IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE es AUSTRALIAN CAPITAL TERRITORY No. 3756 of 1984 RE: RONALD DAVID GREENHILL and GAY GRAIG GREENHILL EX PARTE: RONALD MARTIN BERNEY and ° PETER JONATHAN LANDER trading as DONALD, BERNEY & LANDER ORDER Judge making order: Beaumont, J. Date order made: 18 October 1984. Where made: Sydney. THE COURT ORDERS THAT: 1. I dismiss the application to set aside the bankruptcy notice served herein. 2. I suspend the operation of order 1 until 4 p.m. on 5 November 1984. 3. I reserve liberty to the debtors to apply, on or before 4 p.m. on 1 November 1984, on giving 48 hours' notice to the judgment creditors in that behalf, to discharge or vary-order 1. 4. I extend time for compliance with the bankruptcy notice up to and including 5 November 1984. 5. I order that the debtors pay one-half of the costs of the judgment creditors of this application, including reserved costs. ' IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE ee ee AUSTRALIAN CAPITAL TERRITORY No. 3756 of 1984 RE: RONALD DAVID GREENHILL and GAY GRAIG GREENHILL EX PARTE: RONALD MARTIN BERNEY and PETER JONATHAN LANDER trading as DONALD, BERNEY & LANDER CORAM: Beaumont, J. DATED: 18 October 1984. REASONS FOR JUDGMENT This is an application by two debtors to set aside a bankruptcy notice served on them. The notice is based on a default judgment obtained in the Hornsby Court of Petty Sessions on 1 August 1983 in the sum of $1,224.50. The judgment creditors are solicitors and the judgment arose out of a claim for legal costs and disbursements, including counsel's fees, incurred in litigation conducted on behalf of the debtors. Last month, the debtors made application to the Hornsby Court of Petty Sessions to set aside its default judgment. That application is returnable on 26 October 1984. In this Court, the debtors also make an application, un the alternative, that time for compliance with the bankruptcy notice be extended until the Court of Petty Sessions deals with the matter. The application to this Court was supported by a short affidavit from the first debtor in which he foreshadowed the application to set aside the judgment "on the grounds that there is complete failure of consideration for the professional services alleged to have been rendered on the basis of breach of contract by the plaintiff (sic)". The first debtor further explained the nature of his claim un an affidavit sworn on 27 September 1984 as follows: "Ss, In about June 1984, ... Ronald Martin Berney of the firm of solicitors Donald, Berney & Lander informed ny wife's cousin, Jan Rasdall, of details of our financial affairs, transactions and dealings. This information was passed onto my wife's family and our friends and associates causing extreme embarrassment and lowering our esteem « socially, professionally ani in business in the eyes of all who became aware and there existed the potential that if the information was given to my business associates that my business would be substantially affected. 6. Prior to the issue of the Plaint and Default Summons in the Court of Petty Sessions at Hornsby, wherein judgment was obtained on 1 August 1983, I forwarded a cheque to the solicitors in payment of the account. At the same time I was transferring ny bank account and as a result when the cheque was presented payment was not made. At this time I decided not to write another cheque or make payment as, without the consent of my wife or I, Mr. Berney engaged the services of a barrister and I felt that these fees should not have to be paid. Mr. Berney iid not inform my wife or I that he would be hiring a barrister although he did state words to the effect 'I will ask a barrister friend of mine about this matter'. I was surprised to find a barrister at the court in connection with our affairs and it was clearly too late to tell him that I did not require his services. 7. When the Plaint and Default Summons had been served on my wife and I, I telephoned Mr. Berney and said to him words to the effect 'I do not agree with paying this account. I did not ask for a barrister. You did not ask me if I would agree to the hiring of a barrister in this matter.' Mr. Berney said words to the effect 'I will be proceeding to execute judgment against you'. Notwithstanding Mr. Berney's statement I believed that he would probably not proceed with the execution of judgment in the circumstances. 8. Judgment was obtained on 1 August 1983. 9. Having obtained new solicitors I presented my financial affairs to my new solicitor who recommended to me to pay the judgment debt off by instalments of $100.00 per month. I was reluctant to do so. I believe that my new solicitor had sympathetic comradeship towards what might be described as his fellow solicitor. Accordingly instalment documents were prepared and filed in the court. I subsequently decided that I should not pay the account and I did not make any instalments under the 4. instalment application." However, during the cross—-examination of the first debtor, further facts emerged which cast real doubt upon the claims he now seeks to make. In the first place, on 6 May 1983, the second debtor, the wife of the first debtor, drew a cheque on the account of their family company, Kamella Pty. Limited, in favour of the first judgment creditor in the sum of $1,061.50, being the costs and disbursements in question. The drawing of the cheque, coupled with the subsequent application to pay the judgment debt by instalments, is the strongest evidence