Bank of Western Australia Ltd v Henderson
[2011] FMCA 157
•16 March 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BANK OF WESTERN AUSTRALIA LTD v HENDERSON | [2011] FMCA 157 |
| BANKRUPTCY – PRACTICE AND PROCEDURE – Application to amend orders under the slip rule – where proceedings adjourned several times pending the outcome of related bankruptcy proceedings in New Zealand – where applicant at last adjournment omitted to request an order for the extension of the creditor’s petition and the petition had since expired – whether the omission was inadvertent – whether proposed extension was a matter of controversy – where respondent debtor maintained grounds of objection to the petition – whether in the interests of justice to allow the proposed amendment under the slip rule. |
| Bankruptcy Act 1966, ss.40(1)(h), 43(1)(b), 52(5) Insolvency Act 2006 (NZ), s.333 |
| Deputy Commissioner of Taxation v Sedrak [2009] FMCA 411 David Stuart Henderson v Westpac Banking Corporation Ltd & Ors HC AK CIV-2010-404-1212 [20 September 2010] Roskell v Snelgrove [2008] FCA 427 Griffiths v Boral Resources (QLD) Pty Ltd (2006) 154 FCR 554 Re Howell; Ex parte Commissioner of Taxation (1996) 70 FCR 261 Elyard Corp Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385 |
| Applicant: | BANK OF WESTERN AUSTRALIA LTD ACN 050 494 454 |
| Respondent: | DAVID STEWART HENDERSON |
| File Number: | SYG 324 of 2010 |
| Judgment of: | Raphael FM |
| Hearing date: | 10 March 2011 |
| Date of Last Submission: | 10 March 2011 |
| Delivered at: | Sydney |
| Delivered on: | 16 March 2011 |
REPRESENTATION
| Counsel for the Applicant: | Mr B Katekar |
| Solicitors for the Applicant: | Norton Rose |
| Solicitors for the Respondent: | Reid Legal |
ORDERS
The Court orders nunc pro tunc pursuant to O 35 rule 7 of the Federal Court Rules there be included in the orders made by this Court on 12 November 2010 an order that the period at the expiration of which the creditor’s petition in these proceedings will lapse be the period of 24 months from the date of presentation of the petition.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 324 of 2010
| BANK OF WESTERN AUSTRALIA LTD ACN 050 494 454 |
Applicant
And
| DAVID STEWART HENDERSON |
Respondent
REASONS FOR JUDGMENT
There comes before me for hearing an application styled as a notice of motion brought by the applicant creditor:
“That under Order 35 Rule 7 of the Federal Court Rules there be included in the orders made by this Court on 12 November 2010 an order that the period at the expiration of which the creditor’s petition in these proceedings will lapse will be the period of 24 months from the commencing on the date of presentation of the petition, (sic) nunc pro tunc.”
The application is resisted by the respondent debtor although he concedes that the Court has jurisdiction to make the order; Deputy Commissioner of Taxation v Sedrak [2009] FMCA 411 and the cases there cited. In order to appreciate the nature of the objection, it is necessary to rehearse the history of the matter.
History
Mr Henderson is a property developer who, in a relevant judgment of the High Court of New Zealand; David Stuart Henderson v Westpac Banking Corporation Ltd & Ors HC AK CIV-2010-404-1212 [20 September 2010], was held to have debts of NZ $105,560,785.41 excluding the debt alleged by the applicant bank in these proceedings which had been converted in the same judgment to NZ $33,541,867.97. On 2 November 2009 the Commissioner for Inland Revenue commenced bankruptcy proceedings against Mr Henderson claiming an amount of NZ $3,659,181.53 plus NZ $27,378 costs and disbursements pursuant to a consent judgment. On 5 February 2010 Mr Henderson served a notice of intention to oppose the Commissioner’s application and on 23 February 2010 filed a proposal at the High Court of New Zealand in Auckland under Pt 5 of the Insolvency Act 2006 (NZ). For the purposes of this decision it is sufficient to say that a proposal of this type has much in common with that found under Pt X of the Australian Bankruptcy Act1966 (Cth) (the “Act”). It does, however, require to be accepted by the Court under s.333 of the New Zealand Act if approved by creditors. The approval must be given by 75 percent in value of those supporting the proposal. Mr Henderson obtained that percentage approval but the Bank of Western Australia Ltd (the “Bank”) was not present at the meeting nor voted. At the s.333 proceedings, decided on 9 March 2011, Associate Judge Doogue found that:
“If Bank West had taken part in the voting on the basis that its debt was of that value ($33,541,867.97) and voted against the proposal, the percentage by value of those supporting the proposal would have fallen below the required 75 percent.”
