Liascos v Anastasopoulos and Hodges v Anastasopoulos

[2013] FCCA 2239

FEDERAL CIRCUIT COURT OF AUSTRALIA

LIASCOS v ANASTASOPOULOS and HODGES v ANASTASOPOULOS [2013] FCCA 2239

Catchwords:
BANKRUPTCY – Related applications to set aside two Bankruptcy Notices founded on same judgment debt – Whether applications for order to set aside bankruptcy notices on grounds that the applicants have counter-claim, set-off or cross demand – whether Court is satisfied that debtors have counter-claim, set-off or cross demand.

Legislation:

Bankruptcy Act 1966 (Cth), ss.30, 33(1)(b), 40(1)(a)(ii), 40(1)(g), 41(6A), 41(6C), 41(7), 43, 44, 52

Federal Circuit Court (Bankruptcy) Rules 2006 (Cth), rr.2.01, 3.03

Australian Securities and Investment Commission v Forge (2003) 133 FCR 487
Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264
Cambridge v Anastasopoulos [2012] NSWCA 405
Cambridge v Anastasopoulos (No.2) [2013] NSWCA 213
Clyne v Deputy Commissioner of Taxation (No. 4) (1982) 42 ALR 703
Conway v Jackson (2001) 107 FCR 201
Coshott v Barry (2009) 113 ALD 358
Emerson & Anor v WreckAir Pty Ltd (1992) 33 FCR 581
Equuscorp Pty Ltd v Meng Chang [1998] FCA 941
Hovan v Goycolea-Silva [2003] FCA 234
Kakavas v Crown Melbourne Limited [2011] FMCA 11
Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71
Lazar v Seccombe [2005] FCA 1652
McPhee v Glentham Pty Ltd [2006] FMCA 1508
Northam v Commonwealth Bank of Australia [1999] FCA 544
O’Loughlin v Glenmont Investments Pty Ltd [2001] FCA 925
Phoenix Constructions (Queensland) Pty Ltd v McCracken  [2012] FMCA 855
Re Baker; Ex parte Baker v Staples [1995] FCA 1520
Re Carter; Ex Parte National Mutual Trustees Ltd (1995) 57 FCR 185
Re Geard; Ex parte Reid (1994) 217 ALR 191
Re Halstead; Ex parte Westpac Banking Corporation  (1991) 31 FCR 337
Re Horwarth; Ex parte Mortgage Acceptance Nominees Ltd (1993) 43 FCR 587
Re Kim Schekeloff; Ex parte Schekeloff v Hopkins Group Pty Ltd& Rainer Pty Ltd (1989) 22 FCR 407
Re Taylor; Ex parte Deputy Commissioner of Taxation (Cth) [1983] 74 FLR 377
Re Wong; Ex parte Kitson (1979) 27 ALR 405
Shephard v Chiquita Brands South Pacific Ltd [2004] FCAFC 76
Skouloudis v St George Bank Ltd (2008) 173 FCR 236
Streimer v Tamas (1981) 37 ALR 211
Valassis v Bernard [2001] FCA 477
Walsh v Deputy Commissioner of Taxation (1984) 156 CLR 337
Warner v Frost [1999] FCA 830

Applicant: JIM LIASCOS

Respondent: PETER ANASTASOPOULOS

File Number:	SYG 1044 of 2011
Applicant:	GREGORY JOHN HODGES

Respondent: PETER ANASTASOPOULOS

File Number: SYG 1046 of 2011

Judgment of: Judge Lloyd-Jones

Hearing dates:

27 September 2011, 30 September 2011

 and 18 April 2013

Delivered at: Sydney

Delivered on: 23 December 2013

REPRESENTATION AT HEARINGS ON 27 & 30 SEPTEMBER 2011

Solicitors for the Mr Liascos:

Ms S. Nash of

Sally Nash & Co Lawyers

Solicitors for Mr Hodges:                  Ms S. Nash of

Sally Nash & Co Lawyers

Counsel for the Respondent: Mr A. Joseph

Solicitors for the Respondent:

Mr G. Gourlas of

George Gourlas Lawyer

REPRESENTATION AT HEARING ON 18 APRIL 2013

Counsel for the Mr Liascos: Mr J. R. Young

Solicitors for the Mr Liascos:

Mr E. Georges of

G&S Law Group

Counsel for Mr Hodges:  Mr J. Jobson

Solicitors for Mr Hodges:               Ms I. Petrovic of
Macquarie Lawyers Burwood

  

Counsel for the Respondent: Mr A. Joseph

Solicitors for the Respondent:

Mr G. Gourlas of

George Gourlas Lawyer

SYG 1044 of 2011

ORDERS

1. Bankruptcy Notice No. BN 3313 of 2011 be set aside.

2. The respondent pay the applicant’s costs of the application, as agreed or taxed.

SYG 1046 of 2011

ORDERS

1. Bankruptcy Notice No. BN 3314 of 2011 be set aside.

2. The respondent pay the applicant’s costs of the application, as agreed or taxed.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 1044 of 2011

JIM LIASCOS

Applicant

And

PETER ANASTASOPOULOS

Respondent

SYG 1046 of 2011

GREGORY JOHN HODGES

Applicant

And

PETER ANASTASOPOULOS

Respondent

REASONS FOR JUDGMENT

Introduction

1. On 23 May 2011, the applicant in proceedings SYG1044/2011, Jim Liascos (“Liascos”) and the applicant in proceedings SYG1046/2011, Gregory John Hodges (“Hodges”), each filed originating applications in this Court (together the “Proceedings”) to have two Bankruptcy Notices (Notice Numbers 3313 and 3314 of 13 May 2011) (the “Bankruptcy Notices”) set aside with costs.  The Bankruptcy Notices were founded on a judgment and orders of Balla DCJ pronounced on 11 March 2011.   The applications sought to first extend the time for compliance with the Bankruptcy Notices and second to have the Bankruptcy Notices set aside. The Proceedings were referred from the Registrar’s bankruptcy list on 27 September 2011 and was part heard.  The application was adjourned until 30 September 2011 where the hearing was completed, and the judgment was reserved. 

Background to the underlying dispute

1. I rely on the decision in Cambridge v Anastasopoulos [2012] NSWCA 405 and particularly the judgment of his Honour Meagher JA at [1]-[3] where his Honour stated:

   1. MEAGHER JA: The respondent (Mr Anastasopoulos) was the owner of a 28-foot Donzi motorboat. He wished to have some repairs and improvements carried out to it. In January 2008 he arranged with the first appellant (Mr Cambridge) and the second appellant (Mr Liascos) that they would take the motorboat, which was at his factory premises in Peakhurst, to the first appellant's premises at Wilberforce so that they could provide a quote for and then carry out that work. On 13 April 2008 the motorboat, on its trailer, was towed by Mr Cambridge from Peakhurst to Wilberforce using his four wheel drive vehicle. In the course of leaving the Peakhurst premises the motorboat suffered some scraping damage when its hull came into contact with the exit door.

   2. The motorboat was stored at the Wilberforce premises until 10 February 2009. During that period it was left uncovered and suffered significant water damage to its engines. On 10 February 2009, the motorboat, again on its trailer, was collected by the third appellant (Mr Hodges) using his tow-truck for transport from Wilberforce back to Peakhurst. A short way along that journey, the trailer dislodged from the towbar, its safety chain broke and it careered off the road through an old barbed wire fence into the Windsor Downs Nature Reserve, where it came to a rest against a tree. The motorboat and trailer suffered substantial damage.

   3. The respondent sued the three appellants and a Mr Seymour for breach of duty as bailees and for negligence. He succeeded against the three appellants. Balla DCJ entered judgments against each of the first and second appellants for $55,048 plus interest. Her Honour also entered judgment against the third appellant for $85,416 plus interest. The appellants, the first and second by leave granted on 11 May 2012, appeal against those judgments.

Proceedings before the Registrar

1. On 23 May 2011 Hodges filed an application under the provisions of Rule 2.01 of the Federal Circuit Court (Bankruptcy) Rules 2005 (Cth) (Proceeding SYG1046/2011) seeking the following orders:

   On the grounds stated in the supporting affidavit or statement of claim, the applicant seeks the following orders…

   1. … I have  filed an application in another court to set aside the judgment referred to in the bankruptcy notice, and you require the time for compliance with the notice to be extended until that application is heard

   and/or

   2. …I wish to make an application to the Federal Magistrates Court [as it was then] to set aside the bankruptcy notice, and you require the time for compliance with the notice to be extended until this is heard

   and/or

   3. …I wish to apply to the Federal Magistrates Court [as it was then] to set aside the bankruptcy notice on the ground that I will have a counter claim, set off or cross demand which I could not have raised in the proceeding which resulted in the judgment against me against Peter Anastasopoulos Respondent A.R. Walmsley and Co Adrian Walmsley Solicitor Frank Mersal and Associates Frank Mersal Solicitor Peter Hill Barrister, Alan Seymour, Stephen Cambridge, Jim Liascos

2. On the same date, 23 May 2011, Liascos filed an application also under Rule 2.01 (Proceedings SYG1044/2011) seeking the following orders:

   On the grounds stated in the supporting affidavit or statement of claim, the applicant seeks the following orders…

   1. … I have filed an application in another court to set aside the judgment referred to in the bankruptcy notice, and you require the time for compliance with the notice to be extended until that application is heard.

   And/or

   2. …I wish to make an application to the Federal Magistrates Court [as it was then] to set aside the bankruptcy notice, and you require the time for compliance with the notice to be extended until this is heard

   And/or

   3. …I wish to apply to the Federal Magistrates Court [as it was then] to set aside the bankruptcy notice on the ground that I will have a counter claim, set off or cross demand which I could not have raised in the proceeding which resulted in the judgment against me against Peter Anastasopoulos Respondent A.R. Walmsley and Co Adrian Walmsley Solicitor Frank Mersal and Associates Frank Mersal Solicitor Peter Hill Barrister, Alan Seymour, Gregory John Hodges, Stephen Cambridge

3. The Proceedings where initially dealt with by Registrar Ng on 23 May 2011, where he made the following order in the matter of Liascos:

   Pursuant to subsection 41(6A) of the Bankruptcy Act 1966 and Rule 3.03 of the Federal Magistrates Court (Bankruptcy) Rules 2006, on the condition that the Bankruptcy Notice number BN3313 of 13 May 2011 was served on the applicant on 20 May 2011, the time for compliance by the applicant with requirements of the Bankruptcy Notice is extended up to and including 31 May 2011.

   In respect of the proceedings commenced by Hodges, the following order was made by Registrar Ng:

   Pursuant to subsection 41(6A) of the Bankruptcy Act 1966 and Rule 3.03 of the Federal Magistrates Court (Bankruptcy) Rules 2006, on the condition that the Bankruptcy Notice number BN3314 of 13 May 2011 was served on the applicant on 9 May 2011, the time for compliance by the applicant with requirements of the Bankruptcy Notice is extended up to and including 31 May 2011.

4. The Proceedings came before Registrar Hedge on 31 May 2011.  They were adjourned until 21 June 2011 and the time for compliance with the Bankruptcy Notices was extended to include that date.  Registrar Hedge, on 21 June 2011, adjourned the Proceedings until 30 August 2011 and the time for compliance was also extended to that date.  The Registrar made a further order in respect to “any request for further adjournment to be supported by an affidavit setting out the grounds and the facts and the circumstances to be relied upon.”  Costs in the Proceedings were reserved.  On 30 August 2011, Registrar Hedge granted a further adjournment until 6 September 2011 at 9.45am.  In the Proceedings Registrar Hedge made the orders that the applicants were to pay the respondents’ costs, fixed in the amount of $750.

5. On 6 September 2011 the Proceedings were further adjourned by Registrar Hedge until 20 September 2011 with time for compliance with the Bankruptcy Notices being extended to include that date.  Costs in the Proceedings were reserved.  On 20 September 2011 the Proceedings were adjourned until 27 September 2011 and the time for compliance with the Bankruptcy Notices was similarly extended to include that date.  Costs in the Proceedings were reserved.

