Oliveri, D.L. v Ferreri, M.A

[1993] FCA 860

Just a note to say that the attached judgment "Oliveri v. Ferreri", is to replace the old

860-93.	The old 860-93 "Eastman v. Ibbotson", is now 6-93 of the Supreme Court judgments.	i
c .

Thank you

Sonia Cornale

860      93

JUDGMENT No. ........ .,....,... 1 ..... ,., ....

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IN THE FEDERAL COURT OF AUSTRALIA )

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NEW SOUTH MALES DISTRICT REGISTRY ) NO. NP986 of 1993

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GENERAL DIVISION )

RE : DOMINIC LAWRENCE OLIVERI

Debtor

EX PARTE:  MARY-ANN FERRERI
Petitioning

23 December 1993

REASONS FOR JUDGMENT

LOCKHART J.

The debtor, Dominic Lawrence Ollveri, seeks an

of the hearing of the petltlon to make hlm bankrupt. He seeks

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to set aslde the judgment entered against hlm by consent in the	I
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Supreme Court of New South Wales, Equity Division, in November
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1991, the settlement being the culmination of a five day	I
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contested hearing before the Supreme Court. The basis on which

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I	the debtor seeks to set aslde the judgment, and in the meantlme

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' have the petition to make hlm bankrupt adjourned or stayed, is

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that the consensual judgment 1s said to have been obtained by the i

fraud of the petitioning creditor, Mary-Ann Ferreri.

The relevant principles with respect to adjournments of matters of the kind that 'the Court 1s dealing with today are referred to in many cases, but assistance is galned from the judgment of a Full Court of this Court in Ahern v Deputy Commission of Taxation (Queensland) (1987) 76 ALR 137 and in Adamopoulos v Olympic Airways SA (1990) 95 ALR 525.

The debtor has applied to the Supreme Court to set aside the judgment, a proceeding which will come before that court sometime next year, probably reasonably earlyinthe year. The proceeding in the Supreme Court was instituted by the petitioning creditor against the debtor and others. Those proceedings arose inter alia from the petitioning creditor's claim against the debtor, a Mr Lahoud, and a company Actlaw Pty Limited. The basis of the

proceedings was a form of partnership arrangement which was said

to exist between the parties to that litigation.

The petitioning creditor also alleged that the debtor had acted unconscionably in dealing with her, and had breached his duties as a solicitor in dealing wlth her in various affairs of business. The clalm by the petltloning creditor against the debtor involved, as part of the factual matrix upon which she sought to prove her case, an allegation of a sexual relationship between herself and the debtor in which it was alleged that she provided moneys to him, or expended those moneys in relation to

property belonging to her.

In the proceedings before the Supreme Court, the debtor was represented by experienced senior and junior counsel and an independent solicitor. An issue arose in the course of the hearing before the Supreme Court relevant to the credit of the debtor as to whether he and the petitioning creditor had had a sexual relationship between them, includingthe specific question whether they had spent a weekend together in Jindabyne at the

Chalet Jindabyne on 1 and 2 September 1989. A letter from the

Chalet Jindabyne to the petitioning creditor's solicitors and an

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accompanying form of receipt were tendered in evidence by the

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I	petitioning credltor before the Supreme Court and were, over objection, admitted into evldence.
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I	The letter was signed by a Mr Libdy as a director of the
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I	Chalet Jindabyne and 1s dated 27 November 1991; omitting formal

L parts it says:

"We wish to confirm that the receipt in possession dated September 1989 number 53 is the true and original copy given to the abovementioned person for accommodation at Chalet Jindabyne for the 1st and 2nd Days of September 1989."

