LFDB v SM - [2011] FMCA 892

FEDERAL MAGISTRATES COURT OF AUSTRALIA

LFDB v SM

[2011] FMCA 892

BANKRUPTCY – Application to set-aside Bankruptcy Notices brought on the basis that it is an abuse of process - deemed extension of time in which to comply with Notice – initial extension of time granted pursuant to s.41(6A) – whereas Application to set-aside claimed to be brought pursuant to s.41(7) although r.3.02 not complied with – Application to dispense with the requirements of r.3.02 of the Federal Magistrates Court (Bankruptcy) Rules 2006 – application dismissed.

Bankruptcy Act 1966 (Cth), ss.33(1)(c), 41(6A) , 41(7)
Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) rr.106, 3.02
Legal Profession Act 2004
Property Relationship Act 1976 (New Zealand)

Alcantara v Buildpower Pty Ltd (2010) 199 IR 73
Australian Securities and Investment Commission v Forge [2003] FCAFC 274
ASB Bank Ltd v SM HC Auckland CIV-2011-404-004245
Brunninghausen v Glavanics [1998] FCA 230
Guss v Johnstone [2000] HCA 26
James v Abrahams (1981) 51 FLR 16
Kennon v Spry (2008) 238 CLR 366
Maxwell-Smith v S & E Hall Pty Ltd [2006] FCA 825
Melaleuca of Australia & New Zealand Pty Ltd v Duck [2005] FCA 1481
Phontos v Carlamax Properties Pty Ltd [2011] FMCA 205
Re Dalco;Ex Parte Dalco v Deputy Commissioner of Taxation (Cth) (1986) 87 FLR 334
Re Sarina; Ex parte Wollondilly Shire Council [1980] 30 ALR 266
Rose v Merriton Apartments Pty Ltd [2011] FMCA 721
Shephard v Chiquita Brands (South Pacific) Ltd [2004] FCAFC 76
Thorpe v Bristile Ltd (1997) 80 FCR 330
Webb v Hunter (1995) 59 FCR 24

Applicant:

LFDB

Respondent:

File Number:

SYG 1575 of 2011

Judgment of:

Lloyd-Jones FM

Hearing date:

4 October 2011

Delivered at:

Sydney

Delivered on:

18 November 2011

REPRESENTATION

Counsel for the Applicant:

Mr B. Skinner

Solicitors for the Applicant:

Newnham Solicitors

Counsel for the Respondent:

Mr S. Golledge

Solicitors for the Respondent:

Leonard Legal

ORDERS

The Application to dispense with compliance with r.3.02 of the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) is dismissed.
The Application filed on 25 July 2011 seeking Bankruptcy Notice BN 4632 of 27 June 2011 to be set-aside is dismissed.
The Applicant is to pay the Respondent’s cost, as assessed or taxed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYG 1575 of 2011

LFDB

Applicant

And

Respondent

REASONS FOR JUDGMENT

The creditor, SM had a Bankruptcy Notice BN4632 issued to LFDB on 27 June 2011 which was served on 6 July 2011. An Application to set-aside the Bankruptcy Notice was filed on behalf of LFDB on 25 July 2011 on the basis that the Bankruptcy Notice was an abuse of process.
On 25 July 2011 LFDB filed an Application seeking to have the Bankruptcy Notice set-aside and interim orders:
That the time of compliance with the Bankruptcy Notice issued on 27 June 2011 and served on the Applicant on 6 July 2011 be extended until further notice.
On that date Registrar Segal made the following orders:
1. Pursuant to subsection 41(6A) of the Bankruptcy Act 1966 and rule 3.03 of the Federal Magistrates Court (Bankruptcy) Rules 2006, on condition that Bankruptcy Notice No.

BN 4632 of 27 Jun 2011 was served on the Applicant on 6 July 2011, the time for compliance by the Applicant with the requirements of the Bankruptcy Notice is extended up to and including 2 August 2011.
2. There be liberty to any party to apply to vary or discharge Order 1, on 24 hours notice.
The time and date of the hearing of the Application was adjourned to 2 August 2011 before the Registrar. On that date the matter was further adjourned to the Registrar’s list on 23 August 2011 and at that time the parties requested the matter to be referred to this Court for resolution. Further, on that date, the matter was adjourned at the consent of the parties until 4 October 2011. No order was made on 2 August 2011 for the time of compliance to be further extended and there is a dispute between the parties whether an extension of time is automatic.
After both parties had made their submissions, Mr Skinner for the Applicant sought to reopen his case and tender further evidence (Exhibits A3 to A6). This decision addresses that application.

Evidence

Mr Skinner tendered the following material:
a)Affidavit of LFDB – sworn 25 July 2011. There was no objection to that affidavit.
b)Exhibit A1 - A restraining order issued out of the Family Court at North Shore in New Zealand, dated 30 April 2010. There was no objection to this tender.
c)Exhibit A2 – copy of a letter from Newnhams Solicitors to Leonard Legal Solicitors dated 31 August 2011. There was no objection to this tender.
d)Judgment of Whata J of the High Court of New Zealand delivered on Friday 30 September 2011. Mr Golledge sought clarification in respect of this tender and Mr Skinner indicated that the judgment involved the bank called “ASB Bank Ltd” (the “ASB”), the present Respondent and his client, although not a party, there were many references. Mr Skinner drew the Court’s attention to the final paragraph of the judgment which states:
There is also an application for name suppression on these proceedings. The family court proceedings and the previous proceeding in this court have been, and are subject to, suppression orders. This judgment overall has issues under some urgency given the need to regularise ASB and the purchaser’s position. I am prepared, however, to grant interim suppression orders suppressing all details of the respondent, including her address and any other identifying information pending the final determination of the application for suppression.
Mr Golledge acknowledged that there were a number of arguments regarding admissibility however he indicated that he would agree to the admission of the affidavit provisionally and allow me to rule upon its admissibility in the course of my judgment
e)Exhibit A3 – letter from Leonard Legal dated 22 July 2011.
f)Exhibit A4 – Letter from Leonard Legal dated 8 August 2011.
g)Exhibit A5 – Handwritten copy of Short Minutes of Order.
Mr Golledge read the affidavit of SM sworn 29 September 2011. There is no objection to this affidavit. Exhibited to this affidavit was:
a)Exhibit R1 – file note prepared by Mr Maker at the Registrar’s hearing on 2 August 2011.

