Biztole Developments Pty Ltd v McLean, H.M. [1995] FCA 286

CATCHWORDS Bankruptcy - extension of time for compliance with requirements of bankruptcy notice - automatic extension of time, Bankruptcy Act 1966 s41(7) - whether, to bring about extension of time affidavit setting out counter-claim, set-off or cross demand must be filed within time originally set for compliance - whether sufficient to file affidavit within time extended pursuant to other provisions of the Bankruptcy Act 1966 Bankruptcy Act 1966 (Cth.) Re Stirling; Ex parte Esanda Ltd (1980) 44 FLR 125 Biztole Developments Pty Ltd (Receiver and Manager Appointed)(ACN 006 394 627) v. Helen Muriel McLean

No. VG271/94 Black CJ, O'Loughlin and Heerey JJ. 5 May 1995 Melbourne

IN THE FEDERAL COURT OF AUSTRALIA ) VICTORIA DISTRICT REGISRTY ) No. VG 271/94 GENERAL DIVISION ) On appeal from the Honourable Justice Northrop BETWEEN: BIZTOLE DEVELOPMENTS PTY LTD (RECEIVER AND MANAGER APPOINTED) (ACN 006 394 627) Appellant AND: HELEN MURIEL MCLEAN Respondent COURT: BLACK CJ, O'LOUGHLIN AND HEEREY JJ PLACE: MELBOURNE DATE: 5 MAY 1995 MINUTES OF ORDER The Court Orders that: 1. The appellant's application for an order extending time pursuant to s41(6A) Bankruptcy Act 1966 (Cth.) be refused. 2. The respondent pay the appellant's costs of the appeal. Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA ) VICTORIA DISTRICT REGISRTY ) No. VG 271/94 GENERAL DIVISION ) On appeal from the Honourable Justice Northrop BETWEEN: BIZTOLE DEVELOPMENTS PTY LTD (RECEIVER AND MANAGER APPOINTED) (ACN 006 394 627) Appellant AND: HELEN MURIEL MCLEAN Respondent COURT: BLACK CJ, O'LOUGHLIN AND HEEREY JJ PLACE: MELBOURNE DATE: 5 MAY 1995 REASONS FOR JUDGMENT THE COURT: In this matter the Court allowed an appeal from an order made by Northrop J setting aside a bankruptcy notice directed to the respondent, Helen Muriel McLean. Reasons for judgment were delivered at the conclusion of argument but the Court reserved its decision on the appellant's application for the costs of the appeal and the appellant's application that the time fixed for compliance with the bankruptcy notice be extended. We turn first to the question of costs. The respondent applied to the Court on various grounds for an order setting aside a bankruptcy notice issued on 18 January 1994 and directed to her. The trial judge considered that there were deficiencies in the material before the registrar in bankruptcy who issued the notice, such that the notice should not have been issued. These deficiencies had not been relied upon by the judgment debtor until raised by the trial judge. In fact, because of the course the hearing before the judge took, the grounds upon which the application was made to the Court have yet to be considered and in allowing the appeal the Court ordered that the respondent's application be remitted to a judge of the Court for further hearing. In these circumstances the respondent contends that the successful appellant should not have the costs of the appeal, or at least there should be some departure from the ordinary rule that costs follow the event. In our view the appellant should have its costs of the appeal. Although the trial judge decided the matter before him on a point not relied upon by the respondent as part of her original case, his Honour's reasoning was central to the case advanced by the respondent on the hearing of the appeal. In taking this course the respondent cannot of course be criticised, but as between the appellant and the respondent we see no reason to depart from the ordinary approach that costs follow the event. We would therefore order that the respondent pay the appellant's costs of the appeal. The costs of the application before the trial judge should be dealt with by the judge who hears the remitted application. As the Court noted in the reasons for judgment in the appeal, when the application before the primary judge was heard the time for compliance with the bankruptcy notice had been extended until midnight on 4 July 1994 or until further order. Because the bankruptcy notice was set aside it was of course unnecessary for the primary judge to make any order for a further extension of time. As a consequence, however, of the order setting aside the bankruptcy notice being itself set aside, the question of an extension of time has arisen. Counsel for the respondent contended that by reason of the operation of s.41(7) of the Bankruptcy Act 1966, time is in any event deemed to have been extended, but in case it was not accepted that there was a deemed extension counsel for the appellant submitted that one of the consequential orders we should make on the disposition of the appeal is an order granting a further extension under s.41(6A) of the Act. The parties were not, however, in agreement about the period for which any further extension should be granted and if s.41(7) does operate to deem an extension of time, as the respondent contends it does, there would be no need for any order extending time under s.41(6A) since the hearing of all outstanding issues will take place at the same time and the