Lavin v Toppi
[2014] FCCA 1228
•13 June 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| LAVIN v TOPPI & ANOR | [2014] FCCA 1228 |
| Catchwords: BANKRUPTCY – Application for extension of time for compliance with a bankruptcy notice pending determination of application for special leave to appeal to the High Court – whether application for special leave to appeal to the High Court from a judgment of an appeal court dismissing an appeal from a judgment in respect of which a bankruptcy notice was issued is “proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor” within the meaning of s.41(6A)(a) of the Bankruptcy Act 1966 (Cth) (Act) – whether the Court has power to order under s.41(6A) of the Act an extension of the time for compliance with a bankruptcy notice after the expiry of the time for compliance if the preconditions for the exercise of that power otherwise occurred before the expiry of the time for compliance of the bankruptcy notice – factors relevant to the exercise of the power under s.41(6A) of the Act to extend the time for compliance with a bankruptcy notice – extension of time for compliance with bankruptcy notice ordered. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.41(6A), 41(6A)(a), 41(6A)(b), 41(6C) 52(4), 52(5) High Court Rules 2004, Schedule 1 – Forms, Form 23 – Application for leave or special leave to appeal |
| Agrillo v Codisposto (unreported, Federal Court, Sackville J, 16 December 1994) Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264 Carson v John Fairfax & Sons Ltd (1991) 173 CLR 194 Collins v The Queen (1975) 133 CLR 120 Conway v Jackson (2001) 182 ALR 185 Flint v Richard Busuttil & Company Pty Limited and Another (2013) 216 FCR 375 Guss v Johnstone (2000) 171 ALR 598 Kalfus v Cassis [2005] FMCA 143 Olivieri v Stafford (1989) 24 FCR 413 O’Loughlin v Glenmont Investments Pty Ltd (2001) 191 ALR 336 Re Geard; Ex parte Reid (unreported, Federal Court, Sheppard J, 11 February 1994) Re Smith (unreported, Federal Court, Whitlam J, 4 May 1994) Re Taylor; Ex parte Deputy Commissioner of Taxation (Cth) (1983) 74 FLR 377 Streimer v Tamas (1981) 54 FLR 253 |
| Applicant: | DOLORES LAVIN |
| First Respondent: | PAOLA TOPPI |
| Second Respondent: | NEIL CUNNINGHAM |
| File Number: | SYG 3082 of 2013 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | 4 June 2014 |
| Delivered at: | Sydney |
| Delivered on: | 13 June 2014 |
REPRESENTATION
| Counsel for the Applicant: | Mr Golledge |
| Solicitors for the Applicant: | Websters Solicitors |
| Counsel for the Respondents: | Mr Johnson |
| Solicitors for the Respondents: | Beazley Singleton Lawyers |
ORDERS
Subject to order 2, the time for compliance with Bankruptcy Notice BN 165826 issued on 1 October 2013 be extended up to and including the date being 28 days from the date of determination of the application for special leave to appeal to the High Court (S115 of 2014) filed by the applicant on 30 May 2014.
Order 1 is made on the term that the applicant must pursue with due diligence the application for special leave to appeal to the High Court.
Subject to order 4, the costs of the application for the extension of time for compliance with the bankruptcy notice be costs of the proceedings.
If any of the parties wish to contend the Court should make a different order for costs than that made in order 3:
(a)by 20 June 2014 whoever so contends must submit to the Associate of Judge Manousaridis and to the other party a short written submission in support of such contention;
(b)by 27 June 2014 whoever opposes such contention submit to the Associate of Judge Manousaridis and to the other party a short written submission in response; and
(c)any contention for the making of a different order to that specified in order 3 be determined by Judge Manousaridis in chambers.
