BANKRUPTCY - Bankruptcy Notice - application to extend time - application posted before but received after expiry of notice - O.1 R5A(6) FCR - Act of bankruptcy committed - no extension possible - court declines to hear complaint seeking to go behind judgment.

Hubner v The Australian and New Zealand Banking Group, [1999] FCA 385 followed.

Guss v Johnstone [2000] HCA 26; 171 ALR 598 followed.

(2) Applicant to pay respondent's costs including any reserved costs.

FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE

1. In this matter, PETER JOHN MASON, the applicant, seeks to set aside a bankruptcy notice issued by Fortron Insurance Agency Limited and dated 22 March 2001. The bankruptcy notice was served on 19 April 2001 and, therefore, an act of bankruptcy would occur if the bankruptcy notice was not complied with by 10 May 2001. Mr Mason gave evidence that when he received the bankruptcy notice he considered the document, decided what he wanted to do about it, and then telephoned the solicitor for the creditor to ask for time to deal with the matter.

2. The solicitor declined to grant him the time and so on 4 May 2001, he obtained from the Federal Court Registry a form of application by facsimile. He says that he completed the form on that day and together with certain other material, posted the same to both the Federal Court in Brisbane and the Federal Court in Perth. The reason he sent the copy of the documents to Perth was because Fortron Insurance Agency Limited is a Perth based company, and their solicitors are resident in Perth.

3. The Bankruptcy Act provides in section 41(6)(a) and 41(7), an opportunity for a person in receipt of a bankruptcy notice to make application to the Court to extend time for compliance.

"41(6)(A) Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice:

(a) proceedings to set aside the 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 (6)C, extend the time for compliance of the bankruptcy notice."

(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 the judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; and

(b) the Court is of the opinion that the proceedings to set aside the judgment or order:

(ii) are not being prosecuted with due diligence;

the Court shall not extend the time for compliance of the bankruptcy notice."

"41(7) Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has applied to the Court for an order setting aside the bankruptcy notice, on the ground that the debtor has such a counter-claim, set off or cross-demand as is referred to in paragraph 40(1)(g) and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter-claim, set off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including day on which the Court determines whether it is so satisfied."

4. Simply put, the effect of these two sections is - in respect of the first, to grant the Court the opportunity to extend time for compliance with the bankruptcy notice and in respect of the second to actually deem time to be extended until the matter is determined. The application made by Mr Mason alleges that he has a counter-claim in excess of the amount claimed by the respondent and he also wishes that the bankruptcy notice be set aside as the judgment on which it is based was allegedly gained by improper means in that moneys given to the applicant were not adduced in evidence. This is an allegation of fraud which would entitle the Court to go behind the judgment.

5. Unfortunately for Mr Mason, he decided to send his application to the Court by post. The rule in relation to filing is Order 1 rule 5A(6) which states as follows:

" 5A(6) a document is filed when it is accepted in the Registry and stamped in accordance with order 46 rule 4."

6. I have no doubt that the reason for the inclusion of rule 5A(6) is to prevent there being any disputes arising from argument concerning the time at which a document may or may not have been posted. Whilst the rules are generous in providing that a document may be filed by using the postal service, the date of filing, which is of considerable importance in many matters, not only those involving bankruptcy, has been firmly fixed as the date when the document was processed by the Court. It is to be remembered that up until recently, all filing would have to be done personally and therefore there would never be any argument as to when a document might or might not have been processed, as it would have been processed in front of the person who was attempting to make the filing.

7. In this case, I accept the evidence given by Mr Mason that he posted the documents on 4 May 2001. What appears to have occurred thereafter is that a fire happened, either in the post box or somewhere else, and the documents were burnt. They did find their way to the Federal Court, but they did not find their way to there until 14 May. On that day they were received, stamped and filed and it would appear that contact was made by the Court with Mr Mason and he filed an undamaged copy of the original application. Applying the provisions of O1 R5A(6) the date of filing was therefore 14 May.

8. 14 May was a date after the expiry of the bankruptcy notice, and once a bankruptcy notice has expired without a party taking the steps adumbrated in sections 41(6) and (7), an act of bankruptcy is deemed to have been committed. Mr Looney who appears for the creditor has provided me in his outline of submissions with authorities which clearly show that I am unable to alter that fact and, at this late stage, extend the time for compliance see Hubner v The Australian and New Zealand Banking Group, [1999] FCA 385 and Guss v Johnstone [2000] HCA 26; 171 ALR 598 at paragraph 55.

9. I do not believe that the provisions of Order 5 rule 8 which allows relief from the rules would apply in a case such as this because the provision of the relief from the rules would not have the effect of making the filing within time to prevent the act of bankruptcy having occurred. All that the relief could have done is to permit a filing where a filing may not otherwise have been permitted. In this case there is no problem about the filing, it is the date of the filing. This being the case, and as I was unable to extend the time for compliance with the Bankruptcy Notice, I saw no point in continuing to hear the argument raised by Mr Mason as to the validity of the original judgment because even if I did so, the creditor could still proceed with his petition based upon the act of bankruptcy that had taken place.

10. The fact is that Mr Mason does have an opportunity at the hearing of a petition, founded upon this act of bankruptcy, to raise these points. I said to him before concluding the case that I would ensure that in my judgment there would be reference to the fact that I did not believe that it would be appropriate for a petitioning creditor to raise against Mr Mason, at the hearing of a petition, any failure to have that aspect of the matter dealt with at this stage. I believe that the appropriate time, in the light of what has occurred, for Mr Mason to raise his points concerning the invalidity of the judgment is on the hearing of the petition.

11. For the reasons given above, I therefore dismiss the application and decline to set aside the bankruptcy notice. I order that the applicant pay the costs including reserved costs of the respondent in accordance with Part 21 rule 21.10 of the Federal Magistrates Court rules. I grant the respondent a certificate for counsel.

I certify that the preceding eleven (11) paragraphs are a true copy of the reasons for judgment of Raphael FM