Mann, C.P. v Westpac Banking Corporation

Re: CHRISTOPHER PETER MANN
And: WESTPAC BANKING CORPORATION
No. N P303 of 1991
FED No. 404
Bankruptcy - Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Einfeld J.(1)

CATCHWORDS

Bankruptcy - creditor's petition - application for adjournment - debtor in receipt of verdict from another court - sufficient moneys paid to court to cover verdict and part of costs expected - no likelihood that remainder of costs will not be able to be paid - awaiting taxation of costs - possible entitlement to further verdict - matters expected to crystallise within six months - if they eventuate as expected then will be more than enough money to pay petitioning creditor's debt - debtor has demonstrated single-minded determination to see matter through and gain sufficient moneys to pay creditors - no apparent advantage to himself - no prejudice to petitioning creditor - adjournment granted

Practice and Procedure - application for adjournment of bankruptcy petition on grounds that debtor likely to be able to pay debts within short period

Re Noye ex parte Deputy Federal Commissioner of Taxation (1956) 18 ABC 77

Re Jones ex parte Clutterbuck Bros (1930) 2 ABC 89

HEARING

SYDNEY

#DATE 1:7:1991

Counsel and solicitor Mr L.S. Einstein
for the petitioning creditor: instructed by Corrs Chambers

Westgarth

Solicitor for the debtor: Mr M. France of Brown and Partners

JUDGE1

This is a petition dated 2 January 1990 for a sequestration order against the debtor. The matter is not without some difficulty. The petitioning creditor, Westpac Banking Corporation, obtained a judgment against a husband and wife Christopher Peter Mann and Christine Estelle Mann, by a judgment of the Supreme Court of New South Wales on 15 March 1988 for $119,117.51. By 27 November 1989, the date to which interest was calculated and claimed in the petition, this had grown to $152,489.98 and by now it has no doubt increased somewhat further. In substance the debtor is seeking an adjournment of the petition.

