Hellier Capital Pty Limited v Richard Albarran

Cahill v Howe [1986] VR 630 Chint Australasia Pty Ltd v Cosmoluce Pty Limited [2008] NSWSC 1054 GFT Australia Pty Limited v Moore (Supreme Court of Victoria, 2 November 1992, unreported) CASES CITED : Leondaris v KGB Design & Construction Pty Ltd [1998] FCA 1354 Lewis v Leslie [ 2001] VSC 110 Limited v Tansey (Court of Appeal, 17 July 1995, unreported; BC 9505123 Red Lea Chickens Pty Limited v Tansey (Court of Appeal, 17 July 1995, unreported; BC 9505123

PARTIES : Hellier Capital Pty Limited (Plaintiff) Richard Albarran (Defendant)

COUNSEL : B Spinks (Solicitor) (Plaintiff) J McCarthy QC / B Katekar (Defendant)

SOLICITORS : Spinks Eagle Lawyers (Plaintiff) Etienne Lawyers (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4058/08 HELLIER CAPITAL PTY LIMITED v RICHARD ALBARRAN JUDGMENT 1 HIS HONOUR: The plaintiff (Hellier) has recovered judgment against the defendant (Mr Albarran) in a sum exceeding $1.6 million. Mr Albarran applied to pay the judgment debt by instalments (UCPR r 37.2). That application was dealt with by a Registrar and an order was made (r 37.3). Hellier applies, pursuant to r 37.3(3), to have the instalment order rescinded.

Principles governing the exercise of jurisdiction 2 As I have said, the relevant rules are rules 37.2 and 37.3. I set them out.

37.2 Application for instalment order by judgment debtor (cf DCR Part 31A, rule 2; LCR Part 27, rule 2) (1) A judgment debtor may apply to the court for an instalment order with respect to the amount owing under the judgment debt. (2) Such an application: (a) may be made whether or not some other instalment order is in force in relation to the judgment debt, and (b) must be supported by an affidavit as to the judgment debtor's financial circumstances, and (c) must be dealt with as soon as practicable after it is made. (3) An application under this rule: (a) except as provided by paragraph (b), is to be dealt with by the registrar under rule 37.3, or (b) if it is made during a hearing before the court, is to be dealt with by the court under rule 37.4. (4) Notice of motion of an application under this rule does not have to be filed or served if the application is made during the hearing at which the judgment debtor is being examined pursuant to an order for examination. (5) An application under this rule may be made not only to the court in which judgment was entered but also, in the case of a judgment entered in a Local Court, to any other Local Court by which an examination is being conducted as referred to in rule 38.5 (2).

(1) The registrar may deal with an application for an instalment order: (a) by making an instalment order in relation to the amount owing under the judgment debt, or (b) by making an order refusing the application. (2) As soon as practicable after making an instalment order under this rule, the registrar: (a) must give notice of the order to the judgment creditor and the judgment debtor, and (b) must also give to the judgment creditor a copy of the affidavit referred to in rule 37.2 (2) (b). (3) Either party may file an objection to an order made under subrule (1) (a) or (b) at any time within 14 days after the order is made. 3 Those rules, among others, were considered by Einstein J in Chint Australasia Pty Ltd v Cosmoluce Pty Limited [2008] NSWSC 1054. His Honour considered at some length the "genealogy" of the rules to which I have referred and, having looked at some authorities, dealt with what he called "the principled exercise of the relevant discretion" at [15]. His Honour there said, and I agree, that the exercise of the discretion in any particular case requires close attention to the facts of the case. 4 Among the circumstances to which his Honour referred as bearing on the exercise of the discretion were that "a party having succeeded in obtaining substantial success in major commercial litigation is obviously entitled to the fruits of its success"; that "some particularly special circumstances would have to be shown to deny a party to major commercial litigation, its entitlement to enforce a court order"; and that "the fact that the losing party continues to run a substantial business … cannot per se, affect the prima facie entitlement of the winning party to enforce the Court's order". 5 His Honour's statement of the considerations relevant in that case has to be understood by reference to the particular facts. Those facts included, as his Honour set out at [10], that the judgment debtor did not require an instalment order to be made to enable it to meet the judgment debt. They included also the fact that the judgment debtor had the benefit of an undertaking from its directors to meet any shortfall in its ability to pay the judgment debt. Notwithstanding that undertaking, as his Honour found, those directors did not appear to be willing to meet their obligation; on the contrary, as his Honour also found, the real reason for seeking the instalment order was to enable the judgment debt to be satisfied by means which did not involve recourse to the assets of the directors. 6 I do not regard the circumstances referred to by Einstein J in Chint as having particular significance to the facts of this case. That is because, as I shall show, there are strong reasons shown by Mr Albarran to support the order that was made by the Registrar. 7 The rules do not indicate any matters that the court should take into account, either in deciding to make an instalment order or in deciding to rescind or vary one. However, Mr McCarthy QC, who appeared with Mr Katekar of counsel for Mr Albarran, pointed to the Uniform Civil Procedure Rules 1999 (Qld). The equivalent rule, r 869, did set out the circumstances that the court must take into account in deciding whether to make an instalment order. Those circumstances are as follows: 869 Prerequisites for instalment order

