Re Elftherics Flemetakis Ex Parte Elefthenos Flemetakis

[1977] FCA 11

N.S.W. 163 of 1974

1

B.D. B i l e y

1 5 t h r h r c h , 1 9 7 7

1 0 t h December, 1976

13th December, 1976

213t February, 1377

COUNSEL FOR THE PETITIONING B.C.M. ;'tall

CREDITOR:

<

INSTRUCTING SOLICITORS: Rolanrl E. G r i d i g e r . CO

99 E l i z a b e t h S t r e e t , Sydney

I

? COUKSEL FOR BAIKRUFT: P. Urquhart

INSTRWTII<G SOLICITOHS: David G. P u l l i n ~ e r . CO

156 C a b r a u t t a dobd, Cabrsm? t i r

OFE'ICIAL PZCEIVER: H.B. Yilson

.# Bankruptcy Act, 1965.

I n t h e matter o f -

BANKRUPTCY ACT 1966-1975 -

R e : CLCFTIITXIOOS FIXMCTt~XIS --

Ex parte: ELCFTHERIOUS FLEMET>.G1S

REASONS FOR JUDGYXNT

Ri ley J.

15 !.!xch 1 9 7 7

The p e t i t i o n i n g c r e d i t o r Sam Hoursalas obtajned a Zc fnu l t

j udgmen t aga ins t t he app l i can t bankrup t E le f the r ious Plemeta+.ls I n

the District Court of N e w South Wales on 1 7 December 1 9 7 1 ?.rd cx?

15 September 1973 caused a b a n k r o p t c y n o t i c c t o b e s e r v e d on ::m.

I t was not complied with, a p e t i t i o n based on thc ncx-compliance

was f i l e d and served, and a s e q u e s t r a t i o n o r d e r was made aqz-.nst

t h e a p p l i c a n t ' s es ta te on 14 Kay 1 9 7 4 . The p e t l t l o n i n g creditor's

! p r o o f o f d e b t f o r t h e amount of the judgment p lus i n t e re s t G T S

lodged on 4 October 1 9 7 4 and was a d m i t t e d I n f u l l at $2,893.

The bankrupt by h i s a p p l i c a t i o n d a t e d 12 August 1 9 7 6 as

amended	by	l eave granted on	10 December	1 9 7 6 sceks t h e	fo.Llo\:ir:g
o r d e r s :

(1) an o rde r pu r suan t t o S . 9 9 ( 1 ) o f thc Bankrupxy

Act 1 9 6 6 t h a t t h e p e t i t i o n i n g c r e d i t o r ' s F r c a f

of debt be expunyed;

( 1 A ) a n o r d e r , a l s o u n d e r S . 9 9 (1) , t h a t t h e a n o u l t of

t h a t a d r c i t t e d dklbt he rcduced;

( 2 ) an o rde r uni!cr S. 15i !<l ) ( a ) t h a t h e bmkrl7,I>tr:; Lt

a n n u l l d .

I have hare hcard, and am now dc~lx:~ WI th, on lv the s:>rpL~c: -! w

- 2-

f o r o r d e r s	(1) and	(In), which	presumably	are s c u q h t	i n	tl?e
a l t e r n a t i v e .

This is r e a l l y a b u l l d i n g case. The bankrupt i s zn

e lectr ical c o n t r a c t o r . I n 1 9 7 0 he and h i s wlfe E l e f t h e r j a j o l n t l y

owned a b lock of land a t Moorebank on which they decided t o

b u i l d a house. The bankrupt made a l l t h e necessary arrangclficnts.

He l o d g e d a n a p p r o p r i a t e b u i l d i n g a p p l i c a t i o n , c o m p l e t e w i t h p l a n s

and spec i f i ca t ions , w i th the L ive rpoo l Counc i l on 2 0 J u l y 1 0 7 0 ,

showing "Name of owner" as "E. L E. Flemetakis" , and " K a m e of

b u i l d e r " as " S e l f " . H e arranged to o b t a i n a b u i l d i n g loan, i n the

j o i n t names of h imse l f and h i s wife, f rom the Rural Bank oi i!ew

South Wales. H e himself dug the t renches and poured the coilcrcte

foundat ions . H e a n d h i s wife t h e n e n t e r e d i n t o arr o r a l dgi-eemerlt

w i t h t h e p e t i t i o n i n g c r e d i t o r Mr. Hoursalas .

