Lindfield, T.G. v Westpac Banking Corporation Ltd
[1994] FCA 190
•13 APRIL 1994
TERRY GEORGE LINDFIELD v. WESTPAC BANKING CORPORATION LIMITED
No. P 3409 of 1993
FED No.190/94
Number of pages - 12
Bankruptcy
COURT
IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT
OF THE STATE OF NEW SOUTH WALES
EINFELD J
CATCHWORDS
Bankruptcy - sequestration - failure to pay pursuant to consent settlement of court proceedings - debtor seeks to set aside settlement - whether hearing of creditor's petition should be adjourned to allow debtor to pursue application to set aside
Harvey v Phillips (1956) 95 CLR 235
Paino v Hofbauer (1987) 13 NSWLR 193
General Credits Ltd v Ebsworth (1986) 2 Qd R 162
Huddersfield Banking Co Ltd v Henry Lister and Son Ltd (1895) 2 Ch 273
National Benzole Co Ltd v Gooch (1961) 1 WLR 1489; (1961) 3 All ER 1097
Purcell v F.C. Trigell Ltd (1971) 1 QB 358
Siebe Gorman and Co Ltd v Pneupac Ltd (1982) 1 WLR 185; (1982) 1 All ER 377
HEARING
SYDNEY, 1-2 March 1994
#DATE 13:4:1994
Counsel and solicitors for Mr S. White instructed by
the applicant John M. Fitzgerand and Assoc.
Counsel and solicitors for Mr P. Dowdy instructed by
the respondent Henry Davis York
Mr O'Halloran, Creditor appeared in person
ORDER
The Court orders that the creditor's petition be adjourned to 8 June 1994 before a Registrar.
In the event that the debtor does not at any time pursue his
Supreme Court proceedings with vigour, the respondent to have liberty to apply on one week's notice by affidavit to have the petition restored to the list for hearing.
Costs of the application for the adjournment to be costs in the
cause.
Note:Settlement and entry of orders are deal with in accordance with Order 36 of the Federal Court Rules.
JUDGE1
EINFELD J Westpac Banking Corporation Limited (Westpac) has presented a creditor's petition for the sequestration of the estate of Terry George Lindfield (the debtor). The petition is based upon the failure to comply with a fourteen day bankruptcy notice which sought the payment of $2,233,644.25 being the amount (plus interest) the debtor was ordered to pay to Westpac by the Commercial Division of the Supreme Court of New South Wales on 15 February 1993 in a settlement of proceedings to which the debtor was a party (the proceedings). The petition is opposed by the debtor. The initial grounds of opposition dated 30 November 1993 claimed that relevant documents were not served personally on the debtor but a fresh notice of opposition, filed on 1 February 1994, gave as the grounds:
1. I am making application to Appeal to the Supreme Court of New South Wales the judgement in the matter in the Commercial Division No. 50015 of 1992 heard on February 15, 1993.
2. The Proof of Debt is prejudiced. Evidential material supporting my mental inability to comprehend and sign the bank guarantee due to a cerebral injury and post-traumatic epilepsy was not accepted by the Court. My legal advisors had not adhered to the Court's timetable for presentation of documents.
3. Consent for judgement was forced upon me during a state of extreme mental anxiety. Judicial advice as to the legal consequences was not received.
4. The Creditor's Petition should not be proceeded upon until a review and the extent of the prejudice has been considered by a Court of Appeal.
There was attached to the notice a report dated 21 January 1993 from a consultant physician, Dr Peter Kendall, who had seen the debtor in several consultations between July 1988 and October 1992.
When the creditor's petition came on for hearing on 1 March 1994, the debtor's primary application was in fact for a fourteen day adjournment. If the adjournment was refused, he sought a refusal of a sequestration order on discretionary grounds under section 52(2) or a suspension of the sequestration order for twenty-one days to permit the proposed appeal to the Supreme Court to be lodged. The debtor's counsel explained that his client's goal was to set aside the Supreme Court settlement. In addition to the petitioning creditor and the debtor, a supporting creditor Mr O'Halloran appeared in person at the hearing.
