably this has led to him making serious allegations concerning the trustees' conduct which would not appear to me to have any foundation in the evidence before the Court. He submits that there will be a flood of litigation if he won the action involving the State of Queensland. It was then said to follow that the trustees in refusing to proceed with the litigation, were acting in concert with the State of Queensland. The evidence of this was said to be the minutes of the meeting and the letter to which I have referred. 12 The trustees were appointed by creditors who have the power of removal under s 181 of the Bankruptcy Act 1966 (Cth). The Court also continues to have such a power but, apart from general allegations, the material does not disclose any basis for such an order. 13 Whilst the Court has power to order a trustee to make good a loss sustained as a result of a breach of their duties, the material does not identify such a breach. The trustees were entitled to ask to be put in funds prior to making any investigations about the position with respect to the litigation. In any event, with respect to most of those actions the notices under s 60 had been served and expired prior to their appointment. A claim of this nature is one personal to the trustees and would, if it had any basis, affect the former trustee. 14 When asked what the basis in law was for the Court's assigning or revesting the chose of actions to him, including those which had been abandoned, the applicant's answer was that it lay in the general discretion of the Court to make such orders as it thinks just and equitable. A review of a particular decision was not sought. In any event, as I have said, most of the notices under s 60 expired before these trustees were appointed and the actions abandoned. 15 Upon sequestration, the Bankruptcy Act 1966 operates to vest property in the trustee. This includes actions and rights of appeal with respect to those actions. So far as concerns litigation of this kind, where the chose in action vests in the trustee, there can be no basis for the Court ordering to the contrary of the statute. No reasonable cause of action is disclosed. The proceeding is, in my view, vexatious within the rules and ought to be dismissed. My order will be that the proceedings be struck out. 16 In relation to the question of costs, it is of some importance that Mr Beames is not just a self-represented person; he is a solicitor. He has brought proceedings which had no foundation in law or fact and which involved serious allegations of impropriety. He was warned of the trustees' intention to seek indemnity costs by the notice of motion filed on 8 October 2002 and persisted with the proceedings and the defence to the application to strike out. The trustees ought, in my view, to have their costs on an indemnity basis. 17 There will be an additional order that the applicant pay the trustees' costs of the proceedings on an indemnity basis. A copy of my reasons will be made available to the parties when they are transcribed. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kiefel.