Johnstone, Raymond v Guss, Joseph

[1997] FCA 570

IN THE FEDERAL COURT OF AUSTRALIA      )

VICTORIA DISTRICT REGISTRY  )          No VN 2041 of 1996

BANKRUPTCY DIVISION  )

BETWEEN:RAYMOND JOHNSTONE

Judgment Creditor

AND:JOSEPH GUSS

Judgment Debtor

COURT:Sundberg J

DATE:1 July 1997

PLACE:Melbourne

EX TEMPORE REASONS FOR JUDGMENT

SUNDBERG J:
On 30 May 1997 the Court declared that it was not satisfied that the judgment debtor possessed a counter-claim, set-off or cross demand of the type referred to in s40(1)(g) of the Bankruptcy Act 1966, and ordered that the judgment debtor pay the judgment creditor's costs. The judgment debtor has appealed to the Full Court against that declaration and costs order. Pursuant to Order 52 rule 17 of the Rules he seeks a stay of the orders made on 30 May.

On 19 September 1996 a bankruptcy notice was issued on the application of the judgment creditor.  By operation of an order made by Registrar Agnew on 1 November 1996, the notice was deemed to have been served on 29 November 1996.

Before the expiration of the fourteen day period specified in the notice the debtor filed an affidavit in which he asserted the existence of a cross demand against the creditor which exceeded the amount claimed in the bankruptcy notice. The proceedings which led to the orders made on 30 May were conducted on the basis that the debtor's affidavit satisfied the description in the opening part of s41(7), with the result that the time for compliance with the notice was extended until the Court determined whether it was satisfied that the debtor had such a cross demand as is referred to in s40(1)(g).

The effect of the declaration made on 30 May was that the time for compliance with the notice expired on that day, and the demand made by it not having been satisfied, the debtor committed an act of bankruptcy.

During argument on the stay application I expressed some doubt as to the efficacy of staying the orders made on 30 May.  It did not seem to me that a stay of the declaration would "undo" the act of bankruptcy that had been committed some three weeks earlier.  In reliance on the act of bankruptcy, on 16 June the creditor petitioned the Court for a sequestration order against the debtor's estate.  The petition is to be heard on 15 July.  I suggested to the debtor's counsel that the appropriate course was to apply on that day for the hearing of the petition to be adjourned pending the outcome of the appeal.  But counsel insisted that the effect of s41(7) was that a stay would extend the time for compliance until the hearing of the appeal.  I do not agree.  That provision is spent.  It operated to extend the time for compliance until 30 May.  The demand in the notice was not met by the close of that day, and accordingly an act of bankruptcy was committed.  A stay of the declaration made on 30 May will not alter that fact.

The application is dismissed.

I certify that this and the preceding two pages are a true copy of the reasons for judgment of the Honourable Justice Sundberg

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Associate

1 July 1997

Counsel for the judgment debtor:  P Vickery QC and J C Paterson

Solicitor for the judgment debtor:  J Guss

Counsel for the judgment creditor:  R E Cook

Solicitors for the judgment creditor:  Morley & Naughton

Date of Hearing:  27 May 1997

Place of Hearing:  Melbourne

Date of Judgment:  1 July 1997