Frigger v Kitay

stay of execution 11 The applicants' first contention is that a property seizure and sale order (PSSO) over the real estate property of the applicants which the respondents obtained on 30 September 2015, operated as an implied stay of execution in respect of the judgment debt upon which the bankruptcy notice was issued. 12 Ms Michelle Guy of Herbert Smith Freehills, the solicitors acting for the respondents, by affidavit dated 11 October 2016 gave the following evidence. 13 The PSSO was obtained by Ms Guy on 30 September 2015 in respect of three properties. These were: (a) a property located in Applecross owned by Mr and Mrs Frigger; (b) a property located in Bayswater owned by Mrs Frigger; and (c) a property located in Como owned by Mrs Frigger. 14 On 6 October 2015, Ms Guy caused the PSSO to be provided to the Sheriff's Office for execution. 15 On 9 October 2015, the Deputy Sheriff sent a letter to Herbert Smith Freehills, advising that: (a) the Sheriff's Office had received five PSSOs in respect of the Friggers; (b) Mrs Frigger had advised that the Applecross property, the Bayswater property and the Como property were "over encumbered"; (c) the premises were "modestly furnished with nothing of any real significant commercial value"; and (d) the Deputy Sheriff had not issued the PSSO to an officer for execution as he could not "see there being much chance of success until all matters with the real properties are resolved". 16 I make findings in terms of this evidence of Ms Guy. It follows that I find that no execution has been levied on the property of the applicants which is the subject of the PSSO. 17 In the case of Wiltshire-Smith v Mellor Olsson (1995) 57 FCR 572 (Wiltshire-Smith), the Full Court accepted that conduct by a judgment creditor, or a court order which prevents the debtor from paying a bankruptcy notice, may result in the judgment creditor not being able to rely upon the debtor's failure to pay the sum demanded in the bankruptcy notice. 18 In Wiltshire-Smith, Mr Wiltshire-Smith appealed against a sequestration order which had been made against him consequent upon his failure to pay a debt demanded in a bankruptcy notice issued by Mellor Olsson, a firm of solicitors. The debt which was the basis of the bankruptcy notice was a judgment debt obtained by Mellor Olsson on 25 March 1993 in the Adelaide Magistrates Court in respect of unpaid professional fees. The debt was for $1,794. 19 On appeal, Mr Wiltshire-Smith argued that the Court should have gone behind the Magistrates Court judgment and determined that he did not owe the judgment debt. Mr Wiltshire-Smith relied on two grounds. It is the second of the grounds that is relevant to this case. 20 In 1993, Mr Wiltshire-Smith had conducted a newsagency business from two premises in a shopping centre in Parafield Gardens. Mellor Olsson had provided professional services to Mr Wiltshire-Smith in relation to a dispute between Mr Wiltshire-Smith and his landlord and in respect of Mr Wiltshire-Smith's attempts to sell the newsagency business. 21 Also in 1993, Mr Wiltshire-Smith and his then wife were parties to a matrimonial dispute in the Family Court of Australia. On 10 March 1993, the Family Court made an order that Mr Wiltshire-Smith's wife be at liberty to appoint an accountant as receiver and manager of the Parafield Gardens newsagency business and, in that capacity, to take into his custody and control the assets and business of the newsagency and to sell the newsagency business. 22 Mr Wiltshire-Smith's argument for going behind the judgment was that, once the receiver and manager was appointed, any liability for the debt he may have had was extinguished and replaced by a liability imposed on the receiver and manager. The Full Court rejected that argument. However, relevantly, the Full Court then went on to consider another issue which arose from the making of the Family Court order; and it is this issue which is the basis for the argument raised by the applicants in this case. 23 The Full Court identified the question or issue as follows at 584: That issue is whether the order of the Family Court had the effect of restraining or preventing the appellant from paying or otherwise discharging liabilities incurred by him in connection with the conduct and operation of the newsagency business before the order was made…If the order had the effect of so restraining or preventing the appellant on 30 June 1994 [being the date on which the bankruptcy notice was issued] the question would arise whether the bankruptcy notice could properly be issued on that day and whether the failure to make payment in answer to the demand made by the bankruptcy notice after it was served constituted an act of bankruptcy. 