Silberman v Citigroup Pty Ltd - [2011] FMCA 860

FEDERAL MAGISTRATES COURT OF AUSTRALIA

SILBERMAN v CITIGROUP PTY LTD

[2011] FMCA 860

BANKRUPTCY – Application for a review of a Registrar’s decision dismissing application for extension of time for compliance with a Bankruptcy Notice – application pursuant to s.41(6A) of the Bankruptcy Act 1966 – whether Court should exercise the discretion under s.41(6A) – application dismissed.

Bankruptcy Act 1966, s.41(6A), s.41(6C)
Consumer Credit Code, s.80, s.80(2), s.80(3), s.80(4)(c), s.85
Legal Profession Act 1994, s.1.2.1

Atkinson v Oakleigh Holdings Proprietary Limited [2000] FCA 1547
Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264; [1997] FCA 151
Conway v Jackson [2001] FCA 230
Coshott v Barry [2009] FCA 1521
Emanuele v The Australian Securities Commission (1997) 188 CLR 114; [1997] HCA 20
Kakavas v Paradise Enterprises Limited [2010] FCA 915
Perpetual Trustees Victoria Limited v Monas [2011] NSWSC 57
Re Joseph Richard Bryant, Ex Parte Joseph Richard Bryant v Commonwealth Bank of Australia [1994] FCA 1062
Re Geard; Ex parte Reid (1994) 217 ALR 191
Re Nguyen; Ex Parte Commissioner of Taxation (1995) 54 FCR 403
Re Taylor; Ex parte Deputy Commissioner of Taxation [1983] 74 FLR 377; (1983) 74 FLR 377
Santino Agrillo v Raffaele Codisposto [1994] FCA 1561
Shakespeare Haney Securities Limited v Crawford [2009] 2 Qd R 156
Sockhill v Deputy Commissioner of Taxation [2000] FCA 1208
Re Stirling; Ex parte Esada Ltd (1980) 44 FLR 125
The Bank of Queensland v Dutta [2010] NSWSC 574

Applicant:

DOV RAPHAEL SILBERMAN

Respondent:

CITIGROUP PTY LTD

File Number:

MLG 755 of 2011

Judgment of:

Whelan FM

Hearing date:

19 October 2011

Date of Last Submission:

19 October 2011

Delivered at:

Melbourne

Delivered on:

20 October 2011

REPRESENTATION

Counsel for the Applicant:

Mr Korman

Solicitors for the Applicant:

Self represented

Counsel for the Respondent:

Mr McNamara

Solicitors for the Respondent:

Lander & Rogers

ORDERS

The application for review filed 6 September 2011 be dismissed.
The Applicant pay the Respondent’s costs of the review, including reserve costs, as agreed or failing agreement as taxed.
The transcript of proceedings be provided by the Court to the parties upon receipt of same.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT MELBOURNE

MLG 755 of 2011

DOV RAPHAEL SILBERMAN

Applicant

And

CITIGROUP PTY LTD

Respondent

REASONS FOR JUDGMENT

(revised from transcript)

Introduction

This is an application filed 6 September 2011 to review a decision and orders of a Registrar who on 5 September 2011 dismissed an application made by the Applicant, Mr Silberman, that:
(i)the date for compliance with Bankruptcy Notice BN3317 issued on 16 May 2011 be extended by 21 days after final determination of the appeal instituted by the application in respect of the judgment upon which the bankruptcy notice is based and;
(ii)in the alternative, that Bankruptcy Notice BN33117 issued on 16 May 2011 be set aside as an abuse of process.
The Application for Review seeks orders by the Court in the same terms as those rejected by Registrar Burns; although at the hearing no argument was pursued with respect to the claim that there had been an abuse of process, and I have therefore dealt with the application solely as pursued under the provisions of s.41(6A) of the Bankruptcy Act 1966 (“the Act”).

