Hearings before Conti J
17 The petition came on for hearing before Conti J on Monday 21 August. In the context of discussing the application for leave to appeal the following exchange took place (in this and following passages the parts underlined are said by Mr Gould to show bias):
Mr Gould:
"…This bankruptcy notice was lodged nearly 12 months ago and in the last six to seven months a great deal has happened obviously for me to be able to show the Court that now I am in a position financially not only solvent but more important explain to the Court why this creditor's petition and bankruptcy notice should be dismissed."
18 His Honour:
"If you're solvent, why don't you pay the District Court judgment? Why don't you pay? What's the problem? The District Court judgment has been established. You have exhausted avenues of appeal and, according to material that I have read on the file, you have no assets."
19 There followed further discussion in which Mr Gould was asserting that he had "intellectual property assets". Mr Gould spoke of amounts said to be due to him. He claimed in substance that Mr Day and Mr Manly had contacted potential purchasers of his assets and made defamatory statements about him. He asserted that he had since 1997 been conducting a business called Halisa New South Wales Partnership together with one Guy Blowberg. His Honour then said:
"If I [sic] drawing the inference that you're intentionally seeking to disclose [sic] the existence of funds and assets of your own from the judgment creditors, Mr Day and Mr Manly, why would that inference not be open for me to draw? If I could put it more simply, why can't I draw the inference in the light of what you have told me about your business operation, that you are deliberately and dishonestly withholding from Mr Day and from Mr Manly the existence of assets upon which they could levy execution on their judgment?"
20 His Honour also pointed out that on the Court file was a statement of financial position signed by Mr Gould against which he had stated a nil value for each item of property and assets except interest in a partnership said to be worth $1 million. It was on the basis of that that he sought an exemption from paying Court fees.
21 His Honour then asked Mr Gould:
"Is the statement that you have no money in a bank or a building society, no other investments, no money owing to you. Is that a true and frank statement to the Court?"
22 Mr Gould replied that he had plenty of money owing to him and that he had paid the filing fees for two affidavits and one notice of motion.
23 His Honour told Mr Gould that he could seek from himself leave to appeal the decision of Katz J or could apply to a Full Court but that if Mr Gould took the former option there was no appeal to the Full Court. Mr Gould indicated that he was prepared to abide by that. After referring to certain material his Honour said:
"Well, I'll take that material as being before me on this present application for leave to appeal against Katz J's orders. Well, I assume, Mr Gould, correct me if I am wrong that you will be wanting to also place these affidavits before me as a basis for resisting the creditors petition depending on the outcome of your present application?"
24 Mr Gould agreed.
25 Mr Gould then gave evidence and was cross-examined by Mr Day, mainly in relation to the affairs of the alleged partnership business. At the conclusion of the cross-examination his Honour said:
"Is there anything else you would like to say to me arising out of the questions that have been asked of you?"
26 Mr Gould said:
"Yes your Honour I think you will see in my submission why the creditors' petition should be struck out."
27 His Honour said:
"Yes. We are not dealing with the creditors' petition now, we are just dealing at the moment with what was the error that Katz J committed by declining to allow you to take your various courses of which you now complain. We'll come to the creditors' petition if necessary or if appropriate after that."
28 His Honour then said:
"Mr Gould, I don't think that anything contained in these affidavits demonstrates that Katz J miscarried in the exercise of his discretion in declining to allow you to put further material on in opposition to the creditors' petition, nevertheless, as a practical matter and whilst I would formally dismiss your application for leave to appeal against his Honour's orders, I propose to take the course of allowing you to use this material and also, any questions in cross-examination for the purpose of resisting the creditors' petition.
I am not persuaded that there is any reason why we can't proceed with the creditors' petition today, subject to something I want to say to you. Mr Gould, I am conscious of the fact that you are a litigant in person, just as I'm conscious of the fact that Mr Day and Mr Manly are also and that a very large amount of money has been spent and will obviously continue to be spent in this apparently interminable litigation between you.
