Re Tsiampas, Constantinos Tsiampas, Constantinos v Official Trustee In Bankruptcy

[1996] FCA 575

IN THE FEDERAL COURT OF AUSTRALIA
EXERCISING FEDERAL JURISDICTION
IN BANKRUPTCY  No VB 292 of 1988

BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA

RE:  CONSTANTINOS TSIAMPAS  Bankrupt

BETWEEN:  CONSTANTINOS TSIAMPAS
  Applicant

AND

OFFICIAL TRUSTEE IN BANKRUPTCY
  and OTHERS  Respondents

COURT:         NORTHROP J
DATE:            5 JULY 1996
PLACE:         MELBOURNE

REASONS FOR JUDGMENT

Constantinos Tsiampas, as applicant, has made an application to the Court under section 99 of the Bankruptcy Act 1966. The amended application relied upon is dated 17 August 1995. At that time the applicant was represented by a solicitor. The amended application seeks the following order:-

"That the admission by the Official Trustee of the proof of debt lodged by George Stavrou and Dina Stavrou against the estate of the Applicant be expunged."

Section 99(1) of the Bankruptcy Act provides:-

"99(1)Where a creditor or the bankrupt considers that, by virtue of a decision of the trustee under subsection 102(1), (3) or (4), a proof of debt has been wrongly admitted, he may apply to the Court for an order that the proof be expunged or that the amount of the admitted debt be reduced, and the Court may make an order accordingly."

Sub-section (2) provides:-

"(2)Notice of an application under subsection (1) shall be given in accordance with the rules, to the creditor by whom the proof of debt was lodged."

In the present case a brief history of relevant events will set the framework for the present application.  On 26 May 1987 Mr Stavrou and Mrs Stavrou issued a writ in the County Court of Victoria seeking damages against the applicant for breach of contract relating to the building of a house for them at 35 Rennie Street, Thornbury.  That writ was served on the applicant on 5 June 1987.  On 7 March 1988 a sequestration order was made against the estate of the bankrupt on a petition brought by another creditor, Apex Quarries Pty Ltd. On 23 March 1988, in conformity with the requirements of the Bankruptcy Act, the applicant as the bankrupt, attended the office of the trustee and swore an affidavit verifying his statement of affairs.  In that statement the applicant listed as creditors Mr and Mrs Stavrou as being owed the sum of $33,000 and although the statement has a notation signed by the applicant that he disputed the debt claimed by Apex Quarries, there is no such notation recorded as against the debt owed to Mr and Mrs Stavrou.  The debt is said to be pursuant to a judgment in No.87704977 being the number of the County Court action referred to earlier.

At this stage it should be noted that the applicant is Greek and although he said he could understand some English he could not express himself in English. He presented his
case and his evidence through an interpreter.  This does give rise to difficulties, not only to the applicant who has no experience of legal procedures, but also to the legal advisers of the respondents and also to the Court.  The Court makes due allowance for the difficulties of the applicant arising from both the fact that he is not legally qualified, that he appeared in person and that he presented his case and evidence through an interpreter.

Just to complete the history there was a default judgment against the applicant entered in the County Court action on 13 July 1988 in favour of Mr and Mrs Stavrou. The judgment was based on a claim for damages against the applicant arising out of a contract to build a house for them.  Having regard to the provisions of the Bankruptcy Act, it is difficult to understand how the County Court had power to enter the default judgment on 13 July 1988, to set aside the default judgment on 27 September 1988 on the application of the present applicant, to have judgment entered again on 1 June 1989 and to have the damages assessed by the County Court on 27 September 1989 in the sum of $44,702 plus interest of $14,289, together with costs. Thus the total amount of the claim by Mr and Mrs Stavrou was just under $60,000.