The parties have liberty to apply on such notice as the circumstances warrant.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 3082 of 2013
| DOLORES LAVIN |
Applicant
And
| PAOLA TOPPI |
First Respondent
| NEIL CUNNINGHAM |
Second Respondent
REASONS FOR JUDGMENT
Introduction
Before the Court is an application for an extension of time to comply with a bankruptcy notice. That application is made pursuant to s.41(6A) of the Bankruptcy Act 1966 (Cth) (Act) which provides:
Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice:
(a)proceedings to set aside a 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.
The application arises out of a somewhat intricate procedural history. To identify the issues that arise on the application, therefore, it will be necessary to set out the procedural history, and the relevant background to that history.
Background
The applicant, Ms Lavin, and the respondents, Ms Toppi and Mr Cunningham, were co-guarantors of a loan made by National Australia Bank Limited (Bank) to Luxe Studios Pty Limited, a company of which Ms Lavin and Ms Toppi were directors. Two other companies guaranteed the loan. One was Dolores Lavin Management Pty Limited (DLM), a company controlled by Ms Lavin; and the other was Luxe Productions Pty Ltd.
On 3 March 2010 the Bank demanded repayment of the loan from Luxe Studios and from each of the guarantors. The outstanding amount of the loan then stood at $7.8 million.
In June 2010 the Bank commenced proceedings against the guarantors, but in November of that year, the Bank settled its claim against Ms Lavin and DLM on the terms set out in a deed. Under that deed, Ms Lavin agreed to pay the Bank $1,349,632.09. The Bank, in return, covenanted not to sue Ms Lavin and DLM in relation to the guarantee Ms Lavin and DLM had given the Bank.
In February 2011 Ms Toppi and Mr Cunningham, who is Ms Toppi’s partner, entered into a contract to sell their home; and in May 2011 they paid to the Bank $2.9 million out of the proceeds of sale of their home. The payment of $2.9 million, together with other amounts that had been paid to the Bank by Luxe Studios and Ms Lavin, was sufficient to discharge the loan.
The amounts Ms Toppi and Mr Cunningham contributed towards the discharge of the debt exceeded the amounts Ms Lavin paid to the Bank by around $1.6 million. Ms Toppi and Mr Cunningham, asserting a right of contribution, demanded that Ms Lavin pay 50% of that amount.
Ms Lavin refused to pay any of the amount demanded. She refused because of what she claimed was the effect of the terms on which the Bank settled its claims against Ms Lavin. Ms Lavin claimed that, as a result of the settlement with the Bank, it could no longer be said that she or DLM had any liability that was co-ordinate with the liabilities Ms Toppi and Mr Cunningham had to the Bank.
Ms Toppi and Mr Cunningham commenced proceedings in the Supreme Court of New South Wales for the recovery of the amount of contribution. On 12 September 2013 Rein J ordered that Ms Lavin and DLM pay equitable contribution to Ms Toppi and Mr Cunningham in the amount of $726,308.50, together with interest in the amount of $144,708.06.
On 2 October 2013 Ms Lavin and DLM filed a notice of appeal to the Court of Appeal of the Supreme Court of New South Wales against the orders of Rein J. On 24 May 2014 the Court of Appeal, by a unanimous decision, dismissed the appeal. On 30 May 2014, Ms Lavin and DLM filed an application for special leave to appeal to the High Court from the judgment of the Court of Appeal.
Proceedings before this Court
On 1 October 2013 Ms Toppi and Mr Cunningham arranged for the issue of a bankruptcy notice against Ms Lavin. The bankruptcy notice, which was served on Ms Lavin on 29 November 2013, required Ms Lavin to pay $871,016.56, being the sum of the amounts Rein J ordered Ms Lavin pay to the respondents.
That led to Ms Lavin applying to this Court on 11 December 2013 for an order purportedly under s.41(6A) of the Act. The only final order, apart from costs, Ms Lavin sought was an order extending the time for compliance with the bankruptcy notice. On that day, a registrar of the Court extended the time for compliance with the bankruptcy notice up to and including 28 January 2014.