The objective facts are that you have been unable to persuade the courts thus far as to why you should not pay and satisfy the judgment, the original judgment of the District Court and although I'm conscious of the fact that you are seeking leave to appeal to the High Court, I must say that your prospects of obtaining leave to appeal to the High Court are entirely remote. In any event, the mere lodgment of an application for leave to appeal to the High Court does not create a stay.
On the other hand I don't want to see you in effect, lose this business today by proceeding with the creditors' petition and on the assumption that the creditors' petition will result in your sequestration. You've obviously got, if I may say so, a significant business interest and operation and I think the time has come when you must bite the bullet and from the resources of that operation repay the judgment debt which you owe or else put yourself in the probably inevitable circumstances of bankruptcy.
I want to give you an opportunity in the next seven days by standing this matter over, to put behind you and I'm making a similar observation to Mr Day and Mr Manly, put behind you this extraordinary amount of litigation which is taking up the time which could otherwise be engaged by all of you in the positive endeavours of improving your own business. I want you to come to your good senses and accept my counsel to you that enough is enough.
That I want to stand these proceedings over, subject to what Mr Day and Manly have to say to me, for seven days to enable you to consider what I've said and to on or before the next occasion tender by bank cheque payment of what is owed to you under the creditors' petition. If you don't want me to give you the opportunity, then I'll proceed with the hearing of the creditors' petition.
As a practical matter I've allowed you to put before me although technically in connection with an application for leave to appeal, in fact all the evidence which you apparently wish to put before Katz J or which you foreshadowed that you would put before Katz J in resisting the creditors' petition. So you haven't been prejudiced in any way, in fact you've had the advantage in effect, of getting the material before the Court notwithstanding that his Honour was not prepared to allow you further time so to do.
So, you could have achieved by virtue of my having to hear whatever evidence you wish to put in support of the application for leave to appeal, the very evidence that you have wished to put before the Court in connection with your opposition to the creditors petition. So, having achieved in a practical way what you had sought to achieve in front of Katz J notwithstanding that I am unable to identify any ground for impugning his Honour's exercise for discretion, I now want to, as I say, subject to what Mr Day and Mr Manly want to say to me, to give you seven days to put all this behind you.
I have heard what you have said in terms of your assets, I'm not entirely convinced that you have been frank with the Court as to the nature and extent of your assets in terms of either legal ownership or control. But I do see that you are very concerned to retain this business, you have obviously worked hard to build up this business and it will be a great pity if you allow the pursuit of litigation to destroy what is most important to you in your life.
I have been in this profession now for some 40 years and I've seen people many times do what you are doing and live to regret it and I think that as much as there is hurt and I've got no doubt it's mutual hurt, much as there is enormous antagonism, a deep desire for revenge on the part of both of you, you have got to now totally reverse the path you are taking. I believe, from the snippets of evidence you have let through here, that you probably have got the means to be able to fund this indebtedness, or convince the Court that you can make a substantial effort towards so doing in the next week or so and complete the entire satisfaction of the indebtedness within a finite period and that is the course I commend to you. The other course is just going to be a disaster for yourself and your business, if I chose to make a sequestration order today. Are you prepared to accept my suggestion that this matter be stood over for seven days - and as I say, I'm not tying your hands, Mr Day and Mr Manly, at the moment - on the basis that it's an opportunity which presents to you to be able to liquidate or substantially liquidate an indebtedness that had been established in other courts and which you must now face up to?
Are you prepared to accept my invitation for a week to consider your position and come back here and tender cash, or a substantial amount of cash - and by cash I mean of course a bank cheque - and face up to the fact that you are now inevitably going to have to find the money to meet those outstanding succession of judgments for basically the same sum of money plus costs, or else face the very likely prospect of sequestration of your estate and thus a very great handicap to your business? What is your response? It can't go on, Mr Gould.
