Lipov v Alexander Fraser & Son Ltd

LIPOV v. ALEXANDER FRASER & SON LTD. (1978) 36 FLR 126
Bankruptcy

COURT

FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
C.A. Sweeney J.(1)

CATCHWORDS

Bankruptcy - Application to set aside bankruptcy notice until after determination of appeal against judgment on which notice based - Appeal against judgment on which notice based already lodged - Time for service of notice of appeal expired - Power of court to extend time for compliance with bankruptcy notice - Circumstances of exercise of power - Bankruptcy Act 1966 (Cth.), ss. 33, 40.

HEADNOTE

The respondents issued a bankruptcy notice, based on a judgment debt against the applicant, requiring compliance with its terms within fourteen days. Within the fourteen days the applicant filed an application to set aside the notice until after the determination of an appeal already lodged against the judgment on which the notice was based. The respondent opposed the application on the grounds that at the time of service of the bankruptcy notice the time for service of notice of appeal from the judgment had expired and the applicant had not then been granted an extension of time for service of the notice of appeal: in those circumstances, it was argued, the pending appeal was not in law a proper ground for setting aside the notice.

Section 40(1)(g) of the Bankruptcy Act 1966 provides, inter alia, that a debtor commits an act of bankruptcy if he fails to comply with a notice within the time fixed by the registrar, in the case of a notice served within Australia, or within the time fixed by an order giving leave to effect service, in the case of a notice served elsewhere.

Section 33(1)(c) of the Act provides, inter alia, that the court may "extend before its expiration . . . any time limited by this Act for doing any act or thing or abridge any such time".

Held: (1) The time of fourteen days fixed by the registrar or the time fixed by an order giving leave under s. 40 of the Act is a time limited by the Act within the meaning of s. 33 of the Act.

Re Grace (1931), 3 ABC 131, referred to.

(2) The institution of a bona fide appeal against a judgment upon which a bankruptcy notice is based is a good reason for adjourning the hearing of the petition.

Ex parte Heyworth; In re Rhodes (1884), 14 QBD 49; Union Bank of Australia Ltd. v. Dean (No. 4) (1898), 24 VLR 453, referred to.

(3) In the circumstances, the time for compliance with the bankruptcy notice should be extended.

HEARING

Melbourne, 1978, August 10, 15; September 27. #DATE 27:9:1978

APPLICATION.

The material facts appear from the judgment.

The applicant appeared in person.

D.L. Harper and P. McCurdey, for the respondents.

Cur. adv. vult.

Solicitors for the respondents: Thomas, Frenkel & Berkovitch.

R. L. Crisp

JUDGE1

September 27.

The following judgment was delivered.

C. A. SWEENEY J. The applicant, Maurice Lipov, is the debtor named in a bankruptcy notice dated 1st August, 1978, issued on the application of Alexander Fraser & Son Ltd. and Fraser Confirming Pty. Ltd. (hereinafter called "the creditors") and expressed to be based upon a judgment for $199,263.79 obtained by the respondents against the applicant in the Supreme Court of Victoria on 6th July, 1978. The bankruptcy notice, which required compliance with its terms within fourteen days, was served on the applicant on 1st August, 1978. On 8th August the applicant filed an application in which he sought an order that the bankruptcy notice "be set aside until seven days after the determination" of his appeal against the judgment on which it was based. (at p127)

