FEDERAL COURT OF AUSTRALIA Nugawela v Deputy Commissioner of Taxation [2016] FCA 578 File number: WAD 81 of 2016 Judge: MCKERRACHER J Date of judgment: 25 May 2016 Catchwords: BANKRUPTCY - application to set aside bankruptcy notice – whether original application to set aside bankruptcy notice was made within the period of compliance – whether there is an inconsistency between the Bankruptcy Act 1966 (Cth), Bankruptcy Rules 2005 (Cth) and Federal Court Rules 2011 (Cth) as to when an application to set aside a bankruptcy notice must be filed – whether it is sufficient for an application to set aside a bankruptcy notice to be lodged at 'the last moment' of the day fixed for compliance – whether power to dispense with compliance of the rules under r 1.34 of the Federal Court Rules 2011 (Cth) – whether power to extend time for compliance under r 1.39 of the Federal Court Rules 2011 (Cth) - whether it is open to the applicant as a matter of law to rely on the matters now sought to be raised Legislation: Bankruptcy Act 1966 (Cth) ss 40(1)(g), 41(7) Federal Court of Australia Act 1976 (Cth) ss 35A(1)(h), 59 Federal Court (Bankruptcy) Rules 2005 (Cth) rr 2.01(a), 3.02(2), 3.02(3), 3.11 Federal Court Rules 2011 (Cth) rr 1.32, 1.34, 1.39, 1.40, 2.21(1)(d), 2.23, 2.24, 2.25, 2.26, 2.27, 2.29, 2.29, 2.32(2) Taxation Administration Act 1953 (Cth) s 14ZZM Cases cited: Brennan v McGuire [2015] FCCA 665 Bryant v Commonwealth Bank of Australia (1994) 217 ALR 251 Charlton v CNH Capital Australia Pty Ltd [2013] FMCA 232 Re Daunt; ex parte McIntyre (1905) 5 SR (NSW) 533 Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2009) 237 CLR 473 Deputy Commissioner of Taxation v Cumins [No 5] [2008] FCA 794 Deputy Commissioner of Taxation v Nugawela [2015] WASC 468 Deputy Commissioner of Taxation v Wilson [2016] WADC 60 Johnston v Vintage Developments Pty Limited (ACN 067 567 006) [2006] FCAFC 171 Liascos v Anastasopoulos [2013] FCCA 2239 Re Maud (1891) 8 Morr 144 Patane v Asteron Life Ltd [2004] FCA 232 Re Prow; Ex parte Dalgety Farmers Ltd (1985) 5 FCR 233 Purden Pty Ltd v Registrar in Bankruptcy (1982) 64 FLR 306 Russell v Polites Investments Pty Ltd [2012] FCA 11 Re Schmidt; Ex parte Angelwood Pty Ltd (1967) 13 FLR 111 Sibonna Nominees Pty Ltd & Anor v Vouzas [2014] FCCA 224 Southgate Investment Funds Limited v Deputy Commissioner of Taxation (2013) 211 FCR 274 Date of hearing: 27 April 2016 Registry: Western Australia Division: General Division National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Category: Catchwords Number of paragraphs: 70 Counsel for the Applicant: The Applicant appeared in person with Pro Bono Counsel assistance of Mr MD Cuerden SC with Ms RR Joseph regarding the timing of the lodgement of the application under review Counsel for the Respondent: Mr JM Healy Solicitor for the Respondent: Australian Taxation Office ORDERS WAD 81 of 2016 BETWEEN: PATRICK NUGAWELA Applicant AND: DEPUTY COMMISSIONER OF TAXATION Respondent JUDGE: MCKERRACHER J DATE OF ORDER: 25 MAY 2016 THE COURT ORDERS THAT: 1. The interlocutory application be dismissed. 2. The application be dismissed. 3. The applicant pay the costs of the respondent, to be assessed if not agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT MCKERRACHER J: THE APPLICATION 1 Dr Nugawela applies (the Application) to set aside an order dismissing an originating application to set aside a bankruptcy notice (the Original Application). 2 On 1 March 2016, a Deputy District Registrar dismissed Dr Nugawela's Original Application to both set aside a bankruptcy notice with which he had been served and to extend time for compliance with the bankruptcy notice. Dr Nugawela did not, through misunderstanding the Court's electronic process of notifying the listing date for hearings online, appear at the hearing of the Original Application before the Registrar. There were other difficulties with the Original Application. On one view, it was filed out of time. If that view is correct, it is highly doubtful whether the Court has power to grant the relief Dr Nugawela now seeks. Secondly, Dr Nugawela had not served the Original Application on the Deputy Commissioner of Taxation and, thirdly, his affidavit in support was deficient for non-compliance with the Federal Court (Bankruptcy) Rules 2005 (Cth) (Bankruptcy Rules). THE TIMING ARGUMENT 3 A creative argument has been raised for Dr Nugawela to the effect that the Original Application (sent electronically at 4.39 pm on the last day for lodging) was within time. In essence, it turns on the contentions that: no time is specified for electronic lodgment as distinct from paper lodgment; the statutory time limit within which the Original Application was to be lodged has precedence over court rules and lodging is permissible by statute until the last moment of the day in question; and in any event, the key question is not when filing took place (which is arguably the act of the court staff, not the litigant), but when the lodging of the application took place. 4 In contrast to this argument, the Commissioner contends that: if an Act requires that a document be lodged within a certain time, it is implicit that the lodgment will be in accordance with a court's rules; properly understood, the 4.30 pm deadline for filing pertains to all means of lodging documents with the Court as the relevant rules must be read as a whole, in context; and lodging and filing of electronic documents are simultaneous under r 2.23. 5 I have set out the arguments in detail in deference to the labours of counsel, but in the end, find it unnecessary to resolve this point as it is clear on the merits (which I could not examine if the Original Application was out of time), that Dr Nugawela could not have succeeded on the Original Application. It follows that the Application and any supporting interlocutory relief that he pursues must be dismissed. THE BACKGROUND 6 Each of the parties has filed a deal of affidavit evidence in relation to the Application. Collectively, it reveals the following background. 7 On 9 December 2014, the Commissioner commenced proceedings against Dr Nugawela in the Supreme Court of Western Australia. At that stage, Dr Nugawela was represented by solicitors. On 5 May 2015, the Commissioner filed an application for summary judgment. It was opposed by Dr Nugawela. Reasons for the grant of summary judgment by Justice Kenneth Martin were delivered on 19 August 2015 (Deputy Commissioner of Taxation v Nugawela [2015] WASC 468) (Supreme Court judgment). Dr Nugawela advanced the following broad issues in opposition to the application for summary judgment before his Honour, as is seen in the analysis by his Honour (at [16]-[19]): (a) that Dr Nugawela did not file tax returns because he had encountered a number of personal problems in the past few years, including the flooding of his medical practice in January 2014; (b) his involvement in legal proceedings with his former landlord, and since 2003 psychological issues prevented him from fulfilling his obligation to lodge tax returns; (c) he had now lodged tax returns for the financial years ended June 2007, June 2008; (d) that the Commissioner had wrongly assessed his tax liability for the years ended 30 June 2007 at $122,600.40 and for 30 June 2008 at $211,813.95, whereas his accountant had assessed tax liability for the year ended 30 June 2007 at $55,947.30, and for the year ended 30 June 2008 at $1380.40; and (e) that Dr Nugawela sought that summary judgment be deferred for one month to enable Dr Nugawela's tax returns for the balance of the years to be lodged. 8 Summary judgment was entered in favour of the Commissioner on 19 August 2015 in the sum of $1,668,164.16 plus interest pursuant to s 5-15 of the Income Tax Assessment Act 1997 (Cth), and s 8AAZF, Pt IIA and s 298-25 of Sch 1 of the Taxation Administration Act 1953 (Cth) (TAA). 