Johnston v Boyd, in the matter of Johnston (No 2)
[2025] FedCFamC2G 972
•23 June 2025
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Johnston v Boyd, in the matter of Johnston (No 2) [2025] FedCFamC2G 972
File number(s): CAG 71 of 2023 Judgment of: JUDGE MANSINI Date of judgment: 23 June 2025 Catchwords: BANKRUPTCY – Application to set aside or stay a bankruptcy notice pending pursuit of separate proceedings – where notice itself is not subject of challenge – whether applicant has a counter claim, set off or cross demand – whether the bankruptcy notice constitutes an abuse of process – whether time for compliance with the bankruptcy notice should be extended – application dismissed. Legislation: Bankruptcy Act 1966 (Cth) ss.30, 40, 41
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) r.3.02
Cases cited: Alhalek v Quintiliani trading as Kells Lawyers [2020] FCA 1272 (Markovic J)
Australian Securities and Investments Commission v Forge [2003] FCAFC 274
Bhagat v Global Custodians Ltd [2002] FCA 223
Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91
Guss v Johnstone [2000] HCA 26
Johnston v Boyd, in the matter of Johnston [2024] FedCFamC2G 1104
Royal v Nazloomian, in the matter of Royal [2019] FCA 555
Seller v Deputy Commissioner of Taxation [2011] FCA 865
Division: Division 2 General Federal Law Number of paragraphs: 71 Date of hearing: 23 October 2024 Place: Sydney The Applicant: Appearing in person Counsel for the Respondent: Ms Castle Solicitor for the Respondent: Deutsch Miller ORDERS
CAG 71 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF DARYL LINDSAY JOHNSTON
BETWEEN: DARYL LINDSAY JOHNSTON
Applicant
AND: ABIGAIL BOYD
Respondent
ORDER MADE BY:
JUDGE MANSINI
DATE OF ORDER:
23 JUNE 2025
THE COURT ORDERS THAT:
1.Pursuant to s.41(6A) of the Bankruptcy Act 1966 (Cth), the time for compliance with bankruptcy notice BN262648 issued 4 December 2023 be extended to 14 July 2025.
2.The application as amended on 18 September 2024 is otherwise dismissed.
3.By 4.00 pm on 7 July 2025, the Respondent have leave to file any application and submissions as to costs.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
Judge Mansini
IN SUMMARY
This is an application to set aside or alternatively stay a bankruptcy notice.
The lengthy history of litigation that continues to embroil the parties to these proceedings commenced with an electoral pre-selection dispute involving an attempt by Mr Daryl Lindsay Johnston (Applicant) (and another) to have Ms Abigale Boyd (Respondent) dislodged from her position as Greens Party candidate on the electoral ballot immediately prior to the 2019 New South Wales State election.
Arising from those proceedings, a costs order was first made in 2019. Since then, the Applicant has unsuccessfully attempted to challenge the costs order, including by initiation of several proceedings in the New South Wales Court of Appeal which resulted in further costs orders being made.
As a result of costs that remain unsatisfied by the Applicant, the subject bankruptcy notice was issued in December 2023.
The bankruptcy notice itself is not challenged. However, the Applicant asks this Court to set aside or stay the notice in order to allow him the opportunity to pursue and succeed in separate proceedings in the District Court of New South Wales which are on hold pending the determination of this matter.
The Respondent opposed on the basis that she is entitled to recover the amount specified in the bankruptcy notice and there has been no abuse of process or demonstration of a counter claim, set off or cross demand.
For the reasons that follow, the Applicant shall have an extension of the time for compliance with the bankruptcy notice and the application as amended is otherwise dismissed.
CONTEXT
The following factual background to the matter was not contentious, in part adopted from a chronology prepared by the Respondent.
On 1 March 2019, the Applicant and a Mr Christopher David Harris commenced proceedings in the Supreme Court of New South Wales against the Respondent and others (in proceeding number 2019/67490) (First Instance Proceedings).
Also on 1 March 2019, the First Instance Proceedings were dismissed by a Judge of the Supreme Court of New South Wales.
On 27 March 2019, the Applicant filed a notice of intention to appeal in respect of the First Instance Proceedings.
On 16 January 2020, the first instance Judge of the Supreme Court of New South Wales ordered the Applicant and Mr Harris to pay the costs of 3 of the defendants (including the Respondent) in the First Instance Proceedings (First Instance Costs Order).
On 12 February 2020, the Applicant filed a second notice of intention to appeal in respect of the First Instance Proceedings.
