FEDERAL COURT OF AUSTRALIA Sogelease Australia Ltd v Griffin, in the matter of D J Griffin [2003] FCA 454 BANKRUPTCY – creditors' petition – notice stating grounds of opposition to the petition – application to file notice of opposition at the hearing 'with the Court's consent' – application for an adjournment to enable evidence to be filed in support of the grounds of opposition – where debt based on default judgment in Supreme Court of New South Wales – where grounds of opposition assert that the acts of the respondent debtor were acts committed under duress by parties other than applicant creditors – where defence of duress not raised in Supreme Court due to Legal Profession Act 1987 (NSW), s 198J – where respondent debtor seeks certificate under Evidence Act 1995 (Cth), s 128 in respect of evidence to be filed Bankruptcy Act 1966 (Cth) ss 50, 52, 309 Evidence Act 1995 (Cth) s 128 Federal Court Rules O 1 r 8, O 9 r 7, O 77 r 11 Evidence Act 1995 (NSW) s 128 Legal Profession Act 1987 (NSW) s 198J Sogelease Australia Ltd v Griffin, in the matter of D J Griffin [2003] FCA 453 cited SOGELEASE AUSTRALIA LTD & ANOR v DAVID JAMES GRIFFIN, IN THE MATTER OF D J GRIFFIN N 7101 OF 2003 EMMETT J 1 MAY 2003 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N7101 OF 2003 BETWEEN: SOGELEASE AUSTRALIA LIMITED ACN 002 093 030 FIRST APPLICANT CREDITOR SG AUSTRALIA LIMITED ACN 002 093 021 SECOND APPLICANT CREDITOR AND: DAVID JAMES GRIFFIN RESPONDENT DEBTOR JUDGE: EMMETT J DATE OF ORDER: 1 MAY 2003 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. the hearing of the petition be adjourned to 2 May 2003 at 3.00 pm. 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 N7101 OF 2003 BETWEEN: SOGELEASE AUSTRALIA LIMITED ACN 002 093 030 FIRST APPLICANT CREDITOR SG AUSTRALIA LIMITED ACN 002 093 021 SECOND APPLICANT CREDITOR AND: DAVID JAMES GRIFFIN RESPONDENT DEBTOR JUDGE: EMMETT J DATE: 1 MAY 2003 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This morning I made a declaration under O 9 r 7 of the Federal Court Rules that the creditor's petition filed in this proceeding has not been duly served upon the respondent debtor ('the Debtor'): see Sogelease Australia Ltd v Griffin, in the matter of D J Griffin [2003] FCA 453. However, in the course of giving my reasons for making that declaration, I indicated that I would be disposed to make an order under O 1 r 8 waiving compliance with the requirement of O 7 r 1 for personal service of the petition on the Debtor or, alternatively, an order under s 309 of the Bankruptcy Act 1966 (Cth) ('the Act') dispensing with personal service. 2 Following the making of a declaration for the reasons then given, an unconditional appearance was filed in court on behalf of the Debtor. An application was then made on behalf of the Debtor to waive non-compliance with O 77 r 11. That rule provides that a person who intends to oppose a petition must, at least three days before the date fixed for the hearing of the petition, or, with the Court's consent, at the hearing, file and serve a notice stating the grounds of opposition to the petition. 3 The application made ore tenus was, in effect, for the Court's consent since the petition was fixed for hearing today following successive adjournments yesterday and the day before. The grounds as set out in the proposed notice of intention to oppose the petition are, in short, that s 52(1)(c) of the Act would not be satisfied because the judgment debt, upon which the bankruptcy notice was founded, is not still owing. 4 The judgment debt arises out of conduct on the part of the Debtor involving alleged misappropriation of funds of the applicant creditors (together 'the Creditors'). Briefly, the allegation is that cheques of the Creditors were falsified by the Debtor and paid into various accounts in the name of the Debtor's wife. The notice of intention to oppose the petition asserts that the acts of the Debtor, in respect of which default judgment was entered, were the subject of operable and continuing duress in the nature of illegitimate pressure and coercion leaving the Debtor with no choice but to act whereby the acts in question were not his in law and by reason of which he accordingly has no liability and no debt is owing. 5 Senior counsel for the Debtor, in oral submissions, indicated that he desired the opportunity to adduce evidence as to the alleged pressure and coercion. The names of the persons alleged to have brought the pressure and coercion to bear were not disclosed. However, senior counsel indicated that they were not the Creditors or persons connected with the Creditors. 6 Senior counsel for the Debtor indicated that, while the judgment debt upon which the bankruptcy notice is based was a default judgment unopposed by the Debtor, the reason for the lack of opposition were constraints imposed by the Legal Profession Act 1987 (NSW). The provisions of the Legal Profession Act are relied upon by way of explanation for the entry of judgment by default without opposition from the Debtor. Section 198J of the Legal Profession Act relevantly provides that a solicitor or barrister must not provide legal services on a defence of a claim for damages unless the solicitor or barrister reasonably believes that the defence has reasonable prospects of success. 7 In support of the application for an adjournment, and for consent to file the notice stating the grounds of opposition, the Debtor relied upon an affidavit sworn today by his solicitor, Mr J F S North. Mr North says that he gave preliminary consideration as to whether there was a reasonable prospect of success in relation to a defence of duress prior to the entry of default judgment. Mr North says that no issue relating to the constitutional validity of the provisions of the Legal Profession Act were contemplated or considered by him prior to 30 April 2003. In essence, Mr North says that a constitutional issue concerning the validity of the Legal Profession Act was raised for the first time on 30 April 2003. Mr North therefore made arrangements to see the Debtor prior to the hearing today and received instructions, after I gave my reasons earlier today, to file the notice of intention to oppose the petition. 