deemed extension will be sufficient. The appellant contended, however, that s.41(7) does not apply where, as here, the time originally fixed for compliance with the bankruptcy notice expired before the affidavit that s.41(7) requires was filed, although it was not contested that an affidavit otherwise sufficient to satisfy s.41(7) was filed before the expiration of the extended time fixed for compliance. In these circumstances the Court reserved for further consideration the appellant's application for an extension of time under s.41(6A). It is convenient to consider first whether s.41(7) does apply in the circumstances of the present case. Section 41(7) provides: "Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has filed with the Registrar an affidavit to the effect that he has such a counter-claim, set-off or cross demand as is referred to in paragraph 40(1)(g) and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter-claim, set-off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied." The time originally fixed for compliance with the bankruptcy notice expired on 7 May 1994 at which time no affidavit meeting the requirements of s.41(7) had been filed. On the previous day, however, an application to set aside the bankruptcy notice had been filed and an extension of time for compliance with the notice granted by a registrar under s.41(6B)(b). Subsequently there were further extensions of time. Affidavits directed to satisfying the requirements of s.41(7) were filed within the extended times fixed under s.41(6B)(b). The purpose of extending time under s.41(6A)(b) is to enable the Court to hear the application to set aside the bankruptcy notice without the occurrence of an act of bankruptcy in the meantime: see Re Stirling; Ex parte Esanda Ltd (1980) 44 FLR 125 at 130 per Lockhart J. The evident purpose of s.41(7) is similarly to enable the court to hear a judgment debtor's claim that he has a counter-claim, set-off or cross demand such as is referred in s.40(1)(g) without the occurrence of an act of bankruptcy in the meantime. In these circumstances there is nothing to suggest that the expression in s.41(7) "before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice" should be given any narrow or technical meaning such as might exclude from consideration an extended time fixed under s.41(6A) or s.41(6B). A time for compliance extended under these provisions is, according to the ordinary meaning of the words used, the time "fixed for compliance". Moreover, when time has been extended under s.41(6A) or s.41(6B) the extension operates generally and it will be possible for the judgment debtor to avoid committing an act of bankruptcy in various ways during the period of extension, including by satisfying the Court during that extended period that he or she has a relevant counter-claim, set-off or cross demand. It would be strange if, in these circumstances, s.41 worked in such a way that the judgment debtor could avoid committing an act of bankruptcy by satisfying the Court that he or she has a counter-claim, set-off or cross demand if that issue were determined during the period of an extension granted under s.41(6A) or s.41(6B) but that an affidavit filed for the purposes of s.41(7) during that same period of extension would be too late to bring about an extension of time. It is most unlikely that such a result would have been intended by Parliament. The requirement of s.41(7) that the affidavit be filed before the expiration of the time fixed for compliance with a bankruptcy notice is understandable in the context of a deemed extension of time that will have the effect of avoiding the occurrence of an act of bankruptcy at the expiration of the time originally fixed for compliance. It avoids the difficulty of a deemed extension after an act of bankruptcy has occurred. No such difficulty occurs if, in accordance with the ordinary meaning of the words used, the reference to the time fixed for compliance with the requirements of a bankruptcy notice is taken to include a time fixed under one of the provisions allowing for an extension of time. In our view, the filing of an affidavit by a judgment debtor to the effect that he or she has a counter-claim, set-off or cross demand such as is referred to in s.40(1)(g) will activate s.41(7) so as to extend time if it is filed with the registrar after the time originally fixed for compliance but before the expiration of any extended time for compliance fixed under s.41(6A) or s.41(6B). In the present case we therefore consider it unnecessary to make any order extending time under s.41(6A) because s.41(7) operates to deem time to have been extended. We would therefore refuse the appellant's application for such an order. I certify that this and the preceeding five (5) pages are a true copy of the reasons for judgment herein of the Court. Associate: Date: Counsel for the appellant: R L Berglund Solicitors for the appellant: Blake Dawson Waldron Counsel for the respondent: D R Meagher QC P J Guinnane Solicitors for the respondent: Kingdon Lawyers Date of hearing: 17 March 1995 Date of judgment: