Laginha v Williams [2000] FCA 249 (2 March 2000)

Last Updated: 9 March 2000

FEDERAL COURT OF AUSTRALIA

Laginha v Williams [2000] FCA 249

EDUARDO LAGINHA v TREVOR WILLIAMS

N 8270 of 1999

LINDGREN J

2 MARCH 2000

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 8270 of 1999

BETWEEN:	EDUARDO LAGINHA APPLICANT
AND:	TREVOR WILLIAMS RESPONDENT
JUDGE:	LINDGREN J
DATE OF ORDER:	2 MARCH 2000
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The application for an adjournment of the hearing be refused.

2. The application be dismissed.

3. The respondent creditor's costs of the present application be treated as if they were part of his costs as petitioning creditor for the purpose of s 109(1)(a) of the Bankruptcy Act 1966.

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 8270 of 1999

BETWEEN:	EDUARDO LAGINHA APPLICANT
AND:	TREVOR WILLIAMS RESPONDENT

JUDGE:	LINDGREN J
DATE:	2 MARCH 2000
PLACE:	SYDNEY

REASONS FOR JUDGMENT

(ex tempore)

Introduction

1 The applicant ("Mr Laginha") applies for an order under s 153B of the Bankruptcy Act 1966 that a sequestration order made against him on 21 September 1999 be annulled. On 15 February last I fixed the application for hearing today. Mr Laginha has appeared in person, Mr Francis, solicitor, has appeared for the respondent petitioning creditor and Ms Banfield of Sally Nash & Co has appeared for the Official Trustee in Bankruptcy who is the trustee in bankruptcy of Mr Laginha's bankrupt estate.

Pro bono assistance

2 Mr Laginha, who is a solicitor, has asked me to make an order referring the matter for pro bono assistance under O 80 of the Court's rules. The only affidavit which he has filed is a brief one dated 28 October 1999 which conveys the idea that the issue sought to be raised in the proceeding is that the sequestration order was made by Registrar Tesoriero in the absence of Mr Laginha in circumstances in which there had been prior correspondence between him and the solicitors for the creditor, as a result of which, so the submission goes, Mr Laginha was entitled to assume that a sequestration order would not be made in his absence on 21 September last.

3 Order 80 subrule 1(5) makes it clear that nothing in O 80 requires the Court to make a referral or even require it to consider a litigant's case for referral under O 80. Notwithstanding this, I have allowed Mr Laginha to make submissions as to why a referral should be made. He has pointed out that although he is a solicitor his practice is in the area of criminal law with some elements of family law and that he is inexperienced in bankruptcy law and practice. I accept what he says. He submits that he should therefore be treated as a litigant in person for the purpose of O 80. Although I do not entirely agree, I do accept that inexperience in bankruptcy law and practice means that he would be aided if he were advised or represented by a solicitor or barrister who had such experience.

4 But I do not propose to consider any further the case for referral. The case appears to involve no issue of legal difficulty or complexity on which the Court would wish to have assistance and there are no other special circumstances distinguishing the case from the many in which an unrepresented litigant would be assisted by legal aid. Indeed, in so far as Mr Laginha is a solicitor, his need for legal assistance is at least somewhat less than that of the "average" litigant in person. This is not a case in which I would wish to exercise my discretion to refer the proceeding under O 80. It would be possible to discuss at some length the background to O 80 and its purpose as that background reveals it. It would also be possible to refer to the practice of the Court in so far as judges' decisions to refer under the Order reveal that practice. But to do all of this is to do the very thing that subrule 1(5) says is not required.

Application for adjournment

5 I move on to consider the application for adjournment. Mr Laginha says that the shortness of the period of adjournment from 15 February to today took him by surprise. He says that his practice as a solicitor has kept him busy during the period from then to now. I should say that on 15 February the applicant was represented by a solicitor for the occasion. Essentially he says that even in the absence of a reference under O 80, he would wish to seek legal advice from someone experienced in bankruptcy law and practice.

