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FEDERAL COURT OF AUSTRALIA - GENERAL DIVISION

RE DALCO; EX PARTE DALCO AND DEPUTY COMMISSIONER OF TAXATION (NSW)

Neaves J

22 August 1986 - Canberra

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Neaves J    On 1 April 1986 the Deputy Commissioner of Taxation (the respondent) obtained judgment in the Supreme Court of New South Wales against Jeffrey Thomas Dalco (the applicant) in the sum of $4,591,900.64 being $4,591,523.64 for debt and $477 for costs. The amount of the debt represented income tax and additional tax claimed to be due and payable by the applicant pursuant to notices of assessment and amended assessment served on the applicant under the Income Tax Assessment Act 1936 (Cth) (the Income Tax Assessment Act) in respect of the years of income ended 30 June 1976 to 30 June 1980 inclusive.

   On 19 May 1986 a Deputy Registrar in Bankruptcy issued a bankruptcy notice, based upon the judgment and directed to the applicant, requiring him within 14 days after the service of the notice upon him either to comply with the requirements of the notice or to satisfy the Court that he has a counter-claim, set-off or cross demand equal to or exceeding the sum specified in the notice, being a counter-claim, set-off or cross demand that he could not have set up in the action in which the judgment was obtained. The bankruptcy notice was served on the applicant on the date of its issue. Thus, the time fixed by the notice for compliance with its terms expired on 2 June 1986.

   On that day, an affidavit sworn by John Clyde Behm, solicitor, was filed with the Registrar in Bankruptcy on behalf of the applicant. The affidavit, which was sworn on the day of its filing, was intended to be an affidavit to the effect that the applicant has such a counter-claim, set-off or cross demand as is referred to in para 40(1)(g) of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act) and, thus, an affidavit of the kind referred to in s 41(7) thereof. Thereafter, a Deputy Registrar in Bankruptcy gave notice to the applicant and the respondent that the matter had been set down for hearing by the Court pursuant to rule 10 of the Bankruptcy Rules.

   Section 41(7) of the Bankruptcy Act provides:-

   

"(7) Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has filed with the Registrar an affidavit to the effect that he has such a counter-claim, set-off or cross demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter-claim, set-off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied."

   Paragraph 40(1)(g) provides:

   

"(1) A debtor commits an act of bankruptcy in each of the following cases: …

 (g)  if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia, or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not-

 (i)  where the notice was served in Australia - within the time fixed by the Registrar by whom the notice was issued; or

 (ii)  where the notice was served elsewhere - within the time fixed for the purpose by the order giving leave to effect the service, comply with the requirements of the notice or satisfy the Court that he has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he could not have set up in the action or proceeding in which the judgment or order was obtained; …"

   When the matter came on for hearing on 23 June 1986, the applicant sought, and was granted, leave to file in Court an application dated 20 June 1986 for an order that the bankruptcy notice be set aside or, in the alternative, for an order that the time for compliance with the requirements of the bankruptcy notice be extended to such date as the Court might think fit. I shall defer discussion of this application until the questions arising under s 41(7) of the Bankruptcy Act have been considered.

   As I have indicated, the affidavit which is said to satisfy the requirements of s 41(7) is that of John Clyde Behm sworn 2 June 1986. Paragraph 8 of that affidavit refers to an affidavit sworn by Mr Behm on 13 May 1986 and filed in a proceeding under s 39B of the Judiciary Act 1903 (Cth) (the Judiciary Act) pending in this Court at the suit of the applicant against the respondent and numbered G 188 of 1986. The applicant also relies upon two affidavits of John Walter McEwen sworn respectively 12 May 1986 and 19 June 1986 and filed in that proceeding. Some of the statements in the affidavits were objected to by counsel for the respondent and were either not pressed or rejected. In relation to other statements in those affidavits, the evidence was admitted subject to objection and it will be necessary to rule on the objections in the course of these reasons.

