Re Ward, L.A. & Anor v Ex parteL Brown & Company Pty Ltd

[1991] FCA 160

Re: LYLE ALAN WARD and PHYLLIS MARY WARD
Ex parte: R.W. BROWN and COMPANY PTY LIMITED
No. P2838 of 1990
FED No. 160
Bankruptcy
28 FCR 329

COURT

IN THE FEDERAL COURT OF AUSTRALIA

BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES
GENERAL DIVISION
Hill J.(1)

CATCHWORDS

Bankruptcy - Presentation of creditors petition against joint debtors - whether extension of time for compliance with bankruptcy notice on application of only one of the joint debtors operates to extend time for compliance in respect of each of the debtors or only that debtor who applied for the extension.

Bankruptcy Act 1966 (Cth): ss. 41, 43-46

HEARING

SYDNEY

#DATE 17:4:1991

Solicitor for the Applicant: Miss K Rawsthorne of Sally

Nash and Co.

ORDER

The creditor's petition in so far as it relates to Phyllis Mary Ward be dismissed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

Before the court is a creditor's petition of R.W. Brown and Company Pty Limited for orders of sequestration against the estates of Lyle Alan Ward and Phyllis Mary Ward. Neither of the debtors appeared on the hearing of the petition.

1. The act of bankruptcy upon which the petition is based is, in the case of each of the debtors, that they failed to comply on or before 17 July 1990 with the requirements of a bankruptcy notice served on each of them, in the case of Mr Ward on 30 March 1990, and in the case of Mrs Ward on 11 April 1990. The bankruptcy notice in question is a bankruptcy notice addressed to Mr and Mrs Ward as joint debtors. It is based upon a final judgment of $29,488.36, together with interest thereon.

2. The point which arises before me is a short but not unimportant one. After the bankruptcy notice had been served, an application was made by Mr Ward to set aside the bankruptcy notice. In the course of those proceedings, which were ultimately dismissed on 17 July 1990, a Registrar of the court made orders extending the time allowed for compliance with the requirements of the bankruptcy notice initially to 20 April 1990, then to 22 May 1990, then to 19 June 1990 and finally to 17 July 1990. The form of order was expressed in the usual way and, by way of example, that extending the time for compliance to 22 May 1990 read as follows:
   

"... I extend the time allowed for compliance with the requirements of the bankruptcy notice to 22 May 1990."

1. That order clearly shows it was in a matter entitled Re Lyle Alan Ward; Ex parte R.W. Brown and Co.

2. By virtue of the provisions of s.44(1)(c) of the Bankruptcy Act 1966 (Cth) ("the Act"), the act of bankruptcy upon which the petition is founded must be committed within six months before the presentation of the petition. The present petition was dated 17 November 1990 and was filed in this court on 26 November 1990. That date is within six months of 17 July 1990, but not within six months of the act of bankruptcy that would be committed by Mrs Ward if, in respect of her, the time for compliance with the bankruptcy notice had not been extended to 17 July 1990. If that be not the relevant date in respect of Mrs Ward, the relevant date will be 21 days after the service upon her on 11 April 1990, that is to say 2 May 1990.

3. The question that arises, therefore, is whether the making of the order by the Registrar in the case of a joint bankruptcy notice on the application of only one of the joint debtors, operated to extend the time for compliance with the bankruptcy notice in respect of each of the debtors or only that debtor who applied to extend the time for compliance.

4. Section 41 of the Act, which deals with bankruptcy notices, does not deal specifically with a bankruptcy notice addressed to more than one debtor. Provision is made for the bankruptcy notice to be issued "in relation to a debtor": s.41(3), and the notice must be such that it requires "the debtor named in it" within a specified time to either pay the judgment debt or sum ordered to be paid in accordance with the judgment or order or to secure the payment of the debt to the satisfaction of the court or the creditor or his agent: s.41(2). The prescribed form (form 4) is likewise expressed in the singular. Extension of time for compliance is dealt with in ss.41(6A) and (6B) of the Act, the power under s.41(6A) being conferred upon the court and the power under s.41(6B) being conferred upon the Registrar. Section 41(6A), by way of example, provides:
   

"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 subsection (6C), extend the time for compliance with the bankruptcy

notice."

