Robert & Susan Sterling v Esanda Ltd [1980] FCA 75

RE: ROBERT STERLING EX PARTE: ESANDA LIMITED RE: SUSAN STERLING EX PARTE: ESANDA LIMITED NO. B 1140 OF 1980

BANKRUPTCY DISTRICT OF THE STATE OF ) No. B1140 of 1980 NEW SOUTH WALES AND THE AUSTRALIAN

RE: SUSAN STERLING also known as SUSAN BARBARA STERLING also known as

ORDER JUDSE MAKING ORDER: LOCKHART J. WHERE MADE: AT SYDNEY DATE OF ORDER: MONDAY 2 JUNE 1980

1. Time for compliance with the requirements of bankruptcy notice No. B 1140 of 1980 be extended until further order.

2. Liberty be reserved to any party to apply for relisting of the applications on a day which will permit the giving of seven (7) day's notice to other parties.

3. The applications to set aside the bankruptcy notice be adjourned generally, with liberty being reserved to any party to apply for relisting of the applicationson a day which will permit the giving of seven (7) day's notice to the other parties.

NEW SOUTH WALES AND THE AUSTRALIAN NO. B1140 OF 1980

EX PARTE: ESANDA LIMITED RE: SUSAN STERLING also known

as SUSAN BARBARA STERLING also known as SUSAN TARISZNYAS

These are two applications to set aside the same bankruptcy notice. The applicants are Robert Sterling and his

wife, Susan Sterling ("the applicants"). By consent both

applications were heard together. The bankruptcy notice was served on the applicant Robert Sterling. It has not been served yet on the applicant Susan

compliance with the requirements of the bankruptcy notice.

Counsel for the applicant Susan Sterling informed me that the order for extension of time is sought in her case for more abundant caution lest it be held that service of the bankruptcy notice on her husband is deemed to constitute sufficient service thereof upon her. This point was not argued before me. However, it is common ground that if I make an order for extension of time for compliance in the case of the applicant

Robert Sterling, I should do so in the case of his wife.

The applications for extension of time are made under sub-s. 41 (6A) of the Bankruptcy Act 1966 ("the Act"). Sub-sectiona (6B) and (6C) are also relevant. These sub-ss. were

introduced into the Act by s. 24 of the Bankruptcy Amendment Act

1980. Section 24 came into operation on 8 April 1980.

Sub-sections (6A), (6B) and (6C) provide as follows:-

"(6A) Where, before the expiration of the time fixed by the Court or the Registrar for compliance with the requirements of a bankruptcy notice --

(a) proceedinas 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 to set aside the bankruptcy notice has been filed with the Registrar,

extend the time for compliance with the 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 to set aside the bankruptcy notice has been filed with the Registrar,

(a) a debtor applies to the Court or the Registrar for an extension of the time for complying with a 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 or the Registrar, as the case may be, is of the opinion that the proceedings to set aside the judgment or

the Court or the Registrar, as the case may be, shall not extend the time for compliance with the bankruptcy notice.".

bankruptcy notices issued before or after 8 April 1980:

of the Bankruptcy Amendment Act 1980. They should be read

Amerdment Act 1980 to s. 33 of the Act, s.- 20 also havina come

into operation on 8 April 1980. The amendments to s. 33 provide that the power of the Court or the Registrar to extend times limited by the Act for doing acts or things does not extend to an extension of time for compliance with the requirements of a

bankruptcy notice. This is dealt with by sub-ss. 41 (6A), (6B) and (6C).

The amendments to ss. 33 and 41 were intended to overcome doubts that previously existed as to the powers of the

Court or the Registrar to extend time for compliance with the

requirements of a bankruptcy notice: see Lipov v. Alexander Fraser & Son Limited & Anor (1979) 24 A.L.R. 616; and Re K.A. 7

Studwell Ex parte Australian Fibreglass Pty. Limited, a judgment

The Court's power under sub-s. 41 (6A) to extend time for compliance with the requirements of a bankruptcy notice may be exercised only where the proceedings to set aside the judgment or order in respect of which the notice was issued have been instituted, or the application to set aside the bankruptcy notice has been filed with the Registrar, in each case before the expiration of the time fixed by the Court or the Registrar for

compliance with the requirements of the notice: see the

It is the Registrar who fixes the time for compliance with the requirements of the bankruptcy notice where it is served in Australia: sub-para. 40 (1) (g) (i). Where the notice is served elsewhere than in Australia the Court fixes the time for compliance with its requirements by the order giving leave to effect service outside Australia: sub-para. 40 (1) (g) (ii). This explains the reference to "the time fixed by the Court or the Registrar for compliance with the requirements of a bankruptcy

notice" in the introductory words of sub~s. 41 (6A).

