CATCHWORDS Bankruptcy - application by judgment debtor for an order for extension of time for compliance with bankruptcy notice - appeal by Judgment debtor against judgment in Supreme Court of Victoria - application for stay of execution pending hearing of appeal refused - appeal heard but judgment not yet given ~ principles upon which bankruptcy court proceeds where appeal instituted against judgment on which bankruptcy notice based. Ex parte Heyworth; In re Rhodes [1884] 14 Q.B.D. 49 - con. RE: GEORGE CLIFT EX PARTE: V.L. FINANCE PTY, LIMITED No. B1240 of 1984 Beaumont, J. 1 March 1985. Sydney. ry IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY No. B1240 of 1984 RE; GEORGE CLIFT EX PARTE: V.L. FINANCE PLY. LIMITED ORDER Judge making order: Beaumont, J. Date order made: 1 March 1985. Where made: Sydney THE COURT ORDERS THAT: 1. Extend time for compliance with Bankruptcy Notice No. B1240 of 1984 up March 1985. 2. Stand application over to 1l a.m... 3. Make no order for the costs heard on 26 February 1985. the requirements of to and including 11 March 1985 at 9.30 of the application IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY No. B1240 of 1984 RE: GEORGE CLIFT EX PARTE: V.L. FINANCE PTY. LIMITED CORAM: Beaumont, J. DATED: 1 March 1985. REASONS FOR JUDGMENT This is an application by a judgment debtor for an order for the extension of time for compliance with the requirements of a bankruptcy notice. The history of the matter commences with orders made on 23 May 1984 by Fullagar, J. in the Supreme Court of Victoria in proceedings between the parties allowing an appeal against a decision of Master Evans, setting aside an order made by the learned Master on 18 May 1984 and in lieu thereof granting leave to the judgment creditor to enter final judgment for the sum of $400,000.00 together with interest and costs. The precise nature of the orders made by the learned Master does not appear in the evidence in this application. Further, the reasons for judgment of Fullagar, J. were not tendered in this application. Pursuant to the leave granted, judgment against the judgment debtor was entered on 12 June 1984. Execution was stayed for a period of 28 days. The judgment debt arises out of a guarantee given by the judgment debtor to the judgment creditor in respect of an advance made to Pandera Pty. Limited. On 4 dune 1984, the judgment debtor filed a notice of appeal seeking to set aside the orders made by Fullagar, d.. The general thrust of the notice of appeal was that Fullagar, J. should have held that the judgment debtor had made out acase for the grant of leave to defend the proceedings brought against him. It was contended, inter alia, that the principles stated in The Commercial Bank of Australia v. Amadio (1983) 57 A.L.J.R. 358 were applicable. On 31 August 1984, the judgment debtor lodged in the Supreme Court a notice of motion seeking a stay of execution on the judgment entered against him pending the hearing of his appeal. On 6 September 1984, the application was refused by a Full Court (Starke, Crockett and Beach, Jd.) upon an undertaking being proffered by the judgment creditor that, as noted in the Full Court's order, it "not u proceed in any bankruptcy proceedings against (the judgment debtor) founded upon the judament... to a sequestration order until the ... determination of the Appeal ..." (emphasis supplied). (It should be noted that there is a dispute between the parties, which need not be resolved at this stage, as to the terms of the undertaking given: an extract of part of the transcript of the proceedings before the Full Court indicates that counsel for the judgment creditor gave an undertaking "not to proceed in any bankruptcy proceedings against the defendant founded upon the judgment ... until the determination of the appeal ..."; no mention was there made of the sequestration order; the suggestion on the part of the judgment debtor is that the undertaking extended to the taking of any step whatever by way of proceedings to bankrupt the judgment debtor; on the other hand, the judgment creditor, apart from submitting that the terms of the order of the Full Court are conclusive for present purposes, claims that the undertaking was given in the context of a statement made to the Full Court on behalf of the judgment creditor that, although 1t was content not to bankrupt the judgment debtor pending the determination of the appeal, it was concerned to ensure that