Gray, Garrick Lewis v Ball, Michael Lee
[1997] FCA 1512
•24 DECEMBER 1997
FEDERAL COURT OF AUSTRALIA
BANKRUPTCY - Bankruptcy notice - Application to set aside - Source of power ‑ Ineffective service ‑ Extensions of time for compliance with notice - Before hearing of application identical notice effectively served - Application dismissed by Registrar ‑ Time for compliance not extended - Whether act of bankruptcy committed - Application to review Registrar’s decision seeking setting aside of notice and extension of time for compliance - Nature of review - Expiration of time for compliance with second notice - Whether time for compliance with second notice to be extended.
Bankruptcy Act 1966, ss 30, 41(6A)(b)
Federal Court Rules O 77 r 8
Re Kwiatek (1989) 89 ALR 631 considered
Shaddock v Commonwealth Bank of Australia (Ryan J, 16 September 1997, unreported) distinguished
McLean v Australia and New Zealand Banking Group Ltd (1993) 42 FCR 300 considered
Re Udowenko; Ex parte Mitchell (1996) 69 FCR 299 considered
Guss v Johnstone (Full Court, 13 November 1997, unreported) considered
GARRICK LEWIS GRAY v MICHAEL LEE BALL as a representative of ALLEN ALLEN & HEMSLEY
VG 7588 OF 1997
SUNDBERG J
24 DECEMBER 1997
MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VG7588 of 1997
In the matter of GARRICK LEWIS GRAY
BETWEEN:
GARRICK LEWIS GRAY
APPLICANTAND:
MICHAEL LEE BALL as a representative of ALLEN ALLEN & HEMSLEY
RESPONDENT
JUDGE:
SUNDBERG J
DATE OF ORDER:
24 DECEMBER 1997
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
The time for compliance with the bankruptcy notice served on the applicant on 23 October 1997 be extended to 4:00 pm on 14 January 1998.
The motion notice of which was filed on 10 November 1997 be otherwise dismissed.
The respondent pay the applicant’s taxed costs of the motion.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VG7588 of 1997
In the matter of GARRICK LEWIS GRAY
BETWEEN:
GARRICK LEWIS GRAY
APPLICANTAND:
MICHAEL LEE BALL as a representative of ALLEN ALLEN & HEMSLEY
RESPONDENT
JUDGE:
SUNDBERG J
DATE:
24 DECEMBER 1997
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
On 16 September 1997 the applicant applied to have a bankruptcy notice “for payment of $119,115.34 and purportedly served” on him on 26 August 1997 set aside. The application bore an endorsement that it was made under s 41 of the Bankruptcy Act 1966. But the source of the power to set aside a bankruptcy notice is, I think, s 30. The application was supported by the affidavit of Eugene Wawer, a solicitor employed by the applicant’s solicitors, Garrick Gray & Co. Mr Wawer asserted that the bankruptcy notice had not been served in accordance with reg 16.01 of the Bankruptcy Regulations. He claimed that a copy of a document which appeared to be a bankruptcy notice had been “found by chance” in the corridor outside the solicitors’ office. It appeared to have been dropped there, and was not in an envelope. No one in Mr Wawer’s office had any knowledge of anyone coming into the office to serve any process or otherwise knew how the document came to be where it was found. Mr Wawer produced a letter from the respondent’s solicitors stating that their process server had advised that the notice had been served on 26 August. Mr Wawer said he had requested the respondent’s solicitors to provide a copy of the affidavit of service of the notice, but the solicitors had failed to provide it. Mr Wawer also asserted that the notice was defective in that the amount claimed to be payable by the applicant was not clear.
On 17 September a Registrar extended the time for compliance with the notice to 4:00 pm on 30 September or until further order. The extension was granted “upon condition that the Bankruptcy Notice was served on the applicant not earlier than 26 August 1997”. On 30 September a Registrar adjourned the application to 28 October and extended the time for compliance with the notice until 4:00 pm on that day. On 23 October a bankruptcy notice in the same form as that found in the corridor was served on the applicant by post.
On 28 October an affidavit sworn by James William Gray was filed in support of the application. He deposed that he occupies offices also occupied by Garrick Gray & Co. He said that while getting out of the lift outside the offices on 26 August he noticed a document lying on the floor near the lift area. It was not in anyone’s office. On examination it turned out to be a bankruptcy notice directed to the applicant. It was not in an envelope. He produced the notice. It requires the applicant within twenty‑one days after service of the notice on him to pay the sum of $119,115.34 to the respondent or to make an arrangement to the respondent’s satisfaction for settlement of the debt.
On the same day Registrar Wood dismissed the application and refused to extend time for compliance with the notice. The applicant has applied by motion to review the Registrar’s decision, and seeks orders that the notice “purportedly served” on 26 August “and again purportedly served” on 23 October be set aside, and in the alternative that the time for compliance with it be extended to a date twenty‑one days after the determination of the review. Although the application that was before the Registrar referred only to the notice “purportedly served” on 26 August, the matter was dealt with by the Registrar on the basis that what was before him was an application in the same form as that now before me.
Another affidavit sworn by Mr Wawer was filed in support of the application for review, in which he says that on 23 October (ie before the decision under review) the bankruptcy notice was served on the applicant by post. The affidavit also contains these assertions:
the Registrar should have held that the bankruptcy notice had not been properly served
the Bankruptcy Notice is irregular because “it should require a certain time to comply with it” whereas at the time of the Registrar’s decision there were two times for compliance, one by virtue of the extension to 28 October and the other twenty‑one days after the date of the second purported service
the Notice was defective in that the amount claimed to be payable is not clear.
