Bankruptcy Act 1966, s.41(6A)

Liew v JNS Technologies (M) Sdn Bhd (1999) FCA 1428 (Unreported Kenny J 18 October 1999)

Re Geard; Ex parte Reid (unreported FCA Sheppard J 11 February 1994)

Byron v Southern Star Group Pty Ltd [1997] FCA 151; (1997) 73 FCR 264

Benaharon v Fabric Dyeworks (Aust) Pty Ltd (1998) FCA 1109

Re Bryant; Ex parte Bryant CBA (unreported) (FCA Full Court) 4 May 1994 Conway v Jackson [2001] FCA 230; (2001) 107 FCR 201

Re Baker; Ex parte Baker Applicant v Staples BC9502879 (Unreported FCA

Wenkart v Abignano and Anor (Unreported FCA 28 August 1998)

Warner v Frost [1999] FCA 830

Beckwith v Pedler (Unreported FCA 15 September 1999)

Re Nguyen; Ex parte Commissioner of Taxation [1995] FCA 1036; (1995) 54 FCR 403

WATER WHEEL HOLDINGS LTD (SUBJECT TO A DEED OF ARRANGEMENT)

WATER WHEEL MILLS PTY LTD (SUBJECT TO A DEED OF ARRANGEMENT)

WATER WHEEL HOLDINGS LTD (SUBJECT TO A DEED OF ARRANGEMENT) (ABN 50 004 450 033)

WATER WHEEL MILLS PTY LTD (SUBJECT TO A DEED OF ARRANGEMENT) (ABN 43 004 032 473)

1. There are two applications before the court namely applications

MZ 1456 and 1457 which were filed on 18 December 2003 wherein John Dorman Elliott (the applicant) seeks in each application an order for the extension of time for compliance with bankruptcy notices until the expiry of 14 days after final judgment in Victorian Court of Appeal proceeding number 7748 of 2000 or until further order.

2. In application MZ 1456 of 2003 the bankruptcy notice is VN 1894 of 2993, with a bankruptcy notice VN 1895 of 2003, being the subject of the application in proceedings MZ 1457 of 2003. Both applications raise the same issues and the affidavit material is almost identical. It is appropriate, therefore, to deal with the applications together, and indeed it is noted that this was the approach adopted for and on behalf of the applicant and the respondents to both applications.

3. The background material in relation to these applications is not in dispute. The relevant bankruptcy notices rely upon orders made by Mandie J in the Supreme Court of Victoria on 30 June 2003 in proceedings commenced by the Australian Securities and Investments Commission (ASIC) against the applicant and others. The proceedings which were the subject of the order by Mandie J had commenced on

27 November 2000 whereby ASIC made a claim against the applicant, who was second defendant in those proceedings, and two other parties for what was alleged to be a breach of the civil penalty provision in s.588G (duty to prevent insolvent trading) of the Corporations Law (as it then was) (the insolvent trading proceeding) and other provisions of the Corporations Law. ASIC sought remedies from the Court which included a declaration that the applicant had contravened s.588G, compensation pursuant to that section equal to the loss or damage suffered by creditors and the respondents as a result of the contravention of the insolvent trading provisions, orders prohibiting the applicant from managing a corporation and orders imposing pecuniary penalty for contravention of s.588G. Mandie J ordered that the applicant pay compensation pursuant to s.588J(1) of the Corporations Law (as it then was) to Water Wheel Holdings Ltd (subject to a deed of company arrangement) ("Holdings") and Water Wheels Mills Pty Ltd (subject to a deed of company arrangement) ("Mills") in the sums of $97,513.89 and $1,330,456.11 respectively. Further orders were made that the applicant be prohibited from managing a company for a period of four years commencing 28 July 2003. In addition the applicant was ordered to pay to the Commonwealth a pecuniary penalty in the sum of $15,000 and he was ordered to pay taxed costs of the plaintiff in the proceedings though not req uired to pay more than 80% of such costs. It is not necessary to refer in further detail to the precise orders which are attached to the relevant bankruptcy notices. The basis of the orders included declarations made by Mandie J that the applicant had breached s.588G in relation to Mills and Holdings and he was found to have breached that section which relates to a directors duty to prevent insolvent trading and in relation to his position as a director of Mills and Holdings by failing to prevent certain debts from being incurred between 14 September 1999 and 17 February 2000.

4. The applicant in these applications seeks orders pursuant to s.41(6A) of the Bankruptcy Act 1966 (the Bankruptcy Act) which provides as follows:

"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."

5. It is relevant to set out s.41(6C) of the Bankruptcy Act which provides:-

(a) a debtor applies to the court for an extension of the time for complying with the bankruptcy notice on the ground that proceedings to set aside a judgment or order irrespective of which the bankruptcy notice was issued had been instituted by the debtor; and

(b) the court is of the opinion that the proceedings to set aside the judgment or order;

(ii) have not been prosecuted with due diligence;

the court shall not extend the time for compliance with the bankruptcy notice."

6. It should also be noted in passing that the applicant has filed further applications against both respondents in proceedings numbered MZ 57 of 2004 and MZ 59 of 2004 seeking orders setting aside the relevant bankruptcy notices. For the present purposes it is not necessary to consider the detail of those applications to set aside the bankruptcy notices. However, it is important to note that when the application for extension of time came before the court both counsel for the parties urged the court to hear and determine the application for extension of time in both applications and to do so prior to hearing and determining the applications to set aside the bankruptcy notices.

7. Accordingly, the court made directions that the hearing of the application to set aside the bankruptcy notices would be fixed for hearing on 13 February 2004 and the court otherwise made certain directions in relation to further affidavit material and outlines of submissions which both parties were required to file and serve by 4 pm on 11 February 2004.

8. In support of the applications the applicant relies upon an affidavit sworn by him on 18 December 2003. The applicant further relies upon an affidavit of Ian Leslie Walker sworn 12 January 2004 which essentially refers to the chronology of events and otherwise provides some further material in relation to the notice of appeal and the expected time within which it is thought an appeal decision will be delivered. A further affidavit has been relied upon which was sworn by Hugh William McLaren on 23 January 2004.

