Federal Court of Australia|1991-11-14|Before: Heerey J

The applicant applies under s.41(6A) of the Bankruptcy Act 1966 for an extension of time for compliance with a bankruptcy notice which was served on 15 January 1991. The time fixed for compliance with the notice was 28 days, so an act of bankruptcy was committed on 12 February 1991. The time for presentation of the petition thus expired on 12 August 1991; see s.44(1)(c).

2. However, on 8 February 1991 the debtor brought an application to set aside the bankruptcy notice. After a series of interlocutory hearings this application came on for hearing before me on 19, 22 and 23 July. I reserved judgment and on 6 September I dismissed the application, although I ordered that the notice be set aside as against the debtor's wife.

4. Indeed, where, as in the present case, a debtor has brought an application to set aside a bankruptcy notice, there may be circumstances which prevent a decision on that application being made until well after the expiration of the period fixed by the notice, despite the fact that the application has been instituted bona fide and has been prosecuted with due diligence, with the consequence that s.41(6C) has no application.

5. The pressure of other court business, the need to reserve a decision, and the possibility of appeal are all matters which may drag out time long beyond the period fixed by the notice. I think, therefore, that reading s.41(6A) as being available to a creditor so he can preserve the efficacy of his notice if it survives the debtor's challenge is consistent with a workable operation of the statute.

6. Accepting, then, that I have jurisdiction to make the order sought, the question is whether sufficient ground has been made out for its exercise and whether such an order would be fair as between the applicant and the debtor and not inconsistent with the public interest which, of course, attaches to all bankruptcy proceedings.

7. The application seeks an extension of the time to 4 October 1991, that is, 28 days after I delivered judgment, or such other date as the Court should see fit. Counsel for the applicant, wisely in my view, did not press that primary contention and put as an alternative a period of 28 days from today. She put it that the debtor would then be in no worse position than he would be if the application were dismissed, because it would always be open to the applicant to serve a fresh notice. Also in respect of a fresh notice, the debtor would by reason of the rule of issue estoppel be prevented from raising the matters that were decided by me in his application to set aside the earlier notice.

8. The difficulty I have had with the applicant's case is that there is no direct evidence of any factual ground as a basis for the exercise of the jurisdiction. It was said from the bar table that it had been "mere oversight" which prevented the application being made before 12 August 1991 or at some stage in the earlier hearing before me. The problem is that the affidavit sworn in support of the application by the solicitor for the applicant makes no mention of oversight. The deponent says:

The final date which a bankruptcy petition based upon the act

of bankruptcy specified in the bankruptcy notice could have

been presented was the 11th day of August 1991. I believe it

would have been an affront to the Federal Court for Westpac

Banking Corporation to have presented a petition based on this

act of bankruptcy while the application was under consideration

by the Honourable Mr Justice Heerey.

9. This passage is ambiguous in that it is not clear whether the deponent is saying that he in fact turned his mind to the presentation of a petition and decided not to take that course, for the reasons stated, or whether he is making a comment now as to what the effect of such a presentation would have been. In any event, the affidavit is completely silent as to why an application to extend time for compliance with the bankruptcy notice, as distinct from presentation of a petition, was not made at some earlier time.

10. It seems to me that once it is accepted that s.41(6A) gives power to extend the time for compliance, even where application is made after the time fixed by the notice has expired and on the application of a creditor, there is no necessary significance in that being done before or after the time for presentation of a petition based on the original non-compliance has expired. Logically there is no reason why the extension could not have been granted in the course of the hearing before me.

11. Therefore, I think I can infer that there was, in fact, oversight on the part of the applicant. I think if the application had been made during the course of the earlier hearing, it would have been difficult to resist, because, as I have said, the process contemplated by the Act for the challenging of bankruptcy notices would operate unfairly if inevitable court delays in the hearing of the application had the practical effect that the notice was rendered useless anyway.

12. I am satisfied there is no relevant prejudice to the debtor. The fact that he might "live to fight another day" if a fresh bankruptcy notice were issued should not weigh against the order sought, particularly as there has been a substantial hearing on the merits. I do not think I can rationally assume that there might be some technical defect in a fresh notice, or difficulty in effecting service, of which he might take advantage.

13. Any bankruptcy would only relate back to the earliest act of bankruptcy within six months prior to the presentation of a petition; see s.115(1). Therefore no complication arises by reason of the possible effect on other creditors of the act of bankruptcy which occurred on 12 February 1991.

14. I shall order, therefore, that subject to the undertaking hereafter mentioned the time for compliance by the debtor Paul Anthony Halstead with the bankruptcy notice No. 25 of 1991, which was issued on 7 January 1991, be extended to Friday, 13 December 1991.

15. The applicant did not seek an order for costs. The debtor, who was not represented, incurred expenses of $680 in coming from Melbourne to appear today. If the matter had been raised during the hearing before me in July he would not have incurred that extra expense.

16. I shall, therefore, require as a condition of making the order sought that the creditor undertake to pay to the debtor within seven days the sum of $680, such amount not to be set off against any sum owing by the debtor to the creditor.

Re Paul Anthony Halstead and Anor Ex Parte: Westpac Banking Corporation [1991] FCA 548; (1991) 32 FCR 394 (14 November 1991)

Streimer v Tamas [1981] FCA 123; (1981) 37 ALR 211; followed

Streimer v Tamas

At a glance

Court

Decision date

Before

Source

Judgment (18 paragraphs)

Parties

Cases Cited (4)

Re Paul Anthony Halstead and Anor Ex Parte: Westpac Banking Corporation [1991] FCA 548; (1991) 32 FCR 394 (14 November 1991)