Balhorn, S.G. v. Colby, R. & Ors [1982] FCA 226

the order of the registrar in bankruptcy on 1 June 1981.

That the application of Sydney Gordon Palhorn dated 19 June 1981, insofar as it sought an order restraining the registrar in bankruptcy from

delivering the documents marked for identification as 'MFI2' referred to in the order of the reqistrar

in bankruptcy on 1 June 19R1, the two applications of Sydney Gordon Balhorn dated 30 December 19°1 and

the application of Sydney Gordon Balhorn dated ?5 February 198? each be dismissed.

That Sydney Gordon Balhorn pay the costs of the official trustee in bankruptcy of Sydney Gordon Balhorn's application of 19 June 191 including the costs reserved by Deane J. on 14 August IJ981, otherwise no order as to costs incurred up to and including 21 October 1981.

That all parties pay their own costs of the proceedings giving rise to the hearing before the Federal Court of Australia on 1 and 5 March 1982, 19 March 1982 and all costs incidental to that hearing.

BRIAN BURZACOTT (Senior Assistant Official Trustee) and JOHN WATSON (Assistant Official Trustee)

Respondents Coram: Fox, Northrop and Ellicott JJ. REASONS 10OR JUDGMENT

This is an appeal] from orders made by a Judge of this Court exercising jurisdiction in bankruptcy. The facts, and relevant statutory provisions, are set

as he had conducted procecdinys below. The problems

which have arisen are almost entirely a product of his inability, or unwillingness, to comply with fundamental requirements of judicial procedure. Before this Court

he was given great latttude indecd in the presentation

ascertain the nature and validity of his conmmlaint

against some or all of the orders which had been made adversely to his interests. 'the notice of appeal comprised a lengthy tirade, and should not have been allo.cd to remain on the file. However, no application was made

in respect of it, and we considered it for the guidance

jt might offer in indicating the nature of the appellant's

The essence of the matter is that the appellant wishes to procecd against ccortain persons concerned with the administration of his estate in bankruptcy on the basis of their "misfeasance, negligence, wilful default and criminal conspiracy to defraud .. .". He sought relief in the bankruptcy procecdings by way of an award of damages in the sum of $2,000,000 and, as incidenial thereto, he sought an order that documents of title to land formerly owned by him remain with the registrar, and not be handed over to the official trustee, until

present when these matters came on for hearing before

a Judge of the Court, and the Judge, satisfied that he had received due notice, proceeded in his absence, and refused the relicf he sought. The Judge gave him an opportunity to come in, by staying the operation of the orders he made (which included an order for costs). The exact form of the order he made in this regard was possibly the source of the uncertainty which later occurred. The appellant made application in due time, and in accordance vith the terms of the orders sought to rescind them. This application, and others of relatively minor

significance, cane on for hearing before another Judgc. It 1s apparent from the record that the latte: took

received a full and fair hearing, but the position was plainly made very difficult by the appellant's unfamiJiarity with legal piocess, and the repetition of what must have sounded as very extravagant allegations. The Jearned

Judge made two principal orde1s: he dismissed the application for rescission, and confirmed the orders

sought to be rescinded. At this stage, as it appears

to me, the matter procecded alongs incorrect lines. The Judge should not have made an order "confirming" the

orders already made, although 1n the ordinary course

littic or no harm would have Slowed from his doing so.

There was a case for rescinding the carlier order on the basis that the appellant could have been undcr a genuine misunderstanding concerning the first hearing. Apart From that, there was scope for doubt whether, before the Judge, the appellant was presenting his

case on the major issue. I am prepared to accept what the appellant now says, supported as 1t 1s by some passages in the transcript, namely that he was far from being in a position to proceed, and sought at the time

There is also scope for concluding that the appellant 1s a humhug, and for acceding to the submission for the respondents that serious allegations shouid not

On the whole, I prefer the approach which does not leave irretrievably determined against hii the case which he believes he has and which he feels strongly he has never had a fair chance to litigate. I agree

I certify that this and the three preceding pages are a true copy of the Reasons for Judgment hcrein of his Honour Mr. Justice Fox.