On 9 June 2020, the Applicant filed and served a summons seeking leave to appeal from the orders made in the First Instance Proceedings (First Appeal Proceedings).
On 24 December 2020, the New South Wales Court of Appeal dismissed the First Appeal Proceedings and ordered the Applicant to pay the Respondent’s costs of those appeal proceedings.
On 7 January 2021, the Applicant filed a notice of motion in the First Appeal Proceedings essentially seeking to have the 24 December 2020 orders of the New South Wales Court of Appeal set aside.
On 30 November 2021, the Applicant’s notice of motion in the First Appeal Proceedings was dismissed by the New South Wales Court of Appeal and the Applicant was ordered to pay the Respondent’s costs of that application.
On 8 February 2022, the Respondent filed an application to have her costs assessed in respect of the First Instance Costs Order in the Supreme Court of New South Wales. Subsequently, on 1 June 2022, the costs assessor determined the costs assessment and issued certificates totalling $64,610.36.
On 1 September 2022, the Applicant commenced proceedings in the Supreme Court of New South Wales against the Respondent and others in respect of the costs assessment (in proceedings number 2022/264349) (Judicial Review Proceedings).
On 12 September 2022, the Respondent caused the costs assessment certificates to be registered as a judgment of the Supreme Court of New South Wales (First Instance Costs Judgment Debt).
On 2 March 2023, the Judicial Review Proceedings were dismissed by a Judge of the Supreme Court of New South Wales and the Applicant was ordered to pay the costs of the Respondent fixed in the sum of $36,850.00 (Judicial Review Judgment Debt).
On 8 March 2023, the Applicant filed a notice of intention to appeal in respect of the Judicial Review Proceedings.
On 14 August 2023, Mr Harris paid an amount of $60,000.00 to the Respondent in settlement of his costs liability.
On 4 and 8 December 2023 respectively, the Respondent obtained and served bankruptcy notice (BN262648) (Bankruptcy Notice) on the Applicant. The Bankruptcy Notice named the Respondent as creditor and claimed that the Applicant owed a total debt amount of $41,460.36 (total of the costs ordered in the First Instance Costs Judgment Debt and the Judicial Review Judgment Debt less the $60,000.00 paid by Mr Harris) (Debt Amount). The Bankruptcy Notice required the Applicant to pay the Debt Amount within 21 days of service or otherwise make arrangements to the Respondent’s satisfaction for settlement of the Debt Amount. The Bankruptcy Notice included information about options to apply for an extension of time for compliance and to have the Bankruptcy Notice set aside.
On 22 December 2023, the Applicant filed and served a summons seeking leave to appeal the decision in the Judicial Review Proceedings (Second Appeal Proceedings).
On 29 December 2023, the Applicant commenced these proceedings seeking to set aside or stay the Bankruptcy Notice.
On 15 March 2024, the Second Appeal Proceedings were dismissed by the New South Wales Court of Appeal and the Applicant was ordered to pay the Respondent’s costs of those proceedings which costs were subsequently fixed in the amount of $16,020.00.
On 17 June 2024, a Registrar of this Court ordered that the application filed 29 December 2023 be dismissed by operation of a self-executing order and as to costs.
On 7 July 2024, the Applicant commenced separate proceedings in the District Court of New South Wales (in proceedings number 2024/00251449) (which he had first attempted to file on or about 7 June 2024) (District Court proceedings).
On 27 August 2024, consent orders were entered in respect of the District Court proceedings wherein the time for the defendant (the Respondent in this case) to file and serve a notice of motion for summary relief or a defence was extended and the matter was listed for a directions hearing/return of motion on 4 October 2024. At the time of hearing of the present application, the District Court proceedings were in abeyance pending the outcome of these proceedings.
On 5 September 2024, the Registrar’s orders of 17 June 2024 were set aside for reasons given in Johnston v Boyd, in the matter of Johnston [2024] FedCFamC2G 1104 and the matter was programmed for hearing before the Court as presently constituted.
On 23 October 2024, this matter proceeded to hearing. The Applicant was not represented and the Respondent was represented by Counsel.
APPLICATION BEFORE THE COURT
The pleadings
At hearing the Applicant confirmed that, by his further amended application filed 18 September 2024, he seeks an order of the Court setting aside or alternatively staying the Bankruptcy Notice pending the determination of the extant proceedings earlier defined as the District Court proceedings.