Background

It is worthwhile considering the history of this matter in the context of the application currently before the Court.
Between February 1998 and September 2005, the Applicant, Mr Silberman, entered into various arrangements with the Respondent creditor for the advancement to him of credit facilities. In April 2009 and November 2009, default notices were issued in respect of those facilities. On 18 March 2010, the creditor commenced proceedings in the Magistrates’ Court against Mr Silberman. In October 2010, Mr Silberman commenced proceedings in the Magistrates’ Court against the creditor under the Consumer Credit Code (“the Code”) alleging that the credit contract was unjust.
The two proceedings were set down for trial on 17 March 2011 and after a five-day hearing, Magistrate Braun on 23 March 2011 dismissed Mr Silberman’s claim and found the creditor’s claim proved. An order was made for $49,978.88 with costs. A stay of 15 days was granted on the execution of the order.
On 1 April 2011, the creditor wrote to the Applicant giving notice that it required payment of the amount by 8 April 2011, which was the date on which the stay expired. The Applicant, in response, on 6 April 2011 advised the creditor that he intended to appeal the Magistrate’s decision. Notices of appeal in relation to both the decision to grant the creditor’s application, which is now and will be referred to as SCI2011/1936, and to dismiss the Applicant’s application, SCI2011/1937, were lodged with the Supreme Court on 27 April 2011. The Applicant also sought a stay of the Magistrate’s orders pending the determination of these appeals.
On 16 May 2011, the creditor issued a Bankruptcy Notice BN3317.

It is not necessary to consider the procedural steps which occurred prior to 1 September 2011 when Mukhtar AJ delivered his judgment; save to say that the time for compliance with the Bankruptcy Notice was extended by the Registrar until after that date. Mukhtar AJ in a 14-page judgment rejected both appeals on the grounds that neither identified a question of law and that even if one could distil a question of law, in this case statutory construction, Mr Silberman’s appeals were bound to fail.
The appeal in SCI2011/1936 concerned the validity of the default notices issued by the creditor. It was acknowledged by the creditor that the notices did not contain the statement required by s.80(3) of the Code. This states that “[a] default notice must specify the default and the action necessary to remedy it”, both of which the default notices did, but also goes on to say:
and that a subsequent default of the same kind that occurs during the period specified in the default notice for remedying the original default may be the subject of enforcement proceedings without further notice if it is not remedied within the period.[1]
[1] s.80(3) of the Consumer Credit Code.
It is with respect to this third element that the notices were deficient. The Magistrate held on the basis of The Bank of Queensland v Dutta[2] (“Dutta”), a decision of the New South Wales Supreme Court, that non-compliance did not render the proceeding a nullity and in any event the Court was empowered under s.80(4)(c) to authorise the credit provider to begin the enforcement proceedings and that this could be done nunc pro tunc. Mukhtar AJ held that in doing so the Magistrate had proceeded on a properly authoritative basis and the appeals were therefore dismissed.
[2] [2010] NSWSC 574 at [136].
On 2 September 2011, the Applicant filed notices of appeal in both SCI2011/1936 and SC12011/1937 in respect of the orders made by Mukhtar AJ. On 5 September 2011, Registrar Burns refused his application to extend the Bankruptcy Notice until after the determination of the appeal. On 6 September 2011, the Applicant lodged this Application for Review. On 15 September 2011, time for compliance with the Bankruptcy Notice was extended until 19 October 2011 and was procedurally extended on that date until today.
On 18 October 2011, Whelan J handed down judgment in both appeals. In relation to SCI2011/1937, the appeal against the orders of Mukhtar AJ was dismissed with costs. In relation to SCI2011/1936, his Honour allowed the appeal against Mukhtar AJ, heard the appeal instanter and dismissed it. In matter SCI2011/1937, Whelan J referred to the very limited view of his financial history given by the applicant in the Magistrates’ Court proceedings and accepted Magistrate Braun’s approach to the construction of the term ‘substantial hardship’.

