Maloney, Re C.G. Cussan, Re M.M. Ex Parte Sunbird Plaza Pty Ltd

[1986] FCA 302

C A T C H W O R D S

BANKRUPTCY - Supreme Court judgment under appeal - bankruptcy

notice issued thereon - time for compliance expired - whether

jurisdiction to extend expired time - exercise of discretion -

undertaking to adjourn petition	- importance of letting petition
issue.

Bankruptcy Act, 1966 s.41(6A), s.41(6C)

Re: Cvril Gardner Malonev

Ex Parte: Sunbird Plaza Ptv. Ltd.

? Qld BN700 of 1986

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PINCUS S.

BRISBANE

11 JULY 1986

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IN THE FDERAL COURT OF AUSTRALIA )

! GENERAL DIVISION )

BANKRUPTCY DISTRICT OF THE SOUTHERN )

DISTRICT OF THE STATE OF OUEENSLAND ) QLD BN700 of 1986

RE: CYRIL GARDNEX MALONEY

M PARTE: SUNBIRD PLAZA PTY. LTD.

QLD BN701 OF 1986

RE: MARGAREX MARY CUSSAN

M PARTE: SUNBIRD PLAZA PTY. LTD.

MINUTES OF ORDER

JUDGE MAKING ORDER:	PINCUS J.
DATE OF ORDER:	11 JULY 1986
WHERE MADE:	BRISBANE

THE COURT ORDERS IN EACH APPLICATION THAT:

1. The application be dismissed on the respondent

undertaking not to oppose an application to adjourn any

hearlng of the petition for a sequestration order when

issued, until determlnation of the appeal to the Full Court of the Supreme Court of Queensland, instituted on

14 May 1986, such undertaking to be subject to two

conditions:

(i) that the effect of such adjournment not be to

cause the petition to become stale, and

(ii) that the appeal be prosecuted with due

diligence, so far as that lies in the power of

the applicant.

2. The costs of and incidental to the application be

costs of the petitionins creditor in the Detitinn ~~~ ~~~~ L - . - . - - - -

to be issued by the reGPondent on the bankruptcy

notice dated 17 April, 1986.

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Settlement and entry of orders is dealt with in Rule 124

of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA	1
GENERAL DIVISION	1

BANKRUPTCY DISTRICT OF THE SOUTHERN )

DISTRICT OF THE STATE OF OUEENSLAND ) QLD BN700 of 1986

RE: CYRIL GARDNEX MALONEY

EX PARTE: SUNBIRD PLAZA PTY. LTD.

!

QLD BN701 OF 1986

R€: MARGARET MARY CUSSAN

EX PARTE: SUNBIRD PLAZA PTY. LTD.

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PINCUS J. 11 JULY 1986

REASONS FOR JUDGMENT

These two applications to extend the time for compliance

with a bankruptcy notice were heard together. The facts relating

to each are similar and it is convenient first	to discuss that
concerning the applicant Mr. Maloney.

On 3 April 1986, Connolly J., in the Supreme Court of

Queensland, gave judgment in favour of the respondent against the applicant on a guarantee. It is argued on behalf of the applicant that the judgment is somewhat unusual in that it contemplates the

guarantors of obligations under a contract of sale having to pay

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the full purchase price, although there	has been no conveyance.	I	!
return to this point below.

On 17 April 1986, the respondent applied for and

obtained the issue of a bankruptcy notice upon the judgment just

referred to. The following day, a notice of appeal against the

judgment was filed in the Supreme Court but not, it appears, in

consequence of the issue of the bankruptcy notice, of which the !

applicant could not then have had knowledge. The appeal was

entered for argument on the 14 May 1986. On 21 May, Spender J. in

this Court ordered that personal service of the bankruptcy notice

be dispensed with. He directed that service be effected by post

and by service upon solicitors. That appears to have been

completed on 26 May. The effect of the order of Spender J. was

that service was deemed to have been effected 14 days after 26

May, that is, on 9 June. However, on 26 May the solicitors for

the applicant became aware of service of the issue of the

bankruptcy notice, but did not take any step to seek an extension

of time for compliance with it.

The present application was filed on 9 July. In the

meantime, two significant events had occurred: one was that an act

of bankruptcy was committed and the second that an application for

a stay was made and refused in the Supreme Court. The application

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was made to a Master and under the practice of that Court may be

renewed on application to a judge who hears the matter de novo.

I am told the applicant intends to pursue such an application,

that is, one to a judge.

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The present proceeding is apparently prompted by the

failure to obtain a stay in the Supreme Court. It is said that

one of the reasons given by the Master for refusal of the stay was

the possibility that this Court would exercise its power to extend

time for compliance with the notice. It does not seem to me,

however, that this Court's consideration of the application should

be affected by any expectation as to what the Supreme Court might

do with a further stay application. The considerations bearing

upon the present application are by no means the same as those

which the Supreme Court might consider on an application for	a	, .
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stay.
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Senior counsel for the respondent, Mr. Robin Q.C.,

argued, firstly. that I have no jurisdiction in the matter. He

conceded that on the face of it the decision of the Full Court in

Streimer v. Tamas 37 A.L.R. 211 was against hls contention but

said that it was distinguishable. In that case a similar

application was made and held by the Full Court to be within

~urisdiction, the only factual difference being that he

application was filed before the commission of an act of

bankruptcy but heard and determined later.

Mr. Robin Q.C. argued that that difference is critical

and that, because here both the application and its determination

were later in time than the act of bankruptcy, there is no power

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to extend time for compliance. He fastened upon references in the

reasons of the majority in Streimer v. Tamas, namely Deane and

Ellicott JJ., to the time of making of the application.