9 Dr Nugawela filed no application to appeal the Supreme Court judgment or to stay its operation or effect under the Civil Judgments Enforcement Act 2004 (WA). Dr Nugawela has since filed an application before the the Administrative Appeals Tribunal (AAT). Those proceedings do not operate as a stay of or appeal from the Supreme Court judgment. Those proceedings have no other relevance to this application by virtue of s 14ZZM TAA which provides that the fact that a review is pending in relation to a taxation decision does not in the meantime interfere with, or affect, the decision and any tax, additional tax or other amount may be recovered as if no review were pending. 10 The substantive matters raised by Dr Nugawela in support of the Original Application are, in essence, the same as those advanced before his Honour in the Supreme Court. Since that judgment was delivered, no amended tax returns have been lodged for the financial years ended 30 June 2002, 2004, 2005, 2006 or 2010. THE ISSUES 11 The issues arising on this Application are: (a) whether Dr Nugawela's Original Application to set aside the bankruptcy notice was made within the 21 day period for compliance with the bankruptcy notice. If it was not, the Commissioner says the Application ought be dismissed immediately. If it was within the 21 day period, then the issues in (b) and (c) arise for consideration: (b) the consequences of Dr Nugawela's non-appearance and the consequences of Dr Nugawela's failure to file an affidavit in compliance with r 3.02(2) of the Bankruptcy Rules and failure to serve the Original Application in accordance with r 3.02(3) of the Bankruptcy Rules; and (c) whether any of the matters raised by Dr Nugawela give rise to any ground on which to set aside the bankruptcy notice. The key question on this topic is whether there is any counter-claim, set-off or cross demand equal to or exceeding the amount of the Supreme Court judgment debt that he could not have set up in the action or proceeding in which the judgment was obtained: see s 40(1)(g) of the Bankruptcy Act 1966 (Cth). 12 It is not in issue that: (a) the Application is to be heard de novo; (b) the Application was filed within time, that is, within 21 days after the day on which the power was exercised by the Registrar (being 1 March 2016), in accordance with r 3.11 Federal Court Rules 2011 (Cth) (FCR); and (c) the Registrar had power to make the orders he did on 1 March 2016, pursuant to s 35A(1)(h) of the Federal Court of Australia Act 1976 (Cth) (FCA) and Sch 2, item 1 and item 4 of the Bankruptcy Rules. STATUTORY AND RULE CONSIDERATIONS 13 The timing debate turns around rr 2.11-2.27 FCR, which (in a little more detail) are relevantly in these terms: 2.11 General provisions about documents A document that is to be filed in a proceeding must be in accordance with any approved form and the Court's requirements. … Note 2: The Court's requirements in relation to preparing and lodging documents are set out in practice notes issued by the Chief Justice. 2.12 Compliance with approved forms A requirement in these Rules that a document be in accordance with an approved form is complied with if the document: (a) is substantially in accordance with the approved form and any practice notes issued by the Chief Justice; or (b) has only those variations that the nature of the case requires. … 2.21 How documents may be lodged with the Court (1) A document may be lodged with the Court by: (a) being presented to a Registry when the Registry is open for business; or (b) being posted to a Registry with a written request for the action required in relation to the document; or (c) being faxed to a Registry in accordance with rule 2.22; or (d) being sent by electronic communication to a Registry, in accordance with rule 2.23. … 2.23 Sending a document by electronic communication (1) A document that is sent by electronic communication to a Registry for filing must: (a) be sent by using the Court's website at http://www.fedcourt.gov.au; and (b) be in an electronic format approved by the Registrar for the Registry; and (c) if a document is required to be in accordance with an approved form—so far as is practicable, be in an approved form that complies with rule 2.12 or 2.13; and (d) be capable of being printed in the form in which it was created without any loss of content. Note: The electronic format approved by the Registrar for a Registry is available on the Court's website at http://www.fedcourt.gov.au. (2) An affidavit must be sent as an image. (3) If the document is in an existing proceeding, it must be sent to the proper Registry by using the Court's website at http://www.fedcourt.gov.au. (4) The person who sends the document must: (a) keep a paper or electronic copy of the document prepared in accordance with this rule; and (b) if ordered to do so by the Court, produce the hard copy of the document. 2.24 Documents sent by electronic communication (1) If a document sent to a Registry by electronic communication in accordance with rule 2.23 is accepted at the Registry, and is a document that must be signed or stamped, the Registrar will: (a) for a document that these Rules require to be endorsed with a date for hearing—insert a notice of filing and hearing as the first page of the document; or (b) for any other document—insert a notice of filing as the first page of the document. (2) If a notice has been inserted as the first page of the document in accordance with subrule (1), the notice is taken to be part of the document for the purposes of the Act and these Rules. 2.25 When is a document filed (1) A document is filed if: (a) it is lodged with the Court in accordance with rule 2.21(1); and (b) either: (i) for a document in an existing proceeding—it is accepted in the proper Registry by being stamped as 'filed'; or (ii) in any other case—it is accepted in a Registry by being stamped as 'filed'. … (3) If a document is faxed or sent by electronic communication to a Registry, the document is, if accepted by a Registry under subrule (1), taken to have been filed: (a) if the whole document is received by 4.30 pm on a business day for the Registry - on that day; or (b) in any other case - on the next business day for the Registry. Note 1: Business day is defined in the Dictionary. Note 2: File is defined in the Dictionary as meaning file and serve. Note 3: Because of the Court's computer security firewall, there may be a delay between the time a document is sent by electronic communication and the time the document is received by the Court. 2.26 Refusal to accept document for filing - abuse of process or frivolous or vexatious documents A Registrar may refuse to accept a document (including a document that would, if accepted, become an originating application) if the Registrar is satisfied that the document is an abuse of the process of the Court or is frivolous or vexatious: (a) on the face of the document; or (b) by reference to any documents already filed or submitted for filing with the document. 2.27 When documents will not be accepted in a Registry A document will not be accepted for filing if: (a) it is not substantially complete; or (b) it does not substantially comply with these Rules; or (c) it is not properly signed; or (d) a Registrar has refused to accept the document; or (e) the Court has given a direction that the document not be accepted; or (f) the Court has given a direction that the document not be accepted without the Court's leave, and leave has not been obtained. Note: If a document is lodged with the Court in accordance with paragraph 2.21(1)(b), (c) or (d) and the Registry does not accept it, a Registrar will notify the sender of the document accordingly. 14 Rule 1.34 and r 139 FCR provide: 1.34 Dispensing with compliance with Rules The Court may dispense with compliance with any of these Rules, either before or after the occasion for compliance arises. 1.39 Extension and shortening of time The Court may extend or shorten a time fixed by these Rules or by order of the Court: (a) before or after the time expires; and (b) whether or not an application for extension is made before the time expires. 15 In addition, the Bankruptcy Rules relevantly provide that: 1.03 Application of these Rules and other rules of the Court … (2) The other rules of the Court apply, to the extent that they are relevant and not inconsistent with these Rules: (a) to a proceeding in the Court to which the Bankruptcy Act applies; and (b) to a proceeding in the Court under the Cross Border Insolvency Act that is commenced after 29 March 2009. 