1. Division 2 of Part IV of the Act deals with creditor's petitions. Sections 43 and 44 are general sections setting out the court's jurisdiction to make sequestration orders and the conditions upon which a creditor may petition. Those sections are expressed by reference to a debtor in the singular. Section 45 of the Act deals specifically with creditor's petitions against a partnership and s.46 with creditor's petitions against two or more joint debtors. Section 46 provides as follows:
   

"(1) A creditor's petition may be presented

against 2 or more joint debtors, whether partners or not.

(2) Where there are 2 or more respondents to a

creditor's petition, the Court may make a

sequestration order against one or more of them and dismiss the petition in so far as it relates to the other or others."

1. Consolidation of proceedings once two or more joint debtors have become bankrupt is dealt with in s.53 of the Act.

2. It was submitted by the petitioning creditor, that the effect of the orders made by the Registrar from time to time extending time for compliance with the bankruptcy notice, was that the time for complying by all debtors was extended. While it was conceded that the power to extend the time for compliance was dependent upon an application being made to the court or Registrar as the case may be, it was submitted that ss.41(6A) and (6B) referred only to the time (that is to say one time only) for compliance with the bankruptcy notice. It followed, so it was said, that once on the application of any one of joint debtors referred to in a bankruptcy notice the court or the Registrar regarded it as appropriate to extend the time for compliance, the consequence of the order was that the time for compliance with the notice was extended in relation to all joint debtors referred to in the bankruptcy notice. The provisions of ss.41(6A) and (6B) were contrasted with the provisions of s.46 of the Act which deals specifically with the case where there were two or more joint debtors.

3. The petitioning creditor's submission would have strange consequences indeed. First, it may be noted that when the bankruptcy notice is originally issued in respect of joint debtors, the time for compliance by each of those debtors will depend upon the date of service. That is to say that except in a case where the bankruptcy notice is served on the same day on each joint debtor, there will, from the very outset, be different times for compliance in respect of each debtor, dependent upon the date of service. The present is an example of such a case.

4. Next, it may be noted that where there are two or more joint debtors and the time for compliance has expired in respect of one of them, it is still possible for the other to seek to set aside the bankruptcy notice and in connection with that application the Registrar may extend the time for compliance by that person. On the submission of the petitioning creditor in this case, if the court's order extended the time for compliance with the notice in respect of both debtors, the strange consequence would be that one of the debtors had committed an act of bankruptcy and presumably could commit a second act of bankruptcy by failing to comply with the extended time.

5. A third problem of the submissions made on behalf of the petitioning creditor is that where only one of the debtors referred to in a bankruptcy notice makes an application to extend the time and the other is not a party, the acceptance of the submission requires that a person not being a party to the proceedings be bound by the order made in his or her absence. Often, of course, the order would be beneficial to the debtor not a party, for example, if the submission be accepted, in a case extending the time for compliance by such a debtor to a later date, a date, of course, of which it would not necessarily follow that he was advised. If it be assumed that one debtor had made application to set aside the bankruptcy notice and failed, it is hard to see how that application could preclude the other debtor from making a similar application. Certainly, it would be a breach of natural justice to decide such an application adversely to a person not a party. It would become necessary in any application made by one joint debtor to set aside a bankruptcy notice, therefore, to join the other joint debtor in any event. That was not the case here.

6. Although the order made by the Registrar extending the time for compliance with the bankruptcy notice was expressed in general terms, having regard to the way the matter was entitled, that is to say as an application made by Mr Ward rather than by both Mr and Mrs Ward, the order properly construed is an order that the time for compliance by Mr Ward of the provisions of the bankruptcy notice be extended. It would no doubt be preferable, where cases such as the present arise, that the order made specify its applicability to a particular joint debtor but in my view it is not necessary to state this, it being inherent in the combination of the application and the order.

7. These considerations lead me to the conclusion that where an application is made by one joint debtor to set aside a bankruptcy notice, that application operates only in respect of that joint debtor, and if time is extended by the Registrar or the court, that extension of time is an extension of time in respect of the debtor making the application and not an extension of time for compliance with the bankruptcy notice generally. It follows, therefore, that so far as the petition alleges an act of bankruptcy on the part of Mrs Ward, no such act of bankruptcy was committed. In fact, the only act of bankruptcy committed by Mrs Ward was that which occurred 21 days after service upon her of the bankruptcy notice, and as the petition was not presented within six months of that date it is out of time.