McAtee, Re P. McAtee, Ex Parte P. v Spadina, M

[1986] FCA 661

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BANKRUPTCY - application to extend time for compliance--with

bankruptcy notice - appeal against judgment pending - nature of

evidence of prospects of success.

Maqistrates Court Act	1 9 2 1
Bankruptcy Act 1966

Re Tavlor; Ex parte Deputy Commlssioner	of Taxation	(1983) 74
F.L.R. 377

Ex parte Heyworth; In re Rhodes C18847 l4 Q.B.D. 49

Lipov v. Alexander Fraser & Son Ltd. & Anor. (1978) 36 F.L.R. 126

Re Sterlinq; Ex parte Esanda Ltd. (1979) 44 F.L.R. 125

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HE PATRICK McATEE; M PARTE PATRICK McATEE (APPLICANT) MICHAEL

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SPADINA (RESPONDENT)

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QLD. No. BN2140 of 1986

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SPENDER J.

BRISBANE

2 DECEMBER, 1986.

IN TIE FDER9L COURT OF AUSTRALIA	)
GENERAL DIVISION	) QLD. No.BN2140 of 1986
BANKRUPTCY DISTRICT OF THE SOUTHERN
DISTRICT OF THE STATE OF DUEENSLAND

R E : PATRICK McATEE

Fx PARTE:

PATRICK McATEE (Applicant)

MICHAEL SPADINA (Respondent)

MINUTE OF ORDER

JUDGE MAKING ORDER:	SPENDER J.
DATE OF ORDER:	2 DECEMBER, 1986
WHERE MADE:	BRISBANE
THE COURT ORDERS THAT:

1. That he time for compliance of the

bankruptcy notice issued on 31 October

1986 be extended until further order;

2. that the applicant and the respondent be

at llberty to relist this matter on

reasonable notice;

3 . that the costs of this application be

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reserved.

m:	Settlement and entry of orders is dealt with in Rule	124
of the Bankruptcy Rules.

IN THE FEDERAL C 'OURT OF AUSTFQ U )

)

GENERAL DIVISION	1	QLD. No.BN2140 of 1986
BANKRUPTCY DISTRICT OF THE SOUTHERN 1
)
DISTRICT OF THE STATE OF OUEENSLAND )

E: PATRICK McATFE

EX PARTE: PATRICK McATEE (Applicant)

MICHAEL SPADINA (Respondent)

DATE JUDGMENT DELIVERED: 2 DECEMBER, 1986

COUNSEL :

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I	for the applicant	Mr. Gardiner
f o r the respondent	Mr. Newton

T. MACDERMOTT

ASSOCIATE TO SP33KlER J.

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IN THE FEDERAL COURT OF AUSTRALIA ) 1

DIVISION GENERAL 1 QLD. No.BN2140 of 1986

BANKRUPTCY DISTRICT OF THE SOUTHERN )

1

DISTRICT OF THE STATE OF DUEENSLAND )

E: PATRICK McATEE

Ex PARTE: PATRICK McATEE (Applicant)

MICHAEL SPADINA (Respondent)

SPENDER J.

BRISBANE

2 DECEMBER, 1986.

REASONS FOR JUDGMENT

This is an application by a judgment debtor for an order

l for the extension of time for compliance with the requirements of

a bankruptcy notice. On 19 September 1986, Mr. W.J. McKay,

Stipendiary Magistrate, after a contested hearing, ordered that judgment be entered for the debtor in the sum of $3,578.65, being an amount encompassing the various claims in dispute between the

parties, and for costs.

The judgment entered under r.187(21 of the Maqistrates

Court Act 1921, which was the basis of the application for the

issue of a bankruptcy notice, is in these terms:

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'Whereas on the 19th day of September 1986, it was

adjudged by the Magistrates Court at Brisbane that

the Defendant do recover against the Plaintiff the

amount of $3549.25 for CLAIM and COSTS and	$NIL
for costs

And it was ordered that the defendant do pay the

same forthwith

Judgment is hereby entered for the amount of

$3570.65 for CLAIM & COSTS and the amount of $nil

for costs, including $29.40 costs of entering

Judgment.

