Re Geard; Ex parte Reid

[1994] FCA 45

- . - -. . . -- ..-,.-. - --.-----h

yg . ,

JUDGMENT No. ...,...,	....	,	.,,.. ...,,,,, ,,.	-	.	,,	.
1

) No. NN 3741 OF 1993

1
1

. .

Jut	FREDERICK JOHN GEARD
EX:	IAN THYNE REID and ORS.  i I

!

a:	SHEPPARD J.
m r	11 FEBRUARY 1994  16 FEB 1994

AUSTRALIA

PRINCIPAL

REGISTRY

HIS HONOUR:  The debtor in this matter, Dr. Geard, has applied -

$ '

to have a bankruptcy notice set aside or, in the alternative,

the time for '.ts compliance extended until the hearing of an	- I L	I !
appeal pending in the Supreme Court of New South Wales.	The	I

judgment upon which the bankruptcy notice is based was recovered by the judgment creditors in an action in the Supreme Court of New South Wales in which they were plaintiffs and the debtor one of three defendants. Relevantly the judgment ordered the debtor to pay to the plaintiffs the sum of $942,722 together with certain interest.

the judgment debt or to secure the payment of it to the

The bankruptcy notice issued on 8 October 1983. It was served on 22 October 1993. It required the debtor within 21

days after service of the notice upon him to pay the amount of

satisfaction of this Court or the creditors or compound the

sum to their satisfaction. This application was filed on 27

October 1993, that is, prior to the expiry of the time limited for compliance with the bankruptcy notice.

The proceedings in the Supreme Court which led to the 'ud~ment to which I have referred were pr-ceedings in which the judgment creditors, the plaintiffs in the Supreme Court proceedings, sued the debtor, amongst others. They did so in their capacity as executors of the estate of the late A.T.

Reid. Mr. Refd, a Mr. Anderson, who was the first defendant, and the debtor, were CO-venturers in a scheme to import deer from New Zealand to Australia and to breed and sell their progeny, The venture failed and Mr. Andclreon .and the debtor .,. 3. -

were sued to recover from them an indemnity.for the amount which the estate of Mr. Reid had been called upon to pay pursuant to a guarantee in which he, Mr. Anderson and the debtor were guarantors.

The matter was tried by Young J. in the Equity Division of the Supreme Court. He gave judgment on 9 December 1993. He concluded that the plaintiffs were entitled to recover the sum of $942,729 from each of Mr. Anderson and the debtor, that sum being one third of a total liability of $2,828,168. To this sum was to be added an amount for interest.

The appeal which has been brought against his Honourys
judgment is, I am informed, to be heard in April next. The

3   1 .

grounds of appeal, which are in evidence, challenge his	I
Honour's conclusions on two main grounds. Firstly, it is said
that the plaintiffs were not entitled to recover anything
because they ehemselves had not, at the time their action was
instituted, paid out the amount due under the guarantee.	,
Secondly, it is contended that his Honour should not have made	!
i .1 order for the payment of any sum of money but should have
ordered an inquiry for the purpose of ascertaining the amount	1 j
of the contributions to be made by each of the guarantors.	i
Initially his Honour had delivered a judgment in which he had	i L ,
I-
taken the view that the proper course was to order an inquiry.	1

-

Before his order was taken out, he was persuaded by subsequent

submissions made by counsel for the plaintiffs that the case	..
was one in which he should make an order for the payment of

!

specified sums of money.

l
i I -

The parties have made detailed submissions, which are partly in writing, canvassing the questions which are raised	!
1 L
!
I

for determination in the appeal. I am not, of course, asked ?

will be argued but the matters were raised on behalf of the	to express any final opinion on the matters of substance which
debtor in order to persuade me that the appeal had substantial

8

prospects of success. The matters relied upon on behalf of [ .

the debtor were challenged by counsel for the judgment

creditors for the purpose of endeavouring to show that the	1:
appeal had little prospect of success.	I
Before I come to the question whether I should exercise my discretion in favour of granting an extension of time, there is a preliminary point which I should dispose of. The application is, in my opinion, governed entirely by the provisions of subsec.41(6A) of the &l&ruwtcv A c t 1966. Section 33 has no application because, although it empowers the Court to extend any time limited by the Act or any time fixed by the Court or the Registrar under the Act for doing an act or thing, the section has no application to applications to extend the time fixed for compliance with a bankruptcy notice; para.33(l)(c). The provisions of subsec.41(6A) empower the Court to extend the time for compliance with a bankruptcy notice but only in the circumstances provided for. The section requires that, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, proceedings to set aside the judgment or order in respect of which the bankruptcy notice was issued be instituted or an application to set aside the bankruptcy notice be filed with the Registrar. I am satisfied that no proceeding has been instituted to set aside the judgment upon
which the bankruptcy notice in this case has been based. The

only proceeding to challenge the judgment instituted in the Supreme Court is the appeal. In my opinion, that is not an application to set the judgment aside in the sense in which that expression is used in subsec.41(6A). In this respect I am in agreement with the judgment of Neaves S. in Re Lentini;

j3x ~arte Lentini v CSR Limited (1991) 29 FCR 363; see at 367.

