Re Nellis, C. Ex parte Gornish Pty Ltd

[1992] FCA 397

3S7 92

IN THE FEDERAL COURT OF AUSTRALIA)	JUDGMENT No. -.d ,,
NEW SOUTH WALES DISTRICT REGISTRY)	No NP 3053 of 1991
GENERAL DIVISION	1

BETWEEN	CON NELLIS
Debtor

12	IUN 1992	EX PARTE	GORNISH PTY LIMITED
Petitioning Creditor

EX TEMPORE JUDGMENT

EINFELD J SYDNEY 12 MAY 1992

The petitioning creditor applies for a sequestration order against the debtor's estate. The petition is based upon an act of bankruptcy of failing to comply with a bankruptcy notice. The judgment against the debtor, which forms the basis of the bankruptcy notice, was obtained undefended in the District Court on 30 June 1987. The claim in that Court was that the debtor was a tenant of the judgment creditor and that he failed to comply with the requirements of his lease to pay rent.

was eventually served.

The bankruptcy notice in this case was given number B 3562 of 1990, even though it was dated 21 February 1991. The record of the Court shows that in May 1991 the petitioning creditor was required to make application to the Court for substituted service of the bankruptcy notice on the grounds that it had not proved possible to serve the debtor with the notice. After an order for substituted service was made, the document

Similar difficulties were experienced in relation to the service of the petition, and again an order for substituted service of the petition had to be applied for, made and complied with. It now turns out that the address for service given by the debtor is in fact the address at which the two documents were originally attempted to be served. Although the debtor has informed me that this is his parents' house and that at the time he was not living there and was partly estranged from his parents, the only conclusion that can possibly be drawn from the material contained in the affidavits is that the debtor was deliberately avoiding service of the documents, and obtained the aid of others, probably family members, in that avoidance.

For those reasons and others, the matter has been before Registrars of the Court on at least six occasions. It has also been before Justice Hill on one occasion and me on two occasions. I fixed it today before myself in order to avoid the problems that arise when the Court is differently