On the face of the amended application, the Applicant also sought orders:
(a)Requiring the Respondent to account for the means by which she made payments of her debts for legal costs forming the basis of the claim against the Applicant subject of the Bankruptcy Notice and, once produced, leave to further amend the application; and
(b)That the Bankruptcy Notice “expire” on 29 June 2024 or, in the alternative, if the Bankruptcy Notice were not set aside then the time for compliance be 21 days from the date of determination of this amended application.
For completeness, to the extent that there remained a reference (not struck out) in the further amended application, the request for a stay pending Supreme Court of New South Wales proceedings in 2023/96350 was not understood to be pressed as it were overtaken by the determination of those proceedings in the intervening period since the application in this jurisdiction was commenced.
Material relied on
The Applicant relied on the following material, which was received subject to the Respondent’s general objection to some irrelevancies and some inadmissible material:
(a)Originating application accepted for filing on 29 December 2023;
(b)Affidavit of Daryl Lindsay Johnston accepted for filing on 29 December 2023;
(c)Affidavit of Daryl Lindsay Johnston accepted for filing on 2 May 2024;
(d)Affidavit of Daryl Lindsay Johnston accepted for filing on 31 May 2024;
(e)Affidavit of Daryl Lindsay Johnston accepted for filing on 14 June 2024;
(f)Affidavit of Christopher David Harris accepted for filing on 14 June 2024;
(g)Affidavit of Christopher David Harris accepted for filing on 17 September 2024;
(h)Affidavit of Darryl Lindsay Johnston accepted for filing on 17 September 2024;
(i)Amended application accepted for filing on 18 September 2024;
(j)Outline of submissions accepted for filing on 19 September 2024; and
(k)List of authorities accepted for filing on 21 October 2024.
The Respondent relied on the following material:
(a)Bankruptcy Notice issued 4 December 2023;
(b)Outline of submissions accepted for filing on 3 October 2024;
(c)Court book (including a brief chronology) accepted for filing on 21 October 2024; and
(d)List of authorities sent to chambers on 21 October 2024.
At hearing, both parties made oral submissions.
The respective contentions
For his part, the Applicant sought to emphasise to the Court that he has behaved as a reluctant litigant and, as an aged pensioner with no assets other than superannuation and who has experienced chronic and acute health events, has only taken the necessary action in an attempt to overcome threat of bankruptcy.
In summary, the Applicant contended that the Respondent’s conduct amounts to harassment, intimidation and an abuse of process, including by: pursuit of payment from an aged pensioner with no financial means (cashflow) to pay and otherwise attempt to extract debt payments from his quarantined superannuation retirement assets; prior attempts at service and withdrawal of bankruptcy notices; the slow speed and timing of service of the Bankruptcy Notice (just prior to Christmas) which was a form of duress; the use of her electoral allowance to pay some of her legal costs; and attempting to frustrate the Applicant in bringing his claims.
Further, by the existence of the District Court proceedings, the Applicant claimed to have contingent claims amounting to some $492,250.00 against the Respondent and third parties which claims are yet to be expanded upon. He submitted that the Court ought draw an inference, on the basis that his statement of claim was accepted for filing by a Registrar of the District Court of New South Wales, that the claim in those proceedings is valid and the quantum exceeds that of the various judgment debts ordered in favour of the Respondent.
The Applicant also claimed impropriety in the Respondent’s refusal to account for moneys she has used to offset her debts and in allegedly seeking priority over other creditors. He argued that the Respondent ought provide proof that she is prepared to fund a bankruptcy trustee to establish her bona fides. He also argued that the other judgment debts (not subject of the Bankruptcy Notice) ought be taken into account by the Court.
Ultimately, the Applicant contended to have suffered loss and damage which is yet to be quantified on account of the Respondent’s conduct, including delay in filing intended (unrelated) proceedings against a third party.
The Respondent opposed a setting aside or stay of the Bankruptcy Notice. In summary, for the following reasons:
(a)The Applicant does not dispute the Bankruptcy Notice, its service or the existence of debts underpinning it.
(b)The Court cannot be satisfied that the Applicant has a counter claim, set off or cross demand against the Respondent equal to or exceeding the amount of the debts comprising the Bankruptcy Notice.
(c)The Bankruptcy Notice was issued regularly and not for any improper purpose.
(d)The application is founded on mere assertions with no proper legal or factual basis.
STATUTORY FRAMEWORK
The Bankruptcy Act 1966 (Cth) (Act) provides a process by which a creditor who has obtained a final judgment debt(s) or order(s) of a court, in an amount of at least $5,000, may apply to the Official Receiver for issue of a bankruptcy notice: ss.41 and 40(1)(g).