16 Further, the Original Application was an application of the type referred to in s 41(6A) and s 41(7) of the Bankruptcy Act. The subsection, in relevant context, provides: 41 Bankruptcy notices … (6A) Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice: (a) proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or (b) an application has been made to the Court to set aside the bankruptcy notice; the Court may, subject to subsection (6C), extend the time for compliance with the bankruptcy notice. (6C) Where: (a) a debtor applies to the Court for an extension of the time for complying with a bankruptcy notice on the ground that proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; and (b) the Court is of the opinion that the proceedings to set aside the judgment or order: (i) have not been instituted bona fide; or (ii) are not being prosecuted with due diligence; the Court shall not extend the time for compliance with the bankruptcy notice. (7) Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has applied to the Court for an order setting aside the bankruptcy notice on the ground that the debtor 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. (emphasis added) 17 Section 40(1)(g) of the Bankruptcy Act referred to in s 41(7) provides: 40 Acts of bankruptcy (1) A debtor commits an act of bankruptcy in each of the following cases: … (g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not: (i) where the notice was served in Australia—within the time specified in the notice; or (ii) where the notice was served elsewhere—within the time fixed for the purpose by the order giving leave to effect the service; comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter claim, set off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained; … WAS THE ORIGINAL APPLICATION FILED WITHIN TIME? 18 This is an important and novel question. If it is answered in the negative, it is most unlikely that there was or is any power to grant the extension of time on the Original Application or, therefore, for that decision to be reversed. More broadly, the requisite timing of an application to the Court under s 41(6A) or s 41(7) of the Bankruptcy Act is an important question, particularly in the context of an application to the Court by a self-represented litigant using the Court's relatively new electronic court filing system, ECF. The Commissioner argues that Dr Nugawela's Original Application was out of time. I issued a pro bono certificate for counsel on this issue and was grateful for the prompt and helpful assistance of Mr MD Cuerden SC and Ms RR Joseph of counsel in preparing and advancing written and oral submissions on this particular point. Pro bono counsel's assistance was confined to the timing point. 19 The bankruptcy notice itself was served on 23 January 2016. This meant that Dr Nugawela had 21 days to apply to set it aside. This 21 day period expired on 13 February 2016, which was a Saturday. This enabled an extension until the next business day, which was Monday, 15 February 2016 in accordance with s 36(2) of the Acts Interpretation Act 1901 (Cth). 20 Section 59(1) FCA provides the Court with a power to make Rules of Court, and s 59(2)(q) provides the Court with a power to prescribe forms to be used for the purposes of proceedings in the Court. Division 2.3 FCR sets out the Court's procedure for lodging and filing documents. 21 Relevantly to this issue, as noted, r 2.21(1)(d) FCR provides that a document may be lodged with the Court by being sent by electronic communication to a registry in accordance with r 2.23 FCR. The Court's requirements in relation to preparing and lodging documents are set out in Practice Note CM 23 – Electronic Court File and Preparation and Lodgment of Documents issued by the Chief Justice, and particularly para 4.2 and para 6.11 therein. Therein it is provided, amongst other things, that affidavits must constitute an image (referring back to this requirement within r 2.23 FCR). 22 Rule 2.24(1) provides that if a document sent to a Registry in accordance with r 2.23 is accepted at the Registry and is a document that must be signed or stamped, the Registrar will insert a notice of filing (and hearing) as the first page of the document. An application to set aside a bankruptcy notice is such a document. Rule 2.24 does not prescribe when the Registry will make the insertion. 23 It follows that, pursuant to r 2.25(1) FCR, a document will be filed if it is lodged with the Court in accordance with r 2.21(1) and it is accepted in a Registry by being stamped 'filed'. Rule 2.25(3) provides that if a document is sent by an electronic communication to a Registry, the document is, if accepted by a Registry under subrule (1), taken to have been filed on that day if the whole of the document is received by 4.30 pm on a business day for the Registry; or in any other case – on the next business day for the Registry. 24 In this instance, the Original Application was sent by electronic communication and received at 4.39 pm on 15 February 2016, nine minutes late, the Commissioner says, due to the content of r 2.25(3) FCR. 25 Rule 2.27 relevantly provides that a document will not be accepted for filing in a Registry where: (a) it is not substantially complete; or (b) it does not substantially comply with these Rules; or (c) it is not properly signed; or (d) a Registrar has refused to accept the document … 26 The Commissioner's argument is that: (a) the mere uploading of a document onto the Court's electronic lodgement portal is not sufficient to constitute its filing; (b) in order for a document to be filed, there is the additional requirement that the document be accepted by the Registry or a Registrar and stamped 'filed' (r 2.25(1)); (c) the requirements under r 2.25(1) FCR are further explained in Practice Note CM 23 – Electronic Court File and Preparation and Lodgment of Documents as follows: 8.5 The date of filing of a document is the day it was lodged (if that is a business day for the District Registry which accepts it and the document was received by 4.30 pm local time at that Registry) or otherwise on the next business day for that Registry [r 2.25(3)]. If a document is eLodged and accepted, the notice required by either rule 2.24(1)(a) or 2.24(1)(b) to be inserted as the first page of the document will show the date and time that the document was received by the Court. Where necessary this will enable the date of filing to be calculated. (emphasis added) 27 No interlocutory application was made by Dr Nugawela to extend the 4.30 pm cut-off time in r 2.25(3) FCR under r 1.39 or otherwise, at least until a passing reference in Dr Nugawela's further submissions received 27 April 2016 in respect of this Application. He orally requested an extension of time on the hearing of this Application. He did not on the Original Application because he thought the documents were accepted for filing. Of course, the documents were accepted for filing, but the issue remains as to whether they were filed within or out of time. 28 The basic contention for Dr Nugawela is that the time fixed for compliance with the requirements of the bankruptcy notice expired, not at 4.30 pm, but at 'the last moment' on 15 February 2016 by reference to Re Prow; Ex parte Dalgety Farmers Ltd (1985) 5 FCR 233 per Pincus J, following Re Maud (1891) 8 Morr 144. 29 The question is not, it is submitted for Dr Nugawela, when he 'filed' the Form 2 document because that was not for him to do. The question is when he 'applied to the Court' pursuant to s 41(7) of the Bankruptcy Act. It is further submitted for Dr Nugawela that he 'applied to the Court' when he lodged his Form 2 application electronically at 4.39 pm in accordance with r 2.21(1)(d). This occurred before the last moment of 15 February 2016 and, therefore, it is argued, before the expiration of the time fixed for compliance with the requirements of the bankruptcy notice. 30 Counsel for Dr Nugawela draws attention to the distinction under the FCR between the concepts of lodging and filing documents. 