The Proprietors - Units Plan No. 95/38 v Jiniess Pty Ltd - [2000] NTSC 1

The Proprietors - Units Plan No. 95/38 & ors v Jiniess Pty Ltd & ors [2000] NTSC 1
PARTIES:THE PROPRIETORS - UNITS PLAN No. 95/38
and
HETHERINGTON & SIMMONS DEVELOPMENTS PTY LTD (ACN 069 858 939)
and
DROSOS AND DESPINA KLIDARAS
and
ALLAN GRAHAM ANDERSON
and
THOMAS CHRISTOPHER SAWYER
and
BOULEVARD INVESTMENTS (NT) PTY LTD (ACN 068 356 356
and
RELKDAR PTY LTD (ACN 009 634 922)
and
MARIA JOSPEHINE STEPHENS AND ALAN ROBERT STEPHENS
and
MARISTEW PTY LTD (ACN 053 905 089)
and
MARILYNNE PAMELA PASPALEY

AND

JINIESS PTY LTD (ACN 009 616 406)
and
SINCLAIR KNIGHT MERZ PTY LTD (ACN 001 024 095)
and
SLEEMAN DUNKLEY TREACY PTY LTD (ACN 009 631 592)
and
JOHN GLYNATSIS

TITLE OF COURT:  SUPREME COURT OF THE NORTHERN TERRITORY
JURISDICTION:  SUPREME COURT OF THE NORTHERN TERRITORY EXERCISING TERRITORY JURISDICTION
FILE NO:245 of 1998 (9827956)
DELIVERED:  6 January 2000
HEARING DATES:  21 December 1999 and 4 January 2000
JUDGMENT OF:  RILEY J
REPRESENTATION:
Counsel:
Plaintiffs:L Silvester
First and Fourth Defendants:      J Glynatsis (in person)
Second and Third Defendants:     D Alderman
Solicitors:
Plaintiffs:Clayton Utz, Purcell Lancione & Cureton, Cooney & Associates, James Noonan & Associates
First and Fourth Defendants:
Second and Third Defendants:     Hunt & Hunt
Judgment category classification:    C
Judgment ID Number:  ril00001
Number of pages:  12

ril00001
IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWIN
The Proprietors Units Plan No. 95/38 & ors v Jiniess Pty Ltd & ors [2000] NTSC 1
No. 245 of 1998 (9827956)

BETWEEN:
THE PROPRIETORS - UNITS PLAN No. 95/38
First Plaintiff

and
HETHERINGTON & SIMMONS DEVELOPMENTS PTY LTD (ACN 069 858 939)
Second Plaintiff

and
DROSOS AND DESPINA KLIDARAS
Third Plaintiffs

and
ALLAN GRAHAM ANDERSON
Fourth Plaintiff

and
THOMAS CHRISTOPHER SAWYER
Fifth Plaintiff

and
BOULEVARD INVESTMENTS (NT) PTY LTD (ACN 068 356 356)
Sixth Plaintiff

and
RELKDAR PTY LTD (ACN 009 634 922)
Seventh Plaintiff

and
MARIA JOSPEHINE STEPHENS AND ALAN ROBERT STEPHENS
Eighth Plaintiffs

and
MARISTEW PTY LTD (ACN 053 905 089)
Ninth Plaintiff

and
MARILYNNE PAMELA PASPALEY
Tenth Plaintiff

AND

JINIESS PTY LTD (ACN 009 616 406)
First Defendant

and
SINCLAIR KNIGHT MERZ PTY LTD (ACN 001 024 095)
Second Defendant

and
SLEEMAN DUNKLEY TREACY PTY LTD (ACN 009 631 592)
Third Defendant

and
JOHN GLYNATSIS
Fourth Defendant

CORAM: RILEY J
REASONS FOR DECISION
(Delivered 6 January 2000)

I deal with two applications made by the fourth defendant, John Glynatsis, in relation to the conduct of the case of the first defendant, Jiniess Pty Ltd.