On 8 March 1991, by effluxion of time, the bankrupt was discharged from bankruptcy.  Almost two years later, on 10 February 1993, the applicant's wife paid $70,000 to the trustee in settlement of the trustee's claim to half an interest in the matrimonial home of the applicant and his wife.  Thereafter, the trustee gave advertisements in relation to the dividends to be paid from the estate to creditors.  Mr and Mrs Stavrou lodged a proof of debt in the sum of $44,702, being the amount of the judgment debt less interest, and on 24 March 1993 amended the claim to $30,655. The proof of debt was accepted by the trustee as the amount of the debt owing to Mr and Mrs Stavrou, even though it was less than the amount
of damages assessed by the County Court. In April 1994, the trustee advised that the dividends would be paid by the end of May and if the bankrupt, now the applicant, had made no application under section 99 of the Bankruptcy Act there would be a distribution.  The application was issued on 25 May 1994 but in its amended form has only come on for hearing now. 

The substance of the complaint by the applicant is that in a document dated 1 December 1986 addressed to the State Bank from C. and P. Constructions of 7 Meredith Street, Elwood, phone [phone], there is a quotation given by C. and P. Constructions for a double storied building at 35 Rennie Street, Thornbury 3071, for the cost of $75,000.  This appears to be signed by Peter Bosman and Constantinos Tsiampas.  The applicant says his signature was not written by him, and his complaint is that it is a forgery by Mr Bosman.  He has a sense of frustration and disillusionment arising from the fact that he feels he has not received justice from the authorities in relation to his claim of forgery. It appears that to a large extent, although he says that the forgery was made by Mr Bosman, he is taking out his frustration and sense of injustice against Mr and Mrs Stavrou.

In support of the application, the applicant gave evidence and was cross-examined.  He called as a witness Gary Storey, a forensic document examiner, who gave evidence that in his opinion the signature appearing on the document to the State Bank was not written by the applicant but that his opinion was, to some extent, weakened by the fact that he only had the opportunity to compare that document from a facsimile copy of a photocopy of the original.  It should be noted that the original document is not available. 

At the end of the evidence on behalf of the applicant, and after hearing from counsel for the trustee as to the background facts and the proof of debt, the Court allowed submissions to be made on behalf of the trustee and on behalf of Mr and Mrs Stravrou who had been joined as respondents, that there was no case to answer and that the application should be dismissed.  Mr Nolan on behalf of the trustee addressed the Court first. The Court expresses its appreciation to Mr Nolan for the very impartial and clear summary of the evidence and the conclusions to be drawn from it. Although it is an unusual course for the Court to adopt, I accept and incorporate those submissions as part of my reasons relating to the evidence and the findings to be made from that evidence. This is contained in the Appendix to these reasons.

I should indicate that because of the obsession, the apparent obsession, by the applicant with respect to the forgery of the document, he has not been able to appreciate the real issues of fact and of law that this Court must determine.  The Court is required to apply the law to the facts found.  In many cases, facts which a party thinks are of great importance have no relevance to the issues that the Court must determine.  This is such a case.  The Court makes no finding one way or the other whether the writing of the name of the applicant on the document to the State Bank dated 1 December 1986 was in fact written by the applicant or not. In other words, the Court does not express an opinion on whether that signature is a forgery or not.  At the very most, that document could constitute evidence of the existence of a contract between C and P Constructions as builder and some unknown persons in relation to a building at 35 Rennie Street, Thornbury.  From the evidence given by the applicant, particularly in cross-examination, and from other documents put to him, there is ample evidence to support a finding that there is a contract between C and P
Constructions and Mr and Mrs Stavrou by which C and P Constructions were to build the house for Mr and Mrs Stavrou.

In all the circumstances, the Court finds that the admission of the proof of debt by the Trustee was quite justified, but having regard to all the circumstances the amount of that debt was far greater than the $30,000 agreed to.  But before departing from this aspect of the matter, the Court should express its opinion that it found the applicant a witness who could not be relied upon to tell the truth.  He prevaricated and changed his story to suit what he thought would be in his best interest, and had no suitable explanation, when confronted by documents signed by him which said the very opposite, to what he claimed in evidence-in-chief.

