FEDERAL COURT OF AUSTRALIA

Conway v Jackson [2001] FCA 230

BANKRUPTCY - bankruptcy notice - whether an appeal is a proceeding to set aside a judgment for the purposes of s 41(6A) of Bankruptcy Act 1966 (Cth).

Bankruptcy Act 1966 (Cth) ss 33(1), 40(1)(g), 41(6A), 41(6B) and 41(6C)

Bankruptcy Act 1924 (Cth)

Bankruptcy Amendment Act 1980 (Cth) s 20 and s 24(c)

Bankruptcy Legislation Amendment Act 1996 (Cth) s 3, cl 115 of Sch 1

District Court Act 1973 (NSW) s 83A(1)

Re Baker; ex parte Baker v Staples (Kiefel J, 4 September 1995, unreported) considered

Re Geard; ex parte Reid (Sheppard J, 11 February 1994, unreported) considered

Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685 considered

Stavrianos v Commonwealth Bank of Australia Ltd (Branson J, 9 September 1998, unreported) considered

Bryant v Commonwealth Bank of Australia ((Davies, Foster and O’Loughlin JJ, 9 November 1994, unreported) considered

Lipov v Alexander Fraser & Son Ltd (1978) 36 FLR 126 considered

Re Grace; Ex parte Castling (1931) 3 ABC 131 considered

James v Abrahams (1981) 51 FLR 16 considered

Parker v Transfield Pty Ltd [2000] WASCA 382 considered

Rollond v Bank of Western Australia Ltd (3 September 1998, WASCA, unreported) considered

Dittes v Clyde Industries Ltd (Einfeld J, 10 December 1992, unreported) considered

Re Bryant; ex parte Bryant v Commonwealth Bank of Australia (Hill J, 4 May 1994, unreported) considered, applied

Re Taylor; ex parte Deputy Commissioner of Taxation (1983) 74 FLR 377 considered

Re Lentini; ex parte Lentini v CSR Ltd (1991) 29 FCR 363 not followed

Re Maddox (Neaves J. 12 May 1987, unreported) not followed

Benaharon v Fabric Dyeworks (Aust) Pty Ltd (Weinberg J 24 August 1998, unreported) considered

Pak Sun Lieu v JNS Technologies (M) Sdn Bhd [1999] FCA 1428 considered

Jenkins v National Australia Bank Ltd [1999] FCA 1758 considered

Bond v Hong Kong Bank of Australia (Foster J, 24 October 1991, unreported) considered

Re Halliday; ex parte Halliday (1993) 44 FCR 349 considered

Vincent v State Bank of New South Wales (1995) 60 FCR 290 considered

Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264 considered

DENISE CONWAY v ALAN JACKSON

N 1250 of 2000

MOORE, MATHEWS & MANSFIELD JJ

16 MARCH 2001

SYDNEY

ON APPEAL FROM A SINGLE JUDGE OF THE

FEDERAL COURT OF AUSTRALIA

THE COURT ORDERS THAT:

1.                  The appeal is dismissed.

2.         The appellant pay to the respondent costs of the appeal to be taxed.

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

ON APPEAL FROM A SINGLE JUDGE OF THE

FEDERAL COURT OF AUSTRALIA

REASONS FOR JUDGMENT

THE COURT:

1                     The only issue on this appeal is whether the expression “proceedings to set aside the judgment or order” in s 41(6A) of the Bankruptcy Act 1966 (Cth) (“the Act”) includes an appeal from the decision in which the judgment was given upon which a bankruptcy notice is issued.

2                     It is an act of bankruptcy by a debtor to fail to comply with a bankruptcy notice served upon that debtor by a creditor who has obtained against the debtor a final judgment or final order, the execution of which has not been stayed:  s 40(1)(g) of the Act, unless the debtor satisfies the Court of the existence of a counterclaim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order which could not have been set up in the proceeding in which the judgment or order was obtained.  Compliance with a bankruptcy notice requires payment of the judgment debt to the creditor, or making an arrangement to the creditor’s satisfaction for settlement of the debt, within the time specified in the notice.

3                     Section 41 deals generally with bankruptcy notices.  It relevantly provides:

“(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.

(6B)     repealed

(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 the 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.”

