National Australia Bank Ltd v Gorgas

[1999] FCA 1378

FEDERAL COURT OF AUSTRALIA

National Australia Bank Ltd v Gorgas [1999] FCA 1378

IN THE MATTER OF WILLIAM GORGAS; NATIONAL AUSTRALIA BANK LTD v WILLIAM GORGAS

N7537 of 1999

WILCOX J
SYDNEY
5 OCTOBER 1999

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 7537 of 1999

BETWEEN:

NATIONAL AUSTRALIA BANK LIMITED

Applicant

AND:

WILLIAM GORGAS
Respondent

JUDGE:

WILCOX J

DATE OF ORDER:

5 OCTOBER 1999

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.        A sequestration order be made against the estate of William Gorgas.

2.The costs of the applicant, including costs incurred in connection with the various adjournments of the matter, be costs in the estate.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 7537 of 1999

BETWEEN:

NATIONAL AUSTRALIA BANK LIMITED

Applicant

AND:

WILLIAM GORGAS
Respondent

JUDGE:	WILCOX J
DATE:	5 OCTOBER 1999
PLACE:	SYDNEY

EX TEMPORE REASONS FOR JUDGMENT

1. HIS HONOUR:   A notice of intention to oppose the petition was filed in this matter by the respondent, William Gorgas.  The matter has been before the Court on a number of occasions, on some occasions before a Deputy Registrar and on other occasions before myself.  There have been a number of adjournments caused, substantially, by Mr Gorgas' absence in Greece, where he was visiting his mother who was apparently ill, and also by a pending District Court application wherein Mr Gorgas sought to set aside the default judgment that had been entered against him by the petitioning creditor, National Australia Bank Limited.

2. The application in the District Court was heard by Judge Hoskings QC, on 24 September.  I have been furnished with an affidavit sworn by Mr Gorgas' solicitor, Mr J J Buchanan, summarising the events at that hearing and the view formed by Judge Hoskings.  It is not necessary to set out in any detail the judge's findings; the application was comprehensively lost.  The judge was not persuaded that Mr Gorgas' indebtedness was undertaken otherwise than on his own account.  He disbelieved significant aspects of his evidence. 

3. Normally, perhaps, one would expect that to be the end of the matter.  However, Mr Gorgas pursued his claim that his indebtedness to the bank, on an overdraft account, was not undertaken on his own account, but rather at the behest of a friend and adviser, Achilles Constantinidis.  It appears Mr Constantinidis is currently in hospital, at least for a short period.  He has not been able to attend court today. 

4. Affidavits were furnished by both Mr Gorgas and Mr Constantinidis, giving some information about the circumstances in which the indebtedness to the bank was incurred.  The way in which this was done was unsatisfactory.  A copy of the affidavit of Mr Gorgas was provided to counsel for the bank at 10.17 this morning, immediately before the commencement of the hearing.  No copy of Mr Constantinidis' affidavit was provided until it was furnished to the Court.  I regard this as unsatisfactory and discourteous.  It would have put Mr Reeves, counsel for the bank, in an impossible situation, if he had had to deal with the detail of the affidavits.  The affidavits, particularly that of Mr Constantinidis, are quite complex.  However, in my opinion, the new material does not assist Mr Gorgas' case.

5. It seems to be clear that an account was opened with the National Australia Bank in April 1997.  It was opened in the name of William Gorgas, the respondent. It was opened under circumstances where he was seeking some accommodation from the bank in order to re-organise his business affairs.  It seems Mr Gorgas has been a painting contractor for some 25 years or more.  He had decided to retire from his business, perhaps partly because of the state of his wife's health.  He desired his son to take over the business and he thought it would be desirable to re-organise his finances.  For that purpose, he attended a meeting with a bank officer in company with Mr Constantinidis.  Arrangements were made for an account to be opened. 

6. Substantial cheques were drawn promptly.  Over the ensuing months the account was in overdraft almost all the time, to the extent of several hundreds of thousands of dollars.  In September 1997 it appears that somebody within the bank became concerned about the fact that the account was in substantial overdraft without security.  Accordingly, an overdraft facility was approved, operative until 31 December 1997.  It was a condition of the overdraft facility that there be a mortgage of real estate and a maximum overdraft figure of $550,000 was specified.  A property in Maitland was provided by way of security and the account continued in overdraft.  It was not repaid at the end of 1997 and demands for payment by the bank were unsuccessful.  I gather the property, the subject of the security, was sold.  Notwithstanding that, there is a current debt to the bank, according to an affidavit filed in court today, in the sum of $536,043.26.  That is the amount of the judgment debt obtained in the District Court.

7. Mr Gorgas does not dispute that he signed the cheques that put the bank account into overdraft.  Nor does he suggest he did not understand the significance of signing a cheque.  His case is that, at all times, he acted on the instructions of Mr Constantinidis and Mr Constantinidis was, in effect, using him and his account in order to obtain finance from the bank.  Mr Constantinidis confirms this view of the matter.  It is true Mr Constantinidis suggests, in an oblique way, that the benefit of some of the finance might have gone to other people rather than himself personally; but it seems to be common ground, as between Mr Constantinidis and Mr Gorgas, that the money borrowed from the bank was used for the benefit of people other than Mr Gorgas.

8. Under those circumstances I can understand Mr Gorgas feeling it hard that he should be threatened with bankruptcy in respect of the unpaid account.  However, it is important to emphasis that there is no case put against the bank that it dealt with Mr Gorgas other than on the basis that he was the customer of the bank.  The account was opened in his name, he attended on the occasion when the account was opened, correspondence was sent to Mr Gorgas directly, he signed the cheques which put the account into debit.

9. I see no basis for imputing to the bank knowledge that Mr Constantinidis was using the account for purposes that were not those of Mr Gorgas.  Mr Gorgas may have a claim against Mr Constantinidis, and perhaps other people as well, but I do not think  this furnishes any answer to the claim made against him by the bank.

10. Mr Chippindall, counsel for Mr Gorgas, concedes the evidence establishes that Mr Gorgas signed the cheques.  He does not suggest Mr Gorgas was unaware of the significance of this action.  His case is that the account was not that of Mr Gorgas, but of Mr Constantinidis.  However, whatever may have been the position as between those two gentlemen, there is nothing to fix the bank with any knowledge of this.

11. It seems to me the denial of indebtedness must fail.  This is the only substantial basis of opposition and it follows that it is appropriate to reject the notice of grounds of opposition.  The necessary formal affidavits having been put before the Court, it is appropriate to proceed to make a sequestration order.

12. I am satisfied that the debtor, William Gorgas, committed the act of bankruptcy referred to in the petition, namely that he failed to comply with the requirements of a bankruptcy notice served on him on 21 April 1999. I am satisfied of the other matters required to be established by s 52 of the Bankruptcy Act 1966. I make a sequestration order against the estate of William Gorgas. I order that the costs of the applicant, including costs incurred in connection with the various adjournments of the matter, be costs in the estate.

I certify that the preceding twelve
(12) numbered paragraphs are a
true copy of the Reasons for Judgment
herein of the Honourable Justice
Wilcox.

Associate:
Dated:             7 October 1999

Counsel for the Applicant:        S M P Reeves
Solicitor for the Applicant:        Mallesons Stephen Jacques
Counsel for Respondent:          J Chippendal and S Bell
Solicitor for Respondent:          Garrett Walmsley Madgwicks

Date of Hearing:  5 October 1999

Date of Judgement                   5 October 1999