Zdrilic v Hickie
[2014] FCCA 1593
•24 July 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| ZDRILIC & ANOR v HICKIE & ANOR | [2014] FCCA 1593 |
| Catchwords: BANKRUPTCY – Application seeking review of Registrar’s decision to dismiss application to set aside a bankruptcy notice – Appeal proceedings in NSW Court of Appeal dismissed leading to Registrar’s dismissal of application to set aside bankruptcy notice – Application for review of registrar’s decision subsequently filed – Application for special leave to appeal filed in High Court – Relevant principles – Application for review dismissed. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.40(1)(g), 41(6A), 41(6C) Federal Circuit Court Rules 2001 (Cth), rr.3.04, 20.01 |
| Anderson v Kirk & Anor (2004) 82 ALD 668 Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264 Herchenroder v Smith [2003] FMCA 96 Hickie v Land Enviro Corp Pty Ltd [2014] NSWSC 472 James v Abrahams (1981) 34 ALR 657 Javeev Pty Ltd v Deane (1997) 72 FCR 398 Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd [2012] NSWSC 382 Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd [2013] NSWCA 35 Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd [2014] NSWCA 34 Miller v Nationwide News Pty Ltd [2008] FMCA 1576 O’Farrell v Network Entertainment Pty Ltd [2005] FMCA 1936 Portellos v GE Finance Australasia Pty Ltd [2013] FCCA 1044 Re Dalco; Ex parte Dalco v Deputy Commissioner of Taxation (1986) 67 ALR 605 Re Udowenko; Ex parte Mitchell (1996) 69 FCR 299 |
| First Applicant: | SAM ZDRILIC |
| Second Applicant: | AMY ZDRILIC |
| First Respondent: | DAVID HICKIE |
| Second Respondent: | VOCIFA PTY LTD |
| File Number: | SYG 800 of 2013 |
| Judgment of: | Judge Lloyd-Jones |
| Hearing date: | 28 April 2014 |
| Delivered at: | Sydney |
| Delivered on: | 24 July 2014 |
REPRESENTATION
| The Applicants: | The First Applicant appeared in person on behalf of both Applicants. |
| Solicitor for the Respondents: | Ms V. Botsikas of Bartier Perry |
ORDERS
Pursuant to reg.20.01(2)(a) of the Federal Circuit Court Rules 2001 (Cth), the time for filing the applicants’ application for review filed on 27 March 2014 be extended to 27 March 2014.
The application for review filed on 27 March 2014 be dismissed.
Any creditor’s petition founded on the basis of a failure to comply with the requirements of Bankruptcy Notice No. BN 159172 of 2013 be referred to the docket of Judge Lloyd-Jones for case management and hearing.
The applicants pay the respondents’ costs of and incidental to the application for review filed on 27 March 2014 as agreed or assessed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 800 of 2013
| SAM ZDRILIC |
First Applicant
| AMY ZDRILIC |
Second Applicant
And
| DAVID HICKIE |
First Respondent
| VOCIFA PTY LTD |
Second Respondent
REASONS FOR JUDGMENT
Introduction
Before the Court is an application seeking review of the decision of a registrar of this Court dismissing an application by Sam and Amy Zdrilic (the “Applicants”) to have a bankruptcy notice set aside that had been issued against them and subsequently served on them by the respondents in these proceedings, David Hickie and Vocifa Pty Ltd (the “Respondents”).
On 21 March 2013, on the application of the Respondents, Bankruptcy Notice BN 159172 of 2013 was issued by the Official Receiver (the “Bankruptcy Notice”) against the Applicants pursuant to a judgment/order of the Supreme Court of NSW in the sum of $358,588.89.
The Bankruptcy Notice was subsequently served on the Applicants on 5 April 2013. On 17 April 2013 the Applicants filed an application in this Court seeking the following final orders:
1. The Bankruptcy Notice BN 159172 issued 21.3.2013, which was served on me on 5.4.2013, be set aside. A copy of that Bankruptcy Notice accompanies this application.
2. Costs.
3. Such other order as the court deems fit
That application also sought the following interim order:
1. That the time for compliance with the Bankruptcy Notice be extended up to and including 31 October 2013 on the grounds that the Applicants have instituted proceedings to set aside the judgment in respect of which the Bankruptcy Notice was issued.
Time within which to comply with the Bankruptcy Notice was extended up to and including the first return date before a registrar of this Court, being 30 April 2013.
The matter then came before Registrar Wall on 30 April 2013 who made the following orders on that date:
THE COURT ORDERS THAT TO THE EXTENT THAT THE JURISDICTION IS ENGAGED AND ON THE CONDITION THAT:
(a) The Applicant take all necessary steps to have the stay application heard in the New South Wales Supreme Court heard on 6 May 2013, and;
(b) The Applicant prosecute the appeal in the New South Wales Supreme Court with due dispatch, and;
(c) The Applicant files and serves, within 7 days, an affidavit annexing the Grounds of Appeal (relied upon and filed in the New South Wales Supreme Court) required by rule 3.02(1)(c) of the Federal Circuit Court (Bankruptcy) Rules 2006
1. Time for compliance with Bankruptcy Notice No. BN159172 issued 21 March 2013 be extended up to and including 21 May 2013
2. The application be adjourned until 11:30am on Tuesday, 21 May 2013.
On 2 May 2013 the Affidavit of Sam Zdrilic sworn on the same day was filed on behalf of the Applicants, in compliance with the orders of Registrar Wall.
On four further occasions the matter came before a registrar of the Court and was adjourned by consent.
The matter then returned before Registrar Wall on 18 March 2014. The learned Registrar was informed that the Applicants’ appeal against the judgment/order founding the Bankruptcy Notice had been dismissed. The Applicant claimed, however, that he was in the process of seeking to apply for special leave in the High Court. Ultimately, Registrar Wall found that under s.41(6A)(a) there was no power to extend time to comply with the Bankruptcy Notice where no extant proceedings were on foot seeking to set the judgment/order aside. Registrar Wall dismissed the application on that day and made no order as to costs.
Statutory Framework
An application for review of a decision of a registrar of this Court is dealt with in Division 20.2 of the Federal Circuit Court Rules 2001 (Cth). His Honour Judge Simpson stated in Portellos v GE Finance Australasia Pty Ltd [2013] FCCA 1044 at [11]-[12]:
11. Section 104(2) of the Federal Circuit Court Act 1999 (Cth) provides that a party to a proceeding in which a Registrar has exercised any of the powers of the Federal Circuit Court under s 102(2), or under a delegation under s 103(1), may apply to the Federal Circuit Court for review of that exercise of power. Under s 104(3), the Federal Circuit Court may, on an application under s 104(2), or on its own initiative, review an exercise of power by a Registrar under s 102(2) or pursuant to a delegation under s 103(1) and may make any order or orders it thinks fit in relation to the matter in respect of which the power was exercised.