'Filed' traditionally describes the act or process of placing documents in the records of a court or registry: Purden Pty Ltd v Registrar in Bankruptcy (1982) 64 FLR 306 per Bowen CJ, Fisher and Lockhart JJ (at 310). In this context, the act of filing the document is the act of the Court as opposed to the act of lodging it, which is the act of a party: Re Daunt; ex parte McIntyre (1905) 5 SR (NSW) 533 (at 536-537) per Walker J; Johnston v Vintage Developments Pty Limited (ACN 067 567 006) [2006] FCAFC 171 where Tamberlin, Jacobson and Rares JJ said (at [16]): Order 4 r 1(1) provides that except as otherwise provided in the rules, all proceedings in the Court's original jurisdiction are to be commenced by filing an application. Order 1 r 5A(1) provides that a document that is required by the rules to be filed may be presented to a registry when it is open for business. The word 'filed' is the word traditionally used to describe the act or process of placing documents in the records of a court or registry: Purden Pty Limited v Registrar in Bankruptcy (1982) 64 FLR 306 at 309-310; 43 ALR 512 at 515 per Bowen CJ, Fisher and Lockhart JJ; Hong v Minister for Immigration and Multicultural Affairs (1998) 82 FCR 468 at 471C-D, 473B per Burchett, Lehane and Finkelstein JJ. In this context the act of filing a document is the act of the Court, as opposed to the act of lodging it, which is the act of a party. (emphasis added) 31 The argument for Dr Nugawela points to the four means provided pursuant to r 2.21(1) FCR for a document to be 'lodged' with the Court. If it is lodged by being presented to a Registry, then it must be presented when the Registry is open for business pursuant to r 2.21(1)(a) FCR. However, there is no such limitation expressed when the document is lodged by being sent by electronic communication to a Registry. Rule 2.21(1)(d) FCR requires only that the document be sent in accordance with r 2.23; that subrule, in turn, imposes no time limit for the lodgement of a document electronically in the same way that r 2.21(1)(a) does, with respect to lodgement by presentation to a Registry. Rule 2.25 FCR proceeds thereafter to specify when a document, once 'lodged' with the Court in accordance with r 2.21(1), is 'filed'. The 'filing' of a document that has been 'lodged' with the Court in accordance with r 2.21(1) FCR requires a decision of the Registry to 'accept' the document by stamping it as 'filed': r 2.25(1)(b). The decision to 'accept a document for filing' may involve an assessment of the document by a Registrar or by the Registry. A Registrar may refuse to accept a document (including a document that would, if accepted, become an originating application) if satisfied that the document is an abuse of the process of the Court or is frivolous or vexatious: r 2.26 FCR. A document will not be accepted for filing, not only if a Registrar has refused to accept the document under r 2.26 FCR, but also if it is not substantially complete, does not substantially comply with the FCR, or is not properly signed: r 2.27 FCR. 32 Against that background, the effect of r 2.25(3) FCR, which applies specifically to documents that are faxed or sent by electronic communication to a Registry, is that, if the document is 'accepted' by the Registry under r 2.25(1) FCR, then it is taken to have been 'filed': (a) if the whole of the document is received by 4.30 pm on the business day for the Registry – on that day; or (b) in other case – on the next business day for the Registry. 33 It might be thought that one can only apply to a court in accordance with its rules. But, equally, a statute will have precedence over a rule inconsistency if there is one. Note 3 to r 2.25 FCR expressly recognises the theoretical possibility of delay between sending and receipt of a document sent by electronic communication due to the Court's firewall. A party who lodges a document by sending it by electronic communication in accordance with the FCR (or otherwise) should not be penalised for circumstances beyond his, her or its control as to when the document is actually filed by the Court Registry. 34 This view is said by counsel for Dr Nugawela to accord with the reasoning in Purden, where the Full Court (Bowen CJ, Fisher and Lockhart JJ) dealt with a similar question about the meaning of the word 'presented' in the Bankruptcy Act. The question there arose in the context of presentation of a petition to the court immediately prior to expiry of the statutory six month period. However, the signing and sealing of the petition by the Registry of the Court occurred on a date after the lodgement and a day after the six month period. The petition was lodged on the last day, but processed on the day after. The Court at first instance rejected the petition as being out of time. On appeal, the Full Court held (at 310) that the 'presentation' was actually effected at the time of showing the document to the appropriate court officer and its receipt by the officer. The Court said further (at 310): However, what the officer does with the document thereafter is nothing to the point as by then it has been presented. Not only is this so according to the ordinary use of the words in the context of the Act; but the far-reaching consequences in bankruptcy law of the presentation of a petition, to which we have already adverted, demonstrate the necessity for the act and date of presentation to be certain and readily ascertainable. Merely to show the petition to the Registry clerk without its being received would necessarily introduce an unacceptable element of uncertainty surrounding the date of presentation. Our view is supported by s 47(2) of the Act which provides: "Except with the leave of the Court, a creditor's petition shall not be withdrawn after presentation." There would be no point in this provision if receipt by the Registry were not an integral part of the presentation of a petition. ... Counsel for the respondent argued that a petition is not presented until it is filed. "Filed" is not a word to be found in the Act in relation to a petition, whether a creditor's or a debtor's petition. The Act uses the word "presented". "Filed" is a word which appears in the Bankruptcy Rules, and understandably so. Those rules are concerned with what happens within the Bankruptcy Registries and with the duties of parties lodging documents there. "Filing" is the word traditionally used to describe the act or process of placing documents in the records of courts or registries. 35 Similarly, counsel contend that to ascertain whether a debtor 'applied to the Court' within s 41(7) of the Bankruptcy Act by reference to the time a document sent by electronic communication to the Court Registrar was actually received by the Registry, and by reference to whether that document was then accepted by the Registry so as to be taken to have been filed, would have the potential for unreasonable consequences. Given the seriousness of a failure to apply to the Court within the time prescribed by s 41(7) (that is, the debtor will have committed an act of bankruptcy under s 40(1)(g) of the Bankruptcy Act), Counsel argues that it seems unlikely that the legislature would have intended that the question of whether or not a debtor has 'applied to the Court' within the time prescribed under s 41(7) would depend upon matters beyond his or her control. 36 Counsel emphasise that their analysis centres on the specific terminology of the Bankruptcy Act in s 41(7) as to when someone 'applies to the Court'. In other respects, the FCR impose time limits by reference to the date on which a document is 'filed'. So, for example, the time for filing a notice of appeal is specified by r 36.03 FCR. Where the FCR, as distinct from external legislation, impose time limits by reference to the time at which a document is filed, then the Court has power under the FCR to extend those limits. 