On 28 January 2014, the Court extended the time for compliance with the bankruptcy notice up to and including 7 February 2014. The order was made on the basis of an undertaking by Ms Lavin that pending the determination of the application she filed with the Court, she would not encumber or dispose of any of her real or personal property other than in the ordinary course of her business.
On 7 February 2014 this Court, by consent, ordered that the time for compliance with the bankruptcy notice “be extended up to and including the date which is 7 days from the date of determination of the appeal” Ms Lavin lodged against the orders of Rein J. On the same day, the Supreme Court, also by consent, ordered that the enforcement of the judgment of Rein J be stayed “pending further order of this Court or the Court of Appeal”, and that Ms Lavin be restrained until further order from dealing or encumbering two properties specified in the order. The Supreme Court granted the stay on the undertaking that Ms Lavin would conduct the appeal expeditiously.
On 19 May 2014 Ms Lavin filed an amended application. It sought two final orders. The first is that the bankruptcy notice be extended up to and including the date being 28 days from the date of determination of the appeal by the Court of Appeal. The second is that the bankruptcy notice be set aside. The amended application also sought an interim order to the same effect as the first final order.
On 27 May 2014 the lawyer for Ms Lavin attempted to file with the Court Registry an “Amended Application”. That document sought final relief which was similar to the final relief sought in the amended application filed on 19 May 2014, except what was intended to be sought was an extension of the time for compliance with the bankruptcy notice to a date 28 days after the date on which the High Court were to deal with the special leave application. The Registry, so I was informed by counsel, refused to accept the amended application because it was incorrectly titled “Amended Application” when it should have been headed “Interim Application”.
I permitted counsel for Ms Lavin to file in Court on 4 June 2014 the document that Ms Lavin’s lawyers attempted to file with the Court Registry on 27 May 2014 but with the heading amended to read “Interim Application”. It is on the basis of that document that Ms Lavin moved the Court for an order extending the time for compliance with the bankruptcy notice.
Whatever the reason for the interim application not having been filed before 30 May 2014, the position is that the time for complying with the bankruptcy notice, as extended by the Court on 7 February 2014, has now passed and, unless the Court has power to grant a further extension and exercises that power by making an order to that effect, Ms Lavin will have committed an act of bankruptcy.
Submissions
Ms Lavin, by her counsel, relies on a number of grounds for seeking an extension of time for compliance with the bankruptcy notice. First, there are at least some prospects that she will succeed in obtaining special leave to appeal to the High Court and, if leave is granted, succeeding in her appeal. Second, Ms Lavin granted mortgages to Westpac Banking Corporation (Westpac). Those mortgages specify as an act of default Ms Lavin’s committing an act of bankruptcy. Not to extend the time for complying with the bankruptcy notice will mean that the act of bankruptcy Ms Lavin committed by not complying with the bankruptcy notice by 31 May 2014 will stand, and she will be exposed to enforcement action by Westpac against her. Third, there will be no prejudice to the respondents or any other creditor if an extension is granted.
The respondents oppose the application on three grounds. The first is that an application for special leave to appeal to the High Court is not a proceeding “to set aside a judgment or order” within the meaning of s.41(6A) of the Act. Second, the Court does not have jurisdiction to grant an extension because the current application for extension of time has been filed after the time for complying with the bankruptcy notice, as extended on 7 February 2014, has expired. Third, if the Court does have power to order an extension, it should not do so because Ms Lavin’s application for special leave has limited prospects of success.
Is an application for special leave to appeal a proceeding “to set aside a judgment or order”?
