Re Lentini; Ex parte Lentini v CSR Ltd
[1991] FCA 295
•31 MAY 1991
Re: ROSS JOSEPH LENTINI and DOMINIC ANTHONY LENTINI
Ex parte: ROSS JOSEPH LENTINI and DOMINIC ANTHONY LENTINI
And: CSR LIMITED trading as THE READYMIX GROUP
No. ACT B24 of 1991
FED No. 295
Bankruptcy
29 FCR 363
COURT
IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE AUSTRALIAN CAPITAL TERRITORY
GENERAL DIVISION
Neaves J.(1)
CATCHWORDS
Bankruptcy - bankruptcy notice - application to extend time for compliance until determination of pending application for stay of further proceedings on judgment on which bankruptcy notice based or, alternatively, pending determination of appeal against such judgment - Whether pending proceedings are proceedings to set aside judgment - Application also seeking order setting aside bankruptcy notice - No grounds stated in application - Affidavit in support failing to state grounds or facts supporting application - Discretion to adjourn application pending determination of appeal and grant extension of time for compliance with requirements of bankruptcy notice.
Bankruptcy Act 1966 (Cth), s.41(6A)
Bankruptcy Rules, rules 102, 103
HEARING
CANBERRA
#DATE 31:5:1991
Counsel for the applicants : Ms R. Saladino, Mr R. Crowe,
(in order of appearance) Mr G.J. Lunney
Solicitors for the applicants : Pamela Coward and Associates
Counsel for the respondent : Mr B. Loftus
Solicitors for the respondent : Gallens Crowley and Chamberlain
ORDER
1. The order made herein on 3 April 1991 be vacated.
2. The application filed herein on 26 March 1991, in so far as it seeks, pursuant to s.41(6A)(a) of the Bankruptcy Act 1966 (Cth), an extension of the time for compliance with the requirements of the bankruptcy notice issued on 1 March 1991, be dismissed.
3. The said application, in so far as it seeks an order that the bankruptcy notice issued on 1 March 1991 be set aside, be adjourned until 31 July 1991 or until further order.
4. The time for compliance with the requirements of the said bankruptcy notice be extended up to and including 31 July 1991 or until further order.
5. Any party have liberty to restore the application to the list on two days' notice to the other parties.
6. The applicants pay the respondent's costs to date of the application, those costs to include the costs referable to the hearings on 3 and 4 April 1991 and this day.
Note: Settlement and entry of orders is dealt with in rule 124 of the Bankruptcy Rules.
JUDGE1
On 1 March 1991, on the application of CSR Limited trading as The Readymix Group ("the respondent"), a bankruptcy notice was issued by a Deputy Registrar in Bankruptcy addressed to Ross Joseph Lentini and Dominic Anthony Lentini ("the applicants"). The bankruptcy notice was based on a judgment obtained by the respondent in the Supreme Court of the Australian Capital Territory on 3 December 1990 in proceedings (No. SC 3 of 1988) commenced by the respondent as plaintiff against ACT Land Developments Pty Limited as first defendant and the applicants as second defendants. Judgment was entered in those proceedings for the respondent against all the defendants in the sum of $92,255.86 with interest of $32,633.30 making a total of $124,889.16. The judgment was entered after a contested hearing in the Supreme Court in which the applicants and ACT Developments Pty Limited were represented by counsel. The Supreme Court ordered that there be a stay of execution of the judgment for 21 days from 3 December 1990.
On 21 December 1990 a notice of appeal to this Court from the whole of the judgment given on 3 December 1990 was filed. No extension of the period during which the execution of the judgment was stayed was sought or obtained by the applicants or either of them or ACT Land Developments Pty Limited. Neither at the time of the issue of the bankruptcy notice nor at the time of its service on Ross Joseph Lentini was the execution of the judgment stayed.
The time fixed by the bankruptcy notice for compliance with its requirement was fourteen days from the date of service. It is common ground that the notice was served on the applicant Ross Joseph Lentini on 12 March 1991. It is also common ground that service has not been effected on the applicant Dominic Anthony Lentini.