On 18 February 2010 the Bank presented a petition to this Court seeking a sequestration order against Mr Henderson. The basis of the claim was that Mr Henderson failed to comply with a demand dated 12 February 2010 for payment of $27,951,556.64 and that, within 6 months before presentation of the petition, Mr Henderson had given notice to the Bank that he had suspended or was about to suspend payment of his debts (s.40(1)(h) of the Act). The evidence in support of this claim was Mr Henderson’s own affidavit of support of his proposal pursuant to Pt 5 of the New Zealand Insolvency Act sworn on 1 November 2009 in which he acknowledged in para.5 a deficit of $67,847,222.66 to secured creditors, although, in his Notice of Objection, Mr Henderson argues that the Bank has failed to file admissible evidence to prove an act of bankruptcy under s.40(1)(h) of the Act because his affidavit was allegedly provided on a private and confidential basis, without prejudice. The Notice of Objection notes that Mr Henderson has filed a proposal under Pt 5 of the Insolvency Act with the New Zealand High Court and that the Bank had received notice of the proposal by letter dated 5 March 2010. Whilst the basis of the Bank’s contention may be controversial, the fact of Mr Henderson’s insolvency is clearly not.
Although the petition was presented on 18 February 2010 it was not served until an order for substituted service was obtained from Registrar Hedge on 30 March 2010. In his Notice of Objection Mr Henderson also disputes the jurisdiction of the Australian courts to make a sequestration order against him on the basis that he is not a person normally resident in this country.
The matter first came before me on 11 May 2010. I made directions standing the matter over for hearing on 16 June 2010. On that date the nature of the New Zealand proceedings was explained to me. I was informed that the Bank was appearing in the New Zealand proceedings and was opposing the approval of the arrangement. This is confirmed in his Honour’s judgment which was handed down at 4 pm on 9 March 2011. Having been appraised of these matters, I took the view, for reasons of comity, that it would not be appropriate to proceed with a petition in Australia when there was in existence proceedings relating to the very same matter on foot in New Zealand which, there was every hope, would be resolved within a few months. I ordered that the matter be stood over for further mention on 15 November 2010 with liberty to apply. I allowed the parties to discontinue without leave by consent in the event that the Pt 5 arrangement was approved because it would have had the effect of binding the Bank.
The New Zealand proceedings were heard on 20 and 21 September 2010 and adjourned until 17 February 2011 when they were heard on that day and on 18 February. Thus, there was a need for a further adjournment of the proceedings before me on 15 November 2010. What then occurred was not untypical of the manner in which matters such as this are dealt with under modern case management principles. On 12 November 2010, three days before the adjourned hearing, an email was sent to my associate by Mr Reid on behalf of Mr Henderson with a copy to the Bank’s solicitors. The email read:
“Dear Ms Jones
I refer to our previous discussions and confirm I am the solicitor on the record for David Stewart Henderson, the respondent in these proceedings.
I refer to the last order of the Court made on 10 June 2010, and, in particular, order 1 that "Pending resolution of New Zealand proceedings stood over for further mention on 15 November 2010 at 9.30am”.
As I indicated in our last telephone discussion, the New Zealand proceedings are not yet resolved and remain part heard. I attach for your information a letter from the New Zealand High Court confirming the resumption of the hearing on 17 and 18 February 2010.
In these circumstances, I would submit that it is appropriate for the Court to standover these proceedings for a further period of time pending resolution of the New Zealand proceedings. I would suggest that a date in the first week of March 2011 would be suitable, for example, 7 March 2011.
I have communicated this proposal to Norton Rose, the solicitors for the applicant, and have received no objection from them to the proposal. I have also copied the relevant solicitors from Norton Rose into this email.
Would you please advise whether Raphael FM would be willing to consider this submission and make an order in chambers without the necessity for an appearance on Monday.
I look forward to hearing from you.
Yours faithfully
Callum Reid
Principal.”
My associate, after discussions with me responded to both parties:
“Dear Mr Reid,
Federal Magistrate Raphael will consider the request upon receipt of consent orders in the proper form.