The debtor's account of why this debt has not been paid is quite unusual. It appears that the debtor and his wife were financially destroyed or at least significantly adversely affected when, as directors and sole shareholders of a company called Western Medical Services Pty Limited, they gave a number of personal guarantees in 1981.
Somewhat earlier than that time, they employed a Doctor John Neville Eccott in that company. Subsequently that doctor published a series of libellous attacks on the company or the debtors. In due course, legal proceedings were begun by Mr Mann in England for defamation against Doctor Eccott, who thereupon brought a counter claim.
The counter claim was dismissed, but the claim by Mr Mann for damages for defamation was successful, in that he obtained a verdict from a jury of 15,000 pounds. He represented himself. Prior to the hearing the defendant, supported by the British Medical Defence Union, paid into court some 50,000 pounds so that the debtor is, under the English rules of court similar to here, only able to obtain the costs of his action up to the date of the payment in.
Presumably to assist Mr Mann recover promptly everything payable to him, the English trial judge ordered that the 50,000 pounds paid into court remain there until the conclusion of the taxation of costs. That taxation of costs is in the process of wending its way through the English court system supported by an order from the trial judge that the taxation hearing be expedited. I have evidence before me, albeit hearsay, that it is expected that the taxation will take place before the end of 1991.
From the proceeds of the judgment, the order for costs on the cross-claim and the balance of the costs of Mr Mann's action between those incurred prior to the date of the payment in and those incurred subsequently, he asserts that he will have available a sum considerably in excess of $1,000,000 for payment to his and his wife's creditors. I should add that an additional sum of money, albeit of a somewhat smaller variety, may also become available from the proceeds of a further action brought by Mr Mann against the British Medical Journal, which is to be before a directions hearing in England in August, but which I am informed is the subject of settlement negotiations.
In the event that the debtor receives the sums expected to flow from the damages victory and the two sets of costs claimed, together with any settlement monies out of the outstanding suit, he and his wife will be well able to meet the claim of the petitioning creditor in this matter.
I have available to me evidence of some expert costing accountants in England concerning the expected financial return to Mr Mann in these costs proceedings. I call it evidence, although the petitioning creditor correctly points out that these are statements made by persons in England who are not here available for cross-examination. Mr Mann is also not here because he is in London, supporting his costing experts in the preparation of the bills of costs for taxation.
I did offer, and I would continue to offer, to Westpac that I would adjourn the application for adjournment for the purpose of permitting these persons to fly to Australia for cross-examination at Westpac's expense, but that offer has not yet been taken up. At the end of these proceedings I will reserve liberty to apply to permit further consideration to be given to that matter if it is desired to take it any further. Meanwhile, on an adjournment application, it seems appropriate to consider in a general way the matters referred to in the affidavits and letters emanating from these persons and thereby to deal with the prima facie position. Understandably from my reading of the material, Westpac does not allege that anything said in the material presented in this regard is outlandish or impossible to accept or even seriously unlikely to be correct.
The evidence of these persons provides a range of likely results of the taxation proceedings. I accept, as was made abundantly plain by counsel for Westpac and is obvious in proceedings of this kind, that there is a necessary element of uncertainty in any form of legal proceedings, including taxations of costs. But I think that people who are apparently experienced in the field are likely in a general way to be reasonably able to estimate the likely result, especially in the case of a taxation of costs where they have prepared or supervised the preparation of the bill from material made available to them.
Thus the situation in this case is that the debtors say we cannot pay this debt to Westpac at present but we genuinely expect to be able to pay it probably by the end of this year or very soon afterwards, say, of the order of six months from now. They say also we will be able to pay it from identifiable amounts, 50,000 pounds of which is presently held in the English High Court under order of a High Court judge to be released to the debtors as soon as their total rights have been determined. That 50,000 pounds would itself pay a substantial portion of the Westpac debt. It is obvious that they must obtain some costs from the proceedings in England and it would not take a large amount of costs to be received which when added to the 50,000 pounds would enable the debtors to pay out the debt to Westpac.
My attention has been drawn to authority which suggests that the court must weigh up in circumstances such as this, the "distinction", as it was called in Re Noye ex parte Deputy Federal Commissioner of Taxation (1956) 18 ABC 77, between a debtor who is able to pay his debts, presumably meaning at the time of the relevant hearing, and a debtor who will be able to pay the debts at some future time. This is an important distinction but it does seem to me that both that case and another case cited, namely Re Jones ex parte Clutterbuck Bros (1930) 2 ABC 89, turn on facts which make the likelihood of payments within an identifiable period far more speculative and uncertain than the circumstances of this case.
That there is uncertainty in this case cannot be doubted in that, as I have previously said, they depend upon not only the outcome of legal proceedings but the timing and dating of them, none of which, if English procedure bears any resemblance to its Australian counterparts, could be estimated with absolute certainty. However, there seems to be enough certainty in this case and the amounts involved have been identified with enough precision to make this case significantly distinguishable from those to which I have been referred.