Background

Mr Skinner indicated that the Applicant and the Respondent were former de facto partners in a relationship which transversed Australia and New Zealand. When precisely the relationship commenced is a matter of dispute, however it seems to be that the parties separated in or around January 2009. The Respondent resides in New Zealand in a residence in Mays Street, Devonport, Auckland, which is in dispute between the parties.
Mr Skinner indicated that the parties are in dispute in both Australia and in New Zealand and without reaching a concluded hearing of their difficulties under the Property Relationship Act 1976 which is the New Zealand de facto relationship code central to the dispute that gives rise to the Bankruptcy Notice in this matter based on the disputed ownership of the real estate at … Mays Street and the occupation of it by the Respondent. The Applicant is the legal owner subject to a mortgage in favour of the ASB. His Honour Whata J observed in his judgment of 30 September 2011 that the debt to ASB is in excess of NZD $1,200,000 (para.5 of the judgment). The property is apparently of special emotional and personal significance to the Respondent and she wishes to remain in the property.
There was an interim order made in the Family Court of New Zealand and the Respondent has the right to occupy the property at Mays Street until further notice. That order was made on 22 March 2010 and part of that order for occupancy was that LFDB maintained the mortgage payments to the ASB. He did not do so and the ASB, pursuant to its power as mortgagee, exercised a power of sale and sold …Mays Street by public auction. Settlement of the sale was scheduled for 15 September 2011 however this did not occur and the Respondent took action for the title of Mays Street with an instrument akin to a caveat, being a notice of claim. The Respondent in the High Court of New Zealand sought to postpone the interest of the ASB to the right of residency granted to the Respondent in the Family Court in New Zealand. A hearing was conducted on 21 September 2011 and judgment was delivered on 30 September 2011 at 4pm. It should be noted that LFDB was not a party to those proceedings.
In respect of the proceedings before this Court, these are a consequence of previous proceedings in the Supreme Court of New South Wales. By a Statement of Claim filed in the Supreme Court of New South Wales on 12 February 2009, LFDB sought orders against SM for an anti-suit injunction. His Honour Barrett J refused the Application … and ordered LFDB to pay SM’s costs: … . His Honour held the proceedings to be oppressive because they had been brought in the full knowledge as to the nature and extent of the claims that the defendant, SM might seek to bring in New Zealand that were unavailable in New South Wales. The Court held that the proceedings in New South Wales were initiated with precise intention of creating a platform from which he could seek a stay of the New Zealand proceedings. The Court also held that it could not and would not make any order in relation to the residential property in New Zealand.
SM’s costs were assessed under the Legal Profession Act 2004 (NSW) and the resulting certificate of determination was regularly registered as a judgment in the Supreme Court on 30 May 2011. The present proceedings in bankruptcy therefore arose out of an unsuccessful application by LFDB to commence and maintain proceedings under the relevant de facto relationship legislation in Australia.

Applicant’s submissions

Mr Skinner submits that the ASB sold the property at … Mays Street and sought to settle that transaction on 15 September 2011. It is evident in this case from the outset that his client, LFDB, wished to change his interest in the proceeds of sale of … Mays Street in order to satisfy the judgment debt. That offer has been rejected and indeed thwarted by the decision of his Honour Whata J while disposing of SM’s application in terms of title, nevertheless, ordered that the condition of the removal of her notice of claim (caveat) ordered that:
…the proceeds of sales net of the original loan sum and unpaid interest, if any, to 22 January 2009 be paid into Court pending resolution of the Family Court proceedings or further orders of this Court.
Mr Skinner contends that not only is LFDB confronted by the restraining order, he is confronted by orders made on 30 September 2011 in the High Court of New Zealand and is thereby prevented by reasons of the action of SM from satisfying the judgment debt. In his judgment Whata J made an observation at [81] that the Court was concerned that all of this had been precipitated by the conduct of LFDB. Mr Skinner submits that this is a disturbing comment given that LFDB was the denied any natural justice with regard to that finding or indeed that allegation. There is nothing in the judgment of his Honour to indicate that the issue of the Bankruptcy Notice or the repercussions of the order made by his Honour were ever canvassed in those proceedings.
Mr Skinner submits that the Bankruptcy Notice that was issued on 27 June 2011 is a clear abuse of process. The question of payment of the debt belongs clearly in the province of the Family Court of New Zealand at Auckland. His Honour, Barrett J has said so as has his Honour Whata J. When proceedings between spouses and ex-spouses are resolved, there has to be a tally of assets and liabilities: Kennon v Spry (2008) 238 CLR 366 at [221] per Kiefel J where her Honour said that contributions of parties direct and indirect are central to the means by which the Family Court is to determine proceedings with respect to property. Mr Skinner submits that the judgment debt owed by LFDB to SM will form part of the compensation process which is yet to be ultimately determined.
Mr Skinner contends that the legal principles are relatively straightforward as there is no debate that the power to set-aside a Bankruptcy Notice as an abuse of process arises from s.30 of the Bankruptcy Act 1966 (Cth): Maxwell-Smith v S & E Hall Pty Ltd [2006] FCA 825 per Jacobson J, who at [41] confirmed this. His Honour followed this decision in Brunninghausen v Glavanics [1998] FCA 230 per Emmett J and he also followed Re: Sarina; Ex parte Wollondilly Shire Council [1980] 30 ALR 266. Mr Skinner submits that his Honour Jacobson J clearly indicated that he followed Brunninghausen (supra) and Sarina (supra) and stated at [43]:
If it is apparent to the Court that the purpose of a Bankruptcy Notice is to put pressure on a debtor to pay a debt rather than to invoke the Court’s insolvency jurisdiction, the issue of the Bankruptcy Notice will be an abuse of process. …
Mr Skinner submits that the present application has been effectively prevented from pursuing whatever rights LFDB may have had under Australia’s de facto relationship law by the judgment of his Honour Barrett J in LFDB v SM (supra). He has been further restrained from accessing money in New Zealand by orders made in the Family Court of New Zealand and finally by the High Court of New Zealand on 30 September 2011. Mr Skinner argues that it is near impossible to discern any motive on the part of SM other than to exert pressure for payment of the judgment debt. More significantly, and this point is made and underscored by his Honour Jacobson J in Maxwell-Smith v S & E Hall Pty Ltd (supra), there is no evidence from SM in the present proceedings, notwithstanding an affidavit filed on 30 September 2011 to dispel the natural inference that the Bankruptcy Notice was issued for a purpose collateral to the pursuit of insolvency proceedings. Mr Skinner contends that the Bankruptcy Notice should be set aside allowing the Family Court of New Zealand at North Harbour to adjudicate all matters in dispute between LFDB and SM including the payment of the judgment debt.