On 26 March 1991 the applicants filed in this Court an application which was described on its face as an "Application to the Court for an Extension of Time". It sought the following orders:
"1. That the time set for compliance with the Bankruptcy Notice filed herein and dated 1st March 1991, be extended pursuant to Section 41(6A)(a) of the Bankruptcy Act 1966 for a period of 14 days after the determination of the application for stay of proceedings made 26 March 1991 in matter SC 3 of 1988 in the Supreme Court of the Australian Capital Territory being CSR Limited trading as The Readymix Group v. ACT Land Developments Pty Limited and Ross Joseph Lentini and Dominic Anthony Lentini.
2. That the Bankruptcy Notice filed and served herein be set aside.
3. Such further or other order as this Honourable Court deems fit."
That application was supported by an affidavit affirmed on 26 March 1991 by Rosa Saladino, the solicitor for the applicants. The affidavit deposed to the following:
"2. On 26 March 1991 I caused to be lodged in the Supreme Court of the Australian Capital Territory an Application for stay of proceedings pursuant to Section 4 of the Judiciary (Stay of Proceedings) Act 1933 or in the alternative pursuant to Order 52 Rule 17 of the Federal Court Rules. A copy of that application is annexed and marked with the letter 'A'.
3. Mr Ross Joseph Lentini has been served with a notice of Bankruptcy and I believe that a Notice has been issued for Mr Dominic Anthony Lentini, however, as far as I am aware the latter has not been served.
4. The applicants in these proceedings were two of three defendants in an action by CSR trading as Readymix Concrete to recover a sum of money allegedly owed by the three defendants. Judgment was entered in favour of CSR on 3 December 1990 in the sum of $92,255.86 and interest of $32,633.30 being a total of $124,889.16. The defendants have appealed to the Federal Court. The file number of that appeal is No. ACT G 78 of 1990.
5. I am advised and verily believe that the matter is likely to be heard during the June 1991 sittings of the Federal Court.
6. The application for stay of proceedings has been set down for hearing on the 5th day of April 1991."
Sub-sections (6A) and (6C) of s.41 of the Bankruptcy Act 1966 (Cth) provide:
"(6A) Where, before the expiration of the time fixed by the Court or the Registrar for compliance with the requirements of a bankruptcy notice -
(a) proceedings to set aside the judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or
(b) an application to set aside the bankruptcy notice has been filed with the Registrar, the Court may, subject to sub-section (6C), extend the time for compliance with the bankruptcy notice." "(6C) Where -
(a) a debtor applies to the Court or the Registrar for an extension of the time for complying with a bankruptcy notice on the ground that proceedings to set aside the judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; and
(b) the Court or the Registrar, as the case may be, is of the opinion that the proceedings to set aside the judgment or order -
(i) have not been instituted bona fide; or
(ii) are not being prosecuted with due diligence, the Court or the Registrar, as the case may be, shall not extend the time for compliance with the bankruptcy notice."
Section 4 of the Judiciary (Stay of Proceedings) Act 1933 (A.C.T.) provides:
"(1.) Where it is shown to the satisfaction of a court that a person, against whom the court has given judgment or made an order for the payment of a sum of money -
(a) has suffered such a loss; or
(b) is in such circumstances,
that the immediate payment of the whole or any part of the sum will entail serious hardship, the court may, at the time of giving the judgment or the making of the order, or subsequently thereto, upon the application of the person adjudged or ordered to pay the sum of money, in its discretion, if in all the circumstances it deems it desirable so to do, order that the payment of the whole or part of the sum shall be deferred until such time and upon such conditions as the court thinks fit.
(2) An application under this section shall operate as a stay of proceedings upon the judgment or order until the hearing of the application."