The nature of an application for special leave to appeal to the High Court, as at 1975, was described in Collins v The Queen as follows:[1]
In the ordinary course of litigation, criminal or civil, it is considered that a party to proceedings should have the right to present his own case. But an application for leave or special leave to appeal is not in the ordinary course of litigation. The practice of this Court in granting or refusing leave or special leave makes this clear. First, until the grant of leave or special leave, there are no proceedings inter partes before the Court. This is so even in a case in which the application for leave or special leave is opposed. Whilst notice of intention to move the Court for leave or special leave may be given in writing, which is filed in the Registry of the Court, the motion for leave or special leave is made orally in court. Notwithstanding that the notice of intention to apply is served on persons who may be interested to oppose the application, the intending applicant is not bound to move the Court. When the motion is moved, the applicant for such leave or special leave is no more than an applicant desiring to obtain the Court's leave to commence proceedings in the Court. Secondly, the application must exhibit features which attract the Court's discretion in granting leave or special leave. There is no right to leave or special leave.
[1] (1975) 133 CLR 120 at pages 122-123 (Barwick CJ, Stephen, Mason, and Jacobs JJ)
These observations must now be read subject to what the High Court said in Carson v John Fairfax & Sons Ltd:[2]
From time to time statements have been made which draw attention to the unusual character of an application for special leave to appeal . . . Such an application has special features which distinguish it from most other legal proceedings. . . Notwithstanding these special features, an application for special leave to appeal, like an application for leave to appeal, is an accepted and long-standing curial procedure in this country . . . The procedure calls for a hearing, whether orally or on written materials, and a determination in the form of a curial order. If the application be refused, the order dismissing the application is the final curial act which brings the litigation between the parties to an end. An application for special leave to appeal therefore involves the exercise of judicial power.
[2] (1991) 173 CLR 194 at pages 217-218
It follows from this last passage that an application for special leave to appeal is a “proceeding”. In addition, in my opinion, applications for special leave properly fall within the meaning of “proceedings to set aside a judgment or order”. That follows from the meaning of “to”. Some of the meanings of “to” given by the Oxford English Dictionary are “Indicating aim, purpose, intention, or design: For; for the purpose of; with the view or end of; in order to”, and “Indicating destination, or an appointed or expected end or event”.[3] Applications for special leave have an aim, purpose, and design; and this is not restricted to obtaining special leave. The aim, purpose, or design of special leave applications is to set aside the judgment or order from which special leave to appeal is sought. That is reflected in the prescribed form by which an application for special leave must be commenced.[4] After requiring the applicant to identify the judgment or order from which special to appeal is sought, the form, under the heading “Grounds” requires the applicant to “[s]tate briefly the grounds on which the judgment below is said to be wrong” and, under the heading “Order(s) sought”, the form requires the applicant to “[s]tate the judgment which will be sought if special leave is granted and the appeal is successful, including any special order as to costs”.
[3] Oxford English Dictionary, accessed on 11 June 2014.
[4]High Court Rules 2004, Schedule 1 – Forms, Form 23 – Application for leave or special leave to appeal
There are two cases where it has been held that applications for special leave to appeal to the High Court are “proceedings to set aside a judgment or order”. The first is the decision of Mansfield J in O’Loughlin v Glenmont Investments Pty Ltd.[5] His Honour so decided “[i]n the light of the decision” in Conway v Jackson.[6] In that case, the Full Court held that “proceedings to set aside the judgment or order” includes the institution of an appeal from the judgment or order in respect of which the bankruptcy notice was issued where that appeal does in reality seek to have that judgment or order set aside.[7] The second is the decision of Driver FM (as his Honour then was) in Kalfus v Cassis.[8]
[5] (2001) 191 ALR 336 at page 337 ([4])
[6] (2001) 182 ALR 185
[7] (2001) 182 ALR 185 at page 191 ([20])
[8] [2005] FMCA 143
Power to extend time after time for compliance has expired
Counsel for the respondents submits that the Court has no jurisdiction to extend the time for compliance with the bankruptcy notice because the time for complying with the bankruptcy notice, as extended by the order made on 7 February 2014, has already expired.