   Paragraph 1 of Mr Behm's affidavit of 2 June 1986 is formal. Paragraph 2 and 4 refer to the proceedings in the Supreme Court of New South Wales which resulted in the judgment on which the bankruptcy notice is founded. Paragraph 3 refers to certain correspondence (Annexure "A" to the affidavit) between Mr Behm, as solicitor for the applicant, and the solicitor for the respondent between 24 December 1985 and 13 March 1986. In that correspondence, Mr Behm had requested further particulars of the matters set out in the statement of claim delivered in the Supreme Court proceedings and a statement under s 13 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) of the reasons for the decision to commence those proceedings. In reply, the respondent had declined to accede to those requests beyond stating, in a letter dated 31 January 1986, that:

   

"… the additional income assessed to your client represents bona fide calculations of the amounts of fees and commissions derived by your client in relation to a number of tax avoidance or minimisation schemes, including those colloquially known as 'bottom of the harbour' schemes."

   Paragraph 3 of the affidavit was objected to on the ground of relevance. It is, however, in my view admissible on the ground that, whatever relevance it may have to the questions that arise under s 41(7) of the Bankruptcy Act, it provides some foundation for a submission upon which the applicant sought to rely to justify the extension of the time for compliance with the bankruptcy notice.

   Paragraph 5 of the affidavit deposes to the fact that on 30 November 1983 the applicant, with certain other persons, was charged with offences against s 86(1) of the Crimes Act 1914 (Cth) of conspiring to prevent or defeat the execution or enforcement of the Income Tax Assessment Act and of conspiring to defraud the Commonwealth and that committal proceedings in relation thereto are continuing before the Local Court of New South Wales. This paragraph was also objected to but, in my opinion, it is admissible as tending to provide some explanation for the absence of any affidavit in this proceeding by the applicant himself.

   Paragraph 6 refers to the proceeding commenced in this Court pursuant to s 39B of the Judiciary Act to which reference has been made and is, I think, admissible. Paragraph 8, as I have said, refers to an affidavit sworn by Mr Behm in that proceeding and para 9 states that the terms of that affidavit:

   

"… outline the facts which shall be relied upon in the said Application for Orders to Show Cause proceedings No G 188 of 1986."

   Paragraph 7, 10, 11 and 12 were not read in the face of objections taken by counsel for the respondent. The only remaining paragraph, para 13, is formal.

   Turning now to Mr Behm's affidavit of 13 May 1986, counsel for the applicant did not read parts of paras 2 and 5 and the whole of para 6. Paragraph 11 was objected to and rejected. Of the remaining paragraphs, paras 1 and 15 are formal. Paragraph 2, 3 and 5 refer to the Supreme Court proceedings for the recovery of the income tax claimed to be due and payable by the applicant, para 2 stating that the deponent had been informed by the applicant and believed that the respondent failed to consult the applicant before commencing those proceedings. Paragraph 4 is in similar terms to para 3 of the affidavit of 2 June 1986 and, although objected to, is, I think, admissible.

   Paragraph 7 of the affidavit of 13 May 1986 refers to an application for information made to the respondent pursuant to s 26 of the Freedom of Information Act 1982 (Cth). The paragraph deposes to the fact that the applicant was given access to certain documents concerning the assessments referred to in the amended statement of claim delivered in the Supreme Court proceedings, those documents being annexed to the affidavit as Annexure "C". Paragraph 7 was objected to both as to form and relevance but it is, in my view, admissible. The documents in Annexure "C", however, include documents other than those referred to in para 7. Those documents are, in my view, inadmissible as being irrelevant to any issue that arises in this proceeding. I, therefore, admit only the letter from the respondent to the applicant dated 8 October 1984 and the attachments thereto.

   Paragraph 8 refers to the bankruptcy notice herein while para 9 refers to an affidavit filed in connection with an earlier bankruptcy notice which is no longer relied upon by the respondent. It is unnecessary to refer to that affidavit.

   Paragraph 10 states, on information and belief, that the applicant has insufficient assets to pay the income tax demanded. This paragraph is irrelevant to any issue now arising and is rejected.

   Paragraph 12 and 13 relate to the committal proceedings referred to in para 5 of the affidavit of 2 June 1986 and are in substantially similar terms to that paragraph. It should be recorded that para 14 was rejected except for the last sentence which annexes a copy of the conditions of the bail granted to the applicant in the committal proceedings.