6 It is necessary in assessing the application for adjournment to say something about the underlying facts. The judgment debt was for $7,155 and was recovered in the Local Court of New South Wales at Sutherland on 18 May, 1999. A bankruptcy notice was served on 30 June, 1999. On 22 July, 1999 Mr Laginha wrote to the solicitors for the respondent creditor, Watkins Tapsell, acknowledging service of the bankruptcy notice and acknowledging that he was indebted in the sum mentioned. In his letter he said that in the three weeks since being served with the bankruptcy notice he had tried to borrow the full amount from family and friends without success and had applied for loans from various financial institutions also unsuccessfully. He referred to his various debts owed to other creditors and to the fact that he was paying off debts by instalments. He asked the present creditor to accept instalments of $100 per week. His letter said:

"Should you elect to proceed with the bankruptcy, I advise that I will not contest it. The result will be that I will lose my position and not be in a position to even make periodic payments."

7 The next matter to refer to is a letter dated 20 August, 1999 sent by Watkins Tapsell. It stated:

"On Tuesday, 21 September, 1999 we will ask the Court to make an order sequestrating your estate."

That letter also contained this sentence:

"As this is the first day this matter will come before the Court it will not normally be necessary for you to satisfy the Court that you can pay your debts as they fall due before the petition will be dismissed. However, we suggest you contact your own solicitor for legal advice on your position."

8 Mr Laginha states that he next sent a facsimile to Watkins Tapsell dated 7 September, 1999. A copy of that facsimile transmission is in evidence on the application for adjournment. Apparently it is in issue whether this facsimile was received by the solicitors. The facsimile stated amongst other things:

"Please note that I will be interstate for the period 10 Sept until about 12 Oct, `99 and thus not able to attend Court on 21 Sept. Would you kindly mention the matter for both of us, and obtain an adjournment date beyond the 2nd half of October."

9 On 21 September 1999, the sequestration order was made by Registrar Tesoriero in the absence of Mr Laginha as previously mentioned. On 7 October 1999, Mr Laginha wrote to Watkins Tapsell asking the date of the next court appearance. Finding out that in fact a sequestration order had been made against his estate, on 15 November 1999 Mr Laginha commenced the present proceeding for annulment. This was to come before the Court initially on 7 December 1999, but he requested a delay and in fact the matter was adjourned on 7 December 1999 to 14 December 1999. On that day, Mr Laginha appeared. By now it was known to the parties that there was an issue as to whether Mr Laginha's facsimile of 7 September 1999 had in fact been received by Watkins Tapsell.

10 On that day directions were made for the filing of affidavits including a direction that Mr Laginha file affidavits by 25 January. However, he filed no further affidavits beyond the short affidavit dated 28 October 1999 filed on 15 November 1999, the day this proceeding was commenced, to which I have referred previously. The application was stood over to 15 February 2000 when the matter came before me. On that occasion I directed Mr Laginha to file and serve any further affidavits by 22 February and the respondent and the trustee in bankruptcy to file and serve any affidavits by 29 February.

11 As well, I directed Mr Laginha to serve notice on the unsecured creditors of his application for annulment in accordance with O 77 r 43 of the Federal Court Rules and fixed the matter for hearing today. Mr Laginha has not filed any further affidavits, which, of course, he is not obliged to do if he does not wish to rely on them, but neither has he served notice on creditors as required by O 77 r 43.

12 All in all, I accept the submission of the solicitors for the petitioning creditor and the Official Trustee, who both oppose the application for adjournment, that enough indulgence has been already allowed to Mr Laginha in this proceeding.

13 It is a serious matter to proceed to a hearing when a litigant says that he or she does not feel able to handle a matter adequately but one needs to balance the interest of the other parties. A report of the Official Trustee to the Court reveals that the amounts owed to Mr Laginha's creditors amount to some $26,000 against assets of the order of $374.65. Accordingly, to run up further costs in the matter with yet another appearance is not something for which Mr Laginha is in a position to compensate.

14 I think the proper exercise of discretion is to decline the application for adjournment and I do so.

The substantive application

15 Section 153B of the Bankruptcy Act 1966 (Cth) provides as follows:

"If the court is satisfied that a sequestration order ought not to have been made or, in the case of a debtor's petition, that the petition ought not to have been presented or ought not to have been accepted by the Official Receiver, the Court may make an order annulling the bankruptcy."