The facts of the matter commence with a guarantee by the debtor and four other persons of the obligation to Westpac of a company called Morstone Pty Ltd. This company took a sublease of land at Charlotte's Pass ski resort in 1984 and built a hotel on it for which it borrowed $1.12 million from Westpac. It defaulted on its loan. The defendants which included Mr O'Halloran were directors of Morstone and, it seems, another company also involved in ski lodge development. On 8 August 1979 the debtor was injured in a motor vehicle accident, sustaining amongst other injuries frontal lobe brain damage. He was hospitalised for five months and has continued to receive treatment thereafter. A co-guarantor/defendant Mr Constantine suffered serious injuries and Mrs Constantine was killed. Part of the debtor's defence to Westpac's claim was that his injuries, and especially his brain damage, meant that he could not understand or even recollect signing the guarantee. He cross claimed under the Trade Practices Act alleging misleading and deceptive conduct by Westpac inducing his entry into the guarantee. On these and other bases he sought the setting aside, invalidation or variation of the guarantee.
Westpac's proceedings against the directors of Morstone to recover its loan via the guarantees were launched on 16 January 1992. On 10 July 1992 Justice Rolfe in the Commercial Division ordered that the debtor serve by 10 September 1992 all medical and other expert evidence intended to be relied upon at the hearing to establish the brain damage. This was not done despite the fact that on the evidence before me several medical reports concerning his mental injuries and disabilities reports were already in existence and could easily have been obtained.
The case was fixed for hearing for four days commencing on 15 February 1993. On 14 January 1993 the debtor's solicitor served a number of medical reports ranging in date from 2 March 1982 to 26 October 1992. On 2 February 1993 Westpac applied to Justice Cole in the Commercial Division for an order that the debtor not be permitted to rely upon his expert medical evidence at the trial on the grounds of its late service. Alternatively it sought an adjournment of the hearing. At the conclusion of the hearing his Honour gave judgment ex tempore setting out the history of the matter and granting the principal order sought. This decision in substance removed the bulk of the debtor's defence but no appeal from the ruling was lodged. On 15 February 1993 the case was settled when all but one of the parties attended by counsel, solicitor or in person before Justice Cole and tendered to his Honour Short Minutes of Orders. The orders sought were made and entered that day.
The debtor and his wife were married on 24 June 1968 when he was almost twenty-seven and she twenty-six. They became the joint owners of the matrimonial home at 34 Maroa Crescent, Allambie soon after their marriage and have lived at that address harmoniously within the marriage ever since. They have three children, twin boys aged twenty-four and a daughter aged twenty. In 1991 or 1992, the family company was restructured to reduce the debtor's interest and increase his wife's interest in it. On 10 March 1992 the debtor transferred all but a one hundredth share of the matrimonial home to his wife for $1. On 17 September 1992 they executed a maintenance agreement which provided as follows:
1. If called upon to do so at any time by the wife, the husband will forthwith transfer to her all assets standing to his name whether real or personal and without limiting the generality of the same, this will include all real estate, shares, bank accounts and income therefrom.
2. It is intended that all assets presently standing to the husband's name become and remain the property of the wife forthwith free from all debts other than those debts presently secured on those assets.
3. The husband hereby forever indemnifies the wife against any liability for amounts incurred by him for debts whether past present or future (other than debts presently secured on real estate) and this indemnity shall continue whether or not the wife was aware of the husband's intention to incur that debt.
4. This Deed shall be binding on the heirs executors and assigns of the husband.
5. The husband and wife will sign all documents and do all necessary things to give effect to the provisions of this Deed including, if called upon to do so by the husband or wife, the signing of Terms of Settlement in any Court of competent jurisdiction, the execution of any Transfer, Deed of Assignment or other document necessary to carry out the provisions of this Deed, and the execution of any document reasonably necessary to give effect to the provisions of this Deed.
6. The husband and wife acknowledge that they have read this Deed and fully understand its contents and that each has been given the opportunity of seeking independent legal advice regarding the contents of this Deed prior to the signing of the same.