I'm very happy to proceed and hear all the submissions you want to make and the creditors' petition, if you would prefer to further address me, if you don't want to have the opportunity of a weeks adjournment on the basis that you will do something of a practical kind towards addressing the gravity of the situation you face."
29 Mr Gould then suggested that "mediation may be a way to go". Mr Day then said that he and Mr Day were prepared for Mr Gould to have seven days but were not prepared to mediate. The exchange then continued
His Honour:
"Well, that is the choices, Mr Gould. You must recognise that they are your choices."
Mr Gould:
"No, I believe your Honour, under 52(3).
His Honour:
"This is section 52 of the Bankruptcy Act?"
Mr Gould:
"Yes."
His Honour:
"That's what you'd be able to address me."
Mr Gould:
In fact I believe it's 21 days rather than 7 days.
His Honour:
"You will be able to address me on any ground upon which you would wish to oppose the making of a sequestration order pursuant to a creditor's petition. I haven't dealt with that yet. Section 52 matters would then come up for dealing but you appreciate that if I'm against you in relation to the creditor's petition then the sequestration order will be made today and I emphasise here what I'm offering to you is the opportunity to go away, perhaps get independent advice but come to your senses and deal with the fact that these are judgments of the court and are going to stay as judgments of the court. You either face that decision within the next 7 days or you may not have the opportunity to face it again."
30 Mr Gould then said that within seven days he was not likely to be able to get the money available for Messrs Day and Manly. The following exchange took place:
Mr Gould:
"I have already got commitments that the funds that the people working to develop projects to get certain things done within certain times, those people have to be paid. Now the revenue that is likely to come in and this depends on a whole series of meetings that we're having now or over the next two weeks, primarily to put in a funding application to Dis for two projects on 15 September. That is really going to be whether those organisations are then going to put in funds to actually get the projects up and running, whether - and this is obviously the great fragility of the situation here - I may turn round and say look fellows this is the money that is owed to me and as I'm New South Wales partnership, via the OAC, those people may be in a position to say well hold on we're not putting in funds to do that.
Obviously Mr Day and Mr Manly will use that if they get wind of any of these projects being set up anywhere because they've already said to people do you realise you're paying money to the OAC to pay Mr Gould's legal fees."
His Honour:
"Mr Gould, can I just say this to you, that I've endeavoured to follow what you've said about these somewhat curious corporate or non-corporate vehicles. I want to be frank with you and say that I don't think that you have frankly put your financial position before the court which would have enabled me to evaluate what you've now said to me. I think that it's quite apparent to me that you're seeking to dissemble the essence of your financial position.
That is why I'm saying to you you have an opportunity to do something within 7 days and it may well be that you can't come up with a substantial sum but you can show bona fides and endeavour to come up with a reasonable sum and then Mr Day and Mr Manly may well take the view that they will give you further time to bear the balance. I certainly see no virtue if I accept the entirety of what you say in terms of your present situation in seeing you financially destroyed but the paucity of the evidence that you have put on with these affidavits that have been filed, which are virtually valueless in terms of enabling me to assess what is your true worth, that paucity of evidence is such that the making of a sequestration order today is a very real possibility.
I want to put all that behind me and give you a week to endeavour to come back and come up with something in the meantime of a practical nature and not just words and documents. I repeat to you would you like that opportunity or do you submit to a hearing which will take place immediately on the creditors' petition."
31 His Honour then adjourned the matter to 31 August and formerly ordered that the motion for leave to appeal against the interlocutory order of Katz J made August 2000 be dismissed and
"since the evidence in support of that motion with [sic] leave to appeal will become, in reality, evidence in the creditors' petition proceedings I will not make any order for costs in relation to the dismissal of the summons for leave - or the motion for leave to appeal at least for the time being."
