Re Zafiropoulos, Theodore
[1997] FCA 786
•18 AUGUST 1997
FEDERAL COURT OF AUSTRALIA
BANKRUPTCY - Sequestration order - Judgment Debt - Validity - Power of Court to go behind judgment - Whether debt owed by third party - contract for the benefit of a third party - sale of goods - purchase price paid by third party - Bankruptcy Act 1966 (Cth) s52.
Corney v Brien (1951) 84 CLR 343
Wilshire-Smith v Mellor Olsson (1995) 57 FCR 572
Wren v Mahoney (1972) 126 CLR 212
RE THEODORE ZAFIROPOULOS (A Debtor) EX PARTE BHP STEEL (JLA) PTY LIMITED (ACN 000 011 058) (Petitioning Creditor)
No VP 965 of 1996
FINN J
MELBOURNE
18 AUGUST 1997
IN THE FEDERAL COURT OF AUSTRALIA )
GENERAL DIVISION ) No VP965 of 1996
BANKRUPTCY DISTRICT OF )
THE STATE OF VICTORIA )
RE: THEODORE ZAFIROPOULOS
A Debtor
EX PARTE: BHP STEEL (JLA) PTY LIMITED
(ACN 000 011 058)
Petitioning Creditor
JUDGE:FINN J
PLACE:MELBOURNE
DATE: 18 AUGUST 1997
MINUTES OF ORDERS
THE COURT ORDERS THAT:
a sequestration order be made against the estate of the debtor Theodore Zafiropoulos and;
the costs of the petitioning creditor of and incidental to the petition be taxed and paid out of the estate.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
GENERAL DIVISION ) No VP965 of 1996
BANKRUPTCY DISTRICT OF )
THE STATE OF VICTORIA )
RE: THEODORE ZAFIROPOULOS
A Debtor
EX PARTE: BHP STEEL (JLA) PTY LIMITED
(ACN 000 011 058)
Petitioning Creditor
JUDGE:FINN J
PLACE:MELBOURNE
DATE: 18 AUGUST 1997
REASONS FOR JUDGMENT
The question in this proceeding by BHP Steel (JLA) Pty Ltd (“BHP”) for a sequestration order against the estate of Theodore Zafiropoulos is whether, despite a judgment debt in its favour, BHP is Mr Zafiropoulos’ creditor. On 28 March 1996, BHP obtained a final judgment against Mr Zafiropoulos in the Supreme Court of Victoria in the sum of $1,249,150.74. At the time of presentation of the creditor’s petition $1,175,836.44 of that judgment debt remained unpaid.
It is Mr Zafiropoulos’ contention that the debt claimed was for goods sold and delivered, not to him, but to his company that was variously named T Z Consolidated Industries Pty Ltd and T Z Metal Building Products (Aust) Pty Ltd. I will refer to the company in these reasons as “TZ Metals”, though noting this name change did not occur until 1994. It is claimed that circumstances warrant this Court going behind the judgment of the Supreme Court in order to determine if “in truth and reality” a debt is owed by Mr Zafiropoulos to BHP. Given the issue raised, I would note as a curiosity that this year marks the centenary of the decision of the House of Lords in Salomon v A Salomon and Co Ltd [1897] AC 22.
As a matter of convenience and following the course taken by the parties at the hearing, I will refer to Mr Zafiropoulos as “Mr Theo”. I mean no disrespect to him in so doing.
The Supreme Court Proceedings and the Judgment Debt
On 30 November 1995 BHP instituted proceedings against Mr Theo by way of originating motion in which it sought payment of $1,249,150.74 in respect of goods said to have been sold and delivered by it to Mr Theo at his request. An affidavit of the same date, sworn by Colleen Anne McKenna (the credit manager of BHP) was filed in support of this motion.
On 9 February 1996 the creditor issued a summons seeking that the originating motion be referred to the Practice Court for hearing and determination. That summons came on for hearing before a Master on 19 February 1996. It was then ordered that Mr Theo file his affidavits by 11 March 1996 and that the further hearing be adjourned until 27 March 1996. On that date Mr Theo applied for an adjournment of BHP’s application. This being opposed a Master adjourned Mr Theo’s adjournment application to 28 March 1996 for determination by Mr Justice Beach of the Supreme Court. Affidavits in support of Mr Theo’s application were filed for that hearing. The adjournment was refused by Beach J who then gave judgment for BHP.
I do not have such reasons as there were for that decision in evidence before me. Nonetheless a transcript of notes of a solicitor in the employ of the firm acting for BHP has been put in evidence. That transcript was accepted by Mr Brand, the solicitor who acted for Mr Theo before Beach J, as a “simple summary of the submissions made during that application” which was of approximately 50 minutes duration.
As best I can ascertain, the evidentiary material before Beach J was contained in (on Mr Theo’s side) affidavits of himself and of Mr Brand and (on BHP’s) of Ms McKenna, of BHP’s external solicitor and of another BHP officer.
At no stage in those proceedings was it claimed by Mr Theo that BHP was suing the wrong defendant. Mr Theo’s own affidavit adverted to a possible counterclaim under the Trade Practices Act 1974 for price discrimination but that a considerable amount of preliminary work would have to be done to sustain that claim. This would require a comparison for at least 6 years past of all invoices and receipts:
“to establish the prices at which I purchased steel products, and a comparison of those prices to other steel merchants prices:” emphasis added.
The major part of his affidavit was, though, directed at explaining the reason for delay in filing his affidavits in the principal proceeding.
Ms McKenna’s affidavit annexed (inter alia) documents (i) indicating that orders for goods were placed on BHP order forms in the name of “T Zafiropoulos”; and (ii) acknowledging that payment for the goods was made by T Z Metal and that there was an outstanding debt in respect of such orders. These acknowledgments were made by Andrew Zafiropoulos (Mr Theo’s son and a director of T Z Metal) and Mr Phyland (an officer of a company that took over T Z Metal).
According to the transcript note of the hearing before Beach J, his Honour (a) refused an extension of time in which to file affidavits, a defence and counterclaim; (b) accepted that on the totality of the correspondence there had been admissions of the debt; (c) refused, further, to adjourn the application for judgment so as to allow Mr Theo to consider issues as to quantum; and (d) gave judgment for BHP on the originating motion. There was no appeal from this judgment.
Going Behind the Judgment
Put simply, Mr Theo’s case is that, no matter the name of the customer account, the goods were sold and delivered at the request of T Z Metal and were to be paid for by T Z Metal. The identity of the purchaser was not investigated on the merits at the hearing before Beach J. It remains a real, triable issue. There would be a clear miscarriage of justice if BHP were allowed to rely upon a judgment based on a non-existent contract with Theo.
The parties have, predictably, placed differing emphasis on the statements of principle to be found in particularly the judgments of the High Court in Corney v Brien (1951) 84 CLR 343 and Wren v Mahoney (1972) 126 CLR 212 as to the exercise of the discretion to go behind a judgment debt.
Mrs Moshinsky QC for Mr Theo has submitted that the proceedings before Beach J should properly be analogised to a default judgment; that, notwithstanding that Mr Theo was legally represented at that hearing and that the true identity of the purchaser issue was not there raised, he should not have this held against him; and that there is a bona fide allegation, with appropriate evidentiary justification, that no real debt lay behind the judgment.
Ms Crennan QC for BHP submits, in contrast, that the appropriate principle to apply is that a court will not go behind a judgment where both parties have appeared at the hearing unless a prima facie case of fraud, collusion or miscarriage of justice is made out. It is then said that on the evidence adduced before me I should find that Mr Theo was always BHP’s customer, hence no reason is shown for going behind the judgment.
