Burns v AMP Finance Limited

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FEDERAL COURT OF AUSTRALIA

Burns v AMP Finance Limited [2004] FCA 1094

BANKRUPTCY – bankruptcy notice – application for extension of time for compliance with bankruptcy notice – bankruptcy notice issued in respect of judgment debt – proceedings to set aside judgment – no application for stay of execution of judgment debt – whether time for compliance should be extended – whether order restraining respondent from presenting a petition should be made

Bankruptcy Act 1966 (Cth) subs 41(6A)

Shephard v Chiquita Brands South Pacific Ltd [2004] FCAFC 76 followed
Jackson v Conway [2000] FCA 1530 cited
Conway v Jackson (2001) 107 FCR 201 cited
Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264 applied
Re Geard; Ex parte Reid (unreported, Federal Court, 11 February 1994) cited

JOHN BURNS v AMP FINANCE LIMITED ACN 002 812 704

N 1096 of 2004

BRANSON J
24 AUGUST 2004
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 1096 of 2004

BETWEEN:

JOHN BURNS
APPLICANT

AND:

AMP FINANCE LIMITED ACN 002 812 704
RESPONDENT

JUDGE:

BRANSON J

DATE OF ORDER:

10 AUGUST 2004

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.Time for compliance with the bankruptcy notice be extended until midnight on Tuesday 17 August 2004.

2.The application be otherwise dismissed.

3.The applicant to pay the respondent’s costs, including reserved costs, on the basis that if a sequestration order is made on a petition that relies on failure to comply with the bankruptcy notice such costs are to be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth).


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 1096 of 2004

BETWEEN:

JOHN BURNS
APPLICANT

AND:

AMP FINANCE LIMITED ACN 002 812 704
RESPONDENT

JUDGE:

BRANSON J

DATE:

24 AUGUST 2004

PLACE:

SYDNEY

REASONS FOR JUDGMENT

INTRODUCTION

  1. The applicant has applied under subs 41(6A) of the Bankruptcy Act 1966 (Cth) (‘the Act’) to set aside, or alternatively for an extension of time for compliance with, a bankruptcy notice. I proceed on the basis that the reference on the face of the application to s 41A(6A) is the result of an inadvertent error.

  2. On 10 August 2004 I made the following orders:

    1.Time for compliance with the bankruptcy notice be extended until midnight on Tuesday 17 August 2004.

    2.The application be otherwise dismissed.

    3.The applicant to pay the respondent’s costs, including reserved costs, on the basis that if a sequestration order is made on a petition that relies on failure to comply with the bankruptcy notice such costs are to be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth).

    I indicated at the time that I made the above orders that I would publish at a later date my full reasons for making the orders.  These are my reasons for making the orders.

    RELEVANT STATUTORY PROVISION

  3. Subsection 41(6A) provides:

    ‘Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice:

    (a)proceedings to set aside a…

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Details
Case
[2004] FCA 1094
Decision Date

CaseChat Overview and Summary

In the matter of Burns v AMP Finance Limited, the applicant, Burns, sought an extension of time to comply with a bankruptcy notice issued by the respondent, AMP Finance Limited. The bankruptcy notice was issued based on an unpaid judgment debt, and the applicant had failed to comply within the specified time. The applicant sought either to set aside the bankruptcy notice or, alternatively, an injunction to prevent the respondent from presenting a bankruptcy petition based on the failure to comply with the notice. The court had to determine whether it had the jurisdiction to extend the time for compliance with the bankruptcy notice and, if so, whether it was appropriate to exercise that discretion.

The court examined the circumstances under which it could extend the time for compliance with a bankruptcy notice. The court noted that the applicant had instituted an appeal against the judgment debt, which could be considered a proceeding to set aside the judgment. The court found that the appeal was bona fide and being prosecuted with due diligence, allowing the court to consider extending the compliance time. The court also considered the implications of extending the time, including the potential impact on the applicant's financial obligations and the interests of the creditors. The court concluded that while the applicant had not applied for a stay of proceedings pending the appeal, special circumstances existed that warranted extending the time for compliance.

The court granted the application to extend the time for compliance with the bankruptcy notice until 17 August 2004, dismissing the application in all other respects. The court ordered that the applicant would pay the respondent's costs, including reserved costs, on the basis that if a sequestration order was made on a petition that relied on the failure to comply with the bankruptcy notice, those costs would be taxed and paid in accordance with the Bankruptcy Act 1966.

Orders

Orders of the court

1. Time for compliance with the bankruptcy notice be extended until midnight on Tuesday 17 August 2004.

2. The application be otherwise dismissed.

3. The applicant to pay the respondent’s costs, including reserved costs, on the basis that if a sequestration order is made on a petition that relies on failure to comply with the bankruptcy notice such costs are to be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth).