For purposes of s.40(1)(g), a person who is entitled to enforce a final judgment or final order for the payment of money shall be deemed to be a creditor who has obtained a final judgment or final order: s.40(3).
A debtor properly served with a bankruptcy notice has the opportunity, during the specified period, to comply with the requirements of the bankruptcy notice or satisfy the court that they have a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter claim, set off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained. Failure on the part of the debtor to pay the debt within the specified period constitutes an “act of bankruptcy” within the meaning of the Act: s.40(1)(g) of the Act.
Rule 3.02 of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) (Bankruptcy Rules) relevantly provides:
Setting aside bankruptcy notice
(1) An application to set aside a bankruptcy notice under the Bankruptcy Act must be accompanied by an affidavit stating:
(a) the grounds in support of the application; and
(b) the date when the bankruptcy notice was served on the applicant.
(2) A copy of the bankruptcy notice must be attached to the affidavit.
(3) If the application is based on the ground that the debtor has a counter - claim, set - off or cross demand referred to in paragraph 40(1)(g) of the Bankruptcy Act, the affidavit must also state:
(a) the full details of the counter - claim, set - off or cross demand; and
(b) the amount of the counter - claim, set - off or cross demand and the amount by which it exceeds the amount claimed in the bankruptcy notice; and
(c) why the counter - claim, set - off or cross demand was not raised in the proceedings that resulted in the judgments or orders to which the bankruptcy notice relates.
(4) If the application is based on the ground that the debtor has instituted proceedings to set aside a judgment or order in relation to which the bankruptcy notice was issued, a copy of the application to set aside the judgment or order and any material in support of that application must also be attached to the affidavit.
(5) The application and supporting affidavit must be served on the respondent creditor within 3 days after the application is filed.
The Court may extend the time for compliance with a bankruptcy notice in circumstances where an application to set aside is made before the expiration of the time fixed for compliance - but not if the Court is satisfied that the proceedings to set aside were not instituted bona fide or were not being prosecuted with due diligence: ss.41(6A) and (6C).
Section 41(7) of the Act concerns when the time for compliance with a bankruptcy notice shall be deemed to have been extended, as follows:
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 paragraph 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.
Section 30 of the Act provides general powers of courts in bankruptcy and affords jurisdiction to determine all questions, whether of law or fact, in any case of bankruptcy or in any matter coming under Part IX, X or XI and may make such orders as the Court considers necessary for the purposes of carrying out or giving effect to the Act.
CONSIDERATION
Should the Bankruptcy Notice be set aside or stayed?
By his amended application, the primary contentions for setting aside or staying the Bankruptcy Notice were that:
(a)The Applicant should be inferred to have a valid counter claim, set off or cross claim in the District Court proceedings which (if he is permitted to pursue those proceedings by the stay or setting aside of the Bankruptcy Notice in these proceedings) will result in an award that exceeds the amount in the Bankruptcy Notice; and
(b)The Respondent’s pursuit of and attempt to enforce the judgment debts via the Bankruptcy Notice is an abuse of process and/or tainted by improper purpose.
The Court’s powers to set aside a bankruptcy notice and extend the time for compliance are well established. There is no general discretion to set aside a bankruptcy notice issued in valid form and which is not otherwise an abuse of process. However, one of the grounds on which a bankruptcy notice may be set aside includes the existence of any counter claim, set off or cross demand equal to or exceeding the amount of the debt on which the notice is founded: Australian Securities and Investments Commission v Forge [2003] FCAFC 274 (Emmett J) at [26]–[27] (with whom Branson and Stone JJ agreed).
Is there a cross claim, set off or cross demand?
In Guss v Johnstone [2000] HCA 26 at [40] the High Court of Australia (Gleeson CJ, Gaudron, McHugh, Kirby and Callinan JJ) said:
The state of satisfaction referred to in s 40(1)(g), and s 41(7), involves weighing up considerations as to the legal and factual merit of the claim relied upon by the debtor, and the justice of allowing the bankruptcy proceedings to go ahead or requiring them to await the determination of the claim.