Respondent’s submissions

Mr Golledge, appearing for SM argues that the issue of abuse of process has been raised for the first time in Mr Skinner’s submissions before the Court. It is significant because it is in breach of the rules of this Court as it did not identify in the body of the application the basis upon which it was brought. In the Application filed on 25 July 2011, contrary to what the rules require and the forms which the rules proscribe, there is no indication either at paragraph A (final orders sought by Applicant) or paragraph B (interim orders sought by the Applicant) of either the statutory basis or now a general abuse of process basis upon which the Application is based. It simply identifies the relief. If one goes to the relevant rule, this Court requires an Applicant to identify the statutory basis on which the Application is made.
Mr Golledge acknowledges that the absence of the statutory basis in the Application is not normally a major problem as they can be identified from the affidavit which is filed in support of the Application. In the affidavit of LFDB sworn 25 July 2011 at para.15 is a claim of solvency. Mr Golledge contends that this would be abandoned as such an assertion is irrelevant to the issue of the Bankruptcy Notice. The second ground, which is the subject of the whole affidavit, addresses the existence of counter claims, cross actions and demands of the type described in s.41(7) of the Bankruptcy Act. There is a Statement of Claim annexed to the affidavit being proceedings recently commenced by LFDB.
Mr Golledge submits that the disconnect between the Application which was filed and the evidence and submissions now made is important for two reasons:
a)There has been a failure to comply with r.3.02 of the Federal Magistrates Court (Bankruptcy) Rules and this requires that an Application seeking to set-aside a Bankruptcy Notice must be accompanied by a copy of the Notice and an affidavit which sets out the grounds. Sub-rule 2 sets out the requirements in respect to an application based on s.41(7) being an attack base on the existence of a counter-claim, set-off or cross demand.
b)The order obtained from Registrar Segal on 25 July 2011 was obtained under s.41(6A)of the Bankruptcy Act which authorises the extension of time where there are to be attacks on the underlying judgments. The Bankruptcy Notice would otherwise have expired but for the extension of time which was obtained under s.41(6A).
Mr Golledge indicates that no further extension was granted when the matter was before the Court on 2 August 2011 in the Registrar’s list where the matter was adjourned until 23 August 2011. Mr Golledge drew to the Court’s attention that the applicant is relying on the continuation of a deemed extension of time under s.41(7) but such a deemed extension only arises in respect to applications brought under s.41(7), that is, applications that rely upon arguments of an abuse of process or that the underlying judgment is to be attacked by appeal, but it is a limited jurisdiction that is applicable only to applications brought under s.41(7). Mr Golledge argues that in the circumstances where there was no deemed extension on 2 August 2011 and because this is not an application, as now described, which attracts a deeming provision of the statute, then an act of bankruptcy was committed on 3 August 2011 because the previous actual express extension expired on 2 August. Therefore, this application fails on the primary ground because an act of bankruptcy has already occurred and the Bankruptcy Notice has been spent by the commission of an act of bankruptcy and no application for a retrospective additional extension of time has been made.
Mr Golledge submits that if the cross-action demand or cross-claim argument is revived in reply, he refers the Court to the decision of her Honour Barnes FM in Rose v Merriton Apartments Pty Ltd [2011] FMCA 721 which traverses all of the relevant issues under the operation of s.41(7).
Mr Golledge then made submissions on the abuse of process argument that had been introduced by Mr Skinner in his oral submissions on behalf of the applicant. That argument is that the Bankruptcy Notice, based upon a judgment obtained some years ago from a state court and the assessed costs of those proceedings based on the judgment, which has been unaffected by any appeal process, is an abuse of process because of the existence of Family Court proceedings between the parties in New Zealand. Mr Golledge contends that the circumstances are that LFDB brought proceedings in the Supreme Court of New South Wales which his Honour Barrett J found to be inappropriate as the matters properly were the subject of the Family Law jurisdiction in New Zealand. As a consequence, LFDB suffered a substantial costs liability leading to the issue of the Bankruptcy Notice.
The Applicant then seeks to persuade this Court that the attempt by the Respondent to pursue the rights available to her under the Bankruptcy Act arising from the failed proceedings in the Supreme Court being denied the recovery of her costs because she ought to rely upon whatever rights she has in the Family Law jurisdiction in New Zealand. Mr Golledge argues that it was LFDB who invoked the jurisdiction of the Courts of this State and now states that SM should be prevented from doing so as a creditor under the Bankruptcy Act because she should be pursuing the matter in the New Zealand Courts. This is the proposition that his Honour Barrett J upheld when he dismissed LFDB’s application in the Supreme Court of NSW.
Mr Golledge then addressed the issues arising from his submissions made by Mr Skinner in respect to the decision in ASB Bank Ltd v SM HC Auckland CIV-2011-404-004245, per Whata J handed down 30 September 2011. Mr Golledge argues that the judgment was tendered not to derive any support from that judgment but to invite this Court to draw some criticism of SM from its contents based upon comments made by his Honour. Mr Golledge invites this Court to draw conclusions about what was said or not said to that Judge in that Court entirely in the absence of evidence. Mr Golledge acknowledges that he cannot put a submission that SM did or did not draw the existence of these proceedings to his Honour Whata J’s attention. There is no evidence available of what the issues were in the New Zealand High Court and they cannot be determined simply by reading the judgment. His Honour may not have found it necessary to consider whatever was going on in another place because what was involved in the New Zealand proceedings was a dispute, not between LFDB and SM, but a claim by a mortgagee to remove a caveat.

Mr Golledge contends that it is not immediately apparent what relevance these proceedings would have to such a matter when the New Zealand proceedings were concerned presumably with questions of competing priorities between the legal mortgagee and SM who seems to be asserting some rights arising either in equity or under the equivalent statute of the Property Relationships Act. Mr Golledge contends that although there is no mediation of those proceedings by his Honour Whata J because what is happening in this jurisdiction could have no possible relevance to the ASB’s entitlement to enforce this mortgage in New Zealand.
Mr Golledge submits that in response to the submission made on behalf of the Applicant, that the mere fact that the Bankruptcy Notice is issued, either in the context of extant proceedings the equivalent of Family Court of New Zealand, and in light of the restraining order dated 30 April 2010 (Exhibit A1) make these proceedings an abuse of process. The underlying liability being the basis of the Bankruptcy Notice arises from the judgment of his Honour Barrett J, being a liability incurred after the termination of a relationship and will be taken into account in the final assessment of the respective entitlements in the Family Law Court of New Zealand. Mr Golledge contends that this Court should not accept that submission because its underlying premise is that this Court should draw an inference as to the likely operation of New Zealand Family Law. There is no evidence of that and it is not a matter on which this Court should conclude.
Mr Golledge argues that if the Applicant wishes to make that submission, he bears the onus of proof in circumstances where no evidence has been led as to how such a liability might be taken into account in the Family Law proceedings in New Zealand. It is equally possible that being a post-relationship liability it might be entirely irrelevant. Mr Golledge argues that this submission is a matter of mere speculation on behalf of the Applicant. Mr Golledge contends that the Family Law jurisdiction is a specialist jurisdiction based on a specialist statute where matters of approach to different liabilities will be governed by the Court’s application of the law as developed in a country.
Mr Golledge submits that the second proposition advanced on behalf of the Applicant is an abuse of process, as having obtained an injunction for the equivalent of a restraining order in New Zealand, he submits it is an abuse to thereafter continue or to issue a Bankruptcy Notice in this jurisdiction. That submission was put by reference to the terms of the restraining order dated 30 April that it no doubt applies to any property in both New Zealand and Australia. Mr Golledge contends that both LFDB and his New Zealand solicitors would be surprised by that submission if one were to read para.9 of LFDB’s affidavit of 29 July 2011 which says the very opposite in that it does not apply to assets in Australia. The only evidence as to the operation of the restraining order is that it does not apply particularly to non-movable assets in the Australian jurisdiction. LFDB identifies non-movable assets in para.5 of his affidavit as being a property in Dampier Terrace, Broome, and with an apparent value in excess of $2 million, with a liability of approximately $1.3 million. LFDB and his New Zealand solicitors contend that the substantial equity in that property would not be affected in any way by the terms of the restraining order.
Mr Golledge contends that even if this Court accepts that there might be an abuse, were it established that a creditor, having secured a comprehensive restraining order preventing an order from making a payment, to then issue a Bankruptcy Notice which would require, for it to be satisfied, the debtor to do the very thing that the Applicant had been prevented from doing by virtue of securing the restraining order. If that thesis were to be accepted, it could not apply on the evidence in this case as the only evidence as to the effect of the New Zealand law and the restraining order comes from LFDB which is to the effect that it only affects property in New Zealand. Even if otherwise good as a matter of principle, it is not borne out by the factual circumstances of this case.
Mr Golledge contends that this leaves a situation that is entirely uncontroversial and an entirely orthodox state of affairs where a creditor with a judgment which has been outstanding for a substantial period of time, not subject to appeal, which is subject to a costs application which was argued unsuccessfully by the Respondent Debtor. In a quite orthodox way the creditor issued a Bankruptcy Notice and this Court is being asked to characterise that as an abuse on the basis that there are some family law proceedings on foot between the parties in another jurisdiction. That does not make a Bankruptcy Notice an abuse unless one can characterise or colour it as being an illegitimate attempt to use the Notice for the debt recovery proceedings in accordance with Maxwell Smith v S & E Hall Pty Ltd (supra). Mr Golledge indicates that SM has sworn an affidavit in these proceedings but was not required for cross-examination so the above proposition could have been fairly put to SM but there has been no attempt to do so. Consequently this Court is now invited to speculate as to SM’s ulterior purpose. The only evidentiary basis in support of that proposition is that there are proceedings between the same parties in another jurisdiction and it is not clear that those proceedings will embrace or involve in any way a consideration of the discharge of the liability arising in New South Wales, as that will depend upon the intricacies of New Zealand Property Relations Act.

Application to re-open

Mr Skinner sought leave to re-open his case and to tender two letters from Leonard Legal dated 22 July 2011 (Exhibit A3) and 8 August 2011 (Exhibit A4). Mr Skinner made an oral application to dispense with the requirements for compliance with r.3.02 insofar as such be necessary to agitate the present Application to set aside the Bankruptcy Notice. Mr Golledge indicated that he did not object to the tender of the letters and made an Application to lead evidence from his instructing solicitor as to what was said in Court on the first return date of the Application being on 2 August 2011. This was made on the basis that he had been instructed that there had been a relevant discussion about the basis upon which the Application had been made that was brought before Registrar Segal.
I indicated during Court that I would grant leave to reopen and allow evidence to be taken from the respective instructing solicitors. Mr Golledge called Ms Kelly Van Munster, his instructing solicitor at Leonard Legal who had the day-to-day carriage of these proceedings on behalf of the Respondent, SM and appeared before Registrar Hedge on 2 August 2011. The following evidence-in-chief was given:
Golledge: Are you able to tell his Honour what, if anything, transpired between bench and those appearing on that day, concerning the basis of this application and the circumstances in which, so far as you can recall, any such exchange occurred?
(Objection which was subsequently withdrawn)
Ms Van Munster: We handed up short minutes of order. The short minutes of order, as I recall, were an application to adjourn the matter on the basis that my office has just received service of the applicant’s application. From the bench – and I do – I cannot recall the registrar’s name, and I – I apologise to the court for that. From the bench, the registrar sought clarity from the applicant as to whether it was an applicant – application under 41.7 of the Bankruptcy Act, and he responded yes, it was. And on that basis, she advised us that on that basis an extension of the – the time for bankruptcy would not need to be extended – time for compliance with the bankruptcy notice would not be – need to be extended by order. It was deemed extended, so she – she said she wouldn’t make that order, on the basis that it was a deemed extension under that particular part of the act.
HIS HONOUR: And we’re talking about Registrar Segal’s original extension?
Ms Van Munster:I believe so.
Mr Golledge: Yes?
Ms Van Munster: I believe she did make a note of it on the orders. She may have crossed out the order where we were ‑ ‑ ‑
Yes, it could be. I don’t have those draft orders in front of me. They’re not in the file.
(discussion as to identity of the Registrar – agreed that it was Registrar Hedge)
Mr Golledge: Thank you. And you said “he” – as the registrar seeking clarity and he said it was only section 41.7. Who is the “he” that you were referring to?
Ms Van Munster: Sorry. The solicitor for the applicant.
Mr Skinner then cross-examined Ms Van Munster:
MR SKINNER: Ms Munster, Mr Bryan Maker, solicitor, appeared along with you on 2 August before Registrar Hedge. That is correct?
Ms Van Munster: That’s correct.
MR SKINNER: And before you announced the matter before the registrar, I think you and Mr Maker prepared some short minutes of order?
Ms Van Munster: That’s correct.
MR SKINNER: And those short minutes of order provided for an extension of the time for compliance with the bankruptcy notice?
Ms Van Munster: That’s correct.
MR SKINNER: And I think you may have said to Mr Maker words to the effect that you consented to the extension of time for compliance, on a without prejudice basis. Is that right? In your discussions with Mr Maker?
Ms Van Munster: I advised Mr Maker that I would – I would consent to those orders for the purpose of adjourning the matter.
MR SKINNER: Yes?
Ms Van Munster: But I did not – I didn’t want to – I consented to that position on the basis that it be no prejudice to my client later on, until the – until later outcome of the matter.
MR SKINNER: Well, now – so let me get this clear. You had a discussion with Mr Maker?
Ms Van Munster: That’s correct.
MR SKINNER: And in the course of those discussions, a document was prepared?
Ms Van Munster: That’s correct.
MR SKINNER: You discussed with Mr Maker an extension of the bankruptcy notice?
Ms Van Munster: He proposed it, yes.
MR SKINNER: And you didn’t disagree with that, did you?
Ms Van Munster: I – I said that I would agree to it on the basis that it would not prejudice my client, although I did seek clarity as in relation to my correspondence that I had sent.
MR SKINNER: Yes, and Mr Maker then prepared some short minutes of order?
Ms Van Munster: That’s correct.
MR SKINNER: And I show you those short minutes of order. Now, that’s Mr Maker’s writing and the short minutes, isn’t it?
Ms Van Munster: That’s correct.
MR SKINNER: And you will see from those short minutes that the part of the document dealing with extension of time is crossed out?
Ms Van Munster: That’s correct.
MR SKINNER: And that’s because Registrar Hedge said that because it was an application under section 41.7 there was no need for a formal order extending time and that it was deemed. Is that right?
Ms Van Munster: That’s – that’s correct.
Mr Skinner tendered the document containing the short minutes of order and it was marked Exhibit A5.
Mr Skinner then continued his cross-examination:
MR SKINNER: You did not take a dissenting position, did you?
Ms Van Munster: No.
MR SKINNER: Now, you had written to Mr Maker on 22 July, clarifying the position as to the grounds upon which his client relied to satisfy the bankruptcy notice?
Ms Van Munster: That’s correct.
MR SKINNER: Correct? And that letter was dated 22 July, and is now in evidence before the court?
Ms Van Munster: From what I can recall, yes.
MR SKINNER: And when you came before Registrar Hedge on 2 August, Mr Maker had not responded to your letter, had he?
Ms Van Munster: No, he hadn’t.
MR SKINNER: So far as you were aware, on 2 August, so far as the court was aware, it was an application proceeding under section 41.7?
Ms Van Munster: That’s correct.
MR SKINNER: You then received a letter from Mr Maker on or about 8 August 2011. Is that right?
Ms Van Munster: From what I can recall. I – I don’t know the specific date.
MR SKINNER: And you’ve seen that letter today?
Ms Van Munster: Yes.
MR SKINNER: And that letter makes it abundantly clear that in addition to section 41.7, the applicant was relying upon the notice being an abuse of process. Correct?
Ms Van Munster: Yes.
MR SKINNER: And the letter went on to even nominate authorities, which have been referred to again today in this court upon which the applicant relied. Is that right?
Ms Van Munster: That’s correct.

Mr Golledge asked the following question in re-examination of his witness:
MR GOLLEDGE: You were asked some questions about what the registrar said, and you attempted to give some further evidence about that now, but were prevented from doing so. Is there anything you want to say about that evidence? Anything further you want to say?
Ms Van Munster: The original orders that I – that were actually tendered were actually written by me, from what I can recall. Sitting in court, I handed them to the solicitor for the applicant. I had not crossed – I had not ticked the matter to be reserved, and he said again, “Well, I want the application to be extended.” And I said, “Well, I will be making – advising the court on what basis I object to that, but I will consent for the purpose of it.” And therefore when it was before the registrar, because the registrar drew our attention to it not being needed because it was actually deemed effective, there was no need to say anything further from the bench.
HIS HONOUR: Were you using the pre-printed form? Or were you just handwriting a form on a piece of paper?
Ms Van Munster: No, it was a pre-printed one. I’m – I actually drafted it though. That might be a copy that the solicitor for the applicant wrote himself for his own file notes.
The witness was excused and withdrew.
Mr Skinner then called his instructing solicitor, Brian Lachlan Maker who is employed by Newnhams Solicitors who has carriage of the matter for LFDB.
MR SKINNER:   And did you – or were you present on 2 August 2011 in the Federal Magistrates Court at Sydney?
MR MAKER: I was.
MR SKINNER:   Who was the presiding registrar?
MR MAKER: Registrar Hedge.
MR SKINNER:   And did you appear for LFDB?
MR MAKER: I did.
MR SKINNER:   And did Miss Kellie Van Munster appear for the respondent?
MR MAKER: She did.
MR SKINNER:   Now, Mr Maker, you have in court your file notes ‑ ‑ ‑?
MR MAKER: I do.
MR SKINNER:   ‑ ‑ ‑ in respect of that appearance?
MR MAKER: I do.
MR SKINNER:   You had an opportunity to look at those file notes before giving evidence today?
MR MAKER: I have.
MR SKINNER:   And do you tell his Honour that that was the first return date of an application filed on behalf of your client to set aside the bankruptcy notice?
MR MAKER: It was.
MR SKINNER:   And was the – an extension of that – for time for compliance of that notice something of concern to you?
MR MAKER: It was.
MR SKINNER:   You had discussions with Miss Munster before short minutes were prepared?
MR MAKER: I did.
MR SKINNER:   And do you recall the words which Miss Munster might have said in relation to your application for an extension of time?
MR MAKER: She did – yes, I remember, yes.
MR SKINNER:   What did she say?
MR MAKER: She said, in the discussions prior to the matter being mentioned before the registrar, that she had no objection to the extension of time to – for compliance with the bankruptcy notice, and when the matter – we mentioned the matter before the registrar, she said to the registrar when she announced her appearance, she had no objection to any extension of time, but there was an objection to the ex parte order made extending the time prior to 2 August.
MR SKINNER:   Right. Has anything been done to pursue that application?
MR MAKER: Not as far as I’m aware, no.
MR SKINNER:   I show you a handwritten court document …the last tender.
(Exhibit A5)
…
MR SKINNER:   Now, Mr Maker, did you draft a short minutes?
MR MAKER: That’s my handwriting, yes.
MR SKINNER:   Yes. And you will see that that deals with the question of extension of time?
MR MAKER: It does.
MR SKINNER:   The part that deals with it is crossed out?
MR MAKER: True.
MR SKINNER:   How did that happen?
MR MAKER: I did that.
MR SKINNER:   Why?
MR MAKER: Because Registrar Hedge had said under the Act, it was section 41(7), I think, there was a deemed extension, and after I walked out of court I then put a line through that second box.
MR SKINNER:   Right, and placed it with your papers?
MR MAKER: I did.
MR SKINNER:   Being a copy of the ‑ ‑ ‑?
MR MAKER: My file copy of the orders that were made.
MR SKINNER:   Yes.
Mr Golledge called for the file not referred to in the evidence to be produced, which occurred. Then the following cross-examination occurred:
MR GOLLEDGE:    So in the course of your discussion with Ms Munster before the appearance before the registrar, did she say to you that she was prepared to consent to the extension, but without prejudice to her client’s rights?
MR MAKER: I don’t recall the words “without prejudice” being mentioned. She could have, but I don’t remember it.
MR GOLLEDGE:   And did she say that the proposition from the respondent is that there ought not to have been any order made in the first place?
MR MAKER: In relation to the initial extension?
MR GOLLEDGE:   Yes?
MR MAKER: Yes, she did.
MR GOLLEDGE: And then when the matter was mentioned before the registrar, the registrar asked for confirmation, didn’t she, that the application was brought pursuant to section 41(7) of the Bankruptcy Act?
MR MAKER: Yes.
MR GOLLEDGE:   And you confirmed that, didn’t you?
MR MAKER: I did.
MR GOLLEDGE:   And then she – what the registrar said was, in those circumstances, it being a s.41 – she said words to the effect as follows: that it being an application under s.41(7) there was no need for an express order extending time, because there was a deemed extension of time?
MR MAKER: That’s correct.
Mr Golledge tendered the file note on which the witness had been cross-examined which was marked Exhibit R1. The witness was excused and withdrew.

Respondents submissions – dispensing with compliance

Mr Golledge indicated that the Respondent opposed the Application in light of what had been said to the Court by the respective solicitors. That is, what was said to the Court was this was an application brought under s.41(7) and a result of the contents of the letter of Leonard Legal dated 8 August 2011. This matters for the reason that the Application to dispense with the compliance is now entirely futile because there was no extension, or deemed extension on 2 August 2011 as the application is not brought under s.41(7) but rather it is on the basis of an abuse of process. On 3 August 2011 an Act of Bankruptcy was committed and it cannot be saved by some retrospective dispensation with r.3.02. Mr Golledge contends that the other side might also need to seek dispensation in those circumstances with r.2.01(3). This section provides that an Application must state each section of the Bankruptcy Actor regulation under which the proceedings are brought. Mr Golledge contends that was a defect in the Application and in the absence of the specification which made the Application effective, and although this objection would not normally be brought, if the sections were addressed in the supporting affidavit.
Mr Golledge contends that with the present application seeking to dispense with compliance is that having formally informed the Court of the basis on which the main application is brought, so as to attract the question of whether an actual extension expressly was needed or a deemed one similarly arose, the Applicant has now advanced a different proposition. Either the main Application that was filed is good or bad and ought not be the subject of being fixed during the course of the final hearing.
In reply, Mr Golledge states that his principle submission that his application must fail because the Act of Bankruptcy has already been committed because the way s.41(7) works does not depend upon and is not affected by anything that the Court does. Consequently, to say that Registrar Hedge deemed there to be compliance is a misnomer. A statute operates according to its terms regardless of anything done or not done by the Court but only in respect of Applications of a particular type. If it is not an Application under s.41(7) then no deeming by the Registrar can have an effect that the statute provides as it is a statutory extension that is attracted by a particular type of Application. The matter before this Court is not an Application of that type even if it might have been at the start, it is not now and was not properly considered when one looks at the evidence as at 2 August 2011. That might have been what the solicitor said but what it now appears is that it was outside of the Application. It would not have mattered what the Registrar said as that is not a power conferred upon the Registrar or indeed anyone as it operates automatically even if nobody had mentioned the subject.

Mr Golledge submits that to say there was a deemed extension by reason of what transpired on 2 August 2011 and indeed what transpired in this Court on 23 August 2011 states the way s.41(7) works. Consequently, this Application became pointless on 3 August 2011 as no actual extension was secure. It may have been that the solicitor for the Applicant was under a misapprehension about the operation of s.41(7) but it is the Applicant that invoked the jurisdiction of this Court and did not obtain an extension of time.