4                     On 13 June 2000, the appellant obtained a final judgment against the respondent in proceedings in the District Court of New South Wales for $111,449.59 inclusive of interest, plus costs.  An appeal to the Court of Appeal of New South Wales was instituted by the respondent on 3 July 2000 by Notice of Appeal without Appointment.  That appeal is in matter No CA 40495 of 2000 (“the appeal”).  On 15 September 2000, the respondent filed and served a Notice of Appeal with Appointment, and sought a stay of execution of the judgment.  On 16 October 2000, by consent, the execution of the judgment was stayed pending hearing and determination of the appeal.  The appeal has not yet been heard.

5                     In the meantime, on 6 September 2000 a bankruptcy notice was issued at the request of the appellant.  It specified the debt as $113,617.51 being the judgment sum plus interest accrued on the judgment sum.  The bankruptcy notice was served on the respondent on 12 September 2000.

6                     On 22 September 2000, the respondent applied under s 41(6A) of the Act to set aside the bankruptcy notice, and if it were not set aside for an order extending the time for compliance with the bankruptcy notice to a time to be specified after the hearing and determination of the appeal.  On 31 October 2000, a judge of the Court dismissed the application to set aside the bankruptcy notice.  Her Honour extended the time for compliance of the bankruptcy notice until ten days after the hearing and determination or earlier disposition of the appeal or until further order.  The challenge to the validity of the bankruptcy notice was upon the basis that interest as included in the claimed debt was not payable, so that the bankruptcy notice did not accurately state the amount of the debt.  It is not necessary to note the contention in detail.  The learned primary judge concluded, by reference to the nature of the appellant’s claim in the proceedings in the District Court of New South Wales, to the terms of the judgment in those proceedings, and to s 83A(1) of the District Court Act 1973 (NSW), that the amount of the debt claimed in the bankruptcy notice was not misstated.  She dismissed that claim to set aside the bankruptcy notice.  No appeal is brought from that decision.

7                     In considering whether to extend time to comply with the bankruptcy notice, the learned primary judge correctly addressed the questions

·                      whether there were on foot proceedings to set aside the judgment, by reason of the appeal, and if so

·                      whether in the exercise of the Court’s discretion and in the light of s 41(6C), the time for compliance with the bankruptcy notice should be extended.

As is apparent, her Honour resolved both those questions in the affirmative.

8                     On the exercise of her discretion, her Honour noted that there are different approaches taken by judges of the Court where there is an appeal from a judgment founding a bankruptcy notice:  cp. Kiefel J in Re Baker; ex parte Baker v Staples (4 September 1995, unreported); Sheppard J in Re Geard; ex parte Reid (11 February 1994, unreported).  It was not necessary for her Honour to give consideration to those differing approaches, in the particular circumstances, having regard to the stay of execution granted pending appeal by the Supreme Court of New South Wales, and the circumstances in which that court will grant such a stay:  Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685 at 693-695.

9                     The appellant has not on this appeal made the claim that the exercise of the discretion miscarried.  She has limited her contention to the claim that the appeal did not constitute “proceedings to set aside the judgment”.  Thus, she contends, the fact which must exist before the Court can exercise the discretion under s 41(6A) of the Act to extend the time for compliance with the bankruptcy notice did not exist, so that no order could have been made extending time for compliance with it.

10                  The learned primary judge noted the conflict of authorities in the Court as to whether an appeal which seeks to set aside the judgment on which a bankruptcy notice is based is a proceeding to set aside a judgment within the meaning of s 41(6A) of the Act.  In Stavrianos v Commonwealth Bank of Australia Ltd (Branson J, 9 September 1998, unreported) (“Stavrianos”) her Honour had determined that the decision of the Full Court (Davies, Foster and O’Loughlin JJ) in Bryant v Commonwealth Bank of Australia (9 November 1994, unreported) (“Bryant”) foreclosed the question for a single judge of the Court by deciding that an appeal against the judgment on which a bankruptcy notice is based is a proceeding to set aside the judgment within the meaning of that expression in s 41(6A) of the Act.  Her Honour adhered to that view, and therefore determined that issue in favour of the respondent.

11                  It is on that particular issue only that the appellant appeals.

12                  We do not consider that the question has been expressly resolved by Bryant, nor by any other decision of the Full Court of the Court.  In his thorough and helpful submissions, the solicitor for the appellant traversed the decisions of judges of the Court which have touched upon that question.  Before considering those authorities, it is helpful to note the legislative background to subs 41(6A) and (6C).  They were introduced into the Act as part of the extensive amendments to the Act effected by the Bankruptcy Amendment Act 1980 (Cth) (“the amending Act”).