Apparently Mrs Lindfield made the call referred to in clause 1 in December 1993 but the transfers have yet to be made. The deed states that it was intended to promote the continuing harmonious relationship between Mr and Mrs Lindfield. The house was said to be valued at $300,000 subject to a mortgage to the National Australia Bank of $150,000. Among other prefatory averments were:
H. The twins ANDREW and MARTIN were born prematurely and as a result suffer from cerebral palsy and a degree of intellectual disability. The wife has devoted herself to caring for the twins and it is anticipated that they will remain under their parents' care for the foreseeable future and will require the wife's full-time attention, as well as considerable financial support.
I. In 1979 the husband suffered a motor vehicle accident resulting in orthopaedic injuries, frontal lobe damage and epilepsy. The husband has been advised by his doctors that his condition will deteriorate. J. As a result of his medical condition, the husband believes he will be unable in the future to independently manage his financial affairs and that it is likely that he will make unwise financial decisions in the future and that he has made unwise financial decisions in the past.
K. The husband is presently party to Supreme Court Suit No. 50015 of 1992 whereby proceedings have been instituted against the husband and four other business parties as guarantors of a debt to Westpac Banking Corporation. It is anticipated that if the Bank is successful in its claim against the husband the husband could be indebted to an amount of approximately $380,000.00 to the Bank. L. The husband has instituted proceedings for damages for negligence as a result of his motor vehicle accident, however these proceedings have yet to be heard. M. As well as caring for the children and home, the wife has worked for the family company however due to the continuing need for care of the twins and the husband, the wife has no income earning ability whatsoever. N. For the reasons set out above, the husband wishes to make provision for the wife and children and as far as possible to safeguard them from the effect his brain damage may have on his ability to properly conduct his financial affairs and also to recognise the contribution the wife has made to the existing assets of the husband and wife.
O. The husband and wife have therefore agreed to enter into a Deed with a view to providing for the wife's future as well as that of the children.
The debtor's evidence was that he did not know that his solicitor had not kept to the Court's timetable for serving the medical evidence until a telephone call from her told him of Westpac's objection to the late service and Justice Cole's ruling that it be excluded. Knowing that it was critical to his defence, he believed that the evidence had been supplied in proper time. The debtor said that at 5.30pm on Friday 12 February 1993, effectively the evening before the case, his solicitor had relayed by telephone counsel's advice that he could not win the case. He was told that he had to give the solicitor a bank cheque for $30,000 by 9.30am on the Monday morning 15 February, before the commencement of the case, or "they would not be proceeding with the case". This was presumably for the legal costs of the hearing although as the banks would not be open in the meantime, this request would be impossible to meet. The debtor said that until that moment his advice concerning his defence had been positive, certainly not hopeless, and that he was "extremely shocked" at the call, and "emotionally and mentally stressed". He had "a feeling of overwhelming devastation". As his solicitor had required an answer that night as to whether he wished to proceed with the case, the debtor felt great pressure to make a decision. After discussing the matter with his wife, he told his solicitor at about 6.30pm on the Friday night that he accepted the advice to withdraw his defence. As a consequence the 15 February settlement earlier referred to was entered.
On 9 March 1993, he wrote to his solicitor seeking (sic) "details including Court transcript, Westpac's solicitors objection and any other parties objections of our failed attempt to present my medical evidence in January 1993". He says that "a copy of the transcript of his Honour's decision was refused as being unduly lengthy". As Justice Cole's judgment is only 91/2 pages long, it is not conceivable that Mr Lindfield could have been denied a copy of it, by fax or post, on the grounds of its length. His letter does not in fact ask for the judgment but the "Court transcript" which he might well, but the solicitor might not, have thought included the judgment. I have not seen the transcript of the hearing before Justice Cole but having regard to what I have seen of the evidence in the principal proceedings and Justice Cole's judgment, the transcript of the hearing itself may well have been thirty pages or thereabouts. However, as the whole proceeding before Justice Cole was completed within the day, it is doubtful that the transcript was taken out at all. Its cost may have been a factor in not supplying it, but as I have received no evidence from the debtor's then solicitor, it is not appropriate to make definitive findings of fact in these regards.