It is, I consider, appropriate to observe at the outset that both parties in their submissions in this have claimed somewhat too much in their own favour - in Mr Theo’s case, because the proceedings before Beach J were not default proceedings and because they were conducted with both parties legally represented and on the understandable assumption that there was not an issue as to the identity of the contractor, given that the proceedings were clearly against Mr Theo personally; in BHP’s, because while both parties were legally represented, the judgment did not follow “a full investigation at the trial”: cf Corney v Brien, above at 356-357.
For present purposes it is sufficient for me to say that, consistent with authority in this Court applying Wren v Mahoney, above, I need to be satisfied that there are substantial reasons for questioning the validity of Beach J’s judgment before going behind it: see Wiltshire-Smith v Mellor Olsson (1995) 57 FCR 572 and esp the cases referred to at 574. As Fullagar J indicated in Corney v Brien, above, at 358 this “will, of course, often involve some preliminary investigation of the merits of the attack on the judgment”. Such is the case here. Indeed, the matter has been conducted both in evidence and in submissions on the basis that, if I am to go behind the judgment, the issue of whether there is a debt in “truth and reality” will have been fully ventilated.
Given the view I take of this matter the practical effect of my decision would be the same were I to refuse in the circumstances to go behind the debt, or were I in fact to undertake that inquiry. I have concluded that BHP’s contracts were with Mr Theo and hence the judgment debt was properly founded. Equally I am of the view that, in light of the evidence before me and in particular of my findings on Mr Theo’s reliability as a witness, no substantial reasons have been shown for questioning the validity of the judgment in that I am not satisfied that there is a real issue to be tried as to the identity of the purchaser from BHP.
Before indicating why I have reached these conclusions, it is necessary to outline the background setting of this matter and then the matters of factual contention and my findings on them. I should preface this by noting that there is no real challenge made to the petition on the basis that Mr Theo was liable for the debt but on some other basis: cf Re Skaff; Ex parte Farrow Mortgage Services Pty Ltd (1993) 113 ALR 715. Equally, as a factual matter, it is not in dispute that at all relevant times the goods sold by BHP were: (a) delivered to the premises at which T Z Metal conducted its business; (b) that the goods were used in, and for the purposes of, that business; and (c) that they were in fact paid for by T Z Metal.
The Background Setting
This can be dealt with briefly. Beginning in the early 1970s, and save for a period in 1977 to 1978, Mr Theo purchased base metal products on his own account, first, from John Lysaght (Australia) Ltd and then, after its takeover, from BHP. In early 1984 he incorporated T Z Consolidated - it changed its name to T Z Metals in 1994 - which thereafter conducted his business.
The customer account Mr Theo had with BHP prior to the incorporation of his company was in his own name. It remained thereafter in the books of BHP in that name. I will refer below to the evidence of Mr Theo’s alleged dealings with BHP at the time of incorporating T Z Metal; of his knowledge of the account name thereafter used for purchases; and of such steps as were taken to change the designation of the account (“Incorporation and its Aftermath”).
As I have noted, it is not disputed that orders for goods were placed with BHP; these were supplied to the premises where T Z Metals conducted its business; and they were paid for by T Z Metals. The parties accept that each separate order for supplies constituted a separate contract. It is BHP’s evidence, which I accept, that, at the relevant period, it would only accept an order if its own order form was filled out - in the present case, this being a form requiring that the designate space for “customer” have Mr Theo’s name entered in it. Nonetheless, the manner both in which orders were placed and accepted and in which the parties (including T Z Metal) dealt with each other over time in, and in consequence of, these sequential contracts are matters of the first importance - and of no little contention. They will be dealt with separately below: (“Orders and the Course of Dealing”).
From 1984 until 1988 Mr Theo seems to have managed T Z Metal. Andrew, his son, then joined him as a manager and took over some range of Mr Theo’s responsibilities. It is Mr Theo’s evidence that by 1990 the company was largely under Andrew’s control. In 1994 Andrew became a director of the company. As will be seen, some reliance is placed by both parties (albeit for differing purposes) on the role assumed by Andrew in the affairs of T Z Metals and vis-a-vis his father.