He otherwise adopted the reasons for dismissing the appeal given by Mukhtar AJ.
In SCI2011/1936, his Honour considered that two issues raised by the applicant, being that the decision in Dutta was wrong and whether the defective s.80 notices meant that acceleration clauses could not operate by virtue of s.85 of the Code, raised an arguable question of law and that the appropriate course was therefore for him to allow the appeal and determine the issues.
His Honour conducted a detailed examination of the decision in Dutta and of other relevant decisions dealing with s.80 notices. He concluded in relation to the argument put by the applicant in this case, which essentially was that Dutta was wrong because it was inconsistent with the decision of the High Court in the case of Emanuele v The Australian Securities Commission[3] (“Emanuele”):
(i)firstly, that the decision in Emanuele was not of assistance because the judgment concerned legislation in very different terms to the legislation in issue before him; and
(ii)secondly, that he should follow what is now a clear line of authority in New South Wales and South Australia and accept the analysis in Dutta.
[3] (1997) 188 CLR 114; [1997] HCA 20.
His Honour noted in that respect that it is also relevantly consistent with the judgment of the Queensland Court of Appeal in Shakespeare Haney Securities Limited v Crawford[4] and that uniformity of decision in the interpretation of uniform national legislation was important in itself. For the reasons given by Davies J in Dutta and Hoeben J in Perpetual Trustees Victoria Limited v Monas,[5] he concluded that there was a power to grant leave under s.80(2) nunc pro tunc. In relation to the argument concerning s.85, his Honour held that there was no error on the part of the Magistrate granting authorisation in relation to the acceleration provisions.
[4] [2009] 2 Qd R 156.
[5] [2011] NSWSC 57.
In these proceedings it was put that the Applicant had raised with Whelan J the issue of a stay of his orders and that this was not allowed. During the course of these proceedings, the Court was provided with a copy of the summons issued on 19 October 2011 in the Supreme Court for an application by the Applicant for leave to appeal against the orders of Whelan J in matter SCI2011/1936 and for a stay of execution with respect to the orders of Magistrate Braun made on 23 March 2011. No date has been fixed for this hearing. The Court was orally notified that an appeal against his Honour’s orders in SCI2011/1937 would also be lodged in the next week or two.

The legislation

The relevant legislation in this matter which the court needs to consider is contained in s.41(6A) of the Act. It states that:
Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice:
(a) proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or
(b) an application has been made to the Court to set aside the bankruptcy notice;
the Court may, subject to subsection (6C), extend the time for compliance with the bankruptcy notice.
Section 41(6C) of the Act says:
Where:
(a) a debtor applies to the Court for an extension of the time for complying with a bankruptcy notice on the ground that proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; and
(b) the Court 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 shall not extend the time for compliance with the bankruptcy notice.[6]
[6] Section 41(6C) of the Bankruptcy Act 1966.