I	The form of receipt attached to the letter is dated
!	September 1989 and purports to record the receipt from M. Ferriri
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[sic] and D. Oliver [sic] for accommodation at the Chalet on 1
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I	and 2 September 1989. The legal representatives of the debtor,
!	upon receiving notice of those documents, caused some enquiries
i	to be made as to the authenticity of the receipt, because it was
introduced into evldence on the fourth day of the hearing before Waddell C.J. in Eq. On the fifth day after the parties appear to have resolved their baslc differences, senior counsel for the debtor said this to his Honour (page 241 of the transcript of the Supreme Court proceeding):

"To the extent that such a declaration would

have a bearlng on any such r igh t s or obligations o f my c l i e n t , and t o the extent tha t such an order would be made arls ing out o f the evidence, and especial ly the evidence on credi t and going t o the relationship between M r Ol lver i and Mrs Ferreri, I have

t o say t h i s , that the document tha t w a s

tendered yesterday from The Chalet, Jindabyne - that w a s two documents tha t were somewhat contentious - Mlss Stapleton telephoned Mr Libdie yesterday, t he

gentleman who signed the l e t t e r , i n order t o

ascertain, so f a r a s she could, t he

providence o f the receipt . What she w a s

to ld by M r Libdie w a s t h a t , havlng received

a telephone ca l l from the p l a i n t i f f ' s

s o l i c l t o r s , he searched for h l s carbon copy

recelpt book for the relevant period	and w a s
unable t o locate that book.	He had some

informatlon i n , I th ink i t w a s the Hotel ledger, and from that informatlon he recreated an orlginal rece ip t . He d i d not have the ledger i n front o f him a t t he time he was speaking t o Miss Stapleton, so tha t from that it would seem that the first p a r t o f the document, the l e t t e r from Mr Libdie,

i s c lear ly inaccurate.

Had t h l s matter proceeded i n the ordinary course I would have asked your Honour t o reconsider the admission o f those documents i n the l i g h t o f what Miss Stapleton learn t . I only r a s e i t a t t h l s stage because that brings us back t o where we were, wlth no corroborative evidence o f W r s Ferrer i ' s claims a s t o the relationship between

bearlng, although perhaps not determinative, herse l f and M r Ol iver i . That has some

but i t i s impossible t o separate the e f f e c t

o f that evidence from any findings your Honour might make i n re lat ion t o the partnership agreement. That being the case, we submit it strengthens what I apprehend t o be your Honour's inc l ina t ion not t o make the declaration. "

The reference t o tha t declaration i s a reference t o one o f t he declarations	sought	as	r e l l e f i n t h e Supreme Court b y t h e
pet i t ioning cred i tor .	Miss Stapleton was	junior	counsel f o r the
debtor.

In the Supreme Court proceeding the debtor challenged the authenticity of the receipt because it had appeared by then that at least it was a "recreated" document, to use the words of his senior counsel. Throughout the Supreme Court proceeding, and indeed this proceeding, the debtor denies that he and the petitioning creditor had a sexual relationship, and in

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particular, denies that they had ever spent a weekend together
at Jindabyne in September 1989.

The Supreme Court proceeding was settled between the parties: I need not refer in detail to the terms of settlement. It is sufficient to summarise them so far as presently relevant by saying that judgment was entered against the debtor in favour of the petitioning creditor in a sum greater than $350,000; and orders for costs against the debtor were made in favour of the