6. On 27 September 2011 the Proceedings were transferred by Registrar Tesoriero from the Registrar’s Bankruptcy List to my docket for hearing.

Initial hearing of proceedings on 27 September 2011

1. Ms Nash, appearing for Liascos and Hodges indicated that both applications sought extensions of time for compliance with the respective Bankruptcy Notices.  However, the application in respect of Hodges was slightly different to that Liascos because Hodges stated that he had not been served with the Bankruptcy Notice, but an unfiled or unissued notice had come to his attention.  Ms Nash acknowledged that Mr Gourlas representing Mr Anastasopoulos (“Anastasopoulos”) stated that Hodges had been served and the issue remained in dispute between the parties.  Ms Nash informed the Court that both her clients Liascos and Hodges, together with Mr Cambridge (“Cambridge”), who had not at the time sought to set a related bankruptcy notice issued against him aside, had filed an appeal from the District Court in the New South Wales Court of Appeal.  The Red Books had been filed and the matter was listed for further directions on 6 October 2011.

2. Mr Joseph, appearing for Anastasopoulos, indicated that his client was vigorously opposed any extension of time within which to comply with the Bankruptcy Notices.  Mr Joseph also informed the Court that he had given notice to Ms Nash indicating that he would require both Liascos and Hodges for cross-examination in relation to their evidence.  

Evidence of Hodges

1. Ms Nash indicated that she relied upon the following evidence;

   a)Affidavit of Gregory John Hodges affirmed 26 September 2011, and filed in Court on 27 September 2011;

   b)Affidavit of Gregory John Hodges affirmed 29 August 2011, filed in Court on 30 August 2011;

   c)Affidavit of Gregory John Hodges affirmed 21 June 2011, and filed in Court on the same date; and

   d)Affidavit of Gregory John Hodges affirmed 2 September 2011 which appears as an Annexure “A” to the affidavit of George Gourlas sworn 5 September 2011 and filed in Court 6 September 2011 (the “Gourlas Affidavit of 5 September 2011”).

2. Ms Nash informed the Court that the above affidavits were filed in support of the exercise of discretion by the Registrars of this Court, extending the time for compliance with the Bankruptcy Notice.  Ms Nash also indicated that the substantive affidavit filed in support of the application is the affidavit of Gregory John Hodges affirmed 23 May 2011.  Ms Nash submitted part of that affidavit    was emotive and not relevant to the considerations of the issues between the applicant and the respondent as it dealt with matters which will probably be canvased in relation to the appeal from the District Court’s judgment.  Paragraphs [8]-[17] of the Affidavit were not read.  Ms Nash also read the affidavit of Gregory John Hodges, affirmed 26 September 2011.

3. Hodges was called to give evidence and attended Court by telephone.  He confirmed that he had affirmed a number of affidavits in his application and that the information in them was true and correct.

4. Under cross-examination, the initial line of questioning from Mr Joseph related to Hodges’ claim that he had not been personally served with the Bankruptcy Notice and that he disputed the contents of the affidavit of Mr Hughes, affirmed 26 May 2011 and filed in Court on 27 September 2011, the process server who claims that he approached Hodges on 23 May 2011.  This led to the following exchange:

   Mr Joseph: …You approached the court before you had seen a stamped - you know, a properly stamped copy of the bankruptcy notice.  That's correct, isn't it?

   Mr Hodges: That's correct, yes.

   Mr Joseph: … because at that stage, you were provided with copy of the bankruptcy notice but it didn’t have the official stamp?

   Mr Hodges: That was passed - that was faxed through to Macquarie Lawyers who weren't representing me in the matter in the bankruptcy, and it was an unstamped copy.

   Mr Joseph: Yes, but you were provided with the document and then you went to ITSA, as I understand it, and they told you what the - they gave you a bankruptcy number; is that right?

   Mr Hodges: ITSA were giving the bankruptcy number to Mr Jim Liascos on a piece of paper.  It included an ITSA number for myself and Mr Liascos.

   Mr Joseph: All right.  And Mr Cambridge as well, I understand; is that right?

   Mr Hodges: Not - I'm not sure about Mr Cambridge.  I can't speak for what was on that piece of paper.  All I know is that my number and Mr Liascos' were there because Mr Liascos went to get his, and he gave me my number based on what ITSA had given him.

   Mr Joseph: You're not suggesting that, at that time, you weren't aware of the judgment against you, are you? ...Well, I mean the judgment of Balla J in the District Court of New South Wales?

   Mr Hodges: I was aware of that, yes.

   Mr Joseph: All right.  And you were aware - and from seeing the bankruptcy notice, albeit it unstamped, you were aware that some action was being proposed against you to force you to pay that judgment debt?

   Mr Hodges: No, I was advised by ITSA - after telling them that I had seen a copy of a bankruptcy order that was unstamped - that that, in fact, was not a bankruptcy order because it hadn't been filed in court, and that I did not need to take any notice of an order that was not stamped because I had not been served.

   Mr Joseph: …nevertheless, you went to the court and made an application to have it set aside?

   Mr Hodges: That's correct.

   (Transcript, 27 September 2011, p.20-21)

5. Mr Joseph then turned to the circumstances in which Hodges was provided with a stamped copy of the Bankruptcy Notice by Macquarie Lawyers, who were representing Hodges at that stage.  The next sequence of questions concerned the filing in the New South Wales Court of Appeal an application for stay of the judgment of Balla DCJ in the District Court and the subsequent discontinuance of that application. 

6. There was no re-examination of Hodges and he was excused.

7. Mr Joseph informed the Court that he relied upon the following evidence:

   a)Affidavit of George Gourlas sworn 26 September 2011 (the “Gourlas Affidavit of 26 September 2011”), with the following Annexures:

   i)“GG1” – District Court of New South Wales reasons – Judge A. Balla;

   ii)“GG2” - District Court of New South Wales Orders of 11 March 2011;

   iii)“GG3” – Notice of Appeal – Court of Appeal;

   iv)“GG4” -  Notice of Appeal – Court of Appeal – Hodges;

   v)“GG5” – Notice of Motion – Court of Appeal – Liascos

   vi)“GG6” – Notice of Motion – Court of Appeal –Cambridge;

   vii)“GG7” – letter from Macquarie Lawyers – Adjournment applications;

   viii)“GG8” – Notice of Discontinuance – Hodges;

   ix)“GG9” – Notice of Discontinuance – Liascos;

   x)“GG10” – Notice of Discontinuance – Stephen Cambridge; and

   xi)“GG11” – Title Search – Jim Liascos.

   b)The Affidavit of George Gourlas sworn 5 September 2011 ([5] was not read);

   c)Affidavit of Personal Service sworn by Greg Hughes, licenced commercial agent, on 26 May 2011.

Evidence of Liascos

1. Ms Nash indicated that she relied upon the following evidence:

   a)Affidavit of Jim Liascos, affirmed 23 May 2011. The following paragraphs were not read: [8], [9], [10], [11], [12], [13], [14], [15], [16], [17], [18], [19], [20], [21], [22], [23], [24], [25], [26], [29], [30] and [31], together with Annexure “B” and “C”;

   b)Affidavit of Jim Liascos sworn 20 June 2011 and filed in Court on 21 June 2011;

   c)Affidavit of Jim Liascos sworn 19 September 2011 and filed on 20 September 2011; and

   d)Exhibit “R1” to the Affidavit of Jim Liascos sworn 2 September 2011 and filed in the Supreme Court, Court of Appeal proceedings No 2009/337501.

2. Liascos was then called to give evidence.  Under oath he confirmed that he had prepared the two affidavits in the current proceedings and his residential address had changed since the affidavit of 20 June 2011.

3. Mr Joseph’s initial questioning of Liascos concerned details of the timing of the filing of a notice of intention to appeal and an application for a stay.  These matters were listed before the Court of Appeal, the stay application being listed on 22 August 2011 and the first listing of the appeal proceedings was on 24 August 2011.  This led to the following sequence of questions:

   Mr Joseph: All right.  Now sir, what I'm putting to you, it was a considerable period of time, some eight weeks or more after you filed your Notice of Appeal, when those matters first came before the Court of Appeal; is that - do you accept that…?

   Mr Liascos: Yes

   Mr Joseph: …Now you first went before the Court of Appeal on your application for a stay; do you recall that, 22 August?

   Mr Liascos: Yes

   Mr Joseph: … you were going to be seeking, as I apprehended, that the judgment of her Honour Judge Balla, as it affected you?

   Mr Liascos: Mm.

   Mr Joseph: …and Mr Cambridge, that that be stayed pending the hearing of the appeal that you've instituted?

   Mr Liascos: Yes.

   Mr Joseph: You went before the court, and you said to the court on 22 August, that you needed six to eight weeks?

   Mr Liascos: Correct.

   Mr Joseph: …in order to get legal advice and get together all of the documents and so on and so forth, in order to enable you to prosecute the matter properly?

   Mr Liascos: Yes.

   Mr Joseph: All right.  And you asked for the stay application to be stood over for six to eight weeks for that purpose?

   Mr Liascos: Correct.

   (Transcript, 27 September 2011, p.36)

1. The cross-examination then sought to establish to what had been done during that eight week period in order to prepare for those proceedings in the Court of Appeal.

2. Liascos was vague and evasive in his responses to a series of questions about whether there was any attempt to receive legal advice prior to the filing of the appeal and stay applications, whether he and Hodges were assisted in the preparation of those documents and whether they had the benefit of any legal advice.  Liascos responded that they were attempting to do as much as possible by themselves because of the associated costs.  Judgment was handed down 11 March 2011 and the applications for the stay and appeal were filed in the middle of June 2011.  Liascos was asked what occurred during that period in preparation for the filing of those applications.  Liascos claims he had no clear recollection of what had occurred during that period.  Liascos indicated to the Court that he, Cambridge and Hodges spoke to Mr Bolger of counsel and provided him with documents and transcripts of the District Court proceedings.  It is unclear from Liascos’ responses the true nature of Mr Bolger’s involvement and for what period, however, Mr Bolger did appear for Liascos, Hodges and Cambridge on 22 August 2011.  The following exchange occurred:

   Mr Joseph: …And when it came for hearing, you weren't ready to prosecute that?

   Mr Liascos: No, I - you know, it - we just needed more time.

   Mr Joseph: Six to eight weeks, you said?

   Mr Liascos: Well, I didn't say it.  If you recall, you were there,
   Mr Cambridge said it.  I was sitting next to him.

   Mr Joseph: Well, did you say - did you stand up and say, "No, I actually - I only need one week or two weeks"?

   Mr Liascos: No.

   …

   Mr Joseph: …So the court gave you two weeks, and you came back two weeks later, you recall?

   Mr Liascos: Yes.

   Mr Joseph: And Mr Bolger appeared for you on that occasion?

   Mr Liascos: Correct.

   Mr Joseph: And he said he had a conflict?

   Mr Liascos: Yes.

   Mr Joseph: So he couldn't appear for - well, he said he couldn't appear for you and Mr Cambridge?

   Mr Liascos: Well…

   Mr Joseph:… or there was an issue about a conflict?

   Mr Liascos: There was an - there was an issue about a conflict.

   Mr Joseph: All right.  So the matter was adjourned again?

   Mr Liascos: Yes.

   Mr Joseph: All right.  You then - you then - the matter was set down on 19 September, the stay application?

   Mr Liascos: I believe so.

   Mr Joseph: All right.  And you discontinued?

   Mr Liascos: Correct.

   Mr Joseph: Can I ask you why you discontinued?

   Mr Liascos: Well, I don't think we could - I don't know.  We couldn't do anything about it.  Just - it was - it was advice given to us.

   Mr Joseph: …so the stay application was discontinued on the basis of advice, was it?