AS mentioned earlier, the application in question

5   i ,

includes an application for an order that the bankruptcy

l !

notice be set aside.	This part of the application was not
proceeded with by the solicitor for the debtor; rather she	i .
,.
concentrated on the application to extend time for compliance
I
with the bankruptcy notice until the appeal against the	.

judgment had been disposed of by the Court of Appeal.	In	I
, -
these 'ircumstances	there is a question whether it is correct	i
II.

to say that the application in this matter is in truth an I

application to set aside the bankruptcy notice.	There is	L
I '
!

force in the view that it is not because no argument has been

I-'
f

addreesed to the Court seeking the setting aside of the i

-

notice; as mentioned, the submissions made on behalf of the

;

debtor concentrated on the question of extension of time.

Of course, if one were to extend the time until the appeal were disposed of and the appe~?	were allowed, the	l
i
I

judgment would go and it would be appropriate, in those	I
circumstances, to set aside the bankruptcy notice because the judgment upon which it was founded would no longer exist.
think that circumstances coupled with the fact that there is	Despite the way in which the matter was conducted in Court, I
on the file an application to set aside the bankruptcy notice should persuade me that the case does fall within subsec.41(6A) because it is a case where an application to set aside the bankruptcy notice was filed with the Registrar before the expiration of the time fixed for compliance with it; see para. (b). Accordingly, I take the view that the circumstances which give rise to the discretion for which subsec.41(6A) provides exist and that the Court does have power to extend the time for compliance with the bankruptcy notice.
The critical question then is how that discretion should be exercised. As earlier stated, the parties have made, both orally and in writing, detailed submissions concerning the issues which will arise for determination on the appeal and have invited the Court in effect to express a view, provisional though it may be, on the likely outcome of the appeal. To a degree I have felt obliged to look at the matter for myself, but I think it most undesirable that a judge of this Court should in effect undertake some provisional review to determine the correctness or otherwise of the judgment of another court especially when that judgment is under appeal to the court of e?peal which has jurisdiction to hear appeals in the normal course. I prefer to approach the matter in a different way.
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.	If one were	I ,
,

to contemplate the taking of such a course, one would usually

, .

require evidence of the means of the debtor and would wish to

-

consider whether or not it were appropriate to order that

security for the amount of the judgment should be provided.	il
?
I
Thoae are matters which a court exercising jurisdiction to	I
stay the execution of a judgment would wish to consider.
A further factor is that this is an application to extend time for compliance with a bankruptcy notice; it is not the
hearing of a bankruptcy petition. The refusal of the
application will not affect the status of the debtor but it	-.
will mean that he, in all probability, will commit an act of bankruptcy. That act of bankruptcy will be available to the petitioning creditors or to any other creditor upon which to base a bankruptcy petition at any time in the period of six months after the act of bankruptcy has been committed. Otherwise the debtor's position will remain unaffected by what the Court does.

I

I _

If the appeal is ultimately dismissed and the judgment stands with the consequence that the bankruptcy proceedings go	,
on, it may be quite important to the petitioning creditor,
whoever he or she may be, to the general body of creditors and	i
to the trustee in bankruptcy, that there be, for the purposes
of the administration of the bankrupt estate, an act of	i
l
bankruptcy committed at an earlier time than would be the case	t
if this application were acceded to.	I I
I
All these matters have pezsuaded me that I should refuse the application for an extension of time and I do so.	I
I

There

!

is no application prosecuted to set aside the bankruptcy	I	l
notice so that that application should also be dismissed. In
order to provide the debtor with an opportunity of complying
with the bankruptcy notice I propose to extend the time for	l ,
compliance for one further week from the date of this
judgment.	The debtor must pay the costs of the application.	I.

I certify that this and the 7 pr-,W

pages are a true copy of the reasons for

judgment horeln of The Honourable

Mr Justice 8 - b Assaclate

1 1 f i ~ l 3 e