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Hrycenko v Hrycenko (by his legal representative Hycenko) [2022] FCAFC 152 (9 September 2022)
Last Updated: 9 September 2022
FEDERAL COURT OF AUSTRALIA
Hrycenko v Hrycenko (by his legal
representative Hycenko) [2022] FCAFC 152
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Appeal from:
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File number:
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Judgment of:
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Date of judgment:
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Catchwords:
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PRACTICE AND PROCEDURE– power of the
Court to invoke the “slip rule” to extend the term of a
creditor’s petition under the Bankruptcy Act 1966 (Cth) –
where 12-month period had expired – whether slip rule available to
retrospectively extend life of a creditor’s
petition where sequestration
order already made – whether there was a relevant accidental slip or
omission BANKRUPTCY AND INSOLVENCY –whether it was open to
the Federal Circuit and Family Court of Australia (Division 2) to invoke the
slip rule to extend the
term of a creditor’s petition after 12-month
period expired and sequestration order made
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Legislation:
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National Security (War Service Moratorium) Regulations 1941 (Cth) r
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Federal Circuit and Family Court of Australia (Division 2)
(Bankruptcy) Rules 2021 (Cth) r 4.02
Federal Circuit and Family Court of Australia (Division 2) (General
Federal Law) Rules 2021 (Cth) r 17.05
Federal Court Rules 1979 O 35 r 7
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Cases cited:
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Re Wakim; Ex parte McNally (1999) 198 CLR 511
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Committee Appointed by the Attorney-General of the Commonwealth to Review
the Bankruptcy Law of the Commonwealth, Report of the Committee Appointed by
the Attorney-General of the Commonwealth to Review the Bankruptcy Law of the
Commonwealth, (Canberra, 1962) (Clyne Report)
Macquarie Dictionary
Online (Macmillan Publishers Australia, 2022)
Tarrant, Amending
Final Judgments and Orders (The Federation Press, 2010)
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Division:
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General Division
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Victoria
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Commercial and Corporations
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General and Personal Insolvency
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Number of paragraphs:
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Counsel for the Applicant:
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Mr P Fary SC with Ms V Bell |
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Solicitor for the Applicant:
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NOH Legal Pty Ltd
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Counsel for the Respondent:
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Mr T Bevan
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Solicitor for the Respondent:
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Kennedy Guy Solicitors
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ORDERS
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AND:
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GEORGE HRYCENKO (BY HIS LEGAL REPRESENTATIVE
NICHOLAS HYCENKO)Respondent
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BROMBERG, MOSHINSKY AND MCELWAINE JJ
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DATE OF ORDER:
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THE COURT ORDERS THAT:
- Leave
is granted to the appellant to rely upon ground 1 of the amended notice of
appeal which ground was not raised in the proceeding
before the Federal Circuit
Court of Australia.
- The
appellant has leave to rely on further evidence on the appeal, being the
evidence that the Federal Circuit Court of Australia
did not at any time before
the expiration of the period of 12 months commencing on the date of presentation
of the creditor’s
petition make any order under s 52(5) of the
Bankruptcy Act 1966 (Cth) extending the period for expiration of the
petition.
- The
appeal is allowed.
- The
sequestration order made on 28 October 2021 in the Federal Circuit Court of
Australia in the estate of Victor Hrycenko is set
aside.
- Order
1 of the orders made on 14 January 2022 in the Federal Circuit and Family Court
of Australia, amending the orders made 14 May
2021 nunc pro tunc, is set
aside.
- The
proceeding is adjourned for further submissions in writing or for hearing if
necessary all consequential orders, including costs.
- The
Registrar is directed to provide a copy of these reasons to Mr Michael David
Badge, who may be heard before the making of further
orders.
- The
parties, and Mr Michael David Badge (should he wish to be heard) are to in the
first place provide short written submissions,
not to exceed 3 pages, on the
question of consequential orders and costs.
REASONS FOR JUDGMENT
BROMBERG J:
- The
essential facts giving rise to this appeal are very helpfully summarised in the
reasons for judgment of Moshinsky J. I gratefully
adopt, without here
repeating, his Honour’s summary. I have also had the substantial
advantage of reading, in draft, the reasons
for judgment of McElwaine J. I
agree with his Honour that the appeal should be allowed and that the other
orders proposed by him
should be made.
- In
my view it is sufficient for the appeal to be determined by reference to grounds
1 and 1A of the appellant’s Amended Notice
of Appeal:
- The
learned primary Judge erred in making a sequestration order in circumstances
where the creditor’s petition had lapsed pursuant
to s 52(4) of the
Bankruptcy Act 1966 (Cth) ... prior to the making of the sequestration
order, and no order extending the period provided for in s 52(4)(a) had been
made under s 52(4)(b).
1A. The learned primary Judge erred in making an order nunc pro tunc
extending the period provided for in s 52(4)(a) of the Act in circumstances
where the requirement in s 43 that a sequestration order be made on a
(subsisting) petition was substantive and not procedural and could not be cured
by an order
made nunc pro tunc under the slip rule.
- There
are two primary questions raised by those grounds. First, can a
sequestration order be validly made in the absence of a subsisting
creditor’s petition? Second, if the answer to the first question
is no, can that invalidity be cured by an order made under the slip rule to
retrospectively
enliven the creditor’s petition?
- As
to the first question, it seems clear enough that a bankruptcy court is not
authorised or empowered to make a sequestration order
in the absence of a
creditor’s petition.
- By
the presentation of a creditor’s petition, a creditor applies to a
bankruptcy court for a sequestration order. The petition
is an application for
a sequestration order to be made against the debtor. It may only be presented
if the conditions specified
in s 44 of the Bankruptcy Act 1966
(Cth), including the existence of an act of bankruptcy, are satisfied.
Section 47 of the Act requires that the creditor’s petition be
verified by affidavit. Section 52 of the Act provides that at the hearing of
the creditor’s petition the court may make a sequestration order if,
inter alia, it is satisfied of the “matters stated in the
petition”.
- The
jurisdiction to make a sequestration order is conferred by s 43 of the Act which
is headed “Jurisdiction to make sequestration orders”. Relevantly, s
43(1) of the Act provides that “the [c]ourt may, on a petition
presented by a creditor, make a sequestration order against the estate of the
debtor” (emphasis added).
- The
terms of s 43(1) of the Act are clear enough. A bankruptcy court’s
jurisdiction is enlivened by the existence of a creditor’s petition
the
subsistence of which is a precondition to the exercise of the jurisdiction to
make a sequestration order.
- Section
52(4) of the Act provides that, unless extended, a creditor’s petition
lapses twelve months after its presentation. Once a petition
has lapsed it must
be taken to no longer subsist. In that respect I respectfully agree with the
observations made by McElwaine J
at [99] and [100].
- The
second question is more difficult to resolve. However, in my view, the second
question should be answered by applying, by analogy,
the reasoning of the High
Court in Emanuele v Australian Securities Commission [1997] HCA 20; (1997)
188 CLR 114.
- Recognising
for the reasons just given, that a creditor’s petition is a form of
application, the terms of s 459A of the Corporations Law (as set out in s
82 of the Corporations Act 1989 (Cth)) considered in Emanuele, are
relevantly analogous to those of s 43(1) of the Act set out above. Section 459A
of the Corporations Law provided (emphasis added):
On an application under s 459P, the Court may order that an insolvent
company be wound up in insolvency.
- In
Emanuele, a further provision of the Corporations Law was
relevant, namely s 459P. Amongst other things, that provision provided that an
application for a winding-up order made by the
Australian Securities Commission
(ASC) may only be made with the leave of the court and that the court may
give leave if satisfied that there is a prima facie case that the company
the subject of the application is insolvent.
- The
pertinent facts in Emanuele were that the ASC had made an application to
this Court for an order winding-up a particular corporation and obtained that
order
without having first obtained the leave required by s 459P. On appeal,
the Full Court took the view that it had the power to make
a corrective order
which retrospectively granted the leave the ASC required under s 459P.The
respondents in Emanuele supported the nunc pro tunc order made by
the Full Court as an exercise of the power conferred by the slip rule (Order 35,
r 7(3) of the then Federal Court Rules 1979 (Cth) which allowed for the
correction of “[a] clerical mistake...or an error arising in a judgment or
order from an accidental
slip or omission”). The appellants in
Emanuele contended that it was not open to the Full Court to have made
that order.
- All
of the judges proceeded on the basis that whether the slip rule was available to
cure the irregularity in question had to be determined
by reference to the
proper construction of the Corporations Law: see in particular at
122 and 124 (Brennan CJ); 127-129 (Toohey J with whom Dawson J agreed); 138
(Gaudron J), 140 (Kirby J). On
the question whether a nunc pro
tunc order was available to be made on the proper construction of the
Corporations Law, the High Court split largely on the basis of whether or
not a failure to obtain the leave required by s 459P went to a court’s
jurisdiction to make a winding-up order.
- In
essence, the majority (Dawson, Toohey and Kirby JJ) considered that the absence
of the grant of leave did not deny the existence
of the ASC’s application
before the Court. As there was a subsisting application, the Court had
jurisdiction to make the winding-up
order even though the application was
procedurally irregular because of the absence of leave. In the view of the
majority, the corrective
retrospective order which the Full Court made was
available to be made because it was curing an irregularity which was procedural
rather than jurisdictional. So much can be discerned from the observations made
by the majority: see at 125 (Dawson J); 128, 129,
131 and 132 (Toohey J); 156
(Kirby J). In particular, emphasising the importance of a subsisting application
to the question of the
Federal Court’s jurisdiction, Toohey J (with whom
Dawson J agreed) said at 132:
If the absence of leave was not fatal to the [ASC’s] application, there is
no sufficient reason why this Court should interfere
with the nunc pro tunc
order made by the Full Court.
Similarly, at 156 Kirby J stated:
But the application was undoubtedly before the Court which has jurisdiction.
That jurisdiction having attached in the present case,
it may be inferred that
Parliament contemplated that oversight and inadvertence would sometimes occur
for which the Court's general
powers of correction would be available, within
the limited area of operation and compatibly with the statutory requirement that
ordinarily leave should first be obtained.
- The
judges in the minority in Emanuele (Brennan CJ and Gaudron J) essentially
reasoned that the grant of leave under s 459P was a pre-condition to the
making of a valid
application by the ASC and thus a precondition on the
jurisdiction of the Court to make a winding‑up order. The minority judges
reasoned that on the proper construction of the Corporations Law, a
retrospective corrective order was not available to cure an absence of
jurisdiction. So much can be discerned from the observations
of the judges in
the minority at 119 and 122 (Brennan CJ); and 139 (Gaudron J). In
particular, and again emphasising the criticality
of a subsisting application,
Gaudron J (at 139) said this:
It follows, in my view, that although leave to make a winding up application may
be granted at any point prior to, or simultaneously
with, the making of a
winding up order, it may not be granted thereafter, whether by the judge who
made the order or by a court exercising
appellate jurisdiction. More precisely,
until leave has been granted there is no application for the purposes of s 459A
and, thus,
no application on which a winding up order can be made. That
conclusion is directed by the nature of the discretion which s 459P(2),
(3) and
(4) confer. And no different view is suggested by s 467(3)(b). Although s
467(3)(b) allows for notices and steps required
by the Law to be dispensed with,
it does not allow for the making of a winding up order in the absence of a
winding up application.
And as already indicated, the effect of s 459A, when
read in the light of s 459P(2) and (5), is that, until leave is granted, there
is no application upon which a winding up order can be made.
- The
following propositions are consistent with the reasoning in Emanuele in
relation to the availability of a retrospective corrective order to cure an
error or omission made in the course of the making
of a winding-up order under
the Corporations Law:
(1) a subsisting application is a pre-condition to a court’s jurisdiction
to make a winding-up order;
(2) a retrospective corrective order is available to cure a procedural
irregularity in an application; but
(3) a retrospective corrective order is not available to cure the absence of a
subsisting application because a subsisting application
is a jurisdictional
pre-condition for the making of a winding-up order.
- Those
propositions are apt to be applied in the resolution of the second question.
There is no constructional basis for relevantly
distinguishing the accommodation
provided to the operation of the slip rule by the Corporations Law as
considered in Emanuele in relation to the making of a winding-up order
from that of the Act in relation to the making of a sequestration order.
- If
the existence or subsistence of a creditor’s petition underpins the
jurisdiction of a bankruptcy court to make a sequestration
order, as I consider
it does, then by parity of reasoning with Emanuele, it seems to me that a
retrospective corrective order is not available to be made to cure the absence
of a subsisting creditor’s
petition and thus the invalidity of a
sequestration order made in that circumstance.
- The
position would be different where a creditor’s petition was merely
procedurally irregular at the time a sequestration order
is made, as was the
winding-up application in Emanuele.
