Re Komesaroff, Morris Ex Parte Law Institute of Victoria

[1996] FCA 426

CATCHWORDS

BANKRUPTCY - bankruptcy notice - affidavit pursuant to s 41(7) of Bankruptcy Act 1966 - Court not satisfied that the debtor had such a set-off, counter-claim or cross demand as referred to in s 40(1)(g) - more than six moths since commission of act of bankruptcy - creditor applied pusuant to s 41(6A) for extension of time for compliance with the bankruptcy notice - no formal application by debtor to set aside the bankruptcy notice - whether Court had jurisdiction under s 41(6A) to extend time for compliance.

Bankruptcy Act 1966 s 41(6A)
Bankruptcy Rules 1966 rr 10, 195(1)

Re Carter and another; Ex parte National Mutual Trustees Limited 129 ALR 435
Steimer v Tamas 37 ALR 211
Re Harrison; Ex parte Morgans unreported Von Doussa J 8 March 1995 No. SN 682/94

MORRIS KOMESAROFF; EX PARTE LAW INSTITUTE OF VICTORIA No VN 1986/95

Olney J
Melbourne
23 May 1996

IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT
OF THE STATE OF VICTORIA                 No VN 1986 of 1995

RE:             MORRIS KOMESAROFF
  Judgment Debtor

EX PARTE:    LAW INSTITUTE OF VICTORIA

Judgment Creditor

Coram:    Olney J

Place:    Melbourne

Date:     23 May 1996

REASONS FOR JUDGMENT

The matter presently before the Court is an application by the judgment creditor (the creditor) for an order extending the time within which the judgment debtor (the debtor) is required to comply with the bankruptcy notice.

I have had the opportunity of perusing the written submissions made in this matter and have referred to the various authorities that are mentioned therein and to other authorities.  

I make the following findings which are based on the affidavit material on the file.

The creditor caused a bankruptcy notice addressed to the debtor to be issued on 24 August 1995. It was a 14 day notice and was served on 16 October 1995. On 26 October 1995 the debtor filed an affidavit pursuant to s 41(7) of the Bankruptcy Act setting out details of what was said to be a cross demand against the creditor which could not have been set up in the proceedings to which the bankruptcy notice relates.   In his affidavit the debtor further asserted that the bankruptcy notice was invalid on several grounds, notably because, as it was said, that the creditor's solicitors were not authorised or entitled to act on behalf of the creditor, the bankruptcy notice was irregular giving rise to substantial injustice (no particulars of the alleged irregularity were provided), the provisions of Rule 7 of the Bankruptcy Rules in relation to the application to issue the bankruptcy notice had not been complied with and, as a previous bankruptcy notice in relation to the same debt had been set aside, the Court had finally determined the creditor's right to issue a bankruptcy notice in respect of that debt.

The debtor did not file a formal application pursuant to Rule 10 of the Bankruptcy Rules but, nevertheless, the filing of the affidavit was treated as an application for the purposes of that rule, and for the purpose of the debtor's application to set aside the bankruptcy notice on the grounds of invalidity.   No application was made prior to the current application for an extension of time for compliance with the bankruptcy notice.   The matter first came before the Registrar on 22 November 1995 when orders were made for the filing and service of affidavits by the creditor and the debtor, and the hearing was adjourned to 7 February 1996 on which day the matter was set down for hearing on 11 June 1996.  The hearing date was later brought forward to 30 April 1996 when it came on before me.

On 30 April 1996 the question in relation to the debtor's claimed cross demand was argued in full. The other issues raised in the original affidavit relating to invalidity were either not pressed or were abandoned in the course of the hearing. Judgment was reserved and on 8 May 1996 I gave judgment and published reasons for my conclusion that I was not satisfied that the debtor had such a set-off, counter-claim or cross demand as is refereed to in s 40(1)(g) of the Bankruptcy Act.   However, no formal order to that effect has yet been entered.

The effect of my decision was that the deemed extension of time pursuant to s 41(7) did not apply, and accordingly the debtor committed an act of bankruptcy upon the expiration of 14 days from the service of the bankruptcy notice namely 30 October 1995.

