i CATCHWORODS BANKRUPTCY - Supreme Court judgment under appeal - bankruptcy notice issued thereon - time for compliance expired - whether jurisdiction to extend expired time - exercise of discretion — undertaking to adjourn petition - importance of letting petition issue. Bankruptcy Act, 1966 s.41(6A), s.41(6C) Re: Cyril Gardner Maloney Ex Parte: Sunbird Plaza Pty. Ltd. Qld BN700 of 1986 Re: Margaret Mary Cussan Ex Parte: Sunbird Plaza Pty. Ltd. Qld BN701 of 1981 PINCUS J. BRISBANE 11 JULY 1986 " 7 Ta oe IN THE FEDERAL COURT OF AUSTRALIA ) GENERAL DIVISION ) BANKRUPTCY DISTRICT OF THE SOUTHERN ) DISTRICT OF THE STATE OF QUEENSLAND ) QLD BN700 of 1986 RE: CYRIL GARDNER MALONEY EX PARTE: SUNBIRD PLAZA PTY. LTD. QLD BN701 OF 1986 RE: MARGARET MARY CUSSAN EX PARTE: SUNBIRD PLAZA PTY. LTD. MINUTES OF ORDER JUDGE MAKING ORDER: PINCUS J. DATE OF ORDER: 11 JULY 1986 WHERE MADE: BRISBANE THE COURT ORDERS IN EACH APPLICATION THAT: l. NOTE: The application be dismissed on the respondent undertaking not to oppose an application to adjourn any hearing of the petition for a sequestration order when issued, until determination of the appeal to the Full Court of the Supreme Court of Queensland, instituted on 14 May 1986, such undertaking to be subject to two conditions: (i) that the effect of such adjournment not be to cause the petition to become stale, and (ii) that the appeal be prosecuted with due diligence, so far as that lies in the power of the applicant. The costs of and incidental to the application he costs of the petitioning creditor in the petition to be issued by the respondent on the bankruptcy notice dated 17 April, 1986. Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules. , ~ IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION ) BANKRUPTCY DISTRICT OF THE SOUTHERN ) DISTRICT OF THE STATE OF QUEENSLAND ) QLD BN700 of 1986 RE: CYRIL GARDNER MALONEY EX PARTE: SUNBIRD PLAZA PTY. LTD. QLD BN701 OF 1986 RE: MARGARET MARY CUSSAN EX PARTE: SUNBIRD PLAZA PTY. LTD. PINCUS J. 11 JULY 1986 - + Swe tt REASONS FOR JUDGMENT These two applications to extend the time for compliance \ with a bankruptcy notice were heard together. The facts relating to each are similar and it is convenient first to discuss that concerning the applicant Mr. Maloney. On 3 April 1986, Connolly J., in the Supreme Court of Queensland, gave judgment in favour of the respondent against the applicant on a guarantee. It is argued on behalf of the applicant that the judgment is somewhat unusual in that it contemplates the guarantors of obligations under a contract of sale having to pay A memes afal dn ee fell I ed esa the full purchase price, although there has been no conveyance. I return to this point below. On 17 April 1986, the respondent applied for and obtained the issue of a bankruptcy notice upon the judgment just referred to. The following day, a notice of appeal against the judgment was filed in the Supreme Court but not, it appears, in consequence of the issue of the bankruptcy notice, of which the applicant could not then have had knowledge. The appeal was entered for argument on the 14 May 1986. On 21 May, Spender J. in this Court ordered that personal service of the bankruptcy notice be dispensed with. He directed that service be effected by post and by service upon solicitors. That appears to have been completed on 26 May. The effect of the order of Spender J. was that service was deemed to have been effected 14 days after 26 May, that is, on 9 June. However, on 26 May the solicitors for the applicant became aware of service of the issue of the bankruptcy notice, but did not take any step to seek an extension of time for compliance with it. The present application was filed on 9 July. In the meantime, two significant events had occurred: one was that an act of bankruptcy was committed and the second that an application for a stay was made and refused in the Supreme Court. The application was made to a Master and under the practice of that Court may be renewed on application to a judge who hears the matter de novo. I am told the applicant intends to pursue such an application, that is, one to a judge. 3. The present proceeding is apparently prompted by the failure to obtain a stay in the Supreme Court. It is said that one of the reasons given by the Master for refusal of the stay was the possibility that this Court would exercise its power to extend time for compliance with the notice. It does not seem to me, however, that this Court's consideration of the application should be affected by any expectation as to what the Supreme Court might do with a further stay application. The considerations bearing upon the present application are by no means the same as those which the Supreme Court might consider on an application for a stay. Senior counsel for the respondent, Mr. Robin Q.C., argued, firstly, that I have no jurisdiction in the matter. He conceded that on the face of it the decision of the Full Court in Streimer v. Tamas 37 A.L.R. 211 was against his contention but said that it was distinguishable. In that case a similar application was made and held by the Full Court to be within jurisdiction, the only factual difference being that the application was filed before the commission of an act of bankruptcy but heard and determined later. Mr. Robin 9.C. argued that that difference is critical and that, because here both the application and its determination were later in time than the act of bankruptcy, there is no power to extend time for compliance. He fastened upon references in the reasons of the majority in Streimer v. Tamas, namely Deane and Ellicott JJ., to the time of making of the application. - re HH - qeered Section 41(6A), under which it is said that jurisdiction arises, reads as follows: "Where, before the expiration of the time fixed by the Court or the Registrar for compliance with the requirements of a bankruptcy notice - (a) proceedings to set aside the judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or (b) an application to set aside the bankruptcy notice has been filed with the Registrar, the Court may, subject to sub-section (6C), extend the time for compliance with the bankruptcy notice." It appears to me the point in issue in the Full Court case was whether the subsection should be read as if the expression "before the expiration of the time ... for compliance with the requirements of a bankruptcy notice" qualified that part of the subsection which reads, "the Court may, subject to sub-section (6C), extend the time for compliance with the bankruptcy notice". As I read the reasons of the majority, it was held that the former expression does not qualify the latter. Senior counsel for the respondent argued that it would be absurd if, weeks or months after an act of bankruptcy, the Court extended the time for compliance with the bankruptcy notice. The difficulties which ensue from a literal reading of subs.