16 Accordingly, Mr Laginha must show that the sequestration order ought not to have been made on 21 September last and I must be persuaded that I should, being satisfied as to that matter, exercise my discretion to make an order annulling the bankruptcy. In many if not most cases satisfaction of the first limb will lead to annulment of the sequestration order, although there are cases where this has not been so.

17 The act of bankruptcy was non compliance with a bankruptcy notice. As noted earlier, the judgment debt which founded that notice was a judgment in the Local Court at Sutherland for $7,155 dated 18 May, 1999. The bankruptcy notice was served on 30 June, 1999.

18 On 22 July, 1999 Mr Laginha sent a fax to Watkins Tapsell which commenced as follows:

"Re Bankruptcy Notice re debt to your client Mr Trevor Williams of $7,155 legal costs

I refer to the above and confirm service of your bankruptcy notice and my acceptance of my indebtedness to Mr Williams in this sum. In the 3 weeks since being served with the notice I have set about trying to borrow the full amount from family and friends without success. I have also applied for loans from a variety of financial institutions unsuccessfully."

19 The letter went on to say that Mr Laginha would have preferred to be able to pay out the full amount of the judgment debt but regretted not being in a position to do so in his then current financial position which he proceeded to set out. He stated that he owed $9135.53 to various institutional creditors which he was paying off by instalments of $50 per month and over $22,000 to family members. He requested that the respondent creditor accept payment by instalments of $100 per week. His letter concluded:

"Should you elect to proceed with the bankruptcy, I advise that I will not contest it. The result will be that I will lose my position and not be in a position to even make periodic payments."

20 There was a prompt rejection of the offer of instalments. On 26 July 1999 Watkins Tapsell wrote to Mr Laginha as follows:

"We refer to your letter dated 22 July 1999 and advise that given the circumstances set out in that letter we consider the most appropriate remedy for our client, as a creditor, is to pursue the application for bankruptcy with vigorous assertion of our client's rights. We have advised our client accordingly."

21 The bankruptcy petition was served on 2 August 1999. It contained the standard form of notice of hearing as follows:

"This petition has been set down for hearing by the Court at the time, date and place specified below. If there is no appearance by you or your legal representative at that time, the petition may be dealt with in your absence and a sequestration order made against you.

If you wish to appear at the hearing, you must file and serve a notice of appearance in accordance with Order 9 of the Federal Court Rules."

22 The petition continued by stating what Mr Laginha was required to do if he wished to appear at the hearing and oppose the petition. The date assigned for the hearing in the petition was Tuesday 21 September 1999 at 9.15 am.

23 On 20 August 1999, Watkins Tapsell wrote to Mr Laginha a letter which included the following:

"On Tuesday, 21 September 1999 we will ask the court to make an order sequestrating your estate. [The letter stated the effect of a sequestration order, stated that if Mr Laginha wished to avoid bankruptcy by paying the debt, he would have to pay interest as well as the judgment debt, then continued as follows.]

Costs

If you are made bankrupt, although the question of costs is a matter upon which the court exercises its discretion, it will almost certainly make an order that our client's costs of these proceedings be paid out of your property. If you pay our client's debt (including interest) before the hearing we give you notice that at the hearing we will ask the Court to make an order that you pay our client's costs of and incidental to these proceedings.

We will be relying on a copy of this letter to support our application for costs. Please produce the original of it when you attend the hearing.

You may, if you wish, attend the hearing and oppose the application for costs.

Dismissal of Petition

As this is the first day this matter will come before the Court it will not normally be necessary for you to satisfy the Court that you can pay your debts as they fall due before the petition will be dismissed. However, we suggest you contact your own solicitor for legal advice on your position.

If you wish to discuss payment of the costs and/or debt, please do not hesitate to telephone our office."

24 The next matter to recount has been one of some controversy. Mr Laginha testifies that on 7 September 1999 he sent a facsimile to Ms Wade of Watkins Tapsell and she testifies that she did not receive it. The letter commenced as follows:

"Re Bankruptcy proceedings - I refer to the above & in particular your letter of 20 Aug & 26 July `99. It's not clear whether you're rejecting outright any instalment offer, but note that you now invite further discussions/negotiations.