Before turning to the contested matters of evidence which I have foreshadowed, it is necessary to express my views on the principal witnesses of each side - Ms McKenna and Mr Theo.
First Ms McKenna. While her evidence was on occasion partisan in that some answers given were cast in forms that supported (sometimes quite strainedly) the conclusion she wished to press upon me as to the identity of the contractors - a conclusion she doubtless genuinely entertains - I nonetheless accept her evidence on factual matters as truthful and reliable. Lest it be thought I have overlooked it in forming this view, I note in passing her admission of error in relation to an affidavit she prepared for unrelated proceedings in January 1996 in which she said that T Z Metals was BHP’s debtor.
Secondly Mr Theo. He is over 70 years of age and it probably is the case that at the period relevant to this matter his son had a far greater involvement in, and knowledge of, management matters. Often enough in cross-examination he professed not to be able to remember matters or not to have known a matter. While accepting that he may not have a high level of recall, or knowledge of, some events, etc put to him, I do not accept that his recall, or for that matter his knowledge, was as limited as he suggested. I will illustrate this below. There was, in my view, some degree of contrivance in his evidence such that I do not regard it as convincing or reliable in some important instances - hence some of my findings.
Incorporation and its Aftermath
In his affidavit filed in the proceedings before Beach J Mr Theo admitted he was the purchaser of BHP’s goods. In evidence in the present proceedings this was disavowed as mistaken. Rather he claims that from the time T Z Metals was incorporated, the orders placed with BHP were its orders. It is his evidence that, at the time he incorporated his business, he discussed his so doing with his then suppliers including with Mr Rosenthal (a manager) of BHP. Furthermore he claims that Mr Rosenthal “raised no issue [with] me continuing to deal with him through my new incorporated entity”. Thereafter “all orders were placed by T Z [Metals] with BHP” although his affidavit goes on to indicate that he did not recall that “the account name of T Zafiropoulos was ever changed”.
Mr Rosenthal (who gave affidavit evidence but was not required for cross-examination) did not recall any conversation with Mr Theo in which incorporation was discussed or in which he was alleged to have raised no issue concerning Mr Theo’s dealing with BHP through T Z Metals. He did swear, though, that he managed Mr Theo’s account with BHP from about 1977 to December 1985, and that during that period he had continual dealings with him with:
“rarely a week went by that I did not have discussions with him regarding payment of his outstanding accounts and the possible cessation of deliveries of steel products by BHP to him unless his accounts were paid in full or in part.”
For his part, Mr Theo denied he spoke to Mr Rosenthal about the account after the formation of the company. As I will indicate below, BHP’s documentation (order forms, invoices, rebates, etc) retained the name of Mr Theo as customer and, as appropriate, was addressed to him. When cross-examined on his “incorporation conversation” with Mr Rosenthal and his subsequent communications with him, Mr Theo had this to say:
“[Ms Crennan QC: Q] Mr Rosenthal gives sworn evidence that he does not recall any discussion with you regarding the incorporation of T Z Consolidated Industries in 1984 or at any time after? --- That’s not correct. Why then I have to form a company and I didn’t have to notify him. I notify him, definitely I notify him.
You had notified him by letter? --- I had letter. By letter and ---
And you do not have a copy of the letter? --- By letter and I range him as well.
And you rang him as well, did you? Well, I suggest to you that that is simply not true? --- Well, this is your prerogative to believe or not.
Did you complain to him about the order forms having to be sent out in your name to BHP after the company was formed? --- Well, I don’t remember.
You do not remember? --- It doesn’t worry me at all.
Does not worry you. Did you complain to him about the invoices being directed to you after the company was formed? --- I think a few times I told him.
You think you told him? --- I told him.
Did you?How? On the telephone or in writing? --- On the telephone.
And did you notice that he kept doing it? Did you notice that the invoices kept coming to you? --- That’s right.
