Reidpath, D. v Starwide Pty Ltd
[1992] FCA 355
•11 May 1992
S 5 ,/92 / .
JUDGMENT NO. .om .a. . . . . . . . . . . . .wmmw.*. . , I
IN THE FEDERAT. COURT OF AUSTRALIA ) GENERAL DIVISION
1 No. NP 4248 of 1991 1 ~ U P T C Y DISTRICT OF THE. STATE OF^
NEW SOUTH w m s 1 i l,.' f :
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BETWEEN : DONALD REIDPATH I Debtor I ,
/ j EX PARTE: STARWIDE PTY LIMITED ? ? , Petitioning Creditor I.
CORAM: WILCOX J PLACE : SYDNEY DATE : 11 MAY 1992
EXTEMPORE REASONS FOR JUDQ4ENT
WILCOX This is the hearing of a bankruptcy
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The petition is based upon a judgment entered in the Local , Court of New South Wales in the sum of $11,674.52. That sum
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is made up of an initial debt of $9,835 together with interest
$1,624.52 and $215 costs. The judgment in the Local Court was I I .. obtained on 1 February 1991, no defence having been filed.
grounds of opposition advanced by Mr Reidpath, I indicated
When the matter first came before me, the debtor,
Donald Reidpath, who appears for himself, stated that he disputed the existence of the debt the subject of the judgment. He tendered some evidence regarding the circumstances in which judgment was obtained. Having considered that material, and after rejecting some other
that I thought this to -be a proper case in which to exercise concerning that matter.
the Court's discretion to go behind the judgment, and to
ascertain whether, in fact, the amount referred to in the
bankruptcy petition, or some other amount exceeding $1500, was
due by Mr Reidpath to the creditor, Starwide Pty Limited.
Some affidavits were filed. The matter came before me again on 9 April 1992 when I read the affidavits. I also
Mr reason that these documents were in the form of statutory declarations rather than affidavits was that M r Reidpath perceived a problem in obtaining affidavits from the witnesses. Between the date of the original direction and 9 April M r Reidpath contacted my associate to inquire whether he could use statutory declarations. My associate, on my instructions, informed him that this would be possible. He and I both assumed that Mr Reidpath would understand that, nonetheless, the witnesses would have to be available for
read some statutory declarations which had been obtained by
cross-examination if required; in the same way as if
affidavits were used. Although Mr Reidpath apparently
understood the rule concerning affidavits, he said on 9 April,
and I accepted, that he had not realised that this would
equally apply to the use of statutory declarations. The
result of this misunderstanding was that the witnesses were
not at Court.
I did not require the re-engrossment of the
documents as affidavits; but I did make it a condition of
their admission into evidence that the relevant people would
be made available on a future hearing day. Mr Reidpath
indicated that he would subpoena the witnesses; apparently
none of them were keen to attend Court. As the price of an
adjournment Mr Reidpath gave an undertaking to the Court to
issue subpoenas to five people to attend and give evidence.
Those five people were identified in the undertaking. They
were all makers of statutory declarations tendered by Mr
Reidpath.
Before adjourning the matter on 9 April I gave leave
directed that, not later than 14 days before today, the
petitioning creditor file and serve an affidavit of Michaelto both parties to issue subpoenas returnable today. Also I creditor, dealing with the substance of the matters set out in
the statutory declarations of the five people. I made other
directions at that time. It is relevant to note that during
the course of discussions on 9 April, I expressed puzzlement as to the way in which the amount was calculated. This was
despite the fact that, pursuant to my direction on the
previous occasion for the parties to file affidavit evidence
supporting their cases on the issue of whether any moneys were
owing, the petitioning creditor had filed a lengthy affidavit
of Mr Lee dated 17 March.
During the period between 9 April and today, Mr
Reidpath filed and served a notice to produce documents. The required documents included bank statements relating to two bank accounts referred to by Mr Lee; also cheque butts for amounts said to have been paid by the petitioner to Mr Reidpath or on his behalf. As it happens, Mr Reidpath did not in fact call for those documents today. But the notice should have further alerted the petitioning creditor to the
significance of strict proof of the amounts claimed.