24 The Full Court observed at 585-586: It has been established that conduct by a judgment creditor which prevents a judgment debtor from paying the debt may operate to disentitle the judgment creditor from proceeding to immediate execution. In Re Sedgwick; Ex parte Sedgwick (1888) 5 Morr 262 Lord Esher MR said (at 263-264): …there is an equity laid down - a just equity which goes to the extent only that if a creditor gives a notice requiring payment in seven days and actually and in fact prevents the debtor from paying, such creditor cannot rely upon the notice and it will be set aside. The question is whether in the eyes of any person of ordinary fairness in business it will be said that the creditor has in a business sense prevented the debtor from paying. But the possibility that he may have prevented him is not sufficient. The question is whether the creditor has done something which prevents the debtor in fact from complying with the summons. He may do so in different ways. He may put a legal difficulty in the debtor's way, and although he puts no legal difficulty he may have done something which in fact may prevent payment. The question must be whether he has in fact prevented the debtor from complying. The fact that the creditor has made it more difficult for the debtor to pay than if the creditor had done nothing at all does not go to that extent. A similar principle was recognised in Re Bond; Ex parte Capital and Counties Bank Ltd [1911] 2 KB 988, in Re Wilson; Ex parte Jones (1916) 85 LJKB 1408; [1916] All ER 1060 and by a Full Court of this Court in Wallace v Trade Credits Ltd (1983) 72 FLR 252 at 254. The onus in such a case is on the debtor to prove affirmatively that the claim in respect of which the bankruptcy notice was issued could and would have been paid but for some act or omission on the part of the creditor: Bracia Czeczowiczka v Otto Markus [1936] 1 All ER 944 at 949. 25 The Full Court went on to observe that the principle may also operate in circumstances where the debtor is prevented from paying the debt because of an event unrelated to the conduct of the judgment creditor; for example, by the appointment of a receiver over all of the property of the debtor. 26 Later at 586-587, the Full Court observed: Once it is recognised that a petitioning creditor may be disqualified from issuing a bankruptcy notice by reason of a restraint imposed by order of a court on all the property of the judgment debtor thereby removing his ability to make payment, there is no reason why a court order imposed on some only of the property of the judgment debtor which has the same practical effect should not be recognised as a relevant circumstance sufficient to disentitle a judgment creditor from proceeding immediately to execution. In our opinion such an order will have this consequence where in practical reality, although not strictly in law, the order "in any way prevent(s) the debtor from paying his debt" or where it "deprives or may well deprive the judgment debtor of assets which he could otherwise use to pay the judgment creditor and thus comply with the bankruptcy notice". To adapt the test proposed by Lord Esher MR in Re Sedgwick; Ex parte Sedgwick cited above, the factual inquiry to determine the practical effect of the order is whether in the eyes of ordinary fairness in business it will be said that the order has in a business sense prevented the debtor from paying. (Footnotes omitted.) 27 After conducting a detailed inquiry as to the effect of the making of the Family Court order upon the ability of Mr Wiltshire-Smith to pay the debt the subject of the bankruptcy notice (which as I have said was issued on 30 June 1994), the Full Court concluded at 590: At 30 June 1994, the simple fact was that the appellant was without assets or other means to pay the debt, and the operation of the order of the Family Court had no continuing restraint on any asset which the appellant could otherwise have used to pay the demand in the bankruptcy notice. 