Dwyer v Angus Property and Development Pty Ltd
[2006] FMCA 1307
•24 August 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DWYER & ANOR v ANGUS PROPERTY & DEVELOPMENT PTY LTD | [2006] FMCA 1307 |
| BANKRUPTCY – Bankruptcy notice based on default judgment – application to extend time for compliance – no merit shown in application to set aside judgment – no evidence as to solvency – indefinite extension sought – ex parte extension of time discharged – application refused. |
Bankruptcy Act 1966 (Cth), ss.41(6A), 41(6C)
Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth), rr.3.03, 3.03(1)(b)(ii)
Burns v AMP Finance Limited [2004] FCA 1094
Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264
Liew v JNS Technologies (M) Sdn Bhd [1999] FCA 1428
| First Applicant: | PARIS DWYER |
| Second Applicant: | GEOFF DWYER |
| Respondent: | ANGUS PROPERTY & DEVELOPMENT PTY LTD (ACN 065 469 392) |
| File Number: | SYG2301 of 2006 |
| Judgment of: | Smith FM |
| Hearing date: | 24 August 2006 |
| Delivered at: | Sydney |
| Delivered on: | 24 August 2006 |
REPRESENTATION
| Counsel for the Applicants: | Ms S Pagano |
| Solicitors for the Applicants: | Carbone Lawyers |
| Counsel for the Respondent: | Ms S Nash |
| Solicitors for the Respondent: | Sally Nash & Co, Solicitors |
ORDERS
Order 1 made by Registrar Tesoriero on 18 August 2006 is discharged.
The application is dismissed.
The applicants must pay the respondent’s costs as agreed or taxed under the Bankruptcy Rules.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG2301 of 2006
| PARIS DWYER |
First Applicant
| GEOFF DWYER |
Second Applicant
And
| ANGUS PROPERTY & DEVELOPMENT PTY LTD (ACN 065 469 392) |
Respondent
REASONS FOR JUDGMENT
(revised from transcript)
I have before me an application filed on 18 August 2006 seeking orders under s.41(6A) of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) extending the time for compliance with bankruptcy notice NN2609 of 2006 (“the notice”), issued on 30 June 2006.
The applicants, whom I shall refer to as the applicant daughter and the applicant father, are the debtors identified in that notice, and as required by Bankruptcy Rule 3.03(1)(b)(ii), they admit service of the notice on 28 July 2006.
It is common ground that the time for compliance with the notice would have expired on the day of the application being lodged in this Court, but for an ex parte order which was given by a Registrar on that day. His order provided:
1.Pursuant to subsection 41(6A) of the Bankruptcy Act 1966 and rule 3.03 of the Federal Magistrates Court (Bankruptcy) Rules 2006, on condition that Bankruptcy Notice No. NN 2609 of 2006 was served on the Applicants on 28 July 2006, the time for compliance by the Applicant with the requirements of the Bankruptcy Notice is extended up to and including 29 August 2006.
2.There be liberty to any party to apply to vary or discharge Order 1, on 24 hours notice.
Pursuant to Order 2, the respondent creditor has applied for the listing of the matter, upon service with the application and order. It was listed today before me as duty bankruptcy Federal Magistrate, allowing at least 24 hours notice to the applicants.
The solicitor for the respondent contends that the Registrar should not have made the ex parte order, or that it should be set aside due to a failure by the applicants to be sufficiently candid with the Court. However, I do not consider it necessary for me to address her contentions in that respect.
In my opinion, the present application should be regarded as having been listed for hearing today for the first time on a contested basis. In effect, the respondent’s request for an early listing has brought forward the 29 August 2006 return date for the application, and it remains for the applicants to satisfy the Court that they should be granted any extension of time for compliance with the bankruptcy notice. It is therefore not necessary for me to consider whether the ex parte order was properly made by the Registrar.
I also propose to deal with the application directly in terms of the discretion conferred by s.41(6A) to “extend the time for compliance with the bankruptcy notice”. That discretion is “subject to subsection (6C)”, which directs the Court not to extend time if it is of the opinion that an application to set aside the judgment relied upon in the bankruptcy notice was not “instituted bona fide” or is “not being prosecuted with due diligence”. However, I do not need to consider these matters, since I have decided that the applicants have not established a sufficient basis for exercising the discretion itself.