Associate Dated 21 October 1982. Alapdra Vectiutertio -

Official Trustee) and JOHN WATSON (Assistant Official Trustee)

Respondents CORAM: Fox, Northrop and Ellicott JJ. NORTHROP and ELLICOTT JJ. REASONS FOR JUDGMENT 21 OCTOBER 1982

Sydney Gordon Balhorn, the appellant, appeals from some of the orders contained in a judgment of the Federal

Court of Australia constituted by single Judge and given on

19 March 1982. The Federal Court was exercising jurisdiction in bankruptcy, see the Bankruptcy Act 1966 (as amended), s.27 and s.28. Special reference is made to s.27(1A) of the Act

and s.5 and s.7 Bankruptcy Amendment Act 1976 which came into

operation on 1 February 1977. As will appear later, the

proceedings incidental to proceedings instituted in the -Federal Court of Bankruptcy. The proceedings were brought in the original jurisdiction of the Federal Court of Australia but it is important to note that except as to Order 41 of the Federal Court Rules, those rules did not apply to the proceedings before the Federal Court constituted by a single Judge, Order 1, rule 11. Federal] Court Rules. The practice and procedure to be applied in relation to proceedings in the original jurisdiction of the Federal Court of Australia in bankruptcy matters is to be in accordance with the Rankruptcy

Rules as in force from time to time and as made under s.315

On 5 December 1973, a sequestration order was made by the Federal Court of Bankruptcy against the estate of the

appellant under s.58 of the Bankruptcy Act as then in

operation. Upon the making of the sequestration order the property of the appellant vested forthwith in the official receiver in bankruptcy. At that time the appellant was the owner of land at Port Albert in the State of Victoria on which he conducted a poultry farming business. Part of that land was held under the general] law and is described in Memoria] 192, Book 690, Memorial 193, Book 690 and Memorial 916, Book 698. This general law land is hereinafter called

"the land" and it vested in the official receiver on 5

The official receiver has not been able to obtain from the appellant the documents comprising the chain of title to the land, "the title deeds". On 5 December 1978 the appellant was discharged from bankruptcy by reason of s.149

of the Bankruptcy Act as then in operation. On 1 June 1981,

in proceedings which need not be described further, the appellant produced the title deeds to the deputy registrar in

bankruptcy and since then they have been in the custody of

On 19 June 1981 the appellant filed in the Federal Court of Australia an application seeking orders which can be

An order restraining the registrar in bankruptcy from delivering the title deeds to the official trustee (the official trustee in bankruptcy having become the trustee of the appellant's

estate following the commencement of Act No. 12 of 1980 on 1 February 1981); and

An order for relief and compensation from the respondents (being officers of the official trustee in bankruptcy) in the nominal sum of two million dollars over their misfeasance, negligence, wilful default and criminal conspiracy to defraud the plaintiff with P. Vodicka, P. Ryan, Solicitors, and A.E.B. Balhorn, occupier of the appellant's stolen home and farming business at-Port Albert.

In addition, the applicant sought that order 1 he made pending the hearing and determination of the claim being

On 13 April 1981 the official trustee in bankruptcy, "the official trustee", filed an application in the Federal Court of Australia naming the registrar in

bankruptcy, not the appellant, as respondent, seeking an

order that the registrar in bankruptcy deliver the title

On 12 October 1981 these two applications came on for hearing before the Federal Court of Australia constituted by Lockhart J. There was no appearance by the appellant, but the Court, being satisfied that the appellant knew that the two applications were to be heard by the Court on that day, proceeded to hear the applications in the absence of the appellant. The Court reserved its decision and on 21 October 1981 it made the following orders and published its

"1. That Mr. Balhorn's application of 19 June 1981 be dismissed;

2. That the Registrar in Bankruptcy deliver up to the Official Trustee in Bankruptcy the documents marked for identification as 'MFI 2' referred to in the order of the Deputy Registrar in Bankruptcy made on 1 June 1981;

That Mr. Balhorn pay the costs of the Official Trustee of Mr. Balhorn's application

of 19 June 1981 including the costs reserved by McGregor J. on 14 duly 1981 and the costs reserved by Deane J. on 14 August 1981; otherwise no order as to costs.

That the Official Trustee serve Mr. Balhorn personally with a sealed copy of these

That orders ], 2 and 3 shall not operate until the expiration of 21 days from the date of filing the said affidavit of service; and if, in the meantime Mr. Balhorn files an application in the Victoria District Registry of this Court to rescind or set aside orders l, 2 and 3 or any of them, the order which he seeks to set aside shall not operate until further order of the Court;

Liberty to apply is reserved to all parties on two days' notice."

