Paule v Kambouris

Case [2025] FCA 539

FEDERAL COURT OF AUSTRALIA

Paule v Kambouris [2025] FCA 539

File number(s): NSD 403 of 2025
NSD 404 of 2025
Judgment of: STELLIOS J
Date of judgment: 26 May 2025
Catchwords: BANKRUPTCY – extension of time to comply with bankruptcy notice – scope of discretion conferred by s 41(6A) of the Bankruptcy Act 1966 (Cth) – where applicant subject to judgment debt – where application to stay judgment debt pending
Legislation:

Bankruptcy Act 1966 (Cth) ss 41(6A), 116, 120, 121, and 122

Federal Court of Australia Act 1976 (Cth) s 35A(5)

Federal Court (Bankruptcy) Rules 2016 (Cth) r 2.02(3)
Cases cited:

Ahern v Deputy Commissioner of Taxation (1987) 76 ALR 137; [1987] FCA 504

Bechara v Bates (2021) 286 FCR 166; [2021] FCAFC 34

Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264

Callegher v Australian Securities and Investments Commission (2007) 218 FCR 81; [2007] FCA 482

Conway v Jackson (2001) 107 FCR 201; [2001] FCA 230

Coshott v Barry (2009) 113 ALD 358; [2009] FCA 1521

Driver v Botanical Water Technologies Pty Ltd [2024] NSWSC 1409

Driver v Botanical Water Technologies Pty Ltd (No 2) [2024] NSWSC 1641

Frigger v Kitay [2017] FCA 1278

O’Loughlin v Glenmont Investments Pty Ltd (2001) 191 ALR 336; [2001] FCA 925

Owen v Sandhu [2024] FCA 198

Re Baker; ex parte Baker v Staples [1995] FCA 703

Re Geard; ex parte Reid (1994) 217 ALR 191; [1994] FCA 45

Re Taylor; Ex parte Deputy Commissioner of Taxation (Cth) (1983) 74 FLR 377

Sharpe v W H Bailey & Sons Pty Ltd (2014) 317 ALR 738; [2014] FCA 921

Totev v Sfar (2008) 167 FCR 193; [2008] FCAFC 35

Warner v Frost [1999] FCA 830

West International Pty Ltd v Ultradrilling Pty Ltd (2008) 68 ACSR 108; [2008] FCA 1443
Division: General Division
Registry: New South Wales
National Practice Area: Commercial and Corporations
Sub‍-‍area: General and Personal Insolvency
Number of paragraphs: 97
Date of hearing: 19 May 2025
Counsel for Applicant Mr S Golledge SC with Mr M Davis
Solicitors for Applicant: Corrs Chambers Westgarth
Counsel for Respondents: Mr D Birch
Solicitors for Respondents: McCabes Lawyers

ORDERS

NSD 403 of 2025

IN THE MATTER OF TERRY PAULE
BETWEEN:

TERRY PAULE

Applicant
AND:

AMBROSIOS KAMBOURIS

Respondent
NSD 404 of 2025
IN THE MATTER OF TERRY PAULE
BETWEEN:

TERRY PAULE

Applicant
AND:

DJD TRADING PTY LTD (ACN 104 675 643)

Respondent

ORDER MADE BY:

STELLIOS J

DATE OF ORDER:

26 MAY 2025

THE COURT ORDERS THAT:

1.The respective interim applications (dated 5 May 2025) in these proceedings (NSD 403 of 2025 and NSD 404 of 2025) be amended to add the following final order sought:

3. That the orders of Judicial Registrar Birchall made on 5 May 2025 be set aside.

THE COURT NOTES THAT:

2.On the applicant giving the undertaking that he will not deal with:

(a)the Toorak Property (being a residential property located at 63 Albany Road, Toorak, Victoria); or

(b)any other property…

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AGLC
Paule v Kambouris [2025] FCA 539
Case
[2025] FCA 539
Decision Date

CaseChat Overview and Summary

Paule v Kambouris involved the applicant, Paule, who sought an extension of time to comply with two bankruptcy notices served on him by Kambouris and DJD Trading Pty Ltd. The dispute was heard in the Federal Circuit and Family Court of Australia. The central legal issues revolved around the scope of the discretion under section 41(6A) of the Bankruptcy Act 1966 (Cth) to extend the time for compliance with a bankruptcy notice when proceedings to set aside a judgment or an application to set aside the bankruptcy notice have been instituted. Additionally, the court had to consider the relevance of a belated application to stay the judgment debt pending the appeal.

