CATCHWORDS BANKRUPTCY - costs - whether application for extension of time for compliance with bankruptcy notice was necessary - court would not have made sequestration order while appeal against judgment debt was reserved. Re Raymond Eric Watson Ex parte: Stephen Frederick Goodfellow BN1034 of 1994 Cooper J., Brisbane, 27 March, 1995 IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DIVISION OF THE STATE OF QUEENSLAND No. BN1034 of 1994 RE: RAYMOND ERIC WATSON Judgment Debtor EX PARTE: STEPHEN FREDERICK GOODFELLOW Judgment Creditor JUDGE MAKING ORDER: Cooper J. WHERE MADE: Brisbane DATE OF ORDER: 27 March, 1995 MINUTES OF ORDER THE COURT ORDERS THAT: 1. Stephen Frederick Goodfellow pay the applicant, Raymond Eric Watson's costs of and incidental to the application to extend the time to comply with the bankruptcy notice including the reserved costs, if any, of such application to be taxed, if not agreed. Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules. IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DIVISION OF THE STATE OF QUEENSLAND No. BN1034 of 1994 RE: RAYMOND ERIC WATSON Judgment Debtor EX PARTE: STEPHEN FREDERICK GOODFELLOW Judgment Creditor CORAM: Cooper J. PLACE: Brisbane DATE: 27 March, 1995 REASONS FOR JUDGMENT On 4 August, 1994 a bankruptcy notice issued against the applicant, Raymond Eric Watson. The notice claimed payment of a sum of $61,199.59, being the amount of the judgment debt obtained against the applicant in the District Court. At the time of the issue of the bankruptcy notice an appeal from the District Court judgment was in fact pending in the Queensland Supreme Court, Court of Appeal Division. On 14 October, 1994 before the expiration of the twenty-eight (28) day period for compliance with the bankruptcy notice, the judgment debtor applied for an extension of time for compliance with the bankruptcy notice until seven (7) days after the delivery of the judgment in the appeal. An order in those terms was made by Deputy Registrar McQuaid on 19 October, 1994. On 15 March, 1995 the Court of Appeal ordered that the judgment in the sum of $61,199.59 entered against Mr. Watson be set aside, and in lieu thereof judgment in the sum of $4,500.00 be entered against him. Since that time, the $4,500.00 has been paid and the only live issue before the court is what order, if any, ought to be made in relation to the costs of the application. The applicant Mr. Watson by his counsel submits that the application for the extension of time was necessary, as otherwise, in order to avoid committing an act of bankruptcy, he would have had to have paid the sum of $61,199.59, which sum was then under appeal. He submits that he ought, in the circumstances, be entitled to payment of the costs of the application because he was vindicated in his appeal at least to the extent of about $56,700.00. The respondent, Mr. Stephen Frederick Goodfellow, by his counsel submits that, although the judgment was set aside, he was vindicated to the extent of $4,500.00 and ought to have his costs paid. It was submitted on behalf of the respondent that the application was unnecessary in that Mr. Watson could have paid the $4,500.00 or, alternatively committed an act of bankruptcy, it being the intention of Mr. Goodfellow not to press on with the petition to bankrupt Mr. Watson until the result of the appeal to the Court of Appeal, was known. I must confess that the position taken by the respondent is to me a little unreal. The demand which was made in the bankruptcy notice was for the sum of $61,199.59. It was not a demand that was made for a sum of $4500.00. There was no possibility of pressing on to bankruptcy when an appeal against the judgment debt was reserved before the Court of Appeal. This court would not, in the exercise of a proper discretion, have made a sequestration order when the judgment was under attack; and further it is unrealistic to expect that Mr. Watson, if he was not indebted in the sum of $61,199.59, to have paid $61,199.59 to avoid bankruptcy, or to have committed an act of bankruptcy in the belief that no consequences would follow from it. It may be that Mr Goodfellow, for whatever reason, would not have pressed ahead with the act of bankruptcy, but that act of bankruptcy would have become available to creditors generally. In the circumstances, it seems to me it was a wholly reasonable and appropriate course to take, to apply to the court for an extension of time to comply with the bankruptcy notice pending the outcome of the appeal to the Court of Appeal wherein it would be decided whether or not the judgment stood in the whole or some lesser amount, and to finalise the level of indebtedness as between the parties. The application to extend the time did no more than hold in suspension the relative rights of the parties until they had been adjudicated upon by the Court of Appeal. THE COURT ORDERS THAT: 1. Stephen Frederick Goodfellow pay the applicant, Raymond Eric Watson's costs of and incidental to the application to extend the time to comply with the bankruptcy notice including the reserved costs, if any, of such application to be taxed if not agreed. I certify that this and the preceding two (2) pages are a true copy of the reasons for judgment herein of his Honour Justice Cooper. Date: 27 March, 1995 Associate Counsel for the Applicant Judgment Debtor: Mr. R. Bland Solicitor for the Applicant Judgment Debtor: Ken Hooper & Associates Solicitor for the Respondent Judgment Creditor: Mr. K.D. Scott of Goodfellow & Scott Date of Hearing: 27 March, 1995 Place of Hearing: Brisbane Date of Judgment: 27 March, 1995