- For
those reasons, an invalidity arising because a sequestration order was made in
the absence of a subsisting creditor’s petition,
cannot be cured by an
order made under the slip rule to retrospectively enliven the creditor’s
petition. Although the issue
had not been squarely raised before him, the
primary judge erred in making the order his Honour made on 14 January 2022 on
the basis
that such an order was available to extend the life of the
creditor’s petition so as to cure the invalidity in the sequestration
order made on 28 October 2021.
- The
appeal should be allowed and, amongst the other orders proposed by McElwaine J,
the sequestration order made on 28 October 2021
should be set aside.
I certify that the preceding twenty-one (21)
numbered paragraphs are a true copy of the Reasons for Judgment of the
Honourable Justice
Bromberg . |
Associate:
Dated: 9 September 2022
REASONS FOR JUDGMENT
MOSHINSKY J:
Introduction
- I
have had the considerable benefit of reading in draft the judgment of
McElwaine J. I gratefully adopt his Honour’s statement
of the
factual background and summary of the reasons of the primary judge. I agree
with McElwaine J that the appeal should be allowed
and with the other
orders proposed by his Honour. My reasons are as follows.
- The
essential facts giving rise to this appeal can be summarised as
follows:
(a) In April 2020, George Hrycenko (George) served a bankruptcy notice on
Victor Hrycenko (Victor). George was the father of Victor and of
Nicholas Hycenko (Nicholas). (The spelling of Nicholas’s surname
is slightly different from that of George and Victor.)
(b) On 6 June 2020, George passed away.
(c) On 29 July 2020, Nicholas, acting as personal representative of George,
presented a creditor’s petition against Victor
based on the bankruptcy
notice. This was due to lapse on 28 July 2021: Bankruptcy Act 1966
(Cth), s 52(4).
(d) On 8 September 2020, Nicholas became the executor of George’s
estate.
(e) On 14 May 2021, the primary judge (as a judge of the then Federal
Circuit Court of Australia), at the request of the parties,
made consent orders
‘on the papers’ in connection with the hearing of the
creditor’s petition. The orders provided
for the matter to be heard on
30 August 2021. (The hearing was subsequently adjourned to
29 September 2021.) At the time the consent
orders were made, the parties
and their legal representatives did not appreciate that the creditor’s
petition would lapse before
the proposed hearing date. The parties did not
request, and the orders did not include, an order pursuant to s 52(5) of
the Bankruptcy Act extending the period at the expiration of which the
creditor’s petition would lapse.
(f) On 28 July 2021, the creditor’s petition lapsed.
(g) On 29 September 2021, the hearing of the creditor’s petition took
place before the primary judge. By this stage, the Federal
Circuit Court had
become the Federal Circuit and Family Court of Australia (Division 2).
(h) On 28 October 2021, the primary judge gave judgment on the
creditor’s petition and made a sequestration order against the
estate of
Victor: Hrycenko (by His Legal Representative Hycenko) v Hrycenko [2021]
FedCFamC2G 187. At the time the Court gave judgment, no order had been
made pursuant to s 52(5) of the Bankruptcy Act extending the period
at the expiration of which the creditor’s petition would lapse.
(i) On 14 January 2022, the primary judge made an order that the orders
made on 14 May 2021 be amended nunc pro tunc by the addition of an
order that, pursuant to s 52(5) of the Bankruptcy Act, the time for
expiration of the creditor’s petition be extended up to and including
15 July 2022: Hrycenko (by His Legal Representative Hycenko) v
Hrycenko [2022] FedCFamC2G 2 (the January 2022 Judgment). The
order made on 14 January 2022 was expressed to have been made pursuant to
“Order 39.05 of the Federal Circuit Court Rules 2001”, but
the reference is in error as 39.05 is the number of the relevant rule in the
Federal Court Rules 2011. It appears from the January 2022 Judgment, at
[25], that the application for the order was made pursuant to r 16.05 of
the Federal Circuit Court Rules 2001 (set out below).
- By
his amended notice of appeal, Victor appeals from the judgments and orders of
the primary judge dated 28 October 2021 and 14 January
2022. The
issues raised by the appeal fall into two discrete categories:
(a) whether the Court below erred in making the sequestration order in
circumstances where the creditor’s petition had lapsed
prior to the making
of the order and no order extending the period provided for in s 52(4)(a)
of the Bankruptcy Act had been made under s 52(4)(b); and whether
the primary judge erred in making the order dated 14 January 2022 (grounds
1 to 1D); and
(b) whether the primary judge otherwise erred in making the sequestration order
(grounds 3 to 7, 10 to 12). (Grounds 2, 8 and 9
are not pressed.)
- It
is sufficient for present purposes to focus on the first category of
issues.
Key relevant provisions
- The
relevant provisions of the Bankruptcy Act are set out in the judgment of
McElwaine J. I note, in particular, s 52(4) and (5), which
provide:
(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.
- At
all relevant times, the Rules of Court contained provisions relating to the
varying of judgments and orders. It is unclear whether
the applicable Rules of
Court are those in force at the time the order sought to be corrected was made
(14 May 2021) or at the time
the correcting order was made (14 January
2022), but it is unnecessary to resolve that question as the substantive
position is the
same.
- As
at 14 May 2021, the applicable Rules of Court were the Federal Circuit
Court Rules 2001. Rule 16.05 of the Federal Circuit Court Rules 2001
relevantly provided:
16.05 Setting aside or varying judgments or orders
...
(2) The Court or a Registrar may vary or set aside a judgment or order after it
has been entered if:
...
(e) it does not reflect the intention of the Court; ...
...
(h) there is an error arising in the judgment or order from an accidental slip
or omission.
- The
Rules of Court in force as at 14 January 2022 were in the same terms: see
r 17.05 of the Federal Circuit and Family Court of Australia (Division
2) (General Federal Law) Rules 2021.
- It
is sufficient for present purposes to focus on the power in paragraph (h) of the
above rules, which may be referred to as the “slip
rule”.
Applicable principles
- In
Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385
(Elyard), a Full Court of this Court (Black CJ, Lockhart and
Lindgren JJ) considered the operation of the slip rule (contained in
O 35, r
7(3) of the Federal Court Rules 1979) in the context of
s 459R of the Corporations Law. Section 459R was in the following
terms:
(1) An application for a company to be wound up in insolvency is to be
determined within 6 months after it is made.
(2) The Court may by order extend the period within which an application must be
determined, but only if:
(a) the Court is satisfied that special circumstances justify the extension;
and
(b) the order is made within that period as prescribed by subsection (1), or as
last extended under this subsection, as the case
requires.
(3) An application is, because of this subsection, dismissed if it is not
determined as required by this section.
- Briefly
stated, the facts of Elyard were as follows. On 18 November 1994,
an application for the winding up in insolvency of the appellant (Elyard)
was made. On 21 April 1995, orders were made substituting another creditor
as applicant, adjourning the proceeding to 26 May 1995
and extending the
period within which the application had to be determined (the period) to
that date. On 26 May 1995, orders were made adjourning the proceeding to
9 June 1995 and further extending the period to that
date. On 9 June
1995, consent orders were made by a Registrar substituting the respondent
(DDB) as applicant and adjourning the proceeding to 16 June 1995,
together with consequential orders and directions. The solicitor for
DDB
intended to apply for an order further extending the period but omitted by
inadvertence so to apply. No such order was made.
On 9 August 1995, the
judge (Sheppard J) made an order, pursuant to the slip rule, that the
orders made on 9 June 1995 be corrected
by adding an order that the period
be further extended to 30 November 1995.
- The
primary question before the Full Court was whether s 459R(2)(b) prevented
the making on 9 August 1995 of the order for extension.
All members of the
Full Court held that s 459R did not displace the application of the slip
rule or render it unavailable: see 391-393
per Lockhart J (Black CJ
agreeing); and 404-405 per Lindgren J (Black CJ agreeing). In the
course of his judgment, Lockhart J stated
at 390-391:
The slip rule applies where the proposed amendment is one upon which no real
difference of opinion can exist. It does not apply where the amendment is a
matter of controversy; nor does it extend to mistakes that are the consequence
of a deliberate
decision: ...
(Emphasis added.)
- Further,
Lockhart J stated at 391:
It is well settled that the application of the slip rule is not confined to
giving effect to the intention of the judge at the time
when the court’s
order was made, or judgment given. It extends to the intention which the court
would have had, but for the
failure that caused the accidental slip or omission:
Symes v Commonwealth (1987) 89 FLR 356. The rule also extends to
permit the correction of an order or decree where the omission results from the
inadvertence of a party’s
legal representative: ...
(Emphasis added.)
- At
391, Lockhart J referred to the appellant’s argument based on the
language of s 459R(2) and (3). The argument was put on
two independent
bases: first, that the language of subs (2) required any application for an
extension to be made before the expiry
of the period as earlier extended; and
secondly, that the application to wind up the appellant was dismissed by
operation of subs
(3). In rejecting these arguments, Lockhart J stated at
391-392:
In my opinion, the argument rests on a misconception of the nature and operation
of the slip rule. This is the case because the later order corrects the
earlier order, and speaks from the date of the earlier order, which then
operates with full force as
corrected. Hence, the order made by the primary
judge in this case, on 9 August 1995, corrected the order of the Registrar
of 9 June 1995,
which then operated with full force from 9 June 1995. The
slip rule, with retrospective operation, corrected the earlier order. In
the
result, the Registrar’s order of 9 June 1995 embodied the correction of
Sheppard J’s subsequent order, so that the
order of 9 June 1995 was
corrected to extend the relevant period under s 459R before the prescribed
period had expired. The essential
purpose of the slip rule is to give effect to
the intention which the court would have had, if it were not for the failure
which
led to the accidental slip or omission.
It may be trite, but it is worth repeating that the slip rule exists to avoid
injustice: see Monaco v Amedo Pty Ltd (1994) 13 WAR 522 at 524 per
Malcolm CJ. The purpose of the rule would be denied if s 459R operated to
achieve the result for which the appellant contends.
It is irrelevant that
the later order of Sheppard J, which corrected the earlier order, was made after
the expiration of the statutory
time limit. The earlier order as corrected, and
speaking by operation of the later order from the earlier date, operated with
full
force from a time which was within the statutory time frame.
(Emphasis added.)
- At
392, Lockhart J noted that “[p]rovisions such as s 459R(2)(b)
and (3) and s 459G of the Corporations Law, and s 52(3) and (5)
of the Bankruptcy Act, reflect the intention of the Parliament that
applications to wind up companies and petitions to sequestrate the estates of
natural
persons must be dealt with promptly”. His Honour then
stated:
This evident purpose of the Parliament is not denied at all by the exercise by
the court of its power under the slip rule to correct
accidental slips when
justice requires that this be done. The Court has a discretion which it would
be loath to exercise except in clear cases.
(Emphasis added.)
- In
Griffiths v Boral Resources (Qld) Pty Ltd [2006] FCAFC 149; (2006) 154 FCR 554
(Griffiths), the Full Court of this Court
(Spender ACJ, Dowsett and Collier JJA) stated, at [30]:
With all respect, we are a little uncomfortable with the view, inherent in
Elyard, that the slip rule may be used to extend time notwithstanding the
statutory requirement that such order be made within a period
of time which has
elapsed. However Elyard concerns the practice of the Court and has now
stood for over 10 years without legislative intervention. We are reluctant to
reconsider
it. Although it does not directly bind us in applying s 52 of
the Bankruptcy Act, to take a different approach would cause substantial
confusion in insolvency practice.
- In
Flint v Richard Busuttil & Company Pty Ltd [2013] FCAFC 131; (2013) 216 FCR 375
(Flint), the Full Court of this Court (Allsop CJ, Katzmann
and Perry JJ) considered a fact situation that bears some similarity to the
facts
of the present case. In that case, on 29 August 2012 the Federal
Magistrate made a procedural order for the filing of written submissions
in
connection with a review application and a creditor’s petition:
Flint at [4]. On 23 November 2012, the creditor’s petition
lapsed: Flint at [7]. On 7 December 2012, the Federal Magistrate
delivered a judgment in which he made an order that, pursuant to s 52(5) of
the Bankruptcy Act, the creditor’s petition be extended and that,
subject to further order, it would expire not before 23 November 2013:
Flint at [9]. The Federal Magistrate’s reasons indicated that the
order was made under the slip rule and with reference to the procedural
orders
made on 29 August 2012: Flint at [10]. The proceeding was
subsequently transferred to the Federal Court of Australia. On 7 June
2013, a Judge of the Federal
Court made a sequestration order.
- In
a joint judgment, the Full Court held that the slip rule was not engaged in the
circumstances of the case, and that it was not
open to the Federal Magistrate to
make the order that he did: Flint at [34].
- The
Full Court stated, at [35], that for the slip rule to apply there must be an
order in need of correction. The Full Court noted,
at [36], that no argument
was put to the Court that the order of 29 August 2012 was not an order to
which the slip rule could apply.
In the circumstances, it was unnecessary for
the Full Court to consider the discussion in Griffiths at [34]-[67] about
the character of the order required for the slip rule to be engaged:
Flint at [36].
- The
Full Court noted, at [37], that because of the way that the Federal Magistrate
dealt with the matter on 7 December 2012, Busuttil
did not put on any
evidence in support of the invocation of the slip rule; it was therefore
necessary to draw inferences from the
events as they fell out, both as to
whether there was an accidental slip or omission and as to whether there was an
error in the
order resulting from such a slip or omission: Flint at
[37].
- The
Full Court reasoned at [38]-[39]:
- On
29 August 2012 there was a directions hearing before the federal
magistrate. If an application had been made on that day for an
extension of the
creditor’s petition under s 52 of the Bankruptcy Act, his
Honour would have been required to consider whether it was just and equitable to
extend the petition and, if so, in what terms
the order should be made. We
respectfully disagree with the conclusion of the primary judge that there is no
doubt that the order would have been made. The review of the
registrar’s decision was not without its complexity, but almost three
months remained before the petition would lapse. Instead of extending the
period of the creditor’s petition, the federal magistrate may have
shortened the time for Ms Flint
to file her submissions. He may have listed the
creditor’s petition for hearing on a date in early November,
conditionally,
depending upon the outcome of the application before him.
These steps would have reflected the expedition required and the public policy
that inheres in the prompt dispatch of a creditor’s
petition under
s 52. The interests of creditors generally can be adversely affected by
delays in the disposition of bankruptcy matters. Thus, if there was an error
on the part of either the representative of the creditor in not making the
application for an extension
on (or before) 29 August or in the federal
magistrate not adverting to the question, it is not clear what course
would probably have been taken and, a fortiori, not clear that an order
would have been made at that time extending the life of the creditor’s
petition.
- Furthermore,
the evidence is not sufficient to support an inference of error or omission by
the creditor’s lawyer or the federal
magistrate. No doubt at some time
after the petition had lapsed, most likely during the preparation of the reasons
for judgment,
the federal magistrate realised that there was a need to extend
the petition and that he should have done so earlier. That is not
to the point.
The question is whether or not there was an accidental slip or omission on
29 August 2012.
(Emphasis added.)
- In
Endresz v Commonwealth [2019] FCAFC 197; (2019) 273 FCR 286 (Endresz), Rares
and Markovic JJ stated at [81]:
The Full Court in Flint recognised the considerable constraints that
apply where there is resort to the slip rule in circumstances where the exercise
of
an independent discretion is required. Whether the slip rule can be invoked
where, through an accidental slip or omission an order
was not made extending
the life of a petition pursuant to s 52(5) of the Act before the expiration
of 12 months from the date of presentation of a petition, will depend upon the
circumstances. In
particular, as s 52(5) of the Act requires the exercise
of an independent discretion, the question of how the discretion would have been
exercised had the
order been made at the earlier time becomes a relevant factor.
As the Full Court recognised in Flint, if the discretion could only be
exercised one way it is difficult to see how the slip rule could not apply.
But, if there is any room for debate as to the outcome of an exercise of the
discretion under s 52(5) it is difficult to see how the slip rule could be
engaged.
(Emphasis added.)
Application of principles to facts of this case
- In
my view, in the circumstances of this case, it was not open to the primary judge
to apply the slip rule to amend the orders made
on 14 May 2021 to include
an order extending time pursuant to s 52(5) of the Bankruptcy Act.
This is because it is not clear what order would have been made had the creditor
made an application, on 14 May 2021, for an order
under s 52(5) that
the period at the expiration of which the petition would lapse be extended.
- Before
addressing that issue, I note that there is an issue whether, on the facts of
the present case, there was an order in need
of correction. The slip rule
requires there to be “an error arising in the judgment or order from an
accidental slip or omission”.
The candidate order in the present case is
that made by the primary judge on 14 May 2021. The evidence before the
primary judge
included an affidavit of James O’Donnell, the solicitor
acting for Nicholas, dated 23 November 2021. Mr O’Donnell
stated
(at paragraph 21) that, as at 14 May 2021, he had not realised that
the creditor’s petition was due to lapse and that, had
he been aware that
the creditor’s petition would expire before the final hearing on
30 August 2021, he would have made an application
or sought amended orders
by consent extending time pursuant to s 52(5) of the Bankruptcy Act:
see the January 2022 Judgment at [18]. There is an issue whether, in these
circumstances, there was an error in the 14 May 2021
order. An application
for an order extending the period of the creditor’s petition did not need
to be made on 14 May 2021;
it could have been made at any time between
14 May and 28 July 2021 (the date when the creditor’s petition
was due to lapse).
Thus it is not clear that the order of 14 May 2021
contains an error. Nevertheless, I will proceed on the basis that the
14 May
2021 contains an error arising from an accidental slip or
omission.
- In
my view, the difficulty with applying the slip rule in the circumstances of the
present case is that it is not clear what order
would have been made had the
creditor made an application, on 14 May 2021, for an order under
s 52(5) extending the period of the creditor’s petition. While the
Court may have made an order extending the period, the Court may instead
have listed the matter for hearing on a date before the creditor’s
petition was due to lapse (28 July 2021). As at 14 May 2021, there
was still a period of more than 10 weeks before the creditor’s
petition was due to lapse.
- On
an application for an order under s 52(5), the Court may, if it considers
it just and equitable to do so, make an order extending the period at the
expiration of which the
petition will lapse. This requires the exercise of a
discretion by the Court. In the present case, it is unclear what stance the
debtor (Victor) would have taken if the creditor (Nicholas) had sought an
extension of the period. I note that the parties requested
a hearing date after
23 July 2021, to accommodate the availability of Victor’s counsel.
However, that was in a context where
the parties did not realise that the
creditor’s petition would lapse on 28 July 2021. The parties may
have adopted a different
position if that had been realised. In any event, the
Court was not bound to list the matter on a date when Victor’s then
counsel was available, particularly in circumstances where the creditor’s
petition was due to lapse.
- I
also note that, in the January 2022 Judgment, the primary judge stated at
[65]-[66]:
- Contrary
to the submissions advanced by Counsel for the debtor, I have no doubt whatever,
having considered the matter further (I
expressed a slightly more nuanced view
during the trial), that I would have extended the time for the hearing of the
petition. All
parties proceeded on the footing that the petition was properly
before the Court and to be heard and determined. Orders were made
by consent for
the filing of material. There is no conceivable basis upon which I would have
in effect summarily dismissed the petition merely because of a delay that
was most substantially caused by the conduct and requirements of the debtor
himself. If the applicant
had sought an extension of time in the 14 May
2021 Orders I would certainly have regarded it as just and equitable to make
it.
- Notions
that matters might be more readily brought forward or allotted to another Judge
are fine in theory but ignore entirely the
practical realities of the listing
pressures in this Court. Even listing the matter when I did required shoehorning
it into an otherwise
bursting list as would, indeed, be the case for any other
Judge in the Melbourne registry.
(Emphasis added.)
- In
my view, there are a number of difficulties with the above reasoning and the
above finding or conclusion. In the fourth sentence
of [65], in the part
emphasised in the above quotation, the primary judge appears to have assumed
that the alternative to an order
extending the period of the creditor’s
petition was, in effect, the summary dismissal of the petition. However, this
was not
the relevant alternative. The relevant alternative was an order listing
the matter for hearing before the creditor’s petition
was due to lapse.
As already noted, as at 14 May 2021, there was still a period of 10 weeks
before the creditor’s petition
was due to lapse. Insofar as the primary
judge, in [66], suggests that the matter could not have been listed in the
period before
the creditor’s petition was due to lapse, his Honour does
not appear to have considered whether the matter could have been
listed before a
Judge in another Registry of the Court. His Honour also does not appear to have
taken into account that the policy
of the Bankruptcy Act is for such
proceedings to be dealt with speedily: see Griffiths at [31].
- In
the circumstances, by parity of reasoning with Flint, it is not clear
what course would probably have been taken, and therefore what order would have
been made, if an application for
an order under s 52(5) had been made on
14 May 2021. As in Flint, there was still a substantial period of
time before the creditor’s petition was due to lapse. In these
circumstances, to
adopt the language of Endresz, there is “room for
debate” as to how the discretion in s 52(5) would have been
exercised.
- An
important factual distinction between Elyard and the present case is
that, in Elyard, the winding up application was due to lapse on the same
day as the date of the order that was sought to be corrected (9 June 1995).
In these circumstances, it was clear that, but for the accidental slip or
omission, an order would have been made extending the period.
Setting the
matter down for hearing before the winding up application was due to lapse was
not an available alternative.
- For
these reasons, in my view, the slip rule was not available to amend the order of
14 May 2021 by inserting an order extending the
period of the
creditor’s petition pursuant to s 52(5).
- In
light of the above, I do not consider it necessary to consider whether the slip
rule can be exercised to make an order extending
the period of a
creditor’s petition after a sequestration order has been made.
This is because, in any event, in my view, the slip rule was not available to be
exercised in
the circumstances of the present case.
- Accordingly,
I consider that the order made by the primary judge on 14 January 2022 was
in error and should be set aside. It follows
that the sequestration order made
on 28 October 2021 was made without jurisdiction and should be set
aside.
|
I certify that the preceding thirty-three (33) numbered paragraphs are a
true copy of the Reasons for Judgment of the Honourable Justice
Moshinsky.
|
Associate:
Dated: 9 September 2022
REASONS FOR JUDGMENT
MCELWAINE J:
INTRODUCTION
- The
important question that is raised in this appeal is whether it was open to the
Federal Circuit and Family Court of Australia (Division
2) to invoke the slip
rule to extend the term of a creditor’s petition under the Bankruptcy
Act 1966 (Cth) (the Bankruptcy Act) after the making of a
sequestration order? For the detailed reasons that follow, I have concluded
that it was not and accordingly
I would allow the appeal.
- By
an amended notice of appeal filed on 26 April 2022, the appellant
(Victor) appeals from two judgments of the Federal Circuit and Family
Court of Australia (Division 2) (FCFCOA) in Hrycenko (by His Legal
Representative Hycenko) v Hrycenko [2021] FedCFamC2G 187 and Hrycenko (by
His Legal Representative Hycenko) V Hrycenko [2022] FedCFamC2G 2. Each is a
decision of Judge Burchardt. The first was published on 28 October 2021 when a
sequestration order was made in relation
to the estate of Victor and Mr Michael
Badge was appointed as the trustee in bankruptcy (the Trustee). The
second was published on 14 January 2022 and the following order was made,
amongst others:
Pursuant to Order 39.05 of the Federal Circuit Court Rules 2001 the
orders made on 14 May 2021 be amended nunc pro tunc by the addition of an
order that:
a) Pursuant to section 52(5) of the Bankruptcy Act 1966 (Cth) that the
time for expiration of the Creditor’s Petition in this proceeding be
extended up to and including 15 July 2022.
- It
is convenient in these reasons to refer to the second judgment of his Honour as
the primary judgment. There is an error in the order as made by the
primary judge in that it refers to rule 39.05 of the Federal Circuit Court
Rules 2001 (Cth) whereas in the reasons his Honour correctly referenced rule
16.05 of the Federal Circuit Court Rules 2001 which is now rule 17.05 of
the Federal Circuit and Family Court of Australia (Division 2) (General
Federal law) Rules 2021 (Cth) (FCFCOA Rules). Nothing in this appeal
turns on that error.
- The
reference to 14 May 2021 is to an order made by consent that the hearing of the
creditor’s petition be adjourned to 30 August
2021. When that order was
made, it was not noticed that the creditor’s petition, which was presented
on 29 July 2020, would
lapse by operation of s 52(4) of the Bankruptcy Act,
twelve months later on 28 July 2021, unless that period was extended by the
making of an order pursuant to s 52(5) of the Bankruptcy Act. In the events as
they occurred, the creditor’s petition was not heard until 29 September
2021, which resulted in the making
of the sequestration order on 28 October
2021. It was not noticed when that order was made that the petition had by then
expired.
It was not until November 2021 that the error was noticed, which
resulted in the filing of an application on 23 November 2021 by
the respondent
to this appeal Nicholas Hycenko in his capacity as the Executor of the Estate of
George Hrycenko, deceased (Nicholas), for an order pursuant to the slip
rule nunc pro tunc that the time limited for the expiration of the
creditor’s petition
be extended. (I note that the correct spelling of the
surname of Nicholas is “Hycenko” which for reasons which do not
emerge from the materials differs from the spelling of the surname of his father
and brother). That application was contested and
was resolved for the reasons
set out in the primary judgment and the making of the order that is central to
this appeal.
THE FACTUAL BACKGROUND
- On
7 April 2020, Mr George Hrycenko (George), who is the father of Victor
and Nicholas, served a bankruptcy notice on Victor. The notice claimed that
Victor owed George an
amount of $3,115,092.97 pursuant to a judgment entered in
the Supreme Court of Victoria. Victor was required to comply with the
requirements of the bankruptcy notice on or before 28 April 2020 or to satisfy
the court that he had a counter-claim, set-off or
cross demand equal to or
greater than the sum claimed in the bankruptcy notice. Victor committed an act
of bankruptcy in that he
failed to comply with the requirements of the
bankruptcy notice, although he did pursue an application in the Federal Circuit
Court
to set aside the notice. On 16 July 2020, Judicial Registrar Ryan
dismissed that application.
- George
died on 6 June 2020. On 29 July 2020, Nicholas, acting as the personal
representative of George, presented a creditor’s
petition in reliance upon
Victor’s act of bankruptcy. Victor resisted the creditor’s
petition.
- On
8 September 2020, probate was granted for the estate of George, appointing
Nicholas as the executor. Nicholas continued the creditor’s
petition in
his capacity as executor of the estate.
- On
7 August 2020, Victor filed an application for review of Judicial Registrar
Ryan’s orders of 16 July 2020 (set-aside review). On 3 September
2020, Judicial Registrar Gitsham made orders adjourning the creditor’s
petition to a further hearing on 17
September 2020 with subsequent timetabling
orders. On 17 September 2020, Judicial Registrar Gitsham adjourned the further
hearing
of the creditor’s petition to a date to be fixed after the
set-aside review was determined and made a further order requiring
the parties
to notify the Court following the determination as to the outcome of that
application.
- The
set-aside review was heard by Judge McNab on 2 October 2020, who for reasons
published on 19 February 2021, dismissed it.
- On
24 February 2021, the solicitor for Nicholas wrote to the Court advising of the
result of the set-aside review. On 1 April 2021,
Judicial Registrar Gitsham
made orders by agreement referring the creditor’s petition to a judge of
the Federal Circuit Court
for hearing and determination and adjourned the
creditor’s petition for directions on 17 May 2021 before the primary
judge.
- On
14 May 2021, Victor’s solicitor, Mr Omar El-Hissi, emailed the solicitor
for Nicholas and said:
Further to below, we have been able to confirm with Mr Evans QC that he is not
available until 23 July 2021. We will request the
Court to list the hearing on
the first available date after 23 July 2021. If Mr Bevan remains briefed, are
there any unavailable
dates for him after 23.07.2021?
- A
co-operative response was received. Later that day, Mr El-Hissi emailed the
associate to the primary judge and attached a proposed
minute of orders signed
by both parties which set out a timetable for filing material prior to the final
hearing and which requested
a listing of the creditor’s petition on a date
not before 23 July 2021. The primary judge made the requested orders by consent
and ultimately the creditor’s petition was listed for hearing on 29
September 2021. The outcome of that hearing was the making
of the sequestration
order and the appointment of the Trustee for the reasons published on 28 October
2021.
THE REASONS OF THE PRIMARY JUDGE
- His
Honour noted that “despite some earlier confusion” (PJ [25]), the
parties agreed that the discretion that his Honour
was requested to exercise was
conferred by rule 16.05 of the Federal Circuit Court Rules 2001 (now rule
17.05 of the FCFCOA Rules) which relevantly provided:
The Court or a Registrar may vary or set aside a judgment or order after it has
been entered if:
(e) it does not reflect the intention of the Court; or
...
(h) there is an error arising in the judgment or order from an accidental slip
or omission.
- The
primary judge accepted affidavit evidence from the solicitor for Nicholas, who
deposed that:
The creditor’s petition was due to expire on 23 July 2021. The effect of
Burchardt J’s orders was to list the final
hearing of the creditor’s
petition to a date after the expiry of the petition. I had not realised this
was the case. The
expiry of the creditor’s petition had not been raised
with me by counsel, the solicitor’s [sic] for the respondent or the
court. Had I been aware that the petition would expire before the final hearing
on 30 August 2021, I
would have made application or sought orders by consent
extending time pursuant to s 52(2) of the Bankruptcy Act 1966 ( Cth).
- His
Honour also accepted evidence from the applicant’s solicitor that it was
not until 16 November 2021 that he was first alerted
to the expiry of the
petition, when he was informed by the solicitor for Victor of that fact and that
it would be the subject of
an appeal ground from the making of the sequestration
order.
- His
Honour correctly understood that although the slip rule confers a broad power of
correction and extends to the correction of error
that results from the
inadvertence of a party’s lawyer “it is not available as a matter of
course” by reference
to L Shaddock & Associates Pty Ltd v
Parramatta City Council [1982] HCA 59; (1982) 151 CLR 590, Mason ACJ, Wilson and Deane JJ,
at 594 and 597. And his reasoning was also guided by the judgment of Kirby J in
Emanuele v Australian Securities Commission [1997] HCA 20; (1997) 188 CLR 114
(Emanuele) at 152:
It is trite to say, but worth repeating, that the power of a court, such as the
Federal Court, to correct obvious slips by orders
in appropriate cases nunc pro
tunc is one granted by legislation and the rules and implied in the express
powers of the Court to
avoid injustice. There is a reason for the tendency in
the series of cases cited by McHugh JA in Woods v Bate and in other cases
to like effect, for the reluctance of courts in recent times to invalidate acts
done pursuant to a statutory provision
because of a failure to comply with a
prior procedural condition. Courts today are less patient with meritless
technicalities.
They recognise the inconvenience that can attend an overly
strict requirement of conformity to procedural preconditions. In the
morass of
modern legislation, it is easy enough, even for skilled and diligent legal
practitioners (still more lay persons who must
conform to the law) to slip in
complying with statutory requirements.
(Footnotes omitted.)
- The
primary judge undertook a detailed analysis of a number of authorities, which I
later examine in these reasons, from which he
summarised the principles to be
applied at PJ [61] as follows (with my ellipsis):
(a) the Court has power to extend the life of a petition which has lapsed in
appropriate circumstances...;
(b) whether the power is available will depend upon the particular circumstances
of each case;
(c) the respondent’s... submission as to the distinction between
jurisdictional and procedural characterisation is not supported
by the majority
decision in Emanuele;
(d) there must be an error in the relevant order for the Court’s power
under the slip rule to arise;
(e) whether there is an error in the order may be proved either by direct
evidence or by inference.
- At
PJ [64]- [66] his Honour found and stated:
Likewise, the solicitor for the applicant did not turn his mind to the
expiration of the petition. Likewise, again, neither did
I. In asking for a
listing of the matter within five days of the expiration, the parties plainly
committed an inadvertent error.
It must have been readily foreseeable, had they
turned their minds to the matter, that the court would be unable, given its
general
listing pressures, to be able to accommodate the matter prior to 28
July, let alone giving a decision.
Contrary to the submissions advanced by Counsel for the debtor, I have no doubt
whatever, having considered the matter further (I
expressed a slightly more
nuanced view during the trial), that I would have extended the time for the
hearing of the petition. All
parties proceeded on the footing that the petition
was properly before the Court and had to be heard and determined. Orders were
made by consent for the filing of material. There is no conceivable basis upon
which I would have in effect summarily dismissed
the petition merely because of
a delay that was most substantially caused by the conduct and requirements of
the debtor himself.
If the applicant had sought an extension of time in the 14
May 2021 Orders I would certainly have regarded it is just and equitable
to make
it.
- From
that reasoning His Honour concluded at PJ [67]:
If the power under the slip rule is available, this is a paradigm example of its
application. In my view, the failure to address
the extension of the life of
the petition in the order in [sic] 14 May 2021 represents an accidental
slip on the part of the solicitor for the creditor which has led to an error in
the order.
In my view, the application should succeed.
- The
first sentence of that paragraph is curious. As I interpret his Honour’s
reasons, he accepted the submission put to him
that it was open on the facts to
exercise the discretion conferred by the slip rule. Ultimately nothing turns on
that in this appeal,
as it was not submitted to us that the primary judge failed
to expose his reasoning process in navigating to his ultimate
conclusion.
THE APPEAL TO THIS COURT
- Victor
filed his notice of appeal from the primary judgment in this Court on 19
November 2021. On 25 November 2021, Victor filed
an interlocutory application
in his appeal and sought, inter alia, leave to advance a ground of appeal not
the subject of argument
in the proceeding below, leave to adduce evidence not
raised at trial and a stay of all proceedings under the sequestration order
pending the determination of the appeal. On 7 December 2021, Bromberg J made
orders staying all proceedings under the sequestration
order until 28 days after
the hearing and determination of the appeal. His Honour otherwise adjourned the
interlocutory application
to the hearing of the appeal.
- When
the appeal was heard before us, counsel for Nicholas did not oppose a grant of
leave to permit Victor to advance an argument,
being grounds 1 and 1A-1D of the
amended notice of appeal, that was not put to the primary judge, which grounds
in summary contend
that the court did not have jurisdiction to act under the
slip rule in order to extend the period of the creditor’s petition
nunc
pro tunc. That argument is central to the outcome of the appeal, raises a
question of general importance as to the meaning and effect of
s 52 of the
Bankruptcy Act and does not turn on contested facts. It is obviously
appropriate to grant the leave that is sought.
- Victor
relies upon 12 grounds of appeal covering many pages, some of which raise
complex factual contentions that are said to infect
the primary judge’s
exercise of discretion and rely on the assumption that the slip rule was
available. Some grounds were
abandoned in the course of argument before us. It
is unnecessary to set out all of the grounds and I concentrate only on the
jurisdictional
grounds that are dispositive of the appeal. They are:
- The
learned primary Judge erred in making a sequestration order in circumstances
where the creditor’s petition had lapsed pursuant
to s 52(4) of the
Bankruptcy Act 1966 (Cth) (Act) prior to the making of the
sequestration order, and no order extending the period provided for in s
52(4)(a) had been made under s 52(4)(b).
1A. The learned primary Judge erred in making an order nunc pro tunc
extending the period provided for in s 52(4)(a) of the Act in circumstances
where the requirement in s 43 that a sequestration order be made on a
(subsisting) petition was substantive and not procedural and could not be cured
by an order
made nunc pro tunc under the slip rule.
1B. The learned primary Judge erred in failing to find that s 52(5) of the Act,
with its explicit prescription of a time limit for the making of an extension
order, codified a purpose of expedition
in an insolvency controversy which was
inconsistent with any ability to have resort to a slip rule so as to make, after
the expiry
of that time limit, an order extending time having effect prior to
that expiry.
1C The learned trial Judge erred in finding that there was “an error
arising in the judgment or order from an accidental slip
or omission” in
the orders made having regard to the following:
- there
was a gap of more than 10 weeks between 14 May 2021 (directions) and the date on
which the creditors petition lapsed (30 July
2021);
- no
application to extend time was made by the applicant prior to 14 May 2021 and 30
July 2021;
- an
application for an extension of time could have been made by the applicant at
any time between 14 May 2021 and 30 July 2021;
- Mr
O’Donnell deposes that:
“Had I been
aware that the petition would expire before the final hearing on 30 August 2021.
I would have made application or
sought amended orders by consent extending time
pursuant to s 52(5) of the Act”
- to
the extent that the applicant made an error, it was an error made after 14 May
2021 when he failed to apply for an extension of
time – noting that such
an error is not an error arising “in the judgment or order” made on
14 May 2021;
- there
were other courses open to the trial Judge at the hearing on 14 May 2021 to deal
with the circumstance that the creditor’s
petition was due to lapse on 30
July 2021 including listing the creditors petition for hearing prior to 30 July
2021;
- the
trial Judge’s finding that “There is no conceivable basis upon which
I would have in effect summarily dismissed the
petition merely because of a
delay that was most substantially caused by the conduct and requirements of the
debtor himself.”
was erroneous in circumstances where there was no
evidence that no other options were available to the trial Judge on 14 May
2021;
- an
order extending the time provided for in s 52(4)(a) of the Act required the
exercise of an independent discretion (that had not been exercised at the time
the sequestration order was
made);
- the
evidence does not rise above speculation as to the position of both the court
and the applicant on 14 May
2021.
The Statutory Scheme and the Submissions
- Section
43 of the Bankruptcy Act provides:
Jurisdiction to make sequestration orders
(1) Subject to this Act, where:
(a) a debtor has committed an act of bankruptcy; and
(b) at the time when the act of bankruptcy was committed, the debtor:
(i) was personally present or ordinarily resident in Australia;
(ii) had a dwelling‑house or place of business in Australia;
(iii) was carrying on business in Australia, either personally or by means of
an agent or manager; or
(iv) was a member of a firm or partnership carrying on business in Australia by
means of a partner or partners or of an agent or
manager;
the Court may, on a petition
presented by a creditor, make a sequestration order against the estate of the
debtor.
(2) Upon the making of a sequestration order against the estate of a
debtor, the debtor becomes a bankrupt, and continues to be
a bankrupt until:
(a) he or she is
discharged by force of subsection 149(1); or
(b) his or her bankruptcy is annulled by force of subsection 74(1)
or 153A (1) or under
section 153B.