13                  The amending Act, relevantly to the present issue, amended s 33 of the Act (s 20 of the amending Act) as well as introducing subs 41(6A), (6B) and (6C) of the Act (s 24(c) of the amending Act).  Section 41(6B) was subsequently repealed:  s 3 and cl 115 of Sch 1 of the Bankruptcy Legislation Amendment Act 1996 (Cth), as part of certain redrafting of s 41 of the Act; the redrafting (which also reworded s 41(6A)(b)) is of no significance to the present issue.  Section 33 provides:

“(1)     The Court may:

(a)               upon such terms as it thinks fit, at any time adjourn any proceeding before it, either to a fixed date or generally;

(b)               at any time allow the amendment of any written process, proceeding or notice under this Act; or

(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.”

The words in s 33(1)(c)

“… 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), …”

were inserted by the amending Act.

14                  Prior to the amending Act, there was no specific grant of power to the Court to enable it to extend time for compliance with the requirements of a bankruptcy notice.  In Lipov v Alexander Fraser & Son Ltd (1978) 36 FLR 126, CA Sweeney J held that s 33(1)(c) of the Act as then in force empowered the Court to extend time for compliance with the requirements of a bankruptcy notice.  His Honour at 130 remarked that that construction of s 33(1)(c) “has been acted upon by the courts in respect of many bankruptcy notices.”  The facts of that particular case indicate that the debtor was seeking an extension of time to comply until the determination of an appeal from the judgment upon which the bankruptcy notice was founded.  It appears also that under the corresponding provision of the Bankruptcy Act 1924 (Cth), time to comply with a bankruptcy notice could be extended but only before the expiration of the time for its compliance:  Re Grace; Ex parte Castling (1931) 3 ABC 131.  James v Abrahams (1981) 51 FLR 16 (“James”) makes it clear that the amendment to ss 33(1)(c) and the introduction of s 41(6A) preclude any 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:  see per Deane and Lockhart JJ at 22.

15                  In our view, that background to s 41(6A) of the Act has significance to its proper construction.  There was no express power to extend time for compliance with the requirements of a bankruptcy notice, but s 33(1)(c) as then in force was regarded as a source of power to do so.  Moreover, the circumstances in which that power under s 33(1)(c) was exercised included those where an appeal had been instituted by a debtor against the judgment upon which the bankruptcy notice was founded.  In the Explanatory Memorandum to the Bankruptcy Amendment Bill circulated by the Minister of Business and Consumer Affairs, the following appears in relation to cl 20 of the Bill:

“61   The Court will be able to extend or abridge times fixed by the Court or the Registrar (Bill para 20(a)).  …  The power does not extend, … to an extension of time for compliance with a bankruptcy notice which is dealt with elsewhere”

and in relation to cl 24 of the Bill:

“68   The Court may extend times fixed by the Court or the Registrar for compliance with the requirements of a bankruptcy notice where the debtor is seeking to set aside the bankruptcy notice itself or the judgment or order on which the notice is based providing the debtor is acting bona fide and with due diligence. …  These amendments will overcome doubts as to the present powers of the Court and the Registrar in this regard.”

16                  Clauses 20 and 24 of the Bill ultimately came to result in the amendments to ss 33(1)(c) and 41 of the Act referred to above.

17                  There is nothing to suggest in that material that it was intended to remove from the Court the power, in an appropriate case, to extend the time for compliance with the requirements of a bankruptcy notice where there was an appeal seeking to set aside the judgment upon which the bankruptcy notice was based.  The legislature may be taken to have been aware that that power (under s 33(1)(c) as then in force) was being exercised in the case of an appeal seeking to set aside such a judgment.  The Explanatory Memorandum discloses that the amending Act was the consequence of a comprehensive review of the Act by the Department of Business and Consumer Affairs.  Indeed, in the light of the exercise of the power under the then s 33(1)(c) to extend the time for compliance with a bankruptcy notice where there was an appeal from the judgment upon which the bankruptcy notice was based, if there were any intention to preclude the Court from exercising that power, it is likely that a clear intention to do so would have been apparent.  There is no such intention evident.  The limitation upon the exercise of the discretion in the exercise of that power is that contained in s 41(6C), but that does not indicate any intention to remove the power to extend time where there is an appeal from the judgment on which the bankruptcy notice is based.