12. Rule 20.03 of the Federal Circuit Court Rules 2001 (Cth) provides that the review of an exercise of power by a Registrar shall proceed by way of hearing de novo. The current application is therefore not an appeal from the Registrar’s decision in the strict sense but is a complete re-hearing of the matter, but this time before a justice within the meaning of Ch III of the Commonwealth of Australia Constitution Act 1900 (Cth). Emmett J clarified the true nature of the hearing de novo in Totev v Sfar (2008) 167 FCR 1932, cited with approval by Nicholas J in Boutros v Santa Sabina College Ltd [2011] FCA 477.3.
12. A hearing de novo is different from an appeal stricto sensu and is different from an appeal by way of rehearing. In the case of an appeal stricto sensu, the question would be whether, upon the material before the registrar, the conclusion reached by the registrar was correct. In an appeal by way of rehearing, the appellate court would rehear the matter as at the date of the appeal, but on the evidence called before the registrar, subject to a power to receive further evidence where appropriate: the rights of the parties would be determined by reference to the circumstances, including the law, as they existed at the time of rehearing (Harris v Caladine 172 CLR at 125). In each case any question concerning the exercise of discretion would be subject to the restrictions imposed on an appellate court in reviewing the exercise of a discretion (see House v R [1936] HCA 40 ; (1936) 55 CLR 499.
13. In the case of a hearing de novo, however, the judge reviewing the order begins afresh and exercises for himself or herself any discretion exercised by the registrar. The parties commence the proceeding again, subject to any rules concerning the use of evidence adduced before the registrar. The hearing de novo involves the exercise of the original jurisdiction and the petitioner, in the case of a bankruptcy petition, must start again, call witnesses and make out the petitioner’s case (Harris v Caladine 172 CLR at 124).
14. Because the hearing of an application for review of a sequestration order is a hearing de novo, it would not be sufficient for the reviewing judge to be satisfied that the registrar made no error and simply to dismiss the application for review. The judge who hears the review application must hear the petition afresh and must be satisfied as to the matters referred to in s 52 of the Bankruptcy Act. Thus, the reviewing judge must herself or himself be satisfied with the proof of:
• the matters stated in the petition;
• the service of the petition; and
• the fact that the debt or debts on which the petitioning creditor relies is or are still owing.
The reviewing judge must also exercise afresh the discretions conferred by s 52(2).
15. In particular, unless the Bankruptcy Rules are waived, the judge must have the affidavits referred to in r 4.06 of the Bankruptcy Rules, which must be sworn shortly before the hearing. Except in the case of a review on the same day as the sequestration order was made, affidavits relied upon before the registrar would not satisfy r 4.06. In the absence of fresh affidavits, it would be necessary that compliance with the Bankruptcy Rules be waived.
A debtor, when served with a bankruptcy notice, has 21 days in which to comply with that bankruptcy notice before an act of bankruptcy is committed: see s.40(1)(g) of the Bankruptcy Act 1966 (Cth) (the “Bankruptcy Act”).
Under ss.41(6A) and 41(6C) of the Bankruptcy Act, the Court has a power conferred on it in certain circumstances to extend time for a debtor to comply with the requirements of a bankruptcy notice (see [36]-[37] below).
The Court also has the power to set aside bankruptcy notices in certain circumstances, however, it is not necessary to have further regard to these circumstances for the purposes of these reasons.
Current Proceedings
The Applicants on 27 March 2014 filed an application for review of Registrar Wall’s orders of 18 March 2014 (the “Review Application”). The Review Application seeks the following orders:
1. That the orders of Registrar Wall delivered on 18 March 2014 be set aside and in lieu thereof that the following orders be made:
2. That the time to comply with the Bankruptcy Notice be further extended until 30 days after the High Court determination of the application for special leave to appeal, or if that application is successful, 30 days after the High Court’s determination of the appeal against order 4 of the NSW Court of Appeal judgment dated 4 March 2014.
3. That the application be adjourned until 30 days after the High Court determination of the application for special leave to appeal, or if that application is successful, 30 days after the High Court’s determination of the appeal against order of the NSW Court of Appeal dated 4 March 2014.
4. Costs.
5. Such further or other orders as the Court sees fit.
The Review Application came before a registrar of the Court on two occasions and was referred to this Court on 28 April 2014. The Review Application was then heard on that date.
Background
There has been significant litigation in recent history involving not only the parties to the current proceedings, but a number of other parties as well. I have had regard to the judgment of the NSW Court of Appeal and it is convenient to address these reasons insofar as they relate to the Review Application.
The most recent decision of the NSW Court of Appeal in Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd [2014] NSWCA 34 was an application by the Applicants (as well as two other parties, being companies related to the Applicants) seeking an extension of time to appeal against what can be described as the substantive judgment of Justice Stevenson in Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd [2012] NSWSC 382. It should be noted the Applicants (and the two related companies) brought an application seeking an extension of time to lodge a notice of appeal before Allsop P (as he then was), which his Honour dismissed: Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd [2013] NSWCA 35.
In the judgment of Beazley P, Basten and Leeming JJA in Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd [2014] NSWCA 34 the headnote provides a convenient background of the events leading up to and including the commencement of litigation and states:
In 1998, Land Enviro Corp Pty Ltd (“LEC”) had contracted to purchase an area of land for $2.5 million from Powercoal Pty Ltd. LEC (then under the control of the second applicant, Mr Zdrilic) was unable to obtain the necessary finance to complete the purchase and the land was eventually purchased by another company, HTT Huntley Heritage Pty Ltd (“HTT”), which had been incorporated by a number of directors of LEC shortly before Powercoal sent a notice to complete to LEC. In 2001, LEC commenced proceedings alleging breaches of duty and improper use of information and opportunities against these directors; HTT was joined as a defendant. In 2003 LEC placed a caveat over the land.
In 2004 the parties agreed to settle the 2001 proceedings and allow the development of the site to go ahead. By this time, a Mr Renshall was directing the operations of HTT. Key features of this agreement included making Mr Zdrilic a director of HTT; the discontinuance of the 2001 proceedings and the removal of the caveat, once HTT had obtained funding to pay off debts incurred by LEC and HTT, to allow the land to be developed.
Mr Zdrilic discontinued the proceedings and the caveat was withdrawn. However, this occurred without the necessary funding being obtained by HTT. Mr Renshall had made representations to Mr Zdrilic that funding was forthcoming. Mr Renshall also informed Mr Zdrilic that a condition of the funding was Mr Zdrilic surrendering his involvement with HTT as agreed to in the settlement. In 2006, when funding did not appear to be forthcoming, LEC lodged a caveat on the title to the land and, in 2007, commenced proceedings to set aside the settlement made in 2004 on the basis that Mr Zdrilic had been misled.