32 After some debate with Mr Day and Mr Manly about the confidentiality of material which Mr Gould had subpoenaed from them his Honour said:
"Mr Gould is entitled to put the submissions on a fairly wide basis not just only on a financial basis as to why I should not make a sequestration order which I can look at on the next occasion. My belief now is that I shouldn't say anything which might be thought to be provocative or encourage an approach to the adjourned hearing which would see the end or the beginning of the end for litigation rather than the prolonging of it. So what I'll do is ask my associate to keep your affidavit and the material with it separately in a separate folder for the moment. I'll read it before the next occasion so we don't lose any time if we have to lose time. If I do decide that it's material I would need to give Mr Gould time to read it."
33 Mr Gould said that he did not believe he would be able to generate the amount of money in the period of time but would like to hand the Court what was "going to be the basis for my submission anyway next week". His Honour agreed to this.
34 Amongst other things the submission asserted (i) that there was a discrepancy between the determination of the Costs Assessor and the certified amount of the judgment, (ii) that of the debt some $28,000 was for fees for fifteen subpoena and discovery hearings when Mr Day and Mr Manly failed to produce documents, (iii) that Mr Gould was seeking special leave to appeal to the High Court based on new evidence, (iv) that for seven years Mr Day and Mr Manly had engaged in "long term malice" against him by, inter alia, making defamatory statements "de-railing funding applications for Government funds" to the extent that "he is only considered to be an expert in his field in the International arena", he is now recovering from the damage infected by them; although he has over $2 million intellectual property assets his liquid funds are "channelled towards developing software to build on the alliances formed over the last nine months"; that all those amount to special circumstances under s 52(2)(b), (v) that he has defamation claims against Mr Manly and Mr Day, one of which was struck out because of the incompetence of his (Mr Gould's) solicitor in relation to discovery, (vi) that he has paid all other trading costs and the Halisa New South Wales Partnership has various projects in the course of discussion.
35 On 31 August the hearing commenced with his Honour asking Mr Gould about certain documents:
His Honour:
"During the course of the week I received some material I think from you, Mr Gould, is that correct?
Mr Gould:
Yes, your Honour.
His Honour:
I'll hand that material back to you. If you wish to put on evidence you put it on in affidavit form and you provide a copy to the petitioners. You haven't got a right just to correspond with a Judge, the presiding Judge as you see fit. So I have not read the material and as I say if you wish to give any evidence I'll give you the opportunity to go into the witness box and give any evidence you see fit.
Mr Gould:
Your Honour, those affidavits were filed at the same time.
His Honour:
Which affidavits are you referring to?
Mr Gould:
That material, sir, was handed to you in court at the last meeting.
His Honour:
What material did you send to me during the week:
Mr Gould:
I didn't send any to you, your Honour.
His Honour:
I'm sorry then, there has been a mistake, the court has given me the material.
Mr Gould:
All that I filed was other affidavits that were actually sent to the other side as well. That was given to you, your Honour
His Honour:
I'm very pleased about that, Mr Gould.
Mr Gould
You said you were going to read that and that was the confidential information.
His Honour:
I'm pleased about that.
Mr. Gould:
Confidential to respondent.
His Honour:
I'm pleased with that because I was concerned that you were corresponding with me direct and I apologise for thinking that."
36 We were told by Mr Day that the pronoun "that" where first appearing in Mr Gould's statement "You said you were going to read …" is a reference to Mr Gould's submission and the second "that" to certain material said to be confidential to the respondents.
37 His Honour then asked
"Do you wish to respond to the suggestion I made to you last week? All right. But you make an offer to pay the indebtedness.
Mr Gould:
I did respond, your Honour. I offered to withdraw my other legal claims against Mr Day and Mr Manly. I put that in one of the affidavits I sent to you which was ---
His Honour:
Did you say affidavits you sent me?
Mr Gould:
I filed in court, your Honour.
His Honour:
I've read the affidavits that you filed in court.
Mr Gould:
The affidavit is ---
His Honour:
I've read that material. Do I take it you don't wish to advance matters along the lines of the invitation I extended last week?