When the application was first heard on 10th August, time for compliance with the notice was extended to the date to which the hearing was adjourned, 15th August. (at p127)
On that day, the applicant appeared in person and by consent of counsel for the creditors, his application was treated as if it had sought extension of the time for compliance with the bankruptcy notice until the expiration of seven days from the determination of the appeal. The applicant was given leave to amend his application accordingly. (at p127)
In his affidavit, the applicant stated that on 4th August, which was within the extended period allowed by an order of the Supreme Court, he had lodged a notice of appeal against the judgment of that court and he deposed to his belief that he had proper grounds of appeal. He was not cross-examined on his affidavit and no evidence was tendered on behalf of the creditors. (at p127)
In their notice of intention to oppose the application the creditors stated that they intended to oppose the making of the orders sought on the ground: "That where a bankruptcy notice is issued and served: (a) after the expiration of the time allowed for service of any notice of appeal from the judgment the subject of the said bankruptcy notice, and (b) before the time for serving any such notice of appeal has been enlarged; then the fact that an appeal is pending from the said judgment the subject of the said bankruptcy notice is not in law a proper ground for setting aside that bankruptcy notice." (at p127)
Counsel for the creditors conceded that this Court had power to extend the time for compliance with a bankruptcy notice. Section 33 of the Bankruptcy Act provides that the court may, amongst other things, "extend before its expiration or, if this Act does not expressly provide to the contrary, after its expiration, any time limited by this Act for doing an act or thing". (at p128)
The learned authors of the fifth edition of McDonald, Henry & Meek, Australian Bankruptcy Law and Practice, note that the powers given to the court by this section to extend time refer to "any time limited by this Act" and comment as follows: "The time for compliance with a bankruptcy notice is 'the time fixed by the Registrar by whom the notice was issued' in accordance with s. 40(1)(g)(i) post. Unless upon a proper interpretation the words 'fixed by the Registrar etc.' can be regarded as a limitation by this Act there is no power in the court or the registrar to extend time for compliance with a bankruptcy notice." (at p128)
In considering this comment, it will be useful to examine the position which obtained under the Bankruptcy Act 1924. The corresponding section of that Act, s. 27, provided, amongst other things, that the court might extend, either before or after its expiration, any time limited by that Act for doing any act or thing. (at p128)
Section 52 (j) of the Act of 1924 provided as follows: "If a creditor has obtained a final judgment or final order against him for any amount, and execution thereon not having been stayed, has served on him in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act, and the debtor does not, within seven days or such time as is prescribed after service of the notice in Australia, or within the time limited in that behalf by the order giving leave to effect the service elsewhere, either comply with the requirements of the notice, or satisfy the Court that he has a counter-claim, set-off, or cross demand which equals or exceeds the amount of the judgment debt, and which he could not set up in the action or proceeding in which the judgment or order was obtained. . . ." It will be noted that the time for compliance with a bankruptcy notice was "within seven days or such time as is prescribed after service of the notice in Australia, or within the time limited in that behalf by the order giving leave to effect the service elsewhere". (at p128)
Under that Act, the court was given power to extend the time for compliance with a bankruptcy notice served in Australia, as that time was plainly limited by that Act, within the meaning of s. 27. Is one to conclude that s. 27 did not confer any power upon the court to extend the time for compliance with a bankruptcy notice served elsewhere, on the ground that, that time being "limited in that behalf by the order giving leave to effect service elsewhere", should not be held to be within the expression "any time limited by this Act for doing any act or thing"? In my opinion, the answer should be plainly in the negative. Clear words would be needed to found the conclusion that, on the true construction of the section, the court was given power to extend the time of seven days set out in s. 52(j) in respect of service in Australia but had no power under s. 27 to extend the time limited by the order giving leave to effect the service elsewhere. The better view seems to me to be that the expression in s. 27 "any time limited by this Act for doing any act or thing" embraced both the time of seven days and the time limited by an order made pursuant to the power given by the Act. (at p129)