Submissions

The Applicant submits that ss.41(6A) and (6C) effectively provide that the Court may extend the time for compliance with a Bankruptcy Notice where proceedings to set aside judgment in respect of which the Bankruptcy Notice was issued have been instituted prior to expiry of the time for compliance, have been instituted bona fide and are being prosecuted with due diligence. The Applicant submits that these preconditions have been met.
The Applicant submits that the appeal is bona fide, as the decision of Whelan J was a hearing de novo of the application before Mukhtar AJ. Whelan J did not accept the findings of Mukhtar AJ that the case raised no question of law or that the applicant did not have an arguable case. The authorities set a very low threshold for satisfying the bona fide requirement and the Applicant refers the Court to the decisions in Re Taylor; Ex parte Deputy Commissioner of Taxation[7] and Re Joseph Richard Bryant; Ex parte Joseph Richard Bryant v Commonwealth Bank of Australia[8] (“Re Bryant”) as examples of where the threshold was not met. The Applicant submits that the appeal has been prosecuted with due diligence. The Applicant further submits that the discretion to grant an extension of time is a discretion at large. The Court should generally not review the merits of the appeal and in that respect he referred the court to Coshott v Barry[9] (“Coshott”) and to Re Geard; Ex parte Reid[10] (“Geard”).
[7] [1983] 74 FLR 377; (1983) 74 FLR 377.
[8] [1994] FCA 1062
[9] [2009] FCA 1521
[10] (1994) 217 ALR 191.
In Byron v Southern Star Group Pty Ltd[11] (“Byron”), an exception to this rule was said to exist where the prospects of success are slight or unusually strong. Cases where the prospects of success were regarded as slight included:
(a)the debtor admitting liability and adducing no evidence as to quantum (Re Bryant);
(b)the application was for special leave to appeal to the High Court where the appeal point raised had not been previously raised at the appellate level (Atkinson v Oakleigh Holdings Proprietary Limited[12]); and
(c)where judgment orders were made by consent and no evidence of any basis for setting aside the consent orders was adduced (Santino Agrillo v Raffaele Codisposto[13]).
[11] (1997) 73 FCR 264; [1997] FCA 151.
[12] [2000] FCA 1547.
[13] [1994] FCA 1561.
The Applicant submits that, while the grounds for appeal against the judgment of Whelan J have not been settled, they will include the contention that the Court failed to follow the procedure laid down by the High Court in Emanuele for deciding matters of this kind, a determination of the true construction of the provisions in question, taking account of the context of the statute and its apparent purpose.
The Applicant submits that this is an arguable question of law. The Applicant further contends that the appeal was not initiated to disrupt the prosecution of the Bankruptcy Notice. The Bankruptcy Notice was served almost six weeks after the creditor was informed by the applicant of his intention to appeal. The creditor was entitled to issue the Bankruptcy Notice, but it is relevant to the exercise of the discretion of the Court that it was issued in circumstances where it was known that the judgment was under challenge.
The Applicant refers the Court to the decision of Edmonds J in Coshott and in particular to the following, where his Honour said at paragraph [44]:
The consideration which I find most telling in favour of exercising my discretion to further extend the time for compliance with the Bankruptcy Notice is that the appeal against the cost assessor’s determination was instituted on 1 July 2009, over three months before service of the Bankruptcy Notice. That fact alone informs one that the proceeding is not brought to frustrate the proceeding commenced under the Act by the service of the Bankruptcy Notice and there is no evidence to suggest, nor was it suggested, that there are circumstances now extant which would otherwise attract the operation of s 41(6C).
The Applicant concedes that a consideration in favour of the creditor is the fact that the extension of the date for compliance would delay the date of commission of an act of bankruptcy if upheld and cites Conway v Jackson[14] (“Conway”) for that proposition.
[14] [2001] FCA 230.
On the other hand, the consequence of the commission of an act of bankruptcy for the debtor is such that in appropriate circumstances the Court should act to protect the judgment debtor from those consequences. In Mr Silberman’s case, the inevitable flow-on effect of default on a Bankruptcy Notice will be presentation of a creditor’s petition. Under s.1.2.1 of the Legal Profession Act 1994, a practitioner being served with notice of a creditor’s petition is a ‘show-cause event’ and such an event may result in amendment, suspension or cancellation of his practising certificate with all that that would entail.
The Applicant finally contends that if Mr Silberman is granted leave to appeal, and succeeds to any extent, he will be entitled to an order setting aside the Bankruptcy Notice.
The Respondent outlined and placed emphasis on the history of the proceedings. The Applicant took seven months to lodge his application, which was the subject of SCI/2011/1937. He sought to reopen the transactions, which provided the basis for the Respondent’s claim, on the grounds that the contracts were unjust. Three times that application has effectively been dismissed by Magistrate Braun, by Mukhtar AJ and by Whelan J.
All arguments on the merits have been determined adversely to him. There is nothing before the Court to suggest a further appeal would be any more successful. The only claim which Whelan J considered to be at all arguable was the contention that the decision of the Supreme Court of New South Wales in Dutta was wrong because that issue raised an arguable question of law.
The submission put by the Applicant was that Dutta was not correctly decided as it was inconsistent with the High Court’s decision in Emanuele and inconsistent with prior decisions on the same legislation. Whelan J gave detailed consideration to the relevant authorities and determined that he should follow the clear line of authority and accept the analysis in Dutta. He also determined that the decision in Emanuele is of no assistance, because the judgments being considered concerned very different legislation where Emanuele involved winding up proceedings and not the application of the Code.
The application now being made by the Applicant to the Supreme Court requires leave to be granted in order for the appeal against Whelan J to proceed. There is nothing from the Applicant to indicate why leave would be granted or why there would be any different result on the appeal (see Sockhill v Deputy Commissioner of Taxation[15] (“Sockhill”)).
[15] [2000] FCA 1208.
The Respondent further submits that the prospects of success are slight. There is no appeal as of right. The fact that the appeal may be bona fide or that it is being prosecuted with due diligence does mean that an extension of time should automatically be granted,[16] and, as the Court has noted and the Applicant also conceded, the discretion of the Court is at large.[17]
[16] See Re Stirling; Ex parte Esada Ltd (1980) 44 FLR 125.
[17] See Re Taylor; Ex parte Deputy Commissioner of Taxation (1983) 74 FLR 377.
The Applicant submitted that the refusal of the extension would result in an act of bankruptcy on the part of the Applicant. The Respondent submits, however, that the Applicant could of course avoid this by paying the debt unless he is in fact insolvent. The financial position of the Applicant is a relevant consideration on the Respondent’s submission, and the case of Re Nguyen; Ex Parte Commissioner of Taxation[18] (“Nguyen”) was cited in support of this.
[18] (1995) 54 FCR 403.
The whole proceedings have been characterised by a lack of financial material being provided by the Applicant. Magistrate Braun was asked by the Applicant to find that he could not pay, in accordance with the terms of a credit contract, without substantial hardship. The Magistrate was unable to find on the evidence before him that there was such hardship. He observed that the Applicant had chosen to give a very limited view of his financial history. Whelan J also noted that there was no evidence tended before Magistrate Braun in relation to Mr Silberman’s assets. The Court has no information as to solvency.

