FEDERAL COURT OF AUSTRALIA

BANKRUPTCY - application for extension of time to comply with bankruptcy notice - whether the Court may extend time for compliance with bankruptcy notice when application to set aside bankruptcy notice not made within time for compliance - power of the Court to extend time conferred by s 33 of Bankruptcy Act 1966 (Cth).

PRACTICE AND PROCEDURE - application for summary dismissal - proceedings out of time.

PRACTICE AND PROCEDURE - whether service on debtor of bankruptcy petition in lift was within the precincts of a Court - whether such service invalid.

Acts Interpretation Act 1901 (Cth), s 36

Bankruptcy Act 1966 (Cth) ss 33, 40(1)(g), 41(3), 41(6A), 41(7)

Federal Court Rules O 20 r 2, O 35 r 9

Federal Court of Australia Act 1976 (Cth), s 52(1)

Gibbs v Triscott (1995) 65 FCR 80, applied

James v Abrahams (1981) 51 FLR 16; (1981) 34 ALR 657, cited

Re Baker; Ex parte Baker v Staples (Federal Court, Kiefel J, 4 September 1995, unreported), distinguished

Re Carter; Ex parte National Mutual Trustees Ltd (1995) 57 FCR 185, distinguished

Re O'Sullivan ex parte O'Sullivan v Commonwealth Bank of Australia (1995) 57 FCR 145, applied

Re Perry; Ex parte Johnstone Withers & Associates (Federal Court, 27 May 1996,

unreported), affirmed

Re Riordan; Ex parte Riordan v Direct Acceptance Corporation Ltd (1995) 63 FCR 147, noted

Re Sterling; Ex parte Esanda Ltd (1980) 44 FLR 125; (1980) 30 ALR 77, noted

Re Stubberfield (1995-1996) 134 ALR 169, applied

Shaddock v Commonwealth Bank of Australia (Federal Court, 9 April 1998, unreported),

noted

Streimer v Tamas (1981) 37 ALR 211, distinguished

Williams v Spautz (1992) 174 CLR 509, applied

Baldry v Jackson [1976] 1 NSWLR 19, applied

IAN WALTER BROOKFIELD and SEPTIC PRODUCTS AUSTRALIA PTY LTD

(IN LIQUIDATION) v DAVEY PRODUCTS PTY LTD

SG 7158 of 1998

MANSFIELD J

ADELAIDE

25 SEPTEMBER 1998

THE COURT ORDERS THAT:

1.                  Application filed 31 August 1998 dismissed.

2.         Applicant, Ian Walter Brookfield to pay respondent’s costs of the application to be taxed.

Note:  Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR DECISION

This is an oral application by the respondent Davey Products Pty Ltd (“Davey Products”) under O 20 r 2 of the Federal Court Rules (“the Rules”) for summary dismissal of the proceeding.  The applicants were given the opportunity to respond to it, and do not oppose the application being dealt with notwithstanding the absence of a notice of motion.  I accordingly dispense with compliance with the Rules to the extent necessary to enable the application to be pursued.

There are two applicants formally before the Court.  In reality, the applicant is only Ian Walter Brookfield (“Mr Brookfield”).  On 31 July 1998, he was served with a bankruptcy notice issued on the application of Davey Products Pty Ltd (“Davey Products”) in respect of a judgment debt, and interest totalling $385,497.54 (“the bankruptcy notice”).

The judgment debt arises from a claim brought by Mr Brookfield and Septic Products Australia Pty Ltd (In Liquidation) (“Septic Products”) against Davey Products and others.  On 8 February 1996, Branson J dismissed that claim against Davey products and ordered Mr Brookfield to pay the costs of Davey products of those proceedings (“the primary judgment”).  An appeal to the Full Court of this Court was dismissed on 12 September 1996.  On 30 May 1997 the High Court refused to grant special leave to appeal from that decision.  On 19 December 1997, Branson J varied the costs order made on 8 February 1996 to order Mr Brookfield to pay Davey Products costs specified in the sum of $380,493.82 (“the costs order”).