8 Mr North says that he wishes to file an affidavit seeking a certificate under s 128 of both the Evidence Act 1995 (Cth) and the Evidence Act 1995 (NSW) in relation to the evidence intended to be relied upon in establishing that there is no debt owing by the Debtor to the Creditors. Mr North says that he wishes to exhibit, as a confidential exhibit, the proposed evidence of the Debtor. He says that because of the number of transactions and entities involved, as identified in the statement of claim filed by the Creditors in the Equity Division proceedings in respect of which judgment was entered, he would not be able to complete that material before 9 May 2003. 9 Even now, the Debtor is not prepared, it seems, to file evidence in support of his contention that the conduct was the result of duress in the nature of illegitimate pressure and coercion unless he receives a certificate under s 128 of the Evidence Act. Section 128(1) of the Evidence Act provides that that section applies if a witness objects to giving particular evidence on the ground that the evidence may tend to prove that the witness has committed an offence or is liable to a civil penalty. Section 128(2) provides that, subject to s 128(5), if the court finds that there are reasonable grounds for the objection, the court must not require the witness to give that particular evidence. The court must also inform the witness: · that he or she need not give the evidence; · that, if the evidence is given, the court will give a certificate under the section; and · of the effect of such a certificate. 10 Section 128(5) provides that, if the court is satisfied that the evidence may tend to prove that the witness has committed an offence or is liable to a civil penalty, that the evidence does not tend to prove that the witness has committed an offence against, or is liable to civil penalty under, a law of a foreign country, and that the interests of justice require the witness to give the evidence, the court may require the witness to give the evidence. If the witness gives the evidence, either voluntarily or because the court requires the witness to give the evidence, the witness is to be given, by the operation of s 128(3) or s 128(6), a certificate under the section in respect of the evidence. Under s 128(7), in any proceeding in an Australian court, evidence given by a person in respect of which a certificate under s 128 has been given cannot be used against that person, except in relation to a criminal proceeding in respect of the falsity of the evidence. 11 I consider that there is a real doubt as to whether s 128 applies in these circumstances. I express no view about the matter other than to indicate that I have reservations as to whether the section applies in circumstances where a party, in effect, seeks a certificate as a condition of giving evidence in support of that party's own case. 12 There is no material before me at the moment that indicates that there is any substance in the assertion that the conduct of the Debtor that gave rise to any liability was the result of the duress in the nature of illegitimate pressure and coercion. Further, for the purposes of the application, I have to assume that those representing the Debtor do not believe that the allegation of duress in the nature of illegitimate pressure and coercion has a reasonable prospect of success. Senior counsel says, however, that the defence is, nevertheless, at least arguable. I have to consider the application for consent to file the notice of grounds of opposition, and the necessary adjournment that that would entail, on the basis of the utility of such a course. 13 In the circumstances, I indicated to counsel for the parties that I might be disposed to adjourn the hearing of the petition for seven days to enable the Debtor to file the evidence foreshadowed by Mr North but that I was only disposed to do so on terms that the Debtor consent to an order under s 50 of the Act. Section 50(1) provides that, at any time after a bankruptcy notice is issued, but before the debtor becomes a bankrupt, the Court may direct the Official Trustee, or a specified registered trustee, to take control of the debtor's property and make any other orders in relation to the property. However, under s 50(1A), the Court may give a direction or make an order only if, inter alia, the Court is satisfied that it is in the interests of the creditors to do so. 14 At present, I have no information before me concerning the estate of the Debtor. I have no way of being satisfied, one way or the other, as to whether it is in the interests of the Creditors, or significantly contrary to the interests of the Debtor, to make an order under s 50. The Creditors have not applied to the Court to make such a direction, although submissions were made on their behalf that, if such a direction were made, it should be on particular terms. Senior counsel for the Debtor submitted that, if such a term were imposed, it should be subject to the same exceptions as are contained in orders presently in force in the Equity Division of the Supreme Court, restraining dealings by the Debtor with his property. 15 I would draw the inference that, if I were to adjourn the matter for the purposes of evidence being filed as foreshadowed by Mr North, funds would be expended in legal expenses. Having regard to the acknowledged position that the issue to which the legal expenses would be directed does not have reasonable prospects of success, I am not disposed to make any exception in relation to any condition that I would impose as a term of the adjournment. 16 The filing of notice of grounds of opposition, of itself, of course, leads nowhere unless there is evidence in support of the grounds of opposition. Since I do not propose to grant the adjournment sought, the filing of the notice of grounds of opposition would have no utility. In the circumstances, I decline to give consent. It follows that the hearing of the petition should proceed as and when it is convenient to senior counsel for the Creditors. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 14 May 2003 Counsel for the Applicant Creditors: G C Lindsay SC with P A Fury Solicitor for the Applicant Creditors: Piper Alderman Counsel for the Respondent Debtor: A W Street SC with G D Wendler Solicitor for the Respondent Debtor: North & Badgery Date of Hearing: 1 May 2003 Date of Judgment: 1 May 2003