According to the evidence submitted, the bankruptcy notice was issued on 23 April 1993 and served on 11 May. Believing that his options in relation to the guarantee were at an end, the debtor then tried to make a Part X arrangement with his creditors, but these failed in December 1993 because of the opposition of Westpac. The petition dated 12 October and presented on 20 October, together with the supporting documentation, was served on 13 November 1993 and first listed before the Court on 6 December 1993 when it was adjourned by a Registrar on the application of the debtor to 7 February 1994. The debtor was ordered to file any affidavits in opposition to the petition before that date. Nothing was filed so on 7 February, the petition was further adjourned to 1 March by a Registrar on the debtor's application and the time for filing affidavits in opposition was extended to 25 February 1994.
The debtor says that he first learned of the possibility of having the Supreme Court judgment set aside in a conversation with someone from the Law Society at or about the end of December 1993. On 14 February 1994 he instructed his present solicitor Michael John Fitzgerald to make an effort to do so. Mr Fitzgerald received his instructions at about 12 noon. He made immediate efforts to obtain the debtor's files from his previous solicitors but did not actually sight them for four days as the files were in storage and first had to be scanned by the previous solicitors. Thereafter Mr Fitzgerald acted with all due promptness and expedition. His request to Westpac for a fourteen day adjournment of the time for filing the debtor's affidavits and of the petition to enable him to assemble the evidence required was refused by Westpac, as a result of which the application to me on March 1 and 2 to which this judgment is directed was made.
It remains to say something of the medical evidence presented to the Court. Apart from the earlier mentioned reports of Dr Kendall, which are summarised in an attachment to the Notice of Grounds of Opposition to the petition, a further report was sought from Dr Kendall by letter from Mr Fitzgerald on 24 February 1994. I set out most of this letter to Dr Kendall because it is important to an understanding of the argument being advanced by the debtor for delaying the hearing of the petition. Although the formal request is for a short adjournment, the nature of the case to be made to the Supreme Court for the re-opening of the proceedings there is such that a much longer delay would in fact result.
The writer is instructed that Mr Lindfield in relation to a court case in February 1993 consented to a judgment and accepted liability under a guarantee which had previously been disputed in the sum of $2.2m dollars. We are instructed that Mr Lindfield's solicitor advised him at or about 5.45pm on Friday 12th February 1993, that his case had no prospect of success and that he should withdraw his defence. The first day of the hearing of this case was the following Monday, 15th February 1993. The solicitors had advised Mr Lindfield of this after he had spent in excess of $40,000.00 in legal fees in defence of the matter - Mr Lindfield was pushed by his solicitors to provide an answer that night after telling them that he was devastated by the news and felt incapable of answering them at that stage. After discussing the matter with his wife Mr Lindfield provided his consent that night. Mr Lindfield has submitted to the Federal Court that: "consent for judgment was forced upon me during a state of extreme mental anxiety." The purpose of seeking your report is to tender it as evidence to show the Court that Mr Lindfield was incapable of providing within a period of 3/4 to 1 hour, a reasoned and sensible decision whilst under substantial mental and emotional pressure and that any consent given at that stage would not be properly given, and/or that in your view taking into account the circumstances in which the judgment was entered, that you are of the opinion that Mr Lindfield could not have been able to properly consider his position. A report from yourself is sought dealing with inter alia the following:-
1. In your opinion and in your experience with Mr Lindfield, how would Mr Lindfield react to such a situation.
2. Is Mr Lindfield able to weigh plus (sic) and minuses of a complex situation and make logical snap decisions.
3. How does Mr Lindfield react to stressful situations, particularly those situations which require a reaction in a short period of time.
4. Assuming Mr Lindfield freezes when placed under mentally or emotionally stressful set of circumstances, (sic) would it be more or less likely that he would listen to and heed advice in such a situation.
5. Is the drug Dilantin as referred to in your report dated 21st January 1993, one which has a residual effect on the body? Mr Lindfield's consent to the judgment was some 4 months after he has ceased taking this drug - would the effects detailed in your abovementioned report still be present in his system 4 months later or would any other drug with which he was being treated (e.g antidepressants) have affected his consent.