18                  There is nothing in the language or the context of s 41(6A)(a) which indicates that a narrow meaning should be given to the expression “proceedings to set aside judgment”.  It contemplates circumstances where the judgment debtor is seeking to set aside the judgment.  In certain circumstances, that may be done by application to the Court or the judge who entered the judgment.  The clearest example of that arises where judgment has been entered in default of appearance or for some other procedural failure on the part of the judgment debtor.  Commonly, in such cases, there has been no adjudication on the merits of the claim or on some part of the merits of the claim.  But the language of s 41(6A)(a) does not indicate any intention to limit its application to such circumstances.  It would have been easy for such an intention to have been expressed.  In such cases, moreover, it is common to require that the judgment debtor demonstrate some real basis for disputing the merits of the claim, and to have acted promptly in pursuing the application to set aside the judgment:  Parker v Transfield Pty Ltd [2000] WASCA 382; Rollond v Bank of Western Australia Ltd (3 September 1998, WASCA, unreported)  If s 41(6A) has the restricted scope of operation contended for by the appellant, the restrictions imposed by s 41(6C) would not really serve much purpose.  They are likely to bear more significance in cases where there has been an adjudication on the merits of the claim, and an appeal has been instituted from the judgment.  The significance of s 41(6C), in support of the construction contrary to the appellant’s contention, formed part of the reasons for decision of Einfeld J in Dittes v Clyde Industries Ltd (10 December 1992, unreported) (“Dittes”).  It may also be noted that it is commonplace, as the appeal to the New South Wales Court of Appeal illustrates, that an appeal expressly seeks to set aside the judgment upon which the bankruptcy notice is founded  In Re Bryant; ex parte Bryant v Commonwealth Bank of Australia (Hill J, 4 May 1994, unreported) (“Bryant at first instance”), Hill J made that point in the following terms:

“Where an appeal is brought from a decision at first instance, the order of the appeal court, if the appeal be allowed, is an order setting aside the decision at first instance.  Among the meanings of the expression “set aside” contained in the Shorter Oxford English Dictionary (Third Ed) is “to annul, quash, render void or nugutory.  Chiefly ‘law’.”  If authority be needed, the High Court in Commissioner for Railways (NSW) v Cavanough (1935) 53 CLR 220 involved an appeal against a conviction which was set aside and the question to be determined was whether the conviction was avoided ab initio.  The expression “set aside” and the consequences of an order being set aside, are dealt with by the Full Court of this Court in Broken Hill Pty Company Ltd v Trade Practices Tribunal (1980) 31 ALR 401 at 410-411 and also by me in Oates v Commissioner of Taxation (1990) 27 FCR 289 at 299.”

19                  We also consider that the purpose of s 41(6A) would more usefully be served by adopting the construction of the relevant words which includes an appeal from the judgment on which the bankruptcy notice if founded, where that appeal in fact seeks to set aside the judgment.  The commission of an act of bankruptcy has serious consequences.  Apart from the obvious consequence of exposure to the making of a sequestration order, an act of bankruptcy itself commonly constitutes an act of default under security instruments and so exposes the person who has committed the act of bankruptcy to the crystallisation and calling up of other debts.  It is also an event which, at least anecdotally, causes those providing unsecured credit to the judgment debtor, such as trade creditors in the case of a business operated by the judgment debtor, to alter or withdraw the terms upon which credit is or continues to be provided.  Section 41 (6A)(a) would appear to recognise the consequences of the commission of an act of bankruptcy, and to empower the Court in appropriate circumstances to protect a judgment debtor from those consequences.  That policy would not be served by restricting the ability to exercise that power so as to exclude its exercise in all cases where the judgment debtor has appealed from the judgment at first instance and seeks to set it aside.  In Bryant at first instance, Hill J made the point pithily in the following terms:

“As a matter of policy it is hard to imagine why the Court should have power to extend time for compliance where an application has been lodged in the same court in which judgment has been entered to set that judgment aside, but is refused that same power where judgment has been given but there has been an appeal against that judgment.”

20                  For those reasons, and subject to considering the cases on the meaning of s 41(6A)(a), we are of the view that the expression “proceedings to set aside the judgment or order” includes the institution of an appeal from the judgment or order in respect of which the bankruptcy notice was issued where that appeal does in reality seek to have that judgment or order set aside.