   Mr Liascos: In - well, it was just better for us to forget about that and just go for the - just stay with the appeal, like we always intended to do.

   (Transcript, 27 September 2011, p.39-40)

3. More questions were asked of Liascos about the reasons for discontinuance of the stay application and whether that was based on legal advice.  It was also noted that Mr Reid of counsel had appeared for Liascos and Hodges on 30 August and 6 September 2011 in the appeal application in the Court of Appeal and initially before a registrar of this Court exercising its bankruptcy jurisdiction to seek adjournments and temporary extensions of the time for compliance with the Bankruptcy Notices.

4. The questioning then addressed the issue concerning whether Liascos had paid any money into Court as well as about aspects of his liquidity.  The following exchange occurred:

   Mr Joseph: … You can - paying money into court was not something that bothered you?

   Mr Liascos: It does now.

   …

   Mr Joseph:  I see.  All right.  Well, why do you say that?

   Mr Liascos: Well, because I - it's an amount of money that I don't have.

   Mr Joseph: I see.  All right.  So you - essentially, you agree - you would agree with the proposition that you can't meet - you can't meet the debt as it currently stands?

   Mr Liascos: Well, you know, I may be able to through some friends, if they see my way and help out.

   Mr Joseph: Do you recall - do you recall an affidavit that you swore on 2 December, in the Court of Appeal?

   Mr Liascos: Well, remind me.

   Mr Joseph: All right.  Where you refer to a Notice of Tax Assessment?

   Mr Liascos: Yes.

   Mr Joseph:…for last year?

   Mr Liascos: Yes.

   Mr Joseph: …dealing with earnings of approximately - just under $18,000?

   Mr Liascos: Not much.

   Mr Joseph: … in the year end of 30 June 2010?

   Mr Liascos: I haven't - I haven't money in the last nine months, to 10 - 12 months.

   Mr Joseph: All right.  So essentially you would agree with the proposition that you can't - you can't satisfy the debt, as it stands?

   Mr Liascos: Well, like I said to you before, I've got friends that possibly could help me.

   (Transcript, 27 September 2011, p.41)

5. Further questions were asked of Liascos concerning his affidavit in the Court of Appeal proceedings, which was sworn 2 September 2011.  That document was tendered into evidence and marked Exhibit “R1”.

6. Liascos was then asked a series of questions concerning the contents of that affidavit, focusing on the funds that he had available to him together with a line of credit.  In addition, Liascos was asked about the sale of his unit in Rose Bay and the distribution of the proceeds of the sale.  As a consequence of that sale Liascos did not own any real property within Australia.  Evidence given indicates that after the sale of the unit and the repayment of the outstanding mortgage, the balance of the funds was dissipated in the meeting and payment of accrued debts.  Liascos acknowledged that a cost order had been made against him in the amount of $750 to be paid to Anastasopoulos, however that debt had not been paid because Liascos formed the viewed that he had not been specifically asked to satisfy the debt.

7. The questioning then turned to details of the proceedings being pursued in the Court of Appeal where the following sequence of questions occurred:

   Mr Joseph: Now the red book that you've filed - the red book that you filed in the Court of Appeal, you've listed your own name on there.  Are you acting through a firm of solicitors or directly?

   Mr Liascos: No, we're still - we're still with Craig Bolger, but he is assisting us to a certain point.  Even though there is a conflict, he's still assisting us.

   …

   Mr Joseph:  I note that the documents have been filed - seem to have been filed for you, Mr Cambridge and Mr Hodges altogether?

   Mr Liascos: Yes.

   Mr Joseph: Does that mean that you're all acting, as it were, in concert; would that be a fair way of putting it?

   Mr Liascos: Well, I think we set the appeal - the application to appeal together in the first instance, so we just continue that same frame. I…

   Mr Joseph:  All right.  And does that mean that the representation is common as well?

   Mr Liascos: Not necessarily.

   Mr Joseph: Not?

   Mr Liascos: I don't know - I don't really know what Mr Hodges is doing with his representation at this stage.

   …

   Mr Joseph: … you can't pay?  You can't pay the judgment debt, can you?

   Mr Liascos: I have good friends that would probably help me out if I had to.

   Mr Joseph: I see.  All right.  Would you agree that the documents - the documents here don't disclose you having sufficient funds to pay those debts?

   Mr Liascos: Those documents disclose that, but as I said, I have good friends that would probably help me out if I - if it was required.

   (Transcript, 27 September 2011, p.44-45)

8. This was followed by some brief questioning about Liascos pursuing some of his legal representatives involved in the District Court proceedings.  During Liascos’ re-examination Ms Nash asked the following questions:

   Ms Nash: …Mr Liascos, has there been any application made by
   Mr Anastasopoulos, or those who represent him, to strike out the Notice of Appeal?

   Mr Liascos: Not to my recollection.

   Ms Nash: Has there been any application by Mr Anastasopoulos, or those who represent him, seeking an order for security for costs in relation to the appeal?

   Mr Liascos: Not to my recollection, no.

   (Transcript, 27 September 2011, p. 46)

9. This is followed by some questions concerning what Liascos’ expectations were in respect of the hearing at the Court of Appeal on 6 October 2011 and confirming that he was represented by Mr Bolger of Counsel.  That was the end of the examination of Liascos and he was excused.

Resumed Hearing; 30 September 2011

New Affidavit material

1. At the commencement of the hearing of 30 September 2013, Mr Joseph sought to tender a new affidavit, the Gourlas Affidavit of 26 September 2011, which dealt with events that had occurred since the adjourned hearing of 27 September 2011.  Essentially, it dealt with the fact that in the Court of Appeal Matter No. 2009/337501 the Red Book, which was previously tendered, and was stated to have been filed by Liascos and Cambridge, in fact, had not been.  This material is relevant to the question of whether the appeals had been prosecuted with due diligence.  Mr Joseph sought leave to read that affidavit and to rely on it.  There was no objection by Ms Nash, indicating that it was appropriate that the Court was brought up to date.

Submissions on behalf of Hodges and Liascos

1. Ms Nash, appearing behalf of both Hodges and Liascos provided the Court with a written outline of submissions broadly stating the following:

   a)The Proceedings seek to set aside two Bankruptcy Notices BN 3313 of 13 May 2011 (Liascos) and BN 3314 of 13 May 2011 (Hodges) that arise from the judgment of Balla DCJ of the District Court of NSW handed down on 11 March 2011;

   b)There was an issue as to whether Hodges was actually served an issued Bankruptcy Notice or if service on him has been effected;

   c)An appeal remained on foot by Hodges, Liascos and Cambridge in the Court of Appeal. That appeal is an application to set aside judgment for the purposes of s.41(6A) of the Bankruptcy Act1966 (Cth) (the “Bankruptcy Act”);

   d)The Bankruptcy Notice served on Hodges had no notice number issued by the Official Receiver and therefore the Application to set it aside may be premature, however, if there is evidence of active service of an issued Bankruptcy Notice on Hodges, the Court can consider those submissions, otherwise the Court should declare that there had been no effective service of the Bankruptcy Notice on Hodges; and

   e)A Bankruptcy Notice based on the District Court judgment was served on Liascos and an e-Court search showed that orders had been made extending time of compliance with each Bankruptcy Notice to 27 September 2011.  When the Registry made the orders extending the time for compliance with the Bankruptcy Notice at that time had not expired.  Ms Nash contends that the discretion to extend time has been appropriately exercised and this regime should continue, pending the determination of the appeal by the NSW Court of Appeal.

2. In respect to the application for extension of time Ms Nash contended:

   a)Pursuant to s.41(6A) of the Bankruptcy Act, the Bankruptcy Notice must be effectively served as the time of compliance runs from service. In these circumstances there is jurisdiction under s.41(6A)(a) and/or s.41(6A)(b);

   b)The discretion to grant an extension of time is at large: Re Taylor; Ex parte Deputy Commissioner of Taxation (Cth) [1983] 74 FLR 377 at 379; Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264 at 270;

   c)There is no stay in place.  An application for a stay was discontinued by Hodges and Liascos on 16 September 2011.  That stay after service of a bankruptcy notice is of no effect: Re Kim Schekeloff; Ex parte Schekeloff v Hopkins Group Pty Ltd&  Rainer Pty Ltd (1989) 22 FCR 407;

   d)It is submitted that considerable weight ought to be given to the fact that no stay has been granted or sought in respect of the judgment supporting the Bankruptcy Notices.  The decision in Byron (supra) is the normally cited authority for this proposition, although it has its origin in Re Geard; Ex parte Reid (1994) 217 ALR 191, a passage of which is quoted in Byron (supra); and

   e)No weight should be given to the absence of a stay of underlying judgments. If the Supreme Court granted a stay, it would have no effect on the Bankruptcy Notice by the operation of s.40(1)(g) of the Bankruptcy Act, as a stay of a judgment after service of the Bankruptcy Notice has no legal effect, there was no utility in continuing with it (Re Kim Schekeloff (supra)).

3. Ms Nash submitted that if Liascos and Hodges succeeded in the Court of Appeal, then :

   a)They would be entitled to an order setting aside the Bankruptcy Notices:  Re Halstead; Ex parte Westpac Banking Corporation (1991) 31 FCR 337 at 355; and

   b)Until an appeal is decided, this Court should simply extend the time for compliance with the Bankruptcy Notices: Coshott v Barry (2009) 113 ALD 358; Conway v Jackson (2001) 107 FCR 201.

4. Ms Nash submitted that the following issues are relied upon, in support of the application;

   a)Hodges and Liascos are entitled to appeal a decision of the District Court on a point of law;

   b)Is not normally appropriate for the Court, on such applications as the present, to conduct a preliminary review of the appeal: Byron (supra) at 207;

   c)The Court has to be satisfied, under s.41(6C) of the Bankruptcy Act that the appeal is being prosecuted in good faith. There is no application to strike out the appeal for want of prosecution or lack of merit. There was a directions hearing in the Court of Appeal on 8 October 2011 and the Red Book and submissions were filed on 26 September 2011 in the Supreme Court;

   d)The Bankruptcy Notices were served after the appeal proceeding was commenced by Notice of Intention to Appeal which is the Court of Appeal’s procedure.  Whilst the respondent was entitled to issue a Bankruptcy Notice (there being no stay in place), it is relevant to the discretion that the respondent chose to issue his Bankruptcy Notices in circumstances where he knew that the applicants challenged the judgment;

   e)This is not a situation of an appeal being made in response to a Bankruptcy Notice, rather, is it arguably the reverse; and

   f)The Court of Appeal procedure is that notice is first given within 21 days, then the appellants order transcripts and collate the Red Book. A notice of appeal setting out the grounds must be filed within three-months. This Court should not embark on the determination of the appeal without all of the evidence. This Court does not hear or determine the validity of the appeal other than under s.41(6C).

5. Ms Nash contends that in respect of the application to set aside the Bankruptcy Notice, this Court should follow the orders in Conroy (supra) and in Coshott v Barry (supra) and extend the time for compliance in each Bankruptcy Notice until hearing of the appeal.  Liberty to apply should be granted to the respondent if there is any slippage by the applicants in complying with the Court of Appeal directions for preparation of the appeal. 

Oral Submissions on behalf of Messrs Liascos and Hodges

1. Ms Nash brought the Court’s attention to the affidavit of Greg Hughes, a licensed commercial agent, sworn 26 May 2011 concerning the personal service of a Bankruptcy Notice on Gregory John Hodges on 20 May 2011 at 10.55am.  Hodges denies that he was ever personally served with that Notice.  Ms Nash pointed to the fact that Hodges, as at the date of service, was already before this Court, having made an application to set aside the Bankruptcy Notice and would achieve no advantage in refusing to accept the Notice.  Hodges, in his affidavit of 23 May 2011 and under cross-examination, confirmed that he was not served as described in the affidavit of Mr Hughes.  

