Shepherd v Chiquita Brands

REASONS FOR JUDGMENT (revised from transcript) HIS HONOUR: 1 In this case the respondent issued a bankruptcy notice (No. NN317 of 2001) against the appellant which was served upon him as long ago as 28 March 2001. On 18 April 2001 the appellant applied to the Court to have the bankruptcy notice set aside. The hearing and final determination of that application has been a long and complicated process. The hearing was transferred to the Federal Magistrates Court which dismissed the appellant's application. The appellant appealed to this Court against that order. The appeal was upheld. The orders of the Federal Magistrates Court were set aside and the matter was remitted back to that court for re-hearing according to law. 2 On 24 June 2002 the Federal Magistrates Court dismissed the appellant's application to set aside the bankruptcy notice. From that judgment an appeal was made to this Court and on 28 May 2003 I dismissed that appeal. 3 There had been successive, successful applications for extensions of time for the appellant to comply with the bankruptcy notice, the last of the extensions granted expired on 25 June 2002. Thereafter, neither party applied to extend the time for compliance with the bankruptcy notice. So far as the creditor is concerned, the explanation for this is that the solicitor for the creditor simply overlooked the matter and did not realise that, unless something were done, there might be difficulties about presenting the petition in view of s 44 of the Bankruptcy Act 1966 (Cth) ("the Act"), which, so far as material, provides: '(1) A creditor's petition shall not be presented against the debtor unless: … (c) the act of bankruptcy on which the petition is founded was committed within six months before the presentation of the petition.' 4 Subject to the alternative application now made to me, an act of bankruptcy occurred on 25 January 2002. 5 In these circumstances, the respondent creditor now applies to the Court seeking an order, purportedly pursuant to s 33(1)(c) of the Act, for extension of the time specified in s 44(1)(c) of the Act within which the respondent may present a creditor's petition against the appellant after the aforementioned act of bankruptcy. In the alternative, the creditor seeks an order pursuant to s 41(6A) of the Act extending to 28 May 2003 the time for complying with the notice. 6 The debtor says that he has proceedings on foot in the District Court against the creditor and if, in effect, a petition can now be presented, as distinct from one based on any fresh act of bankruptcy he might commit, his ability to maintain those proceedings may be impaired. The debtor submits that the Court might not be empowered under s 33 to make the primary order now sought by the creditor. 7 Section 33(1)(c) provides that: 'The court may extend before its expiration or, if this Act does not expressly provide to the contrary, after its expiration, any time limited by this Act . . . for doing an act or thing ...' 8 In extensive and careful submissions, counsel for the creditor submits, in effect, that despite the form of s 44(1)(c) as a condition precedent to the presentation of a petition, in substance the Act requires that a petition be presented within six months after the commission of the act of bankruptcy on which it is founded. 9 While the matter has not been fully argued before me, I must say there are some seeming attractions to this view. However, there are longstanding authorities to the contrary. The first is a decision by Clyne J in Re Tavella (1953) 16 ABC 166, and the second is Re Lou Moss; ex parte Tyaraf Pty Ltd [1985] FCA 403,an unreported judgment of Morling J constituting this court on 23 August 1985. Both judges in effect regarded s 44(1)(c) as making the due presentation of a petition or its validity conditional upon the occurrence of the act of bankruptcy being six months before the presentation of the petition, so that s 44(1)(c) was not, as Morling J put it: 'A limitation of time of the kind referred to in section 33(1)(c).' 10 That view has been acted on for many many years and represents the settled approach to the matter which has been applied by practitioners in looking at these matters. I am not prepared to depart from that view for that reason and also because, despite counsel's careful argument, I am not convinced that Clyne and Morling JJ were wrong. Any such conclusion, in my view, could only be reached by a Full Court. So I decline to make the first order sought. 11 In relation to the second order sought, the Court has power to extend the time for compliance for the bankruptcy notice, notwithstanding that the time has expired: see Streimer v Tamas (1981) 37 ALR 211. Further, although s 41(6A) in terms authorises a debtor to apply to extend the time for compliance with a bankruptcy notice, it has been held that a creditor may do so: see, for example, Re Halstead; ex parte Westpac Banking Corporation (No.2) (1991) 32 FCR 394. Such applications have frequently been successfully made in this court. 12 The power to extend the time is the subject of a broad discretion which may be exercised in many different situations. The discretion should not be fettered by any particular rules: see Warner v Frost [1999] FCA 830, a decision of Hely J. The prejudice that creditors might suffer by reason of the postponement of the commencement of bankruptcy is often cited as a significant factor weighing against the grant of an extension of time for compliance with the bankruptcy notice. 13 In this case, the only prejudice suggested by the debtor is not said to have arisen because he has been lulled into a false sense of security by the creditor's inaction on account of its solicitors' oversight. If we lived in a perfect world, the application to set aside the bankruptcy notice would have been disposed of adversely to the debtor within six months of the time originally limited by the notice for compliance and no extension of any sort would have been necessary. The delay has entirely been the result of the curial process, initiated in each instance, by the debtor. 14 The creditor has already lost any benefit that might have accrued to it as a result of an earlier relation-back period and, in my opinion, the balance of convenience and of justice in this instance clearly favours the creditor. Accordingly, I make an order as asked extending the time for compliance with the bankruptcy notice to 28 May 2003. 15 The debtor, the appellant in the principal proceedings is to pay the costs of this application. 16 The debtor, after the pronouncement of these orders, made an oral application for further extension of time to comply with the bankruptcy notice but I see no reason to do that. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Madgwick.