The court's reasoning began with an analysis of the discretion under section 41(6A), which allows for an extension of time for compliance with a bankruptcy notice if certain conditions are met, such as the institution of proceedings to set aside the judgment or an application to set aside the notice. The court noted that while an appeal had been filed, the mere existence of an appeal was not sufficient to justify an extension of time, and thus factors (1) and (6) were deemed neutral. The court further examined the belated application to stay the judgment, noting that while it was a relevant consideration, the delay in making the application weighed against granting the extension. The court concluded that the application for an extension of time would be determined after the Supreme Court decided on the stay application, and ordered that the proceedings be adjourned pending the outcome of the stay application. If the stay application was granted, the time for compliance with the bankruptcy notices would be extended until further order. Costs were reserved for another determination.

In summary, the court held that the existence of an appeal alone was insufficient for an extension of time under section 41(6A), and the delay in seeking a stay of the judgment was a significant factor against granting the extension. The proceedings were adjourned pending the Supreme Court's decision on the stay application, with further orders to be made based on that outcome.

Orders

Orders of the court

3. The respective proceedings be adjourned to a date after the determination of a Notice of Motion in the Supreme Court of New South Wales to stay the final orders made by Ball J on 20 December 2024 in proceeding no. 2021/00181606 (stay application).

4. Within 1 day after the Supreme Court has determined the stay application, the parties jointly notify the Associate to the docket judge of the outcome of the stay application.

5. Within 2 days after the stay application is determined, the applicant in both proceedings file and serve:

(a) an affidavit annexing:

(i) a copy of the Supreme Court’s orders and reasons on the stay application; and

(ii) the transcript of the hearing of the stay application; and

(b) any submissions, not exceeding 5 pages, addressing:

(i) the impact of the Supreme Court’s orders on the interim applications in these proceedings; and

(ii) costs in the proceedings.

6. Within 4 days after the stay application is determined, the respondent in each proceeding file and serve:

(a) any affidavit evidence in response; and

(b) any submissions in response, not exceeding 5 pages.

7. Pursuant to s 41(6A) of the Bankruptcy Act 1966 (Cth), the time for compliance with the Bankruptcy Notices (BN276550 and BN276549) issued on 28 February 2025 and served on 6 March 2025 be further extended until the Court’s determination of the interim applications or until further order.

8. Liberty to apply on short notice.

9. Costs be reserved.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The terms of the review applications do not seek to review and set aside the orders of the Judicial Registrar. However, the review applications identify the relevant provisions for review, and it is sufficiently clear from the applications, and the procedural history, that the review applications intended to review those orders. At the hearing, senior counsel for the applicant sought leave, if necessary, to add a paragraph to the review applications seeking an order setting aside the orders of the Judicial Registrar. Counsel for the respondents accepted that there was no prejudice to them and that the procedural irregularity could be cured by the grant of leave sought by the applicant. Accordingly, I give leave for the addition of the following paragraph to each review application:3. That the orders of Judicial Registrar Birchall made on 5 May 2025 be set aside.BACKGROUND On 20 December 2024, the Supreme Court of New South Wales in Driver v Botanical Water Technologies Pty Ltd (No 2) [2024] NSWSC 1641 at [24] ordered the applicant to pay:(1)Ambrosios Kambouris (the respondent in proceeding NSD 403 of 2025) the sum of USD8,518,852.64;(2)DJD Trading Pty Ltd (the respondent in proceeding NSD 404 of 2025) the sum of USD7,469,896.98; and(3)90% of the plaintiffs’ costs on the ordinary basis as agreed or assessed. Justice Ball’s reasons for judgment had been delivered earlier on 8 November 2024 in Driver v Botanical Water Technologies Pty Ltd [2024] NSWSC 1409 (Botanical Water (No 1)). (Together¸ the Supreme Court Proceedings). On 20 December 2024, the applicant, and two other defendants at first instance in the Supreme Court Proceedings, filed a Notice of Intention to Appeal to the New South Wales Court of Appeal. The notice stated that the applicants intended to commence appeal proceedings within three months of Ball J’s orders on 20 December 2024; that is, on or before 20 March 2025. A Notice of Appeal was filed on 19 March 2025. Orders have been made for the appeal to be heard on 20 June 2025. Meanwhile, the Bankruptcy Notices were served on the applicant on 6 March 2025:(1)Mr Kambouris caused Bankruptcy Notice number BN276549 to be issued to the applicant on 28 February 2025. The claimed debt relied on the judgment debt of USD8,518,852.64 converted to AUD13,350,319.91, with an added amount for interest of AUD257,309.65. The total debt claimed was AUD13,607,629.56.(2)DJD Trading Pty Ltd caused Bankruptcy Notice number BN276550 to be issued to the applicant on 3 March 2025. The claimed debt relied on was the judgment debt of USD7,469,896.98 converted to AUD11,706,449.05, with an added amount for interest of AUD225,626.23. The total debt claimed was AUD11,932,075.28. The applicant was required to pay each claimed debt within 21 days after service of the Bankruptcy Notices. On 20 March 2025, the applicant lodged applications seeking orders pursuant to s 41(6A) of the Act that the time for compliance with the respective Bankruptcy Notices be extended up to and including 21 days after the determination of the appeal by the Court of Appeal. The applications were accepted for filing on 21 March 2025. The applications also sought interim relief to extend the compliance date to 4.00pm on the date of the first court date in these proceedings, or until further order.