9. The respondents have both relied upon an affidavit of Jordon Mackenzie Ross sworn 15 January 2004. In that affidavit the deponent annexes by way of exhibit JMR1 a further affidavit of the applicant which had been filed in the proceedings before the Supreme Court of Victoria in application number 7748 of 2000 and sworn by the applicant on 2 June 2003.

10. The proceedings before the court seeking an extension of time for compliance with the bankruptcy notices are opposed by the respondents. The main basis upon which the applications are made is that by a notice of appeal issued on 14 July 2003 the applicant has appealed to the Court of Appeal of the Supreme Court of Victoria from the whole of the decision of Mandie J. It is not in dispute that the appeal had originally been scheduled for hearing in November 2003 but as a result of there being some delay in the filing of material and as a consequence of what was perceived to be the complexity of the matter requiring a perhaps lengthier hearing, the appeal is now scheduled to commence on 23 February 2004; that is, in the immediate future.

11. It is not in dispute that once having heard the appeal, there is a likelihood that the Court of Appeal will reserve its decision and there will be some further delay before the matter is finalised. It is also clear that after the appeal had been issued on 14 July 2003 the applicant issued a summons in the Supreme Court of Appeal seeking a stay of the orders made by Mandie J. It is noted that the Court of Appeal had declined to grant a stay and did so by order made on 25 July 2003. The notice of appeal contains numerous grounds some of which are not now being pursued. Nevertheless it is clear on a proper reading of the notice of appeal that there are serious issues raised although it should also be noted that a number of the grounds relate to arguments that the Learned Trial Judge made findings against the evidence and the weight of the evidence. Outlines of argument for the purposes of appeal have been filed and served on 10 December 2003 and a copy of the applicant's outline has been exhibited to his affidavit. In the Court of Appeal a further hearing was conducted on 11 November 2003 by way of mention. In a decision delivered by Charles JA on that day reference was made to a granting by the Court of a stay of the prohibition order against the applicant pending the hearing and determination of the appeal. Charles JA stated:-

"The principal reason for the court's decision that special circumstances justified the grant of a stay in relation to the disqualification order was that the appeal would be expedited and heard in October."

12. Charles JA then refers to the hearing of the appeal then fixed for

"As it transpired, given the large number of issues apparently to be raised by the appellant, this date provided impracticable and on 15 October the November hearing date was vacated."

13. In my view it is also relevant to note that before the Court of Appeal ASIC had not contended that there had been a breach by the applicant of any undertaking given by him to take all reasonable steps to expedite the hearing of the appeal. Indeed it is clear that had it not been for the Court of Appeal summer recess it may have been possible for the appeal to have been heard in December 2003. In considering whether to lift the stay on the prohibition order against the applicant, Charles JA stated the following:-

"In circumstances where it cannot be said that the appellant has not used his best endeavours to expedite the hearing of the appeal, it would, we think, be a wrong exercise of the court's discretion now to lift the stay."

14. During the course of discussion Charles JA noted the following:-

"What we will do is fix the case on the basis that may it take four or even five days, and we will attempt to ensure that those members of the court hearing it will have the preceding week to read the appeal books. At the moment it is expected that the case will be heard in the week beginning 23 February and beginning on 23 February."

15. It is evident from the extracts to which I have referred that although a stay was granted in relation to the prohibition order against the applicant the court of appeal declined to grant a stay. It did so on

25 July 2003. In considering the application for stay of the order for compensation the Court of Appeal in its decision delivered on 25 July 2003 stated the following:

"It is well-established by authority that the discretion to grant a stay should only be exercised where special circumstances exist which justify departure from the ordinary rule that a successful litigant is entitled to the fruits of his litigation pending the determination of any appeal; Federal Commissioner of Taxation v Myer Emporium Ltd (No 1) [1986] HCA 13; (1968) 160 CLR 220 at 222-223 per Dawson J. The onus of establishing such special circumstances is plainly on the applicant seeking a stay. I also bear in mind, as Giles J observed in Adler v ASIC [2002] NSWCA 303; (2002) 43 ACSR 35 at 38-39 that, as a general principle the protective purpose of a disqualification order should take precedence over the private interests of the person disqualified."

16. Upon the hearing of the application for stay on 25 July 2003 Charles JA of the Court of Appeal notes that undertakings had been given on behalf of the administrator of the Deeds of Company Arrangement entered into by Holdings and Mills. The undertakings included undertakings to place into an interest bearing term deposit account any amounts paid by the applicant to Mills and Holdings in accordance with the orders of Mandie J and that if the applicant's appeal was successful the principal sum plus any interest actually earned on the principal sum in the account would be remitted to an account directed by the applicant. In considering the stay on 25 July 2003 Charles JA stated, after referring to the undertakings in more detail that this "disposes of the principle argument for a stay of the compensation order". It is also noteworthy that in the same decision Charles JA stated, "At the outset of the application the Court indicated that questions of general importance in corporations law were clearly involved in the appeal and that the Court would expedite the hearing of it." The short stay in relation to the prohibition order was then granted upon the Court being satisfied that special circumstances exist justifying that stay. A similar finding of special circumstances was not made and nor was a stay granted in relation to the compensation order.

17. Both parties made submissions in relation to the law applicable to the exercise of the court's discretion in this matter. It is common ground that the discretion may be one which is described as a discretion "at large". It is also common ground in the present application that the parties do not dispute that the appeal which is currently pending by the applicant before the Court of Appeal of the Supreme Court of Victoria is a bona fide appeal which has been pursued with due diligence and that the appellant, that is, the applicant in the present applications, has an arguable case in the appeal.

18. The main thrust of the appeal concerns, on the one hand, arguments raised in relation to what might be described as criticisms of the trial judge in making findings claimed to be against the evidence and the weight of the evidence. It is also significant to note, however, that a further substantive issue is raised in relation to the interpretation by the court of s.588J of the Corporations Act 2001.

19. For my purposes, having accepted that there is a discretion which may be described as a discretion "at large", and having considered relevant authorities to which the parties referred, I am satisfied that an accurate reflection of the relevant law was set out by Her Honour Kenny J in the matter of Liew v JNS Technologies (M) Sdn Bhd (1999) FCA 1428 (18 October 1999). In that case Her Honour considered four applications for extension of time. Her Honour referred to the authorities and in particular stated the following, which in my view, is relevant to the present application:

"12. The authorities establish that an appeal is in the nature of "proceedings to set aside the judgment ... in respect of which the bankruptcy notice was issued": see, e.g., Re Taylor; ex parte Deputy Commissioner of Taxation [1983] FCA 316; (1983) 74 FLR 377; Bryant v Commonwealth Bank of Australia (unreported, Full Court of the Federal Court, 11 November 1994); Benaharon v Fabric Dyeworks (Aust) Pty Ltd [1998] FCA 1109.

