Braune v Gurbiel Holdings Pty Ltd - [2007] FMCA 262

FEDERAL MAGISTRATES COURT OF AUSTRALIA

BRAUNE v GURBIEL HOLDINGS PTY LTD

[2007] FMCA 262

BANKRUPTCY – Application to set aside order extending time for compliance with a bankruptcy notice made before first court date.

Bankruptcy Act 1966 (Cth)
Federal Magistrates Act 1999 (Cth), s.104
Federal Magistrates Court Bankruptcy Rules 2006 r.3.03

Applicant:

KURT BRAUNE

Respondent:

GURBIEL HOLDINGS PTY LIMITED

File number:

SYG 448 of 2007

Judgment of:

Barnes FM

Hearing date:

22 February 2007

Delivered at:

Sydney

Delivered on:

22 February 2007

REPRESENTATION

Solicitors for the Applicant:

Sullivans Solicitors

Solicitors for the Respondent:

Sally Nash & Co.

ORDERS

The application to review order 1 made on 12 February 2007 is dismissed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG 448 of 2007

KURT BRAUNE

Applicant

And

GURBIEL HOLDINGS PTY LIMITED

Respondent

REASONS FOR JUDGMENT

On 12 February 2007 the applicant filed in this Court an application to set aside bankruptcy notice NN4538 of 2006 and to extend the time for compliance with the notice together with a supporting affidavit. Rule 3.03(4) of the Federal Magistrates Court Bankruptcy Rules 2006 provides that an application for extension of time to comply with a bankruptcy notice need be heard in open court only if it is for an extension of time to a date after the first court date.
A Registrar of this Court made an order pursuant to section 41(6A) of the Bankruptcy Act 1966 (Cth) extending the time for compliance with the requirements of the bankruptcy notice up to and including Tuesday 27 February 2007, the first court date.
An order was also made giving liberty to the parties to apply on 24 hours notice to vary or discharge the orders extending the time for compliance with the bankruptcy notice. Pursuant to this order the respondent seeks that the order extending the time for compliance be discharged.
As the respondent contends, in exercising the power to review a decision of the Registrar pursuant to section 104 of the Federal Magistrates Act 1999, the Court should consider for itself whether or not there should be an extension of time for compliance, in this case from today (22 February) until Tuesday, 27 February 2007 and if the court is not so satisfied it should set aside the order.
As pointed out by the legal representative for the respondent, the source of the power to extend the time for compliance is to be found in section 41(6A) of the Bankruptcy Act which provides:
(6A) Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice:
(a) proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or
(b) an application has been made to the Court to set aside the bankruptcy notice;
the Court may, subject to subsection (6C), extend the time for compliance with the bankruptcy notice.
There is no suggestion on the material before the Court that the debtor had instituted of proceedings to set aside a judgment in respect of which the bankruptcy notice was issued before filing the application of 12 February 2007. There is no evidence before me at this stage as to whether or not that has occurred since the applicant’s affidavit was sworn on 12 February 2007. In that affidavit the applicant indicated that he was in the process of lodging an application in the New South Wales District Court to set aside the default judgment in respect of which the bankruptcy notice was issued. In these circumstances there is no evidence before me to establish that the provisions of section 41(6A)(a) are applicable.
The Court nonetheless has a discretion under section 41(6A)(b) where an application has been made to the Court to set aside a bankruptcy notice to extend the time for compliance with the bankruptcy notice.
The discretion under s.41(6A)is limited by subsection (6C) if it is applicable. It provides that where a debtor applies to the Court for an extension of time on the ground that proceedings to set aside a judgment or order have been instituted and the Court is of the opinion that the proceedings have not been instituted bona fide or are not been prosecuted with due diligence the Court shall not extend the time for compliance with the bankruptcy notice. Again, it seems on the evidence before the Court that technically this provision is not applicable in these proceedings as there is no evidence that proceedings to set aside the judgment have been instituted. Nonetheless the Court is to take into account all of the circumstances in exercising its discretion under s.41(6A). The Court can take into account whether proceedings have been commenced bona fide to set aside the judgment and if so, whether they are being prosecuted diligently, even if the application for an extension of time is based on section 41(6A)(b) rather than section 41(6A)(a).
The respondent submitted, in effect, that there is no substance in any grounds for the application to set aside the bankruptcy notice that emerge from the affidavit of the applicant and on that basis the time for compliance ought not to be extended, it being a matter that is necessarily related to the power that the Court has to set aside a bankruptcy notice.