L	petitioning creditor.
There was a deal of evidence before this Court on the hearing of the adjournment application. I need not refer to it in any detail; the evidence centred on events relating to the alleged receipt as to the booking at the Chalet Jindabyne. Affidavits were sworn by a number of witnesses including the debtor, the petitioning creditor, Mr Libdy and others.
The debtor and Mr Libdy were cross examined; the other witnesses were not cross examined. The evidence upon which the debtor relies, if accepted, suggests that not only is the receipt a recreated document, that is, recreated in November 1991 for the purposes of the Supreme Court proceedings a little under two years after September 1989, but that it could not, on any view of the facts, have been taken from the ledger of the Chalet, because a copy of the relevant extract from the ledger is in
evidence. It records against the relevant days in September 1989 that MS Ferreri and another person were apparently booked to stay at the motel on 1 and 2 September, 1989, but no reference is made to the debtor.
Evidence has been led by the debtor to the effect that the reason for the inclusion in the receipt which was tendered before the Supreme Court of the debtor's name in relation to the booking for September 1989 is that the petitioning creditor, so it is
I	.-	said, or possibly someone on her behalf, solicited from the
manager of the Chalet a receipt in the form which it took in the
debtor hlmself as being associated with the booking at the Supreme Court, recording, amongst other things, the name of the
Chalet.
The petltlonlng creditor's evidence does not dispute that the receipt which was in evidence before Waddell C.J. in Eq. was a recreated document (that seems to be plain on the material before the Court); but that she did not dictate the terms of the receipt as recording, amongst other things, the name of the debtor. However, her own affidavit would suggest that she did mention the names of both the petitioning creditor and the debtor in relation to the request for a receipt. I am satisfied that, for the purpose of dealing wlth this adjournment application of the bankruptcy petition, I should accept that the receipt is a reconstructed, or recreated, document, not necessarily based on extracts from the Chalet ledger, or any other primary document
L	and that it is a document upon which no reliance can be placed for present purposes to support the suggestion that the debtor was in fact involved, either in the booking for the weekend at Jindabyne with the petitioning creditor, or that he in fact stayed with her on that occasion at that place. Whether the debtor dld in fact stay with the petitioning creditor that weekend at Jindabyne is a question which I do not need to consider.
L-	The debtor swears that he was astounded by the revelation of the receipt during the course of the trlal before the Supreme Court in 1991 and that this led hlm and his counsel, and solicitor, to settle the matter; primarily because he feared
that his reputation as a solicitor of the Supreme Court of New South Wales and his right to practice there might be jeopardised if it was known or established that he had a sexual relationship with a client, namely the petitioning creditor.
He said that, whllst he was aware that he did not have any such relationship with the petitioning credltor and had not attended the Chalet at Jindabyne, he remained very concerned that the receipt and/or the ledger may be relied upon by Waddell C.J. in Eq. as a basis for preferring the petitioning creditor's evidence to his evidence. He said that it was not until about 9 December this year that he became aware for the first time that the receipt may not have been reproduced from information contained in the Chalet ledger.
Importantly for present purposes, the essential assertion of the debtor is that if he had been aware prior to the entry of the consent judgment on 29 November 1991 that the receipt may not have been produced as a result of information in the Chalet ledger, and that the receipt itself recorded only what Mr Libdy had been told by the petitioning creditor, he would not have consented to the entry of the consent judgment. The debtor was represented in the Supreme Court (as I have said) by senior and junior counsel and an independent solicitor in a strongly
to which I have referred. contested five day proceeding which culminated in the settlement
It is true that the production of the receipt for the booking at Jindabyne was relevant to the credit of the debtor and therefore may have had a bearing on other primary issues in the case and, no doubt, agitated the minds of the debtor, his counsel and solicltor during the course of the trlal. As the passage from the transcript of the Supreme Court proceedings at pages 241 and 242 reveals, the debtor plalnly put in issue before the Supreme Court the authenticity of the receipt. If the debtor had wished to do so he could have sought an adjournment of the proceeding, with what success, of course, I know not, and then

I probed the whole questlon of the authenticity of the receipt at a time when memories may have been more accurate than they perhaps are now, some two years later. Also the recollection of witnesses, and indeed the availability of witnesses, would have

L	been a more certain event than it is now, particularly as in the meantime the company which operated the Chalet has been wound up.
The burden of proving that the adjournment should be granted lles upon the debtor who he has had ample opportunity to adduce evidence to support his application. Yet there is no evidence from counsel or the independent solicitor retained by hlm in respect of the 1989 Supreme Court proceeding to corroborate his evidence, in particular as to the significance of the receipt and
'L	the role it played in the decision to settle the case.
All I have really is the debtor's own evidence, plus the objectives facts which do render the Jindabyne receipt a highly questionable matter; but much of this was known at the time of the trial before the Supreme Court. Indeed, as I have indicated, the debtor's own senlor counsel referred to the fact that on her instructions and inquiries the receipt was a "recreated" document. An adjournment was not sought so that the whole position could be examined with respect to the receipt when, as
I have a l r e a d y s a i d , t h e evldence might have been f r e s h e r and
more r e a d i l y a v a i l a b l e t h a n it i s now, i n view of t h e
i n t e r v e n t i o n of t h e winding up of t h e Cha le t .