Evidence

Evidence Before The Court

On 14 May 2024, a Registrar ordered that the Notice to Produce be adjourned to the hearing before me. When counsel for the respondent called on the Notice to Produce at the hearing, senior counsel for the applicant presented a bundle of documents which was said to be the product of searches made to that point in time. The applicant had no objection to an order for access to that material. Senior counsel for the applicant submitted that there were no documents responsive to category 1, but there were documents responsive to categories 2 to 4. Because the search was ongoing, the applicant could not say whether there would or would not be more documents, in particular documents responsive to category 1. The respondents did not tender any of the documents. EVIDENCE In each proceeding, the applicant read and relied on the following corresponding affidavits:(1)Matthew Richard Critchley sworn on 5 May 2025;(2)Ross Savas affirmed on 7 May 2025;(3)Terry Paule affirmed on 8 May 2025;(4)Matthew Richard Critchley sworn on 20 March 2025;(5)Matthew Richard Critchley sworn on 17 April 2025;(6)Terry Paule affirmed on 17 April 2025; and (7)Mariam Anne Francis sworn on 16 May 2025. The respondents read and relied on corresponding affidavits in their respective proceedings:(1)Guy Samuel Lewis sworn on 15 May 2025;(2)Andrew Joseph James Lacey sworn on 27 March 2025; and(3)Andrew Joseph James Lacey sworn on 8 April 2025. The respondents also tendered a document entitled “Letter of Valuation Advice – Kerbside Assessment” from Westlink Consulting dated 27 March 2025. There were no objections to any of the affidavits and none of the deponents were required for cross‍-‍examination. There was no objection to the tender of the valuation letter from Westlink Consulting.APPLICABLE PRINCIPLES The nature of the review The hearing of an application under s 35A(5) of the Federal Court Act is by way of de novo review: Bechara v Bates (2021) 286 FCR 166; [2021] FCAFC 34 at [17] (Allsop CJ, Markovic and Colvin JJ). As a Full Court said in Bechara, “[t]he review does not hinge, or focus, upon error in the decision of the registrar. It is a hearing de novo, in which the matter is considered afresh on the evidence and on the law at the time of the review, that is at the hearing de novo”: at [17]. The Court “is to rehear the case and decide the facts for itself” and “exercise the discretion unfettered by the decision of the Registrar”: West International Pty Ltd v Ultradrilling Pty Ltd (2008) 68 ACSR 108; [2008] FCA 1443 at [6] (Gordon J); see also Bechara at [21], quoting from the judgment of Emmett J in Totev v Sfar (2008) 167 FCR 193; [2008] FCAFC 35 at [13].The discretion under s 41(6A) is enlivened Section 41(6A) of the Act provides that:Where, before the expiration of the time fixed for compliance with a bankruptcy notice:(a)proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or(b) an application has been made to the Court to set aside the bankruptcy notice;the Court may, subject to subsection (6C), extend the time for compliance with the bankruptcy notice.