Did you continue your complaints? --- Well, I rang him up a few times and then I have other things to do. The accountant was looking after that. I don’t ---
The fact is, Mr Zafiropoulos, you never complained about the orders being in your name, the invoices coming to you or the cheque rebates coming to you, did you? --- I always complain. Always told him about it. As a matter of fact when the deliveries, some of the deliveries was made I was crossing T. Zafiropoulos and I was writing on the delivery notes TZ Consolidated Industries.”
Ms McKenna gave evidence that in 1987 a Mr Carson, apparently an accountant in T Z Metals’ employ, requested during a meeting with her and BHP’s State Manager, that Mr Theo’s account be put into the company’s name. This request was refused, the reason given being that Mr Theo had assets in his own name.
A like request was made by Mr James of T Z Metal in March 1994 and was again refused. And later the same year at a meeting with BHP, according to Ms McKenna, Mr James “quipped” that he would like the account to be changed to the name of T Z Metals. Mr James in his evidence confirmed these requests were made; he said the account name was a subject he discussed as well with the “BHP rep” on several occasions; and he confirmed that the word “quipped” was appropriate to describe the second request referred to above because “knowing BHP I knew that they would fall on deaf ears”.
Mr Theo denies that he ever gave instructions to Mr Carson or Mr James to seek BHP’s change of the account name. Equally he denied having any knowledge of such requests being made on his behalf. His explanation of this state of affairs such as it was, was that others were handling the company’s affairs.
BHP I would note in passing had its own form and procedures for changing customer details including names. The company’s computer system was programmed to accept orders under the customer’s name only and goods would only be supplied if ordered in that name.
The evidence given on BHP’s behalf as to why it refused to change the account is not altogether satisfactory. It is that Mr Theo had assets in his own name and that BHP did not know what assets were held by T Z Metals, itself a two dollar company. Ms McKenna, though, indicated in cross-examination that BHP had no details of his assets - though “we tried on numerous occasions” - and took no security from him. What I do find is that, for whatever reason, BHP was unprepared when requested to transfer the account to the company’s name.
To the extent that Mr Theo’s evidence is that he secured BHP’s acceptance of a de facto change to the name of the customer after incorporation of T Z Metal and that thereafter he was unaware that the account remained in his name, I am unprepared to accept his evidence. While I am prepared to accept that Mr Rosenthal was made aware of the incorporation of T Z Metals - I note that it was the company that paid for the goods supplied - I do not accept that he discussed changing the customer account with Mr Rosenthal and that Mr Rosenthal raised no issue as to this. The state of his account at the time was such (on Mr Rosenthal’s evidence) that a change to it would have been a matter of no little significance hardly to be forgotten if done. I am not surprised that Mr Rosenthal had no recall of this alleged conversation. It did not occur.
My conclusion that no change was accepted is reinforced by the conversations between Mr Rosenthal and Mr Theo subsequent to the company’s formation. Though I consider the evidence of this given by Mr Theo to be unreliable - the more so because his evidence of dealings with Mr Rosenthal in relation to the account is contradictory - it does indicate that BHP continued to designate him as the customer and that he was aware of this.
Furthermore, I do not accept his evidence that he did not know the account with BHP remained in his name. While I am prepared to accept that he may not have given specific instructions to Mr James or Mr Carson to seek to have the account name changed, I also am prepared to infer that, that such steps were taken, reflects what was known both to T Z Metals and Mr Theo at the time: the account remained in his name.
This conclusion of itself is not sufficient, it is said, to conclude this matter. Mrs Moshinsky QC has submitted that the account name itself was historically ordained and was perpetuated by the requirements of the BHP computer system: of itself it does not identify the true, the actual, purchaser of the goods. While I do not accept this in the circumstances of this matter, and in consequence, do not consider that Mr Theo has raised such doubts in relation to the judgment as would require my going behind it, I am nonetheless prepared further to enter upon the evidence for the purpose of making a finding as to whether there was a debt there.