The trial judge dismissed these proceedings on the basis that Mr Zdrilic was aware there was no funding in place when the agreement was concluded and made no complaint. LEC sought to appeal. A notice of appeal should have been filed by 30 July 2012 but was belatedly filed on 8 November 2012. On 21 February 2013 Allsop P dismissed an application for an extension of time and consequentially dismissed the notice of appeal as incompetent. The principal ground for dismissing the application was the lack of any real or significant prospect of success. LEC sought to review that judgment, pursuant to s 46(4) of the Supreme Court Act 1970 (NSW).
In the reasons of the Court of Appeal, Basten JA stated in respect of the Respondents (to these proceedings) and the parties more generally at [4]-[7]:
4. The active applicant, both before Allsop P and in the review proceedings, was Mr Sam Zdrilic, the second applicant. He appeared, with leave, for the company, Land Enviro Corp Pty Ltd, for his wife, Amy Zdrilic, and for the fourth applicant, Amy Holdings Pty Ltd There is no need to consider the separate interests of the applicants in this proceeding.
5. It is, however, necessary to consider the separate interests of the respondents. They fell into three groupings, which may be addressed in reverse order of significance for the present application. Thus, Sentel Pty Ltd, the fourth respondent, was properly joined as a party, but took no part in the proceedings. Its role, as a corporate entity in which both applicants and respondents had an interest, was essentially neutral.
6. Secondly, the third respondent (Mr David Hickie), and the sixth respondent (Vocifa Pty Ltd) had common representation and may be identified as the “Hickie interests”. As will be noted below, the primary case for the applicants was that they had suffered loss and damage as a result of misrepresentations for which Mr Renshall (the first respondent) was primarily liable. In the original pleadings, the claim against the Hickie interests was based on Mr Renshall acting as their agent. However, the trial judge found that there was no evidential basis for the agency: at [997]. Nothing was said in the course of the proceedings in this court to cast doubt on that finding. Although part of the relief claimed by the applicants was the setting aside of the settlement of the 2001 proceedings, to which the Hickie interests were party, it was not submitted that they were a necessary party on that basis.
7. In brief submissions to this court, the Hickie interests noted that they had incurred significant costs which it appeared they would be unlikely to recover, even if the application were to be dismissed, and that factor, combined with the absence of any arguable case in respect of their liability, meant that the proceedings for review should be dismissed with respect to them. That submission should be accepted.
I note Basten JA’s views in respect of the Respondents were agreed with by Beazley P and Leeming JA.
The Court of Appeal made the following orders in respect of the Respondents on 4 March 2014, amongst others:
4. Dismiss the application in relation to [the Respondents].
5. The applicants to pay [the Respondents’] costs of the review application.
The Court, however, granted the Applicants an extension of time in which to appeal against the first, second, fourth and fifth respondents.
The Applicants’ special leave application in the High Court only concerns Order 4 of the Court of Appeal of 4 March 2014. The application for special leave was filed on 25 March 2014 and pleads the following grounds:
1. The applicants apply for special leave to appeal from part of the judgment of the NSW Court of Appeal dated 4 March 2014. The special leave is sough in relation to order 4, which dismisses the application for leave to file out of time in relation to the third and sixth respondents, Mr Hickie and Vocifa Pty Ltd [Hickie Respondents].
2. The special leave is sought under Section 35A because the interests of the administration of justice for this case and, in fact, generally, warrant consideration by the High Court. The dismissal of the application to file out of time, against the Hickie respondents, was unjust and unwarranted and the application against them should not have been treated differently to the application against the first, second and fifth respondents (HTT, Mr Renshall and Devubo Pty Ltd) [HTT Respondents], which was successful because the impact of not granting special leave to appeal in respect of the Hickie respondents will be the deprivation of the Applicants’ ability to prosecute the appeal against the HTT respondents and thereby deprive the Applicants of access to the Court, and thereby financial ruin.
3. The Court erred in not granting an extension of time within which to appeal against the third and sixth respondents, being necessary parties to the appeal, because:
(a) by the appeal, the applicant’s [sic] seek to set aside agreements, including the HOA and the Deed, to which all respondents are a party;
(b) the consequence of the judgment is that the agreements might be set aside against some respondents but left active in relation to others.
4. The Court erred in finding that the [sic] there was no arguable case in respect of the Hickie interests, apparently on the basis that the trial judge found that there was no evidential basis that the Second Respondent was acting as agent for the Hickie interests in engaging in misleading or deceptive conduct which induced the entry into the relevant agreements, notwithstanding that the trial judge found that:
(a) there was a factual basis for the agency in respect of the negotiation of those same agreements; and
(b) the misleading representations were made during the course of negotiations.
5. The Court erred in not applying the findings made in respect of the HTT respondents to the Hickie respondents, those findings being that the applicants have a reasonably arguable case to succeed on appeal, with the delay being short and no material prejudice.
6. The Court made the following erroneous findings which gave rise to its ultimate error:
(a) finding that the Hickie respondents had incurred significant costs in circumstances where those costs were actually met by HTT [Judgment 7]/
(b) dividing the respondents erroneously into two groups (Renshall interests) and (Hickie interests) and then delivering a different decision for each group;
(c) finding that HTT (first and main respondent) as being part of “Renshall’s interests” group [Judgment 8];
(d) finding that the misrepresentations were made by Mr Renshall instead of HTT and Mr Renshall [Judgment 6].
The decision of his Honour Harrison J in Hickie v Land Enviro Corp Pty Ltd [2014] NSWSC 472 on 29 April 2014, the day after the hearing of the Review Application, is of particular assistance in these proceedings. In that decision his Honour dismissed a notice of motion filed by the Applicants (and their related companies) seeking to extend a stay granted by her Honour McCallum J of the order for costs against the applicants that forms the basis of the Bankruptcy Notice.
It is convenient, for a number of reasons, to reproduce significant portions of Harrison J’s judgment. At [1]-[15] therein his Honour stated:
1. By notice of motion filed on 25 March 2014, Land Enviro Corp Pty Ltd, Sam Zdrilic, Amy Zdrilic and Amy Holdings Pty Ltd (the defendants) seek the following orders:
1. That a stay of the costs order in the Supreme Court of New South Wales proceedings under the file number 2013/0078308 be extended until 30 days after the High Court of Australia makes a determination in relation to the application for leave to appeal against order 4 of the judgment of the NSW Court of Appeal dated 4 March 2014, or if that application is successful, 30 days after the High Court‘s determination of the appeal.
2. In the alternative to order 1, that order 4 of the judgment of the NSW Court of Appeal dated 4 March 2014 be stayed until 30 days after the High Court determination of the application for leave to appeal, or if the application is successful, 30 days after the High Court‘s determination of the appeal against order 4 of the NSW Court of Appeal judgment dated 4 March 2014.
2. In order to put these claims in context, it is necessary briefly to trace the not uncomplicated history of the litigation so far.