- By
s 5 of the Bankruptcy Act, a petition is simply defined as “means a
petition under this Act”. At the time of filing of the creditor’s
petition
in this matter, the form of a petition was set out at form B6, as
determined by r 4.02 of the Federal Circuit Court (Bankruptcy) Rules 2016
(Cth). Section 44 of the Bankruptcy Act sets out the conditions on which a
creditor may present a petition. There was a minimum requirement that the
debtor must owe the
petitioning creditor a debt of at least $5000 (or two or
more debts that amount to at least $5000) and that “the act of bankruptcy
on which the petition is founded was committed within six months of the
presentation of the petition”: s 44(1)(c). By s 47 of the Bankruptcy Act,
a creditor’s petition must be verified by an affidavit and, except with
the leave of the Court, shall not be withdrawn after
it is presented.
- Counsel
for Victor submitted to us that the existence of a creditor’s petition
within the meaning of s 43 of the Bankruptcy Act is a jurisdictional, not a
procedural, requirement to the making of a sequestration order. In developing
that argument, he placed
emphasis on the heading to the section and submitted,
that whilst not part of the Bankruptcy Act, it should be referenced similarly to
other extrinsic material: R v A2 (2019) 269 CLR 507; [2019] HCA 35 at
[40], Kiefel CJ and Keane J, a case concerned with statutory provisions enacted
in NSW. In my view, it is not necessary to proceed in
that way as the heading
is part of the Bankruptcy Act by force of s 13 (1) of the Acts Interpretation
Act 1901 (Cth) and falls to be construed with all of the relevant text, in
context and conformably with the purpose of the provisions.
- Counsel
for Victor further developed his argument submitting that a subsisting petition
is a jurisdictional threshold requirement
to the exercise of the discretionary
power to make a sequestration order rather than a non-jurisdictional requirement
for the exercise
of the power. A lapsed petition is not one that has the
character of a petition that the Bankruptcy Act requires. For that submission s
52 is primarily relied upon, which provides:
Proceedings and order on creditor’s
petition
(1) At the hearing of a creditor’s petition, the Court shall require proof
of:
(a) the matters stated in
the petition (for which purpose the Court may accept the affidavit verifying the
petition as sufficient);
(b) service of the petition; and
(c) the fact that the debt or debts on which the petitioning creditor
relies is or are still owing;
and, if it is satisfied with the proof of those matters, may make a
sequestration order against the estate of the
debtor.
(1A) If the Court makes a sequestration order, the creditor who obtained
the order must give a copy of it to the Official Receiver
before the end of the
period of 2 days beginning on the day the order was made.
Penalty: 5 penalty
units.
Note: See also
section 277B (about infringement
notices).
(1B) Subsection (1A) is an offence of strict liability.
Note:
For strict liability, see section 6.1 of the Criminal
Code.
(2) If the Court is not satisfied with the proof of any of those matters,
or is satisfied by the debtor:
(a) that he or she is able to pay his or her debts; or
(b) that for other sufficient cause a sequestration order ought not to be made;
it may dismiss the
petition.
(3) The Court may, if it thinks fit, upon such terms and conditions as it
thinks proper, stay all proceedings under a sequestration
order for a period not
exceeding 21 days.
(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.
- Counsel
acknowledges that there is authority in this Court to the effect that orders may
be made under slip rule provisions to retrospectively
extend the life of a
lapsed creditor’s petition in appropriate circumstances. However, counsel
submits that there is no case
which holds that the power is available after the
making of a sequestration order. Counsel also submits that upon a proper
construction
of the provisions a lapsed petition is not a petition within the
meaning of s 43 of the Bankruptcy Act with the result that the jurisdictional
requirements of the Bankruptcy Act were not present when the sequestration order
was made and on that basis cases that were concerned with procedural
requirements or
irregularities may be distinguished and put to one side.
- In
contrast, counsel for Nicholas submits that it is well established by authority
that there is power to extend the period of a creditor’s
petition before
it lapses pursuant to s 52(5) of the Bankruptcy Act which may be exercised
nunc pro tunc in appropriate cases by reference to slip rule provisions.
In developing that argument, counsel places primary reliance on the distinction
between substantive and procedural requirements by reference to Emanuele
and the purpose of slip rule provisions which operate to avoid injustice to
parties and relatedly are not confined to accidental
slips, errors or omissions
of the Court but extend to like errors made by litigants and their lawyers:
Flint v Richard Busuttil & Company Pty Ltd (2013) 216 FCR 375; [2013]
FCAFC 131, Allsop CJ, Katzmann and Perry JJ (Flint).
- Counsel
for Nicholas emphasised in argument that the clear intention of the primary
judge was to have the creditor’s petition
determined on its merit on 30
August 2021 and that the facilitating procedural orders of 14 May 2021 contained
an error in that no
provision was made for the extension of time that was
necessary to give effect to that intent. That error arose by reason of the
inadvertence of the lawyers for Nicholas who failed to notice and to raise the
impending lapse of the petition prior to the making
of those orders, or at any
time prior to publication of the primary
judgment.
Consideration
- The
threshold question that is raised by grounds 1, 1A and 1B of the amended notice
of appeal is whether the primary judge had jurisdiction
to invoke the slip rule
discretion. A plethora of cases have considered whether slip rule provisions
may be invoked before a sequestration
order under the Bankruptcy Act or a
winding up order under the Corporations Law as set out in s 82 of the
Corporations Act 1989) (Cth) (Corporations Law) or the
Corporations Act 2001(Cth) (Corporations Act) is made, but none
have addressed the use of that power after the making of a sequestration order
upon a lapsed creditor’s
petition.
- There
are two issues to be resolved. One, whether a subsisting petition is a
jurisdictional prerequisite to the making of a sequestration
order. The other
is whether the slip rule is able to be deployed to extend the period for
expiration of the petition after the making
of a sequestration order.
- I
commence with the jurisdiction question and the High Court decision in
Emanuele which held, by majority, that a failure to obtain the leave that
was required by s 459P of the Corporations Law was capable of cure by a grant of
leave nunc pro tunc. Several corporations were indebted to the
Australian Taxation Office which applied to this Court for the making of winding
up orders.
After the applications were filed, the corporations entered into
deeds of company arrangement, the effect of which was to prohibit
the
prosecution of the applications. The Australian Securities Commission
(ASC) intervened in the applications and gave notice that it would apply
for the making of winding up orders pursuant to s 495A of the
Corporations Law.
At the time, s 495P of the Corporations Law (the identical provision is now s
459P of the Corporations Act) enabled the ASC to apply for winding up orders but
only with leave of the Court pursuant to s 459P(2)(d). No application for leave
was made before a judge of this Court, O’Loughlin J, made the winding up
orders sought by the ASC.
- Certain
of the directors of the companies pursued an appeal to this Court against the
making of the winding up orders. The failure
to obtain leave was raised during
the course of the appeal. The ASC made a retrospective application for leave,
which the Court
granted and the appeal against the orders was dismissed:
Emanuele v Australian Securities Commission [1995] FCA 1762; (1995) 63 FCR 54, Spender,
von Doussa and Hill JJ. The High Court dismissed the appeal brought to it by
special leave granted to the directors: Dawson,
Toohey and Kirby JJ; Brennan CJ
and Gaudron J dissenting.
- Brennan
CJ reasoned that the leave requirement is not “merely procedural” at
122 and continued:
It is imposed to prevent the taking of a step that would commence proceedings in
circumstances where the company is entitled, before
the commencing step is
taken, to protection by the Court’s examination of the case to be
presented in proof of the company’s
insolvency. If the requirements of s
459P(2) are treated as merely procedural, the purpose of s 459P(3) and (5) is
frustrated.
- That
was one purpose that his Honour regarded as important on the construction
question. Another, that the contravention “would
or might”
prejudice those interests concluding at 124:
The purpose and effect of the provision would be undermined if the absolute
protection which the provision is expressed to confer
were transformed into a
discretionary bar that could be relieved by a curial order.
- Dawson
J agreed with Toohey J and succinctly said why at 125:
Section 459P does not confer jurisdiction on the Federal Court to make a winding
up order; it does no more than identify the parties who may make
an application,
requiring leave to be obtained in the case of some of them including the
Commission. Jurisdiction is conferred on
the Federal Court by s 459A of the
Corporations Law... The failure to obtain leave was a mere defect or
irregularity in the exercise of that jurisdiction.
- Pausing
there it is to be recalled that ss 43 and 52 of the Bankruptcy Act are the
provisions that confer the jurisdiction to make a sequestration order and unlike
s 459P they are not solely limited to identification
of the party entitled to
seek the making of the order.
- Toohey
J approved of the reasoning of Sholl J in Re Testro Bros Consolidated Ltd
[1965] VicRp 4; [1965] VR 18, which concerned a similar leave requirement at s 199 of the
Companies Act 1961 (Vic). Sholl J applied a “uniform set of
authorities in Australia, extending over seventy years” for a grant of
leave
nunc pro tunc to conclude that the statute was concerned with the
control exercised by the court over the administration of the affairs of a
company
with the consequence that provisions such as s 199 were directory. At
131 Toohey J, in concluding that the leave requirement “does
not impose a
condition precedent to the exercise of the jurisdiction of the court”,
approved the analysis of Lindgren J in
Elyard Corporation Pty Ltd v DDB
Needham Sydney Pty Ltd (1995) 61 FCR 385 (Elyard) at 406 who
said:
More particularly, the distinction is between a situation in which there is a
time limit within which the Court must be approached
if an application for an
order of a particular kind is to be made at all (s 459G), and a situation in
which a proceeding is already
under way and is subject to the Court’s
control and in which a timely but deficient order has been made.
- Also
at 131 Toohey J identified the general policy consideration which flows from the
supervisory role of the court which in his view
favoured “taking a liberal
view of the requirements of s 459P”.
- Gaudron
J approached her analysis at 135 by posing as: “the essential question,
namely, what is required by s 459P”.
The answer, in her Honour’s
view, was to be found in the emphatic language of the provision that “an
application... may
only be made with leave of the Court” which in her view
was unambiguous: at 136. In argument before us, counsel for Victor
emphasised
the following passage in her Honour’s reasons at 139:
It follows, in my view, that although leave to make a winding up application may
be granted at any point prior to, or simultaneously
with, the making of a
winding up order, it may not be granted thereafter, whether by the judge who
made the order or by a court exercising
appellate jurisdiction. More precisely,
until leave has been granted there is no application for the purposes of s 459A
and, thus,
no application on which a winding up order can be made.
- Kirby
J at 147 observed that, despite it not being uncommon for statutes to provide
for a grant of leave before a step may be taken
in a proceeding: “[it] is
difficult, if not impossible, to reconcile all of the decisions on this and
analogous questions”.
Of several matters that his Honour listed in
resolving the construction question, at 156 he reasoned that:
The structure of Pt 5.4 of the Law makes it clear that what s 459P is dealing
with is a procedure to be followed in making the application. Only certain
designated persons are to have standing. Amongst them, half of those specified
(including the ASC) are obliged to seek leave. But
the application was
undoubtedly before the Court which has jurisdiction. That jurisdiction having
attached in the present case,
it may be inferred that Parliament contemplated
that oversight and inadvertence would sometimes occur for which the Court's
general
powers of correction would be available, within the limited area of
operation and compatibly with the statutory requirement that
ordinarily leave
should first be obtained.
(Citation omitted.)
- In
argument before us, as might be expected, each counsel relied on and placed
different emphasis upon the individual judgments in
Emanuele as providing
assistance in resolving the construction question on which this appeal turns.
In my view, the various judgments in
Emanuele, despite the obvious
difference between the statutory provisions, assist in framing and understanding
the issue that is to be resolved
in this appeal, which is whether the existence
of a creditor’s petition, one that has not lapsed by operation of s 52(4)
of the Bankruptcy Act, is a condition to the exercise of the jurisdiction to
make a sequestration order pursuant to s 52(1) and if it is, whether a
sequestration order made upon a lapsed petition may be retrospectively enlivened
by application of the discretion
conferred by the slip rule.
- Speaking
of statutory decision-makers, but in terms that in my view apply equally to
courts that exercise statutory jurisdiction,
Kiefel CJ, Gageler and Keane JJ in
Hossain v Minister for Immigration and Border Protection (2018) 264 CLR
123; [2018] HCA 34 at [23] said:
Jurisdiction, in the most generic sense in which it has come to be used in this
field of discourse, refers to the scope of the authority
that is conferred on a
repository. In its application to judicial review of administrative action the
taking of which is authorised
by statute, it refers to the scope of the
authority which a statute confers on a decision-maker to make a decision of a
kind to which
the statute then attaches legal consequences. It encompasses in
that application all of the preconditions which the statute requires
to exist in
order for the decision-maker to embark on the decision-making process. It also
encompasses all of the conditions which
the statute expressly or impliedly
requires to be observed in relation to the decision-making process in order for
the decision-maker
to make a decision of that kind.