of an admission of the debt. In any event, the debtors have failed, on the material before me, to provide any satisfactory defence to the claim for counsel's fees. The first judgment creditor wrote to the first debtor by letter dated 22 September 1982 informing them that a conference had been arranged with "(y)our barrister". The first debtor now denies receiving the letter. But he concedes that he and his wife used the services of the barrister in the litigation which was ultimately compromised. The suggestion, it would seem, is that the counsel concerned, who was not known to the debtors, was expected to perform his services on an honorary basis. His fees were $286.50. In my opinion, the debtors have failed to make out even an arguable case on this branch of their submissions. At the very least, they ratified the retainer of counsel by adopting the use of his services. 5. This leaves the claim for breach of confidence, which is brought forward, at this late stage, as a claim for damages by way of cross-claim in answer to the claim for costs and disbursements. In his oral evidence, the first debtor said that he overheard a telephone conversation between the second debtor and Mrs. Rasdall. (The second debtor was not available to give evidence because of the illness of one of her children.) He alleges that, in the conversation, Mrs. Rasdall said that, if the fees owed to the judgment creditors were not paid, a bankruptcy notice would be issued and also that the first judgment creditor had told her (Mrs. Rasdall) that the first debtor "owed money everywhere. Tooth & Company were one of those people cee es Both the first judgment creditor and Mrs. Rasdall swore affidavits which were real in the proceeiings and they were cross-examined on their affidavits. The first judgment creditor gave his recollection of his conversation with Mrs. Rasdall as follows: "Jan, some time ago you referred Mr. and Mrs. Greenhill to me. I've done certain legal work for them, but they have refused to pay our fees. JI would be reluctant to take bankruptcy proceedings against your cousin and her husband, but . . I will have no alternative but to take ve those steps if they don't pay very soon. Could you have a word with your cousin to find out if they're going to pay. I've issued a summons against them, but 6. Ron Greenhill has been very hard to find. I believe that he's now working for Tooth's in Wollongong. I don't want you to prejudice your friendship with your cousin and don't want to involve you in this if you'd rather not talk about 1% to your cousin, but I thought they might listen to you because I would rather prefer not to have to commence bankruptcy proceedings against them." This version, which was not seriously challenged in eross-examination, was substantially confirmed by Mrs. Rasdall in her affidavit and in cross-examination. In her oral evidence, Mrs. Rasdall said that her conversation with the second debtor took place as follows: "I rang her. I said to her that I would like to have a private conversation with her. I believed that Ron would be at work because, being a weekend, I thought that that is a good time for the liquor trade, and it would be a time to have a private conversation with her. As it turned out he was at home which - that is just one of those things. I was concerned for her, that if bankruptcy proceedings were going to take place then I would like to let her know about it and give her an opportunity of paying an outstanding account, because it all seemed so stupid. I said this to her, that I had spoken to Ron Berney, that there seemed to be an account that had not been paid for; that he would seem to have no other alternative than to take out bankruptcy charges. He said that he had sent out letters and summonses. Gay, as I remember, called out: 'Haven't you paid Ron Berney's account yet?'. Ron Greenhill asked whom was on the telephone. Gay said, 'It is Jan'. Oh, and he said something like what does she want to know that for. Gay repeated what I had said, that Ron Berney had told me that the account had not been paid, that he had sent summonses out and that he would have to take bankruptcy proceedings against them if they did not pay that account." So far as the evidence of Mrs. Rasdall and the first debtor is in conflict, I accept Mrs. Rasdall's evidence. Whilst her recollection of the events in question was good, the first debtor faces the difficulty that he was overhearing the conversation in circumstances in which he may well have allowed himself to become upset and therefore unreliable in terms of retrieval of what happened. I reject his version of the conversation. It follows that the case for the first debtor is that the first judgment creditor passed on to Mrs. Rasdall, the first debtor's referee, the wholly accurate information that the solicitors' costs and disbursements had not been paid. In the circumstances, even assuming that a breach of confidence is thereby established, it is, at best, a technical breach. A serious question thus arises whether the first debtor is entitled to more than nominal damages. Although exemplary damages are claimed, it is at least doubtful whether anything more than aggravated compensatory damages are available in this State (see Fleming, Law of Torts, 6th Ei. at p.564; Luntz, Assessment of Damages, 2nd Ed. at p.65; cf. Andrews v. John Fairfax & Sons Limited [1980] 2 N.S.W.L.R. 225). Even if the first debtor were to 8. claim equitable damages for an alleged breach of confidence, it would