The evidence of the bankrupt and the evizence of the

T

p e t i t i o n i n g c r e d i t o r are i n d i r e c t c o n f l i c t &S t o t h e terr;s 3f

t h a t a g r e e m e n t a n d a s t o o t h e r matters, and it is t h e r e f o r e

c o n v e n i e n t t h a t I should a t once s ta te t h e o p i n i c n I have fcrmed

of t h e r e l i a b i l i t y o f t h e two men.

In c ross -examinat ion before ne t h e bankrupt swore tha t

when t h e r e l e v a n t District C o u r t d e f a u l t su rmms was served on him

h e took it t o a s o l i c i t o r whom he W ~ S c o n s u l t i n g on a n o t h c r m a t t c r .

I f i n d i n c r e d i b l e h i s f u r t h e r a s s e r t l o c s t h a t t h e s o l i c l t o r s a i c ?

"This is noth ing; don ' t worry about i t", and t h a t t h e r e u p o n , s c t i ~ ~ r

on t h a t a d v i c e , t h e b a n k r u p t t h r e w the sunmons away, cppar?nzIy

i n t o a w a s t c p a p c r r e c e p t a c l e i n t h e s o l i c i t o r ' s o f f i c e . F u r t h e r ,

i n c r o s s - c x m l n a t i o n t h c b a n k r s p t p r G f r s X d a lmost comp1s.t.e

i gnora rxe o f t he con ten t s of t h e @i s t r i c t Ccart sumwns, m c : s:II.~:

t h a t t h e firs:. t ime he knew Nr. H o u ~ r a l . ~ s w?.s clcjimirlg ip.cncy fro::

h i m was whcn he was served wi.th t h e b;:rll;l-uptc;. :!r)tice, wh1rt 01:

thc	advice	o f	t h e	~ r o c c a s	s c r v c r	l- ,~	took t o :	solicitor -	t h s
- 3-

o n e h e h a d e a r l i e r c o n s u l t e d . I!owe;rcr, I n a n a f f i d a v i t :;worn an

13 August 1 9 7 6 (whlch though compiled i n E n g l i s h was read cver

t o him i n a Greek t rans la t ion which In c ross -exa-n inakior . sa id

he understood) he gave an account of havmq seen t k , e p e t l t i o n i n 2

c red i to r " in an endeavour t o s e t t l e Lhc matter'' a f t c r he wris

served wi th t h e D i s t r i c t C o u r t summons. In c ross -examinat ion 1;c

d i s c a r d e d t h a t s t o r y a n d s u b s t i t u t e d a ? i f f e r e n t 0r.e. I n fact jt

was n o t u n t i l t h e b a n k r u p t c y p e t i t i o n was on f o o t i n 1374 t h a t hi:

d i s p u t e d h i s i n d e b t e d n e s s t o t h e p e t i t i o n i n g c r e d i t o r .

Having heard evidence such as t h a t f rom the bankrupt , ard

having observed both him a n d t h e p e t i t i o n i n g c r e d i t o r i n tp:e

w i t n e s s box, I have formed the opinion that where there i s 2 cor,f!~c.

between the evidence of the bankrupt and the eJr idfnCe of tke

p e t i t i o n i n g c r e d i t o r t h e l a t t e r is t o bc p r e f e r r e d . Tn Rrri-;i.xg

a t t h a t c o n c l u s i o n , I have taken i n t o a c c o u n t t h a t t h e b m k r u p t

i s less a t ease w i t h t h e E n q l i s h 1al:guage than j.s t h e p e t l t i o n i n g

c r e d i t o r , t,ho alsc i s G r e e k , I do no t , however , regard tAe

backrupt as w h o l l y u n v e r s c d i n p r a c t i c a l mat te rs of b u s l x z s .

The bankrupt had dec lded to be h i s own Ijuj.lder, tc. 30

some o f founda t lons , and e l ec t r i ca l work , the work hlmself - for example, excavat ion, pourl~- .q rhc-

arld t o c o n t r a c c w i t h o t h e r

!

t radesmen to do o ther work - for excmple, plumbil ls and painclng.