Applicant’s submissions – dispensing with compliance

Mr Skinner indicates that the problem with the submissions made on behalf of the Respondent is that not only did the matter come before Registrar Hedge on 2 August 2011 when there was an extension of time and came before this Court on 23 August 2011. On that occasion, both counsel appeared and there was reference to a sale of assets in New Zealand. Mr Skinner claimed that he made it clear to the Court on that occasion that not only was it a s.41(7) application, but it was also an abuse of process application. No objection was taken to that course. A letter of 8 August 2011 had already been served and it was fairly and squarely on foot as to the grounds at that time. Mr Skinner indicated that on 23 August 2011 his side went as far as to ask the Court for additional time to file evidence should that become necessary as they were anticipating a settlement of the property on 15 September 2011. However, they were not anticipating an application by SM in the High Court of New Zealand. Mr Skinner acknowledges that there has been no discussion or exchange since 23 August 2011 except for the service of the affidavit of SM on 30 September 2011. Mr Skinner claims that it is very harsh of Mr Golledge to criticise him in respect to the contents of SM’s affidavit for not addressing issues of whether or not she was indulging in an abuse of process because the Applicant had not drawn that to her attention. The problem with that criticism is that it is now produced by the Applicant the letters of 22 July 2011 and 8 August 2011 in which these claims are spelt out and it is not entirely clear what the Applicant’s advisors are being criticised for. The Applicant’s representatives did not force SM to file an affidavit on 30 September 2011, nor did the Applicant take any part in the proceedings before his Honour Whata J. The person who was in control of all of that was SM. It can only be inferred from her affidavit that notwithstanding the notice given on behalf of the Applicant on 8 August 2011, she was not prepared to do anything to dispel the allegation of an abuse of process. The matter is out of the Applicant’s control and as for the proposition that the representatives of the Applicant ought to have cross-examined SM on this point is not sustainable as it is for her to adduce evidence. She had the opportunity to adduce evidence from day one and chose not to do that on 30 September 2011.
Mr Skinner submits that in respect to the submissions made about his Honour Barrett J’s decision, it is clear from that decision that the Applicant was not at liberty to make any application for proceedings under Australian legislation as that is the province of the New Zealand legal system. Mr Skinner acknowledged that proceedings were instituted on behalf of the Applicant which were lost but the Applicant is still entitled to rely upon what the Court had to say.
Mr Skinner submits that in respect to s.41(7) it is clear that on 2 August 2011 Registrar Hedge deemed compliance to continue. It is clear that compliance was deemed to have continued on 23 August 2011 in front of this Court and no objection was taken, no ruling was invited and there was no challenge to the original decision of Registrar Segal. The position is therefore on behalf of the Applicant who seeks to dispense with the requirements of r.3.02 on the basis of what was written on 2 August 2011 and that this Court is in the position to deem an extension up to and including the day of the hearing and what happens after that depends entirely upon the outcome of this Application to dispense with compliance.

Consideration

Application to waive Rule 3.02

Mr Skinner made an oral application to waive the requirements of r.3.02 of the Federal Magistrates Court (Bankruptcy) Rules 2006 as the requirements under that rule had not been complied with. The power to waive the requirements of a rule is found in r.1.06 of the Federal Magistrates Court Rules 2001 which states:
Court may dispense with rules
(1) The Court may in the interests of justice dispense with compliance, or full compliance, with any of these Rules at any time.
(2) If, in a proceeding, the Court gives a direction or makes an order that is inconsistent with any of these Rules, the direction or order of the Court prevails in that proceeding.
While the Application to set-aside the Bankruptcy Notice filed on 25 July 2011 was supported by the affidavit of LFDB sworn and filed on 25 July 2011 do not strictly comply with the provisions of r.3.02 of the Federal Magistrates Court (Bankruptcy) Rules 2006 Rule.1.06 enables the Court to dispense with the requirements of the rules in the interests of justice. Further, s.42 of the Federal Magistrates Court Act 1999 provides that the “Court must proceed without undue formality and must endeavour to ensure that the proceedings are not protracted”. The rules provide that the Court may dispense with compliance or full compliance of any of the rules at any time in the interest of justice, but the dispensation is discretionary, and cannot be used to confer on the Court a power that it would not otherwise have and this must be exercised judicially and be granted where it is desirable to do so in the interests of the administration of justice, but not as a matter of course: see Melaleuca of Australia & New Zealand Pty Ltd v Duck [2005] FCA 1481 and Alcantara v Buildpower Pty Ltd (2010) 199 IR 73, in coming to this conclusion.

Setting aside a Bankruptcy Notice

No specific power is granted to the Court to set-aside a Bankruptcy Notice. A power is derived from s.30 and from the principle that a power conferred by Parliament carries with it the power necessary for its performance and execution. A power to extend time for compliance with the requirements of a Bankruptcy Notice, when an Application to set-aside has been filed, carries with it the power to set-aside the Bankruptcy Notice itself: Australian Securities and Investment Commission v Forge [2003] FCAFC 274. In that decision his Honour Emmett J (with Branson and Stone JJ agreeing) stated at [27]:
However, the Act gives no general discretion to set aside bankruptcy notices that are valid in form and not an abuse of process. The Act permits the issue of a bankruptcy notice and, if the notice is valid, prescribes the consequences to the bankrupt of non-compliance. The grounds upon which a bankruptcy notice may be set aside must relate to the form or content of the notice, service of the notice or the existence of the debt upon which the judgment, and, in turn, the notice, is founded. Reference to the existence of a debt includes the existence of a counter claim, set off or cross demand equal to or exceeding the amount of the debt: Re Briggs; Ex parte Briggs v Deputy Commissioner of Taxation (WA) (1986) 12 FCR 310 at 312; Re Athans; Ex parte Athans (1991) 29 FCR 302 at 310. Since jurisdiction to set aside a defective bankruptcy notice is not a general discretionary jurisdiction, it differs from the jurisdiction to make a sequestration order under s 52(1), which is expressly discretionary.
The argument advanced on behalf of the Applicant is that the issue of the Bankruptcy Notice was an abuse of process because the purpose of a Bankruptcy Notice was to put pressure on a debtor to pay a debt rather than to invoke the Court’s insolvency jurisdiction. In support of this contention, the Court was referred to the decision in Maxwell-Smith v S & E Hall Pty Ltd (supra) per Jacobson J at [43]. I acknowledge and agree with Mr Golledge’s observation that the issue of abuse of process was raised for the first time in a letter from Newnham’s solicitors to Leonard Legal dated 8 August 2011 (Exhibit A4) and in Mr Skinner’s oral submissions. Prior to that, it appears that the initial intention was to pursue this Application under s.41(7).
Although the Application and supporting affidavit do not state this, the evidence given by both solicitors which is set out above at [33] – [40]. was that they understood that the Application was being brought under this provision. This has become more confused by the order made by Registrar Segal granting the extension of time under s.41(6A) being the only avenue for the extension of time available to him. The filing of the Affidavit of SM together with the decision of his Honour Whata J, appear to be the reason for the focus now being placed on the abuse of process.
In LFDB’s affidavit sworn 25 July 2011, he states that he was served on 6 July 2011 with a Bankruptcy Notice No.4632 issued by the Australian Government Insolvency and Trustee Service Australia on 27 June 2011 for a total debt of $121,502.15. Attached to that notice is a judgment/order of the Supreme Court of New South Wales, in the amount of $120,614.07. The Bankruptcy Notice has been issued on the standard pre-printed form which complies with the requirements prescribed by the Regulations: see s.41(2). The time of compliance was the standard 21 days after service of the notice which was 27 July 2011.
On 25 July 2011, Newnham solicitors filed on behalf of LFDB an Application being a Form 2, complying with Bankruptcy Rule 2.01 and seeking the following final orders:
On the grounds stated in the supporting affidavit or statement of claim, the applicant seeks the following orders:
1. That Bankruptcy Notice issued on 27 June 2011 and served on the Applicant on 6 July 2011 be set-aside.
2. That the respondent pay the applicant’s costs of and incidental to this application.
3. Such further or other orders as this honourable Court determines.
In section B the Applicant sought the following interim orders:
The applicant seeks the following interim orders:
1. That the time of compliance with the Bankruptcy Notice issued on 27 July 2011 and served upon the applicant on 6 July 2011 be extended until further order.
2. Service of this application and any affidavit in support be served upon the respondent by delivering sealed copies thereof to the office of Leonard Legal Level 4, 167 Philip St, Sydney.
Significantly, the following notation appears at the end of the form:
The application must state each section of the Bankruptcy Act or the Bankruptcy Regulations under which the proceeding is brought – see 2.01(3)(a).
The application under the heading Final Orders Sought by applicant indicates that the Application to Set-Aside the Bankruptcy Notice is supported by grounds in the supporting affidavit. On a fair reading of that affidavit there is no specific reference as to which section of the Bankruptcy Act or the Bankruptcy Regulations the proceedings are brought. Nor is there any reference to a counter-claim, cross-claim, set-off or cross-demand.
On the date that the Application was filed, the duty registrar made the following order:
THE COURT ORDERS THAT:
Pursuant to subsection 41(6A) of the Bankruptcy Act 1966 and rule 3.03 of the Federal Magistrates Court (Bankruptcy) Rules 2006, on condition that Bankruptcy Notice No.

