Time Limits: The Bankruptcy Act
When is a time limit under the Bankruptcy Act, not a limit?
When can the Court use the power under s33 to extend time periods set under the Act?
There have been instances where the power under s33 was used and some occasions when the power was refused.
In a decision late last year in Radnor Enterprises Pty Ltd & Ors v Nicholls (As Trustee of the Property of Boniface, A Bankrupt and Trustee of the Property of Ogston, A Bankrupt)[2017] FCCA 2313 (“Radnor”), the Federal Circuit Court clarified the operation of s33(1)(c) of the Bankruptcy Act 1966(Cth) (“the Act”), which empowers the Court to extend time limits imposed by the Act.
In that case, a delegate of the Official Receiver, on application of a trustee in bankruptcy, had issued a notice under s139ZQ of the Act on the trustee of a superannuation fund of which two bankrupts were members (“the Notice”).
Under that section, the Official Receiver may issue a notice on a person who has received money or property as a result of a void transaction, requiring the person to remedy that receipt by paying a specified sum to the trustee.
Following the issue of the Notice, the debtors filed an application under s139ZS(1) of the Act to set the Notice aside.
The application, however, had been brought outside the 60 day time limit imposed by s139ZS(1A) of the Act.
The debtors and trustee then jointly applied to have the Court consider whether the debtors’ application must fail for it having been brought outside that time limit.
In considering this question, Judge Manousaridis turned first to the relevant considerations of statutory interpretation.
In so doing, his Honour emphasised that the exercise of statutory interpretation requires the Court to first consider the text itself by giving the words used their ordinary meaning.
His Honour went on to explain that this may require the Court to consider the context in which those words were used; which includes the general purpose and policy of the legislative instrument.
Judge Manousaridis then considered whether, in light of these principles, the time limit in s139ZS(1A) referred to above was subject to the operation of s33(1)(c) of the Act.
Section 33(1)(c) of the Act provides that the Court may:
extend before its expiration or, if this Act does not expressly provide to the contrary, after its expiration, any time limited by this Act, or any time fixed by the Court or the Registrar under this Act (other than the time fixed for compliance with the requirements of a bankruptcy notice), for doing an act or thing or abridge any such time.
Meanwhile, s139ZS(1A) of the Act relevantly provides that an application under s139ZS(1) must be made:
…
(b) if the applicant is another interested person—not later than 60 days after the day the applicant became aware that the notice has been given.
His Honour considered that, looking at the text alone, it was clear that s139ZS(1A) of the Act was subject to the operation of s33(1)(c) of the same.
In coming to this decision, his Honour explained that the 60 day period in s139ZS(1A) of the Act is a “time limited by this Act…for doing an act or thing” within the meaning of s33(1)(c); the word limited being given its ordinary meaning, viz. fixing a time in which an act or thing is to be done.
His Honour further explained that neither s139ZS, nor any other provision of the Act, “expressly provides” that the time limit in s139ZS(1A) cannot be extended by s33(1)(c), such that the two provisions are not inconsistent but complementary.
His Honour also rejected a series of submissions relied upon by Counsel for the trustee in bankruptcy to assert that s33(1)(c) ought not apply to s139ZS.
Firstly, Judge Manousaridis rejected the submission that the use of the word “must” in s139ZS(1A) of the Act meant that the time limit was completely mandatory and not subject to s33(1)(c). His Honour explained that, without the use of mandatory language, no time limit could be imposed at all.
His Honour also rejected the notion that the case was analogous to an earlier decision involving the Corporations Act 2001 (Cth) (“Corporations Act”) (David Grant and Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265).
In that case, s.459G of the Corporations Act which set a mandatory time limit was not subject to a general provision which conferred discretion upon the Court to extend time limits.
Importantly, however, that case involved a time limit that was introduced simultaneously with the creation of a new right and in which a new, narrower provision for extending that time limit was enacted in the same part of the Corporations Act. The wording of the Corporations Act contained the phrase “may only” (our emphasis).
Beyond this, the Court also rejected the argument that allowing s33(1)(c) of the Act to impinge s139ZS(1A) would introduce a substantial degree of uncertainty into the operation of the provision, explaining that no uncertainty existed prior to the introduction of the time limit. The Court was persuaded by the debtors’ submissions. The Court held, at [41]:
I now turn to the submissions counsel for the debtors makes. First, the use of the “must” to define a time limit is a word regularly and naturally used when imposing a time limit. There could be no time limit without the employment of mandatory language.[47] Second, the legislature can be taken to have had knowledge of s.33(1)(c) when it introduced s.139ZS(1A) of the Act. If the legislature, therefore, truly intended that s.139ZS(1A) not be subject to s.33(1)(c) it could have used express language to express that intention.[48] Third, that the time limitation has been inserted to facilitate the timely administration of bankruptcies is a matter relevant to discretion, not to denying the application of s.33(1)(c) of the Act.[49]
Whilst a notice under s139ZQ of the Act is a powerful instrument, the Court is clearly reluctant to constrain its jurisdiction to allow an application to set aside such a notice to be heard outside of time. Of course the power to extend time is only part of the argument in these circumstances. The Court has to consider the reasons for delay and the prospects of success before agreeing to extend time.
If you wish to set aside a s139ZQ notice outside of time, or you are a trustee and a debtor is seeking to do so, you should seek legal advice from the insolvency experts at Gavin Parsons and Associates.