   The affidavit of John Walter McEwen sworn 19 June 1986, so far as the same was read, refers to and exhibits income tax returns lodged by the applicant in respect of the years of income ended 30 June 1976, 1977, 1978, 1979 and 1980, copies of notices of assessment and amended assessment relating to those years of income, notices of objection against those assessments and amended assessments, decisions upon the objections and requests to have the objections treated as appeals and forwarded to the Supreme Court of New South Wales. Also referred to in the affidavit and exhibited thereto are copies of taxation returns, financial statements and other related documents concerning the following companies and trusts with which the applicant is associated, namely Martine Securities Pty Ltd, Corporate Consultants Aust Pty Ltd, the Jurest Trust, the Donaldson Trust, the Neild Trust, the Chesser Trust, the Julpet No 2 Trust, the Dalco Unit Trust No 4, the Dalco Unit Trust No 5 and the Dalco Family Trust.

   Objection was taken to the affidavit and the exhibits but I am prepared to admit into evidence para 1, the first sentence of each of paras 2-10 inclusive, para 12 and the documents referred to therein as being exhibited.

   The remaining affidavit is that of John Walter McEwen sworn 12 May 1966. In it the deponent states that he has acted as the tax agent of the applicant and the companies and trusts that comprise the Dalco Group for over 12 years, those companies and trusts being the companies and trusts referred to above. Annexed to the affidavit and marked "A" is a schedule which I admitted into evidence as being a convenient summary of information derived from the documents exhibited to the affidavit of the deponent sworn 19 June 1986 and described above. The affidavit was received subject to objection but, upon further consideration, I am prepared to admit the affidavit other than para 3 which was rejected at the hearing.

   Further reference should be made to the circumstances giving rise to the debt the subject of the judgment upon which the bankruptcy notice herein is founded.

   On 22 December 1983 the respondent issued to the applicant a notice of assessment in respect of the year of income ended 30 June 1976 and notices of amended assessment in respect of each of the years of income ended 30 June 1977, 1978 and 1980. The assessment and the amended assessments were made in purported pursuance of the power conferred by s 167 of the Income Tax Assessment Act.

   The applicant lodged objections in writing, dated 7 February 1984, against the assessment and the amended assessments. There was a lengthy delay before the applicant was informed of the decisions made upon the objections. By letters dated 16 October 1985 the applicant was informed that the objection against the assessment in respect of the year of income ended 30 June 1976 and the objections against the amended assessments in respect of the two subsequent years of income had been allowed in part and that the objection against the amended assessment in respect of the year of income ended 30 June 1980 had been disallowed. On the same day, 16 October 1985, the respondent issued to the applicant notices of amended assessment in respect of the years of income ended 30 June 1976, 1977 and 1978 reducing the applicant's liability to tax in respect of each of those years, a notice of assessment in respect of the year of income ended 30 June 1979 and a notice of amended assessment in respect of the year of income ended 30 June 1980 increasing the applicant's liability to tax in respect of that year.

   By letters dated 10 December 1985, the applicant requested that the objections in respect of the years of income ended 30 June 1976, 1977, 1978 and 1980 be treated as appeals and be forwarded to the Supreme Court of New South Wales. The applicant lodged objections in writing, also dated 10 December 1985, against the assessment in respect of the year of income ended 30 June 1979 and against the further amended assessment in respect of the year of income ended 30 June 1980.

   The proceedings which resulted in the judgment of 1 April 1986 upon which the bankruptcy notice herein is based were instituted by the respondent in the Supreme Court of New South Wales on 17 December 1985. The Court was informed that the objections the subject of the requests dated 10 December 1985 had not at that date been transmitted to the Supreme Court of New South Wales and that they had not been so transmitted at the date this matter came on for hearing. There is nothing before the Court to indicate whether decisions have been made upon the objections dated 10 December 1985 against the assessment and the further amended assessment in respect of the years of income ended 30 June 1979 and 30 June 1980 respectively.

