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Johnstone v Guss

Johnstone v Guss

Case [1998] FCA 117 13 February 1998

Bankruptcy Proceedings

Act of Bankruptcy

Counterclaim, Set-off or Cross Demand

Jurisdiction

Appeal

Insolvency Law

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RAYMOND MARSHALL JOHNSTONE v JOSEPH GUSS
No. VG 7353 of 1997
FED No. 117/98
Number of pages - 5
Practice and Procedure

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

FINN J

PRACTICE AND PROCEDURE - Adjournment - Bankruptcy proceedings - Trial Judge not satisfied of counterclaim, set-off etc - Full Court appeal unsuccessful - Special leave application pending - Principles to be applied to granting of adjournment.

Bankruptcy Act 1966 (Cth) ss 40(1)(g) and 41(7).

Ahern v D.C.T. (1987) 76 ALR 137 (applied)

Ebert v Union Trustee Co of Australia (1961) 105 CLR 327 (applied)

MELBOURNE, 13 February 1998 (hearing and decision)

#DATE 13:02:1998

Appearances

Counsel for the Applicant:
Mr Cook
Solicitor for the Applicant:
Morlen and Naughton
Counsel for the Respondent:
Mr Hayes
Solicitor for the Respondent:
Mr Guss

Order:

The application for an adjournment is refused.

FINN J

On the date fixed for the hearing of the creditor's petition in this matter, the debtor applies to have the hearing adjourned pending the outcome of an application for special leave to the High Court from the judgment of the Full Court of this Court Guss v Johnstone (VG 293 of 1997) given on 13 November 1997.

For the present purposes of chronology and setting I simply incorporate by reference the terms of that judgment as also those of Sundberg J in the same matter of 30 May 1997 and 1 July 1997.

The present creditor's petition is based upon the act of bankruptcy resulting from the debtor's noncompliance with a bankruptcy notice the debtor being unable to satisfy Sundberg J that he had, under s 40(1)(g) of the Bankruptcy Act 1966, a counter-claim, set-off, or cross demand equal to or exceeding the amount of the judgment debt relied upon in the bankruptcy notice.

I would note that the debtor did not apply for an extension of time for compliance with the bankruptcy notice on the day, or before, Sundberg J gave his decision on 30 May 1997, pending the hearing of an appeal from that decision. Rather a stay of the judge's declaratory orders was sought and refused on 1 July 1997. Whether or not an extension of time pending the hearing of this appeal could have been granted in any event - and I express no opinion on that matter - no such application having been made, then s 41(7) took effect according to its terms.

That section provides:

"41(7) [Counter-claim, set-off or cross demand] 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…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Johnstone v Guss

Details

AGLC: Johnstone, Raymond Marshall v Guss, Joseph [1998] FCA 117
Case: [1998] FCA 117
Decision Date: 13 FEBRUARY 1998

CaseChat Overview and Summary

In the Federal Court of Australia, the case of Johnstone v Guss involved a creditor's petition based on the debtor's noncompliance with a bankruptcy notice. The debtor, Joseph Guss, applied for an adjournment of the hearing pending the outcome of an application for special leave to the High Court from the judgment of the Full Court. The legal issues included whether an adjournment should be granted, the principles to be applied in granting adjournments, and the effect of a special leave application on the present matter. The Full Court had previously ruled that the debtor's application to set aside the bankruptcy notice was determined when the trial judge was not satisfied of the existence of a counterclaim or set-off, leading to an act of bankruptcy.

The court's reasoning focused on the interpretation of s 41(7) of the Bankruptcy Act 1966, which extends the time for compliance with a bankruptcy notice if the court is not satisfied of the debtor's counterclaim, set-off, or cross demand. The Full Court had ruled that the time for compliance expired and could not be further extended by the court's decision. Finn J considered the principles from previous cases and noted that the Full Court's decision was in line with the High Court's interpretation of the predecessor to s 41(7). Finn J concluded that the special leave application did not have an immediate bearing on the present matter and therefore refused the application for an adjournment. The court held that the principles applied in appeals against the judgment on which a bankruptcy proceeding is founded did not create an arguable ground of appeal in this context.

The final order of the court was that the application for an adjournment was refused. This decision was based on the reasoning that the special leave application did not warrant an adjournment of the creditor's petition, as the court found no arguable ground for appeal and the principles applied in the Full Court's decision were consistent with the High Court's interpretation of the relevant section of the Bankruptcy Act.

Orders