The application to review Registrar Wood’s decision is made pursuant to O 77 r 8 of the Federal Court Rules. Order 77 came into operation on 31 July 1997. It replaces s 31A(6) of the Act which was repealed by the Bankruptcy Legislation Amendment Act 1996. The review under s 31A(6) was a review de novo: Re Kwiatek (1989) 89 ALR 631. In my opinion the review under r 8 is of the same nature.
Counsel for the respondent has submitted that since no extension of the time for compliance with the notice had been granted on 28 October, the applicant committed an act of bankruptcy at 4:00 pm on that day. He relied on the decision of Ryan J in Shaddock v Commonwealth Bank of Australia (unreported 16 September 1997). In order to appreciate the significance of that case it is necessary to set out s 41(6A) and (7). Sub‑section (6A) provides in part that:
Where before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice:
...
(b)an application has been made to the Court to set aside the bankruptcy notice;
the Court may ... extend the time for compliance with the bankruptcy notice.
Sub‑section (7) provides:
Where before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has applied to the Court for an order setting aside the bankruptcy notice on the ground that the debtor has such a counter‑claim, set‑off or cross demand as is referred to in par 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter‑claim, set‑off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied.
In Shaddock the debtor had applied to have a bankruptcy notice set aside. Before the expiration of time for compliance with the notice, the time was extended. Before the extended time had expired a further extension was granted to 4:00 pm on 17 June 1997. On that day a Registrar recorded a decision that the affidavit sworn in support of the application did not satisfy the requirements of s 40(1)(g) in that it did not identify a counter‑claim, set‑off or cross demand equal to or exceeding the sum due under the judgment on which the bankruptcy notice was based. She did not further extend the time for compliance with the notice. On 18 June the Registrar dismissed the application. The debtor sought a review of the Registrar’s decision and an extension of time for compliance with the notice. Ryan J held that
a decision by a Registrar dismissing an application to set aside a bankruptcy notice is a decision of the Court for the purposes of s 41(7) of the Act, with the result that time for compliance had not been extended by force of that sub‑section
s 41(6A) requires that there be an extant application to set aside a bankruptcy notice before the Court can extend time for compliance: McLean v Australia and New Zealand Banking Group Ltd (1993) 42 FCR 300 at 304‑305; Re Udowenko; Ex parte Mitchell (1996) 69 FCR 299 at 304; Guss v Johnstone (Full Court, 13 November 1997, unreported)
upon expiration of the time for compliance with a bankruptcy notice, in the absence of a pending but unresolved application to set it aside, an act of bankruptcy occurs forthwith and any further attempt thereafter to extend time would be futile
it remains open to the debtor upon the hearing of a subsequent petition to seek to persuade the Court, in the exercise of its discretion, not to make a sequestration order.
Since there was no subsisting application to set aside the notice when the matter came before Ryan J, there was no power under s 41(6A) to extend time, and the application for review was accordingly dismissed. On the basis of the second and third of the above propositions, the respondent contended that since what was before the Registrar was an application to set aside the notice and not to set aside service of the notice, and since the notice in question was valid, time for compliance with it expired at 4:00 pm on 28 October. As it was not complied with before then, and because there was then in existence no unresolved application to set the notice aside, the applicant committed an act of bankruptcy on that day.
Although an attack on the form of the notice had been foreshadowed, it did not materialise. No argument was presented in support of the claim that the amount required to be paid is not clear. In my view the notice is valid. It complies with Form 1 to reg 4.02 of the Bankruptcy Regulations. But the material in Mr Gray’s affidavit, which was not controverted, shows that the notice was not properly served on 26 August. Cf reg 16.01(1)(c). Accordingly the twenty‑one day period did not begin to run, and the applicant did not commit an act of bankruptcy on 28 October.
The notice was however served on 23 October. Time for compliance expired on 13 November. Before then an application to have the notice set aside, and in the alternative for an extension of time in which to comply with it, was filed, namely the notice of motion of 10 November. That is the application with which I am now dealing. Section 41(6A)(b) empowers the Court to extend time so long as, before the expiration of the time fixed for compliance, an application to set aside the bankruptcy notice is “made” to the Court. Before its amendment in 1996, s 41(6A)(b) required the application to set aside to have been “filed” with the Registrar. So long as the application had been filed before the expiration of the time fixed, it did not matter that the application was heard after that time. See Udowenko at 303 and the cases there referred to. In 1996 the phrase “filed with the Registrar” was replaced by “made to the Court”. Given that an application is made to the Court by filing the application in a registry (see Federal Court Rules O 77 rr 6 and 13), I am of the view that Udowenko and the earlier cases are applicable to the sub‑section after the amendment, so that if an application to set aside is filed before the expiration of the time fixed for compliance, an extension can be granted under sub‑s (6A) even though the application is not heard until after the expiration of the time.
In view of the confusion caused by the existence of two copies of the one notice having come to the attention of the applicant, one asserted by the respondent to have been served on 26 August and the other served on 23 October, I will extend the time for compliance with the notice served on 23 October to 4:00 pm on 14 January 1998.
Since I am of the view that the notice is valid, I will make no other order on the motion save that the respondent pay the applicant’s costs thereof.
I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Sundberg
Associate:
Dated: 24 December 1997
Counsel for the Applicant: A N Bristow Solicitors for the Applicant: Garrick Gray & Co Counsel for the Respondent: S P Gardiner Solicitors for the Respondent: Cornwall Stodart Date of Hearing: 12 December 1997
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