Background
3. The judgment debt that is the subject of these proceedings was entered on 14 March 2013 and arises out of a costs order made in proceedings commenced on 26 March 2007, which were ultimately heard and determined by Stevenson J. Orders were sought in those proceedings to set aside a consent judgment dated 1 September 2004 dismissing earlier proceedings in the Equity Division in which Land Enviro Corp Pty Ltd was the sole plaintiff. By an amended statement of claim filed on 11 December 2002, Mr Hickie had been joined to those proceedings, but they were dismissed by consent on 1 September 2004. The plaintiff sought to re-litigate those proceedings.
4. Stevenson J heard the matter between 6 February 2012 and 16 March 2012, over more than 25 days of hearing. The case against the plaintiffs alleged that Robert Renshall made actionable representations to the defendants. Stevenson J found that the alleged representations had either not been made or were not actionable if they had been. It was not alleged that Mr Hickie made any of the representations, either on his own behalf or on behalf of Vocifa. His Honour referred at [985] to the fact that the defendants‘ counsel had conceded as much. His Honour disposed of the case against the plaintiffs at [987] and [997]–[998] in these terms:
[987] As to particular (c), Mr Jucovic accepted that a representation by Mr Renshall of his asserted authority to negotiate on behalf of Mr Hickie would not be sufficient to establish agency. Any such representation would have to come, expressly or implicitly, from Mr Hickie: Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 503: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [36].
…
[997] In those circumstances, I cannot see how Mr Zdrilic could reasonably have inferred that the representations allegedly made to him by Mr Renshall concerning the availability of funds (as opposed to negotiation of the terms of the Heads of Agreement) were made on behalf of Mr Hickie.
[998] For that reason, my opinion is that HTT and Mr Renshall were not acting as Mr Hickie’s agent for relevant purposes, that is to say for the purposes of making the representations as to the availability of funds.
See Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd [2012] NSWSC 382.
5. His Honour published his reasons for judgment on 20 April 2012, dismissing the defendants’ claims pleaded in what by then had become their third amended statement of claim. No allegation was made in those proceedings that Mr Hickie or Vocifa Pty Ltd (the plaintiffs) had made any of the pleaded representations. The case against them was based upon allegations that those who made the representations were the plaintiffs’ agents, but that allegation was dismissed.
6. In a separate judgment published by Stevenson J on 7 May 2012, his Honour ordered that the present defendants pay the costs of the present plaintiffs on the ordinary basis up to 1 September 2011 and on an indemnity basis thereafter. The plaintiffs in due course registered a judgment on 14 March 2013 for the assessed costs in the sum of $358,588.89. No challenge to that judgment was ever made.
7. However, on 18 May 2012 the defendants served a notice of intention to appeal against the judgment of Stevenson J. By notice of motion filed on 8 November 2012 in the Court of Appeal, the defendants sought an order pursuant to UCPR 51.9(1)(b) extending the time for filing and serving a notice of appeal.
8. Other than serving the notice of intention to appeal, the defendants did not advise the plaintiffs or otherwise indicate to them that they proposed to make an application for leave to appeal against his Honour‘s judgment out of time until they served their application to extend time to appeal. That application by the defendants was heard by Allsop P on 18 and 19 February 2013, and dismissed by orders made on 21 February 2013. His Honour ordered that the defendants pay the plaintiffs‘ costs of the application. On 6 March 2013, the defendants filed an application pursuant to s 46(4) of the Supreme Court Act 1970, seeking to discharge Allsop P‘s orders together with an order extending the time within which to file and serve their notice of appeal.
9. On 12 April 2013, the defendants filed a notice of motion in the Common Law Division seeking an order that the judgment entered on 14 March 2013 be stayed until the proceedings in the Court of Appeal had been determined. On 10 May 2013, McCallum J granted a stay of enforcement of the costs judgment until 3 June 2013, conditional upon the defendants paying the sum of $15,000 into court by way of security for the plaintiffs‘ costs of the hearing of the defendants‘ s 46(4) application in the Court of Appeal. The defendants paid the sum of $15,000 into court on 28 May 2013.
10. On 3 June 2013, McCallum J extended the stay up to and including 18 September 2013, which was the date upon which the s 46(4) application was due to be heard. On 4 October 2013, the plaintiffs undertook not to take any steps to enforce the costs judgment until the expiration of the period of 21 days after the Court of Appeal delivered judgment on the s 46(4) application. In the course of her judgment published on 6 June 2013, her Honour said this:
[40] In those circumstances, I felt compelled to determine the application for a stay on the premise that it was not possible for me to form a judgment as to the applicants’ prospects of success in varying the order of Allsop P. I accordingly approached the application on the basis that there may well be very limited prospects of success but, conversely, that there may be some respectable point nestling within the complex and extensive material which will be put before the Court of Appeal.
[41] Against those considerations, I concluded that the most important factors in favour of granting a stay were the fact that, if the stay were not granted, that would in all probability stymie the application under s 46(4) of the Supreme Court Act; the fact that that application is ready for hearing and has a hearing date; the relatively narrow scope of that application and the impossibility of excluding the conclusion that the application has reasonable prospects of success.
[42] The most important factors against granting the stay were, in my consideration, the need to acknowledge that Mr Hickie and Vocifa are entitled to the benefit not only of the judgments of Stevenson J but of the costs judgment, which is not the subject of any appeal; the apparent risk that the applicants will not be able to satisfy that judgment and the plain prejudice of allowing further costs to be incurred in that circumstance.
[43] Weighing those competing considerations, I formed the view that there was an appropriate basis for granting a stay that would be fair to all parties if the applicants were able to provide security in a modest sum to meet Mr Hickie’s legal costs of the hearing of the s 46(4) application in the Court of Appeal. For those reasons, I made the orders set out above.
See Hickie v Land Enviro Corp Pty Ltd [2013] NSWSC 706.
11. On 4 March 2014, the Court of Appeal dismissed the defendants’ s 46(4) application insofar as it related to the plaintiffs and ordered the defendants to pay the costs. (In an otherwise comprehensive appeal against the decision of Stevenson J in the Court of Appeal, the defendants had only alleged against the plaintiffs that his Honour had erred in not finding that Mr Renshall or his associates were the plaintiffs’ agents). Basten JA dealt with the disposition of the application insofar as it related to the plaintiffs as follows:
…
See Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd [2014] NSWCA 34.
12. On 25 March 2014, the defendants filed a notice of motion seeking a further stay of the costs judgment and an application for special leave to appeal from the judgment of the Court of Appeal to the High Court. It is convenient to record the terms of the grounds of appeal that the defendants seek to agitate in that court. They are as follows:
…
13. The defendants have refused to consent to the release to the plaintiffs of the $15,000 paid into court in accordance with the order made by McCallum J on 10 May 2013. The full amount of the costs judgment remains outstanding.
…
15. On 5 April 2013 Sam Zdrilic and Amy Zdrilic were each served with bankruptcy notices. On 17 March 2013 each of them made an application to the Federal Court of Australia to set the notices aside. District Registrar Wall dismissed those applications on 18 March 2014. Sam Zdrilic and Amy Zdrilic filed an application for review of that decision in the Federal Court on 27 March 2014, which is also listed for hearing on 28 April 2014. The time for compliance with the bankruptcy notices has now expired.