The bankruptcy notice was issued by the Registrar on 7 March 1980. The evidence is not entirely satisfactory as to the date of service of the notice on the applicant Pobert Sterling;

It is a fourteen day notice so that the time for compliance with its requirements expired on 9 May 1980. The applications to set aside the bankruptcy notice were filed with the Registrar on 9 May 1980. It was on that day that this Court made an order ex parte extending time for compliance with the requirements of the notice to 13 May 1980. On 33 May, time was extended to 16 May when I made an order extending time for

compliance until further order (as to an order in this form see

Hence the Court's power to extend time for compliance in

Paragraph 41 (6A) (a) is not available as a source of power to extend time as it was not until 13 May 1980 (some days after the expiration of the time fixed by the Registrar for

compliance) that the applicants instituted proceedings in the

Although the Court has been invested by sub-s. 41 (6A) with power to extend time for compliance with a bankruptcy notice where application is made to set it aside, no provision of the Act

in terms confers power on the Court to set aside the notice

(a) has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part X or Part XI coming within the cognizance of the Court; and :

(b) may make such orders (ineluding declaratory orders and orders granting unjunctions or other equitable remedies) as the Court consicers necessary for the

The power conferred by s. 30, and its predecessors both in Australia and the United Kingdom, is wide and has been held to cover a large number of matters relating to bankruptcy. It is not

Notwithstanding that the filina of the application to set aside the bankruptcy notice within the specified time is a condition precedent to the exercise of the Court's power to extend 'time, and 1s perhaps a ground for granting the extension, in truth the power to extend time is in aid of the setting aside of the

notice itself. Unless the Court is to hear the application to set

aside the notice, there is no purpose to be served in having power to extend time for compliance with the requirements of the notice.

I leave aside, of course, the power conferred by para. 41 (6A)

This Court and the Federal Court of Bankruptcy before it, have set aside bankruptcy notices over many years on various grounds. Instances of the exercise of this power are where the notice is not in accordance with the terms of the judament and is calculated to perplex the debtor; the notice is issued for the whole of a judgment debt, yet the judgment debtor has paid into

court in part satisfaction of the debt; in truth no debt lies

behind the judgment: Wilkinson v. Osborne (1915) 21 C.L.R. 89; and the sum of which payment is required by the terms of a notice

has in fact been paid by the debtor: Re Partridge; Ex parte Maidens-Fuller (1945) 13 A.B.C. 185.

In exercising the power to set aside notices the court has been confronted with practical difficulties. If the bankruptcy notice is, as it usually is, a fourteen day, twenty-one er twenty-eight day notice, it may be inconvenient or impossible for the court to hear and determine the application to set aside

within the time constraints imposed by the bankruptcy notice

In some cases the determination of the question may not be difficult and take little time. Other cases may involve complex issues and require days of hearing. The judge needs time

to properly consider the matter. Hence, in practice over the years, until the court has been able to resolve the issues raised on the application to set aside the notice, it has exercised power to extend time for compliance with its requirements so as to ensure that in the intervening period no act of bankruptcy 1s

Strangely enough, notwithstanding the frequent exercise

of the power by this Court, and the Federal Court of Bankruptcy, over many years, there are few reported cases relating to the setting aside of bankruptcy notices, and none revealed by the researches of counsel where the question of power to set aside

bankruptcy notices was raised except Re K.A. Studwell (supra); but there it was not necessary for me to decide the question of jurisdiction as I dismissed the application on discretionary

It is not clear why Parliament did not expressly confer power on the court to set aside a bankruptcy notice; but plainly

it assumed the existence of the power when enacting sub-s. 41 :

It is necessary for the purpose of carrying out or giving effect to the express power vested in the court to extend time for compliance with the requirements of bankruptcy nectices that the court may set aside such notices. Fence sub-s. 30 (1) is

a source of the Court's power to set aside bankruptcy notices.

In my opinion the power to set aside a hankruptcy notice

arises from an alternative source namely, the principle of interpretation of statutes that a power conferred by Parliament

carries with it the power necessary for its performance or

execution. Ubi aliquid conceditur, conceditur etiam et id sine

quo res ipsa non esse potest. See Oath Before Justices Case

(1611), 12 Co. Rep. 130 or 77 E.R. 1405; Bane v. Methuen (1824) 2

Bing. 63 or 130 E.R. 228; Clarence Rail Co. v. Great North of

Enaland, Clarence and Hartlepool Junction Rail Co. (1845) 13 M. & W. 706 or 114 F.R. 815; Cookson v. Lee (1853) 23 L.J. Ch. 473;

Ex parte Martin 1879 4 Q.B.D. 212; affirmed on appeal sub nom.