However, the Court is first required to be satisfied that there exists a counter claim, set off or cross demand. The Court was taken to Bhagat v Global Custodians Ltd [2002] FCA 223 (O’Loughlin, Whitlam and Marshall JJ) at [52] and [53] as authority for the following:
In determining whether a judge in bankruptcy should entertain an application to set aside a Bankruptcy Notice, the judgment debtor, if he or she is to discharge the necessary onus, must satisfy the Court that there is “a reasonable probability of success”: In re A Debtor [1958] 1 Ch. 81 at 99 per Roxburgh J. There must be evidence “that the debtor had … some reasonable ground for bringing his action”: Re Cox (1934) 7 ABC 98 at 100-101. In Vogwell v Vogwell (1939) 11 ABC 83, the question was asked whether it would be just to allow the proceedings which the debtor sought to agitate to proceed to a determination before the bankruptcy proceedings were allowed to continue. More recently, the exercise has been described in the High Court as a:
“… weighing up of considerations as to the legal and factual merit of the claim relied upon by the debtor and the justice of allowing the bankruptcy proceedings to go ahead or requiring them to await the determination of the claim.”
Guss v Johnstone (2000) 171 ALR 598 at 606.
Counsel for Global submitted, quite correctly, that the mere production of a statement of claim in an action that pleads facts which, if proved, would support a claim, has long been held to be insufficient: “[a] statement of claim is no evidence of anything”: In re Foster, Ex parte Basan (1885) 2 Morr 29 at 33 per Brett MR: see also Re Cox (supra) at 101 and Re Verma; Ex parte Deputy Commissioner of Taxation (1985) 4 FCR 181 at 187. It is not even sufficient for a debtor to file an affidavit which merely propounds a claim and states how the debtor proposes to establish it: Ebert v The Union Trustee Co of Australia Ltd (1960) 104 CLR 346 at 350. There is an obligation on the debtor to adduce evidence that provides reasonable grounds for the institution of proceedings Vogwell v Vogwell (supra) at 85 per Lathan CJ. The task that Mr Bhagat faced was an onerous task. He has raised serious allegations but has not placed before the Court the material (if indeed such material exists) that would justify a Bankruptcy Court from interfering with the judgment that founded the Bankruptcy Notice.
In addition, the Court’s Rules require the originating affidavit to state full details of the counter or set off claim. Other authorities support the proposition that it is essential that the amount of the alleged counter or set off claim is established in evidence: Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91 (Pullin, Newnes and Murphy JA). In that case, the Western Australian Court of Appeal considered a raft of analogous authorities including that the mere production of a statement of claim is not evidence of anything even if verified by affidavits: at [90].
The amended application in the present case is similarly affected by an absence of evidence of reasonable grounds for the institution of the District Court proceedings. There is no evidence of the basis on which that claim is proposed to be made out. Indeed, as at the time of hearing, the Applicant acknowledged that he intended to seek legal advice and amend the pleadings/originating process in the District Court proceedings such that the basis for those proceedings is entirely indiscernible on the materials that are before the Court.
Accordingly, I am not able to find that there is in fact a counter claim, set off or cross demand or at least a prima facie case that the Applicant is fairly entitled to litigate as to engage s.40(1)(g) of the Act.
Is there an abuse of process?
In respect of the alleged abuse of process, the contentions put by the Applicant were numerous (as outlined above).
The established authorities acknowledge that the Court has a wide discretion to set aside a bankruptcy notice where it is in the interests of justice to do so, including an abuse of process. One instance of an abuse of process can be, as the Applicant here contends, where the purpose in issuing the bankruptcy notice is to put pressure on a debtor to pay the debt rather than genuinely invoke the Court’s jurisdiction in insolvency: Seller v Deputy Commissioner of Taxation [2011] FCA 865 (Flick J) at [15] – [16] as cited in Alhalek v Quintiliani trading as Kells Lawyers [2020] FCA 1272 (Markovic J) (Alhalek).
However in the present case, the suggestion that the Respondent is not entitled to enforce the 2 judgment debts subject of the Bankruptcy Notice, being the First Instance Costs Judgment Debt and the Judicial Review Judgment Debt, is devoid of merit. The Act expressly provides that a person who is entitled to enforce a final judgment or final order for the payment of money shall be deemed to be a creditor who has obtained a final judgment or final order: s.40(3). The evidence before the Court is that the 2 judgments for costs were obtained by the Respondent. The means by which she arranged to pay (or defer payment, as the case may be) those costs is irrelevant in the context of these proceedings and there is no basis to order disclosure of such. The Respondent is plainly entitled to enforce the judgment debts subject of the Bankruptcy Notice and by doing so has not, without more, engaged in an abuse of process.