- In
my view, the existence of a creditor’s petition that has not lapsed is a
jurisdictional condition to the exercise of the
power to make a sequestration
order pursuant to ss 43 and 52 of the Bankruptcy Act. That conclusion follows
for several reasons. First, the language of the statute is clear and
harmonious. A petition by s 5 means a petition “under” the
Bankruptcy Act. Section 43 is expressly jurisdictional in its text and contains
three jurisdictional facts: (1) the commission by a debtor of an act of
bankruptcy;
(2) that when the act of bankruptcy was committed the debtor was
either personally present or ordinarily resident in, had a dwelling
house or
place of business in, was carrying on business in or was a member of a firm or
partnership carrying on business in Australia;
and (3) a petition has been
presented by a creditor. It is only upon the hearing of the creditor’s
petition pursuant to s 52(1), and subject to satisfaction of the proof
requirements, that the Court may make a sequestration order against the estate
of the debtor.
A creditor’s petition has an expiry date of 12 months
commencing on the date of presentation or such further period that is
provided
for in an order made under s 52(5), unless prior to the expiration of either of
those periods “a sequestration order is made on the petition or the
petition is
dismissed or withdrawn”: s 52(4).
- In
combination, where these provisions speak to a petition which lapses at the
expiration of defined periods the meaning is plain:
a lapsed petition is not
relevantly one that has the statutory character of a creditor’s petition
upon which a sequestration
is capable of being made. It ceases to have effect
as a petition, which accords with the ordinary and natural meaning of lapse for
which the Macquarie Dictionary Online (Macmillan Publishers
Australia, 2022) gives as the fifth definition: “the termination of
a right or privilege through neglect to exercise it or through failure of
some
contingency”.
- Unlike
s 459P of the Corporations Law, these provisions confer the jurisdiction to make
a sequestration order; they go well beyond
identification of the class of
persons entitled to petition the Court for a sequestration order. That there is
an extant petition
is not simply a procedural requirement.
- Secondly,
my reasoning is consistent with the analysis of Starke J and Williams J (in
dissent but limited to the question of remittal)
in Cameron v Cole [1944] HCA 5; (1944)
68 CLR 571 (Cameron), which concerned regulation 22 of the
National Security (War Service Moratorium) Regulations 1941 (Cth) and
which provided that a person shall not, without the leave of a court having
jurisdiction in bankruptcy, issue a bankruptcy
notice or present a
creditor’s petition against a member of the armed forces founded on a
judgment debt incurred before the
member engaged on war service. Starke J at
596 and Williams J at 611-612 each treated compliance with the regulation as
jurisdictional.
Starke J at 596 said:
A bankruptcy notice or a petition presented contrary to the provisions of the
Regulations is irregular, and a party is entitled ex
debito justitiae to have it
set aside or treated as ineffective.
- As
Brennan CJ explained in Emanuele at 124 by reference to Cameron,
where the purpose of a prohibition “is designed to protect the interests
of a particular person” (here the debtor and
creditors generally) breach
is “a fundamental irregularity” which in the case of an inferior
court has the consequence
that an order purportedly made in breach is a nullity:
Cameron at 590-591, Rich J and Emanuele at 120, Brennan CJ.
- Thirdly,
although the grounds for exercising the discretion to extend time conferred by s
52(5) of the Bankruptcy Act are broad, requiring only that it be “just and
equitable” to do so, the discretion is tightly conditioned in that the
application is required to be made before the expiration of the 12 month period
and the petition may only be extended for a maximum
of 24 months from the date
of presentation. These limitations confine in jurisdictional language the scope
of the authority that
is conferred.
- Fourthly,
Toohey J in Emanuele at 130 - 131 addressed a submission that was
advanced to the effect that s 459P of the Corporations Law operates to deny
standing
where required leave is not obtained by analogy with s 459G (which time
limits the ability of a company to apply to have a statutory
demand set aside)
and the decision of the High Court in David Grant & Co Pty Ltd v Westpac
Banking Corporation [1995] HCA 43; (1995) 184 CLR 265 (David Grant) where the
Court held the temporal requirement to be jurisdictional. In that case, Gummow
J, with whom Brennan CJ, Dawson, Gaudron
and McHugh JJ agreed, said at
277:
Here, the phrase “an application may only be made within 21 days”
should be read as a whole. The force of the term “may
only” is to
define the jurisdiction of the court by imposing a requirement as to time as an
essential condition of the new
right conferred by s 459G. An integer or element
of the right created by s 459G is its exercise by application made within the
time
specified.
- In
distinguishing that reasoning as applicable to s 459P, Toohey J accepted the
submission of the Commonwealth that s 459P does not
“impose a condition
precedent to the exercise of the jurisdiction of the court” because of the
absence of a temporal
requirement and there is “less significance”
in the making of a finding of prima facie insolvency prior to or after a
grant
of leave. That reasoning highlights an essential difference for present
purposes. Section 52(4) of the Bankruptcy Act is a temporal provision that is
concerned with the limited twelve-month life of a petition which is only capable
of extension where
an application is made under s 52(5) before it lapses. The
reasoning of Gummow J in David Grant is in my view of itself compellingly
persuasive by analogy with the scheme of ss 43 and 52 of the Bankruptcy Act to
conclude that a petition which has not lapsed is a jurisdictional prerequisite
to the making of a sequestration order.
- Finally,
there is the policy consideration that this Court addressed in some detail in
Re Young; Ex parte Smith [1985] FCA 75; (1985) 5 FCR 204 at 206-208, Bowen CJ, Sweeney
and Lockhart JJ (Re Young). As explained by the Court in that
case, s 52(4) was originally enacted in response to the mischief identified by
the Clyne Committee Report, namely that debtors would seek to have
petitions adjourned in the hope of being able to pay their debts and avoid
sequestration.
The Court then identified at 207-208 the “sound reasons
why there should be no uncertainty surrounding the time during which
a petition
is pending” as follows:
The presentation of a petition is an event which determines many rights duties
and liabilities of bankrupts and creditors under bankruptcy
law and from which
important consequences flow. For example, before a debtor becomes a bankrupt,
the court may appoint a trustee
to take control of his property (s 50), stay
legal proceedings against his personal property (s 60), or order his arrest in
certain circumstances and the seizure of his property (s 78) – in each
case after the presentation of the petition against him.
After a debtor becomes a bankrupt, the date of commission of an act of
bankruptcy and the date of presentation of the petition on
which he was made a
bankrupt are critical for various purposes including the determination of the
period of relation back (s 115), the ascertainment of the property divisible
amongst his creditors (s 116), the avoidance of preferences (ss 122 and 123),
the avoidance of voluntary settlements (s 120) and the repayment by creditors to
the trustee of his estate of moneys received as a result of execution by those
creditors against
his property (s 118).
Involved in the argument of counsel for the petitioning creditor is the
assumption that, if a petition is more than 12 months old
and its life has not
been extended during that time, it is inherently capable of being extended at
any time thereafter, though for
a maximum life of twenty-four months from the
date of presentation of the petition. The period of twenty-four months referred
to
in s 52 is the maximum life of the petition. If the submission is correct
the court could exercise its power to extend the life of the petition
at any
time before or after the expiration of the twenty-four months, say three years
after that date. If the court may extend the
petitions life outside the first
twelve-month period there would be no certainty in dealings by a debtor with his
creditors or with
others, in respect of the debtor’s property, that he may
not be made a bankrupt, on the petition still pending, within the
expiration of
the second period of twelve months. The consequences could be serious and may
create considerable uncertainty and
confusion.
- A
construction of the Bankruptcy Act which holds that a subsisting petition is a
jurisdictional prerequisite to the making of a sequestration order achieves that
certainty
of purpose.
- I
turn now to the second issue: may the slip rule be engaged to extend the life of
a petition pursuant to s 52(5) of the Bankruptcy Act after the making of a
sequestration order?
- Logan
J was certainly correct to characterise the related question (whether the slip
rule may be engaged before a sequestration order
is made) as “a vexed
one” in Luck v University of Southern Queensland (2018) 265 FCR
304;
[2018] FCAFC 102 
at [5] (Luck). Much judicial time has been
spent at trial and appellate level in this Court (and in others) in grappling
with the myriad of cases
where, through inadvertence of the legal
representatives or of a court, the twelve month period at s 52(4) of the
Bankruptcy Act has elapsed and an application is then made under an applicable
slip rule to correct an earlier order (ordinarily one that adjourns
the hearing
of the petition beyond its expiry date) to extend the life of the petition by
the device of making an amendment to that
order to include one pursuant to s
52(5).
- It
was first held in this Court by Pincus J in Re Hibbard; Ex parte Playroom Pty
Ltd [1988] FCA 689 that application of the slip rule in that way could not
be reconciled with s 52(5). Heerey J reached the same conclusion in Re
Agushi; Ex parte Farrow Mortgage Services Pty Ltd (in liquidation) (1994)
126 ALR 704. Other judges of this Court reached the opposite conclusion.
Charlesworth J comprehensively essayed all of the authorities in Luck at
[116]- [136]. The views of Pincus J and Heerey J did not prevail and were
disapproved by the Full Court in Elyard. That case concerned the slip
rule and the power of the Court to extend the time specified in s 459R(1) of the
Corporations Law
to determine an application to wind up a company within 6
months, unless extended by the exercise of the discretion conferred by
s
459R(2). The ratio is that s 459R properly construed did not displace the slip
rule which then found expression at Order 35, r
7 of the Federal Court Rules
1979 (Cth).
- Although
the case concerned the Corporations Law, in obiter reasoning and separately,
each of Lockhart J and Lindgren J (Black CJ
agreed with each) concluded that the
slip rule could be engaged to correct an order, and thereby extend the life of a
petition presented
under the Bankruptcy Act, before a sequestration order is
made: Lockhart J at 392-393; Lindgren J at 402-404. In the view of Lockhart J
(at 391), the contrary
view:
...rests on a misconception of the nature and operation of the slip rule. This
is the case because the later order corrects the
earlier order, and speaks from
the date of the earlier order, which then operates with full force as corrected.
- Lindgren
J reasoned similarly at 400-401. Despite the doubt that Kiefel J expressed as
to the correctness of this reasoning in Re Langridge: Ex parte Bennett,
Carroll & Gibbons [1998] FCA 879, Elyard has been accepted,
sometimes with reservation, as confirming that in appropriate cases slip rule
provisions may be engaged to extend
the life of a petition, or perhaps more
correctly the time within which a petition is to be determined, once the
petition has expired
and s 52(5) of the Bankruptcy Act is unavailable. At the
level of the Full Court of this Court those cases are: Griffiths v Boral
Resources (Qld) Pty Ltd (2006) 154 FCR 554; [2006] FCAFC 149
(Griffiths), Spender ACJ, Dowsett and Collier JJ; Flint,
Allsop CJ, Katzmann and Perry JJ; Ramsay Health Care Australia Pty Ltd v
Compton (2016) 247 FCR 387; [2016] FCAFC 125 (Ramsay Health
Care), Rares, Gleeson and Markovic JJ; Luck, Logan, Mortimer and
Charlesworth JJ and Endresz v Commonwealth (2019) 273 FCR 286; [2019]
FCAFC 197 (Endresz), Rares, Markovic and Charlesworth JJ.
- Where
in those cases doubt was cast on the correctness or direct applicability of
Elyard, it was unnecessary for the Court to decide the point and the
appeals were resolved on other grounds. Thus in Griffiths it was held
that when a Federal Magistrate reserved his decision upon the hearing of the
petition, and then failed to deliver it
before it lapsed, no order had been made
that could be the subject of an error for the purposes of the slip rule and, in
any event,
even if an order had been made the slip rule could not apply as it
could not be inferred that the magistrate committed an accidental
slip, error or
omission when he failed to notice that time had expired during the period of his
reserved decision. It is relevant
for the purpose of this appeal to set out the
doubt which the Court expressed as to the correctness of the decision in
Elyard at [30]:
With all respect, we are a little uncomfortable with the view, inherent in
Elyard, that the slip rule may be used to extend time notwithstanding the
statutory requirement that such order be made within a period
of time which has
elapsed. However, Elyard concerns the practice of the Court and has now
stood for over 10 years without legislative intervention. We are reluctant to
reconsider
it. Although it does not directly bind us in applying s 52 of the
Bankruptcy Act, to take a different approach would cause substantial
confusion in insolvency practice.
- In
Flint at [43] the Court did not find it necessary to consider the
correctness of Elyard, as counsel for the appellant ultimately accepted
in argument that the slip rule could be used, in an appropriate case, to extend
the life of a lapsed petition. The rule was found not to be applicable for
other reasons: one, there was no order relevantly in
need of correction and the
other, the evidence did not support the inference of error or omission by the
lawyer for the petitioning
creditor or the federal magistrate. However, the
Court noted and commented upon the decision of Hammerschlag J in Amorin
Constructions Pty Ltd v Kamtech Electrical Services Pty Ltd (2008) 73 NSWLR
627; [2008] NSWSC 285; who considered Elyard to be plainly wrong,
primarily on the ground that s 459R(2) of the Corporations Act requires the
court to reach a state of independent satisfaction before exercising the
discretion to extend time for the determination
of the application. Whilst the
Court in Flint observed that, “notwithstanding the logical force of
the proposition that there is no room for the operation of the slip rule
where
an independent discretion must be exercised” ([44]), the Court found two
difficulties with accepting it at [45] –
[46]:
First, in Shaddock the High Court invoked the slip rule to amend an order
to include an award pre-judgment interest. Yet an award of interest is in
the
court’s discretion...