(1) In deciding whether to make an instalment order, the court must have regard to the following-- (a) whether the enforcement debtor is employed; (b) the enforcement debtor's means of satisfying the order; (c) whether the order debt, including any interest, will be satisfied within a reasonable time; (d) the necessary living expenses of the enforcement debtor and the enforcement debtor's dependants; (e) other liabilities of the enforcement debtor; (f) if the applicant is the enforcement debtor--whether, having regard to the availability of other enforcement means, making the order would be consistent with the public interest in enforcing money orders efficiently and expeditiously. (2) In deciding the amount and timing of the instalments, the court must be satisfied that the instalment order will not impose unreasonable hardship on the enforcement debtor. (3) However, an enforcement hearing is not necessary before the court makes the instalment order. 8 Further, a perusal of other authorities indicates that at least some of the matters referred to in the Queensland rules are of more general application. For example, as Einstein J said in Chint, and as was pointed out in Leondaris v KGB Design & Construction Pty Ltd [1998] FCA 1354, an instalment order ought not be made if the judgment debtor's means are sufficient to enable him or her to pay the judgment debt immediately and in full. 9 By contrast, an instalment order ought not be made if it is obvious that to make it would be futile, because the judgment debtor could not meet his or her obligations under it: Cahill v Howe [1986] VR 630. 10 The authorities also suggest that the period of time for payment under the instalment order must be reasonable. See Cahill; Lewis v Leslie [ 2001] VSC 110; and GFT Australia Pty Limited v Moore (Supreme Court of Victoria, 2 November 1992, unreported). What is "reasonable" is of course a matter of fact in each case, and requires attention to the amount of the judgment debt and the time for which it will be outstanding, or more accurately the time before it will be satisfied, if the proposed order is made. 11 Again, it would not ordinarily be a proper exercise of the discretion to make an instalment order if the amount proposed to be paid would not enable some reduction to be made in the amount of the judgment debt. That is a relevant circumstance because of course judgment debts carry interest; an instalment order which chipped away at part only of the interest obligation, but did not permit any reduction of the principal amount of the judgment, would be inefficacious. See Red Lea Chickens Pty Limited v Tansey (Court of Appeal, 17 July 1995, unreported; BC 9505123). The evidence 12 By reference to those considerations, I turn to consider the particular circumstances. In doing so, I take account of the following matters:

(1) The evidence for Hellier did not disclose any particular reason for seeking to have the instalment order rescinded other than that Hellier, having served a bankruptcy notice on Mr Albarran, wishes to proceed to bankrupt him as soon as possible.

(2) Mr Albarran's evidence (both from his own affidavits and from affidavits in support) as to his financial situation and the claims upon his income was both comprehensive and unchallenged. 13 In summary, Mr Albarran's evidence is to the effect that:

(1) He has gross assets of about $5,050,000 in value, comprising substantially strata title property at Pyrmont and his interest, as an equity partner, in the firm of Hall Chadwick NSW (a firm of chartered accountants).