   The matters upon which the applicant relies as demonstrating that he has a counter-claim, set-off or cross demand of the kind referred to in para 40(1)(g) of the Bankruptcy Act are coincident with the matters which are the subject of the proceeding pending in this Court under s 39B of the Judiciary Act in which the applicant seeks against the respondent a writ of mandamus, an injunction and other orders. Those matters may be summarised as follows. It is claimed that the respondent, in making the assessments and amended assessments upon which the judgment obtained in the Supreme Court of New South Wales is founded, acted in excess of the powers conferred upon him by the Income Tax Assessment Act in that he failed to make proper enquiries as to the sources of income covered by the assessments and amended assessments, attributed income to sources which were incapable in law of producing such income and assessed the applicant to tax on the whole of the income instead of assessing the companies and trusts comprising the Dalco group. The respondent is also said to have exercised his power under the Income Tax Assessment Act to issue the assessments and amended assessments for a purpose not authorised by that Act, to have committed an error of law in exercising that power, and to have acted in breach of the rules of natural justice in that no prior notice of the exercise of the power was given to the applicant and there was no consultation with him "to attribute income to the sources identified in the Assessments". A claim is also made that the decision of the respondent to institute in the Supreme Court of New South Wales the proceedings which resulted in the judgment on which the bankruptcy notice is based was an improper exercise of the respondent's statutory power, that it involved an error of law, and that there was no evidence or other material to justify the making of the decision. It is said that the respondent should not exercise the power to recover income tax while proceedings by way of appeal against the assessment to such tax are pending and that the decision to institute proceedings against the applicant "was not a genuine attempt to cover [sic] the tax assessed". Finally, it is said that in instituting those proceedings the respondent acted in breach of the rules of natural justice.

   The applicant contends that the matters relied upon in the proceeding under s 39B of the Judiciary Act, if established, will result in the assessments and amended assessments being set aside, thus extinguishing his indebtedness and enabling him, on that ground, to obtain an order of the Supreme Court of New South Wales setting aside the judgment upon which the bankruptcy notice is based. By this course of proceedings, so it is contended, the applicant will make out a counter-claim, set-off or cross demand of the requisite kind.

   To satisfy the test which para 40(1)(g) prescribes, the applicant must establish two propositions. The first is that he has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt. The second is that the counter-claim, set-off or cross demand is one that he could not have set up in the action in which the judgment was obtained.

   It may be said, at once, that the claims made in the proceeding under s 39B of the Judiciary Act are matters that could not have been set up in the proceedings in the Supreme Court of New South Wales in which the judgment was obtained on which the bankruptcy notice is founded. There are two reasons for this. The first is to be found in s 38(e) of the Judiciary Act which makes the jurisdiction of the High Court exclusive of the jurisdiction of the several courts of the States in, inter alia, matters in which a writ of mandamus is sought against an officer of the Commonwealth, a description which the respondent answers. The second is to be found in ss 175 and 177 of the Income Tax Assessment Act. The former provides that the validity of an assessment is not to be affected by reason that any of the provisions of that Act have not been complied with while the latter provides that the production of a notice of assessment, or of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a notice of assessment, is to be conclusive evidence of the due making of the assessment and (except in proceedings on appeal against the assessment) that the amount and all the particulars of the assessment are correct. The proceedings in the Supreme Court were clearly not proceedings by way of appeal against the relevant assessments and amended assessments so that the production in those proceedings of the relevant notices of assessment and amended assessment, or certified copies thereof, would have provided conclusive evidence of the applicant's indebtedness. See McAndrew v FCT (1956) 6 AITR 359; 98 CLR 263; F J Bloemen Pty Ltd v FCT (1980) 11 ATR 914; 147 CLR 360. The comment may be made, in passing, that ss 175and 177 of the Income Tax Assessment Act may preclude this Court considering the issues which the applicant seeks to raise in the proceeding under s 39B of the Judiciary Act but that question does not arise in the matter at present before the Court.

   To bring the case within the other requirement of para 40(1)(g), the applicant relies primarily upon the expression "set-off" although at one stage of the argument counsel called in aid the expression "cross demand". The submission is that the expression "set-off" in para 40(1)(g) is wide enough to encompass any claim which is of such a nature as to provide a legal justification for a refusal to pay the debt claimed by the creditor. This submission was said to find support in a statement of Lord Hanworth MR in Re a Bankruptcy Notice [1934] Ch 431, in the description of "set-off" in Meagher, Gummow and Lehane "Equity - Doctrines and Remedies", 2nd ed and in what was said by Deane and Lockhart JJ in James v Abrahams (1981) 34 ALR 657.

   Lord Hanworth MR, speaking of the provision in the Bankruptcy Act 1914 (UK) corresponding to para 40(1)(g), said at 437:

   

"With regard to the word 'set-off', that is a word well known and established in its meaning; it is something which provides a defence because the nature and quality of the sum so relied upon are such that it is a sum which is proper to be dealt with as diminishing the claim which is made, and against which the sum so demanded can be set off."