I am pleased to advise that I will after all be in a position to raise sufficient funds to make an offer in full settlement & avoid bankruptcy. Previous difficulties related to an incorrect default notice on my credit rating. I anticipate this will be corrected shortly, enabling me to borrow the necessary funds on my return from some long-ago-scheduled leave.

Please note that I will be interstate for the period 10 Sept until about 12 Oct `99 and thus not able to attend Court on 21 Sept. Would you kindly mention the matter for both of us, & obtain an adjournment date beyond the second half of October.

In the meantime, feel free to phone me ... should you wish to discuss the matter further."

25 It was put to Mr Laginha in cross-examination that he did not in fact fax that letter to Ms Wade of Watkins Tapsell and he insisted that he had done so. Ms Wade was not cross-examined on her affidavit to the effect that she did not receive the fax. In submissions Mr Laginha stated that he accepts that Ms Wade did not receive it. Of course, this concession was not an admission that Mr Laginha had knowingly made a false affidavit: he may have sent the fax to a wrong number or believed that he had sent it but was mistaken. In any event, I proceed on the footing that Ms Wade did not in fact receive the fax but that Mr Laginha believed that he had sent it and that she had received it.

26 On 20 September 1999, the day before the return date of the creditor's petition, Mr Laginha was in Western Australia on leave (this is consistent with what was foreshadowed in his fax which was not received by Ms Wade). On that day, he states that he telephoned Watkins Tapsell from Esperance, Western Australia to confirm that the adjournment was agreed to. He states that Ms Wade was not available and that he left a message for her. He does not state what the message was but, be that as it may, he states that he heard nothing.

27 As noted earlier, at the hearing on 21 September Registrar Tesoriero made a sequestration order in the absence of Mr Laginha.

28 On 7 October, Mr Laginha faxed Ms Wade as follows:

"I refer to above matter & previous correspondence by fax.

Kindly advise of the next Court date for these proceedings."

29 After learning that a sequestration order had been made on 21 September before Mr Laginha launched the present proceeding on 15 November. The first return date of his application was 7 December. On 6 December, Mr Laginha sent a facsimile transmission to the "Presiding Duty Judge" requesting an adjournment until 14 December. The letter stated:

"... I was not afforded an opportunity to be heard at the time the sequestration order was made. I believe I can either pay the debt or come to a mutually acceptable arrangement. I aim to avoid bankruptcy and protect my credit rating. I was in the process of negotiating a satisfactory way to pay the debt to Williams of about $7000 when the order was made, on the first mention while I was away on leave in Western Australia. I have other smaller debts but have come to payment arrangements that suit these creditors."

30 Ms Wade states that it was only after the present proceeding commenced that she became aware of Mr Laginha's contention that he had sent the fax dated 7 September.

31 Initially, it appeared to be the case that Mr Laginha relied heavily on his facsimile on 7 September 1999. Of course, that fax remains of relevance to the case since I have accepted that he believed that he had sent it. Mr Laginha has said in submissions that he accepts that the petitioning creditor, not having received the fax, acted properly in seeking the sequestration order on 21 September.

32 The way in which Mr Laginha puts his case is that Registrar Tesoriero had a discretion whether to proceed to hear the creditor's petition on 21 September 1999 or to adjourn the hearing to a later date. No doubt, so much is true. But the question which arises is why it was a wrongful exercise of the discretion to deal with the matter finally on 21 September when the petitioning creditor was (properly) asking that it be heard. In this respect, Mr Laginha states that the Registrar would have been aware that he, Mr Laginha, was a solicitor and would not have wished to allow the petition to proceed to a hearing in his absence. I do not accept this submission. A solicitor, like anyone else, may accept that a sequestration order is inevitable and choose not to oppose the making of the order. Indeed, contrary to his present submission, Mr Laginha himself had stated in his letter of 22 July to Watkins Tapsell:

"Should you elect to proceed with the bankruptcy, I advise that I will not contest it."