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

On 10 August 2004 the applicant, by his counsel, indicated that the application to set aside the bankruptcy notice was not pressed. He further indicated that, in the alternative to an order extending time to comply with the bankruptcy notice, he sought an injunction restraining the respondent from presenting a petition in reliance on any act of bankruptcy committed by the applicant by failing to comply with the bankruptcy notice. Counsel for the applicant was unable to identify any source of power in the Court to restrain a creditor from presenting a petition where a debtor has committed an act of bankruptcy.EVIDENCE The evidence before me reveals that on 18 June 2004 a notice of appeal was filed in the Court of Appeal of New South Wales seeking to have the order of the Supreme Court dated 25 March 2004 set aside. No stay of execution or of proceedings under the judgment dated 25 March 2004 has been sought. No evidence has been placed before me concerning the merits of the appeal. The appeal has been listed for hearing on 5 November 2004. The appellant has given evidence that he is a director and shareholder of the two companies jointly and severally liable with him to pay the judgment debt and of another company. He has deposed to being ‘actively involved in attempts to gain refinancing for the companies of which [he is] a Director, for the purpose of paying the debt owed to the Respondent Creditor’. I am willing to accept that, if the applicant commits an act of bankruptcy, potential financiers might not accept his personal guarantee of obligations assumed by companies of which he is a director and that this may make it more difficult for the debts of the companies to be refinanced. It appears that one of the companies jointly and severally liable with the applicant for the judgment debt is the register proprietor of certain land (‘the land’) within the municipality of the Port Stephens Shire Council. It further appears that another company of which the applicant is a director is appealing to the Land and Environment Court of New South Wales against a refusal by the Port Stephens Shire Council on 3 May 2004 of a development application for a tourist facility on the land. The applicant has placed in evidence a valuation of the land dated 10 March 2003 which values the land in an amount that exceeds the amount of the judgment debt. I note, however, that the valuation discloses that it was undertaken for the purpose of estimating the current fair market value of the land ‘subject to Council Approval (DA for Stage 1) of the proposed redevelopment’. I conclude that the valuation assumes the grant of the development application that was refused by the Port Stephens Shire Council on 3 May 2004. No evidence has been placed before me concerning the merits of the application to the Land and Environment Court of New South Wales in respect of that refusal. The applicant has also placed in evidence a copy of a contract entered into for the sale of twenty of twenty-six lots in a proposed subdivision of the land. The contract is conditional on the Port Stephens Shire Council, and other relevant authorities, giving approval to the proposed subdivision. It seems likely that the success of the application to the Land and Environment Court is critical to the completion of the contract.

Decision

Reasons for decision

BRANSON J

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Established by: BRANSON J

Informal valuations have been placed in evidence as annexures to an affidavit sworn by a financial consultant who is attempting to secure refinancing in respect of the land. These informal valuations assume registration of a plan of subdivision. As there is no evidence before me that suggests otherwise, I assume that registration of the plan of subdivision is dependent on the application to the Land and Environment Court of New South Wales referred to above.CONSIDERATION The present application was made before the expiration of the time fixed by the bankruptcy notice for compliance with that bankruptcy notice. As the application is no longer pressed so far as it seeks an order setting aside the bankruptcy notice, the Court’s power to extend the time for compliance with the bankruptcy notice is dependent upon the applicant having instituted a proceeding to set aside the judgment debt (see [3]-[5] above). In Jackson v Conway [2000] FCA 1530 I expressed the view that an appeal in which an order is sought to set aside the whole of a judgment is a proceeding to set aside that judgment within the meaning of subs 41(6A) of the Act. The correctness of that view was confirmed by the Full Court in Conway v Jackson (2001) 107 FCR 201 at 207-210. I am satisfied that an appeal has been instituted in which an order is sought to set aside the whole of the judgment which created the judgment debt. I am not of the opinion that the appeal has not been instituted bona fide or is not being prosecuted with due diligence. I therefore proceed on the basis that I may, if I consider it appropriate to do so, extend the time for compliance with the bankruptcy notice. The approach that I should adopt in determining whether it would be an appropriate exercise of the Court’s discretion in the circumstances of this case to extend the time for compliance with the bankruptcy notice is, in my view, that which commended itself to Lehane J in Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264 (‘Byron’). In that case his Honour cited with approval a passage from an unreported judgment of Shepherd J in Re Geard; Ex parte Reid (unreported, Federal Court, 11 February 1994). In Re Geard Shepherd J said:‘… I think it most undesirable that a judge of this Court should in effect undertake some provisional review to determine the correctness or otherwise of the judgment of another court especially when that judgment is under appeal to the Court of Appeal which has jurisdiction to hear appeals in the normal course. I prefer to approach the matter in a different way. The debtor has not made any application for a stay of proceedings pending the outcome of the appeal. Why he has not done so is not clear to me but the judgment which has been recovered against him is a final judgment and execution upon it has not been stayed it would seem to me to require quite special circumstances before a court exercising jurisdiction in bankruptcy would, in effect, do what has not been done in the court in which the judgment has been obtained by extending the time for compliance with the bankruptcy notice when no application to stay the judgment has been made. If one were to contemplate the taking of such a course, one would usually require evidence of the means of the debtor and would wish to consider whether or not it were appropriate to order that security for the amount of the judgment should be provided. Those are matters which a court exercising jurisdiction to stay the execution of a judgment would wish to consider.A further factor is that this is an application to extend time for compliance with a bankruptcy notice; it is not the hearing of a bankruptcy petition. The refusal of the application will not affect the status of the debtor but it will mean that he, in all probability, will commit an act of bankruptcy. That act of bankruptcy will be available to the petitioning creditors or to any other creditor upon which to base a bankruptcy petition at any time in the period of six months after the act of bankruptcy has been committed. Otherwise the debtor’s position will remain unaffected by what the Court does.If the appeal is ultimately dismissed and the judgment stands with the consequence that the bankruptcy proceedings go on, it may be quite important to the petitioning creditor, whoever he or she may be, to the general body of creditors and to the trustee in bankruptcy, that there be, for the purposes of the administration of the bankrupt estate, an act of bankruptcy committed at an earlier time than would be the case if this application were acceded to.’