Counsel for Mr Lavin, on the other hand, submits that if at any time during which it was possible for Ms Lavin to comply with the bankruptcy notice there existed the preconditions for extending the bankruptcy notice under s.41(6A), the Court has jurisdiction to extend the time for complying with the bankruptcy notice. Counsel further submitted that these preconditions did exist before 31 May 2014, being the day on which the time for compliance with the bankruptcy notice expired. First, on 19 May 2014 Ms Lavin filed an amended application in which she sought, among other things, an order that the bankruptcy notice issued against her be set aside. That satisfied s.41(6A)(b) of the Act. Second, on 30 May 2014 Ms Lavin filed an application for special leave to appeal from the orders of the Court of Appeal. That satisfied s.41(6A)(a) of the Act.
Counsel for Ms Lavin relied on the following passage from the decision of the High Court in Guss v Johnstone:[9]
There is authority for the proposition that an act of bankruptcy remains in effect, even if the bankruptcy notice was based upon a debt resulting from a judgment which was later set aside. At the same time, what is said to be the ineluctable nature of an act of bankruptcy is qualified by the consideration that time for compliance with a bankruptcy notice may be extended even after the time has expired, provided the conditions of s 41(6A) are otherwise satisfied.
[9] (2000) 171 ALR 598 at page 610 ([58])
The High Court referred to the decision of the Full Federal Court in Streimer v Tamas.[10] In that case, Deane and Ellicott JJ said:[11]
Section 41(6A) introduced into Commonwealth bankruptcy legislation, for the first time, express provision on the subject of extending the time for compliance with the requirements of a bankruptcy notice. The Parliament plainly turned its attention to the question of what steps needed to be taken before the expiry of the time which the bankruptcy notice fixed for compliance with its terms. It specified two alternative steps, namely, the institution of proceedings to set aside the relevant judgment or order or the filing of an application to set aside the bankruptcy notice. Subject to either of those steps being taken within the time limited for compliance, the power to extend time is conferred in general words. It would, in our view, be contrary to the plain import of the words used by the Parliament to construe s. 41(6A) as requiring not only that one or other of the alternative express conditions precedent to jurisdiction be fulfilled within the time originally fixed for compliance but as also requiring that both the application for an order and any initial order be made within that time.
[10] (1981) 54 FLR 253
[11] Streimer v Tamas (1981) 54 FLR 253 at pages 257-258. Sheppard J disagreed (at page 266)
I accept the submissions of counsel for Ms Lavin. Both preconditions to the exercise of the power under s.41(6A) to extend the time for compliance with the bankruptcy notice issued against Ms Lavin occurred during the time it was open to her to comply with the bankruptcy notice. Accordingly, I have power to determine whether I should extend the time for compliance sought by Ms Lavin.
Counsel for the respondents relied on the decision of the Full Federal Court in Flint v Richard Busuttil & Company Pty Limited and Another.[12] That case concerned the question of whether the “slip rule” could be applied to extend a creditor’s petition pursuant to s.52(5) of the Act after the creditor’s petition had lapsed because of s.52(4) of the Act. The Full Federal Court held that the slip rule was not properly invoked in the circumstances of that case.
[12] (2013) 216 FCR 375
In my opinion, the decision and issues considered in Flint do not affect or bear on the construction of s.41(6A). The making of an order under s.41(6A) after the time for compliance with a bankruptcy notice has expired where paragraphs (a) or (b) of s.41(6A) had been satisfied before the time for complying with the bankruptcy notice expired does not involve the application of the slip rule.
Principles governing the exercise of the discretion conferred by s.41(6A)
Before I consider whether I should extend the time for compliance with the bankruptcy notice, I should first identify some of the legal principles that are relevant to the proper exercise of the discretion conferred by s.41(6A) of the Act.
The discretion conferred by s.41(6A) of the Act has been described as being “at large”.[13] However, a number of factors and considerations have been held to be relevant to the exercise of the discretion.