In separate proceedings in this Court, Mr Brookfield sought suspension of the execution of the costs order, as made on 8 February 1996 and varied on 19 December 1997, until 2 August 1998.  Mr Brookfield proposed, and still proposes, to apply to set aside the primary judgment dismissing the claim against Davey products.  At the time of those proceedings, he contemplated that that application to set aside the primary judgment would be instituted by 2 August 1998.  On 19 May 1998 O’Loughlin J dismissed the application for suspension of the costs order.  Mr Brookfield on 21 July 1998, well out of time, applied for an extension of time within which to file and serve a notice of appeal from that decision.  On 6 August 1998 I refused to grant that extension of time.

The proposed application to set aside the primary judgment was not issued on or by 2 August 1998.  It has still not been issued.  Mr Brookfield, in the course of his submissions on this hearing, indicated that he now proposes to have that application issued on 25 September 1998.

In the meantime, on 31 July 1998, Mr Brookfield was served with the bankruptcy notice.  It was issued by the Official Receiver on the application of solicitors for Davey products.  The bankruptcy notice asserted the debt to be $380,493.82 being the amount of the costs order, plus interest of $5,003.72 accrued between the rate of the costs order and the 27 January 1998 calculated in accordance with s 52(1) of the Federal Court of Australia Act 1976 (Cth) and O 35 r 9 of the Rules.

By application filed on 31 August 1998, Mr Brookfield and Septic products applied under s 41(6A) and (7) of the Bankruptcy Act 1966 (Cth) (“the Act”) for orders as follows:

“1.     A declaration that the Bankruptcy Notice is null and void because it is based on a judgment debt obtained by extrinsic fraud, misleading and deceptive conduct and a breach of duty by officers of the Court.

2.         Such further or other orders as the Court deems fit.”

They also applied under s 41(3) of the Act for a stay of enforcement of the bankruptcy notice pending his proposed application to set aside the primary judgment.  The application was treated as an application to set aside the bankruptcy notice under s 41(7), and until its determination for the deemed extension of time for compliance with the bankruptcy notice, or alternatively an application to extend the time for compliance with the bankruptcy notice under s 41(6A), or somehow for a stay.

Section 41(3) of the Act does not provide Mr Brookfield with any avenue to avoid the consequences of the bankruptcy notice, or to stay its operation, or to procure further time for compliance with it.  That subsection specifies circumstances one or more of which must exist before a bankruptcy notice can be validly issued.  Section 41(3)(a) identifies one of those circumstances to be where a creditor who has obtained a final judgment or final order within the meaning of s 40(1)(g) of the Act.

In my view, the costs order is a final judgment or final order.  In Gibbs v Triscott (1995) 65 FCR 80, Drummond J held that an order dismissing an appeal ‘with costs’, together with a certificate of taxation, was a final order for the purposes of s 40(1)(g).  See also Re Stubberfield (1995-1996) 134 ALR 169 at 177.  The costs order finally disposed of the proceeding in which the primary judgment was given, and was properly entered in accordance with O 36 of the Rules.

The basis of the application by Davey Products for summary dismissal of the application is simply that, for the purposes of ss 41(6A) and 41(7) of the Act, the application of Mr Brookfield is irretrievably and clearly out of time.  Consequently, it is said, the Court can make no orders extending the time for compliance with the requirements of the bankruptcy notice on the application.  Nor can there be any deemed extension of time for that compliance.  Mr Brookfield had already committed the act of bankruptcy by failing to comply with the bankruptcy notice within the time permitted.

Sections 41(6A) and (7) provide:

“(6A)Where, before the expiration of the time fixed 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 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.

. . .

(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.”

