Commonwealth Bank of Australia v Heinrich [2003] FCA 540

FEDERAL COURT OF AUSTRALIA

Commonwealth Bank of Australia v Heinrich [2003] FCA 540 PRACTICE AND PROCEDURE – vexatious litigant – whether O 21 r 2 directs Court to have regard only to proceedings in Federal Court – whether respondent had habitually instituted a vexatious proceeding against applicant – whether application to annul sequestration order is a proceeding against the petitioning creditor

Federal Court of Australia Act 1975 (Cth) Bankruptcy Act 1966 (Cth) Federal Court Rules O 21 r 2 Ramsey v Skyring (1999) 164 ALR 378 followed Horvath v Commonwealth Bank of Australia [1999] FCA 504 cited Attorney-General v Wentworth (1998) 14 NSWLR 481 cited Hunters Hill Municipal Council v Pedler [1976] 1 NSWLR 478 referred to Horvath v Pattison [1999] FCA 924 followed Heinrich v Commonwealth Bank of Australia [1999] SASC 210 cited Bank SA v Ferguson (1998) 151 ALR 729 cited COMMONWEALTH BANK OF AUSTRALIA v STEPHEN GLEN HEINRICH S 241 of 2002 MANSFIELD J 6 JUNE 2003 ADELAIDE

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY S 241 OF 2002

BETWEEN: COMMONWEALTH BANK OF AUSTRALIA

APPLICANT

AND: STEPHEN GLEN HEINRICH

RESPONDENT

JUDGE: MANSFIELD J

DATE: 6 JUNE 2003

PLACE: ADELAIDE

REASONS FOR JUDGMENT 1 The Commonwealth Bank of Australia (the CBA) seeks orders under O 21 r 2 of the Federal Court Rules that Stephen Glen Heinrich (Mr Heinrich) shall not, without leave of the Court, institute any proceeding against the Bank in the Federal Court of Australia. The complex fact which the CBA must establish to be entitled to the order sought is that Mr Heinrich has habitually and persistently and without any reasonable grounds instituted a vexatious proceeding against the CBA. An order under O 21 r 2 may be rescinded or varied at a later time: O 21 r 4. 2 Sackville J in Ramsey v Skyring (1999) 164 ALR 378 (Skyring) stated the principles which should be applied to an application under O 21 r 2 at 389 [51]-[52]. His Honour said: '[Order] 21, r 1 must be applied having regard to a fundamental principle of the legal system. It is that every person has a right of access to a court to seek remedies in consequence of an alleged infringement of his or her rights: Bremer Vulkan Schiffbau Und Maschinenfabrik v South India Shipping Corp Ltd [1981] AC 909 at 977, per Lord Diplock. Because an order made under a provision such as O 21, r 1 denies a litigant this right, it has been treated as an "extreme" remedy: Attorney-General v Wentworth (1988) 14 NSWLR 481 at 484, per Roden J. As Kirby J has pointed out in one of the many cases involving the respondent, "it is regarded as a serious thing in this country to keep a person out of the courts": Re Attorney-General (Cth); Ex parte Skyring (at 323). 52. Nonetheless, provisions such as O 21, r 1 give effect to an important countervailing policy. As Toohey J pointed out in relation to the equivalent High Court provision, the rule is designed to protect the court's own processes against unwarranted usurpation of its time and resources and to avoid loss caused to those who face actions which lack substance: Jones v Skyring (at ALJR 814). Linked with that objective is the need to protect the community, including litigants who wish their disputes to be resolved in an orderly and expeditious manner, against disruption of the court system flowing from the repeated institution of groundless proceedings. The serious consequences of an order made pursuant to O 21, r 1 are acknowledged in the stringent requirements of the rule itself. Only if these requirements are satisfied does the court have power to make such an order. Even if the requirements are satisfied, the court must consider whether an order should be made.' The principles are also helpfully considered by Weinberg J in Horvath v Commonwealth Bank of Australia [1999] FCA 504 at [95]-[103]. In Skyring, Sackville J said also that it is appropriate to take into account proceedings in other Courts, even though O 21 r 1 and O 21 r 2 refer to proceedings 'in the Court', that is in the Federal Court of Australia. 3 Order 21 r 1 was replaced in 1999: Federal Court Amendment Rules 1999 (No.6), Statutory Rule 295 of 1999 r 3 and Sch 1. It now enables the Court to consider vexatious proceedings in the Court or in any other Court. Order 21 r 2 was not altered in the same way. Subject to that matter, in my view the principles expressed by Sackville J are equally apposite to an application such as the present under O 21 r 2 of the Rules. 4 Hence, it is necessary for the CBA to show that Mr Heinrich has 'habitually and persistently and without any reasonable ground instituted a vexatious proceeding against [the CBA] in the Court'. 5 Whether Mr Heinrich has habitually and persistently brought a vexatious proceeding in the Court is a matter of fact. In Skyring, Sackville J adopted the test explained by Roden J in Attorney-General v Wentworth (1988) 14 NSWLR 481 at 492 in the following terms: ' "Habitually" suggests that the institution of such proceedings occurs as a matter of course, or almost automatically, when the appropriate conditions (whatever they may be) exist; "persistently" suggests determination, and continuing in the face of difficulty or opposition, with a degree of stubbornness.' As I have not been asked to proceed on any other basis, I also proceed on the basis that the observations of Roden J are correct. 6 The test of whether a person 'without any reasonable ground institutes a vexatious proceeding' is also an objective one. The question must be decided on the facts, not by reference to whether the person against whom the order was sought has acted in good faith. As Sackville J pointed out in Skyring at [46], it is therefore immaterial in this matter that Mr Heinrich may believe in the justice of his argument and may not understand that the argument he seeks to assert has been authoritatively rejected. The descriptive words relate to the proceedings, and not to the state of mind of the person who institutes them. 7 The reference to the institution of a 'proceeding' refers back to the definition of 'proceeding' in s 4 of the Federal Court of Australia Act 1975 (Cth). There has been no submission that any of the proceedings instituted in this Court to which I refer below are not 'proceedings' as so defined. Sackville J at [59] followed the observations of Yeldham J in Hunters Hill Municipal Council v Pedler [1976] 1 NSWLR 478 at 488 that: ' … Where a final decision has been given, any attempt, whether by way of appeal or application to set it aside, or to set aside proceedings taken to enforce such decision, which is in substance an attempt to re-litigate what has already been decided, is the institution of legal proceedings. It is to the substance of the matter that regard must be had and not to its form.' 8 However, one of the proceedings relied upon by the CBA as being a vexatious proceeding is an application by Mr Heinrich under s 153B of the Bankruptcy Act 1966 (Cth) (the Act) to annul the bankruptcy order made against him on 6 September 2000. The CBA is named as the respondent. It is however not clear that the annulment application is a proceeding against the CBA. In Horvath v Pattison [1999] FCA 924, Finkelstein J said at [12]: 'However, an application for annulment under s 153B is not an application against any person. In particular, it is not an application against the trustee or the Bank for it seeks no relief against either of those persons. It is true that the forming which Mr and Mrs Horvath have prepared their proposed application names those persons as respondents. However, generally speaking, in my view an application for an annulment is an ex parte application which pursuant to the rules of the Court must be served on the trustee: see O 77, r 42. It may be that in some circumstances the petitioning creditor should be named as a respondent: see In Re Hastie (No.2) (1926) NZLR 829.'