[13] Re Taylor; Ex parte Deputy Commissioner of Taxation (Cth) (1983) 74 FLR 377 at 379
One factor is whether the recipient of the bankruptcy notice has applied for a stay of the judgment on which the bankruptcy notice is founded. In that regard, Sheppard J in Re Geard; Ex parte Reid[14] said:
“The debtor has not made any application for a stay of proceedings pending the outcome of the appeal. . . . [I]t would seem to me to require quite special circumstances before a court exercising jurisdiction in bankruptcy would, in effect, do what has not been done in the court in which the judgment has been obtained by extending the time for compliance with the bankruptcy notice when no application to stay the judgment has been made. If one were to contemplate the taking of such a course, one would usually require evidence of the means of the debtor and would wish to consider whether or not it were appropriate to order that security for the amount of the judgment should be provided. Those are matters which a court exercising jurisdiction to stay the execution of a judgment would wish to consider.”
[14] Unreported, Federal Court, 11 February 1994, referred to by Lehane J in Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264 at 269-270. Lehane J noted (at 270) that the approach of Sheppard J was followed by Whitlam J in Re Smith (unreported, Federal Court, Whitlam J, 4 May 1994) and by Sackville J in Agrillo v Codisposto (unreported, Federal Court, Sackville J, 16 December 1994).
Another factor is the merits of the proceedings to set aside the judgment with respect to which the bankruptcy notice was issued. Where the relevant proceeding is an appeal to set aside the judgment, Lehane J, in Byron v Southern Star Group Pty Ltd, said:[15]
“[T]he authorities suggest that, reluctant as the Court may in most cases be to enter into the merits of an appeal, the merits may be relevant, at least where the Court is able to regard the prospects of success as “slight” . . . or, possibly, in a case where it is apparent that the prospects of success are unusually strong . . .”
[15] (1997) 73 FCR 264 at 270-271
In the same case, Lehane J further said that:[16]
“ . . . it is relevant, 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 (as here) an application for special leave to make a further appeal.”
[16] (1997) 73 FCR 264 at 271
The exercise of the discretion under s.41(6A) is subject to s.41(6C) of the Act which provides:
Where:
(a)a debtor applies to the Court for an extension of the time for complying with a bankruptcy notice on the ground that proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; and
(b)the Court is of the opinion that the proceedings to set aside the judgment or order:
(i)have not been instituted bona fide; or
(ii)are not being prosecuted with due diligence;
the Court shall not extend the time for compliance with the bankruptcy notice.
Subsection 41(6C) “deals with the debtor who is dragging his feet or toying with his creditor”.[17] The Court is obliged not to extend the time for compliance with a bankruptcy notice if the Court is of the opinion that the proceedings to set aside the judgment in respect of which the bankruptcy notice was issued have not been instituted bona fide or are not being prosecuted with due diligence.[18]
[17] Olivieri v Stafford (1989) 24 FCR 413 at 429, per Gummow J
[18] Olivieri v Stafford (1989) 24 FCR 413 at 429, per Gummow J referring to Re Taylor; Ex parte Deputy Commissioner of Taxation (Cth) (1983) 74 FLR 377
Should time for compliance with the bankruptcy notice be extended?
Counsel for Ms Lavin has identified a number of factors that favour the extension of time. First, there is in place a stay of execution of the judgment made by Rein J. Second, Ms Lavin and DLM are subject to an order of the Supreme Court that they do not deal with their property otherwise than in the ordinary course of business. Third, Ms Lavin is prepared to undertake to this Court to prosecute her application for special leave with expedition, should the Court order that the time for complying with the bankruptcy notice be extended. Fourth, if the time for compliance is not extended, Ms Lavin’s act of bankruptcy will stand, and she will be exposed to recovery proceedings by Westpac. Fifth, extending the time for compliance with the bankruptcy notice will delay the relation back date in Ms Lavin’s bankruptcy, if she fails in her application to the High Court. There is no evidence, however, and it has not been suggested by the respondents that the respondents or any other creditors of Ms Lavin will suffer prejudice if the relation back date is postponed.