2. Significantly, the Bankruptcy Notice received by Hodges’ solicitor (at that time, Macquarie Lawyers) did not have a bankruptcy number allocated by the Official Receiver.  However, that is the copy of the Notice that Hodges used when he made his original application seeking an extension of time and the Bankruptcy Notice to be set aside.  When he attempted to lodge that application with the Court Registry, it was rejected and he was advised by the Registry staff to obtain a bankruptcy number from the Official Receiver.  This number was subsequently obtained and the application was filed.  Ms Nash submits that Hodges did not understand the significance of the fact that the document that he received did not have number, but nevertheless the Court made an order extending time for compliance with the Bankruptcy Notice.  The order made by Registrar Ng refers to the date upon which Hodges obtained it from the Official Receiver and not the subsequent date that Mr Hughes said that he served the document on Hodges.

3. Ms Nash contends that if the Court is troubled to make a definitive determination that Hodges has not been served with the Bankruptcy Notice, then it would be possible to draft some order that protects both Hodges and Liascos in respect of the extension of time for compliance with the Bankruptcy Notice.  

4. The Bankruptcy Notice that Hodges received, which he had also put into evidence, does not have a notice number on it and, prima facie, the Court could not extend time to comply with a bankruptcy notice which had not been issued.  Hodges went to ITSA and obtained the relevant Bankruptcy Notice and it would be open to the Court, without making a finding on the issue of service, to simply extend the time of compliance.

5. Ms Nash submits that Liascos and Hodges are otherwise in the same positions concerning the application to extend time.  Whilst the form of the Applications seek to have the Bankruptcy Notice set aside, Ms Nash confirms that there is nothing formally incorrect with the Bankruptcy Notices.  No interest is claimed, the parties are properly described, the amount of the judgment debt is properly described and a sealed copy of the order is properly attached.  The formal requirements have been met.  Each applicant asked the Court to extend the time for compliance.  Based on the decision in Coshott v Barry (supra) and the authorities referred to in that decision supporting the proposition that the Bankruptcy Act gives no general discretion to set aside a bankruptcy notice that is valid in form and not an abuse of process. Consequently, the application to set aside the Bankruptcy Notices is not pursued. His Honour Edmonds J in that decision at [19] finds that the application to set aside a bankruptcy notice ought to be dismissed so far as there being no jurisdiction where the notice itself is valid in its form. However, his Honour goes on to look at the issue of the extension of time for compliance of the bankruptcy notice, and that is the nub of the Application before this Court. Section 41(6A) gives the Court the power to extend the time for compliance with a bankruptcy notice.

6. Ms Nash referred the Court to the chronology in this matter, which lists the judgment being delivered in the District Court on 11 March 2011 and on 4 April 2011 a Notice of Intention to Appeal was filed.  Liascos was served with a Bankruptcy Notice on 20 May 2011, whereas Hodges received a copy from his solicitors, but there is an argument concerning the statements made by Mr Hughes in his affidavit of service.  On 9 June 2011, the appeals were commenced in the same proceedings.  Ms Nash acknowledges that the facts are not entirely the same as those in Coshottv Barry (supra).  Any delay concerning the service of the Bankruptcy Notices and the commencement of the appeal was not a delay by the applicants.  The delay was due to the NSW Court of Appeal procedure for an appeal, in that to issue a notice there is a length of time to obtain a transcription and lodge the notice of appeal.  The issue is addressed by his Honour Edmonds J in Coshott v Barry (supra) at [32]-[33] where he stated:

   32.  In Byron v Southern Star Group Pty Ltd [1997] FCA 151; (1997) 73 FCR 264, Lehane J undertook a comprehensive review of the considerations that had been taken into account in other cases involving the exercise of the discretion under s 41(6A), although, and it almost goes without saying, the considerations to which his Honour referred were conditioned by the facts of the case in respect of which the exercise of his discretion was called for.

   33.  His Honour made the following observations:

   (1) It is not only on the hearing of a petition that the Court may ‘go behind’ the judgment giving rise to the judgment debt on which the petitioning creditor relies; the judgment debt can be impeached on a notice to set aside a bankruptcy notice (at 268D).

   (2) His Honour noted the different approaches of Kiefel J in Re Baker; Ex parte Baker v Staples (unreported, Federal Court, Kiefel J, 4 September 1995) and Sheppard J in Re Geard; Ex parte Reid (unreported, Federal Court, Sheppard J, 11 February 1994) and to later decisions in which Geard was followed.

   (3) In the course of his judgment in Geard, Sheppard J had taken on board the following considerations:

   (a) The debtor had not made any application for a stay of proceedings pending the outcome of the appeal;

   (b) an application to extend time for compliance with the bankruptcy notice is not the hearing of a bankruptcy petition. The refusal of the application will not affect the status of the debtor but it will mean that he, in all probability, will commit an act of bankruptcy;

   (c) if the appeal is ultimately dismissed and the judgment stands with the consequence that the bankruptcy proceedings go on, it may be quite important to the petitioning creditor, whoever he or she may be, to the general body of creditors and to the trustee in bankruptcy, that there be, for the purposes of the administration of the bankrupt estate, an act of bankruptcy committed at an earlier time than would be the case if the application were acceded to.

   (4) The approach adopted by Sheppard J was followed by Whitlam J in Re Smith (unreported, Federal Court, 4 May 1994) and by Sackville J in Agrillo v Codisposto (unreported, Federal Court, Sackville J, 16 December 1994).

1. Ms Nash submits that in Byron (supra), which followed the matter of Geard (supra), the issue was whether or not there was a stay of execution, and if there was no stay it was one of the matters of discretion which the Court looked at.  In the matter before this Court there is no stay, but it is acknowledged that an application for a stay had been prepared but it had not been pursued.  This is significant to the extent the question of whether or not an application for a stay would have had any effect on the judgment, in any event, because there has to be a stay in place before the judgment is executed upon or capable of being executed upon for the purposes of a bankruptcy notice.  This is addressed in Coshott v Barry (supra) at [34], where his Honour stated:

   34.  At 270, [Byron v Southern Star Group] Lehane J went on to reason:

   In my view the considerations to which Sheppard J refers indicate that the principles to be applied where the question is whether a petition should be adjourned or dismissed are not necessarily those which should guide the exercise of the discretion to set aside, or extend time for compliance with, a bankruptcy notice. The commission of an act of bankruptcy is, undoubtedly, a serious matter; it is, however, of a different order of gravity from the change of status brought about by the making of a sequestration order; and there is also to be taken into account the interest of both the judgment creditor and other creditors of the judgment debtor in ensuring that, if ultimately a sequestration order is made, the relevant act of bankruptcy occurs earlier rather than later.

2. Ms Nash contends that to counter any argument that matters of adjournment and the hearing of the appeals are matters in the province of the Federal Magistrates Court (as the Court was then) hearing a defended Creditor’s Petition which would be on similar grounds. Ms Nash argues that where the appeal is being prosecuted, there is no application to strike out, no application for security of costs which would have an adverse stay, then the Court must accept that the position of the applicants is which falls within s.41(6A) and s.41(6C).

3. Ms Nash contends that this Court only has to deal with the issue of Liascos’ and Hodges’ appeals and referred the Court to his Honour Edmonds J’s reasons in Coshott v Barry (supra) at [41]-[45]:

   41.  It is true that there is no stay of the judgment upon which the Bankruptcy Notice is based and no suspension of the costs assessor’s determination or decision. But both were sought and refused on jurisdictional grounds: see [4] and [7] above. The contrast with Geard and Byron is clear.

   42.  On 1 December 2009, Mr and Mrs Coshott filed a notice of motion in the District Court in proceeding No. 2872/09 seeking leave to file and serve an amended summons, as well as an order that the enforcement of the judgment in proceeding No. 4000/09 be stayed pending determination in proceeding No. 2872/09. That motion is listed for hearing today.

   43.  I agree with the submission of counsel for Mr Barry that it is not appropriate for me, in the exercise of my discretion under s 41(6A), to get involved in the merits or otherwise of Mrs Coshott’s appeal.

   44.  The consideration which I find most telling in favour of exercising my discretion to further extend the time for compliance with the Bankruptcy Notice is that the appeal against the cost assessor’s determination was instituted on 1 July 2009, over three months before service of the Bankruptcy Notice. That fact alone informs one that the proceeding is not brought to frustrate the proceeding commenced under the Act by the service of the Bankruptcy Notice and there is no evidence to suggest, nor was it suggested, that there are circumstances now extant which would otherwise attract the operation of s 41(6C).

   45.  For these reasons, I propose to exercise my discretion pursuant to s 41(6A) of the Act by extending the time for compliance with the Bankruptcy Notice until the day on which the District Court of New South Wales makes final orders in proceeding No. 2872/09.

4. Relevantly, in the Proceedings before this Court, the Notice of Intention to Appeal was lodged in April 2011 and the Bankruptcy Notices were issued and served in May 2011, so the respondent in the Proceedings was well and truly on notice that the applicants intended to appeal. In issuing the Bankruptcy Notice the respondent knew that an application of this type might be made and knew that each of the applicants might ask the Court to exercise its discretion if the appeals were ones which fell within the bounds of s.41(6C). Ms Nash requested that the time for compliance to be extended to seven days after the final orders are made in the Court of Appeal to enable the applicants to make arrangements as required by the Bankruptcy Notice to pay, secure or compound the amount.

Submissions on behalf of Anastasopoulos

1. Mr Joseph, appearing on behalf of Anastasopoulos, provided the Court with a written outline of submissions which refers to the following:

   a)The issue of service regarding Hodges:

   i)An issue is taken by Hodges regarding service of the Bankruptcy Notice;

   ii)An affidavit of service in the name of Greg Hughes has been read in the proceedings.  Mr Hughes was not required for cross-examination.  In those circumstances the Court should accept his evidence and personal service is proven; and

   iii)Even on Hodges’ own evidence he received an unstamped Bankruptcy Notice on or about 13 May 2011 (not relied upon) and then a stamped one from his (then) solicitor on or about 6 September 2011 after it was provided – see Affidavit of Hodges, dated 26 September 2011 at [6]. Hodges has clearly been served and has been on notice for some time regarding the Notice issued against him.

   b)Principles relevant to the Court’s consideration of the application to extend time to comply under s.41(6A) of the Bankruptcy Act:

   i)The following are some of the principles to be gleaned from decided cases on the question of the manner in which the Court should exercise its discretion to extend the time with which to comply with a bankruptcy notice:

   (i)It is not the law that simply because an appeal has been filed that an extension of time to comply with the Bankruptcy Notice should be granted: Kakavas v Crown Melbourne Limited [2011] FMCA 11 at [16];

   (ii)It will tell against an application to extend time where the debtor has no capacity to meet the judgment, there is a risk of assets being dispatched or where the extension of time would affect the relation back period: Kakavas (supra);  

   (iii)The discretion of the Court is “at large”: Byron (supra);

   (iv)Considerable weight should be given to the fact that no stay has been granted (or sought) of the District Court’s judgment supporting the Bankruptcy Notice: Byron (supra);

   (v)A failure to comply with the Bankruptcy Notice, whilst an act of bankruptcy, does not immediately cause the making of a sequestration order.  The less grave consequence of a failure to comply (compared with the making of a sequestration order) will guide the exercise of the discretion: Byron; and

   (vi)Where the debtor has not made any special circumstances before a Court exercising jurisdiction in bankruptcy would provide a de facto stay: Re Geard (supra): Warner v Frost [1999] FCA 830 per Hely J at [6]-[8].