28 However, in this case, no writ of execution was issued consequent upon the obtaining of the PSSO. Further, the evidence from the Friggers did not satisfy the onus of showing that but for the issue of the PSSO, the debt demanded in the bankruptcy notice could and would have been paid. There was no evidence adduced by the Friggers as to their financial circumstances at the date of the bankruptcy notice and how the imposition of the PSSO precluded them from deploying those resources to pay the debt. There is, therefore, no basis on which to conclude that the practical effect of the issue of the PSSO in a business sense prevented the applicants from paying the judgment debt. 29 Accordingly, the applicants have failed to establish that the issue of the PSSO operated as an implied stay of execution of the judgment debt. 30 In their oral submissions, however, the Friggers made a further argument. The Friggers' contention was that they were the only shareholders in CAT and that there was likely to be a surplus of assets over the liabilities of CAT at the conclusion of the liquidation. This meant, said the Friggers, that it was likely that there would be a return to them as the only two shareholders of CAT at the conclusion of the liquidation. Insofar as I understood the argument, the Friggers contend that they have been prevented from paying the sum demanded in the bankruptcy notice because CAT's assets were placed by court order under the control of a third party, namely, in this case, the liquidator. Therefore, said the applicants, they were in the same position as the category of persons referred to in Wiltshire-Smith who had been precluded by a court order from paying the debt demanded in the bankruptcy notice. 31 This contention is rejected. The argument does not address the requirement for the debtor to show that at the date of the bankruptcy notice, but for the court order, the debtor (or in this case, the debtors), could and would have paid the debt demanded in the bankruptcy notice; and that the practical effect of the court order was in a business sense to prevent them from paying the judgment debt. As mentioned, the Friggers have not adduced evidence of their financial resources at the date of the bankruptcy notice, and how the making of the court order for the appointment of the liquidator to CAT prevented them from deploying their personal resources to pay the debt demanded in the bankruptcy notice. 32 It is beside the point that at some unspecified time in the future the Friggers, as the only shareholders in CAT, may, after the liquidation, receive a payment from the liquidators of CAT. In this regard, I would observe that, in any event, the Friggers did not lead any evidence to support the underlying assumption that there would be a surplus available for the shareholders at the conclusion of the liquidation. 33 Accordingly, this ground of objection is dismissed.

counterclaim, set-off or cross demand 34 As mentioned, the applicants filed an affidavit dated 19 September 2016 in support of their application to set aside the bankruptcy notice. One of the grounds on which the applicants rely is that they have a counterclaim, set-off or cross demand against the respondents for the purposes of s 40(1)(g) and s 41(7) of the Bankruptcy Act. 35 Rule 3.02 of the Federal Court (Bankruptcy) Rules 2016 (Cth) provides: Setting aside bankruptcy notice (1) An application to set aside a bankruptcy notice under the Bankruptcy Act must be accompanied by an affidavit stating: (a) the grounds in support of the application; and (b) the date when the bankruptcy notice was served on the applicant. (2) A copy of the bankruptcy notice must be attached to the affidavit. (3) If the application is based on the ground that the debtor has a counter-claim, set-off or cross demand referred to in paragraph 40(1)(g) of the Bankruptcy Act, the affidavit must also state: (a) the full details of the counter-claim, set-off or cross demand; and (b) the amount of the counter-claim, set-off or cross demand and the amount by which it exceeds the amount claimed in the bankruptcy notice; and (c) why the counter-claim, set-off or cross demand was not raised in the proceedings that resulted in the judgments or orders to which the bankruptcy notice relates. 36 Paragraph 4 of the affidavit of Mrs Frigger dated 19 September 2016 was the only paragraph of that affidavit which set out the basis of any counterclaim, set-off or cross demand relied on by the Friggers. That paragraph stated: My husband and I are directors and members of Computer Accounting & Tax Pty Ltd (in liq) since 1 July 1997. During the period from that date until the date of liquidation being 12 December 2009, the company and my husband and I operated a Running Account for the purposes of the company's business and operations. Attached and marked AF4 is copy [sic] of the entries in that Running Account. Pursuant to s 553C Corporations Act 2001 we are entitled to set off the Judgment against the amount the company owes us, which set-off occurred automatically. In those circumstances, the judgment has already been paid and the respondents were not entitled to obtain the Bankruptcy Notice. (Original emphasis.) 