But in the event it is not necessary for the Court to rely upon those matters. The Court takes the view that under section 99 of the Bankruptcy Act, the onus is upon the applicant to show that the Trustee was in error in admitting the proof of debt or the amount of the debt claimed by a creditor.  In the present case the applicant did not appear to dispute the amount of the debt.  His concern was as to the existence of the debt, and this was based upon his claim that his apparent signature on the document dated 1 December 1996 was a forgery. In truth, that is completely irrelevant to the matter before the Court.

On all the evidence, and without calling upon counsel for Mr and Mrs Stavrou whether to call evidence or not, the court is satisfied that the applicant has failed to show that the proof of debt was wrongly admitted.  Accordingly, the application is dismissed.

The application having been dismissed, the question of costs arises.  Normally costs would follow the event and in this case the court orders that:

1. the costs and expenses including reserved costs of and incidental to the application of the trustee be taxed and paid by the applicant.

1. it is ordered that the sum of $2185 paid into court by the applicant pursuant to the order of the Court of 2 August 1995 be paid out to the trustee in part satisfaction of the costs awarded to it under order 1.

Insofar as the costs of the respondents, Mr and Mrs Stavrou, are concerned and part of the costs of the petitioning creditor, Apex Quarries Pty Ltd, are concerned the question is whether they should be ordered to be paid by the applicant or be paid out of the estate being held by the trustee. 

Normally an order would be made against the applicant, but it is recognised that, in all probability he has no assets to satisfy those costs.  These two creditors are the substantial creditors of the estate and so to the extent that their costs are awarded out of the estate, the amount they receive by way of dividend will be reduced, but at the same time the amount received by the other creditors will be reduced also.

Having regard to the fact that they have been forced to attend Court pursuant to the applicant commencing these proceedings and having regard to the peculiar nature of these proceedings, particularly in regard to Apex Quarries, when the application, as originally framed, sought an order annulling the sequestration order, it is only fair as between the two major creditors that they be treated alike and that they should get their costs out of the estate, even though this will be at the expense of the minor creditors. 
Accordingly, the following additional orders are made:

1. the costs and expenses including reserved costs, of the respondents Mr and Mrs Stavrou of and incidental to the application, be taxed and paid out of the estate.

1. The costs ordered to be paid by the order of the Court on 11 August 1995 be paid out of the estate and to that extent the order is now made that the costs and expenses of the respondent Apex Quarries Pty Ltd including reserved costs of and incidental to the application up to and including the order of 11 August 1995, and of making the application for costs today, be taxed and paid out of the estate.  It is noted that counsel for Apex Quarries is not pursuing the claim that its costs be paid on a solicitor/client basis.

   APPENDIX

   TRUSTEE'S SUBMISSIONS

   MR NOLAN:   If your Honour pleases, the case for the applicant is most unusual.  Although there were a large number of affidavits filed and served by the applicant in the proceeding, the applicant has made the specific choice not to rely on those affidavits and he has done that in the light of the position where the only affidavit being put to him is one in which he has stated it not true and correct.  The evidence therefore before your Honour is solely that evidence given by the applicant in the witness box together with the evidence of Mr Storey.  It will be my submission in due course, your Honour, that Mr Storey's evidence, whether it be accepted or not, is irrelevant to the issue before the Court.