21                  In Bryant at first instance, Hill J considered the earlier decisions including those of Sheppard J in Re Taylor; ex parte Deputy Commissioner of Taxation (1983) 74 FLR 377 (“Taylor”) and of Neaves J in Re Lentini; ex parte Lentini v CSR Ltd (1991) 29 FCR 363 (“Lentini”) in which his Honour followed his earlier decision in Re Maddox (12 May 1987, unreported) (“Maddox”).  For reasons similar to those we have expressed above, Hill J in Bryant at first instance expressed the view that, as then advised, there was a very strong argument that s 41(6A)(a) empowered the Court to extend time for compliance with the requirements of a bankruptcy notice where the judgment debtor had appealed from the judgment on which the bankruptcy notice was founded.  His Honour to that extent disagreed with the view of Neaves J in Lentini and Maddox.  He did not, however, reach a concluded view on that question.  It was unnecessary to do so, as he would not in any event have exercised the discretion to extend time for compliance with the requirements of the bankruptcy notice.  In Taylor, Sheppard J at 380 assumed that an appeal fell within the provisions of s 41(6A)(a) but indicated that he did not express an opinion on that question.

22                  In Bryant, the Full Court was not directly called upon to address the question raised by this appeal.  The debtor had appealed, relevantly, complaining only of the exercise of the discretion under s 41(6A) of the Act.  The respondent gave no notice of contention under O 52 r 22(3) of the Federal Court Rules that it contended, as the present appellant contends, that in the particular circumstances of an appeal from the judgment upon which the bankruptcy notice was founded s 41(6A)(a) did not enliven any discretionary power on the part of the Court.  Nevertheless, the Full Court said:

“The trial judge treated the appeal in the Supreme Court as a proceeding to set aside the judgment in respect of which the bankruptcy notice was issued, a course with which we agree.”

23                  The solicitor for the appellant contended that that passage did not amount to an adoption by the Full Court of the views expressed by Hill J in Bryant at first instance on the particular question now before the Court.  It was put that the Full Court simply approved of the course adopted by his Honour of assuming that s 41(6A)(a) applied to the circumstances without deciding that it did so, as the refusal to exercise the discretion available under that provision was to be upheld in any event.  There may be some merit in that submission in the absence of any notice of contention given by the respondent to that appeal raising the point.  It is not necessary to resolve that issue, for we have independently come to the conclusion that s 41(6A)(a) does apply where a judgment debtor has appealed from the judgment upon which the bankruptcy notice was founded with a view to setting aside that judgment so as to enable the Court, in appropriate circumstances, to extend time for compliance with the requirements of a bankruptcy notice.

24                  It should be noted, however, that more recently judges of the Court have regarded Bryant as deciding that point:  Benaharon v Fabric Dyeworks (Aust) Pty Ltd (Weinberg J 24 August 1998, unreported); Stavrianos; Pak Sun Lieu v JNS Technologies (M) Sdn Bhd [1999] FCA 1428, Kenny J at [12]; and Jenkins v National Australia Bank Ltd [1999] FCA 1758, Ryan J at [3] in relation to an application for special leave to appeal to the High Court.

25                  Earlier decisions of the Court expressed conflicting views on that question.  In Bond v Hong Kong Bank of Australia (Foster J, 24 October 1991, unreported) the applicability of s 41(6A)(a) to circumstances such as the present was assumed.  In Dittes, the same point arose.  Einfeld J at 8 tentatively reached the same conclusion on the question now under consideration as that we have expressed, but ultimately did not need finally to decide the question.  The application before his Honour had been amended to have the bankruptcy notice set aside under s 41(6A)(b), and that application was adjourned until after the hearing and determination of the appeal from the judgment.

26                  The two decisions of Lentini and Maddox clearly reached a different view.  In Lentini, Neaves J at 367 adopted his Honour’s reasons in Maddox which were in the following terms:

“The applicant relies on both limbs of s 41(6A).  In reliance upon s 41(6A)(a), it is submitted that the institution of the proceedings in the Supreme Court by way of appeal against the judgment of the Magistrates Court is properly to be considered as the institution of proceedings to set aside the judgment in respect of which the bankruptcy notice was issued.  It is further submitted that, as the appeal was instituted before the expiration of the time fixed for compliance with the requirements of the bankruptcy notice, the condition precedent to the exercise of the court’s discretion under that provision is established.

I am unable to accept this submission.  The language of s 41(6A)(a) is clearly apt to refer to proceedings by a judgment debtor in the court where judgment was entered against him to have the judgment set aside.  What the provision contemplates is an application to have the court by which the judgment was pronounced revoke the expression of its coercive power where there has been a failure to follow the rules of procedure or where there is shown to be some defect or irregularity or some other circumstance which renders it desirable that the debtor should be given an opportunity to have the issue further litigated.  It may be that, in some circumstances, such proceedings may be taken in a court superior to that in which the judgment was entered but, be that as it may, the language of the provision is not, in my opinion, apt to refer to proceedings which are properly characterised as an appeal from the judgment in respect of which the bankruptcy notice was issued.”