   The description of "set-off" given in "Equity - Doctrines and Remedies" appears at para 3701 which reads:

   

"A set-off is said to exist when a defendant, in answer to a plaintiff's claim, is able to plead successfully that a countervailing claim which he has against the plaintiff absolves him, wholly or partially, from liability to the plaintiff."

   James v Abrahams raised the question whether an affidavit filed by the debtor was, for the purposes of s 41(7) of the Bankruptcy Act, an affidavit to the effect that he had such a counter-claim, set-off or cross demand as is referred to in para 40(1)(g). What the debtor claimed was an entitlement to a declaration of trust over certain property the legal title to which was vested in the creditor or, alternatively, an equitable charge over that property in an amount equal to the contributions made by him towards the acquisition of the land and the construction of a dwelling house thereon. In holding that the affidavit was not an affidavit answering the description in s 41(7), their Honours said, at 664:

   

"The debtor's claim against the creditor for a declaration of trust in the present case is neither a claim which sounds in money nor a claim for immediate delivery of a specific chattel. Indeed, even if the debtor succeeds in obtaining against the creditor a declaration of trust and, ultimately, an order for sale, that declaration and order would not provide legal justification for a refusal to pay the amount of the judgment debt on account of money lent. It follows that the debtor's primary claim in the present matter is not a counter-claim, set-off or cross demand of the relevant type."

   The submission put on behalf of the applicant is, to say the least, a novel one but, in my opinion, it misconceives the true nature of a set-off as that expression is used in para 40(1)(g). It is, I think, a misreading of the passages quoted to regard them as establishing, or even supporting, that all that it is necessary to show, in order to establish such a set-off, is that the matter relied upon by the debtor would, if proved, provide a justification for his refusal to pay the creditor's debt. That is of course, a necessary element but it is not, of itself, sufficient. It is also necessary that the matter relied upon by the debtor be properly described as a set-off.

   The essential nature of a set-off is that it is a countervailing claim: the debtor, in effect, admits the existence of the creditor's debt but sets up a countervailing claim as excusing him from paying the creditor's debt either wholly or in part depending upon the amount of the countervailing claim. There is a difference in kind between a set-off to which the debtor is entitled and an assertion by the debtor that there are grounds for disputing the validity of the creditor's debt. In the instant case, it is the latter, and not the former, which the applicant seeks to establish. The fact that ss 175and 177 of the Income Tax Assessment Act precluded the defence upon which the applicant relies being raised in the recovery proceedings, namely the defence that the assessments and amended assessments were not validly made, provides no warrant for giving an extended meaning to the words of para 40(1)(g) of the Bankruptcy Act in a case where the judgment on which the bankruptcy notice is founded is one in respect of a liability to income tax.

   The applicant, as I have said, also sought to rely on the expression "cross demand" but, in my opinion, no assistance is to be gained from that expression. Nor can what the applicant claims be properly described as a counter-claim.

   There is a further impediment to the applicant's contention. It is a requirement of para 40(1)(g) that the counter-claim, set-off or cross demand be characterised as one which is equal to or exceeds the amount of the judgment debt. The claim must be one that sounds in money or a claim for the immediate delivery of a specific chattel: see James v Abrahams, supra, at 664. Clearly the claims which the applicant seeks to litigate in the proceeding under s 39B of the Judiciary Act are not of that character. It is sufficient in this regard to refer to what was said by Romer LJ in Re a Bankruptcy Notice, supra, at 439:

   

"Strictly, of course, a claim or a demand cannot exceed or be equal to or less than the amount of the judgment debt; it is obviously the thing which is claimed or demanded that has to be compared with the amount of the judgment debt. Some things that are claimed or demanded obviously cannot be compared with the amount of the judgment debt. It would be impossible to say that a declaration or an injunction could equal or exceed the amount of a judgment debt, and there are obviously other things which cannot be compared with the amount of a judgment debt. These words seem to me to refer to a case where the judgment debtor is claiming to receive from the judgment creditor something which can properly be said to equal or exceed the amount of the judgment debt."