Kind regards,
Rebecca Jones”
On 12 November 2010 Mr Goldman, the solicitor for the Bank, wrote to my associate with a copy to Mr Reid:
“Dear Associate
Please see attached consent orders signed by me and discussed and agreed with Mr Henderson (who is unable to access the technology this afternoon to endorse his consent on the attachment).
Kindly inform us whether the listing on Monday before Federal Magistrate Raphael can be avoided.
Regards
David Goldman
Partner”
The order which the Court made by consent was that:
“Proceedings are to be adjourned until 7 March 2011.”
The petition, having been presented on 18 February 2010, expired at midnight on 17 February 2011. It is possible to extend the life of the petition under s.52(5) of the Act which is in the following form:
“52(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.”
Consideration
The discretion given to the Court by the wording of the subsection is clearly wide. It is upon this discretionary basis that the respondent seeks to prevent the order being made. I shall discuss those submissions later. But first, having got to a point where the petition has been adjourned to a date after its nominal expiry date, it is as well to define the law which permits this Court to make an order nunc pro tunc granting the extension as from date of the order upon which it should have been made, in this case 12 November 2010. In DCT v Sedrak (supra) Barnes FM, in her usual meticulous manner, explains that orders of this type are available in the Federal Court through use of O 35 rule 7(3) of the Federal Court Rules which provides that:
“A clerical mistake in a judgment or order, or an error arising in a judgment or order from an accidental slip or omission, may at any time be corrected by the Court.”
In Roskell v Snelgrove [2008] FCA 427 Lindgren J on appeal from a Federal Magistrate stated at [38]:
“I agree with counsel that if O 35 rule 7(3) was not available to Driver FM there would, in any event, have been available to him an implied power to the same effect. In my view, however, O 35 rule 7(3) was available to his Honour.”
That decision came after the Full Bench decision in Griffiths v Boral Resources (QLD) Pty Ltd (2006) 154 FCR 554 where their Honours assumed for the purposes of the proceedings that the Federal Magistrates Court was entitled to invoke O 35 rule 7 (at [15]) but did not opine to that effect because it was not necessary. As noted at the commencement of these reasons, the respondent concedes that the Court has this power. The manner in which the power is to be exercised in circumstances of this type where the “slip” is not one of the Court’s but results from inadvertence or mistake on the part of a party was considered authoritatively by Burchett J in Re Howell; Ex parte Commissioner of Taxation (1996) 70 FCR 261. As Barnes FM notes in Sedrak at [20]:
“In Re Howell; Ex parte Commissioner of Taxation (1996) 70 FCR 261 Burchett J of the Federal Court applied the slip rule in circumstances where there was an inadvertent omission by a petitioning creditor to request an extension of time in relation to a creditor's petition which lapsed prior to the date to which the matter had been adjourned by the Registrar. It was not in dispute that it was the creditor's oversight which resulted in there having been no application for an extension under s 52(5) of the Bankruptcy Act. His Honour stated at 262:
"In my opinion, it is plain that this was the kind of mistake to which cases concerned with what is called the "slip rule" refer; and that the Registrar, whose attention was, by reason of the mistake, not drawn to the particular problem, also made a mistake of the same character when the orders in respect of the adjournment were made without the addition of an order pursuant to subs (5) of s 52. That seems particularly plain in this case, where ancillary directions were given which could have had no other purpose than to enable the petition, as a live petition, to be given effect on a date subsequent to the expiry of the period of 12 months from its presentation."”
The Court is not required to inquire into the actual state of mind of the Judge to whom the slip is attributed but may act on the basis that he or she would have had a particular intention but for some omission such as the failure of a party’s representative through inadvertence to request the making of some appropriate ancillary order; Re Howell (supra) at [263]; Elyard Corp Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385 at [391].
The evidence supporting the Bank’s claim that it acted inadvertently is contained in an affidavit of David Benjamin Goldman dated 4 March 2011. Mr Goldman noted at [10] that the email seeking the further adjournment of the case after November came from the respondent debtor and it was he who suggested the date of 7 March 2011. He continues at [11] and [12]:
“11.On 12 November 2010 short minutes of order by consent were sent to the Court by email and next to mark D is a copy of that email.
12.On 12 November 2010 the parties inadvertently omitted to seek an order in those short minutes pursuant to s.52(5) of the Bankruptcy Act to seek an extension of the life of the Bank’s creditor’s petition prior to expiration on 17 February 2011.”