37 Section 553C(1) of the Corporations Act 2001 (Cth) provides: Subject to subsection (2), where there have been mutual credits, mutual debts or other mutual dealings between an insolvent company that is being wound up and a person who wants to have a debt or claim admitted against the company: (a) an account is to be taken of what is due from the one party to the other party in respect of those mutual dealings; and (b) the sum due from the one party is to be set off against any sum due from the other party; and (c) only the balance of the account is admissible to proof against the company, or is payable to the company, as the case may be. 38 Section 553C(2) of the Corporations Act provides: A person is not entitled under this section to claim the benefit of a set-off if, at the time of giving credit to the company, or at the time of receiving credit from the company, the person had notice of the fact that the company was insolvent. 39 The affidavit evidence adduced by the debtor on an application to set aside a bankruptcy notice by reference to s 40(1)(g) and s 41(7) of the Bankruptcy Act must do more than merely assert the existence of a counterclaim, set-off or cross demand which equals or exceeds the amount of the judgment debt. 40 In Ebert v Union Trustee Company of Australia Limited (1960) 104 CLR 346 (Ebert), in respect of an appellant seeking to set aside a bankruptcy notice on the basis of a counterclaim, set-off or cross demand which equalled or exceeded the amount of the judgment debt, Dixon CJ, McTiernan and Windeyer JJ observed at 350: The debtor clearly must satisfy the Court that there exists in him a counter-claim, set-off or cross demand. "Cross demand" is the word relied upon here. The appellant cannot satisfy the court that a cross demand exists by showing no more than that she propounds one and states how she suggests that she can make it out…Perhaps the standard may be expressed by saying that the debtor must show that he has a prima facie case, even if then and there he does not adduce the admissible evidence which would make out a prima facie case before a court trying the issues that are involved in his counter-claim, set-off or cross demand. 41 These observations were approved in Re Brink, Ex parte The Commercial Banking Company of Sydney Limited (1980) 44 FLR 135. At 141, Lockhart J observed: In my opinion this Court should follow the decision of the High Court in Ebert's case. Hence a debtor must show that he has a prima facie case. However, I do not understand Ebert's case as deciding that this Court must undertake a preliminary trial of the counterclaim, set-off or cross demand; rather, this Court must be satisfied that the debtor has a fair chance of success. 42 In Guss v Johnstone (2000) 171 ALR 598, in relation to an application to set aside a bankruptcy notice under s 40(1)(g) and s 41(7) of the Bankruptcy Act, the High Court observed at [38]-[40]: The nature of the exercise upon which Sundberg J was engaged is well established by a long line of authority. In Vogwell v Vogwell, Latham CJ said, in relation to a corresponding provision: [T]he authorities show that the matter to which the court looks is this, - whether it is just that the claim should be determined before the bankruptcy proceedings are allowed to continue; in other words, whether it is a claim which it is proper and reasonable to litigate. The state of satisfaction referred to in s 40(1)(g), and s 41(7), [of the Bankruptcy Act] involves weighing up considerations as to the legal and factual merit of the claim relied upon by the debtor, and the justice of allowing the bankruptcy proceedings to go ahead or requiring them to await the determination of the claim. (Footnote omitted.) 43 In my view, the Friggers' claim based on a set-off under s 553C of the Corporations Act does not, for the following reasons, have sufficient legal merit to warrant setting aside the bankruptcy notice to permit their claim to be tried. 44 First, there is no mutuality between the claims made by the Friggers and the debt claimed by the respondents, for the purposes of s 553C of the Corporations Act. This is because the events which gave rise to the Friggers' liability to the respondents, namely, the order of Master Sanderson for delivery up of the confidential affidavit and the consequential costs order, occurred well after the liquidation of CAT had commenced - in other words, after any statutory set-off under s 553C between the Friggers and CAT would have operated. 