There is a major issue between the parties as to an
amount of $4835 particularised in annexure B to Mr Lee's
affidavit of 17 March 1992. The amount is claimed to be due
for photocopying, facsimile transmissions, telephone calls and
office rent.
Two fundamentally opposed versions have been given by Mr Lee and Mr Reidpath as to the nature of their business relationship. Mr Lee says that Mr Reidpath agreed with him
that he, Mr Reidpath, would share the office facilities of
Starwide and contribute 5 0 per cent of the office rent and pay all other expenses incurred by him. According to M r Lee, Mr
Reidpath was not a director of Starwide and was not engaged on its affairs; he used the office facilities to pursue his own commercial interests. According to Mr Reidpath, he was approached by Mr Lee, who was a comparative newcomer to this country, and was asked to become a director and shareholder of
Starwide. He says that his presence in the office was
entirely attributable to his work on behalf of Starwide.
This fundamental difference between the parties gave rise to the statutory declarations.
It was because of the
provide an opportunity for the declarants to be cross-
examined. The five declarants have been cross-examined today.
It is unnecessary for me to refer in detail to their evidence.importance of that issue that I thought it essential to evidence consistent with Mr Reidpath's version of events. Several of the witnesses attribute to M r Lee a specific statement that Mr Reidpath was a director of Starwide.
I formed a favourable impression of each of these witnesses. Whilst it is possible that one, or perhaps even two, of them may have misremembered, or reconstructed in a
manner unduly favourable to Mr Reidpath, relevant events, it
is most unlikely that all five witnesses were mistaken. In
the circumstances, I have no hesitation in concluding that Mr
Reidpath's version of the relationship ought to be accepted.
It follows from this that I reject that part of the
M r Lee to advance the business interests of Starwide.
claim which refers to $4835 being payable for office expenses. used the office space and facilities primarily, if not exclusively, for the purpose of assisting
Annexed to Mr Lee's affidavit, as annexure A, is a
an acknowledgment by Mr Reidpath of indebtedness to Starwide
in the sum of $9835. The original has not been produced. Mr
document dated 2 February 1990 and purporting to be a copy of a document. He concedes that the signature might be a facsimile of his signature; but he says that, if so, it must have been attached to this document by someone overlaying a photocopy of his signature on a copy of the typed acknowledgment.
typed, it refers to the same money amount. However, on
annexure B the item "loans advanced, $500OW, has been struck
out in pen. The evidence does not disclose by whom. Mrannexure B. This document is also dated 2 February. As words which are agreed to be abbreviations for "subject to confirmation of accounts". As an acknowledgment, the document does not go very far. Even if it were correct that Mr Reidpath had signed annexure A, one would have to read that acknowledgment in the context that Mr Reidpath is saying that his indebtedness in any particular amount is subject to confirmation of the accounts.
One then turns to annexure C, which sets out details amount bears no relationship to the items in annexures A and B. And neither of these amounts has been proved, although they were the transactions the subject of the notice to produce, which went so far as to specify the particular cheque numbers. There then follow annexures D and F. They both of a series of alleged transactions involving accounts with
the Commonwealth Bank at Randwick and the State Bank at
relate to other payments, having no relationship to what has gone before. When I asked counsel for the petitioning creditor about the matter, this he said that these items had
nothing to do with Starwide, that they related to payments
made on behalf of Mr Reidpath by Mr Lee personally. Mr Lee is not a party to the present proceeding. Consequently I leave
these claims out of account.
In this situation, I am then driven back to the previously mentioned documents - annexures A and B.
It seems
to me that they prove nothing. Starwide may have made some advances to Mr Reidpath, or payments to other people at his request. M r Reidpath concedes that some payments were made to
him for salary. He says that the arrangement he made with Mr
him, but he says that these were on account of what was due to together with expenses. The details of this have not been explored and it is impossible to say whether the conceded payments were pursuant to any such arrangement.
I am not in a position to say that this could have
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been done. But am also unable to say that it is not a to affix it to a blank acknowledgment with clear tape and then photocopy the acknowledgment, thereby obtaining a document in
possible explanation. It seems to me that it might have been
possible for a person so minded to obtain a signature - and
there is no doubt that there were ample copies of M r
the form of annexure A. I emphasise that I do not find that
these events happened; still less do I make any finding
against Mr Lee or any other particular person. But I do not feel that I can reject Mr Reidpath's explanation of annexure A.
