Heywood v Sharpe
[2014] FCCA 2999
•23 December 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| HEYWOOD v SHARPE | [2014] FCCA 2999 |
| Catchwords: BANKRUPTCY – Creditor’s petition – creditor’s petition lapses – whether Court has power under the “slip rule” to extend the life of the creditor’s petition after the creditor’s petition has lapsed – observations on the availability of the slip rule as a source of power to make order extending the life of a creditor’s petition after the time limited by s.52(5) of the Bankruptcy Act 1966 (Cth) (Act) for making such order has expired – observations on whether Full Federal Court might wish to reconsider its decision in Re Young; Ex parte Smith (1985) 5 FCR 204 that s.33(1)(c) is not a source of power for making an order for extending the life of a creditor’s petition after the time limited by s.52(5) of the Act for making such order has expired. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.33(1)(c), 52(4), 52(5) Corporations Act 2001 (Cth), ss.6(1), 70, 459E, 459F(2)(a), Part 2.1 |
| Aussie Vic Plant Hire Pty Ltd v Esanda FinanceCorporation Ltd (2008) 232 CLR 314 Ellis v Wallsend District Hospital (1989) 17 NSWLR 553 Flint v Richard Busuttil & Company Pty Ltd (2013) 216 FCR 375 Griffiths v Boral Resources (Qld) Pty Ltd (2006) 154 FCR 554 L Shaddock & Associates Pty Ltd v The Council of the City of Parramatta (No.2) (1982) 151 CLR 590 Piersons Pro-Health Pty Ltd & Ors v Silvex Nominees Pty Ltd & Anor(No.3) [2010] FMCA 250 Re Young; Ex parte Smith (1985) 5 FCR 204 Richard Busuttil & Co Pty Ltd v Flint; In the Matter of Flint [2013] FCA 575 |
| Applicant: | CHRISTOPHER JOHN HEYWOOD |
| Respondent: | DAVID GEORGE SHARPE |
| File Number: | SYG 1569 of 2013 |
| Judgment of: | Judge Manousaridis |
| Hearing dates: | 26 September and 4 November 2014 |
| Date of Last Submission: | 14 November 2014 |
| Delivered at: | Sydney |
| Delivered on: | 23 December 2014 |
REPRESENTATION
| Solicitors for the Applicant: | Mr L. Juhasz and Ms R. Heffernan of Coastal Law & Conveyancing Pty Ltd |
| Respondent appeared by telephone. |
ORDERS
Pursuant to r.16.05(1) of the Federal Circuit Court Rules 2001 (Cth), the order made on 26 May 2014 granting the respondent leave to file and serve a copy of the judgment of Judge Delaney of the District Court of New South Wales, together with a very short note about what the relevance of that judgment to what had been submitted to the Court on 26 May 2014 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 10 July 2013.
The costs of the application to vary the order made on 26 May 2014 are reserved.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 1569 of 2013
| CHRISTOPHER JOHN HEYWOOD |
Applicant
And
| DAVID GEORGE SHARPE |
Respondent
REASONS FOR JUDGMENT
Introduction
On 10 July 2013 the applicant, Mr Heywood, filed a creditor’s petition seeking a sequestration order against the estate of the respondent, Mr Sharpe.
Because of s.52(4) of the Bankruptcy Act 1966 (Cth) (Act), the creditor’s petition was due to lapse “at the expiration of . . . the period of 12 months commencing on the date of presentation [i.e. filing] of the petition”. It was due to lapse unless, at any time before the expiration of the twelve-month period, the Court were to order under s.52(5) of the Act that the period at the expiration of which the creditor’s petition would lapse be for a period exceeding 12 months and not exceeding 24 months commencing on the date on which the creditor’s petition was filed.
I reserved my judgment at the conclusion of the hearing of the creditor’s petition on 26 May 2014. The applicant did not then or at any other time apply for an order under s.52(5) of the Act to extend the life of the creditor’s petition. I did not, however, deliver any reasons for judgment by 10 July 2014, being the date on which the twelve-month period for the creditor’s petition prescribed by s.52(4) of the Act expired. That meant that on 10 July 2014 the creditor’s petition lapsed.
I did not become aware of the lapsing of the creditor’s petition until 23 September 2014. On that day, at my request, my Associate sent an email to the parties informing them that the creditor’s petition had lapsed. I listed the matter for directions on 26 September 2014 for the purpose of determining whether the applicant wished to submit that the Court has power to extend the life of the creditor’s petition. Before the directions hearing, the applicant filed written submissions to the effect that the Court had power under the slip rule to extend the life of the creditor’s petition. Mr Sharpe filed written submissions to the effect that the Court did not have power under the slip rule to extend the life of the creditor’s petition.
At the directions hearing on 26 September 2014, I explored with the solicitor for the applicant and Mr Sharpe what I considered to be the issues I had to consider about whether the slip rule permitted me to make an order under s.52(5) of the Act. Being mindful of the decision of the Full Federal Court in Flint v Richard Busuttil & Company Pty Ltd,[1] I informed the parties that, to a large extent, the operation of the slip rule depended on evidence of what the applicant would have done had he adverted to the fact at the hearing of 26 May 2014 of the possible need to apply for an order under s.52(5) of the Act and, if he had, what Mr Sharpe would have done in response. I made directions for the filing of evidence and set down for hearing on 4 November 2014 the question whether I could and should, under the slip rule, make an order under s.52(5) of the Act to extend the life of the creditor’s petition.
[1] Flint v Richard Busuttil & Company Pty Ltd (2013) 216 FCR 375 (Allsop CJ, Katzmann and Perry JJ)
In the event, the applicant indicated he did not wish to put on any further evidence or make any further submissions. Mr Sharpe indicated he did wish to put on evidence, which he did by filing an affidavit on 14 November 2014. The parties also agreed there would be no need for any further hearing before I could determine whether the slip rule was available to permit me to extend the life of the creditor’s petition and, if so, whether I should exercise that power.
In these reasons for judgment, therefore, I consider whether I have power under the slip rule to make an order under s.52(5) of the Act, even though the period provided for by s.52(4) of the Act has lapsed. My reasons are arranged as follows. First, I consider the nature of the slip rule in general. Second, I consider the text of the rule which expresses the slip rule. Third, I review the cases that have considered or are relevant to whether the slip rule is available to permit the Court to make an order under s.52(5) of the Act. Finally, I consider whether the slip rule is available to permit me in this case to make an order under s.52(5) of the Act.
The slip rule
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 of the FC Rules applies to judgments and orders that have been made and entered by this Court.[2]
[2] Flint v Richard Busuttil & Company Pty Ltd (2013) 216 FCR 375 (Allsop CJ, Katzmann and Perry JJ)
The slip rule has been applied to an increasingly broad range of errors. In addition to clerical errors of judges or court staff who are involved in the drafting and entering of orders and judgments, the slip rule has been applied to errors made by litigants and their legal representatives.[3] This was confirmed by the High Court in L Shaddock & Associates Pty Ltd v The Council of the City of Parramatta (No 2).[4] In that case, the successful appellant (plaintiff), through inadvertence, did not apply to the High Court for an order that the respondent (defendant) pay interest on the amount the trial judge assessed would be payable