45 The Friggers relied upon the case of Re Parker (1997) 80 FCR 1 (Re Parker) to contend that the debt arising from the costs order could, nevertheless, be set-off under s 553C even if it arose after the commencement of the winding up of CAT. 46 In Re Parker, the liquidators of Barossa Ceramics (SA) Pty Ltd (Barossa Ceramics) sought directions as to whether s 553C of the Corporations Law would operate to set-off any debts due by Barossa Ceramics to its parent company, Amber Ceramics (SA) Pty Ltd (Amber Ceramics), against monies which may become payable to Barossa Ceramics pursuant to claims the liquidators may bring against Amber Ceramics under s 588V and s 588W of the Corporations Law. Those two sections empowered a liquidator to bring an action against the holding company, and recover, as a debt due to an insolvent subsidiary company, losses incurred by creditors of the subsidiary company, in respect of unpaid debts incurred by the subsidiary company whilst that company was insolvent. 47 Amber Ceramics argued that s 553C could not apply to the remedy available under s 588W(1) because that section contemplated a liquidator taking action after the date of the commencement of the liquidation. Mansfield J found that the set-off under s 553C would operate in respect of any monies derived from any successful actions which the liquidators of Barossa Ceramics may bring under s 588V and s 588W against Amber Ceramics. Mansfield J at 12, referred with approval to the following observations in Gye v McIntyre (1991) 171 CLR 609 at 623-624: The requirement that the credits, the debts or the claims arising from other dealings be commensurable does not mean that they must be vested, liquidated or enforceable at the decisive date, that is to say, at the time of the sequestration order or special resolution accepting the composition. Provided they exist as contingent at that date and are of a kind which will ultimately mature into pecuniary demands susceptible of set-off, the requirement of the section may be satisfied in relation to them. 48 Mansfield J then went on to observe: In my view, to reflect the words of Rich J in Hiley v Peoples Prudential Assurance Co Ltd (In liq) at 487 which were quoted with approval in Gye v McIntyre, the steps which s 588W addresses post the winding up order merely ascertain the rights of Barossa Ceramics by reference to the natural outcome of the earlier transactions. The events which give rise to the claim, both from the perspective of those supplying credit to Barossa Ceramics, and from the perspective of Amber Ceramics as its holding company, occurred before 30 May 1995. The contravention of s 588V, which I am asked to assume, had occurred by the commencement of the winding up of Barossa Ceramics. The natural outcome of those matters was the claim which the applicant now asserts. 49 The case of Re Parker is, therefore, distinguishable because all of the events which gave rise to the making of the costs order, namely, the refusal by Mrs Frigger to deliver up all copies of the confidential affidavit, and the consequential making of the costs order, postdate the commencement of the winding up. The making of the costs order by Master Sanderson was not the "natural outcome" of events which predated the commencement of the liquidation of CAT. 50 Secondly, s 553C(2) does not permit the Friggers to take the benefit of the judgment debt by way of a set-off in respect of a debt due by CAT. This is because at the time that the Friggers incurred their liability under the judgment debt, CAT was to the knowledge of the Friggers insolvent. 51 The Friggers have also contended that they have other claims which comprise counterclaims, set-offs or cross demands for sums greater than the amount claimed in the bankruptcy notice. 52 The Friggers sought to identify those counterclaims, set-offs or cross demands in affidavits, namely, affidavits dated 19 September 2016, 3 October 2016, 7 November 2016 and 2 December 2016. 53 The respondents relied upon the case of Thomas v St George Bank Ltd [1999] FCA 166 to object to the Friggers being able to rely upon any claims other than the claim based on s 553C identified at [36] above. The respondents contended that the affidavit of 19 September 2016 was the only affidavit filed by the Friggers within the time for compliance with the bankruptcy notice, being the period stipulated in s 41(7) of the Bankruptcy Act. The respondents went on to contend that that affidavit did not assert the existence of any counterclaim, set-off or cross demand based on any other grounds. 54 I have some doubt as to the merit of the respondents' argument in light of the authority of Biztole Developments Pty Ltd v McLean (1995) 57 FCR 36, and the fact that interim orders were made by Registrar Trott and Barker J extending the time for compliance with the bankruptcy notice until the date of the hearing of the Friggers' application to set aside the bankruptcy notice. 55 However, it is unnecessary to determine this issue in light of my findings below. 56 I now turn to consider the applicants' affidavits deposing to the counterclaims, set-offs and cross demands relied on by the Friggers. 