Allen, J.G. v Midland Montagu Australia Limited
[1992] FCA 1025
•8 Dec 1992
1025 1 lqqz
JUDGMENT NO. ..a..rn.a**..a. .a.
IN THE FEDERAL COURT OF AUSTRALIA ) ) l3ANKRUPTCY DIVISION No NB 3184 of 1992 1
NEW SOUTH WALES DISTRICT REGISTRY )
BETWEEN: JORN VICTOR ALLEN
(Applicant)
AND: MIDLAND MONTAGU
| FEDERAL COURT | AUSTRALIA LIMITED |
PRINCIPAL
REGISTRY (Respondent)
Coram: Ryan J Place: Sydney Date: - 8 December 1992 EX TEMPORE REASONS FOR JUDGMENT
Ryan J: In this matter the applicant debtor seeks an order extending the time for compliance with a bankruptcy notice based on a judgment obtained in the Supreme Court of New South Wales on 9 July 1992 whereby Cole J ordered:
"1. Judgment for the plaintiff against each of the second and third
defendant in the sum of $3,659,603.75.2. On the second defendant's cross-claim, judgment for the cross- defendants. 3. On the third defendant's cross-claim, judgment for the cross-
debtor. The orders sought by that notice were: * defendant.
4. The second and th~rd defendants are to pay the plaintiff's costs. "
The judgment debtor was the third defendant in those proceedings.
On 6 August 1992 a notice of appeal, number 40448 of 1992, was filed in the Supreme Court of New South Wales on behalf of the
'1. The appeal be allowed wrth costs. 2. The orders below agarnst Allen be set asrde and in lreu thereof, there be:
2.1 judgment for Allen on the claim and Cross-Claim; 2.2 an order that Midland pay AllenSs costs of the proceedrngs. 3. Alternatrvely to prayer 2, an order that:
3.1 there be a new trial of the proceedrngs; 3.2 the costs of the first trral be Allen's costs in the proceedrngs or be pard by Midland to Allen or be otherwise in the discretron of the Judge hearrng the second trial. 4. Such further or other order or relref as the nature of the case may require."
There has been a divergence of opinion in this Court as to whether the institution of an appeal is comprehended within the expression "proceedings to set aside the judgment or order in respect of which the bankruptcy notice was issued" as used in s.41(6A) of the Bankruptcy Act 1966 as amended. That subsection provides :
"Where, before the exprration of the time fixed by the Court or the Registrar for complrance wrth the requirements of a bankruptcy notrce:
(a)
proceedings to set aside the judgment or order in respect of whrch the bankruptcy notice was issued have been rnstrtuted by the debtor; or
(b) an applrcation to set asrde the bankruptcy notice has been filed
with the Registrar; the Court may, subject to subsection (W), extend the time for compliance w ~ t h the bankruptcy notice." .
In Re L e n t i n i ; Ex p a r t e L e n t i n i v CSR L i m i t e d (1991) 2 9 FCR 363, Neaves J said at 367:
"Counsel submitted, however, that the filing of the notrce of appeal in thrs Court from the judgment of the Supreme Court on which the bankruptcy nocrce was based amounted to the rnstrtution by the applicants of a proceeding to set aside the judgment within the meanrng of s.41(6A)(a) of the BankruptcyAct. Counsel expressly drsclaimed any reliance on par (b) of that subsection.
I did not accept that submrssion and drsmissed the applrcation. The applrcants were ordered to pay the respondent's costs of the applicatron.
A slmrlar argument had been advanced and rejected by me rn Re Maddox
(unreported, 12 May 1987). In that case, I sard:
"The applicant relres on both lrmbs of s.41(6A). In relrance upon s.41(6A)(a), rt rs submrtted that the rnstitutron of the proceedings in the Supreme Court by way of appeal agarnst the judgment of the Magrstrates Court rs properly to be consrdered as the inst~tution of proceedings to set asrde the judgment in respect of whrch the bankruptcy notice was issued. It is further submitted that, as the appeal was rnstituted before the explratron of the time frxed for compliance wrththe requrrements of the bankruptcy notice, the conditron precedent to the exercise of the court's discretion under the provrsron rs establrshed.