37 Although counsel's argument is attractive, I consider there are difficulties with it. First, it is difficult to discern any policy consideration which would favour documents filed electronically out of business hours being treated as filed within business hours. Secondly, while the argument that a litigant lodging a document within time should not be penalised by the court's delay in filing may be accepted, there was no such delay here (or in any such case), in accordance with the FCR, as the Original Application was taken as being filed at the same time it was lodged, namely, 4.39 pm, in accordance with r 2.25(3). It is the rules that then prescribe it is deemed to be filed the next day. Arguably, the better construction of 'the last moment' for lodging on the day in question is the last possible business hour 'moment' under the Court's rules, namely, 4.29 pm. 38 Clearly, an application to the Court under s 41(7) of the Bankruptcy Act must be a bona fide application in the sense of substantially conforming with the requirements of Form 2 of the Bankruptcy Rules. This proposition is consistent with r 2.12 FCR and s 25C of the Acts Interpretation Act. A document which fell well short of substantive compliance with Form 2 could not be described as an application within the meaning of s 41(7). No suggestion has been raised in the material in this instance that Dr Nugawela's Original Application was not substantially compliant with Form 2. Nothing in the foregoing analysis prevents the rejection of the filing of the document for the reasons set out in the FCR. The analysis goes only to the question of the timing of the application to the Court. 39 As the time for compliance with the bankruptcy notice is fixed under the Bankruptcy Act, the Court cannot dispense with compliance with the FCR pursuant to either r 1.34 or r 1.39. In relation to r 1.34, Altobelli FM in Charlton v CNH Capital Australia Pty Ltd [2013] FMCA 232 (at [5]), correctly held in relation to a similarly worded provision that: The power to extend time for compliance with a bankruptcy notice under s 33(1)(c) of the [Bankruptcy Act] is expressly disallowed, and thus the authorities state that failure to comply with s 41(6A) is not a 'procedural irregularity capable of cure' but 'fatal to jurisdiction': Re Shaddock; Shaddock v Commonwealth Bank of Australia (unreported Federal Court of Australia, Goldberg J, 9 April 1998). In other words this court lacks the power to set aside the bankruptcy notice unless the application was filed before the expiration of the time fixed for compliance with the requirements of the bankruptcy notice. 40 While I am doubtful about the correctness of Dr Nugawela's timing argument, I am grateful for counsel's pro bono assistance and will nonetheless turn to consider the underlying merits of the Original Application, a course which would not be open if he was out of time. NON-APPEARANCE ETC 41 Dr Nugawela explained that he failed to attend the original hearing before the Registrar because he was unfamiliar with the form and procedure of eLodgment, this being his first encounter. He had had numerous contacts with the Court by mail, telephone and email and had no instruction for a layperson to serve papers. For present purposes, that explanation may be accepted. I also propose putting to one side the questions of non-service and the defective affidavit. THE MERITS 42 The bankruptcy notice is based on the Supreme Court judgment. Dr Nugawela says the subject of the Supreme Court judgement is the subject of his appeal to the AAT. He also asks by way of interlocutory relief that the current Application be stood over until the AAT determines the correctness of the amount that he owes the Commissioner. 43 Dr Nugawela says that as soon as he heard about the dismissal of the Original Application, he contacted the Commissioner and took urgent steps to file the current Application. He argues that if this Application is not determined 'on the merits', it will effectively and practically frustrate his current application before the AAT, which challenges the correctness of the Australian Taxation Office's (ATO) actions. He submits that there is no prejudice to the Commissioner 'as a model litigant acceding to a proper judicial determination of [his] rights [at] a fair hearing, rather than capitalising on an administrative [or] procedural oversight by a layperson'. 44 In further submissions, Dr Nugawela stresses that in relation to the errors in the tax assessments, which he raised before Martin J in the Supreme Court, the Commissioner remitted to him a substantial sum in reassessment for 2007 and 2008. Accordingly, on the reduction of his liability, he rejects the suggestion raised by the Commissioner that the matters raised in support of the application to set aside the bankruptcy notice are exactly the same as those which were advanced before his Honour. On the question of whether the matters he wishes to raise now could have been raised by way of counter-claim, Dr Nugawela says they were not and could not; it was impossible because the reassessments for the financial years ended 30 June 2007 and 30 June 2008 were not communicated to him until December 2015. 45 Dr Nugawela also asserts that s 14ZZM TAA is discretionary and not mandatory, and that there are other provisions of the TAA that impose obligations on the Commissioner to comply with their reassessment obligations, especially when their original assessments were default assessments and when the default assessments are substantially inflated. 46 Dr Nugawela also complains that the Supreme Court should have waited until after the reassessments were made because he did not have the power to do this himself and any appeal of the reassessments only lies to the AAT. He also complains, but with no particularisation, about the quality of his legal representation in the Supreme Court. 47 His submission is that: The AAT proceedings are a pre-cursor to setting aside Martin J's decision because Martin J had no power to do the re-assessments himself. Martin J wanted to get on with it, but to allow the ATO to use the summary judgment procedure, for the ATO to conceal the fact of re-assessment until after summary judgment was obtained, launch bankruptcy proceedings in the face of AAT proceeding to prevent scrutiny of the manifold [sic] errors in the ATO's default assessments, all do not reflect very nicely upon the ATO's obligations as a model litigant. I have lodged appeal papers in the Supreme Court last week. 48 Further, Dr Nugawela says that his application is supported by the decision in Liascos v Anastasopoulos [2013] FCCA 2239, where Dr Nugawela contends bankruptcy notices were set aside in similar circumstances. He relies on the passage at [160] where the court said: In the matter before this Court there are two distinct aspects in respect of the judgment upon which the Bankruptcy Notices are founded. As detailed above the judgment of her Honour Balla DCJ was set aside and, as of the date to which the decision was handed down, the Court of Appeal has issued a new judgment and entered different orders effective from that date. Secondly, as noted in [143] above, the quantum of the Court of Appeal judgment is substantially different from that of the District Court and the debtors would reasonably be misled as to the amount that they were required to pay. Further, interest calculations attached to the Bankruptcy Notices are wrong. The same rate and number of days will apply, but the principal amount will be substantially different, requiring recalculation. In these circumstances the debtors might reasonably be misled as to what they need to do to comply with the Bankruptcy Notices. While an overstatement of interest and hence, the total amount due does not of itself invalidate a notice in the absence of a s.41(5) notice, in this case the information in the Bankruptcy Notices did not enable the debtors to identify or verify that there were misstatements, let alone the amounts of the misstatements. I have borne in mind that the Bankruptcy Notices must be considered as a whole and can be read in light of fact [sic] extraneous to the Notices themselves and it should be read sensibly and not perversely: Northam v Commonwealth Bank of Australia [1999] FCA 544 per Weinberg J. As both Liascos and Hodges were actively involved in pursuing the appeals in the Court of Appeal against the District Court judgment it would have been known to them that there had been a considerable amendment to the quantum that they owed. These are not formal defects or irregularities capable of being cured under s.306 of the Bankruptcy Act. The Bankruptcy Notices are invalid which makes it a nullity and of no effect. They cannot be amended pursuant to s.33(1)(b) of the Bankruptcy Act and cannot be relied upon to found an act of bankruptcy: Skouloudis v St George Bank Ltd [2008] FCA 1765; (2008) 173 FCR 236. 