57 The Friggers identified in the affidavit dated 19 September 2016 a claim of set-off by reference to s 553C of the Corporations Act. I have dealt with that claim above. 58 There is annexed to Mrs Frigger's affidavit of 3 October 2016, a copy of an application which the Friggers have filed in Supreme Court proceeding COR 2 of 2010. This is the proceeding in which Master Sanderson made the order for the delivery of the confidential affidavit and the consequential indemnity costs order which is the basis for the bankruptcy notice. The application in COR 2 of 2010 annexed to the affidavit is entitled "Interlocutory Process for Orders" and it is accompanied by an affidavit of Mrs Frigger in COR 2 of 2010 dated 30 September 2016 in support of that application (the COR 2 of 2010 support affidavit). 59 The Interlocutory Process for Orders seeks 13 different orders. 60 Order 1 of the interlocutory process seeks leave for the applicants to rely upon and refer to the confidential affidavit of Mr Kitay in support of the interlocutory process. This is the confidential affidavit which was the subject of the delivery up orders made in 2014 by Master Sanderson. 61 The other 12 orders sought are not confined to orders which are to be made in respect of COR 2 of 2010. Nor are the orders sought confined to orders of an interlocutory nature. Thus, for example, there are orders seeking declarations and injunctions which affect other Supreme Court proceedings. Those orders include orders which seek to restrain the respondents from enforcing costs orders in Supreme Court proceedings CACV 2765 of 2010 and CACV 120 of 2013, and also a declaration that a named solicitor did not have authority to act for CAT in Supreme Court proceedings CACV 2765 of 2010, CACV 120 of 2013, CACV 62 of 2016 and CACV 80 of 2016. 62 Further, by order 13, the Friggers make a claim against Mr Kitay, the first respondent, for the difference between compound interest at a rate of 8.5% and interest at an undisclosed rate, on sums referred to as "the sale proceeds of the Armadale Property" and "superannuation contribution" made by the applicants to the Frigger Superannuation Fund. In her COR 2 of 2010 support affidavit, the only evidence that Mrs Frigger refers to in support of order 13, is that the Friggers will rely upon the confidential affidavit. 63 As mentioned, the first order sought in the interlocutory process is that the applicants have leave to rely upon and refer to the confidential affidavit. 64 On 28 April 2017, in the Supreme Court, Martino J dismissed the Friggers' application for the relief sought in order 1 (Frigger v Mervyn Jonathon Kitay in his capacity as liquidator of Computer Accounting & Tax Pty Ltd (in liq) [No 14] [2017] WASC 120). 65 I also observe that there is annexed to the 3 October 2016 affidavit of Mrs Frigger a list of what the Friggers allege are contraventions by Mr Kitay of the Superannuation Industry (Supervision) Act 1993 (Cth). 66 In an affidavit dated 7 November 2016 at para 7, Mrs Frigger says that the applicants have sought summary judgment in a case which the Supreme Court has refused to hear and that "the applicants are confident they will be awarded the following judgments to be paid by the first respondent", namely, Mr Kitay: (a) Interest on Filing Fee from 1 November 2010 until present $5,760; (b) Interest on St George Term Deposit from November 2010 until present $30,600; (c) Interest on sale proceeds of Armadale Property from 11 February 2016 until present $80,422.68; (d) Interest on sale proceeds of service station business from 11 February 2016 until present $99,824.69; (e) Legal costs of approximately $230,000; (f) Loss on sale price of $430,000 of Armadale Property to United Fuel Pty Ltd in December 2013 plus interest of $109,650; (g) Total $986,257 counter claim (Original emphasis.) 67 Further, Mrs Frigger also states in para 13 of that affidavit that the state of the loan account between CAT and the applicants is that the applicants are owed $1,998,976.64 plus accrued interest of $1,701,023.00. 68 In a further affidavit dated 2 December 2016, Mrs Frigger at para 41(a) says: 41. I confirm the following in relation to the set off counterclaims and cross demands we have against the respondents. (a) In COR2/2010 we have a claim for damages against BOTH respondents: (ii) Interest withdrawn by the respondents from the St George Term Deposit: 2/01/2010 1,082.96 12/05/2010 394.52 2/7/2012 1,853.37 1/10/2013 3,720.00 Total $7,050.85 plus interest @ 6% pa from November 2010 until 12 December 2016 on $87,050.00 being $31,338; Total claim re St George Term Deposit $38,388.85 plus term deposit of $80,000 and all accrued interest. (iii) Interest on filing fee $16,000 from November 2010 until 12 December 2016 of $5,760 (the filing fee will be refunded by the Supreme Court to me, which has already approved the refund in November 2010). (iv) Interest at 9% pa on sale proceeds of service station business at a daily rate of $360.74 from 11 February 2016 until 12 December 2016 total $110,386.44 (v) Interest at 9% pa on sale proceeds of Armadale Property at a daily rate of $290.52 from 11 February 2016 until 12 December 2016 total $88,898.36 (Original emphasis.) 