On that curiously worded judgment a bankruptcy notlce in

the amount of $3,608.05 was issued. However, in this case, no

question arises under s.41(5) of the Bankruptcv	Act 1966, which
provides:-

"A bankruptcy notice is not invalidated by reason

only that the sum specified in the notice as the

amount due to the creditor exceeds the amount in

fact due, unless the debtor, within the time

allowed for payment, gives notice to the creditor

tht he disputes the validity of the notice on the

ground of the mis-statement.

The basls of the applicatlon to extend time for

compliance with the bankruptcy notice 1 s that proceedlngs to set aside the judqment or order in respect of which the bankruptcy

! notice was issued have been instituted by the debtor. This is

one of the grounds provided by s.41(6A1 of the Bankruptcv Act

! 1966.

An appeal was filed on.10 October 1986.

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A bankruptcy notice was issued on 31 October 1986, and

service was effected on the debtor on 5 November 1986. The

bankruptcy notice was a 14 day notice. This application to

extend time for compliance was filed on 19 November 1986. There

is no dispute that proceedings to set aside the judgment in

respect of which the bankruptcy notice was issued have been

instituted before the expiry of the time fixed by the Registrar

for compliance under the bankruptcy notice.

It follows, therefore, that the application to extend

the time for compliance with the bankruptcy notice was filed

before the explratlon of the time fixed by the Registrar for

compliance wlth the requirements of the bankruptcy notice.

The discretion given to the court to extend time is at

large - Clyne v. Deputy Commissioner of Taxation (1982) 56

A.L.J.R. 857. I accept, as Sheppard J. held In Re Taylor; Ex

parte Deputy Commissioner of Taxation (1983) 74 F.L.R. 377, that

the mere fact that an appeal has been lodged	is not sufflclent to
warrant the discretion being exercised.

I I have not been provided in this case with the reasons

of the learned Stipendiary Magistrate for his judqment. A notice

of appeal has been exhibited. That recites a number of grounds,

including the wrongful reception	of evidence regarding matters
that had not been pleaded.

Some of the grounds challenge the finding that the

defendant was entitled to an award for damages for mental

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distress occasioned by the delayed delivery of a kitchen.

However, it is difflcult from a perusal of the notice of appeal

to form any view as to the prospects of success of the appeal.

In a matter of this kind, a court sitting in bankruptcy

should not "explore the merits of the appeal except on the widest

footing", as the Full Court of the Federal Court concluded in

- V v. Deputv Commissioner of Taxation (unreported decision of

22 February 1985). I am therefore in a position of some

difficulty in assessing the prospects of the appeal.

In Taylor's Case, the position in which Mr. Justice

Sheppard found himself was a little dlfferent from the present.

He said at 378:-

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"The evidence in support of thls appllcatlon

conslsts of evldence from the debtor's solicitor

deposing to the facts of the matter more or less

as I have recounted them. Significantly, there is

no affidavlt from the debtor, nor does the

debtor's solicitor in any affidavit which he has

sworn say that he has been advised by counsel that

the appeal which has been instituted against Lee

J.'s decision has reasonable prospects of success

or something of that kind. Counsel appearing for

I	the debtor this morning is not counsel engaged in the appeal, and has not turned his mind apparently
to the question of whether there is a reasonable
chance of success. All he did in argument was to
refer me to Lee J.'s judgment, and say that it was
a relevant matter for me to consider whether I
thought. upon reading the judgment, he debtor had
some prospect of success in the appeal.
In the circumstances I find myself in an invidious
position. In the absence of evidence of the usual
!	kind to which I have referred, and in the absence
of any argument from the debtor's counsel, I am
asked to express an opinion on the debtor's chance
of success in the appeal. That I s not something
which I should be asked to do. Nevertheless, I
have performed the exercise. Having done so, I
can only say that it does not occur to me that

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there is any reasonable basis for a successful

challenge to Lee J.'s judgment. Nothing having

been put to me upon which I might rely for a

different view, the exercise I have performed has

to be understood in that way. But the fact that

nothing was pointed out or relied upon by counsel

for the debtor is, I think, itself significant.

