Kyrwood v Drinkwater

[1999] FCA 1617

FEDERAL COURT OF AUSTRALIA

Kyrwood v Drinkwater [1999] FCA 1617

BANKRUPTCY – application to set aside bankruptcy notice – application for extension of time to comply with bankruptcy notice where there is an appeal from judgment debt upon which bankruptcy notice is based

PRACTICE AND PROCEDURE – application to amend application for an extension of time to comply with bankruptcy notice – where Court of Appeal ordered stay of judgment debt which is the basis of the bankruptcy notice on condition that debtors lodge security – where no security has been lodged – interests of creditor – delay 

Bankruptcy Act 1966 (Cth) ss 40(1)(g), 41(6A), 41(7)

Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264 cited

GEOFFREY KYRWOOD AND TERENCE KYRWOOD
EX PARTE GEOFFREY KYRWOOD AND TERENCE KYRWOOD v

PETER WESTGARTH DRINKWATER, JOHN FRANCIS DRINKWATER, LUSTRAY PTY LIMITED AND CADDYRACK INC.

N 8081 OF 1999

TAMBERLIN J
SYDNEY
19 NOVEMBER 1999

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	8081 OF 1999

RE:

GEOFFREY KYRWOOD,
TERENCE KYRWOOD
DEBTORS

EX PARTE:

GEOFFREY KYRWOOD,
TERENCE KYRWOOD
APPLICANTS

PETER WESTGARTH DRINKWATER,
JOHN FRANCIS DRINKWATER,
LUSTRAY PTY LIMITED,
CADDYRACK INC.
RESPONDENTS

JUDGE:

TAMBERLIN J

DATE OF ORDER:

19 NOVEMBER 1999

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.Leave is refused to the applicants to amend their application for an extension of time.

2.The applicants are to pay the costs of the respondents of this application.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	8081 OF 1999

RE:

GEOFFREY KYRWOOD,
TERENCE KYRWOOD
DEBTORS

EX PARTE:

GEOFFREY KYRWOOD,
TERENCE KYRWOOD
APPLICANTS

PETER WESTGARTH DRINKWATER,
JOHN FRANCIS DRINKWATER,
LUSTRAY PTY LIMITED,
CADDYRACK INC
RESPONDENTS

JUDGE:	TAMBERLIN J
DATE:	19 NOVEMBER 1999
PLACE:	SYDNEY

REASONS FOR JUDGMENT

Judgment on Application to Amend Details of Claim

1. The only question for present determination is whether the debtors should have leave to amend their application for an extension of time within which to comply with a Bankruptcy Notice under s 41 of the Bankruptcy Act 1966 (Cth) (“the Act”).

2. The extension is sought until fourteen days after the New South Wales Court of Appeal delivers judgment in an appeal from the judgment debt upon which the Bankruptcy Notice is based.

3. The Bankruptcy Notice was issued on 30 August 1999 and served on 6 September 1999.

4. The application to extend time for compliance was filed on 27 September 1999. The grounds on which that application was made were stated in an accompanying affidavit and the basis of the application stated was that the applicants have a counter-claim, set-off or cross demand of the kind referred to in s 40(1)(g) of the Act. That affidavit although strictly not in admissible form because it was sworn by two deponents did signal that reliance would be placed on what was then an application for a stay of execution. The application filed in this matter also seeks an order that the Bankruptcy Notice be set aside.

5. The amended application which was handed up in Court on 5 November 1999 seeks to rely on s 41(6A) of the Act as the basis of the application to extend time for compliance.

6. The application to amend is resisted.

7. Section 41(6A) of the Act provides :

   “Where, before the expiration of time fixed for compliance with the requirements of a bankruptcy notice:

   (a) proceedings to set aside the judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or

   (b) an application has been made to the Court to set aside the bankruptcy notice;

   the Court may, subject to subsection (6C), extend the time for compliance with the bankruptcy notice.” (Emphasis added)

8. Section 41(7) provides that where, before the expiration of the time fixed for compliance with 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 a counter- claim, set-off, or cross demand, which could not have been set up in the action or proceeding in which the judgment order was obtained, and the Court has not yet determined if it is satisfied of the applicant’s claim, time for compliance shall be deemed to have been extended until the Court determines whether it is so satisfied. This ground is not relied on under the amended application.

9. The matter first came before me on 19 October 1999 when I granted an application for adjournment on the basis of a previous agreement between the solicitors that the matter would be adjourned.  The matter again came on for hearing before me on 5 November 1999.  It was not until that hearing that an application was sought to be made to the Court to amend the application of 27 September 1999, although it was indicated on 19 October that such an application might be made.

10. The Bankruptcy Notice is based on a claim for $101,962.49 pursuant to a certificate of judgment of the District Court dated 11 June 1999.  That debt arose under an order for costs made by Young J, on 23 October 1997.  An appeal has been lodged against that order to the New South Wales Court of Appeal and the appeal is fixed for hearing on 1 February 2000.  On 14 October 1999 Priestly JA of the New South Wales Court of Appeal made an order staying the order made on 23 October 1997 on condition that the debtors lodge security to the satisfaction of the Registrar for an amount of $101,601.49, being the taxed costs of the proceedings before Young J, but this has not been done.

11. In my opinion, this is not an appropriate case in which to permit at this late stage the amendment of the application for extension of time for compliance with the Bankruptcy Notice.

12. As Lehane J points out in Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264 at 270:

    “The commission of an act of bankruptcy is, undoubtedly, a serious matter; it is, however, of a different order of gravity from the change of status brought about by the making of a sequestration order; and there is also to be taken into account the interest of both 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.”  (Emphasis added)

13. The fact that an appeal has been taken to the Court of Appeal is a relevant matter to take into account, but it is not controlling.  Moreover, the applicant has not complied with the condition of the stay which specifically secures the respondent’s costs.  The interests of the creditor respondent in having this matter proceed in a timely manner is also of importance.  Although the matter has been fixed for hearing it may be several months before a decision is given and I consider that the creditors will be unduly disadvantaged by the delay.

14. In his reasons for judgment on the stay application, Priestly JA expressed his opinion as being that the appeal was not filed for the purpose of gaining delay and that there were real arguments involved and that it is reasonable on the part of the appellants to pursue the appeal and obtain the judgment of that Court on the points decided by Young J.  This amounts to no more than saying that there is a reasonably arguable case.

15. In these circumstances I refuse leave to amend the application for an extension of time as sought.  The applicants are to pay the costs of the respondents of this application.

I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin.

Associate:

Dated:             19 November 1999

Counsel for the Applicant:	A McInerney
Solicitor for the Applicant:	Wood Roberts
Counsel for the Respondent:	M Ashurst
Solicitor for the Respondent:	Hansens Solicitors
Date of Hearing:	5 November 1999
Date of Judgment:	19 November 1999