69 Mrs Frigger then goes on in para 42 and para 43 to identify and quantify further claims. 70 The following sequence of events is instructive in considering the applicants' claims which were identified in Mrs Frigger's affidavits referred to above. 71 On 8 November 2016, the Friggers filed submissions in support of their claim that the bankruptcy notice should be set aside on the basis of the existence of a counterclaim, set-off or cross demand. The Friggers, relying on Mrs Frigger's affidavit of 7 November 2016, submitted that the Friggers had a set-off against the second respondent, CAT, arising from the amounts due to them under the loan account. They also submitted that the applicants had a claim for damages against the first respondent and relied for that submission on the 7 November 2016 affidavit. 72 On 21 November 2016, the respondents filed submissions in which they observed that the Friggers had in their submissions of 8 November 2016 identified claims against each of the respondents severally. The respondents went on to submit that the judgment debt was a debt which was owed to the respondents jointly. The respondents submitted that a several debt could not be relied upon as a valid counterclaim, set-off or cross demand for the purposes of s 40(1)(g) of the Bankruptcy Act in respect of a debt owed to persons jointly. The respondents relied upon Dudzinski v Kellow [2002] FCA 665 (Dudzinski). 73 After the respondents' submissions were filed, the applicants filed Mrs Frigger's affidavit of 2 December 2016 which deposes for the first time that the debts which Mrs Frigger had previously deposed were owed by Mr Kitay only, were now owed by "both respondents". (See [66] and [68] above.) 74 No explanation is given in Mrs Frigger's affidavit of 2 December 2016, as to why the amounts which she previously deposed as being owed by Mr Kitay in his individual capacity, were now said to be owed by "both respondents". 75 In the case of Dudzinski, Mr Dudzinski brought an application in the Federal Court against 10 respondents. On 8 April 1999, Drummond J struck out a number of Mr Dudzinski's claims, declined him liberty to replead and ordered that the remaining actions in the proceeding be permanently stayed. Mr Dudzinski sought leave to appeal from the order of Drummond J. That application was dismissed by the Full Court and Mr Dudzinski was ordered to pay the respondents' costs. A certificate of taxation was issued which allowed the respondents' bill of costs at $17,700. Mr Dudzinski did not pay the costs and on 20 January 2002, the 10 respondents issued a bankruptcy notice to Mr Dudzinski. 76 Mr Dudzinski brought an application to set aside the bankruptcy notice and to extend time for compliance with the bankruptcy notice. One of the grounds Mr Dudzinski relied upon to set aside the bankruptcy notice was that he had a counterclaim, set-off or cross demand, equal to, or exceeding, the amount of the judgment debt. 77 Spender J held that all the claims on which Mr Dudzinski sought to rely lacked mutuality between the alleged cross demand and the debt on which the 10 respondents to the application relied. Spender J observed at [11]: A debtor may only raise, as an answer to a bankruptcy notice issued by ten joint creditors, as here, a cross-demand against those ten creditors jointly. 78 It follows that, on the authority of Dudzinski, it is necessary for the Friggers to demonstrate that they have a claim against the two respondents jointly to support their contention that the bankruptcy notice be set aside on the grounds that they have a counterclaim, set-off or cross demand which equals or exceeds the amount of the judgment debt. 79 The affidavit material which is relied upon by the applicants does not carry the probative weight necessary to satisfy the onus on them pursuant to s 40(1)(g) and s 41(7) of the Bankruptcy Act to satisfy the Court that there is sufficient legal and factual merit in the claim that the respondents are jointly liable to the applicants such as to warrant the claims being tried and the bankruptcy notice being set aside. It is apparent that the content of Mrs Frigger's affidavits comprise no more than assertions. This is particularly the case when no explanation is given for deposing in November 2016 that only Mr Kitay was liable to the Friggers for the same amounts which a month later Mrs Frigger deposed were owed by both respondents. 80 In any event, the affidavits relied on by the Friggers suffer from the same deficiency in probative weight to warrant setting aside the bankruptcy notice in respect of all the claims deposed to by Mrs Frigger, regardless as to the alleged debtor. 81 It follows that this ground does not comprise a basis on which to set aside the bankruptcy notice.