13. There have been differences in the cases about the principles which are to govern applications such as the present. In Re Baker; ex parte Baker v Staples (unreported, Federal Court, 4 September 1995), Keifel J held that an extension of time should ordinarily be granted where there is a "genuine and arguable" appeal being diligently prosecuted against a judgment founding a bankruptcy notice. A not dissimilar approach was adopted by Weinberg J in Benaharon and by Ryan J in Beckwith v Pedler [1999] FCA 1312. A different approach has been adopted in other cases. In Re Geard; ex parte Reid (unreported, Federal Court, 11 February 1999) Sheppard J refused an application to extend time, stating as follows:

The critical question then is how the discretion should be exercised. As earlier stated, the parties have made, both orally and in writing, detailed submissions concerning the issues which will arise for determination on the appeal and have invited the Court in effect to express a view, provisional though it may be, on the likely outcome of the appeal. To a degree I have felt obliged to look at the matter for myself, but I think it most undesirable that a judge of this Court should in effect undertake some provisional review to determine the correctness or otherwise of a judgment of another court especially where that judgment is under appeal to the Court of Appeal which has jurisdiction to hear appeals in the normal course.

I prefer to approach the matter in a different way.

The debtor has not made any application for a stay of proceedings pending the outcome of the appeal. Why he has not done so is not clear to me but the judgment which has been recovered against him is a final judgment and execution upon it has not been stayed. It would seem to me to require quite special circumstances before a court exercising jurisdiction in bankruptcy would, in effect, do what has not been done in the court in which the judgment has been obtained by extending the time for compliance with the bankruptcy notice when no application to stay the judgment has been made. ...

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 case if this application were acceded to.

Sheppard J's approach has been followed in Re Smith (unreported, Federal Court, 4 May 1994), Agrillo v Codisposto (unreported, Federal Court, 16 December 1994), Bryett v Deputy Commissioner of Taxation (1997) 37 ATR 1411, and Wenkart v Abignano (unreported, Federal Court, 28 August 1998).

14 In Byron v Southern Star Group Pty Ltd [1997] FCA 151; (1997) 73 FCR 264, Lehane J made it clear, at 270-271, that whilst a failure to apply for a stay was a relevant factor to which weight would be attached, it was not necessarily conclusive on the question whether an extension of time should be granted. This point was emphasised in Warner v Frost [1999] FCA 830 in which Hely J said:

For myself, I think with respect, that the view of Lehane J is to be preferred and I propose to follow it but the problem is that really the only matters which were relied upon in support of a stay were these: first, the existence of an arguable appeal. Second, the application for a stay was made but at least inferentially a reason for its refusal was the inability on the part of the applicant to put up security in sufficient sums. Thirdly, the impact of a change in status consequential upon the refusal of the stay. Fourthly, no showing of any prejudice to the respondent should an extension be granted and, finally, the appeal is likely to be heard and decided in a period of eight months or less.

In my view, these factors are insufficient to outweigh the proposition that the Court in which this judgment was obtained has declined to stay its execution and something more than an arguable appeal needs to be shown before the Bankruptcy Court would grant an extension of time for compliance with the bankruptcy notice, which would produce a similar effect to the granting of a stay. Really nothing has been shown in this case other than that there is an arguable appeal and that the consequence of refusing an extension will be the commission of an act of bankruptcy ... .

On the hearing of these applications, both counsel for the applicants and for JNST submitted that, in Warner v Frost, Hely J had correctly stated the principles which ought to govern the exercise of discretion on these applications."

20. After discussing the authorities referred to in the earlier extract Kenny J goes on to say:

"16 Further, there are a number of factors which tell against the exercise of discretion in favour of the applicants. Those factors are:

(a) an application for a stay of the judgment has been made in the Supreme Court and refused;

(b) the appeal will not be heard in the immediate future and, on one account, not until after February 2001;

(c) a lengthy extension of time for compliance with the relevant bankruptcy notices may ultimately prejudice JNST as the judgment creditor; and

(d) the commission of acts of bankruptcy which may occur in the event that these applications are refused is not comparable to the consequences of sequestration orders.

17 As we have seen, in Warner v Frost, Hely J placed some weight upon the former factor. The fact is that, the application for a stay of judgment having failed in the Supreme Court, the judgment is enforceable against the applicants. The period for which an extension is sought is also relevant. The applicants seek an extension until 21 days after delivery of judgment by the Court of Appeal. That date is, on any view, likely to be well into the future. Further, as Heerey J said in Re Nguyen; ex parte Commissioner of Taxation [1995] FCA 1036; (1995) 54 FCR 403 at 407:

Extension of time for compliance with the 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.

See also Byron at 270 per Lehane J. Finally, the commission of an act of bankruptcy, although a serious matter, does not carry with it the grave consequences brought about by the making of a sequestration order: cf Byron at 270 per Lehane J and Warner v Frost at par 8. It remains open to the Court on the hearing of any petition for sequestration to adjourn the hearing pending the resolution of the appeal by the Court of Appeal."

21. On behalf of the applicant it is submitted that the court should go beyond finding that there is simply an arguable case which, as I have indicated, has been conceded by the respondent. Instead it was submitted on behalf of the applicant that the court in the present case should be satisfied that the applicant's appeal has a "considerable prospect of success". It was submitted that in the present case, according to the applicant, the court should not follow the reasoning of her Honour Kenny J in the Liew decision. It was submitted that in the present case the power to grant an extension of time for compliance with a bankruptcy notice reflects the gravity of the commission of an act of bankruptcy.

22. Although it was conceded that courts have tended to hold the consequences of a sequestration order as being more serious than the consequences of a failure to comply with a bankruptcy notice (see Re Geard; Ex parte Reid (unreported FCA Sheppard J 11 February 1994); Byron v Southern Star Group Pty Ltd [1997] FCA 151; (1997) 73 FCR 264), the gravity of the commission of an act of bankruptcy is nevertheless an important consideration in an application to extend time for compliance with a bankruptcy notice particularly, it is submitted, where a genuine and bona fide appeal from the judgment on which the bankruptcy notice is based is currently pending.