(6A) were, to some extent, explored in the majority judgment in Streimer v. Tamas, but it has to be conceded that the Court did not assert that all the consequences of its holding had been exposed. PO ae tet bol A oe 5. Despite the references in the reasons to the fact that the application was filed before the act of bankruptcy was committed, it is not possible to distinguish the case upon that basis. The Court did not decide the matter as it did because it thought the jurisdiction was sufficiently enlivened by the filing of the application in time. The basis of its decision was that the jurisdiction may be exercised after an act of bankruptcy has been committed. I therefore uphold the contentions of Mr. Fraser, for the applicant, on the jurisdictional point. The second question, which is rather more difficult, is whether it is proper in the circumstances to extend time. The respondent claimed that the applicant had been dilatory but that is not, in my opinion, a fair description of his conduct. Nevertheless, it is, in my view, a matter to be taken into account that an act of bankruptcy has already been committed. Extending time for compliance with the notice at this stage necessarily introduces legal complexities into the position of the applicant, if he ultimately goes bankrupt. The fact that an act of bankruptcy has been committed is not a bar to the exercise of discretion but a reason against it. A much more important reason, however, is that at this stage, as I understand Mr. Robin Q.C., all the respondent wishes to do is to issue a petition. As the matter comes before me, the respondent is subject to a temporary undertaking to the Supreme Court not to do so and the real point of the present proceedings is to seek to have the respondent precluded from petitioning until the final resolution of the matter in the Supreme Court. ae ep ee paneer —e ee 6. During the course of argument Mr. Robin Q.C. informed me that the respondent would undertake not to oppose an application to adjourn any hearing of the petition, when issued, until determination of the appeal to the Full Court of the Supreme Court, subject to two conditions. The first was that the effect of such adjournment not be to cause the petition to become stale, and the second that the appeal be prosecuted with due diligence, so far as that lies in the power of the applicant. In these circumstances, it is not easy to see that substantial harm is likely to be done to the applicant by the mere issue of a petition. It is true, of course, that the Court will not necessarily adjourn the petition by the consent of these parties, but the respondent's proposed undertaking is an important alleviation of the applicant's position and is itself a_ strong reason not to grant the application. Another is that there is evidence that the applicant is "presently experiencing grave financial difficulties and is presently unable to pay the moneys the subject of the judgment". It is also said, by the applicant's solicitor, that he is liquidating assets with a view to meeting his liabilities and those of companies with which he is connected. Mr. Fraser pointed out for the applicant that there is no suggestion of fraudulent dispositions being made, but nevertheless, the evidence quoted is of a kind which might reasonably alarm a substantial judgment creditor. Counsel submitted for the applicant that such questions might be dealt with by a Mareva injunction preserving the position of the respondent. That, however, is not a remedy which answers were pee tne oe Ot Ha war 7. the respondent's problem, which is that the date of presentation of the petition is critical, there being evidence of a process of asset liquidation going on, for the purposes of, in particular, s.122 of the Bankruptcy Act. The last of the matters which should be mentioned as relevant to the exercise of discretion is that, according to counsel for the respondent, the points taken in the Full Court of the Supreme Court are merely technical and the appeal has little chance of success. Counsel for the applicant, on the other hand, said that there was no doubt that the points are arguable and that, indeed, did not seem to be in dispute. Although I have read the reasons of Connolly J., it seems to me unnecessary to try to make any prediction as to the prospects of either party in the Full Court of the Supreme Court and I decline the invitation to enter, even in a preliminary way, into a discussion of the issues there pending. In summary, while I hold that there is jurisdiction to grant an extension of time, even where the application under s.41(6A) was filed after commission of an act of bankruptcy, I should not in this case exercise the discretion in favour of the applicant, but should instead accept the proposed undertaking mentioned by Mr. Robin Q.C. As to the application by Margaret Mary Cussan, the facts differ in no significant respect and the same result must ensue. cote ye eee Gee a 8. The order in each case will be - That the application be dismissed on the undertaking mentioned in my reasons; That the costs of and incidental to the application be costs of the petitioning creditor in the petition to be issued by the respondent on the bankruptcy notice mentioned in my reasons. + certify that this and the 7 preceding Pages are a true copy of the reasons for judgment herein of His Honour Mr Justice Pincus Z cf yor Associate Dated // ply 1986 ee eee rane ee