The power expressly conferred by Parliament on the court

to extend time for compliance with the reguirements of a

bankruptcy notice where an applications has been filed to set it ~~

aside carries with it the power to set aside the notice itself.

Plainly the power to extend time for compliance is in aid of the power to set aside the notice itself. What is the point in extending time for compliance otherwise than for the purpose of enabling the court to hear the application to set aside the notice without the occurrence of an act of bankruptcy in the

meantime? If it did occur this would be destructive of the very

It was submitted by counsel for the applicants that the

court has inherent jurisdiction to set aside bankruptcy notices.

Some of the difficulties in the path of this submission are

That this Court has inherent jurisdiction cannot be doubted. It matters not that it is the creature of Statute: see

St.Justins Properties Pty. Limited & Ors. v. Rule Holdings Pty.

Limited, a decision of Toohey J. unreported 14 February 1980.

A superior court's inherent jurisdiction may be exercised in a variety of circumstances; but the only circumstance that could be relevant in the present case is the inherent power of a court to control its own practice and

The bankruptcy notice is the Registrar's document. It is well established that the Registrar, in exercising his power of issuing bankruptcy notices, is not exercising the judicial power

of the Commonwealth but is acting ministerially: In Re Moss; Ex

parte Tour Finance Limited 1969 A.L.R. 285; Re Maddox; Ex: parte The Debtor 24 AL.R. 279.

Whether the court's inherent jurisdiction is a source of power to set aside bankruptcy notices following the amendments to

the Act made by the Bankruptcy Amendrent Act 1980 is not a

question I find it necessary to decide. I am satisfied for the

reasons already given that the Court's power to set aside

The question arises as to the circumstances in which the power conferred by sub-s. 42 (6A) will be exercised when application has been made by a judgment debtor to set aside the

bankruptcy notice within the stipulated time. Plainly the word

may" in sub-s. (6A) ("...the Court may...extend the time for compliance with the bankruptcy notice") is used in a permissive or

facultative sense: Ward v. Williams (1955) 92 C.L.R. 496.

I mentioned earlier some instances of the exercise of the power to set aside bankruptcy notices by this Court and the Federal Court of Bankruptcy. They are not exhaustive of the occasions on which the power will be exercised. The power of the court to extend time for compliance with the requirements of a bankruptcy notice 1s in aid of the power to set aside the notice itself. Once the court has heard the application to set aside the notice it may dismiss it or set the notice aside. In either case,

exercise of the power to extend time for compliance will then be

It as neither necessary nor desirable for me to state

exhaustively the matters which an applicant for extension of time Must show to obtain an order for extension. This will depend on the facts of each case. Orders for extension of time will not be made as of course. Grounds must be established. It is as well to remember that the power to set aside the notice and the power to extend time for compliance are necessarily related. For instance, if the application to set aside is made on the basis that no debt lies behind the judgment, the court may conduct a preliminary enquiry as to whether it should go behind the judgment. This approach is taken sometimes on the hearing of petitions for

sequestration where the debtor alleges that he is not indebted to

the petitioning creditor notwithstanding the judgment: see Corney --

v. Brien (1951) 84 C.L.R. 343; Wren v. Mahoney (1972) 126 C.L.R.

212; and Re Wong; Ex parte Kitson (1979) 27 A.L.R. 405.

There are sound reasons why substantially the same considerations should apply in dealing with applications to set aside bankruptcy notices. There may be cases where the application to set aside should be adjourned pending the outcome of an application by the debtor to a court of competent jurisdiction to set aside the judgment on which the bankruptcy

In other cases, the debtor may seek an adjournment of

the application to set aside pending the outcome of an appeal from the judgment. I respectfully agree with the observations of C.A.

Sweeney J. in Lipov's Case (supra) at p. 620 on this matter.

Although what was said by his Honour was referrable to the Act

before the 1980 amendments, it is equally applicable to the power

As the power to extend time for compliance with the requirements of a bankruptcy notice is in aid of the power to set

aside the notice itself, generally the two will go hand in hand.

For instance if the application to set aside is made on the basis ~

that no debt lies behind the judgment and the court decides to hear the dispute as to the existence of the debt it may give directions as to interlocutory matters and fix the hearing of the application to set aside at some future date; but in the meantime

There may be some overlap between paraaraphs (a) and (b) of sub-s. 41 (6A). Application may be made by e debtor to set aside a bankruptcy notice before the expiration of the time fixed for compliance with its requirements, thus invoking the court's power to extend time under paragraph 41 (6A) (hb). Refore the

application for extension is heard, but after the expiration of

the time fixed by the Court or the Registrar for compliance with the requirements of the notice (see the introductory words of

sub-s. (6A)), the Gebtor may apply to the court where the judgment

was signed to set it aside. In my opinion the court is entitled to have regard to the application to set aside the judgment as a matter relevant to the exercise of its powers both to extend time for compliance and to set the notice aside, notwithstanding the presence of paragraph 41 (6A) (a) as an independent head of power