   c)Application of these principles to the two applications by Hodges and Liascos:   

   i)In both cases an extension of time to comply with the Bankruptcy Notices was initially granted by consent until 30 August 2011.  Thereafter both applicants were successful in being granted two short extensions (on 30 August 2011 and 6 September 2011) to allow them to argue for a stay of the judgments against them:  the Gourlas Affidavit of 26 September 2011, at [8]-[13];

   ii)The stay application was listed before the Registrar in the Court of Appeal on three occasions;

   iii)On the first two occasions the stay applications were adjourned (with costs awarded against Hodges and Liascos) on their request.  On 16 September 2011, without any notice to the respondent those stay applications were withdrawn: Gourlas Affidavit of 26 September 2011, at [13];

   iv)In accordance with the principles stated above the Court will regard it as significant that not only has to stay been granted, but that the applicants have consciously chosen not to pursue a stay after two adjournments at their request: Byron (supra) at 270-271; Coshott v Barry (supra);

   v)Mr Joseph submits that it is worth noting here that Hodges has now through his solicitors filed a consenting appearance in the Court of Appeal and does not appear to seek any orders that might have the effect of overturning the judgment as it relates to him: Annexure “GG7” to the Gourlas Affidavit of 26 September 2011.  Therefore, whilst Hodges filed an appeal it would appear it is not being actively pursued in its own right, noting that there is no evidence that he separately applied for a stay in the first place.  Given that he is not actually agitating an appeal in any case, it is difficult to see the basis on which the Court would exercise its discretion in his favour;

   vi)Neither applicant has offered to pay money into Court, or provided any undertaking about the (non)-dissipation of assets during any period within which time to comply with the bankruptcy notice might be extended.  These are further considerations that would go against the exercise of the Court’s discretion in favour of the applicants: Kakavas (supra) at [16] and [20];

   vii)In Liascos’ case, there appears little doubt that he does not have sufficient assets to meet the debt which is the subject of the Bankruptcy Notice: Exhibit “R1”.  Liascos confirmed this in cross-examination and the Court would not give any real weight to vague suggestions that friends would help him out.  This inability to meet his creditors would weigh heavily against the application to extend time in his case:  Warner (supra);

   viii)This matter could be significant given that any appeal is unlikely to be heard before the middle of 2012 and could conceivably place the transaction of selling his real estate outside any “relation back” period noting that Liascos sold his only real estate in August 2011: Gourlas Affidavit of 26 September 2011 at [16];

   ix)The Court would also note that both applicants have failed to pay outstanding costs orders made by the Court on 30 August 2011: Gourlas Affidavit of 26 September 2011 at [8]. The Court would not view any application from people who have failed to comply with the Court orders favourably;

   x)Mr Joseph submits that the submissions made on behalf of the applicants at [21]-[23] of their outline are not a correct statement of the law;

   xi)Section 40(1)(g) of the Bankruptcy Act is not directly relevant to this application. That subsection deals with a situation where the debtor wishes to prove the existence of a counter claim or set off. That is not the situation here for either applicant as their applications rely on s.41(6A) of the Bankruptcy Act;

   xii)Schekeloff (supra) is not authority for the propositions set out in [21]-[23] of the respondent’s outline of submissions.  The rationale of that decision is that bankruptcy notices will not be set aside when, at the time of service of those notices, no stay was in place in relation to the judgments underpinning those notices: Schekeloff (supra) at 412 per Burchett J. That is a reflection of the wording of s.40(1)(g) but does not affect the operation of s.41(6A) nor the relevance of the matters referred to in [31(b)] above to exercise the Court’s discretion when confronted with an application pursuant to s.41(6A);

   xiii)Paragraph 24 of the applicants’ submissions should be rejected for two reasons. First, the citation referred to does not stand for the proposition set out in [24]. Secondly, the Court is not being asked to consider whether the appeals have merit or are likely to succeed as no such submission has been made by the applicants;

   xiv)Finally, the mere fact that time for compliance was extended in Coshott v Barry (supra) can hardly be relevant to these Proceedings where the facts are so different: see Coshott v Barry (supra) at [41]-[42] and [44]. Further, in that decision Edmonds J did not demur from the statements of principle in Byron (supra) referred to at [32]-[38]; and

   xv)For the above reasons the Court should not accede to the applications to extend time for compliance.

   d)In respect of whether the applications to set aside the judgment in question being prosecuted with due diligence; s.41(6C):

   i)It is submitted that the appeals are not being persecuted with due diligence.  If the Court agrees with this proposition it must not extend the time for compliance (s.41(6C);

   ii)Part 51 of the Uniform Civil Procedure Rules 2005 (NSW) applies to the instituting of appeals before the Court of Appeal of New South Wales;

   iii)Relevantly, those rules provide as follows:

   ·Rule 51.6: a notice of intention to appeal (often called a “holding appeal”) must be filed and served with 28 days after the date of the judgment in question.  In this case the final judgment being appealed against was handed down on 11 March 2011;

   ·This allows a prospective appellant three months from the date of judgment within which to actually file their notice of appeal;

   ·Rule 51.16: in the absence of a holding appeal, a notice to appeal must be filed within 28 days of the date of the judgment appealed against;

   ·Rules 51.27, 51.32 and 51.34: within six weeks of filing a notice of appeal the appellants are to file and serve Red Books (three copies to be served on each interested party, r.51.32(ii)) and file and serve an outline of submissions.

   iv)Liascos filed a notice of intention to appeal on 4 April 2011;

   v)Liascos then filed a notice of appeal on 10 June 2011: Gourlas Affidavit at Annexure “GG3”;

   vi)This was just inside the three month “deadline” to do so.  Liascos said in cross-examination that he filed that Notice of Appeal without the benefit of any legal advice.  This was despite having three months to obtain such advice;

   vii)Liascos also filed an affidavit with his Notice of Appeal, dated 9 June 2011: Gourlas Affidavit of 26 September 2011 at Annexure “GG4”.  Paragraphs [10]-[13] of the Gourlas Affidavit of 26 September 2011 show that he was apparently in the process of obtaining the advice of counsel in June 2011;

   viii)At or about that time, Liascos also filed an application for a stay of the judgments: Gourlas Affidavit of 26 September 2011 at Annexure “GG5”;

   ix)Mr Gourlas sets out in the Gourlas Affidavit of 26 September 2011 what then happened between the middle of June and September 2011;

   x)Mr Gourlas, in his affidavit sworn 29 September 2011(the “Gourlas Affidavit of 29 September 2011”) now further deposes to the fact that Liascos has served one copy, not three as required, of the Red Book, but no submissions as required by the Court of Appeal and the Registrar’s directions of 24 August 2011.  Mr Joseph brings the Court’s attention to the rules referred to above, that the filing and serving of the Red Book was not initially done at the time as is mandated by the Court’s rules;

   xi)In Liascos’ case, he has had a period of over six months since the judgment of the District Court to get legal advice and comply with the procedural requirements of the Court of Appeal.  Apart from serving one copy of the Red Book, he has done very little, other than seek adjournments on three occasions and then abandon a stay application.  His view of the prospects of appeal is irrelevant.  Mr Joseph argues that Liascos is not prosecuting his appeal with due diligence;

   xii)In Conway v Jackson (supra), the Federal Court said at [30]:

   30. In exercising the discretion whether or not to extend the time for compliance with a bankruptcy notice, the creditor should not be routinely frustrated from enforcing the judgment by the device of the institution of an appeal. Section 41(6C), to an extent, recognises that position…

   xiii)In Hodges’ case, it appears no real appeal is being pursued at all.  He has filed a Notice of Appeal out of time and has filed a submitting appearance in the Court of Appeal;

   xiv)Hodges has not complied with the directions of the Court of Appeal made on 24 August 2011 in relation to the filing of submissions and now simply seeks more time, after over six months have transpired since the date of the judgment against him.  He has not done anything to advance his appeal to this point;

   xv)Joseph argues that in the case of Hodges, there is not a real appeal being prosecuted so this Court should not extend the time for compliance: s. 41(6C);

   xvi)In the case of Liascos, the appeal is not being prosecuted with any diligence at all, so the same result ought to follow;

   xvii)The mere fact that no application has been made at this moment by the respondent to strike out the Court of Appeal proceedings for want of prosecution does not affect the force of the submissions put above.  It also doesn’t mean that such an application is not likely to be made in the near future.             

2. In oral submissions, Mr Joseph, first dealt with the issue of service of the Bankruptcy Notice on Hodges, which was contained in the written submissions, reproduced above at [46(a)].  The Affidavit of service of Mr Hughes has been read and indicated that he approached Hodges at his Dural address and asked him “[A]re you Gregory John Hodges, the person referred to in the Bankruptcy Notice?” and handed the document to a male person, who appeared to read it.  He responded “Yes, I don’t want it.”  Mr Joseph submits this is the unchallenged evidence of Mr Hughes.  In Hodges’ affidavit, he attaches a copy of the stamped Bankruptcy Notice which he said in cross-examination had been proved to him by his then solicitors at some time on or before 6 September 2011.  Mr Joseph argues that service is a dead issue.

3. Mr Joseph then referred the Court to the decision in Byron (supra) where his Honour Lehane J at 268 refers to the decision of her Honour Kiefel J in Re Baker; Ex parte Baker v Staples [1995] FCA 1520 when her Honour was a judge of the Federal Court.  In that case her Honour was of the view, in circumstances where the respondent to the application was prepared to concede that the appeal on foot was arguable or had merit, that she would extend the time within which the Bankruptcy Notice could be complied.  His Honour Lehane J in Byron (supra) refers to the judgment of Sheppard J in Re Geard, where his Honour stated at 270:

   The critical question then is how that discretion should be exercised… I think it most undesirable that a judge of this Court should in effect undertake some provisional review to determine the correctness or otherwise of the judgment of another court especially when that judgment is under appeal to the court of appeal which has jurisdiction to hear appeals in the normal course…

   The debtor has not made any application for a stay of proceedings pending the outcome of the appeal. Why he has not done so is not clear to me but the judgment which has been recovered against him is a final judgment and execution upon it has not been stayed. It 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…

4. His Honour continued at 270:

   A further factor is that this is an application to extend time for compliance with a bankruptcy notice; it is not the hearing of a bankruptcy petition…

1. Mr Joseph submits that Lehane J then goes on to endorse these comments and, in effect, what is being said it that the bar for an application at this stage by a debtor ought to be set a little higher because the consequences of him losing an application like this are not as grave as if they are at the gate, in effect, with a Creditor’s Petition and about to be subject to a sequestration order.  Then in Byron (supra) at p.270, point (E) Lehane J stated:

   …In my view the considerations to which Sheppard J refers indicate that the principles to be applied where the question is whether a petition should be adjourned or dismissed are not necessarily those which should guide the exercise of the discretion to set aside, or extend time for compliance with, a bankruptcy notice…

   I think, therefore, that considerable weight should be given to the circumstance that here, as in Geard, no stay has been granted (or, apparently, sought) of the judgment supporting the bankruptcy notice…

2. Mr Joseph submits that in the matter before this Court, a stay was initially sought by Liascos, but there was not separate application for a stay by Hodges.  Those applications were adjourned on two occasions and then withdrawn without explanation.  Mr Joseph referred to the decision in Kakavas (supra) where his Honour Riethmuller FM (as he was then) considered an extension of time for compliance with a bankruptcy notice application and referred to the authority of Byron (supra) making the following observations at [16]-[21]:

   16. Various cases have set out various descriptions of the nature of the power to extend time. It appears to me that the better view is that there is no specific restriction on the nature of the power; that it is a general discretion which should not be fettered and should be exercised based upon the facts and circumstances of the particular cases that come before the court, bearing in mind that there is a particularly wide variety of cases that come before the court, often involving complex and commercial and familial relationships which need to be viewed individually and careful consideration given to specific cases rather than adopting general principles or broad brush approaches. The relevant factors that are usually matters to be considered have been identified in various cases and include whether or not an appeal is being lodged and the time that an appeal may take to hear, whether stay applications have been made and granted, whether or not parties are solvent, the potential impact upon other proceedings and the potential impact upon the parties.

   17. In this case, an appeal has been lodged. There are lengthy and detailed grounds of appeal. There were security for costs orders made by the Court of Appeal of Victoria, which have been complied with by way of the applicant providing a considerable sum by way of security for costs.