In reply Dr Kendall summarised some of his previous reports. One item recalled was his statement in January 1993:
I think it is reasonable to assume the patient would have had difficulty in dealing with more abstract concepts and this would include the ability to draw inferences from learned experience and to comprehend fully and act on the information in any detailed documents. When faced with such demands such patients would tend to gloss over complex features.
Again:
There is no doubt that this patient's frontal lobe damage would have made him less capable than previously or normally when it came to understanding the more complex aspects of financial dealings and the like. At the same time it would have run counter to his desire to have reasonable self-regard to admit this.
Because of his frontal lobe damage and the associated cognitive damage it is likely that he would have been unaware of some of the implications of, say, financial documents, transactions and obligations he might have incurred.
Further on, Dr Kendall said:
Secondly, his organic brain damage by way of cognitive deficit as well as the frontal lobe syndrome features already described by me would have impaired his judgement and would have made it more difficult for him to realise the implications of more complex financial matters.
As to whether Mr Lindfield would have been capable of making an informed decision on any major financial or business transaction put before him, Dr Kendall gave this answer:
In my opinion the answer would be no. He has lost enough intellect (cognitive function) to lack the equipment to analyse any situation and to come to an informed decision. In fact I would go so far as to say that it is doubtful whether he actually could give proper instructions (in the legal sense) to his solicitors. I would hate to be in a position where I would have to rely on his business judgement.
At the same time he would desperately cling to the concept of still being a competent man and would not be inclined to volunteer information about no longer being competent. I am not concerned with the ordinary ethics or business ethics of the situation but, since there is a legal obligation in for instance contracts in relation to house purchase for a solicitor to be involved and to explain to his client (and to make sure that his client does in fact understand) the implications of any document, then surely a similar attitude should apply when it comes to acting as guarantor, particularly when large sums of money are involved.
Unfortunately too many people do not seem to be aware of this obligation, but surely the institution that invited him to be a guarantor should have been sufficiently aware of its obligations to make sure that he really understood what he was signing.
I understand from your letter that he was actually under pressure to make a decision over a very short period of time (three quarters to one hour). Knowing him medically as I do (and after all I have seen him repeatedly over more than 10 years) I am quite sure that he would have been under great stress, would have been unable to give truly informed consent and should never have been put in this position at all.
Dr Kendall answered the specific questions posed in Mr Fitzgerald's letter of 24 February 1994 as follows:
1. He would react in a "panic mode" influenced by the various conflicting and all threatening possibilities if he did or did not make up his mind one way or the other.
2. The answer is definitely no. Even if given a long time to make up his mind, he would be incapable of making an adequate informed judgement, let alone a snap decision.
3. He tends to withdraw into himself or to attend to the minutiae rather than the broad aspects of a situation and to have regard to tangential rather than to critical issues. There probably would be significant psychobiological signs of anxiety, such as tachycardia.
4. The term "freezes" I equate with withdrawing into himself. In such a condition he would cling to whatever decision he has made initially because he would lack the ability to adapt himself to a new set of circumstances.
5. I do not think that the effects of Dilantin would still have been present but his cognitive damage and frontal lobe damage would have been quite enough to produce the features described by me.
Westpac's opposition to the adjournment is founded firstly on the delay in the debtor seeking to approach the Supreme Court -- as at the time of this hearing no application had been made to that Court in the matter at all. The second argument is that any application of the kind envisaged would be hopeless and bound to fail.
On the amended statement of claim and amended defence to cross claim supported by the opinion of Dr Kendall, there are really two delays involved. One is the very long time between the signing of the guarantee on 27 April 1984 and the present time. The second is the time between the consent judgment on 15 February 1993 and the second notice of grounds of opposition to the petition filed on 1 February 1994. Neither delay has really been explained at all rationally. If the debtor was able to recognise his mental problems sufficiently well to divest himself in March 1992 of his share in the matrimonial home and in September 1992 to enter into the deed of settlement registered in the Family Court, it strikes me that he ought to have realised that he had not understood the guarantee or properly comprehended the February 1993 settlement of the Supreme Court proceedings long before the creditor's petition was served in November 1993.