Mr Reid in his affidavit states at [4]:
“Mr Goldman’s assertion, insofar as it relates to the respondent’s position, is incorrect. As the solicitor for the respondent who initiated the enquiry concerning the adjournment of the proceedings, I can confirm that the issue of the extension of the life of the petition did not occur to me at that time. This is not surprising in circumstances where this is an issue more for the applicant than the respondent. Nor was I involved in preparing or signing the short minutes of order adjourning the proceedings, although I was certainly aware that short minutes had been prepared by the applicant. This followed from the email sent by Mr Goldman on 12 November 2010 (annexure “D” of his affidavit), a copy of which I received and read, and considered accurate at that time.”
I accept that there was no inadvertence on the part of Mr Reid. He was simply not concerned with the matter, nor thought about it. Clearly, however, Mr Goldman’s actions were inadvertent. He was responding to an apparently reasonable request to adjourn the matter until after the New Zealand case had concluded and failed to make the extension application. In Elyard (supra) Lockhart J (with whom Black CJ agreed) stated at 390-391 that:
“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.”
I am quite satisfied that there was no deliberate decision not to apply for the extension and, equally, that it was not at that time a matter of controversy. It could not have been. It had not occurred to either of the solicitors.
The respondent argues that I should not exercise my discretion to make the order, firstly, because there is no prejudice to the applicant by refusing to do so. I am not persuaded by this. The applicant was required to go through a substituted service application before the petition could be served. Whatever may be the truth of the respondent’s residence, he appears to be currently outside of Australia and in New Zealand. Service may again prove difficult. More importantly, however, is the fact that the petition was presented well over a year ago and if it is now allowed to lapse and a new petition has to be issued the relation back date will be moved forward to the disadvantage of the present applicant and all other creditors.
More persuasively, the debtor argues that there are real contentions about the petition. The debt is based on guarantees and, in particular, a guarantee of a property which the Bank has sold. Not unexpectedly, the debtor alleges that the Bank sold for a significant under value and that, had it sold for the proper amount, its debt would have been covered. He also argues jurisdiction, claiming not to be a person carrying on business in Australia as claimed in para.3 of the petition (s.43(1)(b)(iii)) of the Act). The debtor claims that the debt does not satisfy the conditions under s.44(1)(b) of the Act as it is not a liquidated sum due at law or in equity or partly at law and partly in equity and nor is it payable either immediately or at a certain future time. He says that the applicant has not got a judgment against him and the quantum of the liability under the personal guarantee is uncertain. He also states that if the Pt 5 proposal is approved by the New Zealand High Court the applicant will be bound and, therefore, there will be no utility in the petition. These are all serious grounds of objection but they have not been established. Moreover, the respondent accepts that it would be open for the applicant to issue a new petition immediately when this one is found to have lapsed and, doubtless, will make the same objections to that petition as to the one currently before me. In these circumstances, I do not think that declining to grant the extension and allowing the petition to lapse would be in the interests of justice and the speedy resolution of the issues between these parties. It would provide one party with an ephemeral advantage but result in considerable prejudice to the other party and, more importantly, to the debtor’s many creditors.
I am of the view that the history of this matter indicates that, on any objective consideration, had the creditor made the application to extend at the proper time it was one that would have been granted. It was, after all, the Court’s decision not to allow the petition to proceed whilst there were proceedings on foot in New Zealand that directly affected the rights of the parties. When those proceedings became part heard considerations of comity would oblige a Court in the position of this one to await the New Zealand conclusion unless, possibly, if the petition would have completely lapsed having already been extended.
I am told by the parties that the New Zealand High Court is to hear the Inland Revenue’s bankruptcy application against Mr Henderson on 31 March 2011. I was asked to adjourn this application pending that hearing. This was something that I might have been prepared to do had I not been told by Mr Reid that his client was considering filing another Pt 5 proposal which would have the effect of staying proceedings for a bankruptcy order. The hearing on 31 March would not then take place. In those circumstances, I thought it proper that consideration be given to whether the petition should be extended immediately and for that reason I heard the parties. I have come to the conclusion that I am entitled to make such an order and that it is in the interests of justice that I do so. I will make orders in accordance with paragraph 2 of the “notice of motion”. I note that the applicant does not seek costs.
I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of Raphael FM
Date: 16 March 2011
5
2