I am unable to accept this submrsslon. The language of s.41(6A)(a) is clearly apt to refer to proceedings by a judgment debtor in the court where judgment was entered agarnst him to have the judgment set asrde. What the provision contemplates is an application to have the court by whrch the judgment was pronounced revoke the expressron of its coercrve power where there has been a failure to follow the rules of procedure or where there is shown to be some defect or rrregularity or some other circumstance which renders it desirable that the debtor should be grven an opportunrty to have the issue further litigated. It may be that, in some circumstances, such proceedrngs may be taken in a court superior to that in which the judgment was entered but, be that as it may, the language of the provision is not, in my opinron, apt to refer to proceedings which are properly characterrsed as an appeal from the judgment rn respect of whrch the bankruptcy notlce was issued."
I remarn of the oprnion there expressed."
On the other hand, in Re Tay lor ; Ex p a r t e DCT (1983) 74 FLR 377,
Sheppard J pointed out at 380:"There is a question as to whether this case is withrn the subsection at all because the actual applrcation to set aside the judgment has been dealt with. What is pending in the Supreme Court is the appeal. That was a matter argued by counsel for the Commrssioner. It rs not a matter upon which I propose to express an opinion; for the purposes of
thrs applrcation I have assumed that, although the proceedings on foot are an appeal rather than an applrcatron to set asrde the judgment, they are within the provrsions of s.41."
In Re Barbaro; Ex p a r t e Amalgamated T e l e v i s i o n Services P t y L im i t ed , unreported 3 December 1987, Burchett J held:
"... that the drscretion conferred by s.41(6A) is a wrde d~scretion
wh~ch, unless the Court makes one of the findrngs specified in subsectron (W), is "at large" (see Re Taylor; Ex parte Depvty
Commissioner of Taxatlon (1983) 74 F.L.R. 377 at 379-SO)." 1.
;
- 4 - ! '
See also Re Clift; Ex parte V.L. Finance Pty Limlted, unreported
1 March 1985, per Beaumont J.
I
It thus remains for me to consider how the discretion should be . I exercised. There was discussion before the luncheon adjournment as to whether an opportunity should be afforded to the debtor to adduce evidence from Counsel retaiaed on his behalf in the appeal. j ' In Re Taylorto which I have just referred, Sheppard J observed "The evrdence rn support of this applrcatlox consists of evrdence from the debtor's solicrtor deposrng to the facts of the matter more or less as I have recounted them. Significantly, there is no affidavit from the debtor, nor does the debtor's solicrtor in any affrdavrt which he has sworn say that he has been advised by counsel that the appeal which has been instituted agarnst Lee JLs decrsion has reasonable prospects of success or something of that krnd. Counsel appearing for the debtor thls morning is not counsel engaged in the appeal, and has not turned his mrnd apparently to the questron of whether there rs a reasonable chance of success. All he did rn argument was to refer me to Lee J's judgment, and say that it was a relevant matter for me to consrder whether I thought, upon reading the ludgment, the debtor had some prospect of success rn the appeal.
In the circumstances I frnd myself in an ~nvrdious positron. In the absence of evidence of the usual kind to whrch I have referred, and in the absence of any argument from the debtor's counsel, I am asked to express an oprnron on the debtor's chance of success in the appeal.
That rs not somethrng whlch I should be asked to do. Nevertheless, I have performed the exercise. Having done so, I can only say that it does not occur to me that there 1s any reasonable basis for a successful challenge to Lee J's judgment. Nothing havlng been put to me upon which I mrght rely for a different view, the exercise I have performed has to be understood in that way. But the fact that nothing was pornted out or relied upon by counsel for the debtor is, I thrnk, itself significant. What he wishes me to do really rs simply to take into account the fact that an appeal has been lodged."
On the other hand in Re Barbaro in the judgment of Burchett J to which I have also referred earlier, his Honour said at page 8:
1 -.
