Bernard v Valassis [2002] FCA 308

FEDERAL COURT OF AUSTRALIA

Bernard v Valassis [2002] FCA 308 ERIC BERNARD v DENNIS VALASSIS N 7292 OF 2001 EMMETT J 12 MARCH 2002 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 7292 OF 2001

BETWEEN: ERIC BERNARD

APPLICANT

AND: DENNIS VALASSIS

RESPONDENT

JUDGE: EMMETT J

DATE OF ORDER: 12 MARCH 2002

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. the debtor pay the petitioner's costs of the petition up to and including 3 September 2001. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 7292 OF 2001

BETWEEN: ERIC BERNARD

APPLICANT

AND: DENNIS VALASSIS

RESPONDENT

JUDGE: EMMETT J

DATE: 12 MARCH 2002

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 I have before me an application by a petitioning creditor for the costs of a creditor's petition that was dismissed on 3 September 2001. It appears that there has been some dispute between the petitioning creditor and the debtor in the Residential Tenancy Tribunal of New South Wales. The details of that dispute are not entirely clear to me, but those details are not presently relevant. It appears that, as a result of that proceeding, a judgment for costs was obtained by the petitioning creditor against the debtor. That judgment was not paid, and formed the foundation of a bankruptcy notice ("the Bankruptcy Notice") issued at the behest of the petitioning creditor. 2 The debtor applied to the Court to set aside the Bankruptcy Notice, and the matter came before Beaumont J on 10 April 2001. On that day His Honour ordered that, upon the debtor, on or before 19 April 2001, paying to the solicitors for the petitioning creditor the sum of $7,519.95, the time for compliance with the Bankruptcy Notice be extended up to and including 12 June 2001. The sum of $7519.95 was to be held by the solicitors for the petitioning creditor in a trust account to abide the further order of the Court. Beaumont J stood the matter over for further mention on 12 June 2001, but reserved liberty to apply. However, pursuant to that liberty, on 19 April 2001, the matter was again before his Honour when the order of 10 April 2001 was varied by substituting 26 April 2001 for the date of 19 April 2001. 3 His Honour observed that the evidence before him suggested that the debtor owned real estate having a value in excess of $3 million, on which there were mortgages securing indebtedness in the sum of $750,000, thereby indicating a surplus in the order of $2.5 million. His Honour concluded that the debtor, on the evidence before him, was "not only solvent, but clearly solvent". His Honour observed, however, that the debtor had made no attempt to raise the small amount claimed in the Bankruptcy Notice. His Honour indicated that he was prepared to grant a further extension of time on the conditions just stated, but that time would be of the essence and that he did not propose to entertain any further extension. Accordingly, his Honour was prepared to extend the time for compliance with the condition until 26 April 2001. 4 When the matter came before His Honour on 12 June 2001 there was no appearance for the debtor. Counsel for the petitioner indicated that there had been compliance with the order and that the money had been paid into the trust account. In the absence of any appearance for the debtor His Honour dismissed the application to set aside the Bankruptcy Notice, with costs. 5 There is some dispute as to what happened on 12 June 2001 outside Court. In an affidavit sworn on 15 January 2002 Ms Margaret Ellen Olsen, a solicitor employed by the solicitors for the petitioner, said that on 12 June 2002 she received a telephone call from the debtor and a conversation ensued as follows: Debtor: "I am filing a motion to stay the judgment in the Local Court. You shouldn't have applied for judgment. Why did you apply for judgment?" Ms Olsen: "Dennis, you owe my client a lot of money and you never pay. Of course I applied for a judgment. It's the only way to make you pay the costs orders. By the way, why didn't you show up in court today?" Debtor: "What was in court? I didn't know any matter was in court." Ms Olsen: "The bankruptcy matter was before Beaumont J. Your application has been dismissed with costs. Now, are you going to let me access the funds in my trust account? I need your written authority to take the money, or do I have to bankrupt you?" Debtor: "I am not responsible for the costs. I am not agreeing to you having my money." Ms Olsen: "Fine. I'll get instructions to issue a creditor's petition." 6 Ms Olsen annexed to her affidavit a note, which she said she made at the time, in the following terms: "T/I Dennis Says he is obtaining a stay on Local Court judgment. We shouldn't have applied for judgment. Told him he missed hearing today. He said he didn't know about it. Asked if he had authorised me to use funds. Said not responsible. Won't pay costs of bankruptcy proceedings either." 7 The debtor filed no evidence in response to Ms Olsen's affidavit, but in the course of the hearing today, he said that he disputed that conversation. He then gave oral evidence in which he said that before 9am on 12 June 2001 he telephoned Ms Olsen, told her that he was very sick and that he would not be able to attend Court that day. He asked her to inform the Court and to ask the Court for an adjournment. He said that Ms Olsen responded saying, "I am not your solicitor. If you want to say anything you should speak to your solicitor." The debtor said that he subsequently spoke to Ms Olsen again and asked her what had happened. She said again that she was not his solicitor and he should speak to his own solicitor. There was no cross-examination of either party in relation to the disputed discussion, and it is difficult therefore to make a judgment as to what happened on that day. However, there was subsequent correspondence that may throw some light on what happened, which I shall mention shortly. 8 On 18 June 2002, a creditors' petition was filed, based on the act of bankruptcy committed by reason of the failure to comply with the Bankruptcy Notice. The debtor filed notice of intention to oppose the petition. The grounds were as follows: "(1) I have assets of $2,000,000.