Paule v Kambouris (No 3)

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FEDERAL COURT OF AUSTRALIA

Paule v Kambouris (No 3) [2025] FCA 648

File number(s): NSD 403 of 2025
NSD 404 of 2025
Judgment of: STELLIOS J
Date of judgment: 19 June 2025
Catchwords: BANKRUPTCY – extension of time to comply with bankruptcy notice – discretion conferred by s 41(6A) of the Bankruptcy Act 1966 (Cth) – where applicant subject to judgment debt – where stay of judgment debt not granted – where applicant gave undertaking not to deal with property – where property subsequently became encumbered
Legislation:

Bankruptcy Act 1966 (Cth) s 41(6A)

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

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

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

Driver v Botanical Water Technologies Pty Ltd [2025] NSWSC 566

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

Paule v Kambouris [2025] FCA 539
Division: General Division
Registry: New South Wales
National Practice Area: Commercial and Corporations
Sub‍-‍area: General and Personal Insolvency
Number of paragraphs: 26
Date of hearing: Determined on the papers
Date of last submissions Applicant: 5 June 2025
Respondents: 11 June 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:

19 JUNE 2025

THE COURT ORDERS THAT:

1.The respective interim applications in these proceedings (NSD 403 of 2025 and NSD 404 of 2025) filed on 5 May 2025 pursuant to s 35A(5) of the Federal Court Act 1976 (Cth) and rule 2.02(3) of the Federal Court (Bankruptcy) Rules 2016 (Cth) seeking to review the orders of Judicial Registrar Birchall made on 5 May 2025, and also seeking extensions of time under s 41(6A) of the Bankruptcy Act 1966 (Cth) to comply with the Bankruptcy Notices (BN276550 and BN276549), be dismissed.

2.The applicant pay the respondents’ costs of the respective applications to be agreed or assessed.

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


REASONS FOR JUDGMENT

STELLIOS J:

INTRODUCTION

  1. In these proceedings, the applicant seeks to review the orders made by Judicial Registrar Birchall on 5 May 2025 dismissing an application in each proceeding made pursuant to s 41(6A) of the Bankruptcy Act 1966 (Cth) for an extension of time to comply with two Bankruptcy Notices. These review applications also seek extensions of time under s 41(6A) of the Act to comply with the Bankruptcy Notices.

  2. The extensions under s 41(6A) are sought in circumstances where the applicant has appealed two judgments of the Supreme Court of New South Wales in Driver v Botanical Water Technologies Pty Ltd (No 2)

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Details
Case
[2025] FCA 648
Decision Date

CaseChat Overview and Summary

The case of Paule v Kambouris (No 3) involved the applicant, Paule, seeking an extension of time to comply with bankruptcy notices issued under the Bankruptcy Act 1966 (Cth). The application was heard by the Federal Court of Australia. The primary issue before the court was whether the applicant had demonstrated circumstances warranting an extension of time under section 41(6A) of the Bankruptcy Act 1966 (Cth). This was in light of the applicant being subject to a judgment debt, where a stay of judgment had not been granted, and where the applicant had provided an undertaking not to deal with property which subsequently became encumbered.

The court found that the applicant had not discharged the burden of establishing circumstances warranting an extension of time. The applicant's failure to comply with the conditions set by the Supreme Court for a stay of the judgment debt, and the subsequent lodging of a caveat over the relevant property, played a significant role in this decision. The court held that the applicant's faint attempts to argue for an extension, such as the proximity of the appeal hearing and the undertaking given by the applicant, were insufficient to warrant the granting of the extensions.

Consequently, the court dismissed the review applications and the applications for extensions of time. The applicant was ordered to pay the respondents' costs of the respective applications. The decision highlights the stringent requirements for establishing circumstances warranting extensions under the Bankruptcy Act 1966 (Cth), especially when dealing with judgment debts and property encumbrances.

Orders

Orders of the court

1. The respective interim applications in these proceedings (NSD 403 of 2025 and NSD 404 of 2025) filed on 5 May 2025 pursuant to s 35A(5) of the Federal Court Act 1976 (Cth) and rule 2.02(3) of the Federal Court (Bankruptcy) Rules 2016 (Cth) seeking to review the orders of Judicial Registrar Birchall made on 5 May 2025, and also seeking extensions of time under s 41(6A) of the Bankruptcy Act 1966 (Cth) to comply with the Bankruptcy Notices (BN276550 and BN276549), be dismissed.