I f i n d t h a t t h e a g r e e m e n t , t o which the b a n k r u p t ' s w i f e was d

p a r t y , was t o t h e e f f e c t t h a t t h e p c t l t i o n i n g c r e d i t o r W ~ F to be

t h e c h l e f o f t h o s e c o n t r a c t o r s a n d vas t o d o s u r h brxiesme>',q wozk

as the bankrupt wanted done and he a g r w d to do, and t3 $c, it. on a

"do and c r e d i t o r wa5 charge basis" . I t i s corrmon qrouw! r h z t tbe p e t ~ f ~ i c ! ~ > f i ~

n o t t o be r e spons ib l e :c.r excavations, foxldat ior1s ,

p l -mblng , e lec t r lcn l work, p a i n t l n u , or c:cmctftc wor!.. Thc:

p c t i t l o n i n g c r e d i t o r a d d s t o t h a t 1 cf exception: t!w s~:p;ly ;L,I,?

l a y i n g of	b r i c k s	and	bathroom	and	1citck.r.n t ~ h s .	The bs!r:,rupt
-4 -

,

-

-5-

l e t te r to the San l . rup t da t ed 20 Scptcmber 197C and anne.wd t o ::I.

Kaufman's a f f i d a v i t o f 2 1 September L376 described a s ' , M a t t e r s t o

be r ec t i f i ed due t o f au l ty workmansh ip" . (So q u e s t i o n a r i s e s

t o t h e q u a l i t y o f a n y materials.) The e v i d e n c e a s t o t h o s e

matters g iven by M r . Kaufnan and, on beha l f of the pe iz i t ion lng

c r e d i t o r , by a Mr. McMahon c o n f l i c t e d i n mx.y r e spec t s , and I

should therefore say someth ing about those twc wi tnesses .

Mr. Kaufman is aged 26. He i s a q u a l i f i e d c a r p e n t e r wh3

h a s b e e n i n t h e b u i l d i n g i n d u s t r y s i n c e h e was 1 5 , and i s now a

l i c e n s e d b u i l d e r . About f i v e y e a r s aqo h e s t a r t e d b u s m e s s a s a

bu i lde r do inq r epa i r s , r enova t ions and ex tens ions , bu t he h a s

n e v e r h i m s e l f b u i l t a house. H e impressed m e ds a ccmpctcnt y o ~ ~ t q

man who has a h i g h r e g a r d f o r good workmanshlp and L? cmte rnp t fo r

shoddy work: indeed I t h i n k It is rlot i n c o r r e c t t o d e s c r i h c

h m as a p e r f e c t i c n i s t .

Mr. McMahon has been engaged in the bu i ld ing indus t ry

s i n c e a b o u t n i n e y e a r s b e f o r e Mr. Kaufmann was born, and has bcc:.

a b u i l d i n g c o n s u l t a n t f o r 22 y e a r s . He 1s a Fellow (and a p a s t

p r e s i s e n t o f t h e New South Wales c h a p t e r ) o f t h c A u s t r o l i s n

I n s t i t u t e o f B u i l d i n g ; a Founda t ion Fe l low o f t he Ins t i t u t e of

A r c h i t e c t s ( A u s t r a l i a ) ; a p a s t p r e s i d e n t a n d l i f e member of t h e

Master Eu i lde r s ' Assoc ia t ion o f P:ew South Kales; a mrrber of a

p a n e l o f t h a t A s s o c i a t i o n as a bu i lde r p repa red t o examice

b u i l d l n g p r o j e c t s f o r t h e p u r p o s e o€ giv inq ev idence about t han ;

and a member o f t he	New South Walcs Local Government	Appeals
Tr ibuna l .