23. It was submitted that it is now settled law that an application of this kind deals with an appeal which is tantamount to an application to set aside the judgment for the purpose of s.41(6A) (see Benaharon v Fabric Dyeworks (Aust) Pty Ltd (1998) FCA 1109 at page 2, and Re Bryant; Ex parte Bryant CBA (unreported) (FCA Full Court) 4 May 1994, paragraph 23, Conway v Jackson [2001] FCA 230; (2001) 107 FCR 201).

24. In considering the principles governing the granting of an extension of time it was noted by counsel for the applicant that there are differing views expressed by Federal Court Justices in relation to the issue. The court's attention was drawn to the decision of Kiefel J in the matter of Re Baker; Ex parte Baker Applicant v Staples BC9502879 where her Honour was prepared to extend the time for compliance with the bankruptcy notice on the basis that the debtor's appeal in the Queensland Court of Appeal appeared genuine and arguable. It is noted in that case that Her Honour stated the following:

"Clearly the discretion under the subsection is at large; se Re Taylor; Ex Parte Deputy Commissioner [1983] FCA 316; (1983) 74 FLR 377 at 379. But that it is to say that account may be taken of whatever factors appear relevant in the particular case. It does not say much of the position where, as here, there is only one factor to consider, namely the existence of a bona fide and arguable appeal which has been instituted and prosecuted with diligence."

25. It is noteworthy in the present case that there is no issue, as indicated earlier in this judgment, that the applicant has an arguable appeal which has been instituted and prosecuted with diligence. In Re Baker Her Honour goes on to state the following:

"In such a case I can see no warrant for inquiring into the relevant merits of the grounds of the appeal and forming a view as to its outcome. I can think of sound practical considerations why that course should not be pursued, not the least of which is that what is presented to this court under the guise of this "factor" going to discretion is not even a fully argued case. If the grounds of appeal were hopeless and completely without merit, then a finding could fairly readily be made that it's not an arguable appeal and indeed the view may be taken that it was not instituted bona fides but for the purposes, for instance, of delay."

26. I should note in passing when considering the submissions made for and on behalf of the applicant that the matters raised by her Honour seemed to me to be an appropriate starting point in relation to this analysis in relation to the exercise of the discretion in this matter. They do not, in my view, detract from the general principles to which

I referred earlier in the judgment of Kenny J in the matter of Liew.

27. In any event, it was submitted on behalf of the applicant that although the court should be prepared to give considerable weight to the failure to obtain a stay, the court's discretion remains at large; that is, it was submitted the court may take into account whatever other factors may be regarded as relevant. It was noted that Lehane J in Byron (at page 270) emphasised that other matters may be relevant to the exercise of a discretion and that his Honour had regard to the applicant's failure to obtain a stay but also examined the basis of the pending application for special leave finding it hopeless.

28. It was submitted that the approach of Lehane J was preferred by Hill J in Wenkart v Abignano and Anor (unreported FCA 28 August 1998) and Hely J in Warner v Frost (unreported FCA 9 June 1999). It was submitted that the question of the strength of the prospects of a pending appeal has "primacy amongst the factors which have been identified as relevant to the exercise of the discretion under s.41(6A)(a) of the Bankruptcy Act".

29. Further reliance was placed by the applicant upon what is described as the practice of Victorian courts not to stay the execution of a judgment for money, except in exceptional circumstances. The court was referred to the decision of Ryan J in Beckwith v Pedler (unreported FCA 15 September 1999). In particular, the court was referred to the following:

"7 However, it seems that the practice of Victorian Courts is not to stay the execution of a judgment for a money amount except in exceptional circumstances. Accordingly, the debtor has been furnished with a memorandum of advice, again by Senior Counsel, which contains this passage:

"However, in Victoria, unlike other Australian jurisdictions, the test which is usually applied on an application for a stay is whether the applicant had demonstrated special or exceptional circumstances: see, for example, Cellante v G Kallis Industries Pty Ltd [1991] VicRp 99; [1991] 2 VR 653; Lagarna Pty Ltd v Bridge Wholesale Acceptance Corporation (Australia) Ltd [1995] VicRp 9; [1995] 1 VR 150. This approach clearly differs from that which applies in other states and, in particular, New South Wales: see Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685. The onus of establishing special or exceptional circumstances falls on the applicant. Where money judgments are involved a balance has to be struck between the principle that a successful party at first instance is entitled to the fruits of his or her victory and the need to ensure that the appeal should not be rendered nugatory.

In the present matter there was no evidence available to the Appellant which would have supported a claim that, once paid, the money would not be recoverable from the Respondent in the event of the appeal succeeding. There were no features of the case which, in my view, would have taken it outside the general rule that an appeal does not operate as a stay. Accordingly, I advised the Appellant that he had little or no prospect of succeeding on a stay application."

8 If that advice is, as I consider it to be, arguably correct, circumstances exist here against which the Court's discretion has to be exercised, which are different from those considered by Sheppard J in Re Geard ex parte Reid, quoted by Lehane J in Byron v Southern Star Group Pty Ltd [1997] FCA 151; (1997) 73 FCR 264 at 269. In Geard, Sheppard J said:

"The debtor has not made any application for a stay of proceedings pending the outcome of the appeal. Why he has not done so is not clear to me but the judgment which has been recovered against him is a final judgment and execution upon it has not been stayed it would seem to me to require quite special circumstances before a court exercising jurisdiction in bankruptcy would, in effect, do what has not been done in the court in which the judgment has been obtained by extending the time for compliance with the bankruptcy notice when no application to stay the judgment has been made. If one were to contemplate the taking of such a course, one would usually require evidence of the means of the debtor and would wish to consider whether or not it were appropriate to order that security for the amount of the judgment should be provided. Those are matters which a court exercising jurisdiction to stay the execution of a judgment would wish to consider."

