FEDERAL COURT OF AUSTRALIA

Rocom International Pty Ltd v Prentice [2002] FCA 604

PRACTICE AND PROCEDURE – application for an extension of time within which to file an application seeking review of the Trustee’s decision to reject proof of debt lodged by applicant liquidator – considerations relevant to extension of time – time for lodging application under s 104 of the Bankruptcy Act 1966 (Cth) runs from date decision on proof of debt is made - whether application by liquidator is without foundation – whether prejudice – delay in lodging proof of debt

Bankruptcy Act 1966 (Cth) ss 33, 104

Corporations Act 2001 (Cth) s 588G

Re CLUBB; Ex parte CLUBB v Westpac Banking Corporation (1990) 93 ALR 123 cited

Gallo v Dawson (1990) 93 ALR 479 cited

Jackamarra v Krakouer (1998) 195 CLR 516 referred to

IN THE MATTER OF THE ESTATE OF ROBIN JACK KNIGHT (BANKRUPT)

ROCOM INTERNATIONAL PTY LIMITED (IN LIQUIDATION) v

MAXWELL WILLIAM PRENTICE (TRUSTEE OF THE BANKRUPT'S ESTATE)

N 7093 of 2002

TAMBERLIN J

SYDNEY

17 MAY 2002

IN THE MATTER OF THE ESTATE OF ROBIN JACK KNIGHT (BANKRUPT)

THE COURT ORDERS THAT:

1.         The application for extension of time is granted.

2.         Costs be awarded in accordance with the outcome of the hearing of the application for review.

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

IN THE MATTER OF THE ESTATE OF ROBIN JACK KNIGHT (BANKRUPT)

REASONS FOR JUDGMENT

1                     In this matter I made orders on 7 May 2002 granting an extension of time under s 33(1)(c) of the Bankruptcy Act 1966 (Cth) (“the Act”) for the applicant to file an application brought pursuant to s 104 of the Act, to 5 April 2002 and I have also ordered that the costs of this application be paid in accordance with the outcome of the application.  I now deliver my reasons.

2                     The application under s 104 of the Act is to review and reverse the decision of the trustee respondent to reject a proof of debt lodged by the applicant liquidator who has been appointed to wind up the company of which the bankrupt was a former director.  The claim of the liquidator is that the bankrupt is liable under s 588G of the Corporations Act 2001 (Cth) in respect of trading by the company whilst insolvent. 

3                     An exhaustive catalogue of considerations relevant to an application for extension of time within which to lodge an application for review is not possible.  There is authority that considerations such as the shortness of the delay involved, the promptness with which the matter is attended to when any failure is or ought to have been realised and the absence of prejudice which cannot be rectified by appropriate orders, are relevant considerations: see Re CLUBB;Ex parte CLUBB v Westpac Banking Corporation (1990) 93 ALR 123 at 126 per Burchett J; also Gallo v Dawson (1990) 93 ALR 479 per McHugh J at 480.

4                     In his concurring judgment in Jackamarra v Krakouer (1998) 195 CLR 516 at 539-543, Kirby J assembles and considers a number of relevant factors concerning the grant of an extension of time, and these include the following considerations:

·        the discretion to grant an extension is broad and flexible;

·        whether it is just in all the circumstances to grant an extension;

·        whether the time limits are of a substantive or procedural nature,

·        whether the case is arguable;

·        respective prejudice to the parties;

·        length of delay;

·        responsibility and reasons for the delay;

·        whether the delay was intentional or the result of a bona fide mistake;

·        whether the delay was caused by the litigant or legal advisers.

5                     The present application under s 104 was made on 2 April 2002, which was the Tuesday after Easter.  The Court Registry had been closed during Good Friday 29 March through to 1 April (Easter Monday) inclusive.  The relevance of this is that under O 3 r 2(4) of the Federal Court Rules (“the FCR”) time does not run when the Court Registry is closed.  In the present case, on the evidence, the applicant only received notice of the decision of the trustee to reject the proof of debt on 11 March 2002.  The application for review was therefore filed within twenty-one days from that date according to the calculations required by the FCR. 