27                  The debtor in that case, nevertheless, achieved the desired result of an extension of time to comply with the requirements of the bankruptcy notice by having the application treated also as having been made under s 41(6A)(b) so as to have the bankruptcy notice set aside.  In so far as the application sought that relief, it was adjourned to a date when it was anticipated that the appeal would have been heard and determined and the time for compliance with the requirements of the bankruptcy notice extended until that time.  His Honour in Maddox, notwithstanding that he did not think it appropriate to set aside the bankruptcy notice, also adjourned the application to set it aside and extended the time to comply with the requirements of the bankruptcy notice until the application further came on for hearing.  Olney J in Re Halliday; ex parte Halliday (1993) 44 FCR 349 at 358 (“Halliday”) adopted the views expressed in Lentini and Maddox.  His Honour referred to provisions of the County Court Rules (Vic) enabling an application to set aside a judgment or order where the judgment debtor did not attend the hearing, where a claim had been dismissed for want of prosecution, or for procedural default.  His Honour then said:

“In my opinion it is this type of application to set aside judgment that is contemplated by s 41(6A), (6B) and (6C) of the Bankruptcy Act.  That is not to say that in the exercise of its wide discretion the Court should not grant an extension of time to comply with a bankruptcy notice where an appeal raising an arguable case has been instituted bona fide and is being pursued with due expedition.”

28                  The views of Neaves J in Lentini and Maddox were also adopted by Foster J in Vincent v State Bank of New South Wales (1995) 60 FCR 290 at 298 (“Vincent”).  It is not clear what is the source of that general discretion referred to in Halliday and Vincent.  In Vincent his Honour would not have granted an extension of time to comply with the requirements of the bankruptcy notice in any event (see at 297-298), and his Honour also appears to have assumed the existence of a general discretion to extend the time to comply with the requirements of a bankruptcy notice.  The decision of the Full Court in James, which concludes that there is no such general discretion, appears not to have been brought to the judges’ attention in either of those two last mentioned cases.

29                  For reasons expressed above, we respectfully disagree with the observations of Neaves J in Maddox and adopted by his Honour in Lentini.  We do not agree that the language of s 41(6A)(a) is apt only to encompass an application to set aside a judgment or order where there has been a failure to follow the rules of procedure or where there is shown to be some defect or irregularity or some other circumstance which renders it desirable that the debtor should be given an opportunity to have the issue further litigated, and so as to exclude proceedings by way of appeal which may result in the judgment being set aside.  It does not seem to accord with any legitimate policy consideration that a debtor whose careless or delictual conduct has allowed judgment to pass by default should be in any better position than a judgment debtor who has unsuccessfully but conscientiously defended a claim and succeeds in having the judgment set aside on appeal.

30                  In exercising the discretion whether or not to extend the time for compliance with a bankruptcy notice, the creditor should not be routinely frustrated from enforcing the judgment by the device of the institution of an appeal.  Section 41(6C), to an extent, recognises that position.  Moreover, the date of the commission of the act of bankruptcy is significant to determine the commencement of the bankruptcy if a sequestration order is made:  s 115(1), and so to determining the property of the bankrupt which is divisible amongst the creditors of the bankrupt:  s 116(1).  It also has significance to the application of ss 118, 120, 121 and 122 of the Act.  The delay in the commission of the act of bankruptcy, if ultimately the requirements of a bankruptcy notice are not complied with and a sequestration order is made, by an extension of time to comply with a bankruptcy notice may therefore have significant consequences to the creditors of the bankrupt.  An extension of time to comply with the requirements of a bankruptcy notice does not, on the other hand, preclude any other judgment creditor from procuring the issue and service of a bankruptcy notice, or from presenting a petition for a sequestration order if some other act of bankruptcy has already been committed.  Such considerations, if significant in the particular circumstances, together with other considerations relevant to the circumstances of the particular case, will no doubt be considered by the Court in exercising its discretion under s 41(6A) of the Act:  see eg. the discussion by Lehane J in Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264.  However, such considerations are properly left to the Court in exercising its discretion whether to extend time for compliance with the requirements of a bankruptcy notice.

31                  In our judgment this appeal should be dismissed.  We see no reason why the normal rule as to costs should not apply.  The appellant should pay to the respondent costs of the appeal to be taxed.

Associate:

Dated:              16 March 2001