However, in the circumstances of this case, I think that these delays should not be permitted to stand in the way of his attempt to litigate his rights fully. There was no evidence of any prejudice to Westpac from delaying the bankruptcy proceedings. On the evidence there is no chance that Mr Lindfield's estate will produce enough funds to pay the debt, whatever the fate of his asset-divesting activities of the last few years. Some delay to Westpac in accessing any assets he does have is inevitable, and seems unlikely to be of relevant moment for the present.
The major problem the debtor must overcome is the difficulty he will face in having the consent judgment set aside. The Supreme Court has jurisdiction to do so but the power is discretionary: Supreme Court Rules Part 40 rule 9(3) and (4). In Paino v Hofbauer (1987) 13 NSWLR 193, the New South Wales Court of Appeal (McHugh JA with whom Samuels and Clarke JJA agreed) said at 198 C:
English courts have gone so far as to say that a court will only interfere with a consent order based on a contract on the grounds that it interferes with any other contract: Siebe Gorman and Co Ltd v Pneupac Ltd (1982) 1 WLR 185; (1982) 1 All ER 377. In Harvey v Phillips (1956) 96 CLR 235 the High Court (at 244) approved the statement of Lindley LJ in Huddersfield Banking Co Ltd v Henry Lister and Son Ltd (1895) 2 Ch 273 at 280, where his Lordship said: "... To my mind, the only question is whether the agreement upon which the consent order was based can be invalidated or not. Or course, if that agreement cannot be invalidated the consent order is good."
The issue in Harvey v Phillips, and in General Credits Ltd v Ebsworth (1986) 2 Qd R 162, which applied it, was whether a consent order based on a compromise agreement could be set aside. The issue in the present case is different. The Court does have a discretion. Moreover, I am not prepared to adopt the English approach to consent orders based on contracts. The discretion conferred by Pt 2, r 3, is not to be equated with the extent of the Court's powers to vary or set aside contracts.
Nevertheless, when a party asks that a consent order based on a contract should be set aside or varied and the underlying contract could not be set aside or varied, the case would need to be exceptional before the Court would exercise its discretion in favour of an applicant.
Clarke JA added at 200 C:
In England there is a line of authority in support of the proposition that a consent order should not be set aside unless grounds which would entitle the court to set aside or vary a contract are shown: Purcell v F.C. Trigell Ltd (1971) 1 QB 358; National Benzole Co Ltd v Gooch (1961) 1 WLR 1489;
(1961) 3 All ER 1097; Siebe Gorman and Co Ltd v Pneupac Ltd
(1982) 1 WLR 185; (1982) 1 All ER 377.
Some of the judicial statements in these cases, and earlier ones referred to in them, are sometimes relied upon in support of an argument that the court is not empowered to set aside or vary any consent order. Or, at least, that if there is power then the court should not exercise its discretion in favour of a party who seeks an order that the order be varied or set aside.
But in Siebe Gorman and Co Ltd v Pneupac Ltd, Lord Denning MR observed there was a critical distinction between consent orders which recorded a contract between the parties and those orders which meant no more than that one party was not objecting. In respect of the former Lord Denning said (at 189; 380): "the court will only interfere with such an order on the same grounds as it would with any other contract." There is also a line of authority in Australia to the effect that consent orders embodying a compromise agreement between the parties should only be set aside if the underlying agreement might be invalidated: Harvey v Phillips (1956) 95 CLR 235 at 243-244 and General Credits Ltd v Ebsworth (1986) 2 Qd R 162 at 165.
Whether a consent judgment will be set aside in such circumstances will therefore apparently depend on the establishment of at least one ground for setting aside the underlying contract, such as illegality, duress, mistake, non-disclosure of a material fact or, seemingly, the grounds that appear in such legislation as the Contracts Review Act, the Trade Practices Act or the Fair Trading Act. The medical evidence before the Court would, if accepted, certainly provide a basis to vary or set aside the guarantee. Likewise Dr Kendall's later opinions would provide grounds for setting aside the consent judgment. Of course I have not heard the Doctor's cross examination on these matters but it could not be said that on their face his views could not possibly be accepted.