BN 4632 of 27 Jun 2011 was served on the Applicant on 6 July 2011, the time for compliance by the Applicant with the requirements of the Bankruptcy Notice is extended up to and including 2 August 2011.
There be liberty to any party to apply to vary or discharge Order 1, on 24 hours notice.
Clearly, the Application filed on 25 July 2011 states that the final orders sought are for the Bankruptcy Notice to be set-aside. If that Application had contained that statement that the Application was being brought under the provisions of s.41(7) that would, in combination with the request to set-aside, enliven the automatic extension of time. In the absence of the reference to s.41(7) and because of the existence of the requested interim order for an extension of time, it must be presumed that when the matter was referred to the duty registrar the only avenue available to him to grant an extension of time under s.41(6A). I note that generally, the Court will be liberal in its approach to this issue: Thorpe v Bristile Ltd (1997) 80 FCR 330 per Burchett, Carr and R.D. Nicholson JJ.
Section 41(6A) is “the sole source of power in the Court to extend the time of compliance with the requirements of a Bankruptcy Notice”: Re Dalco;Ex Parte Dalco v Deputy Commissioner of Taxation (Cth) (1986) 87 FLR 334; James v Abrahams (1981) 51 FLR 16. It is the sole statutory power: Guss v Johnstone [2000] HCA 26 at [62]; Shephard v Chiquita Brands (South Pacific) Ltd [2004] FCAFC 76 per Sackville J at [48]. This is a procedural step adopted in the registry and is not supported by any file not or transcript setting out the reasons for the making of that order. It must be assumed that the Registry has adopted this approach out of an abundance of caution to prevent issues of compliance before the matter can be brought before the Court at a formal hearing. In this matter the first court appearance did not occur until 2 August 2011.
It is noted that the terms of s.33(1)(c) preclude the Court from extending time for compliance with the Bankruptcy Notice under the general extension powers under s.33 or an inherent power: James v Abraham (supra).
The Application made by Mr Skinner is that the requirements of r.3.02 be dispensed with so that the Application is not defeated by the expiry of the time in which to comply with the notice occurring on 3 August 2011 but rather that the Application falls within the provisions of s.41(7) and a deemed extension of time under that provision occurred on both the 2 August 2011 and 23 August 2011. However, the granting of an order dispensing with compliance with the rules does not completely save the matter. In Webb v Hunter (1995) 59 FCR 24 per Burchett, Carr and Tamberlin JJ their Honours addressed the issue of the requirement of s.41(7) and the consequence in respect to a deemed extension of time. Their Honours observed:
"an affidavit to the effect that (the debtor) has such a counter-claim, set-off or cross-demand as is referred to in subs40(1)(g)", the time for compliance with the bankruptcy notice is not extended by the provisions of s41(7). In James v Abrahams (1981) 34 ALR 657 Deane and Lockhart JJ came to that conclusion. Having held that the affidavit in that case was not one which fell within the description contained in s41(7) their Honours expressed their conclusion in the following terms:
"It follows that the time for compliance with the bankruptcy notice was not extended by the provisions of s41(7) and that the Court could not, on the evidence, be satisfied that the debtor had a counter-claim, set-off or cross-demand of the kind mentioned in s40(1)(g)."
Fisher J delivered separate reasons for judgment in which his Honour stated that apart from the fact that he preferred not to base his ultimate conclusion on a finding that the debtor's claim in that matter did not sound in money (a matter presently irrelevant), he was in general agreement with the reasons for judgment of Deane and Lockhart JJ. In Re Vicini; Ex parte E A Sealey and Co (1982) 64 FLR 323 at p327 Fisher J observed at the conclusion of his reasons for judgment:
"In the circumstances therefore the affidavit of the debtor does not answer the description of an affidavit required by s41(7). The consequence is that there has been no deemed extension of time within which to comply with the requirements of the bankruptcy notice."
…
Of course, if the affidavit does comply with s41(7), an automatic extension of the bankruptcy notice is obtained, notwithstanding that ultimately the Court does not accept the sufficiency of the case shown by the affidavit, ie the Court is not "satisfied" upon the question raised by it. That follows from the terms of the subsection.
If I did exercise my discretion to waive the requirements of r.3.02 then that would result in a situation where the Court was exercising a power that it would not otherwise have. The request to waive the requirements of the rule is in effect to allow the Application to proceed on the basis that it complied with s.41(7) and that the deemed extension of time will save the Application from failing to meet the time for compliance. The Application and supporting affidavit are poorly drafted because of the absence of the stated provision under which it is brought and the supplementary details of the counter-claim, set-off or cross-demand.
Additionally, there is no separate inference as to an abuse of process in either document. The abuse of process claim did not appear until the Newnham’s letter of 8 August 2011 (Exhibit A4). The fact that Registrar Hedge dispensed with an order extending the time for compliance during the 2 August 2011 appears to have been made on the advice that the Application was being pursued under s.41(7). In the absence of the transcript of the Registrar’s hearing, it can only be assumed that one of the solicitors present must have advised her that the Application was being advanced on that basis because it is readily apparent that that information does not appear in any Court document filed in these proceedings. Both solicitors gave evidence before this Court that this issue was raised before the Registrar and because she had apparently been advised that this was the basis of the Application, the deeming provision of s.41(7) applied and the draft minute tendered at that time deleted the extension provision for that reason. As Mr Golledge correctly states in his submissions in respect to the Application to dispense with compliance is that the statute operates in according to its terms regardless of anything that is done or not done by the Court but only in respect of the Applications of a particular type. As this is not an Application validly brought under s.41(7) there is no deeming provision enlivened and no statute extension is attracted by the Application.
The supporting affidavit of LFDB sworn 25 July 2011 does not comply with the terms of s.41(7) and therefore there was no effective extension of time for compliance with the Bankruptcy Notice. If this claim, as now advanced, is strictly that of an abuse of process, then it would require leave of the court to extend the time for compliance with the Bankruptcy Notice. Except for the initial extension to 2 August 2011, granted by Registrar Segal, no such leave was subsequently sought directly from the Court or obtained prior to the time for the compliance running out. However, it should be noted in the original Application there was an interim Application for extension of leave which appears to have been the triggered by Registrar Segal’s orders. The normal procedure in this Court is for an Applicant to apply to the Registrar for such an extension of time which the Registrar then considers on its merits. If the Registrar refuses the extension of time, the debtor could apply for review of that decision, the effect of which would be to prevent the Act of Bankruptcy having been committed provided the initial Application was made in time. Clearly this is the case in this matter as the Application and Supporting Affidavit were filed on 25 July 2011 prior to the compliance period expiring on 27 July 2011. Significantly, no further extension was sought from the Registrar on 2 August 2011. Nor was there an Application of this nature made before me, either on 2 August 2011 or 23 August 2011. I am guided by the decision of his Honour Raphael FM in Phontos v Carlamax Properties Pty Ltd [2011] FMCA 205 at [21] where this issue is addressed and the following comment was made:
[21] It seems clear from Order 3.03(3) that the application is one intended to be made to a Registrar. In this case, no such application was made. In my view, the failure to make this separate application and allowing the ground to piggyback on the s 41(7) ground means that, if the s 41(7) ground fails because the affidavit is non-compliant, then there is no extension of time which would serve the abuse of process claim. The act of bankruptcy will have taken place prior to the matter coming before this court and, therefore, the application lacks utility.
His Honour went on to say that he would consider the merits of the Application itself before finalising his decision. His Honour’s decision was not referred to in submissions in respect of the matter currently before this Court nor has any other authority relating to the advancement of an abuse of process claim been referred to. In these circumstances, I believe that I should also follow the course adopted by his Honour Raphael FM.

