Federal Court of Australia

Scenic Rim Regional Council v Cutbush [2025] FCA 493

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 52(5) of the Bankruptcy Act 1966 (Cth) the period at which the creditor’s petition filed on 21 May 2024 will lapse be extended until 20 May 2026.

2.    Costs be the Applicant’s costs in the proceedings.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

WHEATLEY J:

INTRODUCTION

1    The Applicant creditor, Scenic Rim Regional Council (Applicant), has filed an interlocutory application seeking an extension to the creditor’s petition until 21 May 2026, pursuant to s 52(5) of the Bankruptcy Act 1966 (Cth) (the Act). That section permits, if it just and equitable to do so, to extend the life of the creditor’s petition for a maximum of 24 months.

2    The Applicant’s creditor’s petition was originally filed on 21 May 2024 and hence the Applicant is seeking the maximum time permitted under s 52(5) of the Act.

3    In summary, the Applicant submits that it is just and equitable to extend the creditor’s petition because of the history and particular circumstances of the proceedings. These have included necessary adjournments and the intervention of the Official Receiver. The Applicant, quite properly, does not seek to lay the blame for the time taken at the Respondent, given the Applicant consented to appropriate adjournments. However, the Applicant does observe that overall the circumstances make it just and equitable to grant the extension sought.

4    The Respondent debtor, Mr Cutbush (Respondent), opposes the extension sought. The Respondent submits that, contrary to the Applicant’s submission, the delay is not caused by factors beyond its control. In essence, the Respondent relies on the Applicant’s position of seeking to advance a bankruptcy notice, which he contends is invalid, which has caused the delay. This, the Respondent submits, has caused the delays, which has included the intervention by the Official Receiver. In addition to these matters, the Respondent seeks to raise substantive issues in the proceedings which will need to be properly argued and the subject of evidence on any hearing of the creditor’s petition, if the bankruptcy notice is held to be valid (that is yet to be determined).

5    For the reasons given below, I am satisfied that in these particular circumstances, it is just and equitable that the creditor’s petition should be extended until 20 May 2026. As s 52(5) provides that the maximum period for the extension is not exceeding 24 months, commencing on the date of presentation of the petition, it is appropriate to order the extension until 20 May 2026, to ensure it is within the maximum period.

BACKGROUND

6    The Applicant filed the creditor’s petition on 21 May 2024. It was given a first return date of 10 July 2024. On that occasion, the Applicant appeared and requested an adjournment as it had been unable to effect personal service of the creditor’s petition on the Respondent. The matter was adjourned until 28 August 2024.

7    On that first return date, the Judicial Registrar bought to the Applicant’s attention the decision in Metledge v Hopkins [2020] FCA 561, regarding the identification of an address being a post office box in the bankruptcy notice and observed that he was bound to follow that decision.

8    On 28 August 2024, the matter was again before the Judicial Registrar. On that occasion, the Applicant submitted that a substituted service application for the creditor’s petition would be required, and given the decision in Metledge, it was appropriate for the matter to be referred to a Judge.

9    The Judicial Registrar made orders referring the matter to a Judge and that any application for declaratory and other relief be filed by 4 September 2024.

10    On 4 September 2024, the Applicant filed an interlocutory application seeking a declaration that the bankruptcy notice is valid (the Validity Issue) and an order for substituted service of the creditor’s petition.

11    On 24 September 2024, Meagher J heard the interlocutory application as to the application for substituted service but adjourned the Validity Issue to a date to be fixed. Orders for substituted service were made on 24 September 2024.

12    The matter was listed for a case management hearing on 9 October 2024.

13    On 8 October 2024, the Respondent contacted the Court and requested a four-week adjournment. This was opposed by the Applicant.

14    On 9 October 2024, at the case management hearing, Meagher J made timetabling orders for material and the hearing of the Validity Issue, which her Honour set down for hearing on 6 February 2025.

15    In January 2025, the matter was allocated to my docket. I reviewed the issue and made orders on 24 January 2025, which were later extended at the parties’ request, requesting the parties to address additional authorities to assist in a consideration of the Validity Issue.

16    On 5 February 2025, a solicitor from the Australian Government Solicitor on behalf of the Official Receiver contacted the Court, advising that urgent consideration was being given to whether the Official Receiver should seek leave to be heard on the Validity Issue. An adjournment of the hearing of the Validity Issue was sought with timetabling orders being proposed, should the Official Receiver make an application for leave to be heard. The Applicant and the Respondent consented to the vacation of the hearing of the Validity Issue on 6 February 2025, and I made other programming orders. The matter was listed for case management on 20 February 2025.