Mr Glynatsis is a director and shareholder of Jiniess Pty Ltd. The only other officeholder and the only other shareholder of the company is his wife Sylvia Glynatsis. The first defendant was initially represented by solicitors but they ceased to act on 25 August 1999. Mr Glynatsis is also unrepresented. He had legal representation until 15 December 1999 when his former solicitors ceased to act on his behalf.
Mr Glynatsis seeks an order permitting him to take a step in these proceedings on behalf of the first defendant other than by a solicitor. In particular he seeks to file a further amended defence on behalf of the first defendant being the document dated 10 December 1999 and filed and signed by him on behalf of the first defendant. That defence was prepared with the assistance of the solicitors who previously represented Mr Glynatsis in his capacity as the fourth defendant. In addition he seeks permission to appear on behalf of, and represent the interests of, the first defendant at the hearing of the matter which is due to commence on 10 January 2000. Each of the applications is opposed by all of the plaintiffs and by the second and third defendants.
The basis of the applications made on behalf of the first defendant is that the first defendant has insufficient funds to enable it to engage the services of a solicitor or to be represented by a solicitor or counsel at the hearing. Whilst it has, through a third party, the capacity to provide security in the sum of $50,000 in respect of legal fees it has been unable to obtain the services of a legal representative willing to undertake the necessary work without the immediate payment of monies.
The first plaintiff has had significant financial problems in recent times. On 20 April 1999 an order was made by the Supreme Court of South Australia winding up the company and appointing Hilary Elizabeth Orr as the Liquidator of the company. The application for the order was made by the Deputy Commissioner of Taxation. The order was subsequently set aside.
I have been provided with three reports prepared by Ms Orr in the course of her administration. In the final report, which is dated 5 May 1999, she provided a qualified opinion as to the solvency of the company. At that time her view was that the company required third party support to meet its current liabilities but that the company had an apparent surplus of assets over liabilities to the extent of $406,273.
The accountants for the first defendant provided a set of financial statements for the period ended 30 June 1999. Those statements indicated that the company suffered a nett loss in the 1998/1999 financial year of $608,310.72. As at 30 June 1999 the total liabilities of the company exceeded the total assets of the company by $810,473.10.
In an affidavit sworn on 16 December 1999 Mr Glynatsis indicated that the first defendant currently has no readily available funds. It has no overdraft facility. It was the view of Mr Glynatsis that, as at December 1999, the company had total net assets of between $1,433,750 and $1,572,750 and total liabilities of approximately $1,483,000. The schedule of assets and liabilities which was attached to his affidavit and which was prepared by a bookkeeper employed at the offices of the accountants engaged by the first defendant, indicated a surplus of liabilities over assets to the extent of $49,250. In the course of the cross-examination of Mr Glynatsis it became clear that this statement of assets and liabilities did not include all of the assets and liabilities of the first defendant.
Mr Glynatsis was cross-examined as to the differences between the summary of assets and liabilities prepared by Ms Orr in May 1999 and that prepared on behalf of Mr Glynatsis in December 1999. It was established that assets of a significant value had been disposed of during the course of that period. Mr Glynatsis explained that the proceeds of the sale of assets had been used to meet existing debts and that sums had been paid in respect of debts to tradesmen, the Australian Taxation Office, financial institutions and solicitors. The most valuable asset to have been sold during that period was a retail complex at Cullen Bay. That was sold for $3.306m and the proceeds were paid to Norwich Union in respect of a first mortgage and to Tauber Fund Management to discharge a second mortgage. There was no surplus.
Mr Silvester, who appeared on behalf of all of the plaintiffs in relation to this particular matter, conceded that there was no basis for a submission that any part of the proceeds of the sales had been “hidden away”. It was suggested that instead of paying out the funds in reduction of the indebtedness of the company some funds should have been kept aside in order to finance the defence of these proceedings. Just how the first defendant was to avoid paying its debts was not made clear.
Whilst the financial position of the first defendant has not been established with precision, indeed there are numerous matters which are impossible to reconcile without further information, there can be little doubt that it is in an extremely difficult financial position. Mr Silvester described the position as one of “marginal solvency”.