Order 52, rule 17 of the Federal Court Rules provides:
"(1) An appeal to the Court shall not -
(a) operate as a stay of execution or of proceedings under the judgment appealed from; or
(b) invalidate any intermediate act or proceeding, except so far as the Court or a Judge or the court below may direct.
(2) The Court may vary or vacate any direction of the Court or the court below referred to in sub-rule (1).
(3) An application for a direction of the Court or a Judge under sub-rule (1) shall be made to the Court or a Judge by motion upon notice, and may be made whether or not a similar application has been made to the court below. An application for a direction under sub-rule (2) shall be made to the Court by motion upon notice, and may be made whether or not a similar application has been made to the court below."
The references to "the Court" in this rule are, of course, references to the Federal Court of Australia.
The application to this Court came on for hearing on 3 April 1991. It was put to counsel for the applicants that the application made to the Supreme Court pursuant to s.4 of the Judiciary (Stay of Proceedings) Act or, alternatively, pursuant to Order 52, rule 17 of the Federal Court Rules was not a proceeding to set aside the judgment in respect of which the bankruptcy notice was issued so as to fall within par.(a) of s.41(6A) of the Bankruptcy Act. It was further put to counsel that the correctness of that proposition would have the consequence that the making of the application to the Supreme Court could not operate to enliven the power of this Court to extend the time for compliance with the bankruptcy notice.
After a short adjournment to enable counsel for the applicants to consider the matter, the Court was informed that the application, in so far as it was based on the filing of the application in the Supreme Court, was not being pursued. Counsel submitted, however, that the filing of the notice of appeal in this Court from the judgment of the Supreme Court on which the bankruptcy notice was based amounted to the institution by the applicants of a proceeding to set aside the judgment within the meaning of par.(a) of s.41(6A) of the Bankruptcy Act. Counsel expressly disclaimed any reliance on par.(b) of that sub-section.
I did not accept that submission and dismissed the application. The applicants were ordered to pay the respondent's costs of the application.
A similar argument had been advanced and rejected by me in Re Maddox (unreported - 12 May 1987). In that case, I said:
"The applicant relies on both limbs of s.41(6A). In reliance upon s.41(6A)(a), it is submitted that the institution of the proceedings in the Supreme Court by way of appeal against the judgment of the Magistrates Court is properly to be considered as the institution of proceedings to set aside the judgment in respect of which the bankruptcy notice was issued. It is further submitted that, as the appeal was instituted before the expiration of the time fixed for compliance with the requirements of the bankruptcy notice, the condition precedent to the exercise of the Court's discretion under that provision is established. I am unable to accept this submission. The language of s.41(6A)(a) is clearly apt to refer to proceedings by a judgment debtor in the court where judgment was entered against him to have the judgment set aside. What the provision contemplates is an application to have the court by which the judgment was pronounced revoke the expression of its coercive power where there has been a failure to follow the rules of procedure or where there is shown to be some defect or irregularity or some other circumstance which renders it desirable that the debtor should be given an opportunity to have the issue further litigated. It may be that, in some circumstances, such proceedings may be taken in a court superior to that in which the judgment was entered but, be that as it may, the language of the provision is not, in my opinion, apt to refer to proceedings which are properly characterised as an appeal from the judgment in respect of which the bankruptcy notice was issued."
I remain of the opinion there expressed.
Later on 3 April 1991, counsel for the applicants foreshadowed an application to rescind the orders made on that day. In response to a request from counsel, I listed the matter on 4 April 1991 when further submissions were heard.
Counsel who then appeared for the applicants, Mr G.J. Lunney, did not seek to re-open the question whether the steps taken by the applicants amounted to the taking of proceedings of the kind referred to in s.41(6A)(a) of the Bankruptcy Act. What counsel sought to do was to advance a different case, a case based on s.41(6A)(b) of the Bankruptcy Act. It was submitted that the application filed by the applicants on 26 March 1991 was to be read as an application to set aside the bankruptcy notice on the ground that the applicants, by the appeal to this Court, disputed the correctness of the judgment of the Supreme Court upon which the bankruptcy notice was founded. It was further submitted that it would be appropriate that the Court adjourn the hearing of the application to set aside the bankruptcy notice until the appeal had been heard and determined and that, pending the hearing and determination of that application, the time for compliance with the requirements of the bankruptcy notice be extended.
