Re Robert John Laybutt and Irene Laybutt Ex Parte: George Robinson and Patricia Louise Robinson [1985] FCA 259 (17 July 1985)

FEDERAL COURT OF AUSTRALIA

Re: ROBERT JOHN LAYBUTT and IRENE LAYBUTT
Ex Parte: GEORGE ROBINSON And PATRICIA LOUISE ROBINSON
No. B 2152 of 1985
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Burchett J.

CATCHWORDS

Bankruptcy - Application for extension of bankruptcy notice - Section 41(7) - Insufficiency of affidavit - Occurrence of an act of bankruptcy.

Bankruptcy Act 1966, s.40(1)(g), s.41(6A), s.41(7).

HEARING

SYDNEY
17:7:1985

ORDER

1) The application for further extension of time to comply with the bankruptcy notice was refused.

2) An order was made providing for the costs of the creditor in the alternative events of a petition based upon non-compliance with the bankruptcy notice leading to a sequestration order within six months, and this not occurring.

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

DECISION

As the matter is urgent, I will give my decision now. This is an application to extend time for compliance with a bankruptcy notice, pending appeal against a judgement of Beaumont J. determining that he was not satisfied, pursuant to s. 40(1)(g) and s. 41(7) of the Bankruptcy Act, that the debtors had a counter claim, set off, or cross demand falling within s. 40(1)(g).

Beaumont J. treated the matter as an application to set aside the notice, and granted a 14 day extension to enable the debtors to consider their position. This extension I continued by consent for a further week until today. Beaumont J., in his reasons, doubted the sufficiency of the affidavit, which had been filed on the last day of the period limited by the bankruptcy notice, to comply with s. 41(7), but in any event, having permitted a fresh affidavit filed outside the period to be utilised at the hearing before him, he held that he was not satisfied the debtors in fact had the alleged counter-claim, set off, or cross demand.

No other ground of relief was put to Beaumont J. The appellants wish on the appeal to seek to tender fresh evidence, and have filed a further affidavit in this application. They propose to adduce yet further evidence if the facts concerning the claim they propound are relevant. However, there is a difficulty in procuring the swearing of a further affidavit, and I have by agreement of the parties proceeded first to hear argument on the preliminary question whether there is any jurisdiction in the circumstances of this case to grant the relief sought.

Mr. Neil, who appears for the debtors, puts his claim on the basis of s. 41(6A) and s. 41(7). It does not seem to me that s. 41(6A) is relevant. The proceedings under appeal were not instituted to set aside the bankruptcy notice, but to have it determined that the debtors had complied with it by satisfying the Court that they had a counter-claim, set off, or cross demand within s. 40(1)(g).

The structure of s. 41 distinguishes between such a claim and the claim to set aside a bankruptcy notice. Where a debtor seeks to set up a counter-claim, set off, or cross demand, the provisions of s. 41(7), provided they are complied with, produce an extension by force of the statute. They do not provide for an extension by the Court.

The first question is whether the conditions of the statutory extension were met. In my view they were not, and an act of bankruptcy had accordingly occurred before the hearing by Beaumont J. commenced: see James v. Abrahams (1981) 34 A.L.R. 657 at p. 665 in the joint judgment of Deane and Lockhart JJ. There are at least two requirements of s. 41(7) which were not met in the affidavit filed within the period specified in the bankruptcy notice.

Firstly, as Beaumont J. pointed out, that affidavit did not do more than merely assert the existence of a counter-claim, set off, or cross demand. It did not specify the nature or the grounds of that counter-claim, set off, or cross demand.

In Re Brink Ex parte Commercial Banking Company of Sydney Limited (1980) 30 A.L.R. 433, a decision which was subsequently approved by the Full Court of this Court in Eastick v. Australia and New Zealand Banking Group Limited (1981) 53 F.L.R. 91, and was applied in Re Racheha Ex parte Antonios, 49 F.L.R. 423, Lockhart J. at p. 439 said:

"In my opinion the affidavit cannot merely contain an assertion that the debtor has a counter-claim, set-off, or cross demand which he could not have set up in the action in which the judgment or order was obtained. The affidavit must show a counter-claim, set-off or cross demand which equals or exceeds the amount of the judgment debt and which the debtor could not have set up in the action in which the judgment or order was obtained: see Vogwell v. Vogwell (1939) 11 ABC 83, at 85; Ebert's case [1960] HCA 50; (1960) 104 C.L.R. 346, at 350; Re Debtor (1935) 1 Ch 347, per Slesser LJ at 352."

In Eastick's case, to which I have already referred, the joint judgment, after expressing agreement with a passage which it cited from Re Brink at p. 95 of the report, included the following comment on the affidavit there under consideration:

"Examination of the sworn allegations set out above makes it clear that the appellant . . . did far more than simply assert that he had a counter-claim, set off, or cross demand of the kind referred to in section 41(7) of the Act."

It appears to me that, in the light of the earlier citation of Re Brink, this passage indicates acceptance of Lockhart J.'s view.

Secondly, the affidavit did not show that the counter-claim, set off, or cross demand alleged was one that the debtors could not have set up in the action or proceeding in which the judgment or order founding the bankruptcy notice was obtained. It did not show this on its face, and, furthermore, the evidence now adduced does not suggest that the claim was of such a character that it could not have been set up in those proceedings, but rather proffers reasons why it was not set up.

In Re Brink at p. 437, Lockhart J. said:

"The words 'that he could not have set up in the action or proceeding in which the judgment or order was obtained' mean 'which he could not by law set up in the action': See Re Jocumsen (1929) 1 ABC 82 at p. 85; Re a Debtor (1914) 3 K.B. 726, per Avory J, at 730; Re Stokvis (1934) 7 ABC 53, especially per Lukin J at 57, where his Honour said: 'I take a counter-claim, set-off, or cross demand which could not be set up as one which, from point of time, or from its nature, or from absence of empowering provisions, or from positive inhibition so to do, could not be set up in the particular case in which judgment was obtained. . . . Mere failure to take advantage of the opportunity can hardly be said to be inability."

Having reached a firm conclusion that an act of bankruptcy has already occurred, the time fixed by the bankruptcy notice not having been interrupted by the operation of s. 41(7), an issue that Beaumont J. did not find it necessary to decide since he rejected the claim on the merits, I do not think that there is now any basis to grant a further extension of time, and I therefore refuse the application.