49 Dr Nugawela stresses that a benevolent construction should be given to his s 41(5) notice in all the circumstances of the case and in the demonstrated numerous attempts to correspond with and speak with the Commissioner about the topic, but to no avail. He draws on the decision of Sibonna Nominees Pty Ltd & Anor v Vouzas [2014] FCCA 224 (at [29]). (I note that this passage of Sibonna deals with the issue of the validity of the notice of objection raised by the debtor in that case with particular reference to the construction of s 41(5) of the Bankruptcy Act.) 50 Finally, Dr Nugawela contends that the bankruptcy notice is misleading or even an abuse of process in that, on all the materials he has provided, there is a strong and reasonable inference that the Commissioner is only using the insolvency procedure (including the Medicare garnishee) to put pressure on him so that its substantial errors will not be the subject of AAT scrutiny, when the Commissioner knew: the reassessments for the financial years ended 30 June 2007 and 30 June 2008 were going to be substantial; and that he was unrepresented or had 'substandard representation', and nevertheless 'acted with undue haste'. 51 Dr Nugawela's suggestion that there is an abuse of process by a model litigant in the Commissioner recovering unpaid taxes in all the circumstances he describes does not assist. I am not satisfied there is any abuse of process. There is a strong legislative policy manifested in the recovery of tax debts to protect the revenue, pursuant to s 14ZZM of the TAA: see further Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2009) 237 CLR 473; and Southgate Investment Funds Limited v Deputy Commissioner of Taxation (2013) 211 FCR 274 (at [71]-[77]), referred to in turn by Martin J in the Supreme Court decision. 52 Dr Nugawela further complains that the Commissioner did not draw to the attention of the Supreme Court, before the decision of Martin J was delivered, that: Dr Nugawela was under psychiatric care; and there were substantial and now challenged reassessments for 2007 and 2008 which have only now been revealed. 53 The bankruptcy notice was misleading or an abuse of process in the sense discussed, he says, in Brennan v McGuire [2015] FCCA 665 (at [92]-[94], [104]-[106]. 54 In addition, after being advised that judgment would be delivered, and less than 48 hours before judgment was due to be delivered, Dr Nugawela asked that I consider the decision of Deputy Commissioner of Taxation v Wilson [2016] WADC 60 per Deputy Registrar Hewitt. In response, the solicitors for the Deputy Commissioner noted that the decision in Wilson is currently the subject of an appeal by the Deputy Commissioner. Consideration of the merits of the Application 55 Dr Nugawela's Original Application was based on s 40 and s 41 of the Bankruptcy Act, which relevantly provide: 40 Acts of bankruptcy (1) A debtor commits an act of bankruptcy in each of the following cases: … (g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not: (i) where the notice was served in Australia-within the time specified in the notice; or (ii) where the notice was served elsewhere-within the time fixed for the purpose by the order giving leave to effect the service; comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained; … 41 Bankruptcy notices … (3) A bankruptcy notice shall not be issued in relation to a debtor: (a) except on the application of a creditor who has obtained against the debtor a final judgment or final order within the meaning of paragraph 40(1)(g) or a person who, by virtue of paragraph 40(3)(d), is to be deemed to be such a creditor; (b) if, at the time of the application for the issue of the bankruptcy notice, execution of a judgment or order to which it relates has been stayed; or … (5) A bankruptcy notice is not invalidated by reason only that the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due, unless the debtor, within the time allowed for payment, gives notice to the creditor that he or she disputes the validity of the notice on the ground of the misstatement. (6) Where the amount specified in a bankruptcy notice exceeds the amount in fact due and the debtor does not give notice to the creditor in accordance with subsection (5), he or she shall be deemed to have complied with the notice if, within the time allowed for payment, he or she takes such action as would have constituted compliance with the notice if the amount due had been correctly specified in it. (6A) Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice: (a) proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or (b) an application has been made to the Court to set aside the bankruptcy notice; the Court may, subject to subsection (6C), extend the time for compliance with the bankruptcy notice. (6C) Where: (a) a debtor applies to the Court for an extension of the time for complying with a bankruptcy notice on the ground that proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; and (b) the Court is of the opinion that the proceedings to set aside the judgment or order: (i) have not been instituted bona fide; or (ii) are not being prosecuted with due diligence; the Court shall not extend the time for compliance with the bankruptcy notice. (7) Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has applied to the Court for an order setting aside the bankruptcy notice on the ground that the debtor 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. (emphasis added) 56 While s 41(6A)(b) provides a broader discretion to extend the time for compliance with a bankruptcy notice, the criteria in s 41(6C) are not relevant to this matter because no proceedings had been instituted by Dr Nugawela to set aside the summary judgment in respect of which the bankruptcy notice was issued. Belatedly, in late April 2016, an application for leave to appeal the Supreme Court judgment was lodged in the Supreme Court, but this was well after the time of the Original Application and cannot satisfy s 41(6C) or s 41(6A) of the Bankruptcy Act. 57 Section 40(1)(g) of the Bankruptcy Act (which s 41(7) applies) is confined to a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt that an applicant 'could not have set up in the action or proceeding in which the judgment or order was obtained'. There is no plausible evidence to demonstrate this. Dr Nugawela has pointed only to some credit adjustments as to his liability. The only evidence shows substantial remaining unmet liability. 58 Dr Nugawela produced various schedules which were designed to establish that some credits given by the Commissioner and other adjustments necessarily mean that the amounts in respect of which summary judgment were given in the Supreme Court were no longer correct and therefore the bankruptcy notice which turns upon those amounts is said to be incorrect. He argues that, not only is the bankruptcy notice wrong in terms of the amount it claims, but also that it would not have been possible for him to put the correct amounts before the Supreme Court because the adjustments and credits that have been made since the Supreme Court judgment were not then known to him. The difficulty with this argument is that it overlooks the effect of the statutory regime under which the Commissioner is entitled to certify the amount that is outstanding and, absent conscious maladministration, that certification stands as evidence of the amount outstanding. There is no suggestion of relevant conscious maladministration raised. 