17    On 20 February 2025, the Official Receiver was appointed as amicus curiae. Further, other timetabling orders were made and the Validity Issue was listed for a hearing on 19 March 2025.

18    On 7 and 8 March 2025, Cyclone Alfred (then downgraded to a tropical low) first made landfall and then crossed the mainland. It is unnecessary to detail the disruption this caused to both the Applicant and the Respondent but it is sufficient to observe that each party was impacted by the natural disaster and each sought variations to the timetabling orders and an adjournment of the hearing. Appropriately, both the Applicant and the Respondent consented to this position.

19    On 14 March 2025, further orders were made altering the timetable (which were subsequently extended) and listing the Validity Issue for hearing on 30 April 2025, which was a date advised as being suitable for the Applicant, Respondent and the Official Receiver, that the Court could accommodate.

20    At the end of the hearing of the Validity Issue, the Court observed that the creditor’s petition was filed on 21 May 2024 and would expire in three weeks (seeking to avoid the potential difficulties associated with extending a lapsed creditor’s petition: see Griffiths v Boral Resources (Qld) Pty Ltd (2006) 154 FCR 554; [2006] FCAFC 149). The Applicant sought to advance an oral application to extend the creditor’s petition. However, as the Respondent opposed that extension, short timetabling orders were made for that issue to be dealt with on the papers.

LEGAL PRINCIPLES

21    Section 52 of the Act provides for proceedings and orders on a creditor’s petition. Relevantly, s 52(4) and s 52(5) provides as follows:

(4)    A creditor’s petition lapses at the expiration of:

(a)    subject to paragraph (b), the period of 12 months commencing on the date of presentation of the petition; or

(b)    if the Court makes an order under subsection (5) in relation to the petition—the period fixed by the order;

unless, before the expiration of whichever of those periods is applicable, a sequestration order is made on the petition or the petition is dismissed or withdrawn.

(5)    The Court may, at any time before the expiration of the period of 12 months commencing on the date of presentation of a creditor’s petition, if it considers it just and equitable to do so, upon such terms and conditions as it thinks fit, order that the period at the expiration of which the petition will lapse be such period, being a period exceeding 12 months and not exceeding 24 months, commencing on the date of presentation of the petition as is specified in the order.

22    Section 52(4) and (5) should be considered together and not independently of each other: Re Young: ex parte Smith (1985) 5 FCR 204; [1985] FCA 75 at 207. The creditor’s petition has an automatic life of 12 months from the date of its presentation (s 52(4)), and it can be extended, during its life, by an order of the Court but not beyond a maximum period of 24 months. There is no general power to relieve from the consequences of s 52(4): Griffiths at [33]. Further, absent any consideration of the slip-rule, there is no ability of the Court to extend the petition outside the initial 12-month period: Ramsey Health Care v Compton (2016) 247 FCR 387; [2016] FCAFC 125 at [14]-[15].

23    There are sound reasons why there should be no uncertainty surrounding the time when the petition is pending: Re Young at 207.

24    The Court will not make an order extending the petition, as a matter of course: Endresz v Commonwealth (2019) 273 FCR 286; [2019] FCAFC 197 at [75]. Section 52(5) confers a discretion on the Court to extend the petition if it considers it just and equitable to do so. It is notable that the statutory limit of the creditor’s petition is 12 months, in the absence of an extension. This imports that creditor’s petitions should be dealt with promptly.

SHOULD AN EXTENSION BE GRANTED?

The Applicant’s Submissions

25    The Applicant submits that the circumstances of this matter support granting the requested extension. The Applicant does not lay the reasons for the delay solely on the Respondent.

26    The Applicant submits that there is nearly six months of time lost on a proper consideration of the background and steps taken in the proceedings to date. Therefore, the Applicant submits, the parties could not proceed with the creditor’s petition due to matters outside of their control, being the Court’s availability and the time taken due to the intervention of the Official Receiver.

27    It would therefore, so the Applicant submits, be unjust to the Applicant to lose the chance to pursue the creditor’s petition when around half the time it had to do so has been taken up by factors beyond its control.