Counsel for the applicants referred to the decision of Sweeney J. in Lipov v. Alexander Fraser and Son Ltd and Anor (1978) 24 ALR 616 and the decision of Lockhart J. in Re Sterling; Ex parte Esanda Ltd (1980) 30 ALR 77.
In the former, the applicant, Lipov, was the debtor named in a bankruptcy notice issued on the application of the respondents. The notice was based on a judgment obtained by the respondents against the applicant in the Supreme Court of Victoria. After service of the bankruptcy notice upon him but before the expiration of the time limited therein for compliance with its requirements, the applicant had, within the extended period allowed by an order of the Supreme Court, lodged an appeal from the judgment of that court. He deposed in an affidavit to his belief that he had proper grounds of appeal. Within the time limited for compliance with the requirements of the bankruptcy notice the applicant filed in this Court an application in which he sought an order that the bankruptcy notice "be set aside until seven days after the determination" of his appeal against the judgment of the Supreme Court on which it was based. By consent, the application was treated as if it had sought extension of the time for compliance with the requirements of the bankruptcy notice until the expiration of seven days from the determination of the appeal. The applicant was given leave to amend his application accordingly.
Holding that the Court had power under s.33(1)(c) of the Bankruptcy Act to enlarge the time for compliance with the requirements of a bankruptcy notice (the decision being given before the enactment of s.41(6A) and the amendment to s.33(1)(c) effected by the Bankruptcy Amendment Act 1980 (Cth)), his Honour concluded that the time for compliance with the requirements of the notice served on the applicant should be extended until further order. His Honour said, at p 620:
"It is for this court to say whether the time for compliance with a bankruptcy notice will be extended. It has been held that the institution of an appeal, which appears to be bona fide, is a good reason for adjourning the hearing of a bankruptcy petition based upon the judgment subject to the appeal (Ex parte Heyworth; Re Rhodes (1884) 14 QBD 49; Union Bank of Australia Ltd v. Dean (1898) 24 VLR 453). The courts have had regard to the grave consequences which flow from the effluxion of the time fixed for compliance with a bankruptcy notice. Judgment has been obtained against the applicant who has regularly instituted an appeal against it. He has sworn that he believes that he has proper grounds of appeal against it. He has not been cross-examined. The creditors have not offered any evidence in opposition. In these circumstances, the grant of an extension of time for compliance will enable the applicant, should his appeal succeed, to avoid the commission of an act of bankruptcy, based upon a judgment which should not, on this assumption, have been given against him in the first place."
In Re Sterling; Ex parte Esanda Ltd (supra), the applicants sought an order setting aside a bankruptcy notice and, under s.41(6A), an extension of time for compliance with its requirements. Lockhart J. observed that the Court's power under s.41(6A) to extend time for compliance with the requirements of a bankruptcy notice may be exercised only where proceedings to set aside the judgment or order in respect of which the notice was issued have been instituted, or an application to set aside the bankruptcy notice has been filed with the Registrar, in each case before the expiration of the time fixed by the Court or the Registrar for compliance with the requirements of the notice. His Honour also observed that, in the case before him, the power which the Court was asked to exercise was that conferred by s.41(6A)(b), par.(a) of that sub-section not being available as a source of power to extend time as it was not until some days after the expiration of the time fixed for compliance with the requirements of the bankruptcy notice that the applicants instituted proceedings in the District Court of New South Wales to set aside the judgment on which the notice was based. His Honour then examined the question whether the Court had power to set aside a bankruptcy notice, there being no provision in the Bankruptcy Act which, in terms, confers that power. In the course of discussing this question, his Honour said, at p 82:
"Notwithstanding that the filing of the application to set aside the bankruptcy notice within the specified time is a condition precedent to the exercise of the court's power to extend time, and is perhaps a ground for granting the extension, in truth the power to extend time is in aid of the setting aside of the notice itself. Unless the court is to hear the application to set aside the notice, there is no purpose to be served in having power to extend time for compliance with the requirements of the notice. I leave aside, of course, the power conferred by s.41(6A)(a). This court, and the Federal Court of Bankruptcy before it, have set aside bankruptcy notices over many years on various grounds. Instances of the exercise of this power are where the notice is not in accordance with the terms of the judgment and is calculated to perplex the debtor; the notice is issued for the whole of a judgment debt, yet the judgment debtor has paid into court in part satisfaction of the debt; in truth no debt lies behind the judgment: Wilkinson v. Osborne (1915) 21 CLR 89; and the sum of which payment is required by the terms of a notice has in fact been paid by the debtor: Re Partridge; Ex parte Maidens-Fuller (1945) 13 ABC 185.