   Your Honour, the evidence of Mr Tsiampas is that he worked at the Stavrou property, that the Stavrous indicated that they were seeking a builder, that Mr Tsiampas worked with a Mr Bosman, that he knew Mr Bosman to be a builder, that Mr Tsiampas himself is an excavator, that he introduced Mr Bosman to the Stavrous, that the construction of the property was then undertaken by Mr Bosman, that Mr Tsiampas did the excavations for the construction, that Mr Tsiampas was present on at least four occasions during the construction of the property, on one occasion when the council inspector was present and on two or three occasions when Mr Stavrou attended the site.
              During the construction a sign was placed at the construction site.  The sign read C and P Constructions and listed Mr Tsiampas' home phone number.  Mr Tsiampas did nothing to have the sign removed or to indicate to the Stavrous that he was not connected in any way with C and P Constructions.  Mr Tsiampas accepts that C and P is a shortening of the words "Con" and "Peter" and he does not attempt to relate the word "Con" to any other person than himself.  Mr Tsiampas has sworn a statutory declaration to the Victoria Police declaring that he was in partnership with Mr Bosman in respect of this project.  Mr Tsiampas also gave evidence that he operated a joint bank account with Mr Bosman during the period in which the house was constructed.  Mr Tsiampas further acknowledged that he completed another two or three construction projects in partnership with Mr Bosman.  Mr Tsiampas stated that a document relied upon by the Stavrous as evidence of the contract between the two partners, Bosman and Mr Tsiampas, contains a forgery in that, where it appears to have his signature, he did not in fact sign that document.

   It is Mr Tsiampas' contention that Mr Bosman forged that document.  Mr Tsiampas has stated on oath before your Honour that he does not contend that either Mr Stavrou or Mrs Stavrou forged his signature.  In my submission, your Honour, the evidence relating to the partnership relationship between Mr Bosman and Mr Tsiampas, on the admissions of Mr Tsiampas himself, is sufficient to clearly demonstrate in law that a partnership existed between himself and Mr Bosman.  In my submission whether or not his fellow partner forged his signature is not a factor which is relevant to the issue of
   whether the partnership existed. That is the document addressed to the State Bank and dated 1 December 1986. It is expressed to be from C and P Constructions, 7 Meredith Street, Elwood.  That is the address of the applicant. A phone number is given, 531 3142 which is the phone number of the applicant. It appears to be a quotation for the building of the house at 35 Rennie Street, Thornbury, for $75,000. It is not addressed to Mr and Mrs Stavrou. Their names do not appear on the document. This is a document in which the applicant says his signature was not written by him.

   In my submission, your Honour, that is -whether or not that document was in fact written by him is not conclusive or determinative in any way as to whether or not a partnership existed between him and Mr Bosman nor determinative of whether or not that partnership contracted with the Stavrous to build the property in question.  The remaining evidence as to the partnership and as to the construction, if you accept that there was a partnership, is uncontested on all sides that Mr Bosman constructed the property and that Mr Tsiampas completed the excavations and that Mr Tsiampas was present at other times during the construction. Reliance upon the purported written contract is not essential.

   HIS HONOUR:   Does that prevent a finding being made that there was an arrangement at least between these two people to build this house for Mr and Mrs Stavrou.

   MR NOLAN:   No, your Honour.  Your Honour, therefore in my submission, on the evidence of the applicant himself as adduced in the witness box, it is open and there is, with respect, little other conclusion that could be reached that a contractual relationship existed between the partnership, C and P Constructions, to construct the house and that Mr Tsiampas was one of the partners of that partnership.

   The proof of debt lodged by the Stavrous is based upon damages resulting from a breach of the contract between that partnership and themselves for the construction of the house.  The amount claimed in the proof of debt is not a matter relevant to the issues before this court.  The applicant has not challenged the amount of that debt. In any event the amount of the damages awarded by the county court was almost double that amount.  Although there was a default judgment in place at that time, it was necessary for that court to actually turn its mind positively to the issues of the case and to determine what damages were applicable.

   Your Honour, the other relevant factor in my submission that demonstrates that the applicant has not established his case and has not come close to establishing his case is that in the statement of affairs, sworn shortly after his bankruptcy and even prior to the entry of judgment in the county court against him, but most importantly after service of that county court writ on him, he acknowledged an undisputed debt to the Stavrous in the sum of $33,000.

   HIS HONOUR:   There is an unusual feature about this statement of affairs in that on page 2, after a statement written across it that the bankrupt then disputed the liability to the Apex Quarries and a signature appeared.  There then appears other claims by creditors and there appears to be no signature at the end of that page.