Order 5 operates as a stay on the operation of orders 1, 2 and 3. The reference to an application to rescind or set aside those orders must refer to an application under s.37(1) of the Bankruptcy Act, the relevant

"37(1) Subject to sub-sections (2) and (3) the Court may rescind, vary or discharge an order made by it under this Act or suspend the operation of such an order."

On the facts of this appeal, sub-sections (2) and (3) are not

Within the time specified in order 5, the appellant, by application dated 30 December 1981 made application to the Court for an order rescinding orders 1, 2

and 3. By a separate application dated 30 December 1981 the

appellant made application for leave to amend his application

of 19 June 198] and in substance sought that the hearing of the application by the official trustee be stayed pending the hearing of his other claims being the claims' for damages and a claim for an order requiring the official trustee to return ether property previously owned by the appellant. In addition, the appellant continued his claim being claim 1 set out above. Later in these reasons comment will be made concerning the nature of the documents filed by the

relation to these applications including a direction that:

"The application of Mr. Balhorn dated 30th December 1981 be specially fixed for hearing

in Melbourne on Monday, lst March, 1982 at 10.15 a.m."

Other directions were given but they need not be set out. It is to be noted that the direction set out does not specify which of the applications of the appellant dated 30 December 1981 was fixed for hearing on 1 March 1982, but logically it must have included the application to set aside

Under Bankruptcy Rule 1096, by notice of intention to oppose application, the official trustee gave notice that on the hearing of the application by the appellant to rescind

orders 1, 2 and 3 it intended to oppose the applicaticn on

the grounds that the appellant had been notified of the date of hearing of the application, namely 12 October 1981, that he had not attended, and that he had given no satisfactory

explanation of his failure to attend at the heating of the

applications on 12 October 1981 and that the material filed by the appellant in support of his applications of 19 June 1981 was scandalous, irrelevant and ohjectionable and failed

to disclose any legal basis for the orders sought and that

the delay in the delivering up to the official receiver of

the title deeds was obstructing the due administration of the appellant's estate and was prejudicing the interests of the

On 1 March various matters involving the appellant came on for hearing before the Federal Court of Australia constituted by a single Judge. On the material before it, the Court refused an application by the appellant that the hearing of the matters be adjourned. The matters were heard on 1 March 1982 and 5 March 1982 when the Court reserved its decision. Judgment was given on 19 March 1982. In its reasons for judgment the Court identified the matters before

The appellant's application dated 19 June 1981. 2. The appellant's application dated 30

December 1981 being the application seeking to amend the application dated 19 June 1981.

3. The appellant's application to rescind Orders 1, 2 and 3 made on 2] October

trustee dated 11 February 1982 opposing the application referred to in 3.

5. The appellant's application filed on 25 February 1932 seeking an order that a Full Court of the Federal Court of Australia hear the matters.

In addition, the Court listed the evidentiary material which had been filed in connection with the applications and referred to the evidence given orally before the Court. It is to be noted that no reference was made to the application by the official trustee dated 13 July 1981 seeking an order that the registrar in bankruptcy deliver the

"1. The applications presently before me filed on 30th December, 1981 which include the 'NOTICE OF AMENDMENT' are dismissed.

Orders 1 and 2 of the Court on 21st October, 1981 are confirmed.

The Orders as to costs made by Lockhart J. on 21st October, 1981 are varied so that Orders as to costs will be:

In respect of the proceedings heard on 12th October, 1981, each side is to pay its own costs and costs reserved of 14th July, 1981, 14th August, 1981 and on €&th February, 1982.

In respect of the hearing before me on Lst and 5th March, 1982, each side is to pay its costs of and incidental to the hearing on 1st March, 1981; and Mr. Balhorn is to pay the Trustee's costs of and incidental to the hearing of 5th March, 1982.

The application dated 25th February, 1982 to have the Full Court of the Federal Court adjudicate on this matter is dismissed.

Each side is to pay its own costs of the application dated 25th February, 1982 referred to in paragraph 5.