I t would have been, I t h i n k , a v e r y ea sy t a s k , s i n c e

i n q u i r i e s had a l r e a d y been made of M r Libdy, a l s o t o o b t a i n a

copy of t h e l e d g e r which would t h e n have been i n e x i s t e n c e , b u t

lt was dec ided t o s e t t l e t h e ca se .

Following t h e e n t r y of t h e consent judgment i n November of

1991, discussions e n s u e d b e t w e e n t h e p e t i t i o n i n g c r e d i t o r and t h e

d e b t o r	w i th	r e s p e c t	t o t h e q u e s t i o n	of	payment	of	t h e	judgment
d e b t .	The	d e b t o r	n e g o t i a t e d	w i t h	t h e	s o l i c i t o r s	f o r	t h e

p e t i t i o n m g c r e d i t o r f o r a p p r o p r i a t e terms of payment, o r t i m e

t o pay t h e amount of t h e judgment d e b t t o which t h e r e w a s , of

course , i n t e r e s t acc ru ing .

I n a l e t t e r of 1 0 A p r i l 1992 from t h e d e b t o r ' s f i r m of

s o l i c i t o r s t o t h e s o l i c i t o r s f o r t h e p e t i t i o n i n g c r e d i t o r , a

s t a t emen t was made t h a t :

"wl th in t h e nex t month we expec t t h a t o u r

c l l e n t s w i l l	b e	i n	a	p o s l t i o n	t o	pay	a t
l e a s t	a	s u b s t a n t i a l	p a r t	o f	t h e	d e b t	( t h e

r e f e r e n c e t o t h e p l u r a l c l i e n t s i s t o t h e

d e b t o r and t o M r Lahoud).

We a r e g r a t e f u l f o r your indulgence t o d a t e

bu t you may r e s t a s s u r e d t h a t u l t i m a t e l y i t

is t o your c l i e n t s ' b e n e f i t financially."

In a later letter of June 1992, again from Messrs Ollveri and Associates to the solicitors for the petitioning creditor, a statement is made that:

"It seems that the only alternative is for your client to pursue the enforcement procedures open to it."

Again, in a letter of 10 March 1993 from Oliveri and

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Associates to the solicitors for the petitioning creditor, the
letter states amongst other things:

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alternatives.

"In short, your client has three

1.	$100 ,000 .00 immediately (upon the execution o f the appropriate documentation) (I'm not sure whether this offer is still open).
2.	The proceeds of the sale of the coffee- shop-restaurant in due course (or even the purchase of the same by your client).
3.	Proceed on the bankruptcy notice.

room for me to manoeuvre out of the third	Your client's proposal does not leave much
alternative.	"

There was not a breath of the assertion now made before this Court that the debtor would not have consented to the judgment if he had known the true facts about the receipt until early this month, December, 1993. Yet at all times the debtor claims that he had never had a sexual relationship with the petitioning creditor, and that they had not been to Jindabyne together at the

Chalet in September, 1989, or indeed at any other time. The unreliability of the receipt tendered before the Supreme Court must have been a live matter at all material times in the mind of the debtor.

In my view, this adjournment application cannot be properly dealt with unless I resolve the question of the credibility of the debtor. It is not a course that I seek to take, but it would, I think, be an abrogation of the responsibility of this Court in the exercise of its bankruptcy jurisdiction simply to ignore the issue of credit which is before it and that arises on the adjournment application, by simply standingthe petition over until the Supreme Court has dealt with the proceeding to set aside the consent ludgment. The time which that will take will, of course, increase if the proceeding in the Supreme Court has to be a substantive and different proceeding from the proceeding in which the judgment was itself entered.