9 In Byron v Southern Star Group itself, Lehane J said at 270:

"I think, therefore, that considerable 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 (Cth) [1983] FCA 316; (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" (for example Bryant) or, possibly, in a case where it is apparent that the prospects of success are unusually strong. (Kiefel J, in [Re Baker; Ex parte: Baker v Staples (Federal Court of Australia, unreported, 4 September 1995)], 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."

10 In the present case the pending appeal to the Court of Appeal is as of right. In that sense the circumstances are similar to those discussed by Weinberg J in Benaharon v Fabric Dyeworks (Australia) Pty Ltd (Federal Court of Australia, unreported 24 August 1998), where his Honour exercised the discretion in favour of extending the time for compliance with the bankruptcy notice.

11 I have been similarly persuaded to exercise my discretion in favour of extending the time for compliance with the bankruptcy notice. I have been influenced, in reaching that conclusion, by the view which I have formed in the light of all the evidence that the debtor has reasonable prospects of success on the appeal. The appeal is being prosecuted with reasonable diligence and should be heard and determined within nine months. I also regard it as a significant earnest of good faith that the debtor has paid, in January this year, an amount of $60,000, representing about two-thirds of the judgment debt together with interest and costs. The debt remaining unpaid is, by prevailing standards, not large. Moreover, the amount of $60,000 was apparently accepted unconditionally by the judgment creditor.

12 On the other hand, the only detriment which can legitimately be claimed to be inflicted on the judgment debtor by an extension of time for compliance with the bankruptcy notice is that he will be delayed for about nine months in issuing a creditor's petition in reliance on an act of bankruptcy constituted by non-compliance with the bankruptcy notice, assuming such an act of bankruptcy is committed. It is also to be borne in mind that, if a creditor's petition were issued within the next few weeks, assuming this application to be refused, the Court would be called on to exercise substantially the same discretion but directed then to whether or not to make a sequestration order."

30. It was submitted on behalf of the applicant having regard to the decision of Ryan J in Beckwith that the important distinction between what occurs in Victorian courts and other courts had been overlooked by Kenny J in the Liew decision. It was further submitted that the decision of Kenny J in Liew was distinguishable in that in that case Her Honour took account of the fact, in sharp contrast with the present case, it was submitted that the appeal was not to be heard in the immediate future. It was submitted that the applicant's appeal is scheduled to be heard in a month's time and the matter having been expedited for reasons of its general importance to Corporations Law that there is likely to be a judgment also expedited in this matter. Accordingly, it was submitted that the concerns expressed by Kenny J do not arise in the present case.

31. Interestingly, both parties relied upon Warner v Frost and the decision of Hely J. It is perhaps useful to set out the relevant passage in that extempore decision where the court states the following:

"5 I infer that the mortgage to the children was granted to enable the applicant to finance the litigation in the District Court. It has not been suggested that it has any sinister overtones. I have been referred to a number of decisions of judges of this Court in which the principles governing whether an extension of time should be granted are discussed. The first was a judgment of Kiefel J in Re Baker; ex parte Baker v Staples (unreported, Federal Court, 4 September 1995), where her Honour concluded that the subsistence of an arguable outstanding appeal against the judgment on which the bankruptcy notice was based, was of itself a sufficient ground on which to extend time for compliance with the bankruptcy notice.

6. That view has not prevailed in the general run of judgments in this court: Bryett v Deputy Commissioner of Taxation (1997) 37 ATR 141, Wenkart v Abignano (unreported, Federal Court, 28 August 1998) and Byron v Southern Star Group Pty Limited [1997] FCA 151; (1997) 73 FCR 264 are cases which have proceeded in a different direction. It is possible, I suppose, to synthesise from this group of decisions three views. The first is the view of Kiefel J which I have just indicated; the second is the view of Sheppard J referred to in Re Geard; ex parte Reid (unreported, Federal Court, 11 February 1994) that quite special circumstances are required before the Court will extend the time for compliance with a bankruptcy notice when an application has not been made to the court in which judgment was given for a stay of proceedings, and the third is the view of Lehane J in Byron that whilst weight should be given to that matter it is not necessarily conclusive.

7. For myself, I think with respect, that the view of Lehane J is to be preferred and I propose to follow it but the problem is that really the only matters which were relied upon in support of a stay were these: first, the existence of an arguable appeal. Second, the application for a stay was made but at least inferentially a reason for its refusal was the inability on the part of the applicant to put up security in sufficient sums. Thirdly, the impact of a change in status consequential upon the refusal of a stay. Fourthly, no showing of any prejudice to the respondent should an extension be granted and, finally, the appeal is likely to be heard and decided in a period of eight months or less.

8. In my view, these factors are insufficient to outweigh the proposition that the Court in which this judgment was obtained has declined to stay its execution and something more than an arguable appeal needs to be shown before the Bankruptcy Court would grant an extension of time for compliance with the bankruptcy notice, which would produce a similar effect to the granting of a stay. Really nothing more has been shown in this case other than that there is an arguable appeal and that the consequence of refusing an extension will be the commission of an act of bankruptcy but, as Lehane J said in Byron at 270:

"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."

32. It was further submitted on behalf of the applicant that it is relevant to take into account that applications have now been made to set aside the bankruptcy notices. That of itself, it was submitted, provides a basis for extending time for compliance with the notices under s.41(6A)(b). It was submitted that one of the issues raised in these applications, that is, whether compensation ordered pursuant to s.588J of the Corporations Act 2001 could be an accretion to the "fund" defined in the (Deed of Company Arrangement) (DOCA) and this cuts across issues to be agitated in the Court of Appeal, for example, whether s.588J is apt to authorise compensation equivalent to the difference between the return to creditors under the DOCA and 100 cents in the dollar.

33. It was submitted on behalf of the applicant that if the time for compliance with the bankruptcy notices is not extended the result may be the commission of an act of bankruptcy which would expose the applicant to possible applications by one or more creditors referred to in the applicant's affidavit for a sequestration order even before the appeal is determined. It should be noted that the affidavit material currently before the court clearly refers to other creditors of the applicant to which reference will be made in further detail when I deal with the respondent's submissions. It is sufficient, however, for the present purposes to note that it is common ground that this applicant does have at the time of this hearing other substantial creditors.

34. Counsel for the applicant submitted there is a significant countervailing discretionary factor to the issue of any availability of bankruptcy which had been considered relevant in Geard. The countervailing discretionary factor is what is suggested to be the delay by the administrators of the DOCAs of the respondent companies in applying for the issue of bankruptcy notices. In the present case it is not disputed that the summons seeking a stay was unsuccessful on 25 July 2003 and that the bankruptcy notices which have been relied upon were in fact issued on 2 December 2003 with service effected on 5 and

35. It was submitted, therefore, on behalf of the applicant that a significant period of time had elapsed between judgment and the fixing of the appeal date. As indicated earlier in reference to the background of this matter, it is clear that the appeal was lodged on 14 July 2003 whereas the bankruptcy notices did not appear to be issued until after further consideration of the hearing date which occurred on 11 November 2003 when at that time the Court of Appeal maintained the stay in relation to the prohibition against the applicant but otherwise did not interfere with the earlier decision to refuse to grant a stay in relation to the compensation judgment.

36. A further discretionary factor which the court can take into account in favour of the applicant is the fact that the administrators have undertaken to the Court of Appeal that they will not distribute any moneys received by them on account of the judgment amounts but will rather hold any such moneys and interest accumulated thereon upon trust pending the outcome of appeal. That undertaking is not disputed and it is common ground that such an undertaking has been given. It was submitted that the giving of that undertaking, according to the applicant, effectively defeated the applicant's application for a stay on principles peculiar to Victoria but that there is no authority which supports the proposition that an application for extension of time to comply with a bankruptcy notice will be defeated by the giving of such an undertaking.

37. The respondent submitted that in the present case there is no authority which would support the proposition that the question of strength of the prospects of the pending appeal has "primacy amongst the factors which have been identified as relevant to the exercise of the discretion under s.41(6A)(a) of the Bankruptcy Act". The respondents concede that in the present case there is sufficient material which would lead the court to conclude that there is, as indicated earlier, a bona fide appeal which has been prosecuted with due diligence and which could properly be described as arguable.

38. Nevertheless, in the exercise of the court's discretion the respondent submits that in the present case significance should be attached to the fact that an application for a stay of the orders made by Mandie J was unsuccessful. The respondents relied upon the authority of Kenny J in the Liew decision to which I have referred and in particular submitted that arising from that decision and others a number of principles emerge. For the sake of completeness, it should be noted that the respondents also refer specifically to the decision of Lehane J in Byron v Southern Star Group Pty Ltd where at 270 His Honour states:

"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 subsequent order is made, the relevant act of bankruptcy occurs earlier rather than later."

39. Further reference was made to the decision of Heerey J in Re Nguyen; Ex parte Commissioner of Taxation [1995] FCA 1036; (1995) 54 FCR 403 where His Honour states at page 407 the following:

"Extension of time for compliance with the 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."

40. After referring to those decisions it was submitted on behalf of the respondents that the following principles emerge:

(a) First, in order to obtain an order extending time pending the determination of an appeal, it is not enough to show only that a bona fide appeal has been commenced and is being diligently prosecuted.

(b) Second, an extension of time for compliance is similar in its effect to a stay of execution. The natural place to go for a stay of execution is to the court that gave the judgment. As the court that gave the judgment has not stayed execution, an applicant for an extension of time for compliance with a bankruptcy notice needs to show something in the nature of special circumstances: see Sheppard J in Geard.

(c) Although the failure to obtain a stay is a relevant factor to which weight should be attached, the failure to obtain a stay is not fatal to the application for extension for the period of compliance: see Lehane J in Byron v Southern Group Pty Ltd (1997) 73 FCT 264.

(d) The desirability of fixing the relation back day at the earliest proper point of time is another reason why the court should be reluctant to extend the time for compliance where the creditor has an enforceable judgment in its favour.

41. It was submitted on behalf of the respondents that this court should not exercise its discretion in favour of the applicant for the following reasons:

(a) First, the compensation orders are final orders and the Court of Appeal refused Mr Elliott's application for a stay of them.

(b) Mr Elliott has other creditors whose debts are substantial and his ability to pay those debts would appear to depend on the sale of some jointly owned antiques.

(c) If Mr Elliott pays the liabilities set out in paragraphs 29 to 33 of the 2 June Elliott affidavit, the pool of assets available for distribution to other creditors, including mills and holdings, will be diminished. While a trustee in bankruptcy may be able to recover such payments pursuant to section 122 of the act, the six-month period for the avoidance of preference begins six months before the presentation of the petition, and the mills and holdings cannot present a petition until Mr Elliott has committed an act of bankruptcy.

(d) Mr Elliott in making payments of $9000 per month to his estranged wife and daughter an amount which would appear to have been calculated without reference to the claims of his creditors and there are "matrimonial negotiations" which have potential to further prejudice the interest of creditors.

(e) If Mr Elliott makes payment to mills and holdings in accordance with the bankruptcy notices, they "will have the security of these moneys being in his hand pending the determination of the appeal".

(f) Nicholas Brooke, the deed administrator of mills and holdings, has given an undertaking to the Court of Appeal which would mean that any amounts paid in accordance with the bankruptcy notices will be kept in an interest-bearing account pending the hearing and determination of the appeal.

(g) While the appeal is listed for hearing on 23 February 2004 judgment is unlikely to be given for some time.

(h) Mr Elliott has not demonstrated that any particular prejudice would result if he committed an act of bankruptcy.

(i) It remains open for the court on the hearing of any petition for sequestration to adjourn the hearing pending the hearing and determination of the appeal by the Court of Appeal.

42. It was submitted on behalf of the respondents further that the fact that the applicant had obtained a stay of the prohibition order is of no or little relevance to the question of whether time should be extended for compliance with the bankruptcy notice. It was submitted that any other view concerning the prospects of success of the appeal ought be afforded little or no weight, save in relation to the question of whether the appeal is "bona fide".

43. By way of reply the applicant submitted that the order in relation to a stay of the prohibition order was relevant to the extent that it reflected the seriousness and significance of the appeal and/or the strength of the appeal. It was further submitted that in the present case the issue of other creditors was not particularly relevant in the present case as their interests could be dealt with and accommodated on a further occasion if the extension of time were granted.

44. In relation to the failure to obtain a stay, the applicant's counsel by way of reply reiterated the earlier submission that that issue alone is not determinative, albeit it is a significant issue, although given the practice in Victoria and the matters raised by Ryan J in Beckwith, the court should not in the circumstances refuse the application merely on the ground that an application for a stay has been unsuccessful.