2. The applicant pay the respondents’ costs of the respective applications to be agreed or assessed.

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

Background

Background to the litigation

For the reasons that follow, I do not consider that the applicant has discharged his burden of establishing that the circumstances warrant extensions pursuant to s 41(6A) of the Act. Accordingly, I dismiss the review applications in these proceedings. These reasons should be read together with my earlier reasons in Paule v Kambouris [2025] FCA 539.BACKGROUND The background to the review applications is set out in my earlier reasons. Since the making of my orders on 26 May 2025, the following has occurred. The applicant’s application for a stay of the two judgment debts was heard and determined by Williams J of the Supreme Court on 30 May 2025. Her Honour made the following orders:1.Order that the final orders made by Justice Ball on 20 December 2024 in these proceedings be stayed until 5pm on the first day of the hearing in the New South Wales Court of Appeal of Appeal [sic] proceeding 476362 of 2025 conditional upon:A.the fifth defendant filing with this Court, a written undertaking to the Court and to the second and fourth plaintiffs that he will not deal with:(i)the property located at 63 Albany Road, Toorak, Victoria; or(ii)any other property owned by the fifth defendant and for which the fifth defendant holds the beneficial interest other than in the ordinary course of business, for the period of the stay; andB.the fifth defendant granting to the second and fourth plaintiffs a charge in caveatable form over his property at 63 Albany Road, Toorak, Victoria securing the judgment debts arising from the orders made by this Court on 20 December 2024, subject to any contrary order of the Court of Appeal,by 5pm on 3 June 2025.2.Order that the stay in order 1 will take effect on and from 5pm on 3 June 2025 if the conditions set out in order 1 are complied with, and will not otherwise take effect.3.Order that costs of the fifth defendant's notice of motion filed 15 May 2025 are to follow the event of the appeal. Her Honour gave reasons for those orders on 2 June 2025: Driver v Botanical Water Technologies Pty Ltd [2025] NSWSC 566. In part, Williams J made those orders on the basis that the property located at 63 Albany Road, Toorak, Victoria (Toorak Property) was unencumbered (at [19]) and that a caveatable interest on the Toorak Property was required to protect the respondents from the risk of prejudice arising from the applicant’s liabilities increasing during the period of the stay (at [21] and [23]) in the event that the applicant’s appeal was unsuccessful. On 1 June 2025, a caveat (dealing number AZ216186Q) was lodged over the Toorak Property by “Appian Lawyers” on behalf of Anna Paule – understood in the evidence to be the wife of the applicant – on the ground of a claim of an “Implied, Resulting or Constructive Trust”. The caveat prohibited further dealings absolutely. On 2 June 2025, the respondents in these proceedings (Second and Fourth Plaintiffs in the Supreme Court Proceedings) filed a Notice of Motion, which was listed before Williams J on the same day, seeking various orders including that her Honour’s orders of 30 May 2025 be varied to provide for a charge in caveatable form over the applicant’s Toorak Property valued at AUD14,000,000 or payment into the Court of that amount.

Evidence

Evidence Before The Court

The applicant did not comply with Order 1B of the orders of Williams J made on 30 May 2025 (as varied on 3 June 2025).EVIDENCE The parties filed the following additional affidavits:·The applicant relied on the affidavit of Matthew Richard Critchley sworn on 5 June 2025; and·The respondents relied on the affidavit of Andrew Joseph James Lacey sworn on 6 June 2025. There were no objections to either affidavit. Together, the affidavits annexed copies of the orders of Williams J and the transcripts of the Supreme Court hearings of 30 May 2025, and 2 and 3 June 2025 and related correspondence.DISPOSITION OF APPLICATIONS BEFORE THIS COURT In my reasons on 26 May 2025, I stated that if the stay application had not been made to the Supreme Court, I would have been inclined to the view that the applicant had not discharged his onus to satisfy me that an extension order under s 41(6A) should be made in each proceeding. I further stated that given that the other factors on the review applications are neutral or of minimal weight, I would have given considerable weight to the lack of a stay application. In my view, the case against the making of extension orders under s 41(6A) of the Act is now compelling given what has transpired in the Supreme Court. The applicant was given two opportunities to have the benefit of a stay of the judgment debts. The orders of Williams J on 30 May 2025 ordered a stay of the judgment debts on condition that the applicant grant a charge in caveatable form to the respondents. Upon discovery that Anna Paule had lodged a caveat over the Toorak Property, with the likely result that compliance by the applicant with the stay condition would be frustrated, the condition was amended on 3 June 2025 to offer a further pathway for compliance. That did not occur and, consequently, the stay did not come into operation. In written submissions, the applicant faintly offered two factors that were said to weigh in favour of granting the extension applications: first, the proximity of the hearing of the appeal and, secondly, the undertaking that Mr Paule has given. I do not accept that these considerations warrant the granting of the extensions. In relation to the proximity of the hearing date, I accept the respondents’ submissions that the appeal hearing is only close because the applicant has had the benefit of multiple interim extensions. The Bankruptcy Notices were served on 6 March 2025 and the Judicial Registrar dismissed the extension applications on 5 May 2025 – the dismissal of those applications giving rise to the review applications in these proceedings. I adjourned the proceedings and ordered further interim extensions for the very reason that a stay application had been filed belatedly in the Supreme Court on 5 May 2025. The stay application failed because of the steps taken to lodge a caveat over the Toorak Property and the applicant’s failure to provide the written consent of Anna Paule to the lodgement of a caveat by the respondents. In those circumstances, the applicant should not now have the further benefit of relying on the proximity of the appeal as a factor weighing in his favour.

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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