In any event, annexure A has to be read with
The problem, as I see it, is that, in order to
ascertain what moneys, if any, are payable by Mr Reidpath to rejects the claim for office expenses, it is plain that the figure of $9835 is flawed, and, consequently, that the judgment in the Local Court was for an incorrect amount. On the material before me it is impossible to say what is the
correct amount of Mr Reidpath's indebtedness (if any). On one view of the matter, if annexure C is correct, the correct
amount is a shade higher than the amount claimed in the
judgment; but it will be a different amount comprised in a
different way. More significantly, no evidence has been
adduced to support the calculation in exhibit C.
When all these problems were pointed out to Mr
Eassie, counsel for the petitioning creditor, he asked for an opportunity, at least overnight, to consider whether it was possible for him, without reopening his case and producing additional evidence, to reconcile the figures; I gave consideration to M r Eassie's request but I think it is apparent that it is not possible for him to prove his case without further evidence. Consequently an overnight
adjournment would serve no useful purpose. It would merely inconvenience the parties and put them to more expense. In particular, I bear in mind that Mr Reidpath lives at the further mention of the matter.
The real question, I think, is whether I should
allow the petitioning creditor to re-open its case, so as to
file an affidavit - sworn by somebody within the company with
knowledge of the facts, perhaps Mr Lee, perhaps the company's
accountant - containing a proper statement of Mr Reidpath's
account. That affidavit would need to detail the moneys said
to have been paid either to M r Reidpath, or on his behalf,
with supporting documentation, and give credit for whatever
may have been due to him.
Upon reflection I do not think that it would be a
proper exercise of my discretion to take this course. I bear
in mind that the matter has been in the list on several
occasions over some months. There has been ample opportunity
to file such an affidavit. Indeed, there was a direction for the filing of evidence on this aspect of the case. Moreover, it is apparent that, whatever amount is owing will not be the same as the amount the subject of the default judgment. If I dismiss the petition I will not be resolving the state of
accounts between the parties. If they are unable to agree on
this matter, it will be open to Starwide to sue Mr Reidpath in
respect of the moneys properly payable and, if he defends the
action, to establish the proper amount in a court of competent
jurisdiction. Consequently, in declining an adjournment, I am
not finally disposing of the petitioner's rights. I am simply
saying that I do not think that a sequestration order ought to
be made on a petition based upon a Local Court judgment which
is shown to be incorrect. It would, no doubt, be possible
for me to permit an amendment of the petition, so as to state
the correct amount of the debt, when this is established. But
I do not think that the bankruptcy jurisdiction of the Court should be used on a debt ascertainment exercise of that nature.
In referring to possible further proceedings, I wish to add that I very much hope it will not be necessary for
further proceedings to be taken. The amount involved, whilst
no doubt important to the parties, has probably already been
dwarfed by the legal costs. It ought to be possible for
Starwide to prepare an itemised account, supported by appropriate documentation, and put this before M r Reidpath. He will, I hope, look carefully at that account and be prepared to admit any items which he believes to have been properly paid to him or on his account. I trust that the parties will act objectively and reasonably in sorting out
what is the true state of their accounts. It would be most
unfortunate if they had further litigation, involving further
legal costs. However, that is a matter for the parties. I
can do no more than entreat them to be sensible about future
action. In regard to the current petition, and
notwithstanding all of the matters put by Mr Eassie, I have
come to the conclusion that the proper course is that it be
dismissed.
The order that I make is that the petition be
dismissed and that the petitioning creditor pay the costs of
the debtor in respect thereof.
I certify that this and the preceding ten (10) pages
are a true copy of the Reasons for Judgment
of the Honourable Justice Wilcox.
Associate: 3&w
Dated: 11 May 1992
APPEAIUNCES
Counsel for the Applicant: Appeared for self.
Solicitors for the Applicant: Appeared for self. Counsel for the Respondent: R K Eassie Solicitors for the Respondent: David Geddes Date(s) of hearing: 9 April, 11 May 1992
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