Wu v Tang
[2013] FCA 927
FEDERAL COURT OF AUSTRALIA
Wu v Tang [2013] FCA 927
Citation: Wu v Tang [2013] FCA 927 Parties: XIAO PING WU, XIAOLIANG WU and PINSI CUI v JIAN XUN TANG File number(s): NSD 1449 of 2013 Judge(s): BUCHANAN J Date of judgment: 16 September 2013 Catchwords: PRACTICE AND PROCEDURE – whether filing of notice of intention to appeal represented institution of proceedings
BANKRUPTCY – consideration of power in s 41(6A) of the Bankruptcy Act 1966 (Cth) to extend time to comply with a bankruptcy notice
Legislation: Bankruptcy Act 1966 (Cth), ss 40(1)(g), 41(6A), 41(6A)(a), 41(6A)(b), 41(6C), 52(2)(b)
Uniform Civil Procedure Rules 2005 (NSW), rr 51.6, 51.8, 51.9(3), 51.44Cases cited: Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137
Dennis v Cranitch [2005] FMCA 168
Lord v Rankine [2010] FMCA 668
Tang v Wu [2013] NSWSC 583
Wren v Mahony (1972) 126 CLR 212Date of hearing: 4 September 2013 Date of last submissions: 4 September 2013 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 22 Applicants: The First Applicant appeared in person Solicitor for the Respondent: Mr M Di Lizio, Di Lizio & Associates
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1449 of 2013
BETWEEN: XIAO PING WU
First ApplicantXIAOLIANG WU
Second ApplicantPINSI CUI
Third ApplicantAND: JIAN XUN TANG
Respondent
JUDGE:
BUCHANAN J
DATE OF ORDER:
16 SEPTEMBER 2013
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The application filed on 27 August 2013 is dismissed with costs.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1449 of 2013
BETWEEN: XIAO PING WU
First ApplicantXIAOLIANG WU
Second ApplicantPINSI CUI
Third ApplicantAND: JIAN XUN TANG
Respondent
JUDGE:
BUCHANAN J
DATE:
16 SEPTEMBER 2013
PLACE:
SYDNEY
REASONS FOR JUDGMENT
On 16 May 2013, judgment was entered for the present respondent in the Supreme Court of New South Wales, Equity Division in the sum of $208,827.00 (Tang v Wu [2013] NSWSC 583). The judgment reflected terms of settlement in earlier proceedings in the Supreme Court which were filed in those earlier proceedings on 4 July 2012. In the judgment given on 16 May 2013, Pembroke J dealt with an application to enforce the terms of settlement and decisively rejected arguments by the present applicants that the terms of settlement were obtained by fraud and deception.
On 17 June 2013, a bankruptcy notice was issued by the respondent for the amount of the judgment. The bankruptcy notice was served on 4 July 2013. A person upon whom a bankruptcy notice has been served has 21 days to comply with it unless, within that time, the person has applied to a court to set aside the bankruptcy notice or, in the case of a bankruptcy notice founded on a judgment debt, instituted a proceeding to set aside the judgment or order. In either event, the court may extend time to comply with the bankruptcy notice under s 41(6A) of the Bankruptcy Act 1966 (Cth) (“the Act”).
On 24 July 2013, the applicants applied to this Court for an order to set aside the bankruptcy notice and an interlocutory order for an extension of time to comply with the bankruptcy notice “until the outcome of the appeal proceedings to be determined”. The appellants claimed to have instituted an appeal against the judgment and orders of Pembroke J of 16 May 2013. An extension of time to comply with the bankruptcy notice was initially granted by a Registrar of the Court until 7 August 2013. On that day, the application for an extension of time was again listed before the District Registrar.
Evidence before the District Registrar showed:
·the judgment debt remained outstanding;
·the applicants had not complied with the terms of the order of the Supreme Court and, in particular, had not secured the debt by giving a mortgage over identified property at Hurstville, New South Wales, as contemplated by the terms of settlement and as ordered by Pembroke J;
·no grounds of appeal against the order of the Supreme Court had been filed by the applicants although, on 7 June 2013, the applicants had filed a notice of intention to appeal.
Section 41(6A) and (6C) of the Act provide:
41 Bankruptcy notices
…
(6A)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.
(6C)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.
Although the application to this Court took the form of an application to the Court to set aside the bankruptcy notice, it was confirmed in the proceedings before the District Registrar on 7 August 2013 (as appeared in any event from the form of interlocutory order sought by the application) that, in seeking an extension of time to comply with the bankruptcy notice, the applicants relied on the filing of the notice of intention to appeal in the Supreme Court. That notice was attached to an affidavit sworn by the first applicant in support of the application to this Court. That is to say, when the applicants sought an extension of time to comply with the bankruptcy notice they relied upon s 41(6A)(a) and not upon s 41(6A)(b).
In his ex tempore reasons, the District Registrar referred to Dennis v Cranitch [2005] FMCA 168, where the Federal Magistrates Court of Australia accepted an argument that filing a notice of appeal without appointment (sometimes called a ‘holding’ appeal) in the Supreme Court of New South Wales did not represent the institution of a proceeding to set aside a judgment, whereas the filing of a notice of appeal with appointment, including a statement of grounds relied on, may institute such a proceeding.
The District Registrar also referred to authorities in this Court to the effect that s 41(6A) of the Act represents an exclusive source of power to extend time to comply with a bankruptcy notice (see Seller v Deputy Commissioner of Taxation (2011) 282 ALR 80 at [38] and the further authorities there cited).