59 Similarly, the recent decision of Deputy Registrar Hewitt in Wilson goes to material that may be used to set aside a summary judgment application. Once again, the statutory regime is such that the Supreme Court judgment was clearly correct when obtained and at this juncture, absent compelling evidence, it is not appropriate to go behind that judgment. Relevantly, s 41(5) of the Bankruptcy Act provides that a bankruptcy notice is not invalidated by reason only that the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due, unless the debtor, within the time allowed for payment, gives notice to the creditor that he or she disputes the validity of the notice on the ground of the misstatement. In Henderson v National Australia Bank Ltd [2012] FMCA 14, Lucev FM (as his Honour then was) summarised the general principles and usage of the subsection, which included (at [10]-[11]): 10. Olivieri v Stafford & Ors (1989) 24 FCR 413 is a judgment of a Full Court of the Federal Court in which the appellant contended that that [sic] the amount of a final judgment in the District Court of New South Wales, being $19,318.93, which was the same amount as the debt said to be owing under the bankruptcy notice, was overstated by an amount of $389, and that the bankruptcy notice was therefore invalid. The appellant had failed in an application to the District Court of New South Wales to set aside the final judgment. The majority in Olivieri upheld the validity of the bankruptcy notice and dismissed the appeal. A number of propositions emerge from the separate majority judgments, including that: a. a court exercising bankruptcy jurisdiction has power to "go behind" the judgment relied on to found the bankruptcy notice so as to inquire into the existence of the alleged debt, [36] and does so on the basis that a bankruptcy notice which has been "issued for a debt which is liable to be set aside or varied such that the creditor does not have a debt upon which the bankruptcy proceedings can be founded" does not give effect to the provisions of the Bankruptcy Act; Olivieri at 429-430 per Gummow J. b. if the judgment relied upon to found the bankruptcy notice is a default judgment, the court exercising bankruptcy jurisdiction "will always 'go behind' the judgment if there is what it regards as a bona fide allegation that no real debt 'lay behind' the judgment"; Olivieri at 422 per Beaumont J. c. the judgment stands as prima facie evidence of a debt until a court exercising bankruptcy jurisdiction goes behind the judgment; Olivieri at 422 per Beaumont J. d. if a court exercising bankruptcy jurisdiction goes behind the judgment relied upon, the examination of whether there is a bona fide debt "extends to every aspect of the parties dealings", and not merely limited transactions selected by creditor or debtor; Olivieri at 424 per Beaumont J. e. a bankruptcy notice which accurately states the amount of a judgment, which a court exercising bankruptcy jurisdiction has not gone behind, does not overstate the amount due; Olivieri at 424 per Beaumont J, and citing Re Riviere; Ex parte Original Mont de Piete Ltd (1919) 20 SR(NSW) 77 at 84 per Owen AJ. f. a court exercising bankruptcy jurisdiction will only reconsider the judgment relied on to found the bankruptcy notice to determine whether the bankruptcy notice should be set aside, and not merely to ascertain if the judgment debt should be reduced, [42] and hence the court should not go behind a judgment where "to do so would leave a substantial sum still due and owing but unpaid". Olivieri at 432 per Beaumont J. 11. In Emerson & Anor v Wreckair Pty Limited (1992) 33 FCR 581 the amount claimed in the bankruptcy notice to be due and unpaid was the amount of the judgment debt, but that amount was overstated by either $750 or $900 on a debt of $29,081.65. [45] On appeal to the Supreme Court of Queensland the judgment debt was reduced by the sum of $5,400. That appeal was determined after the validity of the bankruptcy notice had been argued before the Full Court of the Federal Court, but before judgment was delivered. [46] In Wreckair the Full Court of the Federal Court: a. citing Walsh said that: i. the relevant date for the inquiry into whether the amount specified in the bankruptcy notice is excessive, that is whether it exceeds the amount in fact due, is the date of the issue of the bankruptcy notice; and ii. a payment in reduction of the judgment debt made after the issue of a bankruptcy notice, but before the service of the bankruptcy notice will not invalidate the bankruptcy notice; b. said that once an act of bankruptcy has been committed, it remains an available act of bankruptcy even though the judgment on which it is based is set aside; [ibid] c. found that: i. the amount due by the appellants and the amount for which execution might issue was the amount stated in the judgment (at first instance in the Queensland District Court), and the bankruptcy notice claimed an amount in accordance with that judgment, and was therefore not for an amount exceeding that in fact due; (at 547) ii. "[t]he circumstance that the amount of the judgment was subsequently reduced is not to the point"; [ibid] and iii. it was not appropriate that a court exercising jurisdiction in bankruptcy, on an application to set aside a bankruptcy notice, go behind a judgment where the grounds for the application, if accepted, would only support a finding that the amount of the debt be reduced, and would not support a finding that there was in truth no debt at all. [at 588-589] (my emphasis added) 60 At the time of service of the bankruptcy notice, the sum claimed was correct, being the amount of the Supreme Court judgment, to which interest accrued since the date of the judgment was added. 61 There is not, with respect, the slightest doubt that the Supreme Court was required to proceed as it did and once the Supreme Court judgment was entered, it necessarily provided the correct basis for the bankruptcy notice, especially in this instance when no application had been made to set aside or appeal from the summary judgment (until very recently and well out of time). The belated appeals to the AAT and Supreme Court, months out of time, do not satisfy the requirements of the Bankruptcy Act as being matters the Court can take into account. The act of bankruptcy arises under s 40(1)(g) of the Bankruptcy Act. According to that view, the act of bankruptcy occurred on 15 February 2016, as the Commissioner had obtained against Dr Nugawela a final judgment and had served on Dr Nugawela a bankruptcy notice and Dr Nugawela did not either: apply to set aside the bankruptcy notice within the time specified in the notice; or satisfy the Court that he has a counter-claim, set-off or costs demand equal to or exceeding the amount of the judgment debt. Arguments about what might be owing now are a different consideration. 62 In Bryant v Commonwealth Bank of Australia (1994) 217 ALR 251 the Full Court (Davies, Foster and O'Loughlin JJ) said (at 256): Section 41(7) provides for an extension of time for compliance with the bankruptcy notice so as to allow the court time to hear the parties and to consider the debtor's claim that he has a counterclaim or set-off as described in s 40(l)(g). The mere filing of an affidavit which satisfies the terms of the subsection will bring the extension of time, for which the section provides, into operation. As an affidavit is required, it must verify the cross-claim or set-off, it must verify that the cross-claim or set-off equals or exceeds the amount of the judgment debt, and it must verify the fact that the cross claim is one which could not have been set up in the action which the judgment order was obtained. In Re Brink: Ex parte The Commercial Banking Co of Sydney Limited (1980) 44 FLR 135 Lockhart J said (at FLR 142): In my opinion the affidavit cannot merely contain an assertion that the debtor has a counterclaim, set-off or cross demand which he could not have set up in the action in which the judgment or order was obtained. The affidavit must show a counterclaim, set-off or cross demand which equals or exceeds the amount of the judgment debt and which the debtor could not have set up in the action in which the judgment or order was obtained: see Vogwell v Vogwell (1939) 11 ABC 83, at 85; Ebert's case (1960) 104 CLR 346, at 350; Re A Debtor per Slesser LJ [l935] 1 Ch 347, at 352. 