His Honour then conducted an analysis of the applicable principles in respect of stays at [16]-[20], then the parties’ submissions in respect of the application before his Honour at [21]-[38]. It is not necessary to reproduce his Honour’s reasons for the purposes of this judgment.
Harrison J then provides his consideration in respect of the application before him. Notwithstanding the specific circumstances of the matter before his Honour, I am of the view his reasons are also of assistance in the matter before this Court. His Honour stated at [39]-[50]:
Consideration
39. Doing the best I can I am unable to see any basis at all either for a continuation or extension of the stay upon the costs judgment that favours the plaintiffs or for a stay of any of the Court of Appeal‘s recent orders.
40. Mr Zdrilic has argued at length and in detail. He has propounded every conceivable argument in support of his application and then some. He is clearly passionate about what he perceives to have been a fraud practised upon him with devastating financial and emotional consequences. I have no doubt about the sincerity with which he holds to his views concerning what occurred and what he maintains is required to put things right.
41. The difficulty for Mr Zdrilic, however, is that he is unable to convert his dissatisfaction with the decisions of Stevenson J or the Court of Appeal into some suitable argument to support the orders that he seeks. In large measure, Mr Zdrilic does no more than protest that the arguments that were rejected by earlier courts should now carry the day. Even putting aside for the sake of the argument that Mr Zdrilic will have to establish some particular matters to attract a grant of special leave, he has not demonstrated why the Court of Appeal was wrong. Mr Zdrilic has a tendency instead to give emphatic repetition to his salient points as if doing so will give them more force than they have previously received. As understandable as that approach may be, it does not further his cause.
42. Mr Zdrilic also embraces selective portions of the reasoning of the Court of Appeal without coming to terms with the parts that do not favour him. Stevenson J held that Mr Hickie was not a principal responsible for the acts of misrepresenting agents. Basten JA agreed. Despite what Leeming JA said at [68] in the Court of Appeal judgment, Mr Zdrilic appears to ignore that at [69] his Honour also said this:
[69] I agree with what Basten JA has said about the absence of a case against the Hickie interests, and his Honour‘s proposed orders as to costs…
43. It will be recalled that Basten JA had earlier agreed with Stevenson J that there was no evidential basis for the agency. That was an unsurprising finding by the trial judge having regard to the quoted concession made by Queen‘s Counsel appearing for Mr Zdrilic that a representation by Mr Renshall of his asserted authority to negotiate on behalf of Mr Hickie would not be sufficient to establish agency. Basten JA reiterated that nothing said in the course of the proceedings in the Court of Appeal cast any doubt upon that finding. Leeming JA‘s agreement at [69] is directed to reinforcing that proposition. It is wholly inimical to the case Mr Zdrilic continues to propound.
44. Nor does there appear to be any reasonable prospect that the decision of the Court of Appeal would attract attention as a special leave candidate. It seems clearly to be a case that turns wholly upon unexceptionable facts and is concerned with no particular issue of law of wider general interest or importance. Despite the manifold ways in which Mr Zdrilic has attempted to formulate his concerns, they ultimately distil entirely to a single complaint that the findings of no agency are wrong. That factual dispute is wholly unlikely to attract a grant of special leave to appeal to the High Court.
45. Moreover, the balance of convenience now clearly favours the plaintiffs. The corporate defendants are insolvent. There is no relationship between the solvency of any of the defendants and the prospect that the costs judgment will be enforced. The subject matter of the stay is not co-extensive with the subject matter of the proposed appeal to the High Court, so that there is no risk that the appeal will prove to be abortive if the defendants are successful there. The defendants have not identified anything that approaches arguable grounds of appeal, or some matter that would attract a grant of special leave. There is no identified risk that the plaintiffs would dissipate the benefit of the costs judgment so that it was beyond the reach of the defendants in the (highly unlikely) event that it was overturned in due course. The defendants have never challenged the quantum of the costs judgment or the assessment process that generated it.
46. I am not satisfied that the defendants have established or demonstrated any reason at all that warrants the exercise of discretion in their favour.
The plaintiffs‘ motion
47. The plaintiffs filed a notice of motion on 3 April 2014 seeking a single substantive order (erroneously suggesting on the title page that the order was sought on behalf of Land Enviro Corp) that the amount of $15,000 paid into court on 28 May 2013 on behalf of the defendants in compliance with the orders of McCallum J be paid to Bartier Perry on behalf of the plaintiffs. That order was made by way of security for the plaintiffs‘ costs of the hearing of the defendants‘ s 46(4) application in the Court of Appeal.
48. The application is supported by the affidavit of Philip James Brand, the solicitor working in the office of Bartier Perry with the conduct of this matter on behalf of the plaintiffs, which was sworn 1 April 2014. Mr Brand deposed, among other things, to the fact that in his opinion as a solicitor with over 30 years‘ experience, the work undertaken by Bartier Perry and counsel retained by that firm for the plaintiffs would have generated party/party costs under the Legal Profession Act 2004 referable to the s 46(4) proceedings in excess of $15,000. Tax invoices from Mr Lever SC and Bartier Perry that are annexed to the affidavit support Mr Brand‘s opinions. Mr Brand was not cross-examined. The defendants did not actively oppose the order sought, otherwise than in the context of their principal prayers for relief.
49. There is not in my opinion any demonstrated basis why the order sought by the plaintiffs should not be made.
Conclusions and orders
50. I consider that the following orders should be made:
1. Dismiss the defendants‘ notice of motion filed 25 March 2014 with costs.
2. Order that the amount of $15,000 paid into court on 28 May 2013 on behalf of the defendants be paid out to Bartier Perry, solicitors.
3. Order the defendants to pay the plaintiffs‘ costs of their motion filed 3 April 2014, limited to the costs of preparation and filing of the notice of motion and the preparation, swearing and filing of the affidavit of Philip James Brand dated 1 April 2014.
Hearing of 28 April 2014
Applicant’s Submissions
At the hearing, Mr Zdrilic, appearing on behalf of the Applicants, made substantial oral submissions. It is not necessary to traverse over these submissions in any great detail as the necessary considerations will be addressed below.
Mr Zdrilic, in a similar fashion to that noted by Harrison J in Hickie v Land Enviro Corp Pty Ltd [2014] NSWSC 472 at [40]-[42] (reproduced above at [24]) addressed the various claims and history of the proceedings, as well as the special leave application. He then went on to cite some of the general authorities this Court may have regard to when considering an application of the nature of the Review Application.
Respondent’s Submissions
Ms Botsikas, appearing for the Respondents, propounded the argument that at the time Registrar Wall dismissed the application to set aside the Bankruptcy Notice there were no proceedings on foot. I will address this limb below.
Ms Botsikas then referred the Court to two authorities which she sought to rely on to support her submission that the Review Application should be dismissed.