On the issue of the behaviour of the Respondent creditor, the Respondent submitted that Magistrate Braun gave a detailed ex tempore judgment on 23 March 2011. The Applicant asked for a stay and was given 15 days only. This is the only stay of the judgment order which has ever been granted. On 1 April 2011, the creditor wrote to the Applicant notifying of the intention that it expected payment on 8 April 2011 - over 12 months after the original application was made. The response of the Applicant was that he intended to appeal.
The decision of Magistrate Braun has now been vindicated on two occasions. An application for a stay was raised before Whelan J but not pursued. The fact that an application has been made for leave to appeal is not grounds for a stay and exceptional circumstances are needed.
In relation to the impact on the Applicant, the Respondent submitted that the Applicant’s submission assumes that the refusal of the extension to the Bankruptcy Notice will lead to an act of bankruptcy and the presentation of a creditor’s petition. While that may follow if the Applicant fails to pay the debt, it does not necessarily follow that he will lose his practising certificate. He could argue to the board that he is seeking leave to appeal from the orders of Whelan J.
The Applicant, in reply to those submissions, sought to distinguish the decision in Nguyen on the basis that involved an application to a board seeking relief on the grounds of financial hardship, and it was assumed that the debt would not be paid. He sought to distinguish Sockhill, also referred to by the Respondent, on the basis that it involved an ex parte decision in relation to interim relief, and to distinguish Byron on the basis that it involved an application for special leave to appeal to the High Court where the prospects of success were very low.
On the question of a stay of the original orders of Magistrate Braun, the Applicant submitted that Mukhtar AJ did not deal with the issue because the appeal was rejected. The issue of a stay was raised with Whelan J but it was considered that more material would be needed. An application for a stay is part of the leave to appeal application.