28    The Applicant relied on the following passage, from Djunaedi v Mohor [2025] FEDFCFamC2G 216 at [8]:

8    The making of an order to extend the period of time at which a Creditors Petition lapses is not unusual, and is often made in circumstances where inadvertence, delay or listing schedules in a court might result in the Creditors Petition expiring, and such orders have been made (albeit with some reluctance on the part of the courts) even in circumstances where a Creditors Petition has already expired: see the discussion generally in Griffiths v Boral Resources (Qld) Pty Ltd [2006] FCAFC 149; (2006) 154 FCR 554; (2006) 235 ALR 247; (2006) 4 ABC(NS) 270 at [17]-[29] per Spender ACJ, Dowsett and Collier JJ; see also Heywood v Sharpe [2014] FCCA 2999; (2014) 291 FLR 217 at [55]-[62] per Judge Manousaridis. In McNally v Fazio (No 2) [2015] FCCA 1935 at [23]-[27] and [32] per Judge Lucev the period was extended where there was insufficient time to properly deal with the Creditors Petition in the event that the appointment of a plenary administrator to an estate was revoked by an administrative tribunal and there was no opportunity in any event to list the Creditors Petition before the date of the revocation hearing in that tribunal and the date on which the Creditors Petition was due to lapse.

29    The Applicant rightly accepts that the determination of the Validity Issue, has taken some time. This is referred to as a necessary “detour”.

30    The Applicant submits that consideration must be given to the effect of any extension of time upon both parties. While the Respondent may have to continue to deal with bankruptcy litigation (including continuing to be listed on the National Personal Insolvency Index, although that is unavoidable and part of this process), that ought not outweigh the right of the Applicant creditor to bring and seek a hearing of the creditor’s petition. Furthermore, it is not in the Applicant’s interest to unduly delay the finalisation of the creditor’s petition.

31    Further, the Applicant submits that time is required to finalise the Validity Issue, and if resolved in the Applicant’s favour, additional time will be required to hear the creditor’s petition.

32    Finally, the Applicant submits in reply that some of the matters relied on by the Respondent effectively seek a summary determination of the relevant issues, including the Validity Issue.

33    The Applicant has also submitted that it should be entitled to its costs of this application if the extension is granted.

THE RESPONDENT’S SUBMISSIONS

34    The Respondent disputes that the delays have been caused by factors beyond the control of the Applicant. The Respondent submits that the reasons for the Validity Issue having to be determined is because the Applicant issued, what he claims, is a defective Bankruptcy Notice. It is this failure which has caused the “detour” and the intervention of the Official Receiver, which has caused further delays, so the Respondent submits. The Respondent also refers to the adjournments and notes that he requested four weeks. However, ultimately six weeks was agreed to by the Applicant.

35    The Respondent also submits that the time taken for this entire matter is the fault of the Applicant. The Respondent observes that these bankruptcy proceedings relate to costs from proceedings in 2019, which were not assessed until 2022. The Respondent relies on these delays to submit that the extension now should not be granted.

36    Furthermore, the Respondent relies on the delay and the position this places him in, while his details are published on the Nation Personal Insolvency Index, as a person who has had a petition presented against him. This, the Respondent submits, has had and continues to have an important impact on him. The Respondent is self-represented and has not filed any evidence to support these submissions. However, I accept that this may have had some impact on the Respondent. The evidence that the Respondent has provided seems to relate to the underlying judgment. It is assumed that the Respondent will seek to develop these matters, if any hearing of the creditor’s petition is necessary.

37    Finally, the Respondent seeks to develop his submission to resist the extension raising the following matters:

a)    Inaccurate Creditor and Address

b)    Delay by the Applicant in commencing a Cost Assessment

c)    Misstatement in the Cost Statements

d)    Reassessment of Cost Order 1

e)    Creditors Petition service issues

f)    Public Interest Disclosure – reprisal against a discloser

CONSIDERATION OF THE EXTENSION

38    The particular circumstances of this case, in relation to the Validity Issue and the Official Receiver seeking leave to appear as amicus curiae, are somewhat unusual. The Validity Issue could have been determined on the hearing of the creditor’s petition. If the bankruptcy notice was thereby invalid, a sequestration order would not have been able to be made, as the creditor’s petition would not have been properly supported by an act of bankruptcy.

39    At the time, and in the context as to when the Validity Issue was raised, it may have been the intention of the Applicant to seek that issue to be resolved, to avoid the costs of a full hearing of the creditor’s petition if the bankruptcy notice was invalid. That is not an unreasonable course.

40    The Court determined it was inappropriate to hear the Validity Issue in the absence of the Respondent. The setting down of that hearing then was some four months later. The intervention of Cyclone Alfred also caused the hearing to be adjourned. There have been significant procedural delays.