Any costs incurred by the Official Trustee in respect of the applications of 19th June, 1981, 13th July, 19813, 7th August, 1981, 30th December, 1981, 25th February, 1982 and 5th March, 1982 be taxed and such of them as are not payable by Mr. Balhorn be payable out of the estate."

In addition, the Court noted that no argument had been presented on behalf of the official trustee in respect of its notice of intention to oppose the applications with respect

The appellant appeals from orders 1, 2, 4 (second section), 5 and 7 of the judgment of the Federal Court made

At this stage it is necessary to make some comments concerning the material relied upon by the appellant. The

appellant has appeared in person. He has prepared his own

material. The documents filed by the appellant are rambling,

lengthy and almost unintelligible. There is a strong prima .facie case that most, if not all, of the contents of the documents ought to have been struck out as being scandalous, vexatious and oppressive, see Federal Court Rules, Order 41, rule 5. See also Bankruptcy Rule 134. At all material times the Court has granted the appeljJant a remarkable indulgence in allowing him to rely upon the material he had filed and in making submissions to the Court. The notice to appeal itself is almost meaningless, but the Court has extended much latitude and has treated it as raising all possible grounds of appeal. There has been no application by the respondents to have the contents or part of the contents of the notice of appeal struck out as being scandalous, vexatious and oppressive. In addition, on the appeal the Court received assistance from counsel who, at the request of the Court,

The application to have the matters heard by a Full Court was, quite correctly, dismissed, see sections 19 and 20

Federal Court of Australia Act. No other Act enables the

order to be made. Section 25(6) of the Federal Court of Australia Act has no application, its operation being limited

to the statement of a case or reservation of a question.

Difficulties arise with regard to the other orders Made by the Court on 19 March 1982. Logically, the appellant's application dated 30 December 1981 for an order rescinding orders 1, 2 and 3 of the orders made on 21 October 1981 should have been heard and determined before the other applications were decided. That application was made under

s.37 Bankruptcy Act, but that section apparently was not

referred to by the parties appearing before the Court nor was it referred to in the reasons for judgment given on 19 March 1982. That application was dismissed, (see order 1 of 19 March 1982). In those circumstances in the light of order 5 of 21 October 1981 the appropriate order would have been to order that orders 1, 2 and 3 of that date shouid operate forthwith. In this appeal the first task of this Court, as we see it, notwithstanding the course adopted below, is to consider the appellant's application for rescission of orders

Section 37(1) of the Bankruptcy Act has been set out. It confers a general and unfettered discretion upon the Federal Court. 1t is a discretion that must be exercised judicially but should not be construed narrowly. The orders made were not judgments entered in default of procedural requirements so the well-known principles to be applied when considering whether judgments entered by default should be set aside do not apply. It is important, however, to note

those principles and this can be done by referring to what

was said by McInerney J. in Gamble v. Killingsworth & McLean

"The judgment which was entered on 17 January 1968 was, in my view, judgment by default within the meaning of 0.27, r.15. Certainly the order of Smith, J., ma@e on 27 November 1967 did not, of itself, amount to a judgment: see Re Gurney, [18961 2 Ch. 863, at pp.864, 865, per Kekewich, J. See also Nixon v. We Phelan & Sons Pty. Ltd., [1960] V.R. 94, at p-96, per Sholl, d.

If the judgment by default was regularly entered, that is, 1f, in the events which had

happened the plaintiff, was, according to the Rules of the Court, entitled to enter judgment by default, the Court, in considering whether that judgment should on application made under 0.27, r.15, be set aside, is bound to consider whether any useful purpose is served by acceding to the application. Plainly no useful purpose is served if it appears that if the judgment were set aside and the action allowed to go to trial, there would be no

possible defence : see Bayview Quarries Pty. Ltd. v. Castley Development Pty. Ltd., 1963 | V.R. 445, at p.446, per Sholi, od. If,

therefore, application is made to set aside a judgment which has been reqularly obtained, it is an 'almost inflexible rule' that the Court will not accede to the application unless the

applicant shows a defence on the merits : see Farden v. Richter (1889), 23 Q.B.D. 124, and Collins Book Depot Pty. Ltd. Vv. Bretherton, f1938] V.L.R. 40; i938) A.U.R. 87...