Conclusions

It is not in dispute that once the provisions of ss.41(6A)(a) or (b) of the Act, have been fulfilled, and s.41(6C)(b) of the Act does not apply, that the discretion conferred on the Court to extend time for compliance with a Bankruptcy Notice is a discretion at large. Such orders will of course not be made as a matter of course. How that discretion is exercised will depend on the facts of each case. The principles which apply to whether a petition should be adjourned or dismissed are not necessarily those which should guide the exercise of discretion to set aside or extend the time for compliance with a Bankruptcy Notice.[19] Both parties have referred the Court to a number of cases relevant to the exercise of that discretion. It has not been argued by the Respondent that s.41(6C) of the Act applied.
[19] Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264; [1997] FCA 151.
I go first to the issue of merit. The issue of merit was argued before me in relation to the discretion the Court has and the circumstances in which it should be exercised. It is conceded that the authorities tend towards reluctance in the Court to enter into the merits of an appeal, although an exception to that may exist where the Court is able to regard the prospects of success as slight. In Byron, the Court considered it to be relevant that an appeal had already been dismissed and the proceeding in question was for special leave to make a further appeal.
In this case, the matter was substantially argued on the basis that leave to appeal was sought in relation to SCI2011/1936 only. It only became apparent towards the end of the proceedings that the Applicant intended to institute an application for leave to appeal in relation to SCI2011/1937 also. Not only was the application in that matter dismissed by Magistrate Braun, but the appeal against that decision was dismissed by both Mukhtar AJ and Whelan J. There was nothing put to me as to why there was any reasonable basis for leave to appeal now being granted in respect of that matter.
In relation to the likelihood of leave being granted in SCI2011/1936, no grounds were available for consideration by the Court. Whelan J gave detailed consideration to the relevant case law as set out in paragraphs [29] to [44] of his judgment. It is of particular relevance that he referred to the Code as part of a national legislative scheme.