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I	Indeed, any adjournment would probably require the extension of the life of this petition, that is, beyond March, 1994 when it would expire, although of course there is power in the Court to order the extension of the life of the petition, and doubtless in these circumstances it is a discretion that would be exercised in favour of the petitioning creditor.
Having considered all the evidence to which I have referred, and indeed, the whole of the evidence before the Court, I regret
to say that I cannot accept the evldence of the debtor as being
truthful .
The debtor also says that he had no knowledge until he was advised earlier this month that a settlement of the civil proceeding may be set aside if the settlement was obtained by fraud. I must say I find this evidence difficult to accept. That settlement may be vitiated by fraud is so fundamental a principle of law that it does make me pause to wonder if I can accept the debtor's evidence on that point. However, I prefer to make no specific flnding with respect to it.
This is not a case of a person entering into a settlement when suddenly confronted with an important document that appears to negate a basic questlon as to his credit. The debtor knew, if he is to be believed, that he had not had sexual involvement with the petitioning creditor and that therefore the receipt must be based on false facts, whether the receipt itself was a genuine
document or not. Thls must have raised serious doubts in the debtor's mind about the authenticity of the document, and that question could
have been examined imrnedlately, as indeed it was in part as appears from the statement of his counsel at page 241 of the transcript of the Supreme Court proceeding. As I have said, the ledger of the Chalet could have been subpoenaed, or indeed, inquiries made as to its contents on an urgent basis which should have revealed that there was no reference to the name of the debtor in the ledger itself.
So even if the debtors case with respect to the receipt and the challenge to its authenticity is entirely substantiated, nevertheless the question that IS ultimately for the Court to decide is whether it will accept the debtor's evidence that he placed such reliance upon the form of the receipt that it induced

l	X-	him, as a material factor, to ~nstruct hls lawyers to settle the proceeding. I am persuaded that hls evidence is not truthful.
There is another question which requires attention; the fraud that is said to vitiate the settlement is the false recelpt, for the reasons which I have given. Practising barristers and solicitors are familiar with crises in the conduct of contentious litigation. The receipt produced by the petitioning creditor and admltted into evidence in the Supreme Court proceeding was investigated, as I say, to a degree and could have been followed further. A decision was made not to do
uncommon in the practice of litigatlon: they are part and parcel so and to settle the matter. Occasions of this kind are not
of the litigious process. The alleged fraud was not, in my view, on the evidence before me, which is fairly full, directly related to the compromise process which resulted in the settlement. It was a document that arose in the course of litigatlon as an important issue over the five day hearing.
If there was misconduct in the production of the receipt, and I do not say that there was, or that there was not, in my view that matter was not itself directly relevant with respect to fraud of a kind which could be said to vitiate a settlement of the nature that was, in fact, reached.
A final point is that this Court, although dealing with an adjournment application, is also really being asked to go behind the consent judgment. The principles that govern going behind consent judgments are well established and it is sufficient to refer in that regard to the judgment of a Full Court of this Court in Olivleri v Stafford (1989) 91 ALR 91 and to the well known cases therein mentioned. In my view it would not be appropriate to adopt the course of going behind the judgment in the present case where the event relied on as vitiating a settlement occurred more than two years ago in the conduct of litigation of the kind I have mentioned, where the debtor was represented by senior and lunior counsel and a solicitor and the
the litigation. alleged vitiating element was but an Incldent in the course of
I am aware that the refusal to grant an adjournment of a petition may in some cases prevent the party seeking it from presenting his case or defence and in some circumstances may warrant injustice of a considerable magnitude. Thls is not, in my view, such a case. In the exercise of the Court's discretion In the present case I propose to decline to adjourn the petition;
accordingly the hearing of the petition will proceed. I certify that this and the preceding flfteen (15) pages are a true copy of the reasons for of the Honourable Mr.

Dated: 23 December 1993

Counsel for the Creditor	D J Durston
Solicitors for the Creditor :	McCabe Brown
Counsel for the Debtor	J B Simpkins and T W C Stuart
Solicitors for the Debtor	D L Oliveri and Associates
Date of Hearing	23 December 1993
Date of Judgment	23 December 1993