If a judgment in default is regularly entered, the Court, when setting aside judgment and giving leave to the defendant to come in and defend, can impose terms upon the defendant see Cockle v. Joyce (1877), 7 Ch.D. 56; Wright v. Mills (1889, 60 L.T. 887; Re Hartley, T1891} 2 Ch. 121; 64 L.T. 786.

But if the judgment attacked is shown to have been irregularly obtained, as, for instance, if ait is shown to have been entered prematurely or for too much, the defendant is entitled to have it set aside ex debito justitiae and without terms - except as part

of the condition of an order as to costs : see Anlaby v. Praetorius (1888), 20 Q.B.D. 764; Daly v. Silley, £1960] V.R. 353."

rescinded or set aside were made in the absence of the

appelJant. The principles to be applied to cases of this kind have been stated. Reference is made to Rosing v. Ben

Shemesh [1960] V.R. 173 in which a Full Court of the Supreme Court of Victoria considered a County Court rule in a form which provided that a Judge of the County Court in a case where judgment had been given at the trial of an action in the absence of a defendant had power to grant a new trial upon such terms as he thought fit "on sufficient cause shown to him for that purpose". The words quoted do not appear in s.37 of the Bankruptcy Act. In relation to the discretion conferred on the County Court Judge, the Full Court (Herring

"In Grimshaw v. Dunbar, [1953] 1 0.B. 408, the plaintif£ obtained an order for possession in the county court in the absence of the defendant who had been told by a court official that it would not be necessary for him to attend at the hearing, seeing he had

paid all arrears of rent into court. Nearly three months later, the defendant applied to have the order set aside and a new trial

ordered. This application was refused. The defendant appealed to the Court of Appeal, and that Court allowed the appeal. The views expressed by Jenkins, L.J., are conveniently summarized in the headnote as follows: 'When determining whether to exercise his

jurisdiction under Order 37, r.2, of the County Court Rules 1936, to order a new trial, the county court judge should be influenced by

the following considerations : First, the reason why the party failed to appear when the case was heard. Secondly, whether there has been any undue delay by the absent party in launching his proceedings for a new trial; delay in itself would not be important, but delay prejudicing the other party, or delay enabling rights of third parties to intervene, would be material. Thirdly, whether the other party would be prejudiced by a new trial in any respect which could not be adequately compensated by a suitable award of costs. A new trial should seldom, if ever, be refused on the ground that the applicant's case was a weak one.'

What is of importance from the point of view of the present case is that the Court of Appeal in Grimshaw v. Dunbar were concerned

with a case where the learned county court judge had given no reason for refusing the

application for a new trial, and it appeared on examination of the facts that what had actuated the judge must have been that he thought that the defendant was unlikely to succeed if there was a new trial. See, at p.419, per Roxburgh, Jd. All three judges of the Court of Appeal decided as a matter of law that the judge was not entitled to reject an application for re-instalment on this ground."

Although not applicable to the present case, by way of

comparison reference may be made to the Federal Court Rule,

On the material before it on 1 and 5 March 1982, the Court found that the appellant knew that the relevant applications were coming on for hearing before the Court on

12 October 1981, that that date was suitable to him, but that

from what he had been told by the registrar in bankruptcy, he believed that the date would be confirmed in writing. That

confirmation in writing was not sent to the appellant. On

this aspect of the matters, the learned trial Judge said:

"I accept what is common ground that the parties knew the date was fixed as 12 October 1981. Any ordinary person, not having received a letter confirming it, would, I consider, have made some enquiry; but Mr. Balhorn did not. But I have preferred to consider the matter on the wider issues, 1.e. as to whether submissions which are made and evidence by Mr. Balhorn should induce an order different from that of the learned trial Judge delivered on 21 October 1981; or entitle Mr.

The trial Judge did not have the benefit of submissions concerning s.37 of the Bankruptcy Act. In all the circumstances he applied the wrong principles to this part of the matter before him. This is reflected in the orders made. Once the application for an order rescinding orders 1, 2 and 3 made on 21 October 1981 was dismissed, apart from determining the date of their operation, there was nothing further for the Court to do with respect to those orders. It was not exercising appellate jurisdiction in

On the findings of fact made by the trial Judge we are of opinion that the orders made on 21 October 1981 should be set aside. In the very special circumstances of the case there was an explanation, implausible as it was, for the

non-attendance by the appellant at the hearing of the

applications on 12 October 1981. Applying the principles set

out in Rosing v. Ben Shemesh, orders 1, 2 and 3 should be set aside. In so doing we note particularly that a new trial should seldom, if ever, be refused on the 'ground that the applicant's case was a weak one. On the question of prejudice, it is to be noted that the automatic stay provisions contained in order 5 prevented undue delay by the

zs appellant causing prejudice to the respondents to the appeal.