Second, if the surrounding circumstances are such (as they can be taken to have
been in Elyard) that it can be concluded that proper attendance to the
matter (had the error not occurred) could only have resulted in the discretion
being exercised in one way, it is difficult to see why the rule should not apply
in the same way that it would if the discretion
had been exercised and there had
been a mere failure to record it.
- The
appeal in Ramsay Health Care turned on a different question. There the
primary judge applied the slip rule to extend the life of an expired petition by
three
months but also ordered that any further application to extend time
pursuant to s 52(5) of the Bankruptcy Act could be made within that period.
That order was wrongly made in that the attention of the primary judge was not
drawn to the Full
Court decision in Re Young where it was held that the
power conferred at s 52(5) is incapable of being exercised outside of the
initial twelve-month period. This Court allowed the appeal and made an order
pursuant
to the slip rule to extend the life of the petition. The correctness
of Elyard was not put in issue.
- In
Luck the appeal turned on the availability of the particular form of
wording of the slip rule to a registrar of the Federal Circuit Court
and this
Court was not asked to reconsider the correctness of Elyard. At issue
was whether as a fact Ms Luck had established, as required by r 16.05(2)(e) of
the Federal Circuit Court Rules 2001, that an order made by a
registrar on 22 March 2016 (whereby the hearing of the petition was adjourned to
a date after its expiry)
reflected the intention of the parties who had not
adverted to the effect of ss 52(4) and (5) of the Bankruptcy Act. Logan J,
agreeing generally with Mortimer J, opined at [8] that the facts were “a
paradigm case” for application of
the slip rule. Mortimer J at [67]
reasoned that on the evidence the case was not one “where there would have
been any independent
discretion to be exercised had the error or omission not
occurred” and approved of the reasoning in Flint at [46].
- Charlesworth
J accepted that the slip rule could apply, but dissented on the factual question
of why the registrar could not exercise
that power which, in summary, she
explained at [145] on the basis that the slip rule which then operated was
limited to correction
of an order which “does not reflect the intention of
the Court”. In her Honour’s view, that rule:
is to be construed in a legal context in which orders (once entered) are final.
In that context, the word “intention”
should be construed as meaning
an intention actually formed upon actual consideration of an issue arising for
determination. The
word does not encompass a situation in which the Court has,
whether by its own omission or the omission of a party, failed to consider
the
issue at all.
- In
reasoning that way, as her Honour acknowledged at [146], other slip rules are
cast more broadly.
- Endresz
is a further example of a case where several creditor petitions expired during
the period of an adjournment. Orders were made administratively
and in chambers
the effect of which was to vacate the initially allocated hearing dates and to
substitute new dates, beyond the expiry
of the petitions. Shortly after the
expiry date, the debtors applied for summary judgment and in response the
Commonwealth, as the
petitioning creditor, made application pursuant to the
Federal Circuit Court slip rule to vary the adjournment orders by adding orders
extending the life of each petition pursuant to s 52(5) of the Bankruptcy Act.
The Federal Circuit Court made those orders. Thereafter, the proceedings were
transferred to this Court and sequestration orders
were made. Each bankrupt
pursued an appeal to the Full Court. The first and primary ground contended
that there was no power to
make the sequestration orders by reason of the expiry
of the petitions and it was not open, in the circumstances, to engage the slip
rule. In oral argument upon the appeal, and despite the framing of the appeal
grounds, senior counsel for the appellants submitted
that it was not contended
“that there is no scope for the operation of the slip rule in the context
of s 52(5)”: [70]. Rather, it was argued that there was no scope for
operation of the slip rule unless at a prior point in time the primary
judge had
considered the s 52(5) discretion but had failed to record the result in the
order.
- In
rejecting that submission “as a very narrow construction of the slip
rule” ([72]), Rares and Markovic JJ at [81] endorsed
the approach in
Flint to the effect that the existence of an independent discretion does
not of itself displace the potential application of the slip rule
and
continued:
The Full Court in Flint recognised the considerable constraints that apply where
there is resort to the slip rule in circumstances
where the exercise of an
independent discretion is required. Whether the slip rule can be invoked where,
through an accidental slip
or omission an order was not made extending the life
of a petition pursuant to s 52(5) of the Act before the expiration of the 12
months from the date of presentation of a petition, will depend upon the
circumstances.
In particular, as s 52(5) of the Act requires the exercise of an
independent discretion, the question of how the discretion would have been
exercised had the
order been made at the earlier time becomes a relevant factor.
As the Full Court recognised in Flint, if the discretion could only be
exercised one way it is difficult to see how the slip rule could not apply.
But, if there is any
room for debate as to the outcome of an exercise of the
discretion under s52(5) it is difficult to see how the slip rule could be
engaged.
- Expressly,
as their Honours observed at [83], Elyard is distinguishable as it was
concerned with a different statutory regime and was not binding as to the
construction of the provisions
of the Bankruptcy Act. For those reasons it was
not necessary to consider its correctness.
- In
contrast, Charlesworth J at [145] said that Elyard “ought not to be
distinguished by this Court on the basis that it was concerned with the exercise
of the slip rule in the context
of the insolvency regime established under the
Corporations Act” but expressly reserved her view that “it may be
necessary” for this Court at a future time to determine whether
Elyard was correctly decided. Otherwise, on this ground, her Honour
agreed with the joint reasons that it could not be said on the facts
that the
discretion could be only exercised in one way, had the issue been adverted to in
a timely way: [149].
- In
this appeal, and despite the broad wording of appeal grounds 1, 1A and 1B,
senior counsel for the appellant in oral argument did
not submit to us that
Elyard was wrongly decided or that ss 52(4) and (5) of the Bankruptcy Act
operate as an exclusive code so as to displace the potential application of the
slip rule. Rather, the argument is that the slip
rule power was simply
inapplicable in this case for the reason that it could not be engaged to correct
the jurisdictional defect
that existed when the sequestration order was made.
In that way, this case is to be contrasted with others that have considered
the
potential application of the slip rule to extend the life of a creditor’s
petition before the making of a sequestration
order.
- At
the outset that submission invites close attention to the effect of a final
order made by a court of inferior jurisdiction where
a jurisdictional
prerequisite to the valid exercise of the conferred statutory power is not
met.
- The
Federal Circuit Court, as it was, and the Federal Circuit and Family Court of
Australia, (Division 2), were and are not superior
courts of record: Federal
Circuit Court of Australia Act 1999 (Cth) s 8; and Federal Circuit and
Family Court of Australia Act 2021 (Cth) s 10. As is well understood an
order made by an inferior court without jurisdiction is without legal effect:
Pelechowski v The Registrar, Court of Appeal (NSW) [1999] HCA 19; (1999) 198 CLR 435 at
[27], Gaudron, Gummow and Callinan JJ; Attorney-General (NSW) v Mayas Pty
Ltd (1988) 14 NSWLR 342 at 347, McHugh J and New South Wales v Kable
(2013) 252 CLR 118; [2013] HCA 26 (Kable) where at [56], Gageler J
succinctly observed:
There is, however, a critical distinction between a superior court and an
inferior court concerning the authority belonging to a
judicial order that is
made without jurisdiction. A judicial order of an inferior court made without
jurisdiction has no legal force
as an order of that court. One consequence is
that failure to obey the order cannot be a contempt of court. Another is that
the
order may be challenged collaterally in a subsequent proceeding in which
reliance is sought to be placed on it. Where there is doubt
about whether a
judicial order of an inferior court is made within jurisdiction, the validity of
the order "must always remain an
outstanding question" unless and until that
question is authoritatively determined by some other court in the exercise of
judicial
power within its own jurisdiction. In contrast:
"It is settled by the highest authority that the decision of a superior court,
even if in excess of jurisdiction, is at the worst
voidable, and is valid unless
and until it is set aside".
(Citations omitted.)
- Jurisdictionally
flawed orders of inferior courts may exist in fact and have consequences, such
as for the commencement of appeals,
but as I explain below that is no answer to
the problem in this case.
- Accordingly,
the fundamental difficulty with the order made by the primary judge on 14
January 2022 to amend the order of 14 May 2021
is the “attempt to cloak
the Court with jurisdiction [which is] beyond the power of the slip rule”:
Al Maha Pty Ltd v Huajun Investments Pty Ltd (2018) 365 ALR 86; [2018]
NSWCA 245 (Al Maha) at [272], Preston CJ of the Land and
Environment Court (LEC), with whom Basten and Leeming JJA agreed. A
relatively long line of analogous cases establish that slip rule provisions
cannot
be employed in that way.
- Sutherland
and Company v Hannevig Brothers Ltd [1921] 1 KB 336 concerned an award made
by an arbitrator of a monetary amount plus costs as between the owner of a
vessel and Sutherland. Subsequently,
the solicitors for Sutherland corresponded
with the arbitrator, noted that certain other costs were not included and stated
their
“impression” that the additional costs were omitted by reason
of an accidental slip or omission, which the arbitrator
had power to correct
pursuant to a statutory slip rule. The arbitrator agreed and delivered an
amended award to include those costs.
The Court of the King’s Bench set
aside the amended award. Rowlatt J at 341 in addressing the scope and
availability of the
slip rule said:
I cannot pretend to give a formula which will cover every case, but in this case
there was nothing omitted by accident: the arbitrator
wrote down exactly what he
intended to write down, though it is doubtful what that really meant when
considered from a legal point
of view. But what the arbitrator has really done
here is to assume a jurisdiction to expound what he had purportedly written
down,
and that, I think he cannot do.
- In
separate reasons, McCardie J agreed. Donaldson MR approved of the reasoning of
Rowlatt J in Mutual Shipping Co of New York v Bayshore Shipping Co of
Monrovia [1985] 1 All ER 520 (Mutual Shipping) at 526, which
was also an arbitration case and in doing so distinguished between “having
second thoughts or intentions and
correcting an award of judgment to give true
effect to first thoughts or intentions”, where in his view second thought
cases
are not within the slip rule. He continued:
Neither an arbitrator nor a judge can make any claim to infallibility. If he
assesses the evidence wrongly or misconstrues or misappreciates
the law, the
resulting award or judgment will be erroneous, but it cannot be corrected [under
the slip rules]... The remedy is to
appeal, if a right of appeal exists. The
skilled arbitrator or judge may be tempted to describe this is an accidental
slip, but
this is a natural form of self-exculpation. It is not an accidental
slip. It is an intended decision which the arbitrator or judge
later accepts as
having been erroneous.
- That
reasoning was referred to with approval in Tonab Investments Pty Ltd v Optima
Developments Pty Ltd (2015) 90 NSWLR 268; [2015] NSWCA 287
(Tonab), where a magistrate exercising the Small Claims
jurisdiction of the Local Court struck out a defence and entered judgment for
the
claimant in an amount slightly below the jurisdictional limit of the court.
Subsequently, the magistrate made an order for indemnity
costs in favour of the
claimant. In doing so the magistrate overlooked that he did not have
jurisdiction to award costs. When that
mistake was realised, and upon further
application by the claimant, the magistrate made an order purportedly pursuant
to a slip rule
to correct the first judgment by adding that the proceeding be
transferred from the Small Claims Division to the General Division
of the Court
and with effect from the date of the original orders. The reason for making
that order was that in the General Division
there was jurisdiction to award
costs. Those orders were the subject of an appeal to the District Court and
then to the NSW Court
of Appeal, which allowed the appeal. Ward JA, with whom
Meagher and Leeming JJA agreed, held the magistrate had no power to invoke
the
slip rule in that way. Her Honour’s characterisation of what occurred at
[66] was:
...when the oral reasons are read in the light of the preceding debates it is
difficult to avoid the conclusion that this was an
ex post facto justification
for what had earlier been done and was by then recognised to have been done
beyond the jurisdiction of
the court. This is the kind of ex post facto
justification for the exercise of the slip rule of the kind recognised in
[Mutual Shipping] as impermissible.
- Following
her reference to the passage from Donaldson MR in Mutual Shipping, Ward
JA at [67] continued:
The slip rule does not permit the making of a correction solely for the purpose
of expanding jurisdiction. In the context of considering
the power of
correction in the Arbitration Act 1889 (UK) 52 & 53 Vict c 49, which
permitted correction of errors “arising from any accidental slip or
omission”, Rowlatt
J in Sutherland and Company v Hannevig Bros Ltd
[1921] 1 KB 336 held that the addition of particular words to the
arbitrator’s award to make clear that a particular amount was included
within
the amount covered by the award was an impermissible assumption of
jurisdiction to expound the award...