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4.

Section 41(6A), under which it is said that jurisdiction

arises, reads as follows:

"Where, before the expiration of the time fixed by

the Court or the Registrar for compliance with the

requirements of a bankruptcy notice -

(a) proceedings to set aside the judgment or

order in respect of which the bankruptcy

notice was issued have been instituted by the

debtor; or

(b) an application to set aside the bankruptcy

notice has been filed with the Registrar,

the Court may, subject to sub-section ( K ) , extend

the time for compliance with the bankruptcy

notice. "

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It appears to me the point in issue in the Full Court case was

whether the subsection should be read as if the expression "before

the xpiration of the time ... for compliance with the

requirements of a bankruptcy notice" qualified that part of the

subsection which reads, "the Court may, sub~ect to sub-section

( K ) , extend the time	for compliance with the bankruptcy notice".
As I read the reasons	of the majority, it was held that the former

expression does not qualify the latter.	i
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Senior counsel for the respondent argued that it would were, to some extent, explored in the majority judgment in be absurd if, weeks or months after an act of bankruptcy, the	Court extended the time for compliance with the bankruptcy notice.
Streimer v. Tamas, but it has to be conceded that the Court did
not assert that all the consequences of its holding had been exposed.

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5.

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Despite the references in the reasons to the fact that

the application was filed before the act of bankruptcy was

committed, it is not possible to distinguish the case upon that

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basis. The Court did not decide the matter as it did because it thought the jurisdiction was sufficiently enlivened by the filing

of the application in time. The basis of its decision was that [ -

the jurisdiction may be exercised after an act of bankruptcy has

been committed. I therefore uphold the contentions of Mr. Fraser,

for the applicant, on the jurisdictional point.

The second question, which is rather more difficult, is

whether it is proper in the circumstances to extend time. The

respondent claimed that the applicant had been dilatory but that

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is not, in my opinion, a falr description of his conduct.

Nevertheless, it is, in my view, a matter to be taken into account

that an act of bankruptcy has already been committed. Extending

time for compliance with the notice at this stage necessarily

lntroduces legal complexities into the position of the applicant,	!
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If he ultimately goes bankrupt. The fact that an act of r

bankruptcy has been committed is not a bar to the exercise of i

discretion but a reason against it.

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A much more important reason, however, is that at this

stage, as I understand Mr. Robin Q.C., all the respondent wishes

to do is to issue a petition. A s the matter comes before me, the

respondent is subject to a temporary undertaking to the Supreme

Court not to do so and the real point of the present proceedings

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is to seek to have the respondent precluded from petitioning until

the final resolution of the matter in the Supreme Court.

6.

During the course of argument Mr. Robin Q.C. informed me

that the respondent would undertake not o oppose an application

to adjourn any hearing of the petition, when issued, until

determination of the appeal to the Full Court of the Supreme

Court, subject to two conditions. The first was that the effect

of such adjournment not be to cause the petition to become stale,

and the second that the appeal be prosecuted with due diligence,

so far as that lies in the power of the applicant. In these

circumstances, it is not easy to see that substantial harm is

likely to be done to the applicant by the mere issue of a

petition. It is true, of course, that the Court will not

necessarily adjourn the petition by the consent of these parties,

but he respondent's proposed undertaking is an important

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allevlation of the applicant's position and is itself a strong

reason not to grant the application.

1 Another is that there is evidence that the applicant is

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"presently experiencing grave financial dlfficultres and is

presently unable to pay the moneys the subject of the judgment".

It is also said, by the applicant's solicitor, that he is

liquidating assets with a view to meeting his liabilities and

those of companies with which he is connected. Mr. Fraser pointed

out for the applicant that there is no suggestion of fraudulent

dispositions being made, but nevertheless, the evidence quoted is

of a kind which might reasonably alarm a substantial judgment

creditor. Counsel submitted for the applicant that such questions

might be dealt with by a Mareva injunction preserving the position

of the respondent. That, however, is not a remedy which answers

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the respondent's problem, which is that the date of presentation

of the petition is critical, there being evidence of a process of

asset liquidation going on, for the purposes of, in particular,

s.122 of the Bankruptcy Act.

The last of the natters which should be mentioned as

relevant to the exercise of discretion is that, according to

counsel for the respondent, the points taken in the Full Court of ?

the Supreme Court are merely technical and the appeal has little

chance of success. Counsel for the applicant, on the other	hand,
said that there was no doubt that the points are arguable and

that, indeed, did not seem to be in dispute. Although I have read

the reasons of Connolly J., it seems to me unnecessary to try to

make any prediction as to the prospects of either party in the

Full Court of the Supreme Court and I decline the invitation to

enter, even in a prelimlnary	way, into a discussion of the issues
there pending.

In summary, while I hold that there is jurisdiction to

grant an extension of time, even where the application under

s.41(6A) was filed after commission of an act of bankruptcy, I

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should not in this case exercise the discretion in favour

of the

applicant, but should instead accept the proposed undertaking

mentioned by Mr. Robin Q.C.

As to the application by Margaret Mary Cussan, the facts

differ in no significant respect and the same result must ensue.

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The order in each case will be -

1. That the application be dismissed on the undertaking mentioned in my reasons;

2.

That the costs of and incidental to the application be costs

of the petitioning creditor in the petition to be issued	by
the respondent on the bankruptcy notice mentioned in	my

reasons. !

judgment herein of His Honour

Mr Justlce Pincus

Associate

Dated I I dd8 /qv6