In exercising the power to set aside notices the court has been confronted with practical difficulties. If the bankruptcy notice is, as it usually is, a 14 day, 21 or 28 day notice, it may be inconvenient or impossible for the court to hear and determine the application to set aside within the time constraints imposed by the bankruptcy notice itself. In some cases the determination of the question may not be difficult and take little time. Other cases may involve complex issues and require days of hearing. The judge needs time to properly consider the matter. Hence, in practice over the years, until the court has been able to resolve the issues raised on the application to set aside the notice, it has exercised power to extend time for compliance with its requirements so as to ensure that in the intervening period no act of bankruptcy is committed."
Having satisfied himself that the Court had power to set aside a bankruptcy notice, his Honour said, at p 84:
"I mentioned earlier some instances of the exercise of the power to set aside bankruptcy notices by this court and the Federal Court of Bankruptcy. They are not exhaustive of the occasions on which the power will be exercised. The power of the court to extend time for compliance with the requirements of a bankruptcy notice is in aid of the power to set aside the notice itself. Once the court has heard the application to set aside the notice it may dismiss it or set the notice aside. In either case, exercise of the power to extend time for compliance will then be spent. It is neither necessary nor desirable for me to state exhaustively the matters which an applicant for extension of time must show to obtain an order for extension. This will depend on the facts of each case. Orders for extension of time will not be made as of course. Grounds must be established. It is as well to remember that the power to set aside the notice and the power to extend time for compliance are necessarily related. For instance, if the application to set aside is made on the basis that no debt lies behind the judgment, the court may conduct a preliminary enquiry as to whether it should go behind the judgment. This approach is taken sometimes on the hearing of petitions for sequestration where the debtor alleges that he is not indebted to the petitioning creditor notwithstanding the judgment: see Corney v. Brien (1951) 84 CLR 343; Wren v. Mahoney (1972) 126 CLR 212; (1972) ALR 307, and Re Wong; Ex parte Kitson (1979) 27 ALR 405. There are sound reasons why substantially the same considerations should apply in dealing with applications to set aside bankruptcy notices. There may be cases where the application to set aside should be adjourned pending the outcome of an application by the debtor to a court of competent jurisdiction to set aside the judgment on which the bankruptcy notice is founded.
In other cases, the debtor may seek an adjournment of the application to set aside pending the outcome of an appeal from the judgment. I respectfully agree with the observations of C.A. Sweeney J. in Lipov's case (24 ALR at 620) on this matter. Although what was said by his Honour was referrable to the Act before the 1980 amendments, it is equally applicable to the power conferred by s.41(6A)."
There was evidence before his Honour of facts intended to show, prima facie, that the applicants had a good defence on the merits and also to explain why they did not defend the proceedings and why in the interests of justice they should be let in to defend. His Honour considered that, in all the circumstances, the appropriate course to take was to adjourn the application to set aside the bankruptcy notice until the application to set aside the default judgment had been determined and, in the meantime, to extend the time for compliance with the requirements of the bankruptcy notice.