The first authority relied on by Ms Botsikas is Re Dalco; Ex parte Dalco v Deputy Commissioner of Taxation (1986) 67 ALR 605. In that judgment Neaves J stated at 614:
The application to extend the time for compliance with the requirements of the bankruptcy notice must fail because the application was not, in terms of s 41(6 a), filed “before the expiration of the time fixed by the court or the Registrar for compliance with the requirements” of the notice. The time for compliance was fixed by the Registrar at 14 days from the date of service of the notice on the applicant, an event which occurred on 19 May 1986. The time so fixed expired on 2 June 1986 and, as the application for extension was not filed until 23 June 1986, s 41(6 a) can provide no source of power to extend the time. The applicant gains no assistance from the provisions of s 41(7) as, on the basis of what has already been said, the time for compliance with the notice was not extended by that section. Even if, contrary to the view expressed above, the conclusion were reached that the affidavit of Mr Behm sworn 2 June 1986 is an affidavit answering the description set out in s 41(7) so that the time for compliance with the bankruptcy notice was automatically extended beyond 23 June 1986, I doubt whether s 41(6 a) would authorise a further extension of time. This is because the introductory words of the sub-section, referring as they do to the expiration of the time fixed by the court or the Registrar, are not apt to refer to an extension of the time so fixed by the operation of s 41(7). However, it is unnecessary in this case to express a definitive opinion on the question.
Finally, no ground has been advanced by the applicant which would justify an order setting aside the bankruptcy notice. Indeed, the applicant did not do more than submit that the application to set aside the bankruptcy notice should be adjourned until the determination of the proceeding under s 39 b of the Judiciary Act. In my opinion, no sufficiently cogent reason has been advanced for the court taking that course and I do not propose to do so.
The second authority relied on by the Respondents is that of James v Abrahams (1981) 34 ALR 657 per Deane, Fisher and Lockhart JJ where Deane and Lockhart JJ held at 662:
It follows that the present case was not one in which an application to set aside the bankruptcy notice had been filed with the Registrar. Nor was it one in which proceedings to set aside the judgment or order had been instituted by the debtor. The consequence is that the various orders extending the time for compliance with the bankruptcy notice which were purportedly made were not warranted by the provisions of s 41(6 a) of the Act. They were beyond jurisdiction unless the court has a general inherent power to make such an order or it is necessary to infer a limited power to extend time to give efficacy to the provisions of ss 40(1)(g) and 41(7).
In our view, the express exclusion of a power to extend time for compliance with the requirements of a bankruptcy notice from the general powers to extend time conferred by s 33(1)(c) and the express grant of the power to extend the time for compliance in the specific cases mentioned in s 41(6 a) preclude the implication of a general inherent power in the court to extend the time fixed by the Registrar for compliance with the requirements of a bankruptcy notice.
Nor, in our view, is it necessary to infer any such power to give effectiveness to the procedure envisaged in the joint operation of ss 40(1)(g) and 41(7). As we have said, para (g) of s 40(1) and sub-s (7) of s 41 are self-operating. Provided the requisite affidavit has been filed, sub-s (7) extends time until the court determines whether it is satisfied as to the issue propounded under para (g): the resolution, in a manner favourable to the debtor of the question propounded by para (g), precludes non-compliance with the requirements of a bankruptcy notice from constituting an act of bankruptcy.
Ms Botsikas submitted that accordingly, given the circumstances of the proceedings at the time Registrar Wall dismissed the application as there was no other option available to him. Accordingly, in her view, the Review Application should also be dismissed.
Consideration
Regulation 20.01 of the FCC Rules provides:
Time for application for review
(1) For subsection 104(2) of the Act, application for review of the exercise of a power by a Registrar must be made within:
(a) for the exercise of a power of the Court under the Family Law Act or Family Law Regulations mentioned in items 3 to 30 of the table in rule 20.00A--28 days; and
(b) otherwise--7 days.
(2) A time prescribed under subrule (1) may be extended in a proceeding:
(a) by the Court or a Registrar on any terms as the Court or Registrar thinks fit; or
(b) with the consent of the parties to the proceeding.
The orders that are subject of the Review Application were made by Registrar Wall on 18 March 2014 and the Review Application was filed on 27 March 2014.
Regulation 3.04 of the FCC Rules states:
Calculating time
(1) This rule applies to a period of time fixed by these Rules or by a judgment, decree, order or any document in a proceeding.
(2) If a period of more than 1 day is to be calculated by reference to a particular day or event, the particular day or the day of the event must not be counted.
(3) If a period of 5 days or less would, but for this subrule, include a day when the registry is closed, that day must not be counted.
(4) If the last day for taking an action that requires attendance at a registry is a day when the registry is closed, the action may be taken on the next day when the registry is open.
(5) Subsection 36(2) of the Acts Interpretation Act 1901 does not apply to these Rules.
Accordingly, to be within time, any application for review had to be filed by 25 March 2014. However, this was not addressed by the parties at the hearing before me. I note the Applicants are self-represented and may not appreciate the operation of the FCC Rules in respect of time in that days of the weekend are to be taken into account when a period of more than five days is to be calculated. I further note the delay in the filing of the Review Application was brief and no major prejudice that the Court is aware of was encountered by the Respondents. Accordingly, I will extend the time for the filing of the Review Application up to and including 27 March 2014.
As noted above in these reasons at [9], the Review Application is a hearing de novo. Accordingly, the Court must have regard to the circumstances of the case at the time of the hearing before me. By the hearing of the Review Application on 28 April 2014 the Applicants (and their related companies) had filed an application for special leave in the High Court, which occurred on 25 March 2014. The special leave application seeks to set aside orders of the NSW Court of Appeal (noted above at [20]) dismissing the Applicants’ application for an extension of time to appeal against the orders of Stevenson J in respect of the proceedings between the Applicants (and their related companies) and the Respondents.
The Applicants are seeking the orders of Registrar Wall of 18 March 2014 (noted above at [8]) to be set aside and an extension of time to be granted to them in which to comply with the Bankruptcy Notice until the resolution of the special leave application before the High Court (and if the special leave application is successful, the substantive hearing). This application is opposed by the Respondents.
After the dismissal of the application by Registrar Wall on 18 March 2014, there has been no order made extending time for the Applicants to comply with the Bankruptcy Notice. An act of bankruptcy has, therefore, been committed by the Applicants.
Subsection 41(6A)(a) of the Bankruptcy Act states:
(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.
Subsection 41(6C) of the Bankruptcy Act states:
(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.
At the time the application to set aside the Bankruptcy Notice was filed, there is no doubt there were proceedings on foot in the NSW Court of Appeal to, inter alia, set aside the judgment founding the Bankruptcy Notice. However, the NSW Court of Appeal dismissed those proceedings on 4 March 2014. On 18 March 2014 the proceedings seeking to set aside the Bankruptcy Notice (or extend time to comply with the Bankruptcy Notice) in this Court came before Registrar Wall where they were dismissed. The application for special leave filed in the High Court was not filed until 25 March 2014. It follows that the application for special leave cannot be relied upon to satisfy s.41(6A)(a) of the Bankruptcy Act as the proceedings were not instituted before the expiration of the time for compliance with the requirements of the Bankruptcy Notice.