Decision

Reasons for decision

The mere existence of an appeal, being a jurisdictional condition that enlivens the exercise of discretion, is insufficient to justify an order under s 41(6A), and I accept the respondents’ submissions that factors (1) and (6) are neutral in this case. Stay of the judgment An application to stay the judgment has been sought, but belatedly. If not from the time of the first return date of this application on 1 April 2025, at least from the date of the Judicial Registrar’s reasons for judgment on 5 May 2025, the applicant was on notice that the seeking of a stay might be an important factor in the exercise of the discretion under s 41(6A). Yet, it was not until 15 May 2025 that the applicant’s solicitors were instructed to file a Notice of Motion in the Supreme Court seeking a stay of Bell J’s orders pending determination of the appeal. The stay application was filed on the same day and listed for hearing in the Motions List on 23 May 2025. No explanation has been offered for the delay from either the date of Ball J’s orders on 20 December 2024 or from the date of the Judicial Registrar’s reasons. Senior counsel for the applicant submitted at the hearing that I should approach my task on this de novo review on the basis that the stay application is now on foot, and that the acknowledged delay is a matter to weigh in the balance of the discretionary calculus. It was further submitted that any error in not applying earlier for a stay has now been rectified and, in those circumstances, the applicant should not be punished for the forensic decision not to file it earlier. The weight to be given to the existence of a stay application is not free from doubt. In Re Geard, in a context where the applicant had not sought to stay the underlying judgment debt, Sheppard J said that (at [11], emphasis added):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. Having approved of that passage, Lehane J in Byron appeared to accept that, where a stay had not been “obtained or sought”, an extension would only be made in “an exceptional case”: at 272. In Warner v Frost [1999] FCA 830, Hely J considered that there was a difference between the approaches of Sheppard J in Re Geard and Lehane J in Byron: the former required special circumstances before an extension would be granted where no stay had been sought, whereas the latter considered “that while weight should be given to that matter it is not necessarily conclusive”: Warner at [6]. Justice Hely considered that the approach of Lehane J as described should be preferred.

Ratio Decidendi

Legal Principle Established

I turn to consider those factors.Considerations arising from the appeal In relation to factors (1) and (6), as indicated earlier in these reasons, an appeal has been filed and will be heard on 20 June 2025. The appeal will determine whether liability for the debts underlying the Bankruptcy Notices exists. There is nothing in the evidence that satisfies me that the appeal is not genuine, has not been instituted in good faith, or has not been prosecuted with due diligence: see Re Baker at [5] (Kiefel J). There is no submission by the respondents that the case is not arguable: cf Re Baker at [4]. As for the merits of the appeal, given the proximity of these reasons to the hearing of the appeal, it is undesirable for me to express any view on the applicant’s prospects. In any event, neither party sought to argue the merits. The mere existence of an appeal, being a jurisdictional condition that enlivens the exercise of discretion, is insufficient to justify an order under s 41(6A), and I accept the respondents’ submissions that factors (1) and (6) are neutral in this case. Stay of the judgment An application to stay the judgment has been sought, but belatedly. If not from the time of the first return date of this application on 1 April 2025, at least from the date of the Judicial Registrar’s reasons for judgment on 5 May 2025, the applicant was on notice that the seeking of a stay might be an important factor in the exercise of the discretion under s 41(6A). Yet, it was not until 15 May 2025 that the applicant’s solicitors were instructed to file a Notice of Motion in the Supreme Court seeking a stay of Bell J’s orders pending determination of the appeal. The stay application was filed on the same day and listed for hearing in the Motions List on 23 May 2025. No explanation has been offered for the delay from either the date of Ball J’s orders on 20 December 2024 or from the date of the Judicial Registrar’s reasons. Senior counsel for the applicant submitted at the hearing that I should approach my task on this de novo review on the basis that the stay application is now on foot, and that the acknowledged delay is a matter to weigh in the balance of the discretionary calculus. It was further submitted that any error in not applying earlier for a stay has now been rectified and, in those circumstances, the applicant should not be punished for the forensic decision not to file it earlier. The weight to be given to the existence of a stay application is not free from doubt. In Re Geard, in a context where the applicant had not sought to stay the underlying judgment debt, Sheppard J said that (at [11], emphasis added):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.