In the case of s 41(6A), the power to extend the time for compliance with the bankruptcy notice may be invoked only “before the expiration of the time fixed for compliance with the requirements of” the bankruptcy notice.  The bankruptcy notice was served on 31 July 1998.  The time fixed for compliance with its requirements is twenty-one days.  That time expired on 21 August 1998.  In the case of s 41(7), the deemed extension of time, until the Court’s determination of whether it is satisfied that Mr Brookfield has a counterclaim, set-off or cross demand of the kind to which s 40(1)(g) of the Act refers, only occurs if the application to set aside the bankruptcy notice was made “before the expiration of the time fixed for compliance with the requirements of” the bankruptcy notice.  The application was not made until 31 August 1998.  It appears clear that, in either case, the application was made too late.

Mr Brookfield said in submissions that he believed the twenty-one days meant twenty-one working days, excluding weekends.  If that were correct, then the time would have expired on the day the application was instituted.  Section 36 of the Acts Interpretation Act 1901 (Cth) provides that:

“(1)   Where in an Act any period of time, dating from a given day, act, or event, is prescribed or allowed for any purpose, the time shall, unless the contrary intention appears, be reckoned exclusive of such day or of the day of such act or event.

(2)      Where the last day of any period prescribed or allowed by an Act for the doing of anything falls on a Saturday, on a Sunday or on a day which is a public holiday or a bank holiday in the place in which the thing is to be or may be done, the thing may be done on the first day following which is not a Saturday, a Sunday or a public holiday or bank holiday in that place.”

That is quite explicit.  If the twenty-one day period had expired on a Saturday or Sunday then the following Monday would have been available as the expiry date.  No consideration of that type arises here.  Mr Brookfield’s understanding was clearly erroneous.  In my view, it is beyond argument that the application was made too late for Mr Brookfield to empower the Court in terms of s 41(6A) or to procure a deemed extension of time for compliance with the requirements of the bankruptcy notice under s 41(7) until the Court makes the merit determination contemplated under that subsection.  There are presently no proceedings to set aside the primary judgment or the costs order so as otherwise to activate s 41(6A)(a).

I note that the same conclusion has been reached in Re Riordan; Ex parte Riordan v Direct Acceptance Corporation Ltd (1995) 63 FCR 147; Re Shaddock; Shaddock v Commonwealth Bank of Australia (Federal Court, 9 April 1998, unreported); Re Sterling; Ex parte Esanda Ltd (1980) 44 FLR 125; (1980) 30 ALR 77; Re Lentini; Ex parte Lentini v CSR Ltd (1991) 29 FCR 363.

Davey Products referred to s 33(1)(c) for the purposes of submitting that it could not be of assistance to Mr Brookfield in the present circumstances.  It provides:

“33.(1)          The Court may

. . .

(c)                 extend before its expiration or, if this Act does not expressly provide to the contrary, after its expiration, any time limited by this Act, or any time fixed by the Court or the Registrar under this Act (other than the time fixed for compliance with the requirements of a bankruptcy notice), for doing an act or thing or abridge any such time.”

That provision expressly excludes from the grant of power to the Court to extend time in its discretion the time fixed for compliance with the requirements of a bankruptcy notice.  Again, its terms are clear.  They do not empower the Court to extend the time to comply with the requirements of a bankruptcy notice.  The effect of such non-compliance in the present circumstances is that Mr Brookfield committed an act of bankruptcy on 21 August 1998 as he did not by that time take action under s 41(6A) or s 41(7) and did not otherwise comply with the requirements of the bankruptcy notice.

In my view it is clear that s 33(1)(c) is not available to assist Mr Brookfield in the present circumstances.  Furthermore, as Deane and Lockhart JJ pointed out in James v Abrahams (1981) 51 FLR 16 at 22, the terms of s 33

“. . . preclude the implication of a general inherent power in the court to extend the time fixed by the Registrar for compliance with the requirements of a bankruptcy notice.”

Branson J in Re Perry; Ex parte Johnston Withers & Associates (Federal Court, 27 May 1996, unreported) adopted a similar view.  I agree with her Honour’s reasons.