I n my op in ion Mr. kKahon adopted a more p ropr r ~~plrroach

t o the p r o h l e n s o f t h i s case than ~ J S Y z . Kaufran. The l a t t e r

was l o o k i n g f o r p e r f e c t i o n o f v:ork:ir,anF;hip; n r d f a l l c r e t o . F i x l It

l e d him, I t h i n k , i n t o p x a q g e r a t i o n . The spEc:j.ficatJons prc-,cidic

only that workmanship and n:ethcds i:l a l l tr ides w c r c ' to c@clr,:rm

* I

-6-

t o c u r r e n t good b u i l d i n g p r a c t l c e ; and a c w t r a c t o r was bounc; EO

use r e a s o n a b l e s k i l l a n d c a r e i n d o i n g t h e s p e c i f i e d w o r k . Fn

expe r t cons ide r ing whe the r work done i n t h i s b u i l d i n g h a s t o

apply those s t a n d a r d s a n d , i f s tandards; and whethcr work i n q u e s t i o n r e a c h e s t h o s e

it does no t , wha t mus t be done to b r ing it up t o

them a r e matters on which he must exercicc his judgment , whj cii

he will found on his experience and on colmon sense. Nr. XcIhhon

is undoub ted ly f a r more experienced than Mr. Kaufman, and i n my

opin ion h i s judgment i s t h e s o u n d e r . F o r i n s t a n c e , I n h i s l c t t e r

of 2 0 Sep te rke r 1976 Mr. Kaufman described t h e brickwork as

" impossible t o r e c t i f y v i t h o u t e n t i r e d e m o l i t i o n " ; and i n h i z

e v i d e n c e h e s a i d t h a t i f a b r i c k l a y e r d i d t h a t s o r t of l o b for him

he would a s k him t o demolish i t . Such phOtOgraFhiC cvidcncc 2 s

t h e r e i s d o e s n o t s u p p o r t t h a t o p i n i o n , b u t r a t h e r ~ u s t i f i s s

M r . KcMahon's d e s c r i p t i o n of the br ickwork as helnq of " t a u avcrdqe

s t anda rd" , t hough "no t t he bes t j ob of brickwork I have evcr sccn".

Mr. McMahon thought it r e q u i r e d no rec t l f ica t . l :>n , hu i rerely ~ ~ m c

c leaning up . Mr. Kaufnan ' s ob jec t ions t o the h r ickwcrk W ~ L C

a e s t h e t i c : h e was n o t c r i t i c a l o f i t s l o e d - b e a l i n q a k i l i t y ; a n d

i n my view t o sugges t a s h e d i d t h a t demoilEiol? was t h e on1.y

remedy was S r e a t l y t o o v e r s t a t e i t s d e f e c t l v e n c s s .

I the re fo re approach Mr. Knufmm's ev idcncc wl th caui ion ,

and where it c o n f l i c t s w i t h t h e e v i f e n c e o f M r . KcVl;T.hon I p e f e r

t h e l a t t e r .

Of t h e f i f t e e n items in 2: ispute I satisfiec! on thc

e v i d e n c e t h a t , i f t h e r e are d e f e c t s i n t h e f o l l c w i 1 , q , t h e y wcre

caused by work t h a t t h e p e t i t i o n i n g i rc - r i j t o r e i t h e r di? n o t

c o n t r a c t t o do	or	i n f a c r d i d n o t	do,	an?	t h a t hc!	,?as n o t	rr.-;:onsih!
f o r thcm:

-7-

1. S l ~ d l n g 2 0 ~ 7 s between Soun-qci z?!C d lp ing 1-oom.

2 . S l l d i n q dovrs between !~4 1 m 6 1Qunge.

4 . F l Q o r i n bedroom.

c .	Kitchen window.
8.	Ace l ine Gu t t r ing .

9 . Brickwork.

10. B r i c k s i l l s .

The bankrup t ' s claim f a i l s m r e s p e c t o f t h o s e m a t t e r s . I s h a l l

d e a l w i t h t h e o t h e r s i n t u r n , u s i n q Yr. Kaufn:an's words t o

i d e n t i f y them.