In the period between May 1999 and the present the first defendant has been endeavouring to dispose of its assets. It has sold two warehouses, the premises at Cullen Bay, a shark cat boat and four units from a development at Foelsche Street in Darwin. There are ongoing efforts to sell the remaining units in Foelsche Street. There is no suggestion that the sale of further assets will place the first defendant in a position that will enable it to engage legal representation using its own funds. Apart from support from a third party no other source of funding has been identified.
In the course of his evidence Mr Glynatsis indicated that he had been making efforts in recent times to obtain legal representation for the first defendant. Although he says that there is no ready cash available to cover legal fees, he is in a position to provide security in the sum of $50,000 which, as I understand the position, will be secured by a second mortgage against the remaining interest (over and above the existing mortgage indebtedness) in the family home. The family home is not an asset of the first defendant. On the basis of the evidence before me I am satisfied that there is no other identified source of income available to the first defendant or to its directors and shareholders.
The Defence of the First Defendant
Rule 1.13 provides, insofar as is presently relevant:
“Except where otherwise provided …a corporation … shall not take a step in a proceeding except by a solicitor.”
There is no dispute that the filing of the defence on 10 December 1999 was a step taken in the proceeding by the first defendant. There is also no dispute that the step was not taken by a solicitor. Application was made to strike out the defence on behalf of several of the plaintiffs on that basis. The filing of the defence of 10 December 1999 by Mr Glynatsis was an irregularity because of the failure to comply with r 1.13. During the course of the presentation of the argument Mr. Glynatsis made application pursuant to r 2.04 for the court to dispense with the obligation of the first defendant to comply with r 1.13.
In considering whether to dispense with compliance with r 1.13 and permit the first defendant to take the step in the proceeding of filing a defence other than by a solicitor, it is necessary to consider whether the applicant has shown “sufficient reason” for concluding that to do so would be in accordance with the interests of justice: Alice Springs Abattoirs v Northern Territory of Australia (1996) 111 NTR 9. As was pointed out in Bay Marine Pty Ltd v Clayton Country Properties Pty Ltd (1986) NSWLR 104 (by Kirby P at 108-9) the Rules of Court are designed, “not as an end in themselves but as a means to the end of the attainment of justice”. The requirement that a step in proceedings be taken by a solicitor may be dispensed with if the circumstances so require.
In the present case, if the first defendant is not permitted to file its defence “except by a solicitor”, it will be left with no defence on the record and will be vulnerable to the applications for judgement in default of defence. It will lose its opportunity to have its opposition to the case of the plaintiffs on the issue of liability considered.
The Application for Mr Glynatsis to Appear
The normal requirement of the courts is that bodies corporate do not appear by their directors but only by solicitors or counsel: Arbuthnot Leasing International Ltd v Havelet Leasing Limited (1991) 1 All ER 591 at 598; Bay Marine Pty Ltd v Clayton Country Properties Pty Ltd (1986) 8 NSWLR 104 at 105.
In Alice Springs Abattoirs v Northern Territory of Australia (supra at 11) Kearney J said:
“I should say that I consider that any court, in exercising its inherent power to control its own proceedings, may allow itself to be addressed by any one it considers a proper person to be permitted audience in the circumstances; this includes hearing a lay person on behalf of a corporation, though such person generally should be a director, officer or regular employee of the corporation - see Charles P. Kinnell & Co. Ltd v Harding, Wace & CoLtd [1918] 1 KB 405 at 413 - and the matter in issue should be of such a nature that the court does not consider it requires the assistance of a legal practitioner in order to resolve it.”
The difficulties that surround the appearance before the courts by persons who are not admitted to practice have been discussed in many cases. In Scotts Head Developments Pty Ltd & Anor. v Pallisar Pty Ltd & Ors (unreported NSWCA 6 September 1994) Mahoney AP said:
“The rule of practice which the court has adopted whereby appearance is limited to persons admitted to practice before the court is not based on technicality. It has long been regarded as based on considerations central to the proper administration of justice and the protection of the parties in the litigation. First, the court has emphasised the importance for, the administration of justice, of the fact that those permitted to appear before it owe a responsibility to the court to ensure that the court is properly informed and not mislead … .