In Re Grace (1931) 3 ABC 131 an application was made after the expiration of seven days from service of a bankruptcy notice for an order that the time of seven days limited for compliance with the notice might be extended under s. 27 (1931) 3 ABC, at p 132 of the Act of 1924, until such time as the court thought meet. Lukin J. said: "I think that the application is entirely misconceived, for, if there be power in the Court to extend the time under s. 27, and such an order were made, the act of bankruptcy would still have been committed, would subsist, and would be operative in a bankruptcy petition alleging it. No provision is made in the Act enabling the Court to annul or to set aside such act of bankruptcy. The only power to prevent the non-compliance maturing, under the circumstances herein narrated, into an act of bankruptcy would be to have the time for compliance extended before its termination, that is, before the act of bankruptcy came into existence. Once it matures in accordance with the provisions of the Statute the Statute operates, and the Court is powerless" (2). (at p129)
Under s. 33(1)(c) of the Bankruptcy Act 1966, the court may "extend before its expiration or, if this Act does not expressly provide to the contrary, after its expiration, any time limited by this Act for doing an act or thing or abridge any such time". It is clear that the application at present under consideration is one made before the expiration of the time of fourteen days referred to in the bankruptcy notice. (at p129)
This time of fourteen days was fixed by the acting deputy registrar pursuant to s. 40(1)(g) of the Act which provides that a debtor commits an act of bankruptcy: (at p129)
"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 under this Act and the debtor does not - (at p129)
(i) where the notice was served in Australia - within the time fixed by the Registrar by whom the notice was issued; or (at p129)
(ii) where the notice was served elsewhere - within the time fixed for the purpose by the order giving leave to effect the service, 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." (at p130)
On the view I have formed of s. 27 of the Act of 1924, the court had power to extend time in relation to a bankruptcy notice whether served in Australia or elsewhere. On the contrary view, it had power to do so in relation to a notice served in Australia but not to one served elsewhere. Applying this contrary view to the present Act, s. 33 would confer no power upon the court to extend time in relation to any bankruptcy notice, whether served in Australia, or elsewhere, as in each case the time is to be ascertained not merely from a reading of the Act, but also from a consideration of the terms of the notice, including the time fixed by the registrar or of the order giving leave to effect the service elsewhere. (at p130)
In my opinion, a time so fixed by the registrar or by the order giving such leave is a time limited by the Bankruptcy Act 1966 within the meaning of s. 33(1)(c). This construction has been acted upon by the courts in respect of many bankruptcy notices. (at p130)
In the present case, counsel for the creditors rightly conceded that the court has power to enlarge the time for compliance with a bankruptcy notice but contended that in the circumstances of this case, the court should not exercise the power. He sought to rely on O. 58 r. 17 of the Supreme Court Rules which provides that an appeal shall not operate as a stay of execution or of proceedings under the decision appealed from, except so far as the court or a judge may so order. (at p130)
It is for the Supreme Court to decide whether it will make such an order. It is for this Court to say whether the time for compliance with a bankruptcy notice will be extended. It has been held that the institution of an appeal, which appears to be bona fide, is a good reason for adjourning the hearing of a bankruptcy petition based upon the judgment subject to the appeal (Ex parte Heyworth; In re Rhodes (1884) 14 QBD 49 ; Union Bank of Australia Ltd. (No. 4) v. Dean (1898) 24 VLR 453 ). (at p130)
The courts have had regard to the grave consequences which flow from the effluxion of the time fixed for compliance with a bankruptcy notice. Judgment has been obtained against the applicant, who has regularly instituted an appeal against it. He has sworn that he believes that he has proper grounds of appeal against it. He has not been cross-examined. The creditors have not offered any evidence in opposition. (at p130)
In these circumstances, the grant of an extension of time for compliance will enable the applicant, should his appeal succeed, to avoid the commission of an act of bankruptcy, based upon a judgment which should not, on this assumption, have been given against him in the first place. (at p130)
The order of the court is that the time for compliance with the bankruptcy notice be extended until further order, liberty being reserved to either party to apply to the registrar for relisting of the application on a day which will permit the giving of seven days' notice to the other party. If the applicant pursues his appeal in the Supreme Court with due diligence, it would not be expected that relisting of the application would be sought before the determination of the appeal. Costs are reserved. (at p131)

ORDER

Order accordingly.

[1978] FCA 121

27 SEPTEMBER 1978