3 . "Wall frame between h a l l apd lour?m t o he s t r a l g h t m e d " . __ __

The e x p e r t w i t n e s s e s were i n s u b s t a n t i a l a g r e e m e n t t h L l t t h l s .;.tea

is de fec t ive . Apparen t ly t he timber frame of the wall was

bowed or was n o t a proper f i t , so t h a t when thc Gyprock Icallb3ard

was f i x e d it was out o f a l ignment . Though t h e Gyprock was f i x e d

in the absence of t h e p e t l t i z n i n g c r e d i t o r t h e f i x i n g or' i L was

h i s r e s p o n s i b i l i t y . Remedial. a c t i o n by ad jus tcwnt of khc fran.,?

should have been tskcn, but was Rot taken , before the Gyprod- was

f l n a l l y f i x e d . I t would then have been a s ivp le wzkter, but n ~ c e

t h e Gyprock 2nd t h e c o r n i c e s were f l s e d it hcc?me mor? ccjl?-licaCcd

and c o s t l y as they would have to be removed t o make rect; 'Ficz.t-Lcm

p o s s i b l e . I t h l n k t h a t on th i s ma t t e r t he bankr t lp t shou ld s ~ o r s e ? ,

and i s e n t i t l e d t o a n a p p r o p r l a t e r e d u c t i o n o f the m o u n t of t h e

d e b t . The ev idence a s to the propc-r amount of rcct i ii c a t i on is

scan ty , bu t counse l were a g r e e d t h a t A sum cf ahc;bt $ 1 2 0 i-ould SC

a p p r o p r i a t e , a n d t h a t i s t h e f i g u r e I use.

5. " E n t l r r rav? s h e e t s n w d to be r c m o b d and r c - f i t r 2 3 r.,-,?

--- .. __ - . -. - - - - -

s x p o r t w l c o r r e c t l y " . C o n s i d e r a b l e	e;-iclcn:	CJ	V i z S	given	2boct	tilis
- -

item. Vr . Xaufmzr. tznded 1-0 a t t r iSu ' ;c the r e l e v ~ ~ : t fclul t tc <I

sagginq o f t h e roaf. Mr. NcIvi.iehon c o ~ l l d see no t race o? clr!y s::GcL!~c;,

and i n the end counse i fo r tilc bankrupt very f ? i r l y i _ rdTc ; t td '-kL

P . . -8-

he c o u l d n o t s t r o n q l y p r e s s t h e b z n k r u p t ' s c l am. 9e conccde.1

that on t h e e v l d e n c c t h e f a u l t seeped t o l i e with t h e f i x j n a 0:

t h e a c e l i n e g u t t e r l n g and perhaps thc h e i g h t of the br ickwork -

f o r n e i t h e r o f w n i c h was t h e petitioning c r e d i c o r r e s p o n s i b l e .

The bankrupt f a i l s on t h i s matter.

7 . "Rear h a l l walls badly l~me?. 2nd n m d s t ra lghtc-n i r lc" . -

This item is similar in k ind to , bu t o f l e s se r maqn i tude khan ,

item 3 . Mr. Kaufmm sa ld no more t h a n t h a t t h e bow is n o t i c e a b l c .

Mr. McMahor. on t h e o t h e r h a n d s a i d t h a t t h e r e were "waves' In

t h e wall, b u t t h a t t h e y were well w i t h i n t h e a c c e p t a b l e t s l e r a n c c

of p lus or minus a q u a r t e r o f a n i n c h i n t e n f e e t f o r a tircber

frame b e l n g o u t o f t r u e , a n d w i t h l n x c e p t a b l e s t a n d a r d s o f

workmanship. In my v iew the bankrup t ' s case on t h i s i t e m is not

made o u t .

11. "F loor ing In ha l lway r equ i r e s _. s t r a i g h t e n j n g - -. . . ____ and - __ p-c: . _- -. 1-1

t o r e c t i f y movement". This item was described by Y r . Kaufman is

nei ther mlnor nor major ; bu t when h!!. McMahon i n s p e c t e z t h e house

he was u n a b l e t o i d e n t i f y a n y c a u s e f o r c o n p l a i n t , a n d t h e b m k r r p t

cou ld no t he lp him t o do so. The b a n k r u p t f a l l s on this item.

