Dimasi v Nangiloc Colignan Farms Pty Ltd - [2006] FMCA 856

FEDERAL MAGISTRATES COURT OF AUSTRALIA

DIMASI & ANOR v NANGILOC COLIGNAN FARMS PTY LTD

[2006] FMCA 856

BANKRUPTCY – Whether court has power to extend time to make an application to set aside Bankruptcy Notice after the due date for compliance.

PRACTICE AND PROCEDURE – Whether ‘Good Friday’ or other day when registry closed can be relied on when calculating time within which to commence proceedings.

Bankruptcy Act 1966, ss.33(1), 41(6A)
Corporations Law (Vic) 1995, s.1322(4)(d)
Federal Magistrates Court Rules 2001, r.3.04(4)

Re Wilhelmsen Ex parte Gould & Ors (1986) 66 ALR 189
Streimer v Tamas (1981) 37 ALR 211
David Grant & Co Pty Ltd v Westpac Banking Corporation [1994-1995] 184 CLR 265

First Applicant:

FRANK DIMASI (TRADING AS F & M DIMASI)

Second Applicant:

MARIA DIMASI (TRADING AS F & M DIMASI)

Respondent:

NANGILOC COLIGNAN FARMS PTY LTD (ACN 008 447 603)

File number:

MLG512 of 2006

Judgment of:

McInnis FM

Hearing date:

5 June 2006

Date of last submission:

14 June 2006

Delivered at:

Melbourne

Delivered on:

15 June 2006

REPRESENTATION

Counsel for the Applicants:

Mr T Best

Solicitors for the Applicants:

V.M. Roccisano

Counsel for the Respondent:

Mr W Stark

Solicitors for the Respondent:

Leonard Legal

ORDERS

The trial shall proceed on affidavit evidence with the affidavit of each adopted to stand as the evidence in chief of the witness.
The Applicants shall file and serve any further affidavits to be relied upon on or before 22 June 2006 and not otherwise, except with the leave of the Court.
The Respondent shall file and serve any affidavits to be relied upon on or before 29 June 2006 and not otherwise, except with the leave of the Court.
If a party requires a deponent to an affidavit to be made available for cross-examination, that party shall notify the other in writing not less than 7 days prior to the trial date.
The Application is listed for final hearing on 11 July 2006 at 10.15 am with an agreed hearing estimate of 1 day and otherwise placed in the Reserved List of Cases docketed to McInnis FM to be listed on an earlier date if one becomes available upon 21 days notice to the parties.
Liberty to apply is granted to the parties in relation to any matters arising out of these orders.
Costs be reserved.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLG512 of 2006

FRANK DIMASI (TRADING AS F & M DIMASI)

First Applicant

MARIA DIMASI (TRADING AS F & M DIMASI)

Second Applicant

And

NANGILOC COLIGNAN FARMS PTY LTD (ACN 008 447 603)