   MR NOLAN:   There would not normally be a signature on that page in any event, your Honour.  The statement of affairs is verified by an accompanying affidavit which occurred in this case.  The statement of affairs in one sense, however, of course, is a discrete document and on the final page of that statement of affairs is the appropriate place for the bankrupt to sign.  The bankrupt has done this in this case.  I say, your Honour, that the significance of the signature on page 2 is to the effect that it highlighted that one particular debt was a disputed debt.  That is particularly relevant insofar as there is no dispute listed against the Stavrous debt.  But interestingly, in the remarks column is added the word "judgment".  Now, in fact judgment had not been entered at that stage, however, the writ had been issued and had been served and as Mr Tsiampas states in the affidavit which has been tendered into evidence and which he now says is not true, he states that he received service of the writ but took no steps to defend it at that time. It was clearly within his knowledge.  Your Honour, if you were to accept his evidence that he knew nothing of the Stavrou claim at all until 1992, in my submission, your Honour, it tests credulity.

HIS HONOUR:   It is almost a fantasy really because of the affidavit and the fact that applications were made on his behalf by a solicitor to have the judgment set aside in August-September 1988.

MR NOLAN:   Yes, your Honour.  Even prior to taking that step someone completed the statement of affairs and put into evidence the fact that there was a judgment debt in the amount of $33,000.  In my opinion the amount of $33,000 has no relevance other than to establish that in Mr Tsiampas's mind it was a substantial debt, but there is no explanation of how that entry could have got into the statement of affairs unless that information had been given by Mr Tsiampas at his meeting with Mr Distefano immediately after his bankruptcy and prior to the entry of judgment against him.

HIS HONOUR:   Because that amount is different from the amount of the judgment which was for $44,000 plus interest.

MR NOLAN:   Yes, that is correct.  There is a question mark next to that amount in the state of affairs, your Honour.  That question mark, in my submission, clearly goes to the amount and not to any dispute.  But, your Honour, in my submission the applicant simply cannot resile from the position that he swore an affidavit immediately after his bankruptcy, verifying the statement of affairs prepared on information provided by him.

Now, there is an allegation that meets me by surprise made today, that in fact he signed a blank statement of affairs.  Your Honour, again that comes to the question of Mr Tsiampas swearing affidavits which would verify a blank statement of affairs and again a question of, in my submission, fantasy again, your Honour, in respect of the trustee accepting a statement of affairs from a bankrupt which in fact was blank.  But even, your Honour, if something most untoward occurred in respect of that statement of affairs and in my submission that clearly would not have been the case.  But even if it had, there could still not be any explanation as to how the item of $33,000 for a debt owed to the Stavrous could have been entered into that document in 1988 without that information having been passed by the bankrupt, to his trustee.

HIS HONOUR:   That is normally the only source, is it not, of information going into that statement of affairs.

MR NOLAN:   Exactly, your Honour, that is the very purpose of calling for the interview.  Now, Mr Tsiampas attempts, in my submission, to cast a cloud over this by talking of him thinking he is going to his bank to give an asset and liability statement rather than going to the trustees office.  But in my submission, your Honour, even if that again were accepted it takes him nowhere because if he knew that he was giving an asset and liability statement then whether he was giving it to the bank or to the trustee does not effect the veracity of the information that he gave, that information being that there was a debt owed to persons called Stavrou in the amount of $33,000. 
           Your Honour, in my submission the conflicting evidence given by Mr Tsiampas in the witness box is also a matter which may properly be taken into account in reaching a conclusion in respect of this application.  Mr Tsiampas, in my submission, has prevaricated and has avoided positions and attempted to pass blame wherever a difficulty has arisen in respect of the voluminous evidence already before the court.

HIS HONOUR:   There are always grave difficulties with a witness who does not speak English in giving evidence.  Speaking through an interpreter both translating questions and giving answers does give rise to real problems.

MR NOLAN:   Yes.

