By Stephen Mullette a Principal of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group
The words “a long and somewhat unfortunate history” in a judgment generally refers to litigation which the Court is suggesting ought not to have been undertaken, or at least which ought not to have been conducted in the manner the Court has observed. In Young v Cooke  FCA 1215, it was probably both. In this case, the Federal Court has used the “Slip Rule” to take away an act of bankruptcy committed under the Bankruptcy Act 1966 (Cth), and give a judgment debtor one last chance to comply with a bankruptcy notice.
The case, as Justice Rares observed, had “a long and somewhat unfortunate history” echoing the conclusion of a Supreme Court Judge in earlier proceedings between the parties. The matter originated in a dispute over a dog named “Apache Jack” which the debtor (Mr Young) accused the Cookes of unlawfully keeping, after it wandered onto their property. The Cookes, fellow residents of Gundary in Country New South Wales (population ~314) denied it was the same dog, and said they had found their dog, handed it in to the local pound, and then purchased it back from Council. Local Court proceedings had concluded that it was not the same dog. Mr Young disagreed and launched proceedings in various courts seeking to justify his claims and recover the cost of the dog ($400-500) and exemplary and aggravated damages – total claim $78,750.
Despite finding that the Cookes had acted in bad faith in collecting a similar dog and handing it in to the pound without telling Mr Young, the Local Court Magistrate nevertheless dismissed the application by Mr Young against them, because it was a different dog, and because any claim Mr Young had lay again Council, who had sold the dog to the Cookes.
Along the way, the long and unfortunate history of the proceedings included several costs orders against Mr Young, which the Cookes sought to enforce against him, by registration of a judgment and issue of a bankruptcy notice. Mr Young applied to set aside the bankruptcy notice based on his cross-claim (for damages in relation to the dog). Time for compliance with the bankruptcy notice was extended from time to time whilst the application to set aside the bankruptcy notice progressed.
However, on one occasion, the Registrar adjourned the proceedings without extending the time for compliance with the bankruptcy notice. As a result, technically, the judgment debtor committed an act of bankruptcy on the date when the previous extension order expired.
When the application to set aside the bankruptcy notice came for hearing, Justice Rares was satisfied that the Registrar had inadvertently failed to extend time for compliance with the bankruptcy notice, and therefore made an order under what is known as “Slip Rule” in the court’s inherent jurisdiction and also under the Federal Court Rules, allowing time for compliance to be extended up to and including the hearing of the application.
This was a minor victory for the judgment debtor, as his Honour also dismissed his application to set aside the bankruptcy notice, finding there was insufficient prospects for success of the appeal against the Local Court’s decision on the identity of the dog. Rares J extended time for him to comply with the costs orders and judgment obtained against him in the meantime.
In the absence of compliance with the bankruptcy notice, the long and unfortunate history of the litigation between the parties looks destined to also include a creditor’s petition.
Read the judgment here(link is external)
If you would like more information or advice in relation to insolvency, restructuring or debt recovery law, contact a Principal of the Matthews Folbigg Insolvency, Restructuring & Debt Recovery Group:
Stephen Mullette on (02) 9806 7459 or firstname.lastname@example.org
Jeff Brown on (02) 9806 7446 or email@example.com