Respondent

REASONS FOR JUDGMENT

In an application filed 18 April 2006 Frank Dimasi (the First Applicant) and Maria Dimasi (the Second Applicant) seek to set aside a Bankruptcy Notice issued by the Official Receiver on 2 November 2005. The Bankruptcy Notice was issued at the request of Nangiloc Colignan Farms Pty Ltd (the Creditor).
The Bankruptcy Notice purports to rely upon a judgment debt and interest in the total sum of $4,422.05. The certified extract of the judgment reveals that orders were made in the Magistrates Court at Mildura on 9 July 2003. It is not necessary to refer in further detail to the issues raised in the application to set aside the Bankruptcy Notice.
A preliminary issue was raised in this matter as to whether the Court had power to entertain the application to set aside the Bankruptcy Notice. The Creditor has argued that the Court does not have power to extend the time within which the Applicants may file the Application to set aside the Bankruptcy Notices on the ground that in each case the time for compliance with the Bankruptcy Notice expired prior to the filing of the application to set aside the Bankruptcy Notice.
The First Applicant is claimed to have been served with the Bankruptcy Notice on 22 November 2005. The Second Applicant is claimed to have been served with the Bankruptcy Notice on 24 March 2006.
Accordingly the Creditor submitted that in each case the time for compliance with the Bankruptcy Notice had expired prior to the application to set aside the Bankruptcy Notice being filed in the Court. Reference was made to s.41(6A) of the Bankruptcy Act 1966 (the Bankruptcy Act) which provides as follows:-
“(6A) Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice:
(a) …
(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.”
It was further submitted that s.33(1) of the Bankruptcy Act is specific in relation to the extensions of time the Court can and cannot grant. It was argued that both the sub-sections allow the Court to extend any time before its expiration but there are no reported cases that the Creditor could locate which allowed for the extension of time for compliance with the Bankruptcy Notice after the date that the Debtor is deemed to have committed the act of bankruptcy. It was submitted that the reason for that is clear namely that the Court does not have the power to do so. The Court cannot, it was argued, undo an act that has already occurred and that has consequences for the Creditors of the Debtor as a whole namely the commission of an act of bankruptcy.
The Court had referred the parties to two decisions which it was thought may be relevant to the issues raised in the determination of this preliminary issue. The first was the matter of Re Wilhelmsen Ex parte Gould & Ors (1986) 66 ALR 189 where Pincus J held the Court had power to extend the time for compliance with a Bankruptcy Notice until it dealt with the application. The Respondent submitted that the basis upon which the Court decided in that case that it had power was that the Debtor had tried unsuccessfully to challenge the Bankruptcy Notice within time thereby enlivening the Court’s power. The other case referred to by the Court of Streimer v Tamas (1981) 37 ALR 211 was a decision of the Full Court of the Federal Court where it held it had power to extend the time for compliance with the Bankruptcy Notice in circumstances where an application to extend time for compliance was not on foot but the Court inadvertently failed to extend the time for compliance when it adjourned the hearing for one day. The Creditor submitted that the basis upon which the Court decided it had the power was that the Debtor had made application to challenge the Bankruptcy Notice within time thereby enlivening the Court’s power.
Neither of those cases, it was submitted by the Creditor, applies to the present application. In this case it was argued the Bankruptcy Notice was served on each Debtor and the time for compliance expired.
Reference was further made to Corporations Law and in particular s.1322(4)(d) of the Corporations Law (Vic) 1995 which had provided:-
“ … The Court may … make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes …
(d) an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this law or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made).”
Reference was made to a decision of David Grant & Co Pty Ltd v Westpac Banking Corporation [1994-1995] 184 CLR 265 where the High Court decided the meaning of s.1322(4)(d). The Court concluded the section did not allow the Court to extend the time for a company to apply to set aside a statutory demand after the 21 day period allowed for in s.459G had expired.
It was argued for the Creditor by analogy that the words of s.41(6A) of the Bankruptcy Act make it clear that the application to set aside the Bankruptcy Notice must be filed and served within the 21 day period and the Courts powers in s.33(1)(c) could not be used to extend that mandatory period. Accordingly it was submitted the Court cannot extend the time for either of the Debtors to comply with the requirements of the Bankruptcy Notice and the application by each Debtor should be dismissed.
It was submitted on behalf of the Applicants that the Application filed on 18 April 2006 was made within time with respect to the Applicants and an act of bankruptcy had not occurred in respect of both Applicants. It was argued that there was an issue as to whether or not the Applicants were properly served with the Bankruptcy Notice and further that the Bankruptcy Notice contains fatal defects rendering it invalid.
It was submitted that in relation to the preliminary issue the Applicants had made their application within time and the Court therefore was able to extend the time for compliance and decide whether or not to set aside the Bankruptcy Notice. In the alternative it was argued that proper service of the Bankruptcy Notice with respect to the Second Applicant is disputed as she was wrongly identified by the process server as Michelina Dimasi rather than Maria Dimasi and accordingly no act of bankruptcy has occurred as the time for compliance cannot start running until service has been properly affected. Further, it was submitted that proper service of the Bankruptcy Notice with respect to the First Applicant is similarly imputed on the basis that no original affidavit of service of the Bankruptcy Notice has been filed and as such the Court is unable to ascertain whether the time for compliance has already passed.
Other criticisms were made of the Bankruptcy Notice itself which seek to establish that it is invalid.
It was specifically submitted that in relation to the Second Applicant who was allegedly served on 24 March 2006 that the date for compliance would have been Friday 14 April 2006 being a period of 21 days from the date of alleged service. Friday was Good Friday and in the circumstances given that the Court registry was closed on Good Friday and Easter Monday then the next available date when the registry was open was 18 April 2006. Accordingly Rule 3.04(4) of the Federal Magistrates Court Rules 2001 applies given that the last date for taking an action requiring attendance at a registry is a day when the registry is closed, then the action may be taken on the next day when the registry is open.
The Applicants also referred to the relevant statutory provisions in the Bankruptcy Act and submitted that the Court has discretion whether or not to extend time for compliance if the condition precedent set out in s.41(6A) has been complied with, namely was it filed before the time fixed by the Court for compliance with the requirement of the Bankruptcy Notice proceedings to set aside the Bankruptcy Notice. It was argued that a Bankruptcy Notice may be set aside because it contains a fatal defect that does not comply with the rules and regulations of the Bankruptcy Act. Reliance was also placed upon s.33(1)(c) of the Bankruptcy Act which provides power to the Court to extend time. It was argued that there are a number of authorities supporting the view that it is futile to apply for an extension of time if the compliance period in a Bankruptcy Notice has elapsed. In this case the Applicants submit that there is no case law supporting the view the Court may extend time for compliance of a Bankruptcy Notice after the expiration of the time set out in the notice and where the conditions precedent set out in s.41(6A) of the Bankruptcy Act have not been complied with.

Reasoning

In my view the calculation of the time period from which the alleged service of the Bankruptcy Notices occurred in relation to the Second Applicant does not preclude the Application being made to set aside the Bankruptcy Notice on 18 April 2006. The Rules make it clear that the last day for taking action should not include a day upon which the registry is closed and therefore I find that the Bankruptcy Notice if served properly has been served on a day which would permit the Second Applicant to file the Application to set aside the Bankruptcy Notice. Accordingly the Court has power to extend the time for compliance with the Bankruptcy Notice. I should further add however that if there is a fundamental defect or flaw in service which is clearly an issue yet to be determined by the Court then that of itself may render the service invalid and in my view accordingly any time periods would not run as a result of invalid service. The same principle applies and may be argued in relation to the First Applicant. Accordingly in both cases the Court is able to entertain the application to set aside the Bankruptcy Notice particularly where in the present case a Creditors Petition has not been filed and served prior to the date of hearing before this Court. In fact the Court as a matter of convenience due to the fact that time was about to expire permitted the Creditor to file a Petition against both Applicants solely for the purpose of preserving the Creditor’s rights. That does not detract however from the Court’s power to properly consider and determine the application to set aside the Bankruptcy Notice.
I do not accept the submissions made for and behalf of the Respondent that this Court does not otherwise have power to entertain the application insofar as it relates to the First Applicant. In my view where there is a challenge which directly seeks to assert that the Bankruptcy Notice is invalid and the Court in the exercise of its general powers under s.33 of the Bankruptcy Act does have power to, if necessary, extend the time within which the application can be filed. If the Bankruptcy Notice is invalid then clearly there can be no act of bankruptcy. It is not sufficient in my view for the Creditor to simply rely upon the effluxion of time for compliance with the Bankruptcy Notice to then submit that the Applicants are precluded as a matter of law from seeking an extension of time within which to file an application setting aside the Bankruptcy Notice. Often defects may not be discovered until after the time for compliance has expired and that does not mean in my view that the Court in Bankruptcy in the absence of an express provision to the contrary would be precluded from exercising its discretion to extend time within which to file an application to set aside a Bankruptcy Notice even where time for compliance with that Bankruptcy Notice has expired.
Moreover in the present case significant issues are raised in relation to the validity not only of the Bankruptcy Notice itself but also in relation to service. Those matters should properly be determined by the Court after a hearing which in this instance I note will involve amongst other things identification of the Applicant by the process server, whether the process server has properly served the documents and fundamental issues in relation to the validity of the Bankruptcy Notice in relation to one or both of the Applicants. I note further that there is an issue concerning settlement of any claim by the Creditor against the Applicants and one issue outstanding is a significant and important issue as to whether or not a document relied upon by the Applicants has been forged.
In my view for the reasons stated the Court does have power to entertain the applications and on the preliminary point it is my ruling that the application should proceed and that in due course the Court will amongst other things consider whether it shall or shall not grant an extension of time within which the Applicants may file the application. As indicated no extension of time is required in my view in relation to the Second Applicant and it would be appropriate for the Court to reserve its final decision on whether to grant an extension of time to the First Applicant until after it has heard all the evidence in relation to the substantive issues sought to be agitated. It may be for example that if there is no point in extending the time then the extension of time would be refused. That ultimately will not be decided until after the Court has heard and determined the substantive issues.
I shall make appropriate directions for the further hearing of the application to set aside the Bankruptcy Notice.

I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate:

Date: 15 June 2006