6                     This circumstance, while relevant is not determinative because the requirement of the Act, under s 104, is that the application should be made within twenty-one days from the date when the decision to reject the proof of debt is made unless the Court otherwise orders.  Time does not run from the date when the notice of the decision to reject the proof of debt is conveyed or served.  In the present case the evidence is that although the notice appears to have been sent on 22 February 2002, it was not received until 11 March 2002.  There is no conclusive evidence as to exactly when the decision of the trustee was made or when the letter was sent, but, I am satisfied that it is more likely than not that the decision of the trustee was made on or before 22 February 2002, which is the date of the notice.

7                     Once the notice was received I am satisfied that the applicant and its solicitor acted in a timely manner in taking steps to lodge the present application. 

8                     The claim of the liquidator is a substantial one being in the order of $903,003.00 arising from alleged insolvent trading by the company of which the bankrupt was a director.  I am satisfied on the material canvassed before me that the application has not been shown to be without foundation or substance such that an extension of time would be futile.  In my view, there appear to be issues raised which call for consideration by the Court.

9                     Generally speaking, one cannot reasonably expect an applicant to lodge an application for review of a decision before the required notice of the decision is brought to his or her attention.  This circumstance can occur where time for making an application runs from the date of a decision rather than from the date on which notice of the decision is served or given.

10                  The prejudice said to arise if an extension of time is granted to the creditors in the bankruptcy is that any dividend payable to them may be further delayed to their detriment whilst review pursuant to the present application is being dealt with.  But, as counsel for the applicant points out, such delay in distribution arises because the Act provides for review and no substantial prejudice has been shown to arise as a direct consequence of the late filing of the application which on the evidence was not the fault of either party.

11                  Perhaps the creditors in the bankruptcy would obtain an earlier distribution if the present application for an extension of time were refused.  This benefit would, however, be fortuitous, arising from a failure of communication which cannot be attributed to the fault of either the trustee or the liquidator.  Such a random circumstance should not be the controlling consideration in making a decision whether to grant the extension of time sought.

12                  The respondent has contended that alleged past delays on the part of the applicant in lodging its proof of debt extending over many months should be taken into account.  I agree that past delays are not irrelevant to the exercise of the Court’s discretion, but in my view, they do not carry great weight in the present circumstances.  Mr Star, the liquidator, was cross-examined and he gave a detailed explanation of the complexity of the prospective claim and the amount of investigatory work involved in making a decision whether to lodge a proof of debt in the bankruptcy.  I accept his evidence and I do not consider that prior to 11 March 2002, there had been any undue delays sufficient to warrant refusal of the extension application.

13                  It is not for this Court on the present application for extension of time to canvass the merits of the application in any detail.  Suffice to say that, on the material before me, there appears to be an arguable basis for a submission that the application could succeed.  Accordingly, the extension should not be refused on the ground that the application lacks foundation.

14                  Nor am I satisfied that any delay in the distribution of dividends to creditors in the bankruptcy is of sufficient detriment to justify the shutting out of the applicant’s claim.  At most, the elapsed time ran from 22 February to 2 April 2002, and the somewhat special circumstances support the conclusion that the delay was fortuitous and that it should not be a basis to prevent ventilation of the issues raised by the liquidator who has lodged the proof of debt in the interests of creditors of the company in liquidation.  There is no direct evidence as to any particular detriment to any specified creditor if the extension of time is granted.  The case for extension of time is a strong one.

15                 It was also submitted for the respondent that it should be a condition of any extension of time that security for costs should be provided.  However, that is a discrete matter which is premature for determination on this application.  It is not an appropriate condition to impose on the grant of an extension of time.  Submissions as to security for costs can be addressed at a later stage if an application is made and supporting evidence is placed before the Court directed specifically to a determination of that question.

16                  I therefore have decided to grant the application for an extension of time.  As to costs, while the applicant has been successful on the application it must be taken into account that the indulgence of the Court is being sought in view of the filing of the application outside the time permitted which cannot be attributed to the fault of the trustee on the evidence before me.  Accordingly, the appropriate order, in my view, is that costs should be awarded in accordance with the outcome of the hearing of the application for review.

17                  I direct that the papers be referred to the Registry for allocation to the appropriate Docket Judge in accordance with the usual practice.

Associate:

Dated:              17 May 2002