Lui v Schnabel

Lui brought a proceeding against Schnabel in the Federal Court, seeking to set aside a bankruptcy notice. The notice had been issued by Lui under the Bankruptcy Act 1966, claiming that Schnabel owed Lui $100,000. Schnabel responded by arguing that the notice was invalid because Lui had not actually made the debt claim before issuing the notice, as required by section 21 of the Act. Schnabel further argued that the proceeding should be dismissed because Lui had not taken reasonable steps to verify the debt before issuing the notice. The primary issue for the court was whether Lui had complied with the statutory requirement to make a debt claim before issuing the bankruptcy notice, and whether Schnabel was entitled to have the notice set aside due to the alleged non-compliance.

The court found that Lui had indeed made a debt claim to Schnabel before issuing the bankruptcy notice, satisfying the requirement under section 21. However, the court also determined that Schnabel was not prejudiced by any potential non-compliance because Schnabel had knowledge of the debt and had not disputed it. The court held that Schnabel was not entitled to have the notice set aside on the basis of non-compliance. However, the court granted Schnabel's application to extend the time for compliance with the bankruptcy notice, pending the outcome of an appeal in the New South Wales Court of Appeal. The court also reserved costs and granted liberty to apply for further orders.