IN THE FEDERAL C OURT OF AUSTRALIA ) GENERAL DIVISION BANKRUPTCY DISTR ) No. B. 5293 of 1983 IcT OF THE ) STATE OF NEW SOUTH WALES 7) CORAM: Lo WHERE MADE: Sy DATE : 16 RE : ROBERT WILLIAM BATTON EX PARTE : ASSOCIATED MIDLAND CORPORATION LIMITED ORDERS ckhart J. dney December 1983 THAT : THE COURT ORDERS THAT The time for compliance with bankruptcy notice 5293 of 1983 be extended up to and including Friday, 30 December 1983; The application of the debtor filed on 2 December 1983 be dismissed; The question of costs including reserved costs be stood over generally with liberty to either party to restore to the list on seven days notice. I grant either party liberty to apply generally in relation to the orders made today on two days notice. IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION No. B. 5293 of 1983 BANKRUPTCY DISTRICT OF THE weer vwvrnr STATE OF NEW SOUTH WALES RE : ROBERT WILLIAM BATTON EX PARTE ;: ASSOCIATED MIDLAND CORPORATION LIMITED CORAM: Lockhart J. DATE : 16 December 1983 REASONS FOR JUDGMENT LOCKHART J. On 15 November 1983 Associated Midland Corporation Limited, "the creditor", caused to be issued against Robert William Batton, "the debtor", a bankruptcy notice requiring payment of the sum of $104,005.21, representing the amount of a consent judgment obtained by the creditor against the debtor in the Supreme Court of New South Wales on 24 August 1982. The amount of the judgment included the sum claimed by the creditor against the debtor in that action, together with interest which was awarded as damages. In addition to the amount of the judgment, interest ran thereon at the rate of 15 per centum per annum from 24 August 1982, 2. and the amount claimed in the notice was for the sum of $14,871.84, made up to 5 October 1983, and no more is claimed. The notice was served upon the debtor and, after an initial extension of time to comply with its requirements, granted by the Registrar, the debtor sought an order from this Court to set aside the bankruptcy notice and to extend time for compliance with its requirements. The application came on for hearing before another Judge of this Court on 14 December last, two days ago, and His Honour adjourned the application to 13 February 1984, extending the time for compliance with the notice until further order. He directed the debtor to file and serve an affidavit of his means by 4 pm yesterday, and noted the following undertakings to the Court by the debtor: 1) that the debtor would prosecute with diligence an appeal, to which I shall refer a little later, to the New South Wales Court of Appeal, and seek an expedited hearing of that appeal; 2) that he would not, in the ordinary course of his business, dispose of, convey, assign, transfer, mortgage, charge or otherwise dispose of or encumber any of his property; and 3. 3) that he would not incur any liabilities otherwise than in the ordinary course of his business. His Honour reserved costs and granted liberty to the creditor to apply, on 24 hours' notice to the debtor, for further orders, including an order dismissing the application, extending time for compliance and setting aside the bankruptcy notice. The creditor availed himself of the liberty to apply thus reserved to him, and in the result, the further hearing of the debtor's application to extend time and the creditor's application that the debtor's application be dismissed, have come before me for hearing. The creditor has not filed a formal application pursuant to the Rules but nothing turns on that. I need not review all the facts in detail, it is sufficient for me to summarise them. The debtor sold to the creditor certain motor vehicles. Questions of title to the vehicles arose and in the result the creditor sued the debtor and Australian Guarantee Corporation Limited. The result of that case was that the consent judgment, to which I have already referred when describing the bankruptcy notice, was signed by the creditor against the debtor in the amounts previously mentioned. One of the terms of the consent order was that there be a stay of execution on the judgment until judgment be delivered on a cross-claim filed by the debtor against the creditor. The debtor also cross-claimed against two people known as Gary and 4. Adrian Ashton, and against his co-defendant in the proceedings brought by the creditor, namely, Australian Guarantee Corporation Limited. After the consent judgment was entered against the debtor, the cross-claim brought by the debtor was heard by the Supreme Court and it succeeded as against the Ashtons, in the sum of approximately $60,000.00. Steps are being taken now by the debtor to enforce that judgment in the Supreme Court of Victoria. That judgment still stands unsatisfied. The debtor's cross-claim against the creditor was heard by the Supreme Court of New South Wales and dismissed on 30 August 1983. The debtor appealed from that judgment on 26 September 1983. The debtor has taken steps today to file a draft index of the appeal papers in that appeal. The debtor's expenditure exceeds his income to a considerable extent. His assets are minimal and his liabilities considerable. They include a debt to his employer of $52,077.44, and a debt to the Commissioner of Taxation of a little over $6,000.00. There is also a sum of about $6,000.00 owing to his solicitors, presumably on account of legal costs. I have ignored for this purpose the debt due under the consent judgment to the creditors. The creditor seeks to have the application to set aside the bankruptcy notice and to extend time for compliance dismissed 5. today. The debtor opposes that. The consequences of the failure to comply with the requirements of a bankruptcy notice are, of course, serious. There can be quasi penal consequences in certain circumstances. No doubt the debtor does not wish to commit an act of bankruptcy. That is understandable, but it seems tome, having reviewed all the circumstances, that the interests of justice are best served if the application to extend time is dismissed and the extension of time previously granted terminated, 30 that if the creditor presents a petition for the sequestration of the estate of the debtor, it will have the benefit of the commission of an act of bankruptcy unless, of course, in the meantime the debtor complies with the requirements of the bankruptcy notice thereby avoiding the commission of an act of bankruptcy. On the hearing of the petition no doubt the debtor can adduce material of the kind he has adduced today, and adduced earlier before McGregor J. and seek to rely on the principle that if an appeal is pending over the amount in dispute between the parties in a court of competent jurisdiction, then, provided the appeal is bona fide and has some prospect of success, the court may exercise its discretion against the making of a sequestration order and adjourn the petition until the appeal is determined or dismiss the petition. Whether the facts call for the application of that principle is not for me to determine today, except to say it would appear to fit broadly into that category. But the question must ultimately be determined on the whole of the evidence as it stands on the hearing of the petition. 6. The commission of an act of bankruptcy has important consequences in law, particularly with regard to the doctrine of relation back. I think in all the circumstances the order that I have indicated is the proper order to make. No specific prejudice to the debtor has been mentioned should I take that course, save of course the prejudice the debtor necessarily sustains upon committing an act of bankruptcy. Accordingly, the orders of the court are as follows: 1. That the time for compliance with bankruptcy notice 5293 of 1983 be extended up to and including Friday, 30 December 1983; 2. That the application of the debtor filed on 2 December 1983 be dismissed; 3. That the question of costs including reserved costs be stood over generally with liberty to either party to restore to the list on seven days notice. I indicate that it seems to me that if a petition is in due course presented, the appropriate time to deal with those costs is on the hearing of the petition; 4, I grant either party liberty to apply generally in relation to the orders made today on two days notice. gix ae Lah Supers Be s38 caren a iy