1 2 . " I n s u f f i c i e n t w a l l a n d l / o r c a v e v c n t i i a t i o r , " . The

evirlence shows t h z t t h e r e are n o e x t c r n a l v e n t i l a t o r s l:~ t h e w a l l s

a b o v e f l o o r l e v e l , a n d t h a t t h e p r o v i s i o n o f them was required

by t h e s p e c i f i c a t i o n s . T h e i r i n s e r t l c n , h o w e v e r , was a ]oh f o r 4-11?

b r i ck laye r and was n o t t h e p e t i t i o n i c g c r e d i t o r ' s r e s p o n s l b i l l t y .

M r . Kaufman s a y s v e n t i l a t i o n i n t h e e a v e s i s i n s u f f l c x n t b u t is

e a s i l y p r o v i d e d by t h e b o r i n g of a few hoics in t h e CZI-ES. !here

is no evidence as t o t h e c o s t o f ci~;.ng SO. This c l & m f z t l s .

-- 1 3 . "Laundry c e i l l n q is - of - . lL1lzorrect - . . . . hoi9ht due t c 1 . n

error in cor,structi.on". 1 am n s t x s i l e c i on the erirJcnce th~: 1:iLr-

heirjht cf c h e l a u n d r y c e i l l n c ~ d i f f e r s f ron the heiTht rcquil-26 124'

t h e p h n s b e c a u s e t h e p l a n of t h c rcof W-;;? d c p i r t - f i fzcx,

.. .

e -9-

and the roof was extended, a t t h c b a n k r u p t ' s r e q u e s t , a n d t h d t he

accep ted t he d l f f e rence . I t i s c lear t h a t Mr. Kaufman d i d nct knot;

t h o s e f a c t s . T h i s c l a i m a l s o f a l l s .

14. "Eave s h e e t s t o c a r p c r t t o b e c o m p l e t e l y remove2 and

_- _ _

r e - f i t t e d " . T h i s item is similar t o item 5 , and the clalm f a i l s

f o r similar reasons .

15. "Roof c o n s t r u c t i o n y n e r a l l y o f v e r y p o o r a u a l i t y and

--

(it) would be extremely d i f f i c u i t t o r e c t i f y same w i t h o u t s t l - l p p x g

e n t i r e r c o f " . As I h a v e s a i d , t h e p l a n o f t h e r o o f was depa r t ed

from, and the roof was extended, a t t h e b a n k r u p t ' s r e q u e s t .

Mr. Hoursa las says tha t he gave the roof ex t ra suppor t on accol ln t of

t h e e x t e n s i o n . Mr. Kaufman was n o t s a t i s f i e d t h a t t h e s u p p o r t wzs

s u f f i c i e n t , a n d d o u b t e d t h e r o o f ' s s t a b i l i t y . Px. McKahon,

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

see no s ign such as he would expect I f t h c r e were l n d e e d i n s t a h l l l r y

Inspec t ions o f t he incomple t e bu l ld ing by i n s p e c t o r s o f t h e J u r a l

Bank and of the Liverpool Councl l a t t i m s when the roo f t imbcr s

were exposed t o view revealed nothing wrong. The ev idence c?!ocs n o t

s a t i s f y me t h a t t h i s claim is v a l i d .

On the whole of t h e case I have concluded tha t t he pznper

o r d e r t o make i s o n e r e c o g n i z i n g t h a t Che bankrupt has succef,ded

i n r e s p e c t o f item 3 o n l y , a n d h a s f a i l e d i n r e s p e c t o f all o t h e r s .

The time s p e n t i n C o u r t on item 3 and i t s amount a r e n o t of such

s i g n i f i c a n c e as t o c a l l f o r a m o d i f i c a t i o n o f t h e g e n e r a l r u l e

t h a t c o s t s f o l l o w t h e e v e n t .

I t h e r e f o r e o r d e r t h a t t h e amount o f t he admi t t ed dcb t

o f t h e p e t i t i o n i n g c r e d i t o r be rgduced by $120.00 , and o rde r t he

! b a n k r u p t t o pay c h c p e t l t i o n i n g c r e d i t o r ' s c o s t s of t h e app1 ;cz t loc

to d a t e , for annulment on l n c l u d i n g r e s e r v e d costs. 1 s h a l l h e a r t h e avgl i c x i o r .

a d a t e s u i t a b l e t o c o u n s c l a n d t h e C o u r t .