(2) He has liabilities of approximately $4.5 million, including a debt secured over the Pyrmont properties, obligations for tax, and obligations to a bank for partnership loans and other matters.

(3) Although he has a surplus of assets over liabilities of about $536,000, that surplus could only be achieved if the strata title property was sold for its full appraised value and if he could realise the full value of his interest in Hall Chadwick NSW. The latter proposition at least must be regarded as somewhat doubtful.

(4) He has other contingent liabilities, including an unresolved property settlement with his former wife, obligations to a former partner in Hall Chadwick NSW who left the partnership in August 2008, and obligations to a current partner in that firm who has given notice of his intention to retire as from 30 June 2009. (5) He has made a number of applications for finance to enable him to pay the judgment debt. All of those applications have been rejected.

(6) Over the last three and a half years, his monthly earnings from the partnership business have averaged $77,000, and on a cash basis have ranged from $52,000 in the financial year 2007 to $96,000 in the year 2005 (the difference between taxable income and cash receipts is explained at least partly because some of his income, received in the form of fully franked dividends, is "grossed up").

(7) His monthly expenses, including $6,880 per month for rent, $10,000 per month for outstanding income tax (under an arrangement that he seeks to make with the Australian Taxation Office, which arrangement has not been confirmed) and $10,000 per month for living expenses, are $38,430.

(8) His ability to earn income is dependent upon his remaining, and practising as, a registered insolvency practitioner. He has no training or experience to enable him to practise in any other area of accounting, and believes that he could not obtain employment in any such other area. This is significant because, if Mr Albarran becomes bankrupt, he will not remain a registered insolvency practitioner.

(9) He believes that he will remain able to continue to earn the income to which he referred over the next four years, and that he will be aided in that because at least some of the money payable to Hellier will be tax deductible. 14 If one accepts Mr Albarran's evidence, the following points are clear:

(1) He cannot pay the judgment debt from his own resources, and cannot borrow money to enable him to meet it.

(2) The amount of $35,000 that he proposed (and that the instalment order accepts) is in reality as much as he can afford to pay, having regard to his likely income and his level of expenses.

(3) If an order were made at any higher amount, it is likely that Mr Albarran could not meet it.

(4) If the order is rescinded, as Hellier seeks, then the inevitable result is that Mr Albarran will become bankrupt, will be unable to practise his profession, unable to support his various dependants, and unable to make any significant contribution to the judgment debt. 15 As I have said, all of that evidence was uncontroverted. It was given at some detail and was supported by an affidavit of Mr Lyle Vallance, an accountant employed by Hall Chadwick NSW, who has had responsibility for looking after Mr Albarran's tax returns and the like for some time. Mr Spinks, solicitor, appearing for Hellier, appeared to question, or express suspicion, as to Mr Albarran's financial position as revealed in the affidavit evidence. Indeed, he submitted, one of the reasons for seeking to bankrupt Mr Albarran was to enable his financial position to be examined more thoroughly. It is obvious that Hellier has suspicions as to Mr Albarran's financial position; its director, Mr Hellier, expressed surprise that someone who had earned what Mr Albarran said he had been earning should be in the somewhat parlous financial position to which Mr Albarran has deposed. 16 Although one can understand those feelings, the simple reality is that Mr Spinks did not choose to cross-examine Mr Albarran, or Mr Vallance, on their affidavits. It may be that, if taxed with the matters to which Mr Spinks and his client referred, Mr Albarran could have given some explanation. But, a challenge not having been made, I do not think it is open to me to act otherwise than on the basis that Mr Albarran's unchallenged evidence, not being inherently implausible, should be accepted. 17 Although it is not of dispositive significance, I do think that there is some basis for concluding that Hellier's interest in bankrupting Mr Albarran is not so much the interest expressed by Mr Spinks in submissions but, rather, an interest of a more vindictive nature. In a letter dated 17 April 2009 from Mr Spinks' firm to Mr Albarran's lawyers, Mr Spinks said:

"My client has instructed me to file a creditor's petition in due course thereby achieving what it regards as at least a moral victory."

