Wily v Wood

Federal Court of Australia|2008-03-03|Before: Cowdroy J

REASONS FOR JUDGMENT 1 The applicant, Mr Wily ('the liquidator'), as liquidator of Kitchen Central Pty Limited ('the company') applies for an extension of time pursuant to O 52 r 15(2) of the Federal Court Rules ('the Rules') to file and serve a notice of appeal from the decision of Federal Magistrate Housego delivered on 31 October 2007. By such decision her Honour set aside Bankruptcy Notice No. NN 2151 of 2007 ('the bankruptcy notice') which was served on the respondent, Ms Wood, on 6 June 2007. The liquidator has applied for his application to be considered without an oral hearing pursuant to O 52 r 4 of the Rules and Ms Wood has not objected to such a course.

FACTS 2 The bankruptcy notice was served upon Ms Wood alleging that she is indebted to the company. Ms Wood applied to the Federal Magistrates Court of Australia to have the bankruptcy notice set aside on the ground that she had a set-off against the company as provided in s 40(1)(g) of the Bankruptcy Act 1966 (Cth). The only issue for determination before Housego FM was whether there was sufficient mutuality of the two respective debts for the purposes of establishing set-off as a basis to set aside the bankruptcy notice. 3 Housego FM was required to determine whether the intervening liquidation of the company which occurred on 21 March 2007 prohibited a finding of mutuality. Housego FM rejected the submission of the liquidator that since the debt owed by the company to Ms Wood was a company debt and the debt owed by Ms Wood was owed to him as the liquidator of the company, the claims were not in the same right. Housego FM instead found that the debt was owed to the liquidator by Ms Wood in his capacity as liquidator. Relying on Stec v Orfanos [1999] FCA 457 at [24] her Honour found that on the basis of set-off there was sufficient mutuality between the debts for the bankruptcy notice to be set aside. Housego FM granted the application and set aside the bankruptcy notice on 31 October 2007. 4 Order 52 Rule 15 of the Rules relevantly provides: (1) The notice of appeal shall be filed and served: (a) within 21 days after: i. the date when the judgment appealed from was pronounced; ii. the date when leave to appeal was granted; or iii. any later date fixed for that purpose by the court appealed from; or (b) within such further time as is allowed by the Court or a Judge upon application made by motion upon notice filed within the period of 21 days referred to in the last preceding paragraph. (2) Notwithstanding anything in the preceding subrule, the Court or a Judge for special reasons may at any time give leave to file and serve a notice of appeal. 5 The 21 day period expired on 21 November 2007. The application for extension of time was mistakenly filed in the Federal Magistrates Court of Australia on 22 November 2007 instead of the Federal Court of Australia. It was ultimately filed in this Court on 27 November 2007. Accordingly, the application for an extension of time was filed six days outside the time allowed for filing of a notice of appeal pursuant to O 52 r 15(1) of the Rules. 6 The affidavit provided in support of the application for extension of time as required by O 52 r 15(3)(c) of the Rules explains that the reason for the delay was an oversight on the part of the liquidator's legal representatives. The affidavit states that the applicant's solicitor received the judgment of Housego FM on 7 November 2007 and promptly briefed counsel to advise whether such decision should be appealed. The counsel did not respond. On 21 November 2007 an inquiry was made of him, and on 22 November the question of the time in which the appeal was to be filed was first raised by counsel. The applicant immediately sought to file the application for leave to extend time in which to appeal.

FINDINGS 7 The Court is required to determine, in its discretion, whether there are any 'special reasons' to justify granting an extension of time to the liquidator as provided by O 52 r 15(2) of the Rules. The nature of 'special reasons' has been considered by the Full Court in Jess v Scott (1986) 12 FCR 187 where the Full Court said at 195: What is needed to justify an extension of time is indicated in r 15(2) by the words "for special reasons". It is that there be shown a special reason why the appeal should be permitted to proceed, though filed after the expiry of twenty-one days. In that context, the expression "special reasons" is intended to distinguish the case from the usual course according to which the time is twenty-one days. But it may be so distinguished (not necessarily will, for the rule gives a discretion) wherever the Court sees a ground which does justify departure from the general rule in the particular case. Such a ground is a special reason because it takes the case out of the ordinary. We do not think the use of the expression "for special reasons" implies something narrower than this.

8 The extent of the time delay in filing the application for special leave is one matter for consideration in the exercise of the Court's discretion. In Jess v Scott (1986) 12 FCR 187 the Full Court said at 195: It would require something very persuasive indeed to justify a grant of leave after, for example, a year; equally, it may be said, something much less significant might justify leave where a party is a few days late. "Special reasons" must be understood in a sense capable of accommodating both types of situation.

9 The Court must also consider whether prejudice would result to the respondent if leave were granted, as well as the merits of the substantial application: see Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 at 348-349; Parker v The Queen [2002] FCAFC 133. 10 The delay in filing the application is negligible and there is a satisfactory explanation for the delay. It could not be said that the applicant has 'rested on his rights': per Fisher J in Doyle v Chief of Staff (1982) 42 ALR 283 at 287. There is no evidence of any prejudice that might result to the respondent if the Court granted leave to appeal. The application also only affects the immediate parties, which is another factor for consideration: see Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 at 349. 11 The only remaining issue for consideration is whether there is merit in the proposed appeal. Although '[t]he object of the rule is to give the court a discretion to extend the time with the view to the avoidance of an injustice' (Hughes v National Trustees Executors & Agency Co of Australasia Ltd [1978] VR 257 per McInerney J at 262-3, quoted by the Full Court with approval in Jess v Scott (1986) 12 FCR 187 at 193), the merits of the substantial application are determinative as to whether the Court's discretion will be exercised: 'should the applicant be unable to demonstrate any prospect of success in the appeal which he seeks to prosecute he would, for that reason, not be entitled to an extension of time, despite the other circumstances' (Jeffers v R [1993] 112 ALR 85 at 86). Accordingly, if the Court formed the opinion that 'there are no prospects of success on the foreshadowed appeal' (Savage v Cranstoun (Trustee) [2001] FCA 1789 per Spender J at [22]) the application should not succeed. 12 The grounds of appeal contained in the draft notice of appeal provide:

Her Honour erred in finding that the company accounts confirmed that the Respondent was owed an amount by the company in excess of her debt to the company.
Her Honour erred in finding that there was sufficient mutuality of debts to allow for set off pursuant to s 40(1)(g) of the Bankruptcy Act 1966 (Cth).
Her Honour should have found that there was no debt as alleged by the Respondent.
Her Honour should have found that, even if she accepted the debts alleged by the Respondent, there was not the mutuality between the parties to allow for set-off. 13 The issues thus sought to be raised essentially challenge the existence of mutuality, which may raise significant legal and possibly factual issues. It is not possible to conclude that the proposed issues have no prospects of success. 14 Given the short delay, the absence of prejudice and the issues to be raised on appeal, the Court is satisfied that there exist 'special reasons' to justify granting an extension of time. The Court will extend the time for the filing of the notice of appeal to 17 March 2008 pursuant to O 52 r 15(2) of the Rules. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cowdroy.

Associate: Dated: 3 March 2008 Date of Hearing: Application determined without an oral hearing

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