At the time that my decision was handed down, counsel for the creditor raised the question of an extension of time for compliance with the bankruptcy notice. The position had by then been reached, as a result of my decision, that in the absence of any other extension of time applying, an act of bankruptcy had been committed on 30 October 1995 and that act had ceased, by effluxion of time, to be an available act of bankruptcy for the purpose of presenting a bankruptcy petition. I stood the matter over and invited counsel for the creditor and the debtor (who appeared in person) to make further submissions in writing. On 10 May a written submission was received from the creditor's solicitor in which it was asserted that the Court had the power under s 41(6A) of the Bankruptcy Act to order that the time for compliance with the bankruptcy notice be extended, and an order to that effect was sought.   No submission was received from the debtor.

After receipt of the creditor's submission, I directed that the creditor file a formal application seeking whatever order was being asked for, and that the motion be supported by an affidavit;  and I further directed that any such motion be served and made returnable today.   The creditor has since filed an application seeking an order that the time for compliance by the debtor with the bankruptcy notice be extended.   The application is supported by an affidavit of Philip Jones (the creditor's solicitor) sworn on 15 May 1996.   Evidence has been adduced today as to the service of the relevant documents.  No further material has been adduced on either side.   The debtor has appeared in person and opposes the extension of time on the ground that the Court at this stage of the proceeding has no jurisdiction to make such an order.

Section 41(6A) of the Bankruptcy Act provides that the Court may extend the time for compliance with a bankruptcy notice where, before the time fixed for compliance either proceedings to set aside the judgment in question have been instituted or an application to set aside the bankruptcy notice has been filed with the Registrar. An application for extension of time under s 41(6A) may be made by either the debtor or the creditor, and I refer in particular to the judgment of Gummow J in Re Carter and another;  Ex parte National Mutual Trustees Limited 129 ALR 435, particularly at 437 and to the authorities cited.

The Court's power to extend time under s 41(6A) may be exercised either before or after the time for compliance has expired, provided one of the preconditions exists, namely, that before the time fixed for compliance either proceedings to set aside the judgment have been instituted or an application to set aside the bankruptcy notice has been filed. I refer to the decision of the Full Court in Streimer v Tamas 37 ALR 211, in particular to the judgment of Dean and Ellicott JJ at pages 214-216. A recent example of an exercise of this power is found in Re Harrison;  Ex parte Morgans, a decision of Von Doussa J on 8 March 1995 in matter SN 682/94.

The debtor's affidavit filed on 26 October 1995 was filed before the time specified in the bankruptcy notice for compliance, and in it the debtor claimed that the bankruptcy notice was invalid.   That affidavit has throughout the proceeding been treated as if it were an application to set aside the bankruptcy notice.   The Bankruptcy Rules do not specifically provide a form of application for setting aside a bankruptcy notice nor, indeed, is any reference made to such an application in the Rules.   However, the subsequent interlocutory directions and the affidavit material filed by the parties proceeded on the basis that the debtor was seeking, amongst other things, to have the bankruptcy notice set aside on the ground of invalidity.   The failure of the debtor to file a formal application to set aside the bankruptcy notice did not render the proceeding void (Rule 195(1)). I am satisfied that one of the conditions necessary to enliven the Court's power to exercise under s 41(6A) has been met.

The fact that the matters raised in the affidavit of 26 October 1995 were not resolved until after the expiration of 6 months from the date on which the act of bankruptcy was committed is not to be held against the creditor.   In my opinion, the justice of the case demands that the time for compliance be extended, first, to give the debtor an opportunity to comply and, second, to ensure that if an act of bankruptcy is committed it will be an available act should the creditor elect to proceed with a petition.   Accordingly, I propose to order that the time for complying with the bankruptcy notice be extended until 24 May 1996.

I have given some thought to the question of the costs of this application and will hear submissions if it is necessary.   My view is that the costs of the application should be taxed and in the event of the debtor being made bankrupt on a petition based on an act of bankruptcy committed as a result of the debtor's failure to comply with the bankruptcy notice such costs be treated as costs in the administration and paid in accordance with the statute.

I certify that this and the preceding 6 pages are a true copy of the Reasons for Judgment of the Honourable Justice Olney

Associate:

Dated:

Heard:    23 May 1996

Place:    Melbourne

Judgment: 23 May 1996

Appearances:

Mr Simon Gardiner (instructed by Tress Cocks & Maddox)

appeared for the judgment creditor.

The judgment debtor appeared in person.