In my opinion paragraphs 41 (6A) (a) and (b) are not

mutually exclusive. The fact that the Court may extend time for --

compliance where the applicant has applied to the Court where judgment was signed against him to set the judament aside (para. (a) ) does not restrict the ambit of the Court's power to extend time for compliance where the applicant seeks to set aside the notice (para. (b) ). In the appropriate case the fact that application has been made to set aside the judgment on which the bankruptcy notice is based may be a relevant circumstance for the Court to consider when hearing an application to extend time in aid of an application to set aside the notice. Put another way, the fact that it is a condition precedent to the exercise of the power to extend time for compliance and a ground of the

application for the exercise of that power that the applicant has

applied to the Court where judgment was signed against him to set aside the judgment (para. 41 (6A) (a) and sub-s. 41 (6C) ) does not mean that this Court cannot treat that same matter as a

relevant consideration when exercising the power to extend time

where application is made to set aside the bankruptcy notice

I turn to the facts. The default judgment was entered against the applicants in the District Court on 9 March 1979 in the sum of $16,691.63. A notice of motion to set aside the

judgment together with an affidavit of the applicant Robert

Sterling, were filed in the District Court Registry on 13 May ~

1980. The solicitors for the applicants have prepared a form of notice of grounds of defence, and the applicants have instructed them to file it if their motion to set aside the judament succeeds. The applicant Robert Sterling has sworn that the contents of the notice of grounds of defence "are true in substance and in fact". He has sworn that either in late 3978 or early 1979 he received copies of two statements of liguidated claim issued out of the Pistrict Court at the request of the respondent; that he handed both documents to his solicitors and asked them to attend to them; that until some time during the week commencing 28 April 1980 he heard nothina further about the

matter either from the respondent or his solicitors; and that

during that time he had been in close touch with his solicitors in relation to various other matters and assumed that the matter, the subject of these proceedings, had been taken care of in some form

The statement of liquidated claim issued by the respondent against the applicants that led to the signing of the judgment, the foundation of the bankruptcy notice in the proceedings before this Court, alleges that by certain lease agreements between the respondent as lessor and a company, Robert Sterling Pty. Limited, as lessee, the respondent leased to the company certain motor vehicles; that the company defaulted in payment of the rent instalments; that the respondent retook possession of the vehicles and diposed of them; that the applicants guaranteed in writing to the respondent payment of ail moneys payable by the company under the leasing agreements to the respondent and all damages recoverable by the respondent from the company arising out of the leasing agreements. The guarantees were the source of the causes of action asserted by the respondent

against the applicants. The proposed notice of grounds of defence

and the company that the respondent would dispose of any goods repossessed by it at a price not less than the fair market price for those goods and that it would take all steps reasonable in the

the respondent was obliged to dispose of any goods respossessed by sale at a price no less than the fair market price for those goods and to take all steps reasonable in the circumstances to obtain

the respondent disposed of the goods repossessed by sale at a price less than

the respondent failed to take all steps reasonable in the circumstances to obtain a price which was no less than the fair market price for those goods and that if the respondent had disposed of the goods

less than the fair market price and had taken all steps reasonable in the circumstances to obtain that price, there would have been no amount payable by the

The applicant, Robert Sterling has deposed, both in

affidavits filed in support of the notice of motion in the

District Court and in support of the application before this court, to facts intended to show prima facie that the applicants

have a good defence on the merits and also to explain why they did

not defend the proceedings and why in the interests of justice ~

The evidence in support of the applications for extension of time consists of two affidavits of the applicant Robert Sterling. Counsel for the respondent read an affidavit of a Mr. Murray who said that he served a true copy of the bankruptcy notice signed by the Depupty Registrar in Bankruptcy on the applicant, Robert Sterling, on 25 April 1980. Neither deponent

appropriate course for this court to take is to adjourn the

applications to set aside the bankruptcy notice until the District Court has dealt with the application to set aside the

default judgment and to extend time for compliance with the

Accordingly, I order that time for compliance with the requirements of bankruptcy notice No. B1140 of 1980 be extended until further order, liberty being reserved to any party to apply for relisting of the applications on a day which will permit the giving of seven days' notice to other parties. I adjourn the applications to set aside the said bankruptcy notice generally, liberty being reserved to any party to apply for relisting of the applications on a day which will permit the giving of seven days'

notice to the other parties. Costs of all parties are reserved.

Reasers for Judgment herein of his Honour Mr Jusi.ce Lockhart,