However, as the Review Application is a hearing de novo (see [9] above), the “Court must provide a rehearing on the merits of any matter which comes before a registrar and with which one of the parties to the proceedings before the registrar is dissatisfied”: see Javeev Pty Ltd v Deane (1997) 72 FCR 398.
Accordingly, the next step is to whether subsection (a) or (b) (or both) of s.41(6A) of the Bankruptcy Act is satisfied and an order extending time for compliance can be made. In respect of these proceedings, I accept the application for extension of time to appeal before the NSW Court of Appeal had been dismissed by the time the Review Application was heard by me. However, given the Review Application is a hearing de novo, I am of the view the Applicants still satisfied subsection (b).
I note that in these proceedings the last order made by Registrar Wall on 10 December 2013 extended time for compliance with the Bankruptcy Notice to 18 March 2014 and no order has since been made further extending such time. His Honour Lindgren J addressed this issue in Re Udowenko; Ex parte Mitchell (1996) 69 FCR 299 where his Honour stated at 303:
The power to extend time for compliance with a bankruptcy notice is statutory and is in aid of an application to set aside the judgment or order in respect of which it was issued or of an application to set aside the bankruptcy notice itself: see, for example, Re Sterling; Ex parte Esanda Ltd (1980) 44 FLR 125 (FCA/Lockhart J) at 129-130, 131-132; Re Lentini; Ex parte CSR Ltd (1991) 29 FCR 363 (FCA/Neaves J) at 372; McLean v Australia and New Zealand Banking Group Ltd (1993) 42 FCR 300 (FCA/Ryan J) at 304-305. Although the application for extension of time may be made after expiry of the time for compliance with the requirements of the bankruptcy notice (Streimer v Tamas (1981) 37 ALR 211 (FCA/FC); Re Carter; Ex parte National Mutual Trustees Ltd (1995) 129 ALR 435 (FCA/Gummow J)), it is clearly a condition of the existence of the Court's power that prior to the expiration of that time, a proceeding to set aside the judgment or order, or an application to set aside the bankruptcy notice, has been instituted or filed.
At the hearing of the Review Application, accordingly, the initiating application in these proceedings seeking to set the Bankruptcy Notice aside was extant. Time for compliance with the Bankruptcy Notice, however, ended on 18 March 2014 and thereafter an act of bankruptcy was committed by the applicants.
In Re Udowenko at 303-304 Lindgren J continued:
The extended time for compliance with the requirements of the bankruptcy notice in the present case expired on 4 June 1996. There is no evidence that a proceeding to set aside the judgment in the Dungog proceeding had been instituted by the Debtors before that date for the purposes of para41(6A)(a) of the Act. On 3 April 1996 the Debtors filed an application aside the bankruptcy notice. But this was dismissed at about 10.10 am on 4 June 1996 and so had ceased to be a current application when the extended time for compliance expired.
In my view, it is clear on the proper construction of subs41(6A) that the condition of the existence of the power to extend time is not satisfied by the mere institution of a proceeding or making of an application to set aside, which has been dismissed or otherwise ceased to subsist as a current proceeding or application before the time for compliance with a bankruptcy notice has expired: cf McLean v ANZ Banking Group Ltd (1993) 42 FCR 300 (Ryan J). The reason is that the purpose of an extension of time under subs41(6A) is limited to that of supporting a proceeding or application, to say, one which was instituted or filed before expiration of the time for compliance with the bankruptcy notice. Further, some support for this view of the provision is found in the use of the perfect form of the verb ("have been instituted" and "has been filed") in para41 para41(6A) para41(a) and para41(b) which suggests a proceeding which has been instituted, or an application which has been made, before the expiration of the time for compliance with the bankruptcy notice, and which still subsists at the time when the occasion for exercise of the power to extend time arises.
However, the circumstances in these proceedings are of a different nature. In these proceedings two days prior to the Review Application being filed, the special leave application in the High Court was filed by the Applicants. That proceeding was on foot when the Review Application was heard and remains on foot today. My associate has made enquiries of the High Court Registry and no date has yet been set down for the hearing of the special leave application.
Notwithstanding the above, I do not believe it is necessary for me to form a view as to whether I have the power to retrospectively extend time for compliance with the Bankruptcy Notice in the manner outlined above at [42] by Lindgren J. Any discretionary extension of time, in my view, would not be in the interests of the administration of justice. Rather, in my view the Review Application should be dismissed for the following reasons.
The Review Application seeks to have time for compliance with the Bankruptcy Notice extended to either the resolution of the Applicants’ (and their related companies’) special leave application or, if that special leave application is successful, the outcome of the appeal to the High Court.
His Honour Smith FM considered an application based on a similar set of events in Miller v Nationwide News Pty Ltd [2008] FMCA 1576 where the applicant debtor had had a bankruptcy notice issued against him pursuant to a judgment of the Supreme Court of NSW. The debtor had then unsuccessfully sought an application for extension of time to appeal in the Court of Appeal and subsequently sought special leave in the High Court. In Miller at [11] his Honour stated:
11. There are many cases which have discussed the principles upon which a Bankruptcy Court will itself embark on a review of the merits of orders which have given rise to the judgment debt, in particular, in the course of considering the validity of a bankruptcy notice. In Olivieri v Stafford (1989) 24 FCR 413, authorities about going behind a judgment debt were referred to, such as Corney v Brien (1951) 84 CLR 343. The judgments of the majority justices, Beaumont and Gummow JJ, suggest that it would be a "rare case" in an application to set aside a bankruptcy notice, where the Bankruptcy Court would extend time for compliance so that the Court could embark upon an inquiry as to what lay behind the judgment debt, in circumstances where the merits of the dispute had been adjudicated previously in a trial court and where avenues of appeal have been pursued unsuccessfully (cf. Beaumont J at 104 and Gummow J at 107 and 110).
In Miller at [14]-[17] Smith FM continued:
14. The relevant principles were identified by Lehane J in Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264. His Honour cited a judgment of Sheppard J in Geard, Re; Ex Parte Reid [1994] FCA Unreported 11 February 1994. This made the point that the currency of a special leave application or appeal, could be considered differently in the context of a bankruptcy notice than in the context of a bankruptcy petition, since the status of the debtor is not in immediate jeopardy. As a consequence, the Court is less inclined to extend time for compliance with a bankruptcy notice than it would be to adjourn a petition.