difficulty.	constituted on matters involving some controversy and
On 18 February 1992, the debtor filed a notice of intention to defend the petition. On 24 March 1992 Justice Hill ordered the debtor to file and serve the affidavits upon which he wished to rely in support of this defence. An affidavit was filed, but it was completely bereft of information of the kind which Justice Hill had in mind, and did not in any way indicate how the application for sequestration could or would be resisted.
When the matter came before me on 28 April, the debtor appeared in person and argued a range of matters to suggest that he had a defence to the petition. I was not persuaded that anything he said would in fact provide any such defence, other than the possibility that he could move to set aside the judgment on which the bankruptcy notice was based.
Moving to set aside a judgment four years old would have significant difficulties, but that does not mean that this Court should not give the debtor the opportunity of doing it if in fact any grounds exist. That is why I gave the debtor another adjournment on 28 April to obtain some advice about his position.
He has apparently already made one such application to the District Court. The debtor has informed me that the District
a condition of being allowed in to defend the proceedings. He Court then required him to lodge $10,000 by way of security as
says that he is quite unable to raise such a large sum of money, which is no doubt part of the reason he is now facing bankruptcy. I have been given no details about this application and am not aware of what information was before the District Court at the time. I can therefore make no comment about the setting of an unattainable condition for letting someone in to defend a judgment already pronounced.
The debtor's notice of grounds of opposition to the petition is a full page document written and filed by him. It provides some narrative of what he thinks his defence would be or would have been in the District Court proceedings in June 1987 when the judgment grounding the current bankruptcy proceedings was pronounced. It is not easy to understand what the actual defence is but the essential claim in the notice of opposition is that the judgment creditor should not have been given judgment at the time and that an application to set aside the judgment would be successful.
One matter specifically raised in the grounds of opposition was that the premises for which the debtor did not pay rent were re-let a short period after he was evicted. If this were the fact, it would only be a defence if the claim made against the debtor in the District Court proceedings included an amount for unpaid rent for a period in which rent was being paid by his successor lessee. There is no statement or evidence that this was the case. As it seems to me, other
matters in the notice of objection are more comment than defences. Regardless of how justified the comments are in the
particular circumstances, and I am not in any position to know whether they are justified or not, they would seem to me to have no effect on the liability of the debtor for the amount claimed. That may well explain the attitude taken by the District Court.
The debtor clearly has a major grievance against the creditor's major shareholder in relation to the subject matter on which the judgment was originally pronounced. I explained to the debtor on 28 April that none of the elements of that dispute as expressed to me has much if anything to do with the bankruptcy proceedings and that the only grounds for further delay could be to allow him to obtain legal advice as to whether he has any defence to the petition. As he indicated that he was short of funds for lawyers although in employment, I explained that the advice should or could at this stage be limited to obtaining advice about this aspect of the matter, not for comprehensive representation in defended proceedings if and when a defence could be indicated. After granting the debtor an adjournment, I said that in the event that no proper grounds for opposition to the petition were presented on the resumed date, I would proceed with it.
The debtor comes before the Court today, again in person, with an account that he has seen a solicitor from Lange and
Company, Mr Farago, with whom he has made an arrangement to provide his earnings for ten weeks in order to enable the
solicitor to appear for him in these proceedings. The debtor informs me that he has paid two of the ten weeks earnings. He says that the solicitor believes that there may be a defence to the proceedings, but the debtor is unable to indicate today what that defence might be.
Ten weeks of even meagre earnings would represent quite a substantial fee for a lawyer to advise someone about his possible defences to bankruptcy proceedings. Two weeks of very basic earnings would ordinarily be enough to enable the solicitor to attend and advise the Court as to what he had in mind or believed to be possible. However, not only did the solicitor not appear today, he did not even provide a letter to his client to present to the Court, explaining what was in view. All he seems to have done is to send the debtor to Court with a request for a ten week adjournment, which has
been subsequently reduced by the debtor on his own accord to
eight weeks, to enable all these fees to be accumulated. At that time I am led to believe that we might be favoured with the appearance of the solicitor to advise then what he proposes to do.
This is a completely unsatisfactory response to the indulgences which the Court has extended to the debtor for a very long time. The impression gained, whether it is correct
bankruptcy proceedings. In fact, on the last occasion I or not, is that almost anything is being done to frustrate the
raised with the debtor what disadvantage bankruptcy would in fact be to him. There seems to be no satisfactory answer to that question either. Ten, even eight, weeks further postponement is out of the question.
Continuing to delay bankruptcy proceedings without any apparent substance is completely unacceptable. If there appeared anywhere the slightest slgn that the bankruptcy proceedings could be defeated in some way, I might be inclined to take a more liberal view. However, at the present time nothing has emerged, notwithstanding the passage of all these months before Registrars and Judges, to indicate that this petition could be successfully resisted.
I propose therefore to proceed with the hearing of the petition as I said I would do on the last occasion. I may give contemplation to delaying the final pronunciation of a sequestration order when I have heard the evidence on the petition.
[Evidence presented]
I am satisfied that the debtor has committed the act of bankruptcy alleged in the petition and with the proof of the other matters of which section 52(1) requires proof.
bankruptcy to enable him to talk to his lawyer again. The The debtor seeks a delay in the pronunciation of his
judgment creditor says that this debtor has already been allowed exceptional indulgence and that no more time should be permitted. The debtor says that he has made a study of the law relating to his present situation. He must therefore understand that Courts do not make the laws, parliaments make them and parliaments are elected by the people. The people do not allow Courts to engage in general investigations of the hard times or difficult circumstances of citizens even if we wanted to. Parties who ask us to do so would be the first people to complain if they were on the receiving end of such a generalised investigation which had no purpose and was not in any way permitted by the law. Courts just do not exist for members of the public to make general complaints about other people with whom they are or have been in contractual or other forms of relationship. They exist for the purpose of hearing and resolving legal disputes.
This type of circumstance is not easy for Courts to resolve. On the one hand a party has made out an undefended and apparently indefensible claim for a sequestration order. On the other hand, a party facing bankruptcy has a general set of complaints about the way in which he comes to be in his present circumstances which might amount to a reason for further delay. He says - and there seems no reason to disbelieve - that he is effectively impecunious and has therefore had apparently no professional advice. He has thus
which the Court can determine or consider. been completely unable to formulate his complaints into a form
The only problem with granting him a further indulgence on this ground is that it was to help him in this very regard, that is, to obtain professional advice as to whether his collection of complaints represented any possible defence to the petition, that I granted the adjournment on 28 April. In this, the only important, regard, the intervening two weeks have been completely wasted and lost.
The Court has already given this debtor a significant amount of time and considerable concessions to get himself into a situation to deal with the case for bankruptcy made against him. This indulgence has not been met with any particular acknowledgment or appreciation, either in the form of words, or more importantly by way of recognition that only action by him not complaints or abuse against others can help him now.
The debtor does not seem to understand that justice must be evenhanded and that there are two parties to these proceedings, not one. The other party has a judgment of a Court against him which was obtained wlthout any opposition from him and has stood undefended and unchallenged for almost four years. He has been in this Court for more than year and despite ample opportunities, has produced nothing except evasion, exceptional delay and a torrent of abuse against "the system" and the judgment creditor. There are few such circumstances which would warrant much understanding from this Court now, and I am not at all sure why this case is any
exception.
I will, however, grant him one further opportunity to get himself and his contentions into a framework which the law might be able to recognise. I will order the debtor's
bankruptcy but postpone the date for it to take effect for two weeks to enable further earnings to be paid to the solicitor as an inducement to one of them to place before the Court any matter at all that might indicate why the sequestration order

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should not be allowed to take its ordlnary course. I make it perfectly clear that if this opportunity is not availed of, no further delays or postponement will be entertained. This matter simply must be brought to a head and any defence must be put into a proper form recognised by the law as within the cognisance of the Court.

I make a sequestration order against the estate of the debtor

but suspend its coming into operation until Wednesday 27 May 1992 at 4.00 pm. The matter will be listed at 9.30 am on Tuesday 26 May to permit the debtor or his solicitor to seek any order which he regards as appropriate. The debtor has been late for court in the past. He would be well advised to be on time on the next occasion. He is not well placed for any more latitude.

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