Gilbert, Trading in Partnership as Gilbert + Tobin v Stolyar

[2016] FCCA 743

FEDERAL CIRCUIT COURT OF AUSTRALIA

GILBERT, TRADING IN PARTNERSHIP AS GILBERT + TOBIN v STOLYAR & ANOR [2016] FCCA 743

Catchwords:
BANKRUPTCY – Creditor’s petition – creditor’s petition lapses one day after day order is made adjourning creditor’s petition – whether through inadvertence applicant creditor failed to apply on the day of the order for an order under s.52(5) of the Bankruptcy Act 1966 (Act) – whether Court would have made an order under s.52(5) of the Act had the applicant creditor requested such order – order granting adjournment amended pursuant to slip rule to include order under s.52(5) of the Act.

Legislation:

Bankruptcy Act 1966, s.52(5)
Federal Circuit Court of Australia Act 1999 (Cth), s.43(2)(b)

Federal Court Rules 2011 (Cth), r.39.05(h)

Federal Circuit Court Rules 2001 (Cth), rr.1.05(2), 16.05(1)

Flint v Richard Busuttil & Co Pty Limited [2013] FCAFC 13; (2013) 216 FCR
Heywood v Sharpe [2014] FCCA 2999; (2014) 291 FLR 217

Applicant: DANIEL THOMAS GLBERT, TRADING IN PARTNERSHIP AS GILBERT + TOBIN

First Respondent: IAN STOLYAR

Second Respondent: BETH NGOC NGUYEN

File Number: SYG 2826 of 2014

Judgment of: Judge Manousaridis

Hearing date: 24 March 2016

Delivered at: Sydney

Delivered on: 8 April 2016

REPRESENTATION

Solicitors for the Applicant: Mr J Ehrenfeld of Gilbert + Tobin

The first respondent appeared in person

ORDERS

1. Pursuant to r.16.05(1) of the Federal Circuit Court Rules 2001(Cth), the order made on 12 October 2015 adjourning the creditor’s petition to 22 February 2016 is varied by adding the order:

   Pursuant to s.52(5) of the Bankruptcy Act 1966 (Cth) the period at the expiration of which the creditor’s petition filed in these proceedings will lapse will be 24 months commencing on 13 October 2014.

2. The applicant creditor bear its own costs of the application to vary the orders made on 12 October 2015.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 2826 of 2014

DANIEL THOMAS GILBERT, TRADING IN PARTNERSHIP AS GILBERT + TOBIN

Applicant

And

IAN STOLYAR

First Respondent

BETH NGOC NGUYEN

Second Respondent

REASONS FOR JUDGMENT

Introduction

1. The applicant creditor applies for an order that the order made by a Registrar of this Court on 12 October 2015 adjourning the creditor’s petition be amended to include an order that the period at the expiration of which the creditor’s petition will lapse be extended pursuant to s.52(5) of the Bankruptcy Act 1966 (Cth) (Act) to 24 months from when the creditor’s petition was presented. The application is made under the “slip rule”.

2. The facts giving rise to the application can be shortly stated.

Facts

1. On 13 October 2014 the applicant creditor filed a creditor’s petition with this Court. The creditor’s petition relied on the respondents’ failure to comply with a bankruptcy notice which, the creditor’s petition claims, was served on the respondents on 12 September 2014. The bankruptcy notice demanded payment of a judgment for $484,314.04 that was entered with the Supreme Court of New South Wales (Judgment Debt). The Judgment Debt is for legal costs the applicant creditor earned when acting for the respondents in proceedings in the Supreme Court of New South Wales. The respondents were successful in those proceedings, but the other party appealed (Supreme Court Appeal).

2. The creditor’s petition was adjourned on 14 November 2014, 15 December 2014, 16 March 2015, 27 July 2015 and, finally, on 12 October 2015, when the creditor’s petition was adjourned to 22 February 2016. The creditor’s petition was adjourned to allow the applicant creditor and the respondents time to await the outcome of the Supreme Court Appeal. There was an expectation that if the respondents succeeded in resisting the Supreme Court Appeal, funds would become available with which to pay the Judgment Debt.

3. As with all previous adjournments, the adjournment of 12 October 2015 was granted by a Registrar of this Court. It was granted at the request of the solicitor for the applicant creditor. It appears that no person appeared on behalf of the respondents. The solicitor for the applicant creditor informed the Registrar of the reasons why the parties sought the adjournment, which were the same as the reasons for which the previous adjournments had been sought and granted. The applicant creditor’s solicitor did not, however, apply for an order under s.52(5) of the Act. The solicitor cannot recall precisely why she did not do so, but she believes it was through oversight on her part. I find that it was through oversight that the solicitor did not apply for an order under s.52(5) of the Act.