HIS HONOUR:   But I note what you say about this, even allowing for those, there does appear to be some force in what you are saying.

MR NOLAN:   In particular, your Honour, I would take you to the very clear evidence from Mr Tsiampas.  Prior to the answers to the interrogatories being put to him that the sign in front of the building was C & P Constructions.  Upon being faced with another document he then changed his story to P & B Constructions.  Yet, in his examination before the Court again this morning he appears to have adopted entirely again the evidence that it was in fact a C & P Constructions sign and there has been no recourse back by him to the fact that the sign was anything other than C & P Constructions.

Your Honour, I find his evidence, in my submission, is open to your Honour to find that the evidence in respect of signing a blank statement of affairs in respect of not knowing about the Stavrous debt, the allegation of the debt until 1992, and of the fact that he freely admits that he has sworn affidavits in this proceeding which he now says are not true and correct, places such a cloud over his evidence that in my submission his evidence lacks credibility to the extent that it can be discounted in its entirety.  Your Honour, in my submission there has been clearly demonstrated to the court on the trustee's evidence a sufficient basis for the trustee to have made the decision to admit the debt of $30,000.00.  That decision was made three years ago now and in the meantime Mr Tsiampas has had every opportunity to put information to the trustee which would have influenced the trustee to reverse his decision, which he could do - without the bankrupt bringing the matter to court.

HIS HONOUR:   He was being represented by a solicitor for much of that time, was he not?

MR NOLAN:   For much of that time, your Honour.  In actual fact several solicitors, your Honour, consecutively, not at the one time.  Your Honour, there is just simply no proper basis or no evidence put to the trustee that enabled him to form a view adverse to that which he had already formed on the basis of the admission in the statement of affairs of the proof of debt and the reasons behind it tendered by the Stavrous, and the history relating to the judgment in the county court.  Your Honour, in my submission, not only
did the applicant not take the opportunity given to him back in 1993 by the trustee to produce evidence, he has failed again before this court to put matters before the court which properly go to that issue.

Mr Tsiampas may have very legitimate concerns about his relationship with Mr Bosman and he may be very vexed by the fact that his bankruptcy has caused him distress. However, your Honour, I hasten to point out that the Stavrous were not the petitioning creditor, that the Stavrous have in fact voluntarily reduced the sum claimed in their proof of debt, substantially below that to which they obtained a judgment. The Stavrous have simply complied with the requirements necessary to support their debt or their claim to be admitted in the estate with the trustee, and that the trustee has had no matters raised in his own mind which would cause him to have concern, other than those matters or general assertions made by the applicant. 

There are no matters that the trustee has concern of in respect of accepting this proof of debt and which the trustee would of course put before this Court in the appropriate manner.  Your Honour, the only matter before this court effectively is that there was a contractual relationship between the applicant as a partner of C & P Constructions and the Stavrous.  In my submission, without the quantum being in question, if the Court is satisfied that on the applicant's own evidence that that question should be answered in the affirmative, then the decision by the trustee to accept the proof of debt, based on that contractual relationship, was a correct decision.  Again, the question of the quantum of the amount for which he had accepted is not a
matter which is in challenge or being challenged before his Honour.  If your Honour pleases.

I certify that this and the preceding eighteen (18)  pages are a true copy of the Reasons for Judgment herein of the Honourable Justice R M Northrop.

Associate:

Date:

ATTACHMENT

Counsel for the applicant:                  Applicant appeared in person.
Solicitors for the applicant:                Applicant appeared in person.
Interpreter:  Mr A. Yenetelis

Counsel for the Official Trustee:       Mr J Nolan
Solicitors for the Official Trustee:     Australian Government Solicitor

Counsel for Mr & Mrs Stavrou:         Mr T Margetts
Solicitor for Mr & Mrs Stavrou:        N Bassatt

Counsel for Petitioning Creditor:      Ms F McLeod
Solicitors for Petitioning Creditor:     Cornwall Stodart