We turn now to the substantive applications. Those matters were canvassed at length before the trial Judge and before this Court. In addition, this Court permitted the appellant to refer to other material not before the trial

The first matter for consideration is the application by the official trustee of 11 July 1981 seeking an order that the registrar in bankruptcy deliver the title deeds to the official trustee. The appellant was not made a party to that application, although clearly interested in it. His application of 19 June 1981, either originally or in its amended form, seeks an order preventing the registrar in bankruptcy delivering the title deeds to the official trustee at least until the hearing of the determination of the other orders sought by the appellant. In his reasons for judgment

"Mr. Balhorn stated in his submissions to me that he does not contest the right of the Official Receiver to hold the documents, nor, as I understand him, would he dispute the right of the Official Trustee in Bankruptcy to take over the documents except that he had made an allegation of fraud which he contends should be sufficient to require that the documents are not handed over until that matter is resolved."

Consideration of sections 30, 58, 116, 129 and 152 of the Bankruptcy Act makes it clear that the Court has the power to make the orders sought by the officiai trustee. On the whole of the material before the Court, no reason appears why that order should not be made nor is there any reason why the order should be stayed pending the hearing and determination of the other matters raised by the appellant. No application is made to annul the bankruptcy and the rights of the official trustee to deal with the property are preserved. Mr. Balhorn's application for compensation is not dependent, in any way, on the exercise of those rights being stayed pending that application being determined. Accordingly, the Court will order that the registrar in bankruptcy forthwith deliver up the title deeds to the

There remain the other applications by the appellant relating to his claim for damages and compensation and for the return of other property. As has been said already, apart from the application of 19 June 1981, the

documents filed by the applicant in relation to his claim for

compensation are almost unintelligible and, prima facie, are objectionable. Much of the present difficulties have probably arisen by allowing that material to remain before the Court in its present form and to be relied upon, and in the failure to ensure that the material relied upon by the appellant conformed with Order 41, rule 5 of the Federal Court Rules. See also Rule 134 of the Bankruptcy Rules. In all the circumstances, we think the best course to adopt is to rescind the order made by the learned trial Judge dismissing in toto the applicant's application of 19 June 1981 and in lieu thereof order that the applicant's said application insofar as it seeks an order restraining the delivery of title deeds be dismissed. This will leave the applicant free to pursue the claim for compensation in that application if he wishes. However, we consider that his amended application of 30 December 1981 is objectionable in form and should be dismissed without prejudice to the applicant's right to seek an amendment, on any proper ground, to his application of 19 June 1981. All material filed by him to date in support of his application of 19 June 1981 should be struck out as it also offends the provisions of Order 41, rule 5. Any further application or material supporting any application filed by him should be in preper

The registrar in bankruptcy forthwith deliver up to the official trustee in bankruptcy the documents marked for identification as ''MFI2° referred to in the order of the registrar in

That the application of Sydney Gordon Balhorn dated 19 June 1981, insofar as it sought an order restraining the registrar in bankruptcy from delivering the documents marked for identification as 'MFI2' referred to in the order of the registrar in bankruptcy on 1] June 1981, the two applications of Sydney Gordon Balhorn dated 30 December 1981 and the application of Sydney Gordon Balhorn dated 25

That Sydney Gordon Balhorn pay the costs of the officia] trustee in bankruptcy of Sydney Gordon Balhorn's application of 19 June 1981 including the costs reserved by McGregor J. on 14 July 1981 and the costs reserved by Deane J. on 14 August

That all parties pay their own costs of the proceedings giving rise to the hearing before the Federal Court of Australia on 1 and 5 March 1982, 19 March 1982 and all costs incidental to that

ft i L re _c attrae copy of to E H ra . Jt Leicin tf the f Ronourale Liz, 2ocrc2 Neethrop and the 1 Honoveable Me Testce Elk cor, 4 t t Wek. Meer 4 s Wek f %