Re Versi, P.

[1991] FCA 183

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GENERAL DIVISION	IN THE FEDERAL COURT OF AUSTRALIA )
EANKRUPTCY DISTRICT OF THE 1 No NW 68 of 1991
STATE OF NEW SOUTH WALES 1

Re: PETER VERS I AND

KATHERINE VERSI

Debtors

Ex Parte: J.C. BUTTROSE AND H.W.

BUTTROSE

Creditors

EX TEMPORE JUDGMENT

Einfeld J Svdne y 26 March 1991

The bankruptcy notice in these proceedings is based upon the debtors' non-compliance with an order made by the Supreme Court on 10 December 1990 for the payment of a little over $18,000 which represents a balance of what is said to be owing under that Court's judgment.

On 18 March 1991 the New South Wales Court of Appeal granted leave to extend time for filing an appeal against that judgment and the appeal is now on foot. In granting leave, the Court declined to order a stay of the judgment. The judgment debtors apply for an extension of time for compliance with the bankruptcy notice pursuant to section 41(6)(a) of the Bankruptcy Act. It will suffice for present purposes for me to say that I accept that the appeal to the Court of Appeal is, or includes, proceedings to set aside the judgment which

forms the basls of the bankruptcy notice.

Merely because an appeal is filed will not be a basis for extending time for compliance with a bankruptcy notice arising in circumstances such as this. Obviously some appeals may be filed merely to frustrate recovery, enforcement or bankruptcy. However, these parties have been heard by the Court of Appeal on the issue of extension of time and I think it would be unwise of me to make the assumption that that Court would have granted leave to appeal out of time, were it in any way satisfied or persuaded that the appeal in this matter lacks any arguable substance.

I must therefore proceed upon the basis that the appeal may be

successful. In such circumstances it seems to me in principle appropriate that the time for compliance with the bankruptcy notice should be extended. However, the question that really arises in these proceedings is whether it should be done wit'h or without conditions.

The condition that comes to mind is that the amount in dlspute	at present, that is the amount which forms the basis of the
bankruptcy notice, should be set aside in an appropriate place or fund so as to found or give extra weight to the bona fides of the debtors' challenge to the judgment in the Supreme Court.
The question for determination on the issue of any such condition is whether anything at all arises, even by way of reasonable suspicion, that the bond fides of the appeal need such support at this time. In other words, has anything arisen which suggests that if the judgment debtors are unsuccessful in the Court of Appeal, anything will have adversely occurred to them financially between now and then, as in any way to prejudice the likelihood of success of the bankruptcy proceedings or perhaps of the debtors' compliance with it? In this regard I note that the creditors have decided to proceed by way of bankruptcy proceedings and not attempted to recover the moneys by other forms of execution or enforcement which are available.
The explanation given for the failure of the judgment debtors to appeal against the decision of the Supreme Court w~thin time is that they received wrong advice from their then solicitor as to the availability of appeal and their likelihood of success in it. It was not until they consulted other solicitors and ultimately obtained an opinion of counsel that they were given reason to believe that an appeal could be
successful.
This evidence has not been challenged and the judgment debtors have not been sought to be cross examined about that explanation of the reason for their failing to file an appeal within time. The consequence LS that there does not arise from any delay in the filing of an appeal any available inference that they have delayed the appeal process in the Court of Appeal as a means of frustrating the creditors' recovery of the balance of the moneys owing. As the Court of
Appeal has only recently granted leave, nothing arises from the conduct of the debtors since that time which also could militate against their bona fides in pursuing the appeal.
There is no material before the Court at all about the respective financial circumstances either of the creditors or the debtors. It is said on behalf of the creditors that if the debtors seek a concession or a discretion to be exercised by the Court, they should as is not uncommon in other types of proceedings, bring some evidence to establish their financial viability or liquidity.
I do not think that that submission should be acceded to in
this case. The creditors have chosen to pursue the route of bankruptcy and although a bankruptcy notice does firstly call for compliance, by the payment of the amount owing, the normal purpose of issuing a bankruptcy notice is to found a petition based upon non-compliance with the bankruptcy notice with a
view to obtaining a sequestration order.
By the time a bankruptcy notice is issued, and this one was issued a little over six weeks after obtaining the judgment, it has presumably become clear that the debtors are not voluntarily willing to pay. It seems therefore that to allow to enter into the debate the question of their financial viability or liquidity is to allow an irrelevance to come into the proceedings.
I think in the circumstances that the proper order to be made here is that the time for compliance with the bankruptcy notice should be extended unconditionally. The matter however should not go into limbo. It is not possible for me to determine with any degree of certainty when the Court of Appeal might dispose of the appeal by way of final judgment, but it looks likely to be several months ahead. I think that I should extend the time for compliance with the bankruptcy notice to a fixed date so that the matter does not merely disappear from view. Prior to that date an application should be entertained for further extension which, if the appeal is proceeding with all due expedition, and there are no other external factors, would normally be granted again so as to await the decision of the Court of Appeal.
In this regard I shall accept from counsel a suitable date.
[ DISCUSSION ]
The bankruptcy notice is extended to 14 October and the matter
will be listed for directions at 9.30 a.m. on that day.
[ DISCUSSION ]
Liberty to apply on three days notice.

I certify that thls n ~ d the '+

[ DISCUSSION ]	prec~do-? n7ges are a true copy of the
Re sons for Judgment herein of h ~ s Hopour I

Juatice Elnfeld ~ v j ~ ~ ~ l , ~ , .. L u ~ p

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Costs are reserved. -

1   Assoclate