Orders and the Course of Dealing
It is not in dispute that, at the period relevant to the debt in question in these proceedings: (a) each order was raised with TZ Metals for the purposes of meeting the needs of TZ Metals in its business; (b) employees of TZ Metals (at least ordinarily) prepared the originating documentation leading to orders being placed with BHP - though there is some not altogether satisfactory evidence that Mr Theo actually prepared some orders; (c) the ordering process involved, first, a purchase order on a TZ Metal form being prepared and, then, the information on that form (including the order number) being transferred to a BHP order form; (d) while both of these steps ordinarily were taken within TZ Metals, there is Mr James’ evidence that for a period, probably in 1993 or early 1994, the later step was taken by a BHP representative who subsequently supplied TZ Metals with BHP order forms; (e) the BHP form had a “Customer” entry and this was filled out by TZ Metals employees in the name “T Zafiropoulos”; (f) the BHP form was transmitted to BHP - as I have earlier indicated that form alone would activate an order - although there is evidence that on occasion the TZ Metal form either alone (see (d) above) or together with the BHP form was sent to BHP; and (g) the goods ordered were delivered to TZ Metals’ business premises and were to BHP’s knowledge paid for by TZ Metals.
Mr James, who was TZ Metals’ internal accountant in the period March 1993 to August 1995, was responsible it would seem for preparing the TZ Metal and BHP order forms over this period. A number of these documents with his signature on them are in evidence. Cross examined on the BHP order form and its customer account entry in Mr Theo’s name, he had this to say:
“[Mrs Moshinsky QC: Q] Do you understand that Mr Theo was the customer himself? --- That was my understanding. That is what I was told.
...
Who filled in this form? --- I did. That is my writing.
Where did you get the information for the customer code? --- When I started with TZ I observed that the documents were coming through from BHP in the name of Theo with that customer code on it. I inquired as to whether that was right, and I was informed by Andrew Zaf that BHP insisted on the name being - the account being in that name.”
Consistent with its order form, such order acknowledgment forms as were sent were sent to Mr Theo. Likewise invoices uniformly were directed to him and rebate cheques were made payable to, and were sent to him, although it is accepted that they ultimately were banked to a TZ Metal account and were not paid to his own account for his own benefit. Of the cheques made payable to him, Mr Theo had this to say in cross-examination:
“How did you deal with the cheques which in the court book are made out to Theo Zafiropoulos? Did you receive those cheques? --- The cheques which came in - the company was getting - BHP was getting paid by the company and when they were sending - they were sent in to the same address of the company.
Yes? --- And the clerk, Mr Phyland, he was taking the cheques and he was putting them back to TZ Consolidated Industries or TZ Metal account.
So, Mr Phyland did not show them to you? --- He did not show them to me. I did not knew anything about it. This has been done - this was always as a business.
So you never saw the rebate cheques? --- I do not.
And you never endorsed the rebate cheques? --- Well, a few - maybe I have endorsed one or two.
You would endorse them all, would you not, Mr Zafiropoulos? You would endorse them all, would you not? --- No, I did not endorse them all.
I see. So, Mr Phyland took the cheques and banked them without showing them to you, is that your evidence? --- Well, it was going into the bank.
By Mr Phyland? --- That is right.
And he was able to do that without showing you the cheques, was he? --- Well, I do not remember. If he showed me, you know, I was not involved in this type - in there.
You may not have been involved but I am only asking you whether you were shown the cheques or asked to do anything with the cheques? --- If I have endorsed - when you say endorsed, I do not understand the meaning?
Did you write on the back of the cheques that they were not to be paid to you but to be paid to somebody else? --- Well, it could be done that.
But did you do it? --- Well, I do not know if I have done it. I do not remember.
You cannot remember if you have done it? --- That is right, I do not remember.”