The circumstances in which a bankruptcy notice may be set aside were again adverted to by Lockhart J. in Clyne v. Deputy Commissioner of Taxation (1982) 42 ALR 703. At p 708 his Honour said:
"As I observed in Re Sterling; Ex parte Esanda Ltd (1980) 30 ALR 77, the court's power to set aside bankruptcy notices is not conferred specifically by any provision of the Act, although it is assumed (see for example sub-ss.41(6A), (6B) and (6C)). Courts exercising bankruptcy jurisdiction have set aside bankruptcy notices over many years and on various grounds. The circumstances in which notices may be set aside are not governed by rigid rules and do not fall into fixed categories. The power may be exercised if warranted on the facts of a particular case. The source of this power is sub-s.30(1) of the Act. That sub-section has been liberally construed by the courts. The circumstances which may give rise to questions or problems in matters of bankruptcy are so multifarious that it is impossible to confer powers upon the court to deal with them other than in general terms. Such powers must not be given any narrow or mean construction. Non-compliance with the requirements of a bankruptcy notice is an act of bankruptcy on which almost every petition is based which comes before the court. A bankruptcy notice is the foundation of a bankruptcy and involves quasi penal consequences. The court must be able to supervise bankruptcy notices at all stages of their existence. If an alternative source of power were needed, however, it would be found in the court's inherent jurisdiction. In my opinion fairness requires that the bankruptcy notice be set aside."
In a subsequent case, Clyne v. Deputy-Commissioner of Taxation (1982) 82 ATC 4,484, Lockhart J. had before him an application in which an order was sought setting aside a bankruptcy notice issued at the request of the Deputy-Commissioner of Taxation. Alternatively, the applicant sought an adjournment of the application to set aside the bankruptcy notice until litigation between the parties concerning the applicant's liability to income tax was determined and an extension of time for compliance with the requirements of the bankruptcy notice in the meantime. At p 4,487 Lockhart J. said:
"There is no general rule that the Court must set aside bankruptcy notices or extend time for their compliance where there is a dispute genuinely based on substantial grounds. Indeed, although there are many 'disputed' debt cases, they generally arise on the hearing of bankruptcy or winding-up petitions or on applications to restrain presentation of petitions. Little guidance is to be found in the reported cases when considering a case such as the present one, although orders are not infrequently made setting aside bankruptcy notices where the Court is satisfied that there is a dispute genuinely based on substantial grounds. Ultimately it is a matter for the Court's discretion."
His Honour referred to the issues in references pending before a Board of Review concerning the applicant's liability to income tax in respect of the 1978, 1979 and 1980 years of income and said (at p 4,488):
"I do not think it appropriate in this case for me to form a judgment as to the prospects of success of the applicant or the respondent in the references. If they were still awaiting hearing the position may be different. But the Board has reserved its decision after a lengthy hearing on complicated issues. For me to express a view now could embarrass the Board and be unfair to both parties."
His Honour then examined the considerations relevant to the exercise of the Court's discretion and declined to grant the relief sought by the applicant.
An appeal from that judgment to a Full Court of this Court was dismissed: Clyne v. Deputy-Commissioner of Taxation (1982) 45 ALR 323. At p 329, the Court (Bowen, C.J., McGregor and Fisher JJ.), after referring to s.201 of the Income Tax Assessment Act 1936 (Cth), said:
"This does not mean that where the Commissioner has become a judgment creditor and has issued a bankruptcy notice based on the judgment the court has no discretion to set the notice aside. However, it is clear that the mere pendency of a reference or an appeal in respect of the assessment will not of itself, in the absence of special circumstances, require the exercise of discretion to set aside: Re Roma Industries Pty Ltd (1976) 76 ATC 4113; Fortuna Holdings Pty Ltd v. D.F.C. of T. (1976) 76 ATC 4312, although circumstances may be such that the exercise of the discretion to set aside a bankruptcy notice, a bankruptcy petition or a winding up petition is called for: cf Re Norper Investments Pty Ltd
(1977) 15 ALR 603; 77 ATC 4212."