Second the court has regard to the possibility of unqualified or untrained advocates interfering with the course of a proceeding before the court and causing loss to the parties involved … . Experience has shown that a proceeding conducted by a person unskilled in advocacy tends to last longer and to cost more. In determining whether to allow such an advocate to appear, the court must have regard not merely to the position of the party for whom he seeks to appear, but also to that of the other party. The interest of the defendant in having the proceeding dealt with without unnecessary delay and cost is one which, in my opinion, is to be borne in mind.
Third, there remains the public interest in the effective, efficient and timeous disposal of litigation. The administration of justice requires that full assistance be available to the court in determining the issues of fact and law that come before it. The isolation of issues and the presentation of the consideration which support one answer rather than another are things best done by a person experienced in such matters. Where one party is represented by an advocate less than appropriately skilled, the duty of the court to act with fairness and impartiality between the parties is more difficult and may in some cases be compromised. The court cannot adopt the role of advocate for one party or the other. Ordinarily it cannot undertake investigation of matters beyond the evidence formally before it.”
It is necessary to consider whether Mr Glynatsis is authorised to appear on behalf of the first defendant and then whether he should be allowed to do so. The affidavit that he filed makes it clear that he does have full authority from the company to appear.
The evidence of Mr Glynatsis is that in December 1999 he approached four firms of solicitors in order to obtain legal assistance for the first defendant. In each case he indicated that he could not provide payment on account of fees but that he could provide security by way of second mortgage in respect of the fees of the solicitors. Each of the solicitors approached declined to accept the brief. Perhaps this was not surprising, given that the solicitors concerned had previously acted for the first defendant and had experienced difficulties and delays in recovering fees. He has also approached the Northern Territory Legal Aid Commission without success. In addition Mr Glynatsis approached “just about every bank” seeking additional funding for the first defendant but was advised that such funding was not available in the circumstances.
The hearing was adjourned from December 1999 to January 2000 to enable Mr Glynatsis to approach other firms of solicitors. He has done this and has not been successful in obtaining legal assistance for the first defendant. He wrote to 25 firms of solicitors in Darwin without receiving any positive response.
In all of the circumstances I conclude that the first defendant has made reasonable efforts to obtain legal representation for the purposes of the proceedings which are to commence on 10 January 2000. The effect of the history of this matter is that the first defendant cannot procure professional representation for the purposes of these proceedings.
Further, in the absence of a defence or an appearance on behalf of the first defendant it would be open to the plaintiffs, or any of them, to seek to obtain interlocutory judgment against the first defendant for damages to be assessed. The denial of the application would operate to erect a barrier to the first defendant having the opportunity to present its case on its merits.
I have a particular concern that any permission to allow Mr Glynatsis, a non-qualified person, to appear in a matter of this kind, which is complex, will be to deprive the Court of assistance in respect of matters of law. It may also have an impact upon the ability of the Court to properly assess matters of fact. As was observed in Molnar Engineering Pty Ltd v Burns (1984) 3 FCR 68 at 74 such a situation is likely to operate to the detriment of the company appearing without legal representation although such a consequence is, in a sense, of the company’s making. However, given that a refusal to grant leave would place the company in a position in which it would be unable to continue to participate in the proceedings, this aspect is of little or no weight.
Notwithstanding the uncertainty surrounding the financial position of the first defendant; the many concerns which arise from the appearance before the courts by persons who are not admitted to practice; and the detriment which may be suffered by the other parties to the proceedings; it seems to me that this is a case in which there is sufficient reason to permit the first defendant to be represented by its director, Mr Glynatsis.
I make the following orders:
(1)In relation to the defence filed and served by the first defendant I dispense with the need for compliance with the requirement that the first defendant file and deliver its defence by a solicitor;
(2)I grant leave to the first defendant to present its defence in these proceedings by Mr Glynatsis and otherwise than by a solicitor.
(3)I dismiss the applications for orders that the defence of the first defendant be struck out and that judgment be entered against the first defendant.

I reserve the question of costs.

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