Romano v PELDAN
[2003] FMCA 227
•15 May 2003
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| ROMANO v PELDAN | [2003] FMCA 227 |
| BANKRUPTCY – Application to extend time for compliance with bankruptcy notice pending appeal – discretionary considerations. |
| Applicant: | BAPTIST JERRY ROMANO |
| Respondent: | MICHAEL PELDAN |
| File No: | BZ 286 of 2002 |
| Delivered on: | 15 May 2003 |
| Delivered at: | Brisbane |
| Hearing date: | 15 May 2003 |
| Judgment of: | Baumann FM |
REPRESENTATION
| Counsel for the Applicant: | Mr McQuade |
| Solicitors for the Applicant: | Burns Jameson |
| Counsel for the Respondent: | Mr Bain QC |
| Solicitors for the Respondent: | Abbot Tout |
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BZ 286 of 2002
| BAPTIST JERRY ROMANO |
Applicant
And
| MICHAEL PELDAN |
Respondent
REASONS FOR JUDGMENT
I propose to deal first with the application to extend the time, and then formally deliver my judgment in respect to the application to set aside, even though it is all part of one application. I deliver these reasons orally.
On 29 April 2003, having intimated the intention to dismiss the applicant's application to set aside a bankruptcy notice, I was persuaded that it was appropriate not to pronounce my final order to dismiss at that time, but rather to adjourn the application for judgment to 9 am on
13 May 2003. I extended the time for compliance with the bankruptcy notice until 12 noon on that day. Subsequent to 29 April 2003, and as envisaged by counsel for the applicant, an amended application was to be filed, seeking, in addition to the setting aside of the bankruptcy notice, an order extending the time for compliance with the bankruptcy notice, pending the hearing and determination of an appeal from my decision declining to set aside the notice.The amended application, which, in error, referred to the earlier bankruptcy notice,(an error corrected by my order giving leave to amend and which was not opposed by the respondent), was filed before the time for compliance with the notice had expired. The power to extend time for compliance may only be exercised in accordance with the provisions of section 41(6)(a) of the Bankruptcy Act, and can only be considered if the application is made prior to the expiration of the time for compliance; in short, had the application, in its amended form, not been filed before expiry, then the Court has no power under section 41(6)(a) to extend – (see Udowenko & Others Ex parte Mitchell (1995) 69 FCR 299).
If the applicant's application is successful, its effect is that no Act of Bankruptcy will have occurred as a result of my intended decision to dismiss the application to set aside the notice. In some ways, the application has the same effect as, and may be categorised as, an application for a stay, pending appeal. Whilst the Bankruptcy Act does provide for stay applications to be brought, (for example, section 52(3), no express power in respect of a bankruptcy notice in these circumstances is contained within the Act.
The Court does have a power to suspend the operation of an order: (section 37(1). However, I was not asked to consider this section in submissions. It would seem that the suspension of an order declining to set aside a bankruptcy notice would be of no real effect, as it is compliance within time of a valid bankruptcy notice which prevents to an act of bankruptcy being committed.
In considering the exercise of my discretion in this matter, I agree with Mr Bain QC that it is appropriate to consider:
a)the existence of some reasonable prospects of success on appeal from the anticipated order of this court;
b)a lack of prejudice to the respondents; and
c)any irreparable prejudice to the applicant if an order with the notice is not made.
Success of the appeal
As I observed during the exchange with Counsel, it is difficult to objectively assess the merits of the proposed appeal, a copy of which is before me, but of course not yet filed. The grounds of appeal are the same as those ventilated before me, essentially, which I rejected. Mr McQuade says, again, that he will ask the Full Court to consider the decision in Abignano v Wenkart and in particular, determine the construction issue raised by him, which was not dealt with, it seems, by the Full Court. Having considered myself bound by the Full Court decision, it would be mere speculation on my part as to whether a differently constituted Full Court (and it may even be a single Judge sitting as a Full Court ), regards the earlier decision is wrong, or at least distinguishable from the facts of this case. All I could properly say is that it is arguable. Because of the order I propose to make, this issue is likely to be further reviewed in the Full Court.
Prejudice to respondent/creditor
The respondent says it will be prejudiced by a delay which would prevent the respondent from effective recovery of the debt “not for themselves but for others”. There is no significant evidence before me which explains what other steps may, or have, been taken to recover the debt ordered by consent over 12 months ago. All the applicant says is, his asset position has not altered since judgment was obtained by the creditor in January 2002. There is no evidence to suggest the applicant has made any attempt or arrangement to satisfy the judgment debt.
I am satisfied that the further delay in being able to rely on the failure to comply with the bankruptcy notice does prejudice the respondent.
Prejudice to the applicant
The failure to grant the request for an extension of time to comply with the bankruptcy notice will mean that an act of bankruptcy will be committed. Whilst a creditor in this matter has sought an adjournment of the petition, of course, other creditors could rely on the Act of Bankruptcy.
It has long been recognised that, until the commission of the Act of Bankruptcy, a person “is the beneficial owner of whatever assets he possess, but by the Act of Bankruptcy his title is to be regarded as such beneficial owner is no longer absolute, but is contingent on no bankruptcy petition being presented” – (see Ponsford Baker and Co v Londan and Smith’s Bank (1906) 2 ch 444,452). In Australia, this change of status has been described as having “profound consequences for the debtor” – (see The Australian Steel Co v Lewis (2000) 109 FCR 33@ 41). Mr Bain QC says, for the respondent, that the applicant would suffer no lasting prejudice as:
“Should his appeal be upheld, he will have the notice set aside to dismiss to any creditor's petition, and have any consequential sequestration order set aside. If prosecuted diligently, the applicant would be able to have his appeal determined before any substantive steps in the sequestration of his estate could be undertake”.
Mr McQuade says that the existence of the Act of Bankruptcy would make any outcome of the proposed appeal nugatory. Whilst the respondent's submission of the remedial effect is clearly correct, the pace at which trustees are now required to act under understandable pressures from unpaid creditors, means that in the months taken to resolve and determine this appeal – which is anticipated – I would find likely prejudice to the applicant, if assets administered were required to be reinstated. It is also likely, of course, that some significant costs of administration would be incurred, and the liability for those costs would be a very fertile issue in this matter, I would suspect.
In determining the balance of convenience, the matter is, in my view, finely balanced. Mr Bain QC has an alternative submission, saying that any further extension of time for compliance should be subject to conditions of payment of the debt and/or restraint of further dealing with disclosed assets, an approach which found favour with Beaumont J in Dalasus v Bernard.
I have come to the conclusion that whether or not the appeal raises an important question of law or principle is a matter best determined by the Full Court. I propose to extend the time for compliance with the bankruptcy notice until 4 pm on 13 June 2003. This is sufficient time for any appeal to be filed and for the Full Court to be moved to make an order for extension for time, pending the determination of the appeal.
I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of Baumann FM
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