"I do not think rt rs for me to attempt to form any vrew about what i
wrll ultimately be the result of the debtor's appeal. It would be an I
invidious and inapproprrate task to attempt to do that. But I think I am required to form a new, on the material placed before me, as to ! . whether it is shown that the appeal rs based upon substantial grounds. i
In my opmron, it i s c l e a r t h a t it 1s s o based, t h e i s s u e s w h ~ c h were
d e a l t wrth by Hunt J . , t h e subject o f appeal, being rssues o f some
difficulty and s ~ g n l f 1 c a n c e . "
I consider that it would be inappropriate to require Counsel retained on behalf of the debtor in the appeal to express an opinion and be exposed to cross-examination on it about the debtor's prospects of success in that appeal. That approach could well raise difficult questions of legal professional privilege and create other embarrassments which should be avoided if at all possible.
As I indicated in the course of argument, the inference which I draw from the facts is that Counsel actlng responsibly in the discharge of his duties as an officer of the Supreme Court has considered that the grounds set out in the notice of appeal are respectably arguable. I also infer that the debtor has bona fide instituted the appeal at significant expense to himself and intends to prosecute it with reasonable diligence.
n
my discretion by not extending the time for compliance with the
Against that background, I have concluded that I should exercise
bankruptcy notice. The detriment to the judgment creditor and possibly other creditors in an extension of time would be a considerable reduction in the period of relation back and the possibility to which Mr Aldridge, on behalf of the creditor, referred that the debtor might use the extended time to create a situation, at the time of later commission of an act of bankruptcy, in which there no longer exists any of the
jurisdictional facts postulated by s.43(l)(b) of the Bankruptcy
Act. On the other hand, M r Parsons of Counsel for the debtor, when pressed, could point only to the possibility that, if time for compliance with the bankruptcy notice were not extended, the debtor might be exposed to prosecution for an offence against s.271 of the Bankruptcy Act which provides:
"A pe rson who ha s become a bankrupt a f t e r t h e commencement o f t h ~ s A c t and :
(a ) w i t h i n 2 y e a r s b e f o r e t h e p r e s e n t a t l o n of t h e p e t l t l o n on which,
o r by v i r t u e of t h e p r e s e n t a t l o n of whlch, he became a bankrupt,
whether t h e p e t ~ t l o n was p r e sen t ed b e f o r e o r a f t e r t h e
commencement o f t h l s A c t , materially contributed to, o r i nc r ea sed t h e e x t e n t o f , h i s insolvency; o r
( b ) d u r l n g any p e r l o d between t h e p r e s e n t a t i o n of t h a t p e t ~ t i o n and
t h e d a t e on which he became a bankrup t , l o s t any of h l s p roper ty ;
by gambling or by s p e c u l a t i o n s t h a t , havlng r ega rd t o h i s financial
p o s i t l o n a t t h e t i m e and any o t h e r ma t e rxa l c i rcumstance , w e r e r a s h and
hazardous, be lng g a m b l ~ n g o r s p e c u l a t i o n s no t connected wi th a t r a d e o r
b u s l n e s s c a r r i e d on by hlm, is g u i l t y of a n o f f e n c e and is punishable ,
on convlccion, by imprisonment f o r a p e r ~ o d no t exceeding 1 year."
I regard that suggested detriment as fanciful in the
circumstances of a debtor who, the evidence suggests, has lived outside Australia since 1985 and has apparently not recently
conducted any business activity in this country. I therefore consider it an appropriate exercise of the Court's discretion to
order : , 1. That the application for an extension of time for
compliance with the bankruptcy notice be refused.
2. That the hearing of any petition founded on non-
compliance with the bankruptcy notice be adjourned, subject to the debtor's appeal to the Supreme Court of New South Wales being prosecuted with reasonable diligence and subject to any necessary renewal of such petition, until the hearing and determination of the said appeal.
3. That the costs of this application be costs in the
cause in any petition founded on non-compliance with the
bankruptcy notice.4. That liberty be reserved to either party to apply on not less than seven days notice in writing to the other party.
I certify that this and the preceding six (6) pages are a true copy of the ex tempore reasons for judgment of his Honour Mr Justice Ryan
Associate: /&%$$&S
Date:
M r R Parsons
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