63 As Mr Healy for the Commissioner noted, it is not open now to this Court to take into account the belated notice of appeal, but that does not necessarily mean that Dr Nugawela can never raise issues of quantum, which may well be relevant in the context of the creditor's petition and the sequestration order being sought in the Federal Circuit Court of Australia. But that is not a matter for this Court on this Application. 64 In Patane v Asteron Life Ltd [2004] FCA 232, Lander J said (at [101]) of this section, and distinguishing Re Schmidt; Ex parte Angelwood Pty Ltd (1967) 13 FLR 111 (Gibbs J) which concerned the making of a sequestration order as irrelevant: An application under s 40(1)(g) raises different issues. The debtor will have committed an act of bankruptcy is [sic] the bankruptcy notice if [sic] not complied with. That entitles the judgment creditor to issue a petition based on that act of bankruptcy. The debtor can still satisfy the Court that he or she is able to pay his or her debts (s 50(2)) at the hearing of the judgment debtor's petition. At that time the course suggested by Gibbs J may for the reasons given by him be appropriate. However in my opinion an applicant under s 40(1)(g) of the Act must satisfy all of the elements of s 40(1)(g) and establish to the requisite level of satisfaction that he or she has a counter-claim set-off or cross demand equal to or exceeding the amount of the judgment debt. (emphasis added) 65 In Deputy Commissioner of Taxation v Cumins [No 5] [2008] FCA 794, Gilmour J (at [68]) held that a subsequent reduction of a judgment debt does not render a bankruptcy notice invalid because the bankruptcy notice is calculated by reference to the amount of the original judgment. 66 In Emerson v Wreckair Pty Ltd (1992) 33 FCR 581 (per Morling, Neaves and Spender JJ), their Honours said (at 587): A bankruptcy notice may be invalid if the amount specified in the notice as the amount due to the creditor exceeds the amount in fact due. The date as at which the inquiry whether the amount specified in the notice is excessive is to be made is the date of the issue of the notice: see Walsh v Deputy Commissioner of Taxation (1984) 156 CLR 337. A payment in reduction of the judgment debt made after the date of the issue of the notice but before its service on the debtor will not invalidate the notice: see Walsh (supra). In that case, Gibbs CJ, in whose judgment the other members of the court agreed, said (at 340): "In form the notice speaks as at the date which it bears, that is, the date of its issue, and although service is essential to make non-compliance an act of bankruptcy, and although the time fixed for compliance runs from the date of service, the notice must be understood as speaking as at the date of its issue and the requirement of the notice, for the purposes of s 40(1)(g) of the Bankruptcy Act, must be ascertained in that context. This reinforces the view that the amount which must be correctly stated is the amount of the judgment debt owing at the date of issue." It is also well established that, once an act of bankruptcy has been committed by the debtor's failure within the time specified to comply with the requirements of a bankruptcy notice or to satisfy the court that he has a counterclaim, set -off or cross-demand of the requisite kind, it remains an available act of bankruptcy even though subsequently the judgment on which it is based is set aside… (emphasis added) 67 Dr Nugawela's rights are not concluded at this point. The petitioning creditor will have to verify the amount due at the time of petitioning. At that stage, as Flick J in Russell v Polites Investments Pty Ltd [2012] FCA 11 said (at [23]), citing Gilmour J in Cumins: 23 Upon proof of the matters set forth in s 52(1) a petitioning creditor has been said to have a "prima facie right" to the making of a sequestration order: Deputy Commissioner of Taxation v Cumins [2008] FCA 353 at [14]. Gilmour J there helpfully summarised the general principles to be applied as follows: [14] On proof of the matters mentioned in s 52(1) of the Bankruptcy Act 1966 (Cth) (the Act) a petitioning creditor has a prima facie right to the making of a sequestration order and the court will proceed to make a sequestration order unless the court is satisfied that for other sufficient cause a sequestration order should not be made: s 52(2)(b) of the Act; Cain v Whyte (1933) 48 CLR 639 at 646. The onus is on the respondent debtor to demonstrate "sufficient cause": Commissioner of Taxation v Bayeh (1999) 100 FCR 144; [1999] FCA 1223 at [12]. [15] Section 52(2)(b) of the Act is wide enough to entitle the court, in a proper case, to adjourn or dismiss a petition in the exercise of its discretion, where the debtor demonstrates a genuine dispute as to the liability to pay the debt: Re Verma; Ex Parte Deputy Commissioner of Taxation (1984) 4 FCR 181 at 185 and 187. This power is discretionary: Clyne v Deputy Commissioner of Taxation (1982) 45 ALR 323 at 328. [16] The court is entitled to inquire whether a judgment is founded on a real debt. In general, a court exercising jurisdiction should not proceed to sequestrate the estate of a debtor where an appeal is pending against the judgment relied on as the foundation of the bankruptcy proceedings, provided that the appeal is based on genuine and arguable grounds: Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137 at 148; Bayne v Baillieu (1907) 5 CLR 64, [1907] HCA 39. [17] The mere fact that an appeal has been lodged does not without more, give rise to a duty to postpone the hearing of the petition: in Re Flatau; Ex Parte Scotch Whisky Distillers (1882) 22 QBD 83 (CA) at 84–85; nor will the court as a matter of course inquire into the validity of a judgment debt: Wren v Mahony (1972) 126 CLR 212 at 222–223, [1972] ALR 307 at 312-314. [18] The test to be applied has been described variously. The judgment debtor must point to grounds having "a real chance of success on appeal": Re Lewin; Ex Parte Milner (1986) 11 FCR 312 at 318; or ensure "that substantial reasons are given for questioning" whether there was in truth a debt: Wren at 225. It is not enough to rely upon mere assertion. The onus is on the applicant for a stay to show the existence of a genuine dispute by adducing evidence establishing the substantial nature of the grounds of challenge: Re Verma and Re Virendra Kumar Verma; Ex Parte Deputy Commissioner of Taxation (FCA, Beaumont J, 14 November 1984, unreported) referred to with approval in Re Verma at 187: [[2008] FCA 353]. In Re Dolman; Ex parte Elder Smith Goldsbrough Mort Ltd (1967) 10 FLR 384 at 391 Gibbs J also referred to a creditor who had proved the existence of a debt and an act of bankruptcy having "what may be called a prima facie right to a sequestration order". See also: Burgess v Permanent Custodians Ltd [2010] FCA 986 at [37]. 68 As to other issues, apart from quantum (that is, flooding etc), not only has Dr Nugawela not proven that it was not open to him as a matter of law to raise the matters which he now wishes to rely upon to set aside the bankruptcy notice, but, in fact, he wishes to raise precisely the same issues. It may be that the relevant debts have been varied, but the complaints raised and the defences offered in relation to the non-compliance with meeting tax obligations are the same issues which were raised in the Supreme Court, and (with respect) quite properly there rejected given the statutory assumptions on which the Commissioner and the Court proceeded. 69 The absence of any prospects of demonstrating that he has a valid counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt under s 40(1)(g) precludes reliance upon s 40(1)(g) of the Bankruptcy Act and would also necessarily strongly militate against any application for leave being granted to extend the time for compliance with the bankruptcy notice, even if the Original Application were lodged within time. CONCLUSION 70 Dr Nugawela has not established that the Registrar erred in dismissing the Original Application. The interlocutory application and application (that is, Original Application and Application) will be dismissed with costs. I certify that the preceding seventy (70) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher. Associate: Dated: 25 May 2016