The applicants have, in my opinion, had sufficient time before bringing their application for extension, and also upon notice of today’s listing, to prepare their case for the purposes of justifying any extension of the bankruptcy notice. As I shall indicate, it is clear that they now seek an extension of time for an indefinite period beyond the date which would otherwise have been the first court date for the application, next Tuesday. In my opinion, they have failed to present to the Court a sufficient basis for any extension of time beyond today.
The judgment relied upon in the bankruptcy notice is what is described in the attached certificate as a “default judgment” in the sum of $147,545.73 obtained in the District Court of New South Wales on 22 June 2006. Although the applicants’ evidence left obscure the background to the judgment and the proceedings in the District Court, I accepted statements of fact made from the bar table by both legal representatives, where they were clearly accepted by the other representative. I consider that this informality has assisted, rather than prejudiced, the applicants in their application, since their affidavits were plainly deficient.
It was common ground that the judgment was obtained in default of defences being filed in response to a statement of claim lodged by the respondent. The statement of claim is in evidence before me. It pleaded a liability to payments of rent on a commercial lease unpaid between June 2005 and October 2006, the lease being taken out by a company and guaranteed by the two applicants. The statement of claim was therefore based upon the guarantees of the applicants.
The absence of defences to the statement of claim arose by reason of the striking out of two defences, which had been filed in identical terms in relation to each of the debtors on 27 January 2006 and 30 May 2006. It is common ground that the last of these defences were struck out by a District Court Registrar on 6 June 2006 due to patent inadequacies. The defences which were struck out claimed that each of the applicants “signed the Guarantee without having read it” and that they were “not aware that she (or he) was signing a Guarantee”. Perhaps they were groping towards a plea of non est factum, a notoriously difficult defence when claimed by literate adult Australians.
The affidavits of each of the applicants in support of the application to this Court to extend the time for compliance with the bankruptcy notice are in identical terms. They annex the bankruptcy notice and take no point challenging its validity. Their contention is that, if time for compliance is extended, the Court would ultimately be able to set aside the bankruptcy notice after the future setting aside in the District Court of the judgment upon which it is based. The affidavits annex evidence purporting to show steps being taken to procure that setting aside.
This shows that the applicants each filed in the District Court on 28 July 2006, i.e. the date on which they were served with the bankruptcy notice, a notice of motion to set aside the judgment and to be given leave “to file an amended Defence”. The contents of the proposed defence has not been shown in the documents filed in the District Court, nor in documents filed in or presented to this Court. Nor has any evidence supporting any defence been presented to either of the courts.
The applicants’ solicitor today tendered a document which she said was a draft defence which was under consideration by the applicants and their current solicitors. This is in terms not dissimilar to the previous defences which were struck out, although it purports to give slightly more particulars of the factual claims for a non est factum defence. For example, the draft in relation to the applicant father says:
The document was never explained to the Third Defendant and he wasn’t given the opportunity to obtain independent legal advice. He did not have his glasses and could not read the document. The Third Defendant was of the view that he was witnessing the signature of his son only.
The document which was tendered today is not accompanied by a verifying affidavit in relation to those factual contentions. No evidence supporting these factual claims has been tendered, and there is nothing before me to show that the applicants have a defence to the respondent’s statement of claim with any prospect of success.
Even less information as to a good defence has been shown in the documents filed in the District Court in support of the notice of motion to set aside the default judgment. The notice of motion is returnable tomorrow, on 25 August 2006, but the solicitor for the applicants today concedes that the applicants will be unable to proceed tomorrow. Her instructions are to seek an adjournment based on a medical certificate which certifies that the mother and wife of the two applicants “is in a chronic comatose state requiring constant 24hr care, which they both provide”, so as to render it impossible for them to attend Court “at this time for the above medical reasons. I would expect this to continue for the next three weeks”.
I could not be at all confident that this certificate will indeed procure the adjournment of the motion tomorrow. If no adjournment is obtained, on the evidence before me, the motion appears to have no prospects of success due to the absence of evidence showing an arguable good defence.
The material filed in the District Court also does not clearly indicate a good explanation for the failure of the applicant debtors to file a good defence. The affidavit in support merely suggests that the solicitor previously acting for the applicants “had not prepared the proper documentation for the mention hearing of 6 July 2006 [sic: 6 June 2006]” due to “bad health”. The affidavit claims that the applicants “had not been advised of the mention hearing”, and that the services of the previous solicitor “have now been terminated and the file was handed back to us on 25 July 2006”. I doubt whether that explanation will appear satisfactory to the District Court, and whether standing alone it could procure the setting aside of the default judgment.
In any event, as I have indicated, the applicants appear to concede that they will not be able to obtain the setting aside of the default judgment in the near future. They accept that they require adjournments of several weeks in the District Court, and implicitly also in this Court. They thus seek an indefinite extension of time for compliance with the bankruptcy notice.
No evidence has been presented to this Court suggesting that any application for stay of the judgment has been sought in the District Court, or that the applicants have a good explanation for not seeking a stay. They have presented no evidence they are solvent nor, indeed, generally as to their financial positions. No undertakings are offered to the Court today to preserve assets for the benefit of their present creditors.
The considerations for the Court when deciding whether time for compliance with the bankruptcy notice should be extended in circumstances where there is no challenge to the validity of the notice, nor to the current effectiveness of the judgment upon which it is based, have been discussed in a number of authorities to which I was referred. In particular, the solicitor for the respondent creditor referred me to a discussion by Lehane J in Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264, which has been followed and discussed in subsequent cases, including by Kenny J in Liew v JNS Technologies (M) Sdn Bhd [1999] FCA 1428 (“Liew”) and Branson J in Burns v AMP Finance Limited [2004] FCA 1094.
Those judgments address a situation where a judgment debt is under appeal, without being stayed by order of the Court in which the judgment was obtained or the Court on appeal, and considered the implications of the absence of a stay on the judgment. Lehane J was of the view that the absence of a stay was not necessarily conclusive against extending the time for compliance with a bankruptcy notice, but referred to the need to consider both the prospects of success in the appeal or proceeding to set aside the judgment, the general situation as to the ability of the judgment debtors to pay the judgment debt in the near future or at all, and the period for which the extension of time for compliance is sought.
In the present case, if there were any prospect that the applicant’s motion in the District Court could be determined in the near future, I would have been inclined to allow the Registrar’s ex parte order to continue at least until next Tuesday.
However, the applicants have conceded that a longer and uncertain period of extension would be required by them. They have also, as I have indicated, not presented any evidence to this Court giving substance to the suggested defence which is under consideration by their current lawyers. They have provided no evidence as to their financial state which would reassure the Court that prejudice would not flow to the present creditors, or any of their other creditors, if the date of an act of bankruptcy were deferred.
As Kenny J pointed out in Liew’s case at [17]:
… the commission of an act of bankruptcy, although a serious matter, does not carry with it the grave consequences brought about by the making of a sequestration order … It remains open to the Court on the hearing of any petition for sequestration to adjourn the hearing pending the resolution of the appeal by the Court of Appeal.
Similarly, in the present situation, if indeed the applicants can present the Court with proper evidence showing a defence of merits or a prospect that they will be permitted to pursue a defence in the District Court, they will have further opportunities to present that evidence to this Court before any sequestration order would be made against them.
On all the circumstances shown in the evidence before me, and taking into account all that was said by both representatives today, including a significant body of factual assertions made from the bar table in support of the application, I am not persuaded that the applicants have made out a case for the Court to exercise its discretion under s.41(6A) to extend the time for compliance with this bankruptcy notice.
I therefore shall discharge the Registrar’s ex parte order, and dismiss the present application.
I certify that the preceding twenty‑eight (28) paragraphs are a true copy of the reasons for judgment of Smith FM
Associate: Lilian Khaw
Date: 11 September 2006
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