In written submissions the respondent referred to issues such as the possibility that there was a claim that the bankruptcy notice was not served. It was submitted that that would not be a ground for setting aside the bankruptcy notice. Further, while the applicant had indicated that he intended to file an application to set aside a default judgment, it was argued that that had not occurred, or at least that there was no evidence that it had. As to what was said to be an apparent claim that the applicant’s associated companies have a claim against the respondent which would extinguish the liability to the respondent and that there may be a set-off or cross-claim of a kind referred to in section 40(1)(g) of the Bankruptcy Act, it was pointed out that a claim by a separate legal entity would not come within the provisions of section 40(1)(g) and that if there were claims by the applicant such claims could have been set up in the proceeding in which the judgment upon which the bankruptcy notice is based was obtained.
However in this instance the nature of the extension of time in issue is a short extension of time granted from the time of filing until the first Court date. There is no suggestion by the legal representative for the respondent (the creditor who issued the bankruptcy notice) that any prejudice would be suffered by the respondent or any other creditor if the time for compliance with the bankruptcy notice was extended until the first court date. No issue was taken as to the impact of an extension of time on the date of an act of bankruptcy by the debtor or, indeed, on any related legal proceedings. Nor was any issue taken in relation to lapse of time or delay in relation to these proceedings and hence whether there was any explanation for such delay.
It was suggested for the respondent that it may be relevant to take into account that there was no evidence before the Court that the foreshadowed proceedings had in fact been instituted to set aside the judgment on which the bankruptcy notice was based. That factor, along with the other factors that I have mentioned, are all matters that can be taken into account in relation to an application to exercise the discretion to extend the time for compliance with a bankruptcy notice. I consider, however, in the particular circumstances of this case it is of importance to take into account the nature of the extension of time in issue as an extension of time from the filing of an application to set aside a bankruptcy notice until the first return date. This matter comes before the Court not on the first return date (when many of the issues that are raised by the respondent may well crystallise and require determination), but rather, by an exercise of liberty to apply on 24 hours notice to vary or discharge the kind of order that it is contemplated need not be made in open court. The extension of time in issue extends only to the first court date.
In his affidavit filed in this Court on 12 February the applicant foreshadowed an application to set aside the default judgment in the District Court. Given that at that time the extension of the time for compliance with the bankruptcy notice was granted until 27 February 2007 it is also relevant to take into account the fact that the question of whether such proceedings had been instituted and were being pursued with due diligence would normally be assessed on the first return date of 27 February 2007.
There is no suggestion that there is any prejudice to be suffered by the creditor if the order extending the time for compliance remains in place up to and including next Tuesday (it now being Thursday). Despite the fact that the respondent does raise issues about the extent to which the affidavit of the applicant specifies a basis on which the bankruptcy notice should be set aside, such submissions are not such as to satisfy me that the time for compliance should not be extended until the first court date.
In all of the circumstances, bearing in mind the particular nature and length of the extension of time for compliance with the bankruptcy notice in issue, the absence of evidence of prejudice to any creditor from the extension of time for compliance remaining in place up to and including the first return date and where it has been foreshadowed that there would be an application to set aside the default judgment in another court, I am not persuaded that the court should set aside the order that was made on 12 February 2007. It is appropriate that the time for compliance with the bankruptcy notice be extended under s.41(6A) of the Bankruptcy Act until 27 February 2007 as the date on which this matter is listed when the application of 12 February 2007 was filed.
Hence the order that was made on 12 February 2007 should remain in place. The application to review the decision of the Registrar and to dismiss Order 1 made on 12 February 2007 is dismissed.

I certify that the preceding sixteen (16) paragraphs are a true copy of the reasons for judgment of Barnes FM

Associate:

Date: 15 March 2007