Mr Brookfield referred to three decisions which, he submitted, were to the contrary of the conclusions I have reached above.  If it were the case that there were conflicting decisions of the Court on any of the relevant issues, there may be an arguable claim that the application may redeem the act of bankruptcy committed by Mr Brookfield and summary judgment would be inappropriate.

In Re Carter; Ex parte National Mutual Trustees Ltd (1995) 57 FCR 185, the debtors had applied on 21 April 1994 to set aside a default judgment entered against them.  A bankruptcy notice had been served on them on 17 and 24 October 1994, and its requirements were not complied with.  An application under s 41(6A) was made on 17 January 1995 to extend time for compliance with the requirements of the bankruptcy notice.  The Court considered that it had jurisdiction to entertain the application, notwithstanding time for compliance with the requirements of the bankruptcy notice had expired before the application was made.  However, that was because there were on foot at all material times proceedings to set aside the judgment on which the bankruptcy notice was based, so s 41(6A)(a) applied:  see per Gummow J at 188.  The debtors did not rely, as Mr Brookfield does here, upon s 41(6A)(b).  There are in the present matter no proceedings to set aside the primary judgment or the costs order.  Indeed, Gummow J said at 188 concerning s 41(6A)(b):

“This reasoning [that the application must be made before the time for compliance with the requirements of the bankruptcy notice had expired] would equally apply to condition (a), so that the debtor must have instituted proceedings to set aside the judgment or order in respect of which the bankruptcy notice was issued within the time limited in the notice.”

Streimer v Tamas (1981) 37 ALR 211 also, in my view, does not assist the applicant.  In that case, an application under s 41(6A) for extension of time for compliance with the requirements of a bankruptcy notice was filed before the time for compliance had expired.  The Court held that, provided either of the conditions precedent in s 41(6A)(a) or (b) were satisfied, there was jurisdiction to extend the time for compliance with the requirements of a bankruptcy notice even though the extending order itself was made after that time had expired.  In that case, unlike the present, both conditions (a) and (b) were satisfied.

Mr Brookfield also referred to Re Baker; Ex parte Baker v Staples (Federal Court, Kiefel J, 4 September 1995, unreported).  That case also involved an application under s 41(6A) for extension of time to comply with the requirements of a bankruptcy notice.  An appeal from the decision and judgment upon which the bankruptcy notice was based had been instituted, apparently before the expiration of the time for compliance with the requirements of the bankruptcy notice.  Kiefel J concluded that that appeal satisfied condition (a), namely that it amounted to proceedings to set aside the judgment in respect of which the bankruptcy notice was issued.  No issue otherwise arose as to the timing of the appeal in relation to the time by which compliance with the requirements of the bankruptcy notice expired.

There was one further submission put by Mr Brookfield, namely that the motive of Davey Products in serving the bankruptcy notice was ‘vexatious and malicious’.  He was permitted to give oral evidence.  He has no significant realisable assets, and his income is confined to the receipt of benefits under the Social Security Act 1991 (Cth).  That picture has been constant since at least 1994.  Davey Products was aware of that picture by affidavits filed and served when it applied unsuccessfully for an order for security for costs in the primary proceedings.  Heerey J refused that application on 7 April 1994, and leave to appeal from his decision was refused by the Full Court (Wilcox, Drummond and Beazley JJ) on 16 May 1994.  Mr Brookfield has had no communications with Davey Products or its representatives on the topic of his assets since that time.  There were two other respondents to the primary proceedings, who together paid $480,000 to Mr Brookfield and Septic Products before the trial, and after May 1994, in settlement of the claims against them.  Mr Brookfield said he had not retained any of that amount, as it had been used to reimburse his financial backers in the primary claim.