The “slip rule”

1. As I have said elsewhere,[1] the “slip rule” is the name commonly given to a rule that is contained in most rules of court that empowers the court to vary or set aside a judgment or order that has been entered where, because of an accidental slip or omission, there is an error in the judgment or order. The Federal Circuit Court Rules 2001 (Cth) (FCC Rules) do not contain any such rule. The Federal Court Rules 2011 (Cth) (FC Rules), however, do. The rule is contained in r.39.05(h) of those Rules. Because of s.43(2)(b) of the Federal Circuit Court of Australia Act 1999 (Cth) (FCCA Act), and r.1.05(2) of the FCC Rules, r.39.05(h) of the FC Rules applies to judgments and orders that have been made and entered by this Court.[2] The slip rule may apply to amend orders in circumstances where, at the time those orders were made, a petitioning creditor through inadvertence failed to apply for an order under s.52(5) of the Act. I have considered elsewhere the circumstances in which the slip rule can be so applied, and I do not propose to repeat here what I there said.[3]

   [1] Heywood v Sharpe [2014] FCCA 2999; (2014) 291 FLR 217

   [2] Flint v Richard Busuttil & Co Pty Limited [2013] FCAFC 13; (2013) 216 FCR (Allsop CJ, Katzmann and Perry JJ)

   [3] Heywood v Sharpe [2014] FCCA 2999; (2014) 291 FLR 217

2. The orders the Registrar made on 12 October 2015 were not entered. The Court, however, has power under r.16.05(1) of the FCC Rules to amend an order not entered on principles that include the principles under which an order may be amended under the slip rule. [4]

   [4] Heywood v Sharpe [2014] FCCA 2999; (2014) 291 FLR 217 at [33]

3. I have already found that it was though inadvertence that the applicant creditor solicitor did not on 12 October 2015 apply to the Registrar for an order under s.52(5) of the Act. The only issue that arises, therefore, is whether, had the applicant creditor’s solicitor on that day requested an order under s.52(5) of the Act, would the Registrar have made an order under s.52(5) of the Act.

Submissions

1. The applicant creditor submits it was inevitable that the Registrar would have made an order under s.52(5) of the Act. That is so because the Registrar had previously granted adjournments for the same reasons the adjournment was sought and granted on 12 October 2015 and that the Registrar would necessarily have made an order under s.52(5) of the Act, for otherwise, there would have been no point in granting the adjournment.

2. The first respondent, Mr Stolyar, who was unrepresented and appeared  for himself, was refreshingly frank in acknowledging that had he been asked before 12 October 2015 whether he would consent to the Court making an order under s.52(5) of the Act, he would have given that consent. He was not prepared to give his consent, however, after the creditor’s petition had expired. Mr Stolyar also requested that I consider the effect of certain emails that passed between him and the applicant creditor. Mr Stolyar submitted that the emails disclose an arrangement under which, in return for Mr Stolyar paying $50,000, the applicant creditor would continue to act for the respondents in the Supreme Court Appeal, and discontinue the creditor’s petition.

Determination

1. I have examined the emails that were tendered. It appears that the respondents and the applicant creditor made an arrangement that, on payment of $50,000, the applicant creditor would continue to act for the respondents in the Supreme Court Appeal. It does not appear from the emails alone, however, that it was a term of the arrangement that the applicant creditor would withdraw the creditor’s petition.

2. I do not, however, propose to make a finding whether any arrangement was made between the applicant creditor and the respondents. Whether or not the parties entered into any arrangement is not relevant to whether the conditions for the operation of the slip rule are met. Whether or not there was an arrangement as the respondents allege is a matter that may be raised as an issue to be determined on the hearing of the creditor’s petition, if the matter gets to that stage.

3. In my opinion, if, before 12 October 2015, the applicant creditor’s solicitor adverted to the necessity of applying for an order under s.52(5) of the Act, she or some other person on behalf of the applicant creditor would have sought and obtained from the respondents their consent to the Court making an order under s.52(5) of the Act. Further, if, during the hearing on 12 October 2015 before the Registrar, the applicant creditor’s solicitor had applied for an order under s.52(5) of the Act, the Registrar would have made an order. That is because the reason for which the applicant creditor’s solicitor had requested the Registrar, at the hearing on 12 October 2015, grant a further adjournment was the same reason for which the parties had requested adjournments on the previous occasions the matter was before a Registrar. It is likely that the Registrar would have granted the adjournment, just as the Registrars had previously granted adjournments.

4. I propose, therefore, to make an order under r.16.05(1) of the FCC Rules to amend the orders the Registrar made on 12 October 2015 by including an order that the period at the expiration of which the creditor’s petition will lapse will be 24 months commencing on 13 October 2014. I also propose to order that the applicant creditor pay its own costs of the application.

I certify that the preceding fourteen (14) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis

Date: 8 April 2016