33 Mr Laginha has referred to the second last paragraph in the letter dated 20 August 1999 from Watkins Tapsell, which I set out earlier, as something which led him to think that the creditor's petition would not be heard on the return date. I agree that the wording of that paragraph is not ideal. Nonetheless, I think it tolerably plain, particularly in the light of the earlier statement in the letter that the Court would be asked to make a sequestration order on 21 September, that the paragraph is intending to convey that if Mr Laginha should pay out the petitioning creditor in full, it should not be necessary for him in addition to satisfy the Court that he was solvent in order to have the petition dismissed by consent on the return date. But in any event, it seems to me, and I so find, that Mr Laginha's mind was not at rest on the matter of the petitioning creditor's consent to an adjournment following receipt of that letter: he thought it necessary, or at least desirable, on the day prior to the return date, to telephone Watkins Tapsell to check, in substance, that his request for an adjournment was consented to. It is not in dispute that he did not receive an assurance that it was consented to.

34 Mr Laginha submits that if he had appeared on the return date of the creditor's petition and applied for an adjournment he probably would have been granted one. Let this be accepted. What would then have happened? There would have been an adjournment for a limited period. Mr Laginha states that he would have applied for finance to enable him to pay out the petitioning creditor's debt. But there is no evidence before me that he would be likely to have obtained it. He has offered an explanation from the bar table as to why the difficulty which he was experiencing back on 22 July last year in obtaining funds from financial institutions had disappeared. Also, in his "undelivered fax" to Watkins Tapsell of 7 September he stated "[p]revious difficulties related to an incorrect default notice on my credit rating" and that he expected that this problem would be corrected "shortly". There is no evidence of these matters. Of course, I accept that following the making of the sequestration order on 21 September it would not have been possible for him to raise the money to pay out the petitioning creditor.

35 Mr Laginha has also referred me to several authorities under s 153B but each case turns on its own facts and I do not think that any of the cases to which he has referred compels or even suggests the conclusion that on the particular facts of the present case the sequestration order ought not to have been made. In saying this, I have in mind, in particular, Priddle v Fisher & Sons [1968] 3 All ER 506 in which the party who did not appear was the moving party and the tribunal knew that that party had intended to appear; Re Faour; ex parte NEC Home Electronics Australia Pty Limited unreported, Beaumont J, 2 April 1996, in which there was a genuine dispute as to the underlying debt in respect of which default judgment had been entered due to oversight on the part of the bankrupt's then solicitor; and Re Anasis; ex parte Total Australia Ltd (1985) 63 ALR 493 in which the bankrupt had not been informed of the adjourned hearing date of the creditor's petition and there was "a real question to be tried and a matter genuinely in dispute".

36 It is not established that the sequestration order ought not to have been made.

37 If that had been established, a question would arise whether I should exercise my discretion to set aside that order. A report from the Official Trustee shows that Mr Laginha's statement of affairs disclosed assets of $374.65, unsecured liabilities of $20,221 and outstanding fees and costs of the administration of $2,488.04. There is no evidence as distinct from assertion that Mr Laginha would be able to pay the petitioning creditor's debt. Likewise, there is no evidence as distinct from assertion that he has made an arrangement with his other unsecured creditors to pay them by instalments, although I note that apparently they have not to date proved in the bankruptcy.

38 I need not resolve the question of discretion finally but my present view is that on the present state of the evidence at least, Mr Laginha is hopelessly insolvent and I would not, as a matter of discretion, have annulled the sequestration order in any event. However, it may be that I would have invited submissions on the question whether Mr Laginha should be allowed a further short period in which to file evidence establishing that he had made an arrangement, subject to annulment of the bankruptcy, to borrow sufficient money to pay out the petitioning creditor's judgment, interest and costs and the Official Trustee's fees and costs and that his other creditors had consented to the annulment. I need not pursue that matter any further in view of the conclusion which I have reached on the first limb of s 153B.

Conclusion

39 In the result the orders of the Court are as follows:

1. That the application be dismissed.

2. That the respondent creditor's costs of the present application be treated as if they were part of his costs as petitioning creditor for the purpose of s 109(1)(a) of the Bankruptcy Act 1966.

I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Associate:

Dated: 9 March 2000

The applicant appeared in person
Solicitors for the Respondent:	Mr D Francis of Watkins Tapsell
Solicitor for the trustee in bankruptcy:	Ms N Banfield of Sally Nash & Co
Date of Hearing:	2 March 2000
Date of Judgment:	2 March 2000