15. In both situations, the Bankruptcy Court should assess the prospects of the judgment debt being overturned on appeal, but the approaches of the Court to its assessment of merits differ. In relation to adjourning a petition, Beaumont J in Westpac Banking Corporation v Carver (2003) 126 FCR 113 at 118 considered that the debtor must show “that there are arguable grounds for concluding that special leave to appeal will be granted”. As I have indicated above, I am not persuaded that Mr Miller’s present application satisfies even this test.
16. In relation to extending a bankruptcy notice, Byron supports the approach that “considerable weight should be given to the circumstance that … no stay has been granted … of the judgment supporting the bankruptcy notice”. This suggests that the bankruptcy court should not itself even enter into the merits of the appeal for which special leave is being sought in the High Court, where a stay has been refused (compare also Branson J in Burns v AMP Finance Ltd [2004] FCA 1094).
17. In the present case, Mr Miller has failed to obtain a stay on enforcement of the judgment debt relied upon in the bankruptcy notice. Taking into account the considerations identified by Lehane J in Byron and by Branson J in Burns, I am firmly of the opinion that Mr Miller's application to set aside the present bankruptcy notice should be resolved today, and that no adjournment or further extension of time for compliance should be granted.
In respect of the Applicants’ proceedings, it is not in dispute their application for an extension of time to appeal against Stevenson J’s judgment in respect of the Respondents was dismissed (see [19] above). Subsequently, an application to extend the stay of the costs order founding the Bankruptcy Notice that had been ordered by McCallum J on 6 June 2013 was dismissed by Harrison J (see [21]-[24] above).
I am guided by the reasons of Smith FM and the authorities his Honour has considered therein. In Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264 per Lehane J, his Honour stated at 270-271:
… [C]onsiderable weight should be given to the circumstance that here, as in Geard, no stay has been granted (or, apparently, sought) of the judgment supporting the bankruptcy notice. It does not follow that other matters are not to be taken into account: the discretion is "at large" (Re Taylor; Ex parte Deputy Commissioner of Taxation (1983) 74 FLR 377 at 379). For example, the authorities suggest that, reluctant as the Court may in most cases be to enter into the merits of an appeal, the merits may be relevant, at least where the Court is able to regard the prospects of success as "slight" (e.g. Bryant) or, possibly, in a case where it is apparent that the prospects of success are unusually strong (Kiefel J, in Baker, discussed the merits of the appeal in some detail, considering it desirable to do so as further applications were likely; it is evident that her Honour's view was that the appeal had substantial prospects of success). It may be that different considerations apply where the proceedings instituted for the purpose of setting aside the judgment are, rather than an appeal, separate proceedings seeking to set the judgment aside (Olivieri; Agrillo) particularly where, as in Agrillo, the judgment was entered by consent. I think it is relevant, as a consideration reinforcing the Court's reluctance to extend time in the absence of a stay, that an appeal has already been dismissed and the proceeding in question is (as here) an application for special leave to make a further appeal.
In respect of the merits of any special leave application to the High Court I am guided by the reasons of Harrison J in Hickie v Land Enviro Corp [2014] NSWSC 472 (see above at [19]-[22]), particularly at [40]-[46]. In my view, the Applicants have similarly failed to establish any reason at all that warrants the exercise of this Court’s discretion in their favour. Despite the Applicants’ affidavits not formally being read into evidence at the hearing of the Review Application, there is nothing therein nor anything flowing from Mr Zdrilic’s oral submissions to warrant the exercise of the Court’s discretion in the Applicants’ favour.
I now turn to the consequences of committing an act of bankruptcy. Raphael FM (as he then was) in Anderson v Kirk & Anor (2004) 82 ALD 668 stated at [18]:
18. I am also sensible of the fact that service of a bankruptcy notice simply marks the start of a process and that the commission of an act of bankruptcy, while undoubtedly of significance to the debtor, does not affect the actual status of the debtor: Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264; Shephard v Chiquita Brands (South Pacific) Ltd [2001] FCA 1394; Re Geard; Ex parte Reid (unreported, FCA, Sheppard J, 11 February 1994); Liew v JNS Technologies (M) Sdn Bhd [1999] FCA 1428; Jenkins v National Australia Bank Ltd [1999] FCA 1758; Warner v Frost [1999] FCA 830. The court in these cases when considering whether to grant an extension of time for compliance with a bankruptcy notice has been mindful of balancing the interests of creditors, noting the potential impact of a later act of bankruptcy in the event that the appeal is unsuccessful and proceedings continue. In Liew v JNS Technologies (M) Sdn Bhd, above, Kenny J referred to the comments of Heerey J in Re Nguyen; Ex parte DCT (1995) 54 FCR 403 at 407:
Extension of time for compliance with a bankruptcy notice may have important adverse consequences for the judgment creditor. For example, if a sequestration order is subsequently made the commencement of the bankruptcy may be later than would otherwise have been the case, which in turn may affect rights of recovery by the trustee in relation to property.
The dismissal of the Review Application and, by consequence, the application to set aside or extend time to comply with the Bankruptcy Notice resulting in the Applicants committing acts of bankruptcy, will not prevent them from pursuing their special leave application or any appeal currently on foot in the NSW Court of Appeal.
In Herchenroder v Smith [2003] FMCA 96 Raphael FM stated at [16]:
16. The Court have long held that the issuing of a bankruptcy notice is only a step along the road to sequestration and that there are matters which may not persuade a Court to grant an extension of time for compliance with the terms of a bankruptcy notice but which may persuade the Court on the hearing of a petition to adjourn that petition. …
I am satisfied the Applicants’ special leave application has been instituted bona fide and are being prosecuted with due diligence. However, I am of a similar view to that of his Honour Harrison J (see [22] above) that there does appear to be any reasonable prospect the decision of the Court of Appeal would attract attention as a special leave candidate. This, however, can be more adequately ventilated on the hearing of any creditor’s petition that may follow.
In O’Farrell v Network Entertainment Pty Ltd [2005] FMCA 1936 Raphael FM stated at [8]:
8. I would therefore not be inclined to further extend the time for compliance with this bankruptcy notice. … I can order that if such an application is made and a petition is filed then it be brought before me for hearing when I shall further consider the appropriate steps which should be taken in regard to it.
In that judgment Raphael FM also urged the creditor not to file a creditor’s petition within three months of his Honour’s orders, though there was no power to compel them to act accordingly. In the matter before this Court there has been a period of approximately three months since the hearing of the Review Application before today’s date. Accordingly, noting the special leave application is still on foot, I do not propose to make the same request of the Respondents. I will, however, order that any creditor’s petition founded on this Bankruptcy Notice come into my docket for case management and, if necessary, final hearing.
Conclusion
Accordingly, for the reasons stated above I propose to dismiss the Review Application and award costs of the Review Application to the Respondents. I will also order that any creditor’s petition based on the Bankruptcy Notice come before me and grant the Applicants’ the extension of time required to file the Review Application.
I certify that the preceding fifty-six (56) paragraphs are a true copy of the reasons for judgment of Judge Lloyd-Jones
Associate:
Date: 24 July 2014
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