any bankruptcy be deemed to commence at the earliest possible date.) The appeal was heard by the Full Court on 5 February 1985. The Court reserved its judgment. However, in the meantime, the judgment creditor had issued a 21 day bankruptcy notice against the judgment debtor baged upon the judgment entered on 12 June 1984. An order for substituted service of the notice was made and service was deemed to have been effected on 12 November 1984. On 28 November 1984, a Deputy Registrar extended time for compliance up to and including 5 February 1985. Although the position is not clear, it seems that on 5 February the time for compliance was further extended to 26 February 1985 when the application was heard by me. At the conclusion of argument, I reserved my decision to 1 March 1985 and further extended time for compliance up to and including 1 March 1985. The general approach to be adopted by a court of bankruptcy where a bankruptcy petition 2s founded on a bankruptcy notice in respect of a judgment when an appeal is pending from the judgment was laid down by the English Court of Appeal in Ex parte Heyworth; In re Rhodes £1884] 14 Q.B.D. 49. In determining upon the exercise of its discretion, the court 18 concerned to consider the character of the appeal. If in its opinion, the appeal is "bona fide" or raises a "substantial question" (per Baggallay, L.d. at p.51) or if there is a "reasonable ground of appeal" (per Bowen, L.d. at p.52), the petition should be dismissed or stayed. On the other hand, no stay ought to be granted if the appeal is "entirely frivolous" (per Fry, L.d. at p.52). In Lipov v. Alexander Fraser & Son Ltd. (1978) 36 F.L.R 126, C.A. Sweeney, J. applied these principles in granting an application to extend time for compifance with a bankruptcy notice where an appeal had been instituted against the judgment on which the notice was based. There, the judgment debtor swore that he believed he had proper grounds of appeal against the judgment. He was not cross-examined. The creditors did not offer any evidence in opposition (see at p.130). The same approach was taken by Lockhart, J. in Re Sterling; Ex parte Esanda Limited (1979) 44 F.L.R. 127 at p.134. The present application is remarkable for its lack of evidence from both sides of the record on substantial issues which now arise between the parties. The judgment debtor in his affidavit evidence merely refers to the fact that the appeal is pending. Although I was informed that judgment of the Full Court stands reserved, no attempt was made on the judgment debtor's behalf to establish that the appeal was based on any substantial ground. On the other hand, the judgment creditor submits that, although it does not seek, at this stage, to proceed to sequestration, {it is anxious to achieve the earitest commencement date of any bankruptcy, presumably for preference or relation back purposes. But again, the matter rests in assertion only and no attempt was made to establish, by evidence, that there are or may be transactions entered into by the judgment debtor which call for investigation. On the whole, I am prepared, at this stage, to infer at least provisionally from the fact that the Full Court reserved its decision in the appeal that there may be substantial grounds of appeal. In the circumstances, I think that in the exercise of my discretion, I should grant the judgment debtor a short extension of time with a view to the position being reviewed by the Court in 10 days' time. By that stage, it is possible that the appeal will have been dealt with. If not, I will hear evidence, if any, and argument on the question whether a further extension of time should then be granted. If the Full Court has not by then dealt with the appeal, I will approach the matter de novo, against the background of the comments already made on the paucity of the evidence adduced to date. Since neither party has been entirely successful in the present application, I propose to make no order for costs. I make the following orders: 1. Extend time for compliance with the requirements of Bankruptcy Notice No. B1240 of 1984 up to and including 11 "e s March 1985. 2. Stand application over to 11 March 1985 at 9.30 a.m.. 3. Make no order for the costs of the application heard on 26 February 1985. | certify that this and the Zz preceding pages are a true copy of the reasons for judgment herein of The Honourable Mr Justice Beaumont. & foaees I~ fiscociat Dated / "fac A (GE