The first reference to an abuse of process claim is contained in Newnham’s letter of 8 August 2011 (Exhibit A4). This letter was tendered by Mr Skinner as part of his re-opening application.
We acknowledge receipt of your letter of 22 July 2011. we confirm that our client relies upon section 41(7) of the Bankruptcy Act 1966 in that he has commenced proceedings in New Zealand against your client which exceed the subject matter of the Bankruptcy Notice.
We also rely upon the fact that the issue of the Bankruptcy Notice is an abuse of process. The Notice has been issued for an improper purpose in that the proceedings are being used as an instrument for vexation and oppression.
Bankruptcy is not a proceeding designed for the recovery of debts; see Re Sarina; Ex Parte Wollondilly Shire Council (19800 32 ALR 596, 599.
It is well settled that if the purpose of the Bankruptcy Notice is to put pressure on a debtor to pay a debt rather than to invoke the court’s jurisdiction in relation to insolvency, then the filing of a Bankruptcy Notice is an abuse of process: see Brunninghausen v Glavanics [1998] FCA 230.
The thrust of Mr Skinner’s submissions is that LFDB is constrained by the orders of His Honour Barrett J In LFDB v SM (supra) and secondly from accessing money in New Zealand by orders made in the Family Court of New Zealand and by the High Court of New Zealand in the judgment of Whata J delivered on 30 September 2011. Mr Skinner argued that due to his client’s situation, the issue of the Bankruptcy Notice is difficult to discern any motive on the part of SM other than to exert pressure for payment of the judgment debt. Mr Skinner argues that other than the Affidavit SM filed on 30 September 2011, there is very little to dispel the natural inference that the Bankruptcy Notice was issued for a purpose collateral to the pursuit of insolvency proceedings.
On the material before the Court I am not satisfied that the argument being advanced by Mr Skinner can be sustained. The argument that the filing of the Bankruptcy Notice is an abuse of process appears to that the Bankruptcy Notice is based upon a judgment obtained some years ago from a New South Wales Court and in respect of the assessed costs of those proceedings. The crux of the argument is that the issuing of the Bankruptcy Notice on such a judgment is an abuse of process because of the existence of Family Court proceedings between the parties in another jurisdiction.
Significantly, the New South Wales proceedings were brought by LFDB so it was not an attempt on the part of SM to invoke the jurisdiction inappropriately and is as his Honour Barrett J found it is not the jurisdiction of the Courts of this State to deal with matter properly the subject of the Family Law jurisdiction of another Country. LFDB, who brings the proceedings, fails in his action and suffers a very substantial costs liability. He then seeks to persuade this Court to rule that attempt by SM to pursue the rights available to her under the Bankruptcy Act arising out of the costs order of those proceeding is an abuse of process.
It was LFDB who initially invoked the jurisdiction of the New South Wales Court and now, it is argued on his behalf that SM should be prevented from doing so, and should be limited to resorting to whatever rights she has as a creditor under the Bankruptcy Act because she should be pursuing the matter in the Courts in New Zealand.
The other limb to the abuse of process argument centres on the judgment of his Honour Whata J in the New Zealand High Court and handed down on 30 September 2011. Mr Golledge informs the Court that his client did not seek to tender and had no intention of tendering that judgment. It is submitted that the judgment was tendered not to derive any support from the judgment but to invite this Court to draw some criticism of SM from it’s contents based upon comments made by his Honour. That judgment also contains criticism of LFDB and that is only before the Court because that course was selected by his counsel to read his material. What in effect is happening is that this Court is being invited to draw conclusions about possible submissions to his Honour Whata J entirely in the absence of evidence. What I am being asked to do is draw inferences based on what is reflected in that judgment. I am being invited to draw conclusions upon reading that judgment as certain things were or were not brought to the attention of his Honour would require evidence from those involved in the proceedings.
The other important element is that the New Zealand proceedings did not arise out of a dispute between LFDB and SM but a claim by the mortgagee to remove a caveat and a question of competing priorities between the legal mortgagee and SM who seems to be asserting some right arising in equity or under the equivalent of the Property Relationships Act 1976 (NZ).
The other substantial argument advanced on behalf of LFDB that the mere fact that the Bankruptcy Notice is issued, either in the context of the New Zealand Family Court proceedings or in light of the restraining order issued on 30 April 2011 (Exhibit A1) makes the proceedings in this Court an abuse of process. This appears to have been canvassed on the basis of the liability his Honour Barrett J’s judgment, being a liability incurred after the termination of the relationship and would be taken into account in the final assessment of the respective entitlements in the Family Law proceedings. To make a finding of this nature, I am being invited to draw an inference as to the likely operation of the New Zealand Family Law. No evidence was led as to how this might be taken into account in the Family Law proceedings in New Zealand and there is a possibility that being a post-relationship liability it may be entirely irrelevant. The family law jurisdiction is a specialist jurisdiction based on a specialist statute where matters of approach to different liabilities will be governed by the Court’s application of the law as developed in that country. In the absence of evidence, I am unable to make any finding in respect of the operation of the New Zealand Family Law jurisdiction.
The second proposition that it is an abuse of process because the restraining order applies to any property in New Zealand and Australia preventing assets from being liquidated in order to satisfy the Bankruptcy Notice. This argument is contrary to the material contained in LFDB’s affidavit at para.9 which states:
9. My New Zealand solicitor informs me and I do verily believe that Australian property is considered by New Zealand Court to be ‘non-movable’ and not the subject of New Zealand Court orders. The Australian assets owned by myself, my business entities and the Trust comprise:-
(a) 44 Dampier Terrace Broome, Western Australia
(b) 42 Dampier Terrace Broome, Western Australia owned by Trust
(c) 2603/183 Kent Street, Sydney owned by Trust.
The only evidence before this Court is the operation of the New Zealand restraining order does not apply to non moveable assets in this jurisdiction. The property in Dampier Terrace, Broome has a value according to LFDB of in excess of $2,000,000 with a liability of approximately $1,300,000 so there exists substantial equity that would not be affected in any way by the terms of the restraining order.
Consequently, what we are left with are entirely controversial or unorthodox state of affairs where a creditor of a judgment that has been outstanding for a substantial period of time in respect to which there is no appeal and a costs order. In these circumstances, it is quite orthodox for SM to issue a Bankruptcy Notice and that process is not an abuse that can be characterised as an illegitimate attempt to use the Bankruptcy Notice for a debt recovery.
In these circumstances, the Application to waive the requirements of r.3.02 would be futile and the Application to set-aside the Bankruptcy Notice should be dismissed.

I certify that the preceding seventy-eight (78) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM

Date: 18 November 2011