45. In his reply counsel for the applicant otherwise referred to the authorities which have been referred to earlier, and in particular, referred to the decision of Kiefel J in Re Baker. Although Counsel for the applicant referred to what Kiefel J said in Baker where Her Honour referred to the Full Court decision in Bryant's case, it is noteworthy in relation to that case Her Honour went on to say the following:-

"In the circumstances of that case however, I do not take it as authority for the proposition that the view to be formed is one which goes beyond whether an appeal is properly arguable."

46. Further reference was made during the course of his reply by counsel for the applicant to the decision of Bryant to which reference has been made earlier, but in particular paragraphs 23 and 24 which provide as follows:

"23. The trial Judge treated the appeal in the Supreme Court as a proceeding to set aside the judgment in respect of which the bankruptcy notice was issued, a course with which we agree. In determining whether or not to extend the time for compliance, his Honour was obliged to form some view of the prospects of success. We would not disagree with his Honour's finding that the prospects of success were slight, in the light of the very limited issue which Mr Bryant put to Levine J for his determination and the grounds of appeal.

24. We see no error in the manner in which the trial Judge exercised his discretion. His Honour was bound to take account of the prospects of success and of the period of time likely to pass before the appeal is heard and determined. ........"

47. It was submitted that in the circumstances the court can go beyond merely finding that there is an arguable case and should do so in the present application. Further reliance was placed upon the material before the court and in particular the outline of submissions which have been filed before the Court of Appeal on behalf of the applicant. Again it was submitted, as indicated earlier, that the court should find that the applicant's appeal has a "considerable prospect of success".

48. In the present case I accept submissions made on behalf of the respondents that it is appropriate for this Court to apply the law set out by Kenny J in the Liew decision. The discretion is clearly a discretion at large. In this matter the acceptance by the respondents that the appeal by the applicant in the Court of Appeal has been instituted bona fide and prosecuted with due diligence means that the Court is not fettered in its discretion by the application of s.41(6C)(b) of the Bankruptcy Act.

49. One of the more significant issues to arise however is the extent to which this Court should take account of the prospects of success of the appeal. In my view it is appropriate that I accept and find that the appeal is arguable. So much is clear from the appeal notice and the outline of submissions in support of the appeal together with comments made by the Court of Appeal during the course of hearing the applications for stay of the orders made by Mandie J. In addition both parties agree that the appeal is "arguable". In my view it is not appropriate to further analyse the prospects of success of the appeal.

I specifically reject the notion that this Court should embark upon a preliminary assessment of the prospects of success of the appeal and the suggestion by Counsel for the applicant that it is appropriate for the Court to make a finding that the appeal has a "considerable prospect of success". In my view to make that finding would be to make an assessment that is inappropriate for this Court. The finding that the appeal is arguable is sufficient to at least assist the Court in determining whether the appeal is bona fide. In the present case it is in fact not necessary to make that determination as both parties have agreed that in fact the appeal is bona fide. I have no doubt that it is appropriate for the Court in some cases to make an assessment of the appeal to the extent that it may be concluded that the appeal is "hopeless" or to use the more polite term has a "slight" chance of success. However, given the concession made that there is a bona fide arguable appeal it would be inappropriate for the Court to proceed beyond making that finding. It seems obvious to me that the Court in bankruptcy should not be in a position where it is encouraged to make what could only be a very superficial assessment of the prospects of appeal if it were to be embark upon an analysis which went beyond a finding that the appeal is "arguable" or "hopeless". I further reject the submission on behalf of the applicant that the prospects of success of the appeal should otherwise be given some "primacy" against the factors which have been identified as relevant in the exercise of the discretion in this application. If I were to rely upon that matter then it seems to me that it would have the tendency to undermine the significance and importance of bankruptcy proceedings which do not simply relate to the party issuing the bankruptcy notice but necessarily involve other creditors.

50. It is relevant and appropriate however that the Court does consider the fact that an application for a stay has been refused by the Court of Appeal. As noted earlier in this judgment the Court of Appeal set out the authority it relied upon in exercising its discretion to grant a stay. The fact that that discretion may be different in Victoria in my view is not particularly relevant and I do not accept that the claimed difference which I note Ryan J in Beckwith referred to as being "arguably correct" should diminish the significance of a refusal by the Court of Appeal to grant a stay. Part of the process which enables a successful litigant to enjoy the fruits of litigation pending the determination of appeal is the opportunity to issue a bankruptcy notice and at least commence bankruptcy proceedings. On the other hand it is clear that where there is a discretion at large provided by statute the Court should not consider the refusal to grant a stay as being the sole and determinative factor or fatal to the exercise of the Court's discretion. I do give it significant and considerable weight however in the circumstances of the present application.

51. The mere fact that undertakings were given by the administrators does not in my view of itself detract from the significance of the refusal of the Court of Appeal to grant a stay. The applicant still has the opportunity to make use of the undertaking.

52. In considering the factors which were described as those being matters which "tell against the exercise of discretion in favour of the applicants", I note that Kenny J in Liew referred to the fact that the appeal in that case would not be heard in the immediate future. The decision of Kenny J was delivered on 18 October 1999 and it appears in that case that the appeal would not be heard until after February 2001. During the course of submissions Counsel for the respondent argued that the immediacy of the appeal in the present case is irrelevant. I do not accept that submission. In my view if it is a relevant factor to take into account that an appeal will not be heard for a considerable time, that is not in the immediate future then it must be appropriate for the Court to take into account in favour of the Applicant that the appeal is imminent. Further in my view it is relevant to take into account the chronology of events to the extent that the orders were made on 30 June 2003 with the appeal being filed on 14 July 2003. The bankruptcy notices were issued on 2 December 2003.

I accept that the delay between the date of the order and the issuing of the bankruptcy notices in the present case is relevant particularly having regard to the fact that had it not been for the summer vacation the hearing of the appeal may well have occurred in December 2003. In my view the delay in issuing the bankruptcy notices and the fact that the appeal would be heard in the immediate future are both factors which I am entitled to take into account in favour of granting the application.