Counsel for the respondents did not dispute, or at least firmly dispute, the existence and relevance of these matters to the exercise of the discretion under s.41(6A) of the Act. Counsel, however, submitted that Ms Lavin’s application for special leave to appeal to the High Court is not based on proper grounds, and I cannot be satisfied of that because Ms Lavin has not tendered evidence of any advice that the application for special leave is based on proper grounds. Counsel also pointed to the fact that both the primary judge, and all of the judges of appeal, decided against Ms Lavin on the issue Ms Lavin desires to litigate in the High Court.
In my opinion, the prospects of Ms Lavin’s application for special leave are slight. As I have noted above, four judges have held against Ms Lavin on the issue she wishes to litigate in the High Court. Further, and quite apart from the technical legal grounds on which the issue has been decided against Ms Lavin, there is an inherent unattractiveness of the position Ms Lavin maintained in the Supreme Court and in the Court of Appeal, and which she wishes to advance in the High Court. That position is that the rights of contribution that co-guarantor A has against co-guarantor B can be destroyed unilaterally by co-guarantor B entering into an agreement with the creditor without the agreement or knowledge of co-guarantor A.
Notwithstanding my views on the merits or unattractiveness of the case Ms Lavin wishes to advance in the High Court, it is obviously not for me to determine that case. My views on the merits of Ms Lavin’s application for special leave is but one factor that I must consider in determining whether to make an order under s.41(6A) of the Act.
In my opinion, all factors, other than the weakness of Ms Lavin’s proposed application for special leave, point to my extending the time for compliance with the bankruptcy notice. The question that arises is whether what I perceive to be a very weak case for special leave is sufficient to outweigh the other factors, and thus lead me to refuse Ms Lavin’s application for an extension of time. And this requires me to compare the respective prejudice to Ms Lavin if an extension is not granted with the prejudice the respondents will suffer if an extension is granted.
The immediate prejudice to Ms Lavin if I do not order an extension of time for the compliance of the bankruptcy notice is the risk that the act of bankruptcy that Ms Lavin has committed by not complying with the bankruptcy notice by 31 May 2014 will stand, and Westpac will commence recovery action against Ms Lavin. The magnitude of that risk must be discounted significantly to take into account the high improbability of Ms Lavin succeeding in obtaining special leave. Stated another way, the granting of an extension of time will offer Ms Lavin a very small chance of preventing Westpac from taking recovery proceedings against her; to not grant the extension of time for compliance with the bankruptcy notice will deprive Ms Lavin of that very small chance.
As for the prejudice to the respondents if an extension of time for compliance with the bankruptcy notice is granted, the evidence before the Court does not permit me to infer any prejudice. There is already in force a stay of execution of the judgment against Ms Lavin and DLM, and it has not been suggested that the respondents intend to apply to have that stay lifted. It has not been suggested, and there is no evidence to suggest, that Ms Lavin has not complied with the undertakings Ms Lavin gave to the Supreme Court. And it has not been suggested, and there is no evidence to suggest that Ms Lavin has dealt with her property in such a way that may render them recoverable by a trustee in bankruptcy if Ms Lavin were to be made bankrupt, and that such potential right to recover such assets will be prejudiced by the postponement of the relation back date if I were to order an extension of time for compliance with the bankruptcy notice.
On balance, I am of the opinion that I should make an order extending the time for compliance with the bankruptcy notice up to and including the date being 28 days from the date of determination of Ms Lavin’s application for special leave to appeal. I propose to make that order conditional on Ms Lavin pursuing her application for special leave with due diligence.
Finally, I propose to order that the costs of the application for an extension of time be costs in the proceeding, although I will make directions to permit the parties to apply for a different costs order if they so elect.
I certify that the preceding forty-seven (47) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Associate:
Date: 13 June 2014
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