A further appeal to the High Court was dismissed: Clyne v. Deputy Commissioner of Taxation (1983) 57 ALJR 673.
It must be accepted that the Court has a wide discretion to set aside a bankruptcy notice where it is satisfied that the interests of justice require it to do so: see Re Taylor; Ex parte Deputy Commissioner of Taxation (1983) 74 FLR 377 at p 379. The discretion may be exercised so as to set a notice aside where it is shown that the judgment upon which the notice is based has itself been set aside in proceedings of the kind to which s.41(6A)(a) refers. It may also be so exercised where the judgment on which the notice is based has been shown, on appeal, not to be correct. Another situation in which a notice may be set aside is where, notwithstanding the existence of the judgment on which the notice is based, the Court is satisfied that there is a dispute genuinely based on substantial grounds as to the correctness of that judgment.
It must also be accepted that, pending the hearing and determination of an application to set aside a bankruptcy notice, the Court may, provided the requirements of s.41(6A) have been satisfied, extend the time for compliance with the requirements of the notice. As has been said on a number of occasions in this Court, the power to extend the time for compliance with the requirements of a bankruptcy notice is a power conferred in aid of the power to set aside the notice itself: see, for example, Re Sterling; Ex parte Esanda Ltd (supra) at pp 82, 84: Re Briggs (1986) 12 FCR 310 at p 315. Unless the time has been extended, the setting aside of the notice will not affect an act of bankruptcy already committed by reason of the non-compliance with its requirements: Re Hanby; Ex parte Flemington Central Spares Pty Ltd (1967) 10 FLR 378 at p 381: Re Hayes; Ex parte Thomas Borthwick and Sons (Australasia) Ltd (1970) 18 FLR 216: Clyne v. Deputy Commissioner of Taxation (1983) 57 ALJR 673: Re Vella; Ex parte Seymour (1983) 67 FLR 287. The time for compliance with the requirements of a bankruptcy notice may be extended after the expiration of the time limited by the notice for compliance provided an application to set aside the notice is made within the time so limited: Streimer v. Tamas (1981) 37 ALR 211: Thurgood v. National Bank of Australasia Ltd (1981) 53 FLR 51.
There is an initial question whether the application filed by the applicants on 26 March 1991 is an application within s.41(6A)(b) of the Bankruptcy Act. It must be said, at once, that that application was hardly designed to bring to the notice of the Court or of those on whom it was served that an extension of time for compliance with the requirements of the bankruptcy notice was being sought in aid of an application that the bankruptcy notice be set aside. In terms, it sought an extension of time based solely upon the application then pending in the Supreme Court for a stay of further proceedings upon the judgment of that Court upon which the bankruptcy notice was founded. No grounds were stated as those upon which the setting aside of the bankruptcy notice was to be sought. Nor did the affidavit filed in support of the application make plain that the bankruptcy notice should be set aside because of the applicants' contention that there were substantial grounds for disputing the correctness of the judgment of the Supreme Court. The affidavit made no reference to the issues that were raised in the proceedings before the Supreme Court, to the decision of the Supreme Court upon those issues, to the reasons for judgment of the Supreme Court or to the grounds of the appeal to this Court. Indeed, the affidavit made but a passing reference to the institution of the appeal. The emphasis, again, was upon the then pending application to the Supreme Court to stay further proceedings upon the judgment.
Subject to the Bankruptcy Act and rule 102 of the Bankruptcy Rules, an application under the Act which is not required to be made by petition is to be instituted by filing an application in accordance with form 45 (rule 102(1)). Subject to the Rules, an application is to specify, inter alia, the order that the Court will, on the hearing of the application be asked to make (rule 102(2)(c)). Rule 102 does not require that the grounds upon which the order is sought be stated. Rule 103(1), however, provides that the grounds on which the Court will be asked to make the order specified in the application, and the facts on which the applicant proposes to rely in support of the application for that order, are to be stated in the affidavit filed in support of the application. Form 45 in Schedule 1 to the Rules requires the applicant to state what affidavits it is intended to use on the hearing of the application and whether or not it is intended to adduce oral evidence.