seem that he would have to prove actual loss and no such loss is established here (see Meagher, Gummow and Lehane, Equity - Doctrines and Ramedies, 2nd Ed. at p.841; Cordery's Law Relating to Solicitors, 7th Ed. at p.169; Gurry, Breach of Confidence at pp.442-3). In the absence of any evidence of damage, no foundation exists for a counter-claim of the kind now asserted by the first debtor. In the result, even if the Court were to go behind the judgment, no basis for setting it aside has been demonstratei in this application. It also appears, therefore, that the debtors have little, if any, prospect of setting aside the judgment in the Court of Petty Sessions since that court applies similar principles to those applied here in an application to set aside a judgment (see Jackson and Byron, Courts of Petty Sessions (Civil Claims) Practice at pp.71l et seq.). Nonetheless, an order dismissing an application to set aside a default judgment does not constitute a bar to a subsequent application of the same character (see Attwood v. Chichester [1878] 3 Q.B.D. 722; Hall v. The Nominal Defendant (1966) 117 C.L.R. 423 at p-440). Thus, it is possible that the debtors could adduce further evidence, not presented to this Court, upon which the Court of Petty Sessions could rely to set aside the default judgment. For instance, the second debtor may then be available to give evidence. Although present indications 9. are that the application to the Court of Petty Sessions will fail, the question arises whether the debtors should have an opportunity to pursue it. In Re Sterling; Ex parte Esanda Limited (1980) 30 A.L.R. 77, Lockhart, J., in dealing with an application of the present kind, said (at p.84) that, although each case must depend upon its own facts, there may be cases where the application to set aside a bankruptcy notice should be adjourned pending the outcome of an application by the debtor to a court of competent jurisdiction to set aside the judgment on which the bankruptcy notice is founded. In my opinion, where the judgment has been obtained by default or where, for other reasons, there has been no real hearing on the merits (see Wren v. Mahoney (1972) 126 C.L.R. 212 at p.225), then, prima facie, the application to set aside the bankruptcy notice should stand over until the application to set aside the judgment has been disposed of. The reason for this approach is that this is a court of insolvency which 1s not an appropriate forum for the resolution of civil disputes, and in particular, the recovery of debts, except where the insolvency of the debtor is apprehended. In the latter event, this Court will readily intervene for the protection of the general body of creditors. But unless the debtor's solvency is not questioned, the primary forum for the resolution of the dispute between the parties should be the Court of Petty Sessions. Although there was some room 10. for doubting the debtors' solvency, I was informed that they have paid the amount of the judgment debt into the trust account of their solicitors as an indication of their liquidity. In all the circumstances, I am not persuaded that any inference of insolvency or even apprehended insolvency should be drawn. In the result, whilst, on the evidence presently available, the debtors' application to set aside the bankruptcy notice cannot succeed, I think that the debtors should be given the opportunity to pursue their application in the Court of Petty Sessions on 26 October 1984. It is unlikely that they will wish to do this in the light of the findings I have made, so that, 1n an effort to achieve some finality in the Litigation, I make the following orders: 1. I dismiss the application to set aside the bankruptcy notice served herein. 2. I suspend the operation of order 1 until 4 p.m. on 5 November 1984. 3. I reserve liberty to the debtors to apply, on or before 4 p.m. on 1 November 1984, on giving 48 hours' notice to the judgment creditors in that behalf, to discharge or vary order 1. Jat. 4. I extend time for compliance with the bankruptcy notice up to and including 5 November 1984. 5. I order that the debtors pay one-half of the costs of the judgment creditors of this application, including reserved costs. I have made orders 1, 2 and 3 to cater for the remote possibility that the Court of Petty Sessions sets aside its judgment on or shortly after 26 October 1984. I have deprived the judgment creditors of one-half of their costs because of their unreasonable opposition to the debtors! application made at the commencement of the hearing before me that the matter stand over until shortly after 26 October 1984 when the appropriate forum, the Court of Petty Sessions, could deal with the matter. Viewing the dispute as I do, as one of debt collection rather than apprehended insolvency, it is appropriate that the judgment creditors, notwithstanding some success in the application, should not receive all their costs. At the conclusion of argument in the application, I adjourned the matter to 25 October 1984, reserved my decision and extended time for compliance with the bankruptcy notice up to and including 25 October 1984. I have now further extended that time up to and including 5 November 1984. It is now unnecessary that any further 12. hearing take place on 25 October 1984. I therefore vacate that hearing date. i cert'fy (iat this and the // preceding PEgGes ere a true copy of the reasons for jusgment herein of Tro Honourable Mr Justice peu Cott EES SoZ 7 Kesociate Dated "© ie fet