To be set against the formal BHP documentation, a body of correspondence from BHP to TZ Metals relating to the latter’s business and to matters connected with the purchases from BHP, were put in evidence. What is notable about this correspondence in the main is that while the letters sent were often couched in language consistent with the assumption that TZ Metals was contracting with BHP, where formal documentation relating to the letter was annexed that ordinarily was addressed to “T Zafiropoulos”. Without setting them out in these reasons I would note by way of illustrations (a) the rebate letter to Mr A Zaf of 20 October 1994 and the accompanying remittance advice (Court Book pp491-492); and (b) the storage charges letter to TZ Metals of May 28, 1993 and accompanying invoice (Court Book pp488-490).
Furthermore there are occasional instances where the correspondence in fact assumed or presupposed that TZ Metals was BHP’s customer. The most notable example was a letter of 23 May 1994 to Andrew Zaf that commenced:
“Dear Andrew,
SUPPLY ARRANGEMENT 1994
TZ CONSOLIDATED INDUSTRIES
We have pleasure in making the following offer for the supply of your steel sheet and coil requirements ordered and acknowledged for delivery from week 13 1994 to week 12 1995.”
The letter went on to indicate that BHP would (inter alia) provide advertising assistance up to the value of $25,000 per annum to the company.
There are as well examples of letters from TZ Metals to BHP which assumed or presupposed that the account was the company’s. I refer for example to a letter of 24 May 1995 of TZ Metal which referred to “our [BHP] trading account”.
In August 1995 TZ Metal informed BHP of its intention to merge with another company. Thereafter a series of meetings occurred and a deal of correspondence was generated aimed at settling “the account”. I do not intend setting out the detail of this. It is clear, first, that Mr Theo was made aware of BHP’s request for payment (eg he received a facsimile to this effect on 28 August 1995); secondly, that the existence of a debt was acknowledged by Andrew Zaf as also, as I will indicate below, by Mr Phyland of TZ Metroof Pty Ltd; and (3) that BHP was looking to TZ Metals for actual payment of the debt (see eg letter of 2 November 1995: Court Book 143).
What I regard as significant are (i) Mr Phyland’s signed notes of a meeting held with BHP the purpose of which was:
“To reconcile current statement of account for T. Zafiropoulos and to determine which amounts are agreed as outstanding and which are in dispute with a view to resolving all matters”;
and (ii) a document prepared by Andrew acting on Mr Theo’s behalf setting out proposed terms for the “resolution of T Zafiropoulos alleged debt” that proposed (inter alia) that:
“T ZAFIROPOULOS TO AGREE TO JUDGMENT IF MATTER ARENT RESOLVED TIME?”
This document’s proposals were designed to settle the proceedings to be heard by Beach J. Mr Theo in his affidavit of 24 December 1996 (para) acknowledged the document and was aware of its contents.
Mr Phyland’s meeting with BHP was probably in an agency capacity for Mr Theo. It was Ms McKenna’s evidence that Mr Phyland was nominated by Theo to represent him. I have, though, no direct evidence that such was the case.
I should add for the sake of completeness that Mr Joseph Lombardi, the external auditor of TZ Metals from 1993 until December 1995, gave evidence that all of the accounts he prepared for the company were prepared on the basis that BHP was the company’s creditor. I should indicate that I do not regard his evidence as being of assistance in resolving the issue in this proceeding. In cross-examination he conceded that he saw none of the primary documents - order forms, invoices, rebates, etc - used by BHP; he simply relied upon material supplied by management in TZ Metals; he assumed they in turn relied on the BHP documents; and he assumed that BHP was the company’s creditor.
Findings
I previously have found that, notwithstanding the incorporation of TZ Metals and the transfer of his business to it, Mr Theo’s customer account with BHP remained throughout in his own name and he knew this to be so. BHP was unprepared, when so requested, to transfer it to the company’s name.
The dealings between Mr Theo and BHP subsequent to incorporation were such that, whatever the underlying purpose and practical effect of the contracts with BHP, those contracts formally were between BHP and Mr Theo. The conclusion in my view is unavoidable that this is one of those cases in which the form of a transaction and its practical substance parted company - though on some occasions representatives both of BHP and of TZ Metals appear to have confused substance and form. I regard BHP’s letter of offer to TZ Metals of 23 May 1994 (above) as illustrative of this.