While it is necessary, if an extension of time to comply with the requirements of a bankruptcy notice is sought under s.41(6A)(b) of the Bankruptcy Act, that an application to set aside the notice be filed within the time limited by the notice for compliance with its requirements, it is not essential that the affidavit in support be filed within that time. It is sufficient if the affidavit is filed within a reasonable time: Re Morgan; Ex parte John Fairfax and Sons Ltd (1987) 72 ALR 83.
There is much to be said for the view that, notwithstanding the shortness of the time which is usually fixed as the time within which the debtor must comply with the requirements of a bankruptcy notice if the commission of an act of bankruptcy is to be avoided, the grounds upon which an application to set aside the bankruptcy notice should be stated in the application. However, in view of the provisions contained in the Bankruptcy Rules, I am constrained to find that, notwithstanding the manner in which the application filed on 26 March 1991 is drafted, it is properly to be treated as an application to set aside the bankruptcy notice though on unspecified grounds.
Earlier in these reasons I have set out the full text of the only affidavit filed in support of the application. That affidavit does not comply with the requirements of rule 103(1). It does not specify the ground upon which the applicants now say that the bankruptcy notice should be set aside and, apart from the cryptic reference to the appeal to this Court from the judgment of the Supreme Court of the Australian Capital Territory on which the bankruptcy notice is founded, it does not set out the facts necessary to support the application as now presented.
There is certainly no material before the Court that would justify the making of an order setting aside the bankruptcy notice. It remains, however, to consider whether, instead of dismissing the application, the hearing of the application to set aside the notice should be adjourned until such time as the appeal to this Court from the judgment of the Supreme Court has been determined. The applicants' case in this regard again suffers from the paucity of the material that has been placed before the Court. However, it appears from the Court records that the appeal to this Court was instituted on 21 December 1990 and that it is listed for hearing before a Full Court of this Court on 1 and 2 July 1991. The Court has been informed that the appellants will be ready to proceed with the appeal on those dates. The Court has also been informed that the judgment was obtained against the present applicants on the basis of guarantees given by them that ACT Land Developments Pty Limited would pay for certain quantities of "readymix" concrete sold to that company by the respondent. The amount of the judgment is $124,889.16. It appears from the notice of appeal that a large number of the findings made by the Supreme Court is challenged.
Notwithstanding the paucity of the material before the Court, I must, I think, assume that the appeal is a bona fide one raising arguable issues and is being pursued with due expedition. In those circumstances and in view of the comparatively short period of time which will elapse before the appeal is heard, I am prepared, though I must say with some hesitation, to adjourn the hearing of the application to set aside the bankruptcy notice and to extend the time for compliance with the requirements of the bankruptcy notice in the meantime. I propose to adjourn the application until 31 July 1991 when the situation can be reviewed.
I, therefore, vacate the order that was made on 3 April 1991 and, in lieu thereof, order as follows:
1. The application filed herein on 26 March 1991, in so far as it seeks, pursuant to s.41(6A)(a) of the Bankruptcy Act, an extension of the time for compliance with the requirements of the bankruptcy notice issued on 1 March 1991 be dismissed.
2. The said application, in so far as it seeks an order that the bankruptcy notice issued on 1 March 1991 be set aside, be adjourned until 31 July 1991 or until further order.
3. The time for compliance with the requirements of the said bankruptcy notice be extended up to and including 31 July 1991 or until further order.
4. Any party have liberty to restore the matter to the list on two days' notice to the other parties.
In all the circumstances it is, in my opinion, appropriate that the applicants pay the respondent's costs to date of the application, those costs to include the costs referable to the hearings on 3 and 4 April 1991 and on this day.
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