Mr Gould:
Your Honour, I think as I said last time if the Court decides that my submission to have the creditors' petition dismissed and the debtors and the bankruptcy notice struck out, if the Court says that they will not dismiss it or strike it out then I request another 21 days to pay the amount; that was part of my submission."
38 His Honour then asked Mr Day and Mr Manly whether they had filed an affidavit of continuing debt and an affidavit of searches. They said they were not aware of these requirements. They asked for a seven day adjournment. His Honour said:
"I think what particularly brought this to my attention was reading Mr Gould's material where he disclosed that there's an alleged discrepancy between what was the subject of the bankruptcy notice, what is the true amount of the judgment debt, etcetera, etcetera. Now, there's no real substance in what Mr Gould is submitting because he didn't tender payment to you of the amount which he claims to be owing. The technical point that there might be a miscalculation of a thousand or two in respect of a judgment debt will not advance Mr Gould's situation in terms of resisting this petition.
It's inevitable that on the basis of that petition and subject to you complying with the rules that an order for sequestration at this stage would be made. As I say the fact that there might [sic] 1000 or 2000 discrepancy in the actual calculation will take Mr Gould nowhere unless he tenders payment into court or to yourselves of the amount that he says is owing. But I think that there really is no alternative but for me to stand this matter over so it's giving you an opportunity to comply with the rules. I really do suggest that you do. In the long term it might be less expensive for you if you got legal advice as to the state of the file and the state of readiness to make the order for sequestration. As I say the court can't do it for you and this is the sort of difficulty that arises when you appear unrepresented.
Now, the question is what would be a - Mr Gould has said that if I was against him on his case as to discrepancy I would be, in terms of - the discrepancy would not stand in the way of the sequestration. He said that he may consider payment within 21 days. Now, the critical question is whether I stand this matter over for seven days or whether I stand it over for 21 days to enable Mr Gould to fulfil his - when I say statement of intention I think it would be unfair to say it's an unequivocal intention he's given as a conditional statement of intention. It's really a question of how long I should stand the matter over."
39 There then followed discussion as to the formalities required. His Honour pointed out to Mr Gould that any discrepancy between the amount owed and the amount of the notice would not avail him unless he had tendered the amount said to be the correct calculation. Then Mr Gould said:
"Your Honour, just as a point of interest where do I stand with the rules 41G and 41(6), 41(7) where there's a counter claim against Manly. Where do I stand with the rule 52.2(a) and 52.2.(b)?
His Honour:
If you have indicated what your counter claim is and I saw that material last time and I do not consider and I'll give you reasons when I give my judgment. I do not consider that they are valid counter claims within the legislation. I suggest you get legal advice on those matters.
Mr Gould:
52 and 52.2(a) which is about the applicants being solvent and I have got an affidavit I would like to hand to the court.
His Honour:
I have read the material.
Mr Gould:
No, this is a new affidavit, your Honour.
His Honour:
Have you served a copy of Mr Day and Mr Manly?
Mr Gould:
Yes, I have.
His Honour:
This is new material about insolvency?
Mr Gould:
This is to show my financial position, insolvency, yes, your Honour.
His Honour:
Well, the material you produced to me last time was not evidence of anything according to law, so you didn't establish anything to my satisfaction on the previous occasion. I'll receive that affidavit now."
40 Mr Gould then handed up a further affidavit sworn 31 August which contained information about two projects for which funding submissions had been made and alleging further interference by Mr Day and Mr Manly. This was said by Mr Gould to be an updating of the material in his submission.
41 His Honour pointed out that if Mr Gould had any further material which he wished to put on affidavit before the adjourned date he was free to do so but that mere unsupported evidence would be "virtually valueless."
42 Mr Day submitted that there was no evidence where money was likely to come from because Mr Gould was effectively relying on a contract between Open Interchange Consortium which was himself and Halisa New South Wales Partnership, which was also himself.
43 His Honour then indicated that he would stand the matter over for seven days because the creditors had to comply with the rules and that "if Mr Gould is able to produce something more tangible within the next seven days" his Honour would "certainly be looking favourably, if it is sufficiently tangible" on standing the matter over then until after the Olympic Games.