The District Registrar applied the reasoning in the cases to which he referred to the notice of intention to appeal filed by the applicants. Accordingly, he took the view that the applicants had not taken a step which served to engage the operation of s 41(6A) of the Act or which provided a basis upon which time to comply with the bankruptcy notice might be extended, or the bankruptcy notice might be set aside. He dismissed the application with costs.
The applicants have now applied for a review of the District Registrar’s decision. For the reasons which follow, I agree with the decision of the District Registrar.
The notice of intention to appeal, upon which the applicants relied to support their application to this Court for an extension of time to comply with the bankruptcy notice, was filed in accordance with r 51.6 of the Uniform Civil Procedure Rules 2005 (NSW) (“the UCPR”). Under r 51.6 it is open, within 28 days of a judgment, to file a notice of intention to appeal within three months of the judgment. The notice of intention to appeal filed on 7 June 2013 advised of an intention to appeal by 16 August 2013. A notice of appeal was filed on 16 August 2013. That notice of appeal was filed well outside the period prescribed by s 41(6A) of the Act. Unless the earlier notice of intention to appeal instituted proceedings to set aside the orders made on 16 May 2013 in its own right, the power to extend time for compliance as contained in s 41(6A)(a) of the Act was not available when the application for an extension of time was filed in this Court on 24 July 2013 because no step had been taken to institute a proceeding to set aside the judgment debt.
Rule 51.9(3) of the UCPR provides:
51.9 Effect of service of notice of intention to appeal
…
(3)The filing and service of a notice of intention to appeal does not operate to commence proceedings in the Court.
In my view, the District Registrar was therefore correct to conclude that filing the notice of intention to appeal did not represent the institution of proceedings to set aside the judgment debt. Accordingly, it must be concluded that no proceedings to set aside the judgment debt relied upon by the respondent had been instituted within the time allowed by s 41(6A)(a). No other ground which might be available under s 41(6A)(b) was identified or relied upon.
Although the applicants did not rely upon s 41(6A)(b), and although there was no suggestion that this Court might be asked to set aside the bankruptcy notice on some ground other than the challenge to the judgment debt in the potential appeal, it is as well to address some comments to whether any independent ground for setting aside the bankruptcy notice might arguably have been available to support the application for an interlocutory extension of time in which to comply with the bankruptcy notice.
At the hearing of the application to review the decision of the District Registrar, the first applicant (“Ms Wu”) appeared in person. The second and third applicants did not appear, but it appeared to be assumed that I would treat what Ms Wu said as submissions also on their behalf.
Section 40(1)(g) of the Act provides that a person commits an act of bankruptcy if:
40 Acts of bankruptcy
(1)(g)… a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:
(i)where the notice was served in Australia—within the time specified in the notice; or
(ii)where the notice was served elsewhere—within the time fixed for the purpose by the order giving leave to effect the service;
comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained; …
In the affidavit in support of the application to this Court, and in Ms Wu’s written submissions on the application for review, the ground which was relied upon to suggest that the applicants had not committed an act of bankruptcy was the contention that they are not indebted to the respondent. The contention that the applicants are not indebted to the respondent depends, in turn, upon the argument that the judgment debt was based upon terms of settlement which were obtained by fraud. That argument is the foundation for the appeal now filed in the Supreme Court. Those were the same matters which were raised before the Supreme Court earlier this year when the present respondent applied to enforce the settlement reached on 4 July 2012.
Those matters were the subject of explicit discussion by Pembroke J in his judgment. In his judgment of 16 May 2013, Pembroke J described the circumstances in which the terms of settlement were agreed. His Honour rejected complaints by the applicants that they misunderstood the nature or effect of the settlement to which they then subscribed. His Honour decisively rejected the assertions of the present applicants that the terms of settlement were obtained by fraud and should not be enforced against them.
The fact that an appeal has now been filed does not operate as a stay on the judgment (UCPR r 51.44). There is, therefore, no basis on which to doubt the present foundation for the bankruptcy notice. No independent ground has been identified upon which this Court might act to set it aside.
In her oral submissions, Ms Wu drew my attention to passages in the judgment of the High Court in Wren v Mahony (1972) 126 CLR 212 at 222-224 and a judgment of the Federal Magistrates Court of Australia in Lord v Rankine [2010] FMCA 668 at [28]-[29]. Those cases dealt with making sequestration orders. The passages relied on from Wren v Mahony reflect the willingness of bankruptcy courts to go behind judgment debts in appropriate cases when deciding whether to make a sequestration order. That is not the present case. Lord v Rankine referred to the use of the bankruptcy process for improper purposes. There is no evidence to support an assertion of that kind in the present case.
As there is no power to extend compliance with the bankruptcy notice under s 41(6A)(a) of the Act and as no ground was identified in the application to this Court, or otherwise, which might engage the operation of s 41(6A)(b) of the Act, the District Registrar was correct, in my view, to dismiss the application in its entirety, leaving the applicants to their appeal in the Supreme Court. If a creditor’s petition is presented it will be open to the applicants to resist the making of a sequestration order upon grounds available under s 52(2)(b) of the Act. If the appeal is pending, that is a circumstance which may be taken into account at that time (see Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137 at 148).
The application for review will be dismissed with costs.
I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Buchanan. Associate:
Dated: 16 September 2013
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