18 The evidence to which I have referred makes it clear that a number of the discretionary considerations to which I have referred fall in Mr Albarran's favour. I have already summarised some of those matters, and I shall not repeat what I have said. Thus, it seems, there was a proper basis by which the order made could be supported. However, this is not in any way some sort of appeal from the order made by the Registrar. It is a hearing de novo. It is thus for me to consider all the evidence afresh, and to exercise the discretion anew, not guided by any presumption in favour of the correctness of the order made by the Registrar. Indeed, it could not be otherwise in circumstances where that order was made (as the rules provide) without a hearing, and was not supported by a statement of reasons. In those circumstances, a basis for challenging the exercise of discretion (if, contrary to what I have said, that were what is required) would not be available. 19 There is one more factor to which regard must be paid. That was hinted at by Einstein J in Chint, when his Honour referred to the proposition that a successful party is entitled to the fruits of its success, and to enforce the court's orders. I accept that. Although his Honour framed the proposition in terms of "major commercial litigation" I do not think that the principle is so limited. There is a real public interest in enabling parties who have litigated their disputes to enforce the victory that they have achieved. That public interest arises, at least in part, because the system of adjudication through courts depends firstly on acceptance of the outcome (if necessary, after exhausting all available avenues of appeal) and, secondly, the ability to enforce the outcome. If the process of adjudication is to survive, so that people do not resort to self-help, the courts should be slow to interfere in the normal processes of enforcement. 20 Equally, however, there is a legitimate public interest in having trained people, who perform important work, remaining available to perform that work. It would be a loss to the community if Mr Albarran's services as an insolvency practitioner were not available to the community; particularly, although this is not a consideration of great significance, during what is often called the "global financial crisis". 21 Equally, there is a significant public interest in the proper support of dependants by those who are, in the old-fashioned and somewhat paternalistic phrase, the breadwinner. Mr Albarran's unchallenged evidence is that the child of his previous marriage, the children of his present partner, and the child that he has had with that present partner, as well as that present partner, are all dependent on him for support. If he is prevented from earning his living (and the proper inference from his evidence is that the making of a bankruptcy order would prevent him from earning his living) then all those people will suffer. 22 Finally, in this context, I note that the instalment order made would not mean that the judgment debt remained outstanding for an unconscionable length of time. As a judgment of the Court, it carries interest at the rate, presently, of 9% per annum. The evidence of Mr Vallance includes a table prepared by him showing how long it would take for the judgment debt to be repaid if the interest rate remained the same and if the payments were made on time. On the evidence of Mr Vallance, the judgment debt would be repaid by February 2013; a period of a little less than four years. In the circumstances of this case, having regard to the amount of the judgment debt, I do not regard that as a time period so long that, of itself, it speaks against the continuation of the instalment order. The repayments that Mr Albarran has proposed (and that the Registrar, by his order, has confirmed) make very substantial reductions in the principal amount of the debt: a little under $23,000 per month initially, and of course increasing thereafter. Although it would be desirable if the judgment debt could be paid more quickly, there is no basis on the evidence for thinking that this would be likely to happen if the instalment order were rescinded. On the contrary, if the instalment order is rescinded and Mr Albarran is made bankrupt, it is likely that the great bulk of the judgment debt will not be paid at all. 23 Accordingly, taking all those matters into account, I am of the view that the order sought, for the rescission of the instalment order made on 17 April 2009, should not be granted. That is because, re-exercising the discretion anew myself, as I am required to do, I am persuaded that the instalment order is in all the circumstances of this case appropriate.

Orders 24 I order that the plaintiff's notice of motion filed on 29 April 2009 be dismissed. 25 I order the plaintiff to pay the defendant's costs of the notice of motion. I order that the costs so payable be set off against costs payable by the defendant to the plaintiff pursuant to the Court's orders made on 5 March 2009.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.