FEDERAL COURT OF AUSTRALIA

Hovan v Goycolea-Silva [2003] FCA 234

BANKRUPTCY – bankruptcy notice – application for extension of time for compliance – proposed application to set aside bankruptcy notice – appeal from order of Federal Magistrates Court dismissing earlier application to set aside bankruptcy notice – application for extension of time dismissed

Bankruptcy Act 1966 (Cth) s 41(6A)

Hovan v Goycolea-Silva [2003] FMCA 65 referred to

GEORGE L HOVAN v MARIA SOLEDAD GOYCOLEA-SILVA

N182 OF 2003

EMMETT J

6 MARCH 2003

SYDNEY

THE COURT ORDERS THAT:

1.         leave be granted to the Applicant to file an application in the form initialled and dated  by Emmett J to be made returnable before Emmett J on 7 March 2003 at 2:15 pm;

2.         the time for service of the application be abridged until 1.30 pm on 7 March 2003;

3.         the application for an extension of time be dismissed.

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

REASONS FOR JUDGMENT

1                     I have before me an application for extension of time for compliance with a bankruptcy notice under s 41(6A) of the Bankruptcy Act 1966 (Cth) (“the Act”).  The application is made on two bases.  First, the application is based on a proposed application to this Court to set aside the bankruptcy notice.  The second basis is that the application is made in aid of an appeal to this Court from an order made by the Federal Magistrates Court dismissing an earlier application to set aside the bankruptcy notice. 

2                     Section 41(6A) of the Act provides as follows:

“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 … extend the time for compliance with the bankruptcy notice.”

3                     The history of the matter does not do any credit to the applicant (“the Debtor”), who, it appears, was previously a solicitor of the Supreme Court of New South Wales.  The Debtor was retained to act for Maria Soledad Goycolea-Silva (“the Creditor”) when she was detained in Mulawa Correctional Centre for being knowingly concerned in the importation of a commercial quantity of prohibited drugs.

4                     The retainer was discontinued after the Debtor had done work for the Creditor.  Nevertheless, the Creditor paid fees in accordance with a fee note apparently rendered to her by the Debtor.  The Creditor subsequently served on the Debtor a request for him to tax a bill of costs.  As a result of an assessment, a refund became due to the Creditor and, in due course, the amount was registered as a judgment in the Local Court.  That judgment forms the basis of the bankruptcy notice, which claimed a sum of $21,140.89 on its face, although the schedule, to which reference is made on the face, says that the total debt owing is $20,564.16.  An application was made to the Local Court to set aside the judgment, although it may be that that application was misconceived. 

5                     The bankruptcy notice was served on the Debtor on 15 November 2002.  On 6 December 2002, the Debtor applied to the Federal Magistrates Court to set aside the bankruptcy notice.  The Registrar made an order extending time for compliance up to 17 December 2002 and thereafter the time for compliance was extended to 18 February 2003, when the application to set aside the bankruptcy notice was heard.  Raphael FM dismissed the application to set aside the bankruptcy notice but extended the time for compliance to 28 February 2003: see Hovan v Goycolea-Silva [2003] FMCA 65.  Subsequently, the time was extended to 4 March 2003 and then, although there is some doubt about this, to today.  Raphael FM declined to extend the time for compliance any further. 

6                     The Debtor appealed against the assessment in relation to his bill of costs.  By reason of failure to take steps in relation to the appeal, it was deemed to be dismissed on 15 August 2001.  The Debtor claims that he received no notification of the steps that he was required to take and did not know until recently that his appeal was deemed to be dismissed.  He has now lodged an application for an order for reinstatement of the appeal.  That application was filed in the Supreme Court on 4 March 2003 and is returnable before the Supreme Court on 9 April 2003.

7                     There is no explanation before me as to why no application was made in relation to the appeal in the Supreme Court prior to 4 March 2003.  The Debtor appears to have acted without any diligence at all in relation to the prosecution of that appeal.  In any event, there is no material before me that suggests that there is any prospect of success on the part of the Debtor in the prosecution of that appeal.  If the appeal is ultimately unsuccessful, there is no reason why the judgment of the Local Court would be set aside.

8                     In the circumstances, assuming it would be appropriate or permissible for this Court to consider a second application to set aside the bankruptcy notice after the Federal Magistrates Court has considered such an application on the merits and dismissed it, I would not extend the time for compliance.  There would be real issues as to whether, in any event, an application could be brought to this Court under s 41(6A) after the time for compliance with the bankruptcy notice had expired according to its original terms.

9                     I am satisfied that there are, at least, arguments in support of the contentions that will apparently be advanced by the Debtor on the hearing of the appeal to this Court, that is that the bankruptcy notice is defective.  However, I am not persuaded that there would be any significant prejudice to the Debtor by reason of a failure to extend the time for compliance pending the hearing of the appeal, assuming that the Court has jurisdiction to do so.  It may well be that the Court does have inherent jurisdiction to extend the time for compliance with a bankruptcy notice pending the hearing of an appeal from an order dismissing an application to set it aside.  However, before the Court would grant interlocutory relief along those lines, it would be necessary to establish that there is irreparable damage that could be occasioned to the Debtor.  No attempt has been made to do so. 

10                  The Debtor was in practice as a solicitor but it appears that he is no longer.  There is no evidence at all before me that there would be any particular prejudice that would arise from the failure to set aside the bankruptcy notice at this stage.  If the appeal were successful, then the Debtor would be taken not to have committed an act of bankruptcy.  If a petition were presented pending the hearing of the appeal, it would be open to the Debtor to apply for the adjournment of the hearing of the petition pending the outcome of the appeal. 

11                  In any event, it would be open to the Debtor to invite the Court to go behind the judgment by adducing evidence to show that there is a substantial prospect that the appeal would be successful and that the judgment in the Local Court would ultimately be set aside.  Whether there is any prospect of that happening, of course, is not within my capacity to know without any evidence. 

12                  There has been no offer to make any payment pending the hearing of the appeal.  That may be a matter that could be taken into account in the exercise of any discretion.  In any event, whether or not the Court has power on an interlocutory basis to extend the time for compliance with the bankruptcy notice pending the hearing of the appeal, I would not, as a matter of the exercise of discretion, be disposed to do so in the present circumstances.  Accordingly, I propose to dismiss the application presently before me.

Associate:

Dated:              21 March 2003