He referred to decisions in that regard of courts in New South Wales, South Australia and Queensland, and he concluded not only that he should follow that clear line of authority but that uniformity of decisions in the interpretation of uniform national legislation was an important factor in itself. Such a consideration will undoubtedly also have relevance to the Appeal Court.
While I accept that the position in this case does not involve an application for special leave to appeal to the High Court, I do consider it relevant that the matter has been considered by both an Associate Justice of the Supreme Court and a Justice of that Court, and leave to appeal will need to be granted for the applicant to proceed any further. I consider those to be important matters going to the merit of the application.
The second issue I have given consideration to is the time that an appeal may take to be heard. While the Applicant put that the application for leave to appeal was likely to be heard by mid-December, it was also put that a further application for leave to appeal in SCI2011/1937 would be lodged in the next week or so. It is not possible to tell when that matter might be dealt with and if it is joined with the existing application, it would appear unlikely that a mid-December date could be guaranteed. This is a case where the initial application was made by the creditor in March 2010 and judgment given in the creditor’s favour in March 2011. It is not unduly pessimistic to consider the matter of leave to appeal, and, if granted, hearing of the appeal may take the matter to a two-year anniversary of its original lodgement.
The next matter I have considered is whether a stay of the orders has been granted. The Applicant has argued that weight should not be given to the fact that there is currently no stay of the orders of Magistrate Braun and has not been one since 8 April 2011. I accept that in part the issue of a stay has not been dealt with by the Supreme Court because Mukhtar AJ did not have to consider the matter as he dismissed the appeal and Whelan J delivered his judgment only one day prior to the hearing of this application. Nevertheless, the fact that material has not to this point been put before a Court, dealing with the basis on which such a stay ought to be granted, is a relevant consideration.
Also relevant, in my view, is the issue of the financial position of the application. While in Nguyen the Court was dealing with an application where there was evidence that the applicant was seeking a release from all or part of his tax liability on grounds of serious hardship and was, to quote, “in fact insolvent”,[20] the capacity of the Court to give consideration to the solvency, or otherwise, of the applicant in such proceedings is also supported by the judgment of Tracey J in Kakavas v Paradise Enterprises Limited.[21]
[20] Nguyen Ex Parte v The Commissioner of Taxation (1994) 54 FLR 403, page 408 at paragraph D.
[21] [2010] FCA 915.
In this case, the Applicant has chosen not to provide any substantial information concerning his financial circumstances to this Court or to the Magistrates’ Court in the proceedings before Magistrate Braun. There is therefore no evidence of the means of the debtor and his capacity to pay the debt. If he is indeed insolvent there would appear to be no point in delaying the inevitable.
The final matter to which I have given consideration is the impact on the parties. This brings me to the issue of the potential impact on both of them should the application be refused. In Conway, the Court recognised the impact of the exercise of the discretion on the creditor. I refer to paragraph [30] of that judgment of the Full Court where the Court said:
In exercising the discretion whether or not to extend the time for compliance with a bankruptcy notice, the creditor should not be routinely frustrated from enforcing the judgment by the device of the institution of an appeal. Section 41(6C), to an extent, recognises that position. Moreover, the date of the commission of the act of bankruptcy is significant to determine the commencement of the bankruptcy if a sequestration order is made: s 115(1), and so to determining the property of the bankrupt which is divisible amongst the creditors of the bankrupt: s 116(1). It also has significance to the application of ss 118, 120, 121 and 122 of the Act. The delay in the commission of the act of bankruptcy, if ultimately the requirements of a bankruptcy notice are not complied with and a sequestration order is made, by an extension of time to comply with a bankruptcy notice may therefore have significant consequences to the creditors of the bankrupt.[22]
[22] Conway v Jackson [2001] FCA 230 at paragraph [30].
While the Court also noted that the extension of time to comply did not preclude other judgment creditors from procuring the issue and services of bankruptcy notice or presenting a petition for a sequestration order, there was no evidence before me in this case of whether such considerations were relevant. The relative positions of the creditor and the debtor were also considered by Lehane J in Byron; his Honour quotes, initially, from the decision of Sheppard J in Geard where he says:
A further factor is that this is an application to extend time for compliance with a bankruptcy notice; it is not the hearing of a bankruptcy petition. The refusal of the application will not affect the status of the debtor but it will mean that he, in all probability, will commit an act of bankruptcy. That act of bankruptcy will be available to the petitioning creditors or to any other creditor upon which to base a bankruptcy petition at any time in the period of six months after the act of bankruptcy has been committed. Otherwise the debtor's position will remain unaffected by what the Court does.
If the appeal is ultimately dismissed and the judgment stands with the consequence that the bankruptcy proceedings go on, it may be quite important to the petitioning creditor, whoever he or she may be, to the general body of creditors and to the trustee in bankruptcy, that there be, for the purposes of the administration of the bankrupt estate, an act of bankruptcy committed at an earlier time than would be the case if this application were acceded to.[23]
[23] Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264; [1997] FCA 151.
And Lehane J went on further to say:
The commission of an act of bankruptcy is, undoubtedly, a serious matter; it is, however, of a different order of gravity from the change of status brought about by the making of a sequestration order; and there is also to be taken into account the interest of both the judgment creditor and other creditors of the judgment debtor in ensuring that, if ultimately a sequestration order is made, the relevant act of bankruptcy occurs earlier rather than later. [24]
[24] Ibid.
The Applicant refers to the special disadvantage he would suffer under the provisions of the Legal Profession Act 2004. There are undoubtedly potential consequences for the applicant but not inevitable ones. The Applicant can avoid being served with a notice of a creditor’s petition by paying the debt. He can explain to the Board that he is seeking leave to appeal the orders of Whelan J, upholding the orders made by Magistrate Braun. It is not inevitable that the service of notice of a creditor’s petition will lead to a sequestration order being made.

It would be open to the Court dealing with the creditor’s petition to look again at the issue of whether proceedings on that petition should be stayed or adjourned in the light of the application for leave to appeal.
The Applicant placed considerable weight on the judgment of Edmonds J in Coshott and the weight given by his Honour in that case to the timing of the service of the bankruptcy notice. The history of these proceedings, in my view, is quite different to those being considered by his Honour in that case.
In the Applicant’s outline of submissions, the Applicant sought extension of time for compliance with a Bankruptcy Notice until either the hearing of his pending appeal or the refusal of leave to make it. The Applicant went on to say the most convenient form of such an order would be an extension of time until further order.
I am not satisfied on the material before me that I should exercise the discretion of the Court under s.41(6A) to grant such an order and the application is therefore dismissed.

I certify that the preceding fifty-four (54) paragraphs are a true copy of the reasons for judgment of Whelan FM

Date: 8 November 2011