- Another
example of impermissible use of slip rule provisions to correct or by-pass
jurisdictional defects or limitations is Al Maha, where a Commissioner of
the LEC made consent orders the effect of which was to grant an amended
development consent for a proposal
without first obtaining owner consent from an
adjoining owner, which was necessary because an aspect of the approved
development
required the construction of an access driveway on the adjoining
land. The statutory scheme required evidence of owner consent to
the making of
an application on all land the subject of the proposed development. The
adjoining owner objected, commenced a proceeding
in the Supreme Court and
claimed the consent was invalid. Thereafter, a Commissioner purported to amend
the impugned consent, in
reliance on a slip rule, to remove from it the
development work required to be undertaken on the adjoining land. The Court of
Appeal
quashed the amended consent. Preston CJ of LEC, with whom Basten and
Leeming JJA agreed, applied the reasoning in Tonab, held the amendments
to be substantive and then reasoned as follows at [271]- [274]:
The amendments to the order and conditions of consent by the slip rule decision
were substantive, for the reasons submitted by Al
Maha and summarised above.
The amendments changed substantively the development to which consent was
granted, by removing the construction
of the driveway connection to provide
permanent access to Hilts Road. The amendment of condition 1 sought to approve
a plan of the
development that did not exist at the time the Commissioner
granted consent. The amended plan sought to describe different vehicular
access
arrangements for the development. The amendments changed the assessment and
approval of the development. The assessment
of vehicular access under cl 101(2)
of the Infrastructure SEPP was affected by the amendments. One amendment of
condition 115 imposed
a requirement to obtain development consent for the
construction of the driveway connection to Hilts Road, where as the consent
granted
by the Commissioner had authorised the construction of the driveway
connection to Hilts Road.
The amendments sought to overcome the need to obtain the consent of Al Maha, as
owner of land on which development is to be carried
out, to the development
application and thereby to give jurisdiction to the Court to grant consent to
the development application.
This attempt to cloak the Court with jurisdiction
was beyond the power of the slip rule.
The slip rule decision was, therefore, not authorised by the slip rule and
should be set aside.
I should also note that the slip rule decision did not cure the lack of
jurisdiction caused by the Commissioner’s failure to
form the opinions of
satisfaction under cl 4.6(4) of the [Canada Bay Local Environmental Plan
2013] necessary in order for the Commissioner to have power to grant consent
to the development application. The slip rule decision was
only intended to
overcome the lack of jurisdiction to grant consent to development on Al
Maha’s land in the absence of Al Maha’s
consent as owner to the
application. None of the slip rule amendments sought to, or could, overcome the
jurisdictional error of
the Commissioner in granting consent to the development
application without first forming the necessary opinions of satisfaction
under
cl 4.6(4) of the [Canada Bay Local Environmental Plan 2013].
- Each
of these cases stand as authority for the general proposition that, despite the
width and flexibility of slip rule provisions,
they are not able to be deployed
retrospectively to confer jurisdiction which did not exist in a court, a
fortiori a court of inferior
jurisdiction, when final orders were made. In a
very useful text, Amending Final Judgments and Orders by John Tarrant
(The Federation Press, 2010) at p 96, this very limitation of slip rule
provisions is addressed. The author, without
qualification, states:
“[t]he slip rule is not available to amend orders in circumstances where
it is later held by an appellant
court that a statutory basis for exercising the
original jurisdiction is invalid” and attention is drawn to the decision
of
Mansflield J in Rothmore Farms Pty Ltd (in liquidation) v Belgravia Pty
Ltd [1999] VSC 227; (1999) 17 ACLC 1,676. In that case, his Honour made final declaratory
orders in June 1999 shortly prior to the publication of the decision of the
High
Court in Re Wakim; Ex parte McNally (1999) 198 CLR 511, which struck down
the purported investment of State jurisdiction in non-federal matters in federal
courts. By
a subsequent motion the respondents sought orders to set aside those
declarations on several bases including the Federal Court slip
rule. In
refusing the motion, his Honour reasoned, inter alia, that 1677 – 1678 as
follows:
In my judgment, the orders which were made were final orders determining the
rights as between the parties. If they were made without
jurisdiction at all on
the part of the Court, the appropriate avenue is for Mr Cooper and Mr Turner, if
they wish to complain of
these judgments and orders, to adopt the normal course
of appealing from them.
...
In my view, having made final decisions and orders in the action, and there
being no circumstance brought to my attention which causes
me to doubt that the
orders as entered reflect those decisions and orders, I no longer have power to
deal with those judgments and
orders in the way which is sought on these
motions.
- Although
his Honour was concerned with a different circumstance, the crux of his
reasoning is consistent with my analysis that the
slip rule cannot be
retrospectively applied to invest jurisdiction that did not exist when the
sequestration order was made in this
case. And as the decision of Mansfield J
discloses, there is a further reason why the primary judge erred in his
purported application
of the slip rule. Once the sequestration order was made
on 28 October 2021, it was a final order, albeit made without jurisdiction.
It
must be accepted that it had a factual operation with consequences. On the face
of it the Federal Circuit Court had exercised
its jurisdiction under the
Bankruptcy Act to make the order provided for at s 43 upon the creditor’s
petition presented to it. Thereafter, various provisions of the Bankruptcy Act
commenced to operate; notably, the property of Victor vested in the Trustee (s
58), legal proceedings were stayed (s 60), the relation back day became fixed (s
115) and the Trustee assumed office (s 157). In this case those provisions
operated from 28 October 2021. They did not cease to operate once it was
appreciated that the sequestration
order had been made upon an expired
petition.
- The
factual existence of jurisdictionally flawed orders of inferior courts can raise
conceptual difficulties. It is sometimes difficult
to determine what
consequences flow from a decision that is void, invalid, vitiated or without
legal effect. On one view there may
be none. Dixon J in Parisienne Basket
Shoes Pty Ltd v Whyte [1938] HCA 7; (1938) 59 CLR 369 when considering a decision of
justices made on an information laid out of time at 389 said:
Where there is a disregard of or failure to observe the conditions, whether
procedural or otherwise, which attend the exercise of
jurisdiction or govern the
determination to be made, the judgment or order may be set aside and avoided by
proceedings by way of
error, certiorari, or appeal. But, if there be want of
jurisdiction, then the matter is coram non judice. It is as if there
were no judge and the proceedings are as nothing. They are void, not voidable
(Cp. The Case of the Marshalsea).
(Footnote omitted.)
- To
similar effect is the judgment of Gummow and Gaudron JJ (when dealing with
administrative decisions) in Minister for Immigration and Multicultural
Affairs v Bhardwaj (2002) 209 CLR 597; [2002] HCA 11 at [51]: “[a]
decision that involves jurisdictional error is a decision that lacks legal
foundation and is properly regarded, in law,
as no decision at all”. But
difficulties of that character do not arise in this case because, although the
sequestration order
was made without jurisdiction, it did exist in fact. This
Court in Jadwan Pty Ltd v Secretary, Department of Health and Aged Care
(2003) 145 FCR 1; [2003] FCAFC 288 at [42] (Gray and Downes JJ) reasoned
that Bhardwaj “cannot be taken to be authority for a universal proposition
that jurisdictional
error on the part of a decision-maker will lead to the
decision having no consequences whatsoever. All that it shows is that the
legal
and factual consequences of the decision, if any, will depend upon the
particular statute”.
- More
recently this Court considered the issue in Bonesch v Somerville Legal
(2021) 286 FCR 293; [2021] FCAFC 79, Katzmann, Markovic and Abraham JJ, a
Bankruptcy Act case where a judge of the Federal Circuit Court, having denied
the debtor procedural fairness, made a sequestration order. This
Court set
aside the sequestration order for jurisdictional error. It was then required to
decide whether the petition had lapsed
by operation of s 52(4) of the Bankruptcy
Act. The Court concluded that it had not as “in fact” one of the
three specified events at s 52(4) had occurred even though the making of the
order was infected with jurisdictional error: [149]. The hearing of the
petition was
remitted to the Federal Circuit Court.
- In
reasoning to that result the Court placed reliance upon the decision of the NSW
Court of Appeal in Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd
(in liq) (2019) 99 NSWLR 317; [2019] NSWCA 11 (Seymour Whyte)
and in turn the reliance placed by that Court on what Gageler J said in
Kable at [52], which relevantly was:
Yet a purported but invalid law, like a thing done in the purported but invalid
exercise of a power conferred by law, remains at
all times a thing in fact.
That is so whether or not it has been judicially determined to be invalid. The
thing is, as is sometimes
said, a "nullity" in the sense that it lacks the legal
force it purports to have. But the thing is not a nullity in the sense that
it
has no existence at all or that it is incapable of having legal consequences.
The factual existence of the thing might be the
foundation of rights or duties
that arise by force of another, valid, law. The factual existence of the thing
might have led to
the taking of some other action in fact. The action so taken
might then have consequences for the creation or extinguishment or
alteration of
legal rights or legal obligations, which consequences do not depend on the legal
force of the thing itself. For example,
money might be paid in the purported
discharge of an invalid statutory obligation in circumstances which make that
money irrecoverable,
or the exercise of a statutory power might in some
circumstances be authorised by statute, even if the repository of the power
acted
in the mistaken belief that some other, purported but invalid exercise of
power is valid.
(Citations omitted.)
- In
Seymour Whyte, Leeming JA at [29], and after referencing the judgment of
Gageler J, stated:
The fact that the decisions beyond jurisdiction, and may be said to be a
“nullity”, is not determinative of its status
for the purposes of
further legal analysis... An order beyond jurisdiction may also be the subject
of proceedings seeking judicial
review in the Supreme Court’s supervisory
jurisdiction, or indeed an appeal...
- At
[175] Sackville AJA reasoned similarly.
- However,
the factual existence of the jurisdictionally ineffective sequestration order
that was made in this case on 28 October 2021,
does not provide a basis for the
later application of the slip rule to retrospectively cure that defect. The
slip rule may operate
to correct or amend an order made by an inferior court
which is within jurisdiction, but not for the purpose of giving effect to
another order which does not have legal force as an order of the court. The
slip rule order made in this case cannot be considered
alone and in abstract.
It was made in order to confer jurisdiction that did not exist when the
sequestration order was made. To
have operative effect, where the slip rule is
deployed to confer jurisdiction, it must correct an earlier order so as to give
legal
effect to the primary order, otherwise there is simply nothing to correct
which is the point made by Gaudron J in Emanuele at 139 in the passage
which I have set out above. Put another way, the slip rule operates as a
mechanism to correct orders made
within jurisdiction and not, to adopt the
language of Preston CJ of LEC in Al Maha, to “cloak the Court with
jurisdiction” which did not exist when the primary order was
made.
CONCLUSION
- I
would allow the appeal and set aside the sequestration order made on 28 October
2021. As the petition lapsed by operation of s 52(4) of the Bankruptcy Act it
is unnecessary to make further orders about it, though I anticipate that there
will be a need for consequential orders, not limited
to costs. For example,
there is the position of the Trustee who has acted, doubtless in good faith,
upon the sequestration order.
The Trustee should be heard. It may be necessary
to make consequential orders to “untangle and unravel” the position
of the parties and the Trustee pursuant to s 35A(6) of the Federal Court of
Australia Act 1976 (Cth): Robson (as former trustee of the bankrupt
estate of Samakopoulos) v Body Corporate for Sanderling at Kings Beach CTS
2942 (2021) 286 FCR 494; [2021] FCAFC 143.
- Accordingly,
I would make the following orders:
- Leave
is granted to the appellant to rely upon ground 1 of the amended notice of
appeal which ground was not raised in the proceeding
before the Federal Circuit
Court of Australia.
- The
appellant has leave to rely on further evidence on the appeal, being the
evidence that the Federal Circuit Court of Australia
did not at any time before
the expiration of the period of 12 months commencing on the date of presentation
of the creditor’s
petition make any order under s 52(5) of the
Bankruptcy Act 1966 (Cth) extending the period for expiration of the
petition.
- The
appeal is allowed.
- The
sequestration order made on 28 October 2021 in the Federal Circuit Court of
Australia in the estate of Victor Hrycenko is set
aside.
- Order
1 of the orders made on 14 January 2022 in the Federal Circuit and Family Court
of Australia, amending the orders made 14 May
2021 nunc pro tunc, is set
aside.
- The
proceeding is adjourned for further submissions in writing or for hearing if
necessary all consequential orders, including costs.
- The
Registrar is directed to provide a copy of these reasons to Mr Michael David
Badge, who may be heard before the making of further
orders.
- The
parties, and Mr Michael David Badge (should he wish to be heard) are to in the
first place provide short written submissions,
not to exceed 3 pages, on the
question of consequential orders and costs.
|
I certify that the preceding ninety (90) numbered paragraphs are a true
copy of the Reasons for Judgment of the Honourable Justice
McElwaine.
|
Associate:
Dated: 9 September 2022
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