53. A further factor which I accept I am able to take into account in the present case is that the applicant has applied to set aside the bankruptcy notices and to that extent has at least of itself provided a basis for extending time for compliance with the notices under s.41(6A)(b) of the Bankruptcy Act. I reject the submission however made on behalf of the applicant that if time for compliance with the bankruptcy notices is not extended the result may be the commission of an act of bankruptcy which would expose the applicant to possible applications by one or more of the creditors referred to in the applicant's affidavit material.

54. I cannot see how the involvement of other creditors even in potential sequestration proceedings before the appeal is determined should be used as a factor in favour of exercising my discretion to grant the application. It may be a consequence of the refusal but I do not regard it as a particularly relevant factor to take into account in my decision.

55. As indicated earlier it is clear to me that a most significant factor in the present case is the refusal of the Court of Appeal to grant a stay.

I further note and accept the passage relied upon by the respondent in the decision of Heerey J in Re Nguyen and in finding that there is significance in the refusal of the Court of Appeal to grant a stay and note that His Honour in that case referred to the appellate court as being the appropriate place to go for a stay of execution having noted that an extension of time for compliance is "similar in its effect to a stay of execution". I accept however that the failure to obtain the stay is not determinative or as Heerey J stated is "not fatal to the application". It is significant to note however and I accept that there is a desirability of fixing the relation back day at the earliest proper point of time and that this is another factor which the Court should take into account and provides a reason why it should be reluctant to extend the time for compliance where a creditor has an enforceable judgment in its favour.

56. It is not necessary for the Court to consider in detail the creditors of the applicant save to conclude that it is common ground that there are other creditors and that there is at least a potential for a pool of assets available for distribution to other creditors being diminished if there is any further delay.

57. In my view the Court should also regard as relevant the potential for different material being provided to the Court upon the hearing of an petition for a sequestration order that might be available to the Court currently hearing an application for extension of time of compliance with the bankruptcy notice. In the present case given the hearing date of the appeal and notwithstanding the fact that in all likelihood the Court of Appeal will reserve its decision, there will undoubtedly be further information available to the parties which may be relevant to the court in bankruptcy upon the hearing of a petition, if there be one, for sequestration. No doubt there is at least a potential for an application to be made for and on behalf of the applicant upon any hearing of a petition for sequestration to adjourn that hearing pending the hearing and determination of the appeal by the Court of Appeal.

I accept the respondents submissions in relation to this issue.

58. I further accept that the fact that the applicant has obtained a stay of the prohibition order is of little relevance to the question of whether time should be extended for compliance with the bankruptcy notice.

59. In weighing up the competing factors it is my concluded view in the exercise of my discretion that those factors which I have accepted which ought properly be taken into account against the granting of the application outweigh the factors I have identified which may be said to be in favour of the granting of the extension of time. In summary those factors include the refusal to grant a stay, the fact that the normal principles should apply that a successful litigant is entitled to the fruits of his litigation pending the determination of an appeal, the potential adverse consequences for the judgment creditor if extension of time for compliance with the bankruptcy notice is delayed and that I should distinguish between the consequences of a sequestration order and exposure of the applicant to the commission of an act of bankruptcy. In my view one of the more compelling factors in favour of this application is the immediacy of the hearing of the appeal perhaps combined with the fact that there is no issue that the appeal is arguable, bona fide and has been pursued with due diligence. However, ironically the timing of the appeal on my reckoning would clearly mean that it is unlikely that any sequestration order would be made or even heard and determined at least prior to the commencement of the appeal and the reserving of the Court of Appeal's decision. It is open to the applicant upon the hearing of an application for a sequestration order to raise new material and seek an adjournment of the sequestration hearing. Whilst I have expressed concern about the delay on the part of the administrators in issuing the bankruptcy notices, it is my view that that factor along with the others in favour of granting the application do not outweigh the factors I have identified which would persuade me to refuse to exercise my discretion in favour of the application.

60. Although the delay in issuing the bankruptcy notice is a relevant factor which I have taken into account, I add that in the present case that delay is not particularly lengthy and in part may well be understandable in the context of commercial negotiations. In addition there has been no suggestion in the material that the issuing of the bankruptcy notice was undertaken with a view to somehow fetter and/or restrict the capacity of the applicant to pursue with vigour the appeal which is currently pending in the Court of Appeal. The applicant may still make payment of the judgment debt and rely upon the undertakings given by the administrators to the Court of Appeal. The Court of Appeal whilst noting there were questions of general importance in corporations law was only prepared in the circumstances to grant a stay on the prohibition order and seemed satisfied that the undertakings disposed of the principal argument in relation to the stay on the compensation order. I see no reason for this Court to make a decision in the exercise of its discretion in the present case which would result in an effective stay in circumstances where the Court of Appeal has declined to grant such a stay.

61. Given the date of the hearing before the Court of Appeal it is difficult to see how the refusal to grant an extension of time for compliance with the bankruptcy notices should interfere with the applicant's capacity to continue to prosecute with due diligence what I have found to have been an arguable appeal.

62. The present application is distinguishable from the facts in the Beckwith case. In that case Ryan J after noting that the appeal had a reasonable prospect of success and was prosecuted with reasonable diligence and would be heard and determined within nine months also regarded it as significant that the debtor had paid about two-thirds of the judgment debt together with interest and costs. There is no material before the Court suggesting that any amount has been paid or offered to be paid or lodged in trust on behalf of the applicant. Just as it may be argued that the payment in Beckwith's case is a relevant factor in the exercise of discretion, it seems to me that conversely the omission of any payment or arrangement in the present case may be taken into account as a relevant factor in refusing to exercise my discretion in favour of the applicant.

63. Whilst in the present case there does not appear to be evidence that the applicant is seeking to alienate assets or put them beyond the debtor's power so they are not available to meet the judgment debt, it is also fair to conclude that the court would not be able to impose a condition that the amount of the judgment debt be paid into the trust account of the respondent's solicitors pending the outcome of the appeal. There do not appear to be sufficient funds readily available to pay the debt and in my view that is another matter which is relevant in the exercise of the court's discretion as any grant of extension of time in this application could not be made conditional upon payment of the judgment debt into the respondent's solicitors trust account.

64. It follows therefore that the applications should be dismissed with costs.

I certify that the preceding sixty-four (64) paragraphs are a true copy of the reasons for judgment of McInnis FM