What he wishes ne to do really is simply to take

into account the fact that an appeal has been

lodged.

It seems to me, that being my view, that is really

determinative of this application, ..."

Unless the time for compliance with a bankruptcy notice is

extended, non-compliance with the requirements of that notice

will constitute an act of bankruptcy. This is so even if the

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appeal ultimately succeeds (see Re Vella; Ex parte Sevmour (1983)

I 48 A.L.R. 420.)

i to be

l	Tke	question	herefore	of whether	ought	time
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extended is by no means academic. In Ex parte Hevworth : In re

Rhodes C18847 1.2 Q.B.D. 49, the English Court of Appeal was

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I	concerned wlth what should be the position where	an appeal was
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I pending from a judgment on which a bankruptcy petltion was

founded. Fry L.J. stated in that case at p.52:-

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"In all cases of this kind I should be very

unwilling to interfere with the exercise of the

registrar's discretion. But in the present case I

think he has exercised his discretion rightly.	If
the appeal from the judgment appeared to be	an

entirely frivolous one, the proceedings on the

petition ought not to be stayed, but that is not

so here. The present appeal, however, is entirely

frivolous, and it must be dismissed with costs."

Those principles have been applied by this Court

considering the question of whether time for compliance with a

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bankruptcy notice should be exLemled where an appeal has been

instituted against the judgment on which the notice is based.

One Instance is the judgment of C.A. Sweeney J. in Lipov v.

Alexander Fraser & Son Ltd. & Anor. (1978) 36 F.L.R. 126; see

also Re Sterlinq; Ex parte Esanda Ltd. (1979) 44 F.L.R.	125 at
134.

The position here is finely poised, but the material

before me does offer some indication as to the nature of the

appeal. In an affidavit filed on behalf of the judgment creditor,

Mr. Gynther has sworn:-

"During the hearlng of the Plaint, Messrs. Morris

Fletcher and Cross instructed Mr. Peter Hastie of Counsel on behalf of the Respondent. Mr. Hastie

has further been instructed by that firm to

consider the prospects of success of the Appeal by

the Applicant. I am informed by Mr. Hastie and

verily believe that the prospects of upholding the

Magistrates declsion are very good."

However, the debtor, Mr. McAtee, has deposed in these terms:

" 7 . On being advised of the declslon on the 19th

September, 1986 I immedlately instructed my

Solicitor, Maxwell Mead of Maxwell Mead & Sowry,

Solicitors,	to	take	Counsel's	advlce	on	an
Appeal.
...

11. I am financially able to pay the Judgment

Debt, however I feel that my Appeal against such

Judgment, being an Appeal based on Legal Advice

should be heard before this matter is finalised."

7.

Although there is a lack of frankness as to the

prospects of success, the view I have reached is that, in the

light of that material, the appeal was instituted at counsel's

advice, from which I am prepared to infer that it was not a

frivolous appeal, and that there were some prospects of success.

Apart from that, I do not think I can take the matter

any further. I do not think I am permitted to infer that the

prospects of success are any higher than that. In relation to

the debtor's claim that he is financially able to pay the

judgment debt, but wishes to exhaust the appeal process, it is

true that the debtor swears that there are in existence other

smaller sums which are unpaid.

The materlal also shows that the appeal will not be

heard until February 1987 at the earliest. In the circumstances

I am prepared to grant an extension of time until further order,

with a provision enabling either party to bring the matter on

before me if the appeal is prosecuted	with	other than due
diligence.

The orders that I propose are these:-

1. That the time for compliance of the bankruptcy notice

issued on 31 October 1986 be extended until further

order;

2. that the applicant and the respondent be at liberty to

relist this matter on reasonable notice;

3 . that the costs of this application be reserved.

I certify that this and the preceding

6 pages are a

true copy of the reasons for

Honour Mr. Justice Spender

Dated 2.12.1986