44 Mr Gould did file an affidavit on 6 September in which he said that it was "too early to request affidavits from organisations on their financial commitments to IOC projects". The affidavit refers to some emails from organisations A, B and C, the identities of which were not revealed. He declined to identify them because of the history of Mr Day and Mr Manly "contacting organisations with whom he was negotiating business". The emails do not seem to provide anything very concrete. For example, in the first one the unidentified author says:
"I have also suggested to management here to consider becoming more formally involved, perhaps with sponsorship or other involvement
…
Is starting to have relevance to [deleted] and I feel it would be of benefit for [deleted] to at least speak with the OIC about how he may contribute and or participate."
45 On the resumption of the hearing on 7 September Mr Day and Mr Manly handed up the formal affidavits of search and continuing debt and advised that no money had been paid. Mr Gould said that he had made an offer of $7,800 which had been rejected. Mr Gould said he had filed a notice of motion to have the hearing heard before another judge because of his Honour's apparent bias. His Honour indicated he could see no viable basis for disqualifying himself.
46 His Honour then gave judgment: [2000] FCA 1397. His Honour's judgment was as follows:
"1. The ground set out in the Creditors' Petition as to non compliance with the Bankruptcy Notice which was filed in this Court on 23 August 1999 has been established, and Mr Gould, has not satisfied me that he has a counter claim set off or cross demand equal to or exceeding the amount of the judgment debt the subject of the Bankruptcy Notice, being a counter claim set off or cross demand that he could not have set up in the action in which the District Court judgment was obtained.
2. The creditors have complied with the requirement of the rules and in particular the requirements of rule 19 as to the additional affidavits to be filed by the applicants before the hearing. I have a discretion, nevertheless, as to whether I should make an order for the sequestration of Mr Gould's estate. It has been obvious to me that these proceedings have an overlay of enormous mutual distrust and animosity between the parties and it is not for me to form any view at all as to where the merits of that distrust and animosity may lie.
3. I have urged upon Mr Gould that if he has available to him the business prospects having the value in terms of intellectual property which he asserts and if that property is of the dimension which he has claimed (he has one document filed in court which has placed an amount of $1 million by way of value upon that interest, then he would in his own interests be best to put all of this bitter litigation behind him and pay out the debt, even though that will cause some obvious damage to his pride and self esteem arising out of the conflicts that have occurred.
4. Mr Gould will not, I think, in my judgment ever take advantage of the opportunity which I have extended to him previously to adjourn the proceedings in order to make such payment. I think that the matters that he continues to put to me and the way he puts them to me are such that this proceeding would go on forever if I continued to adjourn and adjourn it.
5. I propose in fairness and justice to the applicants who hold the benefit of the unsatisfied judgment of the District Court and have held the same for such a long time, despite a package of litigation that has subsequently ensued, that they are entitled to have their present petition upheld and a sequestration order made. As I say I think that the fairness and justice of the matter requires that course and that Mr Gould can still exercise the right which he has pointed out to me, namely his statutory right to apply for a stay within 21 days of the order which I will make.
6. To do so he will have to put forward much more tangible material and information than he placed before Sackville J. His Honour was also dismissive of the basis of the counter claim; that was put before him and I have been similarly dismissive. Mr Gould will need to be, within such period of 21 days, much more demonstrative of the substantive interest which he claims to hold and its value, or else it may be within that 21 day period that he will finally take the opportunity of satisfying this outstanding indebtedness and get on with his life.
7. I think that in the exercise of my discretion I must, as I have said as a matter of fairness and justice to the applicants, make an order which I hereby make for the sequestration of Mr Gould's estate. I am not prepared to stay that order on Mr Gould's application or on anything else that he has told me this morning. I will leave it to him to understand from what I have said as to the kind of application and supporting material that he will need to put forward to the Court if he wishes to obtain a stay of my order."