It is understandable that the Applicant perceives the initial attempts at service of a bankruptcy notice (subsequently withdrawn) and the eventual service of the subject Bankruptcy Notice just prior to Christmas as offensive and that the whole affair has adversely impacted upon him. That being so, with regard to the consideration of Stewart J in Royal v Nazloomian, in the matter of Royal [2019] FCA 555 (Nazloomian), and in the whole of the circumstances, I do not consider these factors relied on by the Applicant of themselves to be reflective of or sufficient to infer any collateral purpose or undue pressure, unjustifiably oppressive conduct toward the Applicant or that the proceedings were invoked for an illegitimate purpose as to bring the administration of justice into disrepute. Accepting that the Applicant has sought to avoid the consequence of bankruptcy via a multitude of appeals as were his right, it remains that the Applicant was responsible for commencing those various proceedings and the Respondent’s pursuit of judgment debts legitimately and finally ordered is not an abuse of process.
Ultimately, the case before the Court is not of sufficient factual foundation to meet the “heavy” onus of an abuse of process identified in the authorities including Nazloomian.
Should the time for compliance be extended?
In the event that the Bankruptcy Notice were not stayed or set aside, the Applicant sought that the time for compliance be extended to 21 days from the date of determination of this amended application.
The Respondent submitted there would be no utility to such order where the Applicant, on his own evidence, does not have the capacity to satisfy the debts subject of the Bankruptcy Notice.
By operation of the deeming provision at s.41(7), a bankruptcy notice is effectively stayed until and including the date of the Court’s satisfaction as to the challenge under s.40(1)(g).
In respect of an application to extend the time for compliance with a bankruptcy notice, the judgment of Alhalek provides a useful overview of the established authorities including that the Court has a general power to extend time under s.41(6A) that is not constrained by s.41(7). Further, that the matters to be taken into account when deciding to extend the time may include:
a.The interest of the judgment creditor and other creditors of the judgment debtor in ensuring that, if ultimately a sequestration order is made, the relevant act of bankruptcy occurs earlier rather than later;
b.Whether any stay has been granted of the judgment supporting the bankruptcy notice;
c.As “a consideration reinforcing the Court’s reluctance to extend time in the absence of a stay, that an appeal has already been dismissed and the proceeding in question is…an application for special leave to make a further appeal”.
(citing Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264 in Sharpe v W H Bailey & Sons Pty Ltd [2014] FCA 921).
The Respondent’s characterisation of the Applicant’s evidence of financial (in)capacity is not apt where the Applicant’s consistent position has been that he has no financial means in terms of cashflow but does have superannuation funds which he ought not be required to utilise in discharging the debt. Appreciating that the Applicant does not prefer to spend his retirement savings on discharging the judgment debts subject of the Bankruptcy Notice, he is understood to have conceded to have financial capacity to pay. Accordingly, and without more, the futility argument does not succeed.
Notwithstanding that (for the above reasons) the Applicant has not succeeded in having the Bankruptcy Notice set aside or stayed, the application commencing these proceedings under s.40(1)(g) was made before the expiration of the time fixed for compliance as required by s.41(6A) and it is therefore open to the Court to extend the time for compliance pursuant to s.41(6A)(b). It was not directly put by the Respondent and in any event, having regard to the particular circumstances of the case, I would not be of the opinion that the proceedings were not instituted bona fide or not prosecuted with due diligence as to engage the prohibition on an extension pursuant to s.41(6C).
It is acknowledged that, by virtue of these proceedings, the Applicant has had the benefit of an effective stay and deferral of the date for compliance with the Bankruptcy Notice. The Respondent has experienced delay in enforcement of the judgement debts and, on the materials, there may be other creditor(s). However, for his part, the Applicant took the necessary steps to bring this application within the specified time for compliance and was entitled to await the outcome. In all of the circumstances and balancing the competing interests, in my opinion it is in the interests of the administration of justice for the Applicant to have a short further period of 21 days after the date of these reasons in which to comply before having the consequences of non-compliance (committing an act of bankruptcy) come to bear. Any prejudice that would befall the Respondent and any other creditor(s) from a further delay of 21 days is not sufficient to alter my conclusion.
Resolution
For the above reasons:
(a)I will order that the time for compliance with the Bankruptcy Notice (BN262648) be extended to 14 July 2025, being the date that is 21 days after delivery of these reasons; and
(b)The amended application for the Bankruptcy Notice filed 18 September 2024 otherwise be dismissed.
I certify that the preceding seventy-one (71) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Mansini. Associate:
Dated: 23 June 2025
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