I assume Mr Brookfield is endeavouring to invoke the principles enunciated in Williams v Spautz (1992) 174 CLR 509.  I assume that those principles are available, and are properly invoked, in this application and by way of opposition to the claim for its summary dismissal.  I am however of the view that the material before me could not support the allegation.  Davey Products is not shown, by any credible evidence, to have recent knowledge of Mr Brookfield’s lack of assets or income.  It apparently was aware of a substantial settlement sum paid by the other two respondents to the primary proceedings.  It is entitled to explore the availability of that sum generally to Mr Brookfield’s creditors, both as to its present whereabouts or, if disbursed, as to its recoverability under the Act.  In addition, as Mason CJ, Dawson, Toohey and McHugh JJ pointed out in Williams v Spautz (at 526-527), it is important not to generalise about the purpose of a litigant in bringing a proceeding.  As their Honours said, in drawing a distinction in certain circumstances between an immediate purpose and an ultimate purpose:

“The purpose of a litigant may be to bring the proceedings to a successful conclusion so as to take advantage of an entitlement or benefit which the law gives the litigant in that event.

. . . the existence of the ultimate purpose cannot constitute an abuse of process when that purpose is to bring about a result for which the law provides in the event that the proceedings terminate in the prosecutor’s favour.”

I perceive that Mr Brookfield’s allegation is that Davey Products is pursuing its present course so that he may become bankrupt, and then the proposed proceedings to set aside the primary judgment will not be able to be pursued, or at least not able to be pursued except through his trustee.  Even if that were so, and I have concluded on the material before me that that is not arguable, the procuring of the costs order and the steps taken to enforce it including by service of the bankruptcy notice, are steps the immediate purpose of which is to bring about a result for which the law provides in the event that a sequestration order is made against the estate of Mr Brookfield.

Mr Brookfield, in submissions, asserted that the affidavit of service upon him of the bankruptcy notice was not fully accurate.  He did not dispute that he was served on the occasion referred to, so I do not need to address that matter.  He also submitted that the service may be invalid because a rule exists prohibiting service within the precincts of the Court.  He alleged that service was effected immediately upon stepping into the lift on the ninth floor of 25 Grenfell Street, Adelaide.  The Court occupies the ninth floor of the building at that address, with courtrooms and public areas, but other floors of the building are otherwise occupied and the lifts generally service other floors of that building.  In these circumstances, I do not think it is accurate to say that the lifts in the building constitute part of the Court precincts.

Even if they were, the rule concerning service in court precincts is a confined one, if it still exists.  In my view, the circumstances in which Mr Brookfield was served would not render the service upon him invalid in any event.  In Re O'Sullivan ex parte O'Sullivan v Commonwealth Bank of Australia (1995) 57 FCR 145, Lindgren J reviewed in detail the authorities concerning service of process in the precincts of a court.  His Honour came to the conclusion that it is not the law that service in the court precincts constitutes a contempt of court.  He found that:

“. . . even if it were, it would not follow that service would be set aside.  Whether conduct constitutes contempt of court by reason of its being calculated to interfere with the administration of justice by a court is to be determined by reference to matters of greater substance . . .” (at 149)

I respectfully agree with his Honour’s observations.  As the law currently stands, service in the precincts of the court may be a contempt if it has “such a deterrent effect as to obstruct the administration of justice”:  Baldry v Jackson [1976] 1 NSWLR 19 at 25.

In O’Sullivan (above), Lindgren J noted that the foyer in that case, like the lifts in the instant case, are used by a large number of people, and that he did not think that the knowledge that process could be served in that foyer as freely as elsewhere was apt to interfere with the administration of justice in the courts by, for example, discouraging litigants and witnesses from attending court (at 150).

Equally, in my judgment, the service on Mr Brookfield in a lift in the building of which the Court occupies a floor or floors would not deter litigants from attending court, or amount to a contempt of court.  Accordingly, I reject that submission.

I am therefore satisfied to the requisite degree that, in the circumstances, the Court has no power to entertain the application now before it or to grant the relief sought.  I order that the application filed 31 August 1998 be dismissed.  I further order that the applicant Ian Walter Brookfield pay the respondent’s costs of the application to be taxed.

Associate:

Dated:              25 September 1998