   18. It is not for me to conduct a review of a judgment of the Supreme Court of Victoria, nor appropriate for me to form a view as to the likely outcome of the appeal. It is appropriate for me to review the judgment and appeal papers in order to determine whether or not the appeal is a bona fide appeal. Having looked through the judgment and had considerable discussion at the bar table and considered the notice of appeal, I am persuaded that this is a bona fide appeal and that, to the extent that I need to consider whether or not an appeal is pending, that is sufficient consideration of this issue.

   19. The appeal is not likely to be heard until late this year or, potentially, early next year. A date has not yet been fixed. There were no submissions to the effect that expedition was sought in this matter and I note that expedition was refused with respect to the applicant’s appeal in the similar case against Crown Casino, and likely to be the outcome of an application for expeditious hearing in this case. Importantly, however, I note that various directions have been made by the Appeal Court and that both the parties are complying with those directions in order to ensure that the appeal does come on, on the first available date and, notably, that neither party is causing any delay in the hearing and determination of the appeal.

   20. A stay application has not been brought in this particular case. A stay application was brought in the Crown Casino case and refused. It was agreed at the hearing of this matter that the relevant issues on a stay application were largely the same in the case in the Supreme Court with respect to this judgment as in the Crown case. The refusal of the stay in the Crown case would be the likely outcome of a stay application in the Supreme Court in this case for the same reasons. The refusal in the Crown case is now the subject of a special leave application to the High Court. Relevant parts of the judgment of Warren CJ and Bongiorno J on the stay judgment in the Crown case are contained in paragraphs 9 to 11 and 13 to 14, which are in the following terms:

   9. Mr Myers QC for the appellant drew attention to Mr Kakavas’ frank concessions as to his impecuniosity. In his affidavit of 22 February 2010, Mr Kakavas deposed to his not having the funds to meet Crown’s judgment debt. In his second affidavit of 31 March he went further and specified his debts in some detail. He said that he was by profession a consultant to the real estate industry and had been involved in real estate development, marketing and sales, specialising in residential and commercial real estate. He operated through a company called Elite Property Investment Group Pty Ltd and said that he was very successful. Elite’s sole asset was an office building situated at 16 Queensland Avenue, Broadbeach in Queensland which was mortgaged to the extent of $15.7M and which someone at least had said was worth $5.2M. Whether that was right or not is a matter of some contention but they are the figures.

   10. As well as suing Crown, Mr Kakavas was sued by Paradise Enterprises Ltd, a company which operated in the Bahamas in the casino business. It sued him for something just over $US1M. That case was tried by Davies J in this Court, who gave judgment on 16 February 2010, that judgment being for $AUD1.28M, with interest of $152,999, against Mr Kakavas. Mr Kakavas in his affidavit deposed to enquiries which he says the solicitors for Paradise had made concerning him for the purposes of serving a bankruptcy notice and I might interpolate that Mr Young informed the Court Paradise now has an order for substituted service of that bankruptcy notice.

   11. Mr Kakavas went on to describe other financial problems that he had: something known as the ‘McCracken litigation’, which was litigation in the Supreme Court of New South Wales before Schmidt J, which resulted in judgment against Mr Kakavas for $1.25M. He referred to a claim by the Australian Taxation Office for $4.342M, of which he was disputing $1.56M, leaving something just under $3M undisputed, presumably. He referred to debts which he owed to United States casinos totalling some $US5M and then deposed to a debt of approximately $25M, plus or minus 20 percent, which he said he owed to family and friends and which he lost in gambling between 2000 and 2006. He said that these debts were not documented in any way and that was why he could not be more certain about their extent. He said that at the time he swore that affidavit at the end of March, no bankruptcy notice had been served upon him. He said that some of his legal costs were being paid by third parties, who ‘consider I have been exploited by the gambling industry.’

   ...

   13. Mr Young QC for the respondents conceded that the case on appeal is not hopeless and for present purposes it is sufficient for me to say that on a ‘rough and ready assessment’ the appellant has some chance of success, although it seems clear that, contrary to Mr Myers’ submissions, that chance will only produce fruit if a successful attack can be made on a number, perhaps a very large number, of the trial judge’s findings of fact – a task not easily accomplished. Mr Myers said that the special or exceptional circumstances which can be shown to merit a stay arise out of the appellant’s impecuniosity and the possibility of him going bankrupt, thus suffering not only the financial consequences of that event but also damage to his business reputation. However, just what business reputation a self-confessed addicted gambler of Mr Kakavas’ accomplishments – who has been to gaol for theft, has admitted largely unsecured debts, including gambling debts of almost $50M, and who has not worked for three or more years – has, Mr Myers did not specify.

   14. I am not satisfied that Mr Kakavas’ impecuniosity can be totally attributed to his losses on the tables at Crown. Although they must have contributed to his debts, on his own affidavit his other debts far outweigh his Crown losses. Mr Kakavas has not demonstrated any special or exceptional circumstance which would warrant a stay of execution on Crown’s judgment debt. There is no need to examine Mr Young’s contention that a stay should not be granted to enable Mr Kakavas’ creditors to take bankruptcy proceedings, thus permitting a trustee to determine whether to proceed with the appeal, and in any event allow a just distribution of any proceeds to be made to all his creditors. Mr Kakavas has failed to establish the fundamental requirement for a stay.

   21. The special leave application to the High Court, again, appears to be a bona fide application based upon the question of whether or not special or exceptional circumstances was the appropriate test to be applied by the Court of Appeal of Victoria in determining whether or not to stay the judgment. Whether or not that special leave application will be successful is not a matter that is appropriate for me to speculate upon, other than to conclude that it does not appear to me to have been an application that was not bona fide. The special leave application does not yet have a date. It is hoped that it will be heard some time later this month, but the business of the High Court is of a heavy workload, with many matters and a large criminal law workload, so it is difficult to speculate as to precisely when a special leave application with respect to an interlocutory issue may get listed or may be heard and determined by the High Court.

   In that case, the extension of time was refused.

3. Mr Joseph then referred the Court to the decision in Warner (supra) where his Honour Hely J considered the principles governing whether an extension of time should be granted. His Honour stated at [5]-[9]:

   5. …The first was a judgment of Kiefel J inRe Baker; ex parte Baker v Staples(unreported, Federal Court, 4 September 1995), where her Honour concluded that the subsistence of an arguable outstanding appeal against the judgment on which the bankruptcy notice was based, was of itself a sufficient ground on which to extend time for compliance with the bankruptcy notice.

   6. That view has not prevailed in the general run of judgments in this court: Bryett v Deputy Commissioner of Taxation (1997) 37 ATR 141, Wenkart v Abignano (unreported, Federal Court, 28 August 1998) and Byron v Southern Star Group Pty Limited [1997] FCA 151; (1997) 73 FCR 264 are cases which have proceeded in a different direction. It is possible, I suppose, to synthesise from this group of decisions three views. The first is the view of Kiefel J which I have just indicated; the second is the view of Sheppard J referred to in Re Geard; ex parte Reid(unreported, Federal Court, 11 February 1994) that quite special circumstances are required before the Court will extend the time for compliance with a bankruptcy notice when an application has not been made to the court in which judgment was given for a stay of proceedings, and the third is the view of Lehane J in Byron that whilst weight should be given to that matter it is not necessarily conclusive.

   7. For myself, I think with respect, that the view of Lehane J is to be preferred and I propose to follow it but the problem is that really the only matters which were relied upon in support of a stay were these: first, the existence of an arguable appeal. Second, the application for a stay was made but at least inferentially a reason for its refusal was the inability on the part of the applicant to put up security in sufficient sums. Thirdly, the impact of a change in status consequential upon the refusal of a stay. Fourthly, no showing of any prejudice to the respondent should an extension be granted and, finally, the appeal is likely to be heard and decided in a period of eight months or less.

   8. In my view, these factors are insufficient to outweigh the proposition that the Court in which this judgment was obtained has declined to stay its execution and something more than an arguable appeal needs to be shown before the Bankruptcy Court would grant an extension of time for compliance with the bankruptcy notice, which would produce a similar effect to the granting of a stay. Really nothing more has been shown in this case other than that there is an arguable appeal and that the consequence of refusing an extension will be the commission of an act of bankruptcy but, as Lehane J said in Byron at 270:

   “The commission of an act of bankruptcy is, undoubtedly, a serious matter; it is, however, of a different order of gravity from the change of status brought about by the making of a sequestration order; and there is also to be taken into account the interest of both the judgment creditor and other creditors of the judgment debtor in ensuring that, if ultimately a sequestration order is made, the relevant act of bankruptcy occurs earlier rather than later."

   9. In the present case, the applicant does have other creditors. She is not in a position to meet the bankruptcy notice and it seems to me that it is in the interests of creditors generally, that if ultimately a sequestration order is to be made, the relevant act of bankruptcy should occur earlier rather than later. Of course, it does not automatically follow that if a petition is presented based upon the act of bankruptcy constituted by the failure to comply with the bankruptcy notice, that a sequestration order would be made on that petition if the appeal to the Court of Appeal was still pending.

4. Mr Joseph then addressed the application of the principles relevant to the Court’s consideration of the application to extend the time to comply under s.41(6A) of the Bankruptcy Act to the facts of the case before this Court. The first issue was in relation to the relevance of the stay of the District Court judgment on which there was an application made by Liascos that there is no evidence of an actual application by Hodges. Liascos’ stay application was listed twice for hearing before the Court of Appeal and adjourned on the application of Liascos and Hodges because they needed legal advice. On the second occasion a further adjournment was sought because there were problems of a conflict between Liascos and Hodges. This was nearly six months after the judgment had been handed down that a stay was being sought. The stay application was simply discontinued with no reasons given. Mr Joseph argues that an inference that might be drawn, that those who were applying for the stay did not think that they possessed a good chance of achieving the stay or perhaps thought that they were going to have to provide security, which is very often the case in the Court of Appeal in order to stay a judgment. The reasons are unknown but the stay application was not pursued and in those circumstances that weighed significantly against the applicants. Added to this is the fact that Hodges has only filed a submitting appearance in the Court of Appeal. In cross-examination Hodges was asked about this, but did not appear to fully understand the significance of his actions, given that it had been done on his behalf by his then solicitors. Mr Joseph argues that, in effect, means that even though Hodges has filed an appeal, he has not actually taken an active role.

5. Mr Joseph argues that neither applicant has offered to pay any money into Court, nor has offered any undertaking as to non-dissipation of assets and in the case Liascos’ evidence, his lack of liquidity.  He is not in a position to meet the Bankruptcy Notice or the amount sought.  This raises the concern as Liascos indicated in evidence that he had sold his only real estate interest quite recently and this would raise a real issue about a relation back period, pending on when the appeal is likely to be held, heard and determined if it does in fact proceed.  In addition there is also the matter of outstanding costs.

6. Mr Joseph addressed the Court on the issue of whether the appeal of Liascos and Hodges was being pursued with due diligence.  Mr Joseph indicated that he relied on his written submissions which are set out above at [46(d)].  The purpose of the Gourlas Affidavit of 26 September 2011, read at the commencement of the hearing on 30 September 2011, is to inform the Court as to the lack of due diligence on behalf of both Liascos and Hodges in their appeal in the Court of Appeal.  Mr Joseph acknowledged that Ms Nash was not acting for Liascos or Hodges in the Court of Appeal proceedings, but had made submissions that they were complying with the Court of Appeal’s orders.  Mr Joseph argues that they have not complied as neither Liascos nor Hodges has filed or served submissions as they were required to do.  In the Gourlas Affidavit of 29 September 2011 at Annexure “GG12” there is a hand written Notice of Motion, prepared and filed by Hodges seeking an adjournment for the purposes of receiving legal advice.  Mr Joseph contends that there is not really a satisfactory explanation as to why those matters have not been dealt with already.  In respect to Liascos, he has not put on any application at all, nor has he put on his submissions and in effect, has not done anything at this stage.  Consequently, both are in default of the Court’s directions.  In Liascos’ case, he has had a period of some six months since the District Court judgment to get legal advice and comply with the requirements of the Court of Appeal.  Apart from serving one copy of the Red Book he has done very little other than seeks adjournments and then abandon a stay application.  Mr Joseph argues that Liascos is not prosecuting the appeal with due diligence.  Mr Joseph relies on his written submissions noted above at [46(d)].