There are some disturbing features of the proceedings before Justice Cole arising from the late supply of the medical reports to Westpac's lawyers. According to the evidence, the debtor did not know that the hearing was to take place at all until the day before. He was not present for the hearing and was not asked to provide an affidavit despite the importance of evidence about his condition and state of mind at relevant times which he alone could give. It is true that Justice Cole's judgment seems to proceed upon an acceptance that the debtor's assertions and the medical evidence brought to support them were true, and that his Honour's rejection of the evidence was based upon its late supply. But if the judge had heard from the debtor himself that he had left the matter in his solicitor's hands and did not know, contrary to the finding (judgment p.4) that the reason she had not provided the reports to Westpac's solicitors on time was that she had not obtained them from the solicitors representing him in the common law proceedings, his Honour's decision may well have been different. Moreover, Justice Cole's judgment did not acknowledge, presumably because his Honour was not told, the absolutely essentiality of the medical evidence to the debtor's case. It was not merely that "the substance of at least one defence which he wishes to raise would be denied to him" (judgment p.5); it was that to all intents and purposes his defence would collapse, as actually occurred. If true as he alleged, it is also disturbing that Mr Lindfield was not provided with a copy of his Honour's reasons for judgment and, on his account, advised of his right to appeal.
These are all matters which the Supreme Court will have to consider if the matter is brought before it. They are not matters on which I should seek to second guess that Court or prejudge its ultimate findings. It will suffice if I express my opinion that the projected application, while very difficult, is not inevitably doomed to fail. No application of this kind is easy because the Courts have always shown a marked and understandable reluctance to re-open settlements. But this case has some very unusual aspects which arouse concern that justice may not have been done or at least requires examination.
My task is to weigh up the respective prejudices if the bankruptcy proceedings are delayed to permit the proposed exercise to go ahead. I have said that I can see little prejudice to Westpac especially if I add that Mr O'Halloran, who was Chairman of Morstone at the relevant time, has paid Westpac some $800,000 of the outstanding debt. If Mr O'Halloran himself is to become entitled to any repayment of this sum by reason of any contribution able to be gained from Mr Lindfield, it seems likely to be a long time away in any event.
I had significant reservations about some of the evidence given by Mr Lindfield in the witness box concerning the rearrangements of his financial affairs in recent years. There is certainly a suspicion that some at least of these activities have not been as purely motivated as he claims. If the company restructuring, the maintenance agreement and the transfer of his interest in the matrimonial home, which account for virtually all his assets, were not driven by his ill health and concerns for his wife and children, then they may have been fraudulent to creditors. If so satisfied, a trustee in bankruptcy would no doubt move to have these dispositions declared void under section 121 of the Bankruptcy Act. Such proceedings have no time bar: s. 127(4). The setting aside of these transactions would expose the matrimonial home to sale with enormous repercussions for the whole Lindfield family, perhaps especially the cerebral palsy twin sons, which could not be reversed if the Supreme Court proceedings ultimately succeed and the bankruptcy is annulled.
It seems to me irrelevant that the debtor may have rights against his former solicitors. If he is made bankrupt, the trustee in bankruptcy would in reality make the decision whether to sue. On the present evidence, a favourable decision would appear unlikely, not or not only because some of Mr Lindfield's evidence on these issues is inherently doubtful, but because it will be very difficult to establish a causal nexus between the identified alleged failings of the solicitors and the debtor's present predicament.
For these reasons I propose to grant the debtor an adjournment of the hearing of the creditor's petition. In the first instance it will be adjourned to 8 June 1994 before a Registrar who and whose colleagues will be asked to monitor the progress of the Supreme Court proceedings by written reports from the parties at intervals of about two months which the Registrars will determine. In the event that the debtor does not at any time pursue his Supreme Court proceedings with vigour, Westpac will have liberty to apply on one week's notice by affidavit to have the petition restored to the list for hearing. The costs of the application for the adjournment will be costs in the cause.
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