The contracts were, and were known by BHP, Mr Theo and TZ Metals to be, for the benefit of the company. And BHP accepted satisfaction from - and ultimately sought to have its debt settled by - the company. Nonetheless BHP adhered for formal purposes to the position that orders on it were being made by Mr Theo; that it was accepting his offers; and that its documentation for, and in effectuation of, the contracts so made was to, and did, reflect this.
Mr Theo, I find, was aware of this. His evidence of his understanding of his naming in BHP’s documentation is contradictory and I find it quite unreliable. Further I infer that with that awareness, and despite his protestations of ignorance, he knowingly permitted officers of TZ Metals to make orders on BHP on his account. They had implied actual authority so to do and, as Mr James’ evidence indicates, he at least acted on the assumption that he was making orders on Mr Theo’s account and that BHP was accepting orders so made. There is no need here to enter upon the question whether Mr Theo should be held to be the purchaser because of an estoppel of some form: cf Laws Holdings Pty Ltd v Short (1972) 46 ALJR 563.
In common with Beach J, I am of the view that there is acceptable evidence of admissions of the debt and that he was purchaser, which can properly be sheeted home to Mr Theo. Despite his disavowal of his statement in the affidavit filed in the proceedings before Beach J that said it was he who “purchased steel products” from BHP, I am unprepared to accept that the statement was not intended to, and did not, state the correct position at the time it was made. Likewise the settlement statement made by Andrew Zafiropoulos prior to the hearing before Beach J was one acquiesced in by Mr Theo.
I would have to say that the true state of affairs was that presented to Beach J and I do not find it at all surprising that Mr Theo’s legal advisers did not then raise the issue of the identity of the contractor. Neither do I find it surprising that they proposed a defence and counterclaim premised upon Mr Theo being the debtor.
I find, then, that behind the judgment there was a debt.
In deference to the submission made by counsel for Mr Theo there is one matter to which I should refer. As I earlier noted, Mrs Moshinsky QC submitted that the order form’s designation of Mr Theo as the customer should not of itself be taken as conclusive of the true contractor issue. Even if I were to agree with this, the totality of the documentation and the evidence of the parties’ dealings are sufficient to dispel any doubt as to who were the contractors.
Conclusion
Though some number of issues of law were raised during the hearing that in the event did not need to be pursued - and I refer particularly to the possible issues of novation, assignment and estoppel - this case in the end reduced itself to a narrow factual issue: who was the actual purchaser? It properly was accepted by Mrs Moshinsky QC that a party, A, could be in contractual relationship with B for goods sold and delivered at A’s request, notwithstanding that those goods were delivered to and paid for by C: cf Benjamin’s Sale of Goods, paras 586, 597ff, 702, London, Sweet & Maxwell, 2nd Ed, 1981.
The issue here was whether the circumstances of this case conformed to that pattern. I have concluded that they did. While I consider that it was strictly unnecessary for me to do so, I have gone behind the judgment of Beach J only to arrive at the same conclusion as that reached by his Honour. There was a debt and Mr Theo was the debtor.
I am now satisfied with the proof of the matters referred to in s52(1) of the Bankruptcy Act 1966. Accordingly I order that a sequestration order be made against the estate of the debtor Theodore Zafiropoulos and that the costs of the petitioning creditor of and incidental to the petition be taxed and paid out of the estate.
I certify that this and the preceding eleven (11) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn.
Associate: Dated: 14 August 1997
Counsel for the creditor : S Crennan QC with D J Havin
Solicitors for the creditor : Freehill Hollingdale & Page
Counsel for the debtor : A Moshinsky QC with J Nolan
Solicitors for the debtor : Nicholas Brand & Co
Date of hearing : 26-28 May 1997
Date of judgment : 18 August 1997
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