APPLICATION TO SET ASIDE COSTS JUDGMENT 82 Although the Friggers have not expressly sought an order for an extension of time under s 41(6A) of the Bankruptcy Act to comply with the bankruptcy notice until the resolution of proceedings to set aside the judgment on which the bankruptcy notice is based, such a claim is implicit in their submissions. 83 Section 41(6A) provides as follows: 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. 84 As mentioned at [58]-[59] above, the Friggers have filed in the Supreme Court a proceeding in COR 2 of 2010 which sought 13 orders. One of those orders sought, namely, order 9, seeks an injunction restraining the respondents from enforcing the allocator of $61,000.42 which, as I have said, is the judgment sum which founds the demand in the bankruptcy notice. The process claims that the injunction is sought pursuant to s 1324 of the Corporations Act and/or s 15 of the Civil Judgments Enforcement Act 2004 (WA). The COR 2 of 2010 support affidavit by Mrs Frigger states in support of the making of order 9: "I will rely on evidence from the Confidential Affidavit in support of this order." As mentioned at [64] above, on 28 April 2017, Martino J in the Supreme Court rejected the Friggers' application for leave to refer to the confidential affidavit in support of the orders sought in the Interlocutory Process. This decision would, therefore, appear to affect adversely the applicants' claim for the injunction sought in order 9. 85 Section 41(6A) of the Bankruptcy Act provides for the exercise of a discretion by the Court in determining whether to extend the time for compliance with a bankruptcy notice until the conclusion of the proceedings to set aside the relevant judgment. The discretion was discussed in Re Geard; Ex parte Reid (1994) 217 ALR 191 (Geard). In that case the debtor sought an extension of time until the determination of an appeal against the order for the paying of the judgment debt which founded the basis for the demand in the bankruptcy notice. At 193-194, Sheppard J observed: The critical question then is how that 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 the judgment of another court especially when 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. If one were to contemplate 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. 86 There is some question as to whether the Friggers' application for the injunction sought in order 9 can properly be regarded as an application to "set aside" either the relevant costs order or the primary orders for delivery up of the confidential affidavit made by Master Sanderson which gave rise to the making of the costs order. 87 However, even if that application can be construed as an application to set aside the costs judgment within the meaning of s 41(6A), I would not exercise the discretion vested in the Court to extend time until the hearing of the application. 88 This is because, to the extent that the application for the injunction in order 9 is an application for final relief, there is no evidence that the Supreme Court has granted any interim relief staying the operation of the costs order. Nor, indeed, is there any evidence of the applicants having applied for such interim relief in the Supreme Court. Applying the observations in Geard, this circumstance is, in itself, a sufficient basis upon which to decline to extend time under s 41(6A) of the Bankruptcy Act; and I decline do so on that basis. 89 Accordingly, the application for an extension of time is dismissed. 90 The applicants' application for review of the Registrar's decision of 28 February 2017 is dismissed. 91 Further, the applicants' application filed on 20 September 2016 to set aside the bankruptcy notice of 29 August 2016 is also dismissed. 92 At the conclusion of the hearing on 15 June 2017, I made orders for the extension of time for compliance with the bankruptcy notice until further order. I will hear submissions as to setting the appropriate date for compliance with the bankruptcy notice. I certify that the preceding ninety-two (92) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.