7. Mr Joseph submits that in Hodges’ case the Red Book, on his inspection, appears to have been filed by Liascos and Cambridge, but not Hodges.  Hodges’ Notice of Appeal has been filed out of time and he is going to need to seek leave if he is intending to prosecute an appeal himself, as distinct from just being a submitted party.  He will need to do something about that and again he has not complied with the directions of the Court of Appeal, made on 24 August 2011. Mr Joseph indicated that he was at the Court of Appeal Registrar’s call-over on 23 August 2011, where the issue of a strike-out of the appeal was a matter that was raised, but no application has been made.  That is not to say that his client will not make an application in due course or even in the near future for strike out or security for costs.  Mr Joseph argues that the relief sought by Liascos and Hodges for an order to extend the time of compliance should be denied on the basis that those applicants are not prosecuting the appeals with due diligence.

Submissions in Reply for Liascos and Hodges

1. Ms Nash submitted that Liascos was asked under oath about his ability to pay and confirmed that he was able, whereas Hodges was not asked any questions about his assets or ability to pay.  He was strident in the fact that he was prosecuting the appeal and that he opposed the finding in the District Court.  They have both indicated to the Court that they are prosecuting their appeals.            

1. Although the draft Bankruptcy Notice described above did not carry a valid notice number or deal, this appears to have been partially overlooked when the applications were filed in the Registry on 23 May 2011 because of the order made in respect of Hodges’ application which is reproduced at [5] above. This misunderstanding seems to have been further perpetuated by the orders of Registrar Hedge made on 31 May 2011 which state:

   1.  The application to set aside the bankruptcy notice BN3313 issued on 13 May 2011 be adjourned until 9:45am on 21 June 2011.

   2.  To the extent necessary, time for compliance with requirements of any properly issued bankruptcy notice (BN3313 issued on 13 May 2011) but apparently served on 9 May 2011 be extended up to and including 21 June 2011.        

2. There is not sufficient material before the Court to enable it to make a definitive ruling on the validity of the Bankruptcy Notice allegedly served on Hodges and this issue should be considered if and when a creditor’s petition is brought before the Court.  This approach was being advanced by Ms Nash during the hearings on 27 and 30 September 2011, but with a much greater focus on the issue on the extension of time for compliance, as the initial granting of the extension was made automatically by a duty registrar when the Proceedings were originally filed.  Consequently, I return to the more significant consideration of whether the Bankruptcy Notices should be set aside. 

3. In the Court of Appeal decision in Cambridge v Anastasopoulos [2012] NSWCA 405 the significant orders made were as follows:

   (1) Appeal allowed.
   (2) Orders (1), (2) and (3) of the District Court made on 11 March 2011 be set aside.
   (3) Judgment for the respondent against the first appellant in the amount of $18,048.25 together with interest from 10 February 2009 to 11 March 2011.
   (4) Judgment for the respondent against the second appellant in the amount of $18,048.25 together with interest from 10 February 2009 to 11 March 2011. 
   (5) Judgment for the respondent against the third appellant in the amount of $11,415.50 together with interest from 10 February 2009 to 11 March 2011.
   (6) The judgments in orders (3), (4) and (5) above to take effect as at 11 March 2011. 
   …

4. The above orders resulted in a substantial reduction for the three applicants as follows:

   a)Stephen  Paul Cambridge (the first applicant), from $55,048 to $18,048.25;

   b)James Liascos (the second applicant); from $55,048 to $18,048.25; and

   c)Gregory John Hodges (the third applicant); from $85,416 to $11,415.50.

   In both the District Court’s decision and the Court of Appeal’s decision, the period of interest applicable to all three applicants was from 10 February 2009 to 11 March 2011.  Consequently, it is only the mathematical extension that has changed.

5. The primary applications that have been put are to set aside the Bankruptcy Notices (set out [3]-[4] above) – in both applications this is set out in Order [3]. In the supporting affidavit, in this instance Liascos sought to set up the prospects of a counter-claim that would defeat the Bankruptcy Notice that had been issued, based on various allegations about matters in which Anastasopoulos had achieved his judgment in the District Court, but also various other allegations about other parties to those proceedings, including legal representation. Although they were the basis on which it was sought to set aside the Bankruptcy Notice, none of those issues were pressed. On reading that affidavit it suggests that they were the issues that were going to be relevant in the arguments presented in the Court of Appeal, but it does not appear that those matters were ventilated in that forum and do not appear to be relevant to the issue of the setting aside of the Bankruptcy Notices.

6. I fully accept that the amounts listed in the respective Bankruptcy Notices were the correct amounts owning pursuant to the District Court judgment of 11 March 2011 which was the existing judgment at the time when the Bankruptcy Notices were issued.  There is a copy of the judgment of the District Court made on 11 March 2011 attached to both of the applications.  The amount of the Bankruptcy Notice for Hodges is exactly the same amount that was on the judgment against him handed down on 11 March 2011 as is the amount in respect of Liascos.  No evidence has been tendered to indicate that any amount has been paid by either Liascos or Hodges in relation to that judgment.  Although, a stay was initially sought, that was subsequently withdrawn and no stay was granted by the Court of Appeal.

7. In the Court of Appeal, the orders for the amounts owed were set aside and new amounts were instituted resulting in a lesser amount being owed, with each of those respective amounts being still greater than the $5,000 which is the minimum that would support the Bankruptcy Notice for the purposes of the Bankruptcy Act.

8. All parties have made reference to the Court of Appeal decision in Emerson v WreckAir (supra) and have offered different explanations as to how that decision should be applied to the matter currently before this Court.  Those approaches have been referred to in the parties’ written submissions above.  The background to that decision is set out in the opening paragraphs as follows at [1]-[6]:

   DECISION

   1.  This is an appeal by Joseph Francis Emerson and Wilma Lucy Emerson ("the appellants") from part of a judgment given by a single judge of the Court (Pincus J.) on 8 May 1991. The subject matter of the judgment is a bankruptcy notice addressed to the appellants that was issued by a Deputy Registrar in Bankruptcy on 14 December 1990 upon an application in that behalf by Wreckair Pty Limited ("the respondent").

   2. The bankruptcy notice was founded upon a final judgment obtained by the respondent against the appellants in the District Court of Queensland (Kimmins D.C.J.) on 27 November 1990 after a contested hearing in which the appellants and the respondent were legally represented. The judgment, which was in the sum of $29,081.65 plus interest of $4,560.64 and costs, arose out of an agreement dated 29 August 1988 whereby, in consideration of the respondent supplying goods and services on credit to a company called Joe Emerson Pty Limited ("the company"), the appellants jointly and severally guaranteed to the respondent the payment by the company of the cost of those goods and services and of any other moneys that from time to time might be owed to the respondent by the company.

   3. In ascertaining the company's indebtedness to the respondent and, in consequence, the liability of the appellants under the guarantee, credit was given for amounts owing by the respondent to the company pursuant to an agreement between them that had been entered into on 3 April 1989. That agreement provided that the respondent would hire out two pumps and associated equipment that were the property of the company and that the money obtained from the hiring would be divided between the respondent and the company, the respondent retaining 40 per cent. and accounting to the company for 60 per cent. of the moneys received. The amounts so credited related to the period up to 7 July 1989, that being the date of commencement of the winding up of the company.

   4. The bankruptcy notice required the appellants, within 28 days after service of the notice, to pay the sum of $33,642.29 (being the sums of $29,081.65 and $4,560.64 referred to above) due under the judgment or to secure the payment of that sum to the satisfaction of this Court or other court exercising federal jurisdiction in bankruptcy or the respondent or compound that sum to the satisfaction of the respondent. The notice was served on each of the appellants on 2 January 1991.

   5. On 21 December 1990, the appellants had filed in the Supreme Court of Queensland a notice of appeal against the whole of the judgment of the District Court. At no stage, however, was execution of that judgment stayed.

   6. On 29 January 1991, that is to say within the time limited by the bankruptcy notice for compliance with its requirements, the appellants, pursuant to s.41(5) of the Bankruptcy Act 1966 (Cth), gave notice to the respondent that they disputed the amount claimed in the notice as being overstated. On the same day, 29 January 1991, the appellants filed an application in this Court seeking an order that the bankruptcy notice be set aside and an order that the time for compliance with the notice be extended until 28 days after the determination of the application to set it aside or until 28 days after the determination of the appeal to the Supreme Court of Queensland whichever should be the later.

9. The paragraphs from Emerson v WreckAir (supra), that set out the reasoning of the Court are found at [22]-[28] where the Court stated:

   22. A debtor commits an act of bankruptcy if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice and the debtor does not comply with the requirements of the notice or satisfy the Court that he has a counter-claim, set-off or cross-demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross-demand that he could not have set up in the action or proceeding in which the judgment or order was obtained (Bankruptcy Act, s.40(1)(g)). A bankruptcy notice is to be in accordance with the prescribed form (s.41(1)), such prescribed form to be such that the notice requires the debtor named in it, within a specified time, to pay the judgment debt or sum ordered to be paid in accordance with the judgment or order or secure the payment of, or compound, the debt or sum (s.41(2)).

   23. A bankruptcy notice may be invalid if the amount specified in the notice as the amount due to the creditor exceeds the amount in fact due. The date as at which the inquiry whether the amount specified in the notice is excessive is to be made is the date of the issue of the notice: Walsh v Deputy Commissioner of Taxation [1984] HCA 33; (1984) 156 CLR 337. A payment in reduction of the judgment debt made after the date of the issue of the notice but before its service on the debtor will not invalidate the notice: ibid. In that case, Gibbs C.J., in whose judgment the other members of the Court agreed, said at p 340:

   "In form the notice speaks as at the date which it bears, that is 
   the date of its issue, and although service is essential to make
   non-compliance an act of bankruptcy, and although the time fixed
   for compliance runs from the date of service, the notice must be
   understood as speaking as at the date of its issue and the
   requirement of the notice, for the purposes ofs.40(1)(g) of the 
   Bankruptcy Act, must be ascertained in that context. This 
   reinforces the view that the amount which must be correctly stated
   is the amount of the judgment debt owing at the date of issue."

   24. It is also well established that, once an act of bankruptcy has been committed by the debtor's failure within the time specified to comply with the requirements of a bankruptcy notice or to satisfy the Court that he has a counter-claim, set-off or cross-demand of the requisite kind, it remains an available act of bankruptcy even though subsequently the judgment on which it is based is set aside: Re Hanby; Ex parte Flemington Central Spares Pty Ltd (1967) 10 FLR 378; Re Hayes; Ex parte Thomas Borthwick and Sons (Australasia) Ltd (1970) 18 FLR 216; Clyne v Deputy Commissioner of Taxation (1983) 57 ALJR 673; Re Vella; Ex parte Seymour [1983] FCA 115; (1983) 67 FLR 287; Re Zagoridis; Ex parte Q'plas Group Pty Ltd [1990] FCA 459; (1990) 27 FCR 108. In the present case, of course, no act of bankruptcy has yet been committed by virtue of the service of the bankruptcy notice as the time for compliance has been extended until the determination of the present appeal.

   …

   26. It is not open to doubt that a court exercising jurisdiction in bankruptcy may, in an appropriate case, "go behind" a judgment and inquire whether it was founded on a real debt: Corney v Brien [1951] HCA 31; (1951) 84 CLR 343; Wren v Mahony [1972] HCA 5; (1972) 126 CLR 212; Olivieri v Stafford (supra) per Beaumont J. at pp 422-3. Such a court, however, has no power to set aside a judgment but only to prevent the judgment creditor from having recourse to the provisions of the Bankruptcy Act: Re Vitoria (1894) 2 QB 387; King v Henderson (1898) AC 720. As between the parties the judgment remains unimpeached and may be enforced accordingly by whatever means may otherwise be available.