41    Although I have carefully considered the Respondent’s submissions, this is not the occasion to determine the substantive issues, including the Validity Issue, going behind the judgment or any of the other issues that the Respondent may seek to raise to oppose the creditor’s petition. I have given weight, in considering whether it is just and equitable to extend the life of the creditor’s petition, that the Respondent has been dealing with this issue for a prolonged period and it has had an impact on him. However, this is not determinative of whether it is just and equitable to grant an extension as consideration must also be given to the position of the Applicant.

42    Further, in this context and in support of the Respondent’s position is that the intent of the statutory period within which the creditor’s petition is to be determined is deliberately defined and relatively short. This is due to the seriousness of bankruptcy proceedings.

43    The Validity Issue has now been heard (on 30 April 2025) and judgment is currently reserved. Even if the Court was able to deliver a judgment promptly, as the creditor’s petition will lapse on 21 May 2025 (in just under a week), there would be no time to provide the Applicant and the Respondent with a proper opportunity to file material in relation to the final hearing of the creditor’s petition, have a hearing and deliver judgment.

44    As such, an extension of the lapsing date will be necessary to ensure that the creditor’s petition can be determined within the statutory period. The initial statutory period was consumed by procedural delays in relation to service of the petition, the filing of evidence and by difficulties the Court had in accommodating the parties in respect of a hearing date. These procedural delays have also been caused by the Official Receiver’s involvement in the proceedings. However, both parties consented to the Official Receiver being heard on the construction question, being the Validity Issue. There was also some delay caused by Cyclone Alfred.

45    In all of the circumstances, the extension order will be made because I am satisfied that it just and equitable to extend the period of time at the expiration of which the creditor’s petition would lapse in circumstances where:

(a)    procedural delays, not properly attributable to either party, have meant that approximately half of the statutory period for the determination of the creditor’s petition has been lost;

(b)    it is reasonable to first determine the Validity Issue;

(c)    it is of assistance, which implicitly was accepted by both parties consenting to the involvement of the Official Receiver, to have submissions from the Official Receiver regarding the Validity Issue;

(d)    the Court will not be able to deal with the substantive hearing of the creditor’s petition (if the Validity Issue is determined in the Applicant’s favour) before the time at which the creditor’s petition would ordinarily lapse (that is, 12 months) because that is in just under a week and that will not afford the parties a proper opportunity to be heard.

46    Finally, should the Validity Issue be determined against the Applicant, the creditor’s petition will be dismissed, and these proceedings will be at an end.

47    However, if the Validity Issue is determined in the Applicant’s favour, the Respondent will still have to deal with the substantive issues in the creditor’s petition. With the extension, time will be available for the Respondent to be afforded a proper opportunity to present his case. It is clear from the matters that the Respondent has previously raised that he will seek to raise a number of arguments.

48    Therefore, I am satisfied that it is appropriate to order an extension until 20 May 2026.

COSTS

49    In this event, the Applicant sought its costs of this application and submitted that costs should follow the event.

50    However, the general rule that costs follow the event does not necessarily apply to every interlocutory step in a proceeding, but is generally directed to a consideration of the litigation as a whole: Gloucester Shire Council v Fitch Ratings, Inc (No 3) [2017] FCA 553 at [13]-[14]. As was explained in Stanley & Ors v Layne Christensen Company & Ors [2006] WASCA 56 at [52]:

[52]    The general rule is, and should remain, that where a party is seeking the indulgence of the Court, that party will be required to pay the costs of the application, including costs thrown away, and will not normally receive the costs of the application. However, it is also a normal rule that the Court will have regard to the extent to which it might be said that costs were unnecessarily incurred by a party, and will have regard to the reasonableness of the party’s conduct in determining how costs should be awarded. In particular, where a contested application, even for an indulgence, is unnecessary because a party acting reasonably would have consented to appropriate orders, the party who has caused the costs to be unnecessarily incurred will not obtain its costs of such a proceeding merely because the application is for some indulgence. That is implicitly recognised in Briggs at 14, where Owen and Parker JJ appear to accept that an unreasonable withholding of consent might form an appropriate basis for a ruling on costs which departed from the “normal rule” relating to indulgences. However, in that case their Honours considered that it could not be said that the other party was unreasonable to require that the proposed amendment be justified to the satisfaction of a judicial officer.

[Emphasis added]

51    As such, it is not appropriate that the Applicant be awarded the costs of this indulgence. However, if the Respondent was acting reasonably, bearing in mind the particular circumstances of this case, he would have consented to the extension sought. As such, the appropriate orders as to costs is that they will be the Applicant’s costs in the proceedings.

Associate:    

Dated:    15 May 2025