Noye was a case in 1956 and Jones was a case in 1930. I think the consequences of bankruptcy today have become even more crystallised and the legislation significantly different to the position in those times as to add another distinguishing feature to this case. Perhaps the most important special feature of this case is Mr Mann's single-minded pursuit of his legal rights and the extent to which his and his wife's creditors at this time depend upon the continuation of that grim determination to see their indebtedness through despite Mr Mann's apparently adverse health in recent years. No doubt this has been somewhat contributed to or at least not helped by his experiences both in his business and in the law.
I have not attempted to outline the part of his case which turns on what is said to be at least misbehaviour by Australian authorities in releasing information to people associated with his litigious opponents in England. The Federal Ombudsman is now reviewing these circumstances, apparently concluding that some significant criticisms of the authorities concerned is warranted. The details are not particularly relevant here but this is another example of Mr Mann's commitment to righting the wrongs he has suffered.
Mr Mann's determination has extended not only to the pursuit of legal actions in England but the pursuit of the action without lawyers whom he could not afford. The conduct of a defamation case without a lawyer is a bold undertaking and it is to his credit that it was successful. He is now seemingly pursuing the costs with vigour and determination; he is pursuing the action against the British Medical Journal for publishing what a jury has already held were libellous statements; and he is also pursuing the authorities in Australia in the way I have just mentioned.
It is a very difficult task for a person without lawyers or very much money to take action to mount a rescue action against injustices of the kind evidenced in this case. On the material available to me it does not seem likely that Mr Mann will come out of this whole operation, at the end of all the various actions, proceedings and activities in which he is involved, with very much money for himself and his wife. He could easily have lain down earlier and accepted bankruptcy. This would have allowed the trustee to do what he wanted. He has chosen not to do that and to pursue his rights. On the facts of this case, this primarily means the rights of the creditors. It seems to me that bankruptcy would harm both the continuing pursuit of the rights as well as the interests of the creditors.
If bankruptcy was added to his difficulties at this time, the trustee would be the person to determine whether the action against the British Medical Journal and the cost proceedings, perhaps some others as well, were to be pursued. As the estate has, on what I am informed, virtually nothing in it in financial terms, the trustee would have no money to pursue these various causes. It would present to the trustee a very difficult task of deciding between whether to go ahead on the basis that the chances of obtaining significant sums of money are there, or whether conducting such matters from Australia in England would be so difficult to control as to make this course too speculative. Assuming funds became available, which is at best doubtful, the work would have to be done by some agent or lawyers in England whose costs would eat into the estate; again the creditors would hardly be advantaged.
In the circumstances of this difficult and in my experience quite unique case, I think that time should be given to enable these assets to crystallise. As far as I can see, they are actual assets and are not particularly contingent, even though the amount is at this time uncertain. Even the uncertain amount appears virtually certain to exceed the amount of the debt to Westpac and none of the other creditors appear to be pressing in any particular way at the present time for a resolution of this matter by a sequestration order. I think in the circumstances it is appropriate to allow a little more time to go. I take into account the fact that the judgment was obtained in March 1988, but the petition was not taken out until January 1990. Obviously Westpac will be charging interest while the debt is unpaid. When it eventually comes to be paid in six months time or so, further interest will have accumulated.
Westpac did not suggest any prejudice from a further delay and the amount of the debt is not so great in relation to an organisation such as Westpac as to be able to suggest that they are in any way prejudiced by a slight further delay. Indeed it seems to me that if the matter is adjourned, there is a greater chance of their getting their money than would be the case if a sequestration order was pronounced today. An affidavit, which is not only hearsay but is between Mr Mann and his present solicitor dated last Friday, refers to a conversation of the previous day between the two men, indicating that the bills of taxation of the debtor and the unsuccessful defendant in England should be filed in a final form within two weeks of that time, that is, about a week and a half from now, and should then be given a date for taxation prior to the end of the year.
For those reasons I propose to grant the adjournment requested. In order to keep a check on the position I will adjourn the matter for five weeks approximately to enable a report to be presented by Mr Mann's solicitor of the present position.
On reflection, rather than five weeks, I shall give a little longer to await the outcome of the directions hearing of the additional defamation case fixed in England for 20 August and therefore fix the adjourned date for hearing the report for 9.30 a.m. Tuesday 27 August 1991. On that date I will expect to be informed by an affidavit of Mr or Mrs Mann of the present position concerning the taxation of costs, both of the action for damages and the dismissed counter claim, as well as the outcome of the directions hearing on 20 August against the British Medical Journal. I will hear counsel on that day if desired on the question of whether Mr Mann or anyone else should be available for cross-examination in respect of any further application for adjournment at that time.
Costs of the application for adjournment will be reserved. I grant liberty to apply to any party on 48 hours notice, including for any desire by Westpac unable to be delayed to or dealt with on 27 August, to cross-examine any person in relation to the application for adjournment.

[1991] FCA 404

01 JULY 1991