   28. … To found the presentation of a creditor's petition it is necessary that there be owing by the debtor to the petitioning creditor a debt that amounts to $1,500 [now $5,000] or two or more debts that amount in the aggregate to $1,500 [now $5,000] (Bankruptcy Act, s.44(1)(a)). There is, however, no requirement for the issue of a bankruptcy notice that the creditor have a judgment for any minimum amount. Nor is there a requirement that a creditor who petitions for a sequestration order based upon an act of bankruptcy of the kind for which s.40(1)(g) of the Bankruptcy Act provides rely, wholly or at all, upon the debt upon which the bankruptcy notice was founded. It would, therefore, seem appropriate that upon an application to a court exercising jurisdiction in bankruptcy to set aside a bankruptcy notice, the court should not go behind a judgment where the grounds upon which the judgment is challenged are such that, if accepted, they would only support a finding that the amount of the debt be reduced and would not support a finding that there was in truth no debt at all.

10. In the application of Emerson v WreckAir (supra) to the Proceedings before this Court, [29] of the Emerson v WreckAir (supra) is of particular importance and states:

    29.  We are also of opinion that his Honour was correct in refusing to extend the time for compliance with the requirements of the bankruptcy notice until the determination of the appeal to the Supreme Court of Queensland. His Honour did so on the basis that there was little substance in the appeal except for the point that the judgment should be reduced by the amount of $5,400.00. That conclusion was vindicated by the abandonment by the appellants of all the grounds set out in the notice of appeal as filed which sought to have the judgment of the District Court set aside in its entirety.

11. Significantly, in Emerson v WreckAir (supra) the Court found there was little substance in the appeal except for the point that the judgment could be reduced and the appeal was not seeking setting aside of the judgment, but rather, substituting an amount that had been incorrectly incorporated in the earlier decision.  Liascos and Hodges did not go to the Court of Appeal to seek the District Court judgment to be being reduced, rather, on the basis that they claimed evidence before her Honour Balla DCJ should not have been admitted, particularly that the expert opinion evidence of Captain Kysil as to the value of the Cruiser at the time it was damaged in February 2009 should have been excluded. 

12. In the case of Liascos, he raised further issues which related to the finding as to his liability as a bailee in that it was claimed that the primary judge erred in holding that he took possession of the Cruiser with Cambridge on 13 April 2008 when it was delivered to Cambridge and whether, if he was a bailee, Balla DCJ erred in failing to find that the damage which occurred on 10 February 2009 was not due to fault on Liascos’ part.  The remaining issue raised by Liascos is whether Balla DCJ erred when apportioning liability between the three applicants for damage sustained on 10 February 2009 (Cambridge v Anastasopoulos [2012] NSWCA 405 at [4]). The Court of Appeal found that the evidence of Captain Kysil relied upon by her Honour Balla DCJ, was unsound and in the circumstances the judgment could not stand. The Court of Appeal indicated that in those circumstances, the matter could return for a further determination on quantum or, alternatively, make a new determination of the judgment amounts.

13. The authority Emerson v WreckAir (supra) states that if there has been failure to comply with a valid bankruptcy notice, an act of bankruptcy may found itself.  However, in the matter before this Court, there has been no act of bankruptcy because the time for compliance has been extended.  There is an argument that a verdict does not exist and there is no amount on which to found a bankruptcy notice.  What does exist, in these proceedings, are judgments entered by the Court of Appeal that, significantly, come into effect as at the same date of the original decision of her Honour Balla DCJ, made on 11 March 2011 (Court of Appeal – Order 6). 

14. I am satisfied that the decision in Emerson v WreckAir (supra) can be distinguished on the facts.  In that matter the Queensland Supreme Court ordered that, save as to the $5,400 the judgment should stand.  However, in the Proceedings before this Court, after a detailed analysis of the evidence before the District Court the Court of Appeal of New South Wales ordered that the foundation of her Honour’s judgment could not stand and the Court of Appeal made its own assessment in relation to what the relevant basis was.   

15. In the Proceedings before this Court, the time for compliance has been extended and the orders of her Honour Balla DCJ in respect to the quantum applicable to those Bankruptcy Notices has been set aside and replaced with new orders. However, the attack is on the validity of the respective Bankruptcy Notices and I acknowledge that there is an avenue to have a bankruptcy notice invalidated, under s.41(5) of the Bankruptcy Act to which I will return. In respect of the question of whether the Bankruptcy Notices should be set aside, the situation that exists is that there are amounts that were owing, Bankruptcy Notices were served (though this is disputed in respect of Hodges) and although the amounts owing have now been reduced on appeal, there remains amounts owing.

16. It was brought to the Court’s attention a decision where Coker FM (as he then was) applied the reasoning in Emerson v WreckAir (supra) to a matter before him: Phoenix Constructions (Queensland) Pty Ltd v McCracken [2012] FMCA 855. His Honour stated at [35]:  

    35. It is clear from the comments of the Full Court, that once an act of bankruptcy has been committed by the debtor’s failure, within the time specified to comply with the requirements of the bankruptcy notice, it remains an available act of bankruptcy even though, subsequently, the judgment on which it is based is set aside.

17. This decision is also distinguished on the facts because an act of bankruptcy was committed and there can be no relevance to the Proceedings before this Court whatsoever because no act of bankruptcy has been committed, as the time for compliance has been extended.  There is no suggestion that there has been an act of bankruptcy by either Liascos or Hodges.

18. The power to set aside a bankruptcy notice was considered in Australian Securities and Investment Commission v Forge (2003) 133 FCR 487 at [26]-[27] where Emmett J (with Branson and Stone JJ agreeing ) stated at [26]-[27]:

    26. While there is no express power conferred by the Act on a Court to set aside a bankruptcy notice, it is clear that there is power to do so. The power is derived from s 30 of the Act and from the principle that a power conferred by Parliament carries with it the power necessary for its performance or execution. Thus, the express power to extend time for compliance with the requirements of a bankruptcy notice, when an application to set it aside has been filed, carries with it the power to set aside the bankruptcy notice itself: Re Sterling; Ex parte Esanda Ltd [1980] FCA 61; (1980) 44 FLR 125.

    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.

1. A court can set aside invalid or substantially defective bankruptcy notices on proper grounds under s.30(1) and pursuant to a power implied from other provisions of the Bankruptcy Act, such as s.41. The power of the Court to extend time for compliance with a bankruptcy notice under s.41(6A),(6C), (7) carries with it the power to set aside the notice itself: Shephard v Chiquita Brands South Pacific Ltd (supra).  While there is no general discretion or principle of fairness to the debtor enabling the Court to set aside a notice, it can be set aside on grounds relating to the form or content of the notice, issue and service of the notice, or the extent or validity of the judgment debt on which it is founded.  This is addressed in the decision of Lazar v Seccombe [2005] FCA 1652 per Jacobson J at [17]-[19]:

   17. The source of the court's power to set aside a bankruptcy notice and the grounds upon which the jurisdiction is exercised were explained by Toohey J in Re Briggs; Ex Parte Briggs v Deputy Commissioner of Taxation (WA) (1986) 12 FCR 310 at 311 - 312; see also Amos v Brisbane TV Limited[2000] FCA 825; (2000) 100 FCR 82 (“Amos”)at [15] to [16] per Drummond J. The grounds may include non-service of the bankruptcy notice. However, it is clear that the court has a discretion in wide terms where there is a real question of whether service has been effected.

   18. Drummond J referred to the width of the discretion on an application to set aside a bankruptcy notice in Amos at [19]; see also Farrugia v Farrugia [2000] FCA 385; (2000) 99 FCR 16 at [45] per Katz J.

   19. In Sunderland v G & J Drivas Pty Limited [2000] FCA 1029 (“Sunderland”), Hely J declined to exercise the discretion where the issue of whether or not a bankruptcy notice had been properly served was raised by evidence on an application to set aside the notice. His Honour said in [3] that “[i]t is an issue which [the debtor] could raise on the hearing of a petition".

2. A bankruptcy notice founded on an irregular judgment is liable to be set aside, as is one that fails to meet a requirement made essential by the Bankruptcy Act or could easily mislead the debtor as to what is necessary to comply with the notice: Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71.

3. In the matter before this Court there are two distinct aspects in respect of the judgment upon which the Bankruptcy Notices are founded. As detailed above the judgment of her Honour Balla DCJ was set aside and, as of the date to which the decision was handed down, the Court of Appeal has issued a new judgment and entered different orders effective from that date. Secondly, as noted in [143] above, the quantum of the Court of Appeal judgment is substantially different from that of the District Court and the debtors would reasonably be misled as to the amount that they were required to pay. Further, interest calculations attached to the Bankruptcy Notices are wrong. The same rate and number of days will apply, but the principal amount will be substantially different, requiring recalculation. In these circumstances the debtors might reasonably be misled as to what they need to do to comply with the Bankruptcy Notices. While an overstatement of interest and hence, the total amount due does not of itself invalidate a notice in the absence of a s.41(5) notice, in this case the information in the Bankruptcy Notices did not enable the debtors to identify or verify that there were misstatements, let alone the amounts of the misstatements. I have borne in mind that the Bankruptcy Notices must be considered as a whole and can be read in light of fact extraneous to the Notices themselves and it should be read sensibly and not perversely: Northam v Commonwealth Bank of Australia [1999] FCA 544 per Weinberg J. As both Liascos and Hodges were actively involved in pursuing the appeals in the Court of Appeal against the District Court judgment it would have been known to them that there had been a considerable amendment to the quantum that they owed. These are not formal defects or irregularities capable of being cured under s.306 of the Bankruptcy Act. The Bankruptcy Notices are invalid which makes it a nullity and of no effect. They cannot be amended pursuant to s.33(1)(b) of the Bankruptcy Act and cannot be relied upon to found an act of bankruptcy: Skouloudis v St George Bank Ltd (2008) 173 FCR 236.

4. There are a number of authorities that address the issue of amendments to bankruptcy notices which result in their invalidity.  His Honour Lockhart J highlighted in Clyne v Deputy Commissioner of Taxation (No. 4) (1982) 42 ALR 703 and, again, in Re Wong; Ex parte Kitson (1979) 27 ALR 405. In Wong (supra) his Honour stated at 414:

   …[A] debtor is not required to manipulate a track through a bankruptcy notice to resolve questions of doubt or ambiguity…

5. In the matter before this Court the recipients of the Bankruptcy Notices are, in effect, being invited to undertake the same exercise as a consequence of the issuing of the Court of Appeal orders.  The original District Court orders in the case of Liascos state:

   2. Verdict for the plaintiff against the second defendant in the sum of $64,093.97 being $55,048 together with interest from 10 February 2009 of $9,045.97.

6. The orders of the Court of Appeal in respect to Liascos state:

   (4) Judgment for the respondent against the second appellant in the amount of $18,048.25 together with interest from 10 February 2009 to 11 March 2011. 

7. A similar sequence of events, with different amounts, has occurred with the orders of the District Court and Court of Appeal made in respect of Hodges.

8. In order for the debtors to determine the amounts that they are required to pay in order to comply with the Bankruptcy Notices, they would be required to use mathematical extensions which can be determined, but may not be immediately obvious to a person without this requiem skill.  More importantly, it is not appropriate for the current Bankruptcy Notices to be amended without their resubmission to the office of the Official Receiver.  

9. Consequently, I believed the Bankruptcy Notices BN 3313 of 2011 and BN 3314 of 2011 should be set aside with costs awarded to the applicants in both proceedings.

I certify that the preceding one hundred and sixty six (166) paragraphs are a true copy of the reasons for judgment of Judge Lloyd-Jones

Date:  23 December 2013