   A debtor cannot satisfy the Court that he has a counter-claim, set-off or cross demand by showing no more than that he propounds one and states how he suggests it can be made out: Ebert v The Union Trustee Co of Aust Ltd [1960] ALR 691 at 693; 104 CLR 346 at 350. It follows that, even if I had been of the view that the nature of the claims which the applicant seeks to raise is such that they could fall within para 40(1)(g), a serious question would have arisen whether the affidavits relied upon do more than contain a mere assertion of the existence of the claims: see Re Brink; Ex parte Commercial Banking Co of Sydney Ltd (1980) 30 ALR 433; Eastick v Aust and New Zealand Banking Group Ltd (1981) 53 FLR 91; Re Racheha; Ex parte Antonios (1980) 49 FLR 423; Re Laybutt; Ex parte Robinson Burchett J - 17 July 1985 - unreported. However, in the light of the conclusions to which I have come on the other matters argued, it is unnecessary to pursue this aspect further.

   For the reasons set out above I am of opinion that the affidavit of Mr Behm sworn 2 June 1986, whether considered alone or as supplemented by the other affidavits on which the applicant relies, is not an affidavit which answers the description set out in s 41(7) of the Bankruptcy Act. That subsection, therefore, did not operate to extend the time fixed for compliance with the requirements of the bankruptcy notice served on the applicant on 19 May 1986.

   I turn now to the application for an order that the bankruptcy notice be set aside or, in the alternative, for an order that the time for compliance with the requirements of the bankruptcy notice be extended to such date as the Court might think fit.

   The sole source of power in the Court to extend the time for compliance with the requirements of a bankruptcy notice is to be found in s 41(6A) of the Bankruptcy Act: James v Abrahams, supra. That sub section provides:

   

"(6A) Where, before the expiration of the time fixed by the Court or the Registrar 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 to set aside the bankruptcy notice has been filed with the Registrar,

 

the Court may, subject to sub section (6C), extend the time for compliance with the bankruptcy notice."

   No proceedings to set aside the judgment in respect of which the bankruptcy notice herein was issued have been instituted by the applicant and an extension of time, if it is to be granted under the subsection, must be on the basis of the application to set aside the bankruptcy notice which was filed on 23 June 1986.

   The application to extend the time for compliance with the requirements of the bankruptcy notice must fail because the application was not, in terms of s 41(6A), filed "before the expiration of the time fixed by the Court or the Registrar for compliance with the requirements" of the notice. The time for compliance was fixed by the Registrar at 14 days from the date of service of the notice on the applicant, an event which occurred on 19 May 1986. The time so fixed expired on 2 June 1986 and, as the application for extension was not filed until 23 June 1986, s 41(6A) can provide no source of power to extend the time. The applicant gains no assistance from the provisions of s 41(7) as, on the basis of what has already been said, the time for compliance with the notice was not extended by that subsection. Even if, contrary to the view expressed above, the conclusion were reached that the affidavit of Mr Behm sworn 2 June 1986 is an affidavit answering the description set out in s 41(7) so that the time for compliance with the bankruptcy notice was automatically extended beyond 23 June 1986, I doubt whether s 41(6A) would authorise a further extension of time. This is because the introductory words of the subsection, referring as they do to the expiration of the time fixed by the Court or the Registrar, are not apt to refer to an extension of the time so fixed by the operation of s 41(7). However, it is unnecessary in this case to express a definitive opinion on the question.

   Finally, no ground has been advanced by the applicant which would justify an order setting aside the bankruptcy notice. Indeed, the applicant did not do more than submit that the application to set aside the bankruptcy notice should be adjourned until the determination of the proceeding under s 39B of the Judiciary Act.

   In my opinion, no sufficiently cogent reason has been advanced for the Court taking that course and I do not propose to do so.

   In the result, the Court declares that the applicant did not, before the expiration of the time fixed for compliance with the requirements of the bankruptcy notice herein, file with the Registrar an affidavit to the effect that he has such a counter-claim, set-off or cross demand as is referred to in para 40(1)(g) of the Bankruptcy Act. Further, the application to set aside the bankruptcy notice or, in the alternative, to extend the time for compliance with its requirements is dismissed. The consequence is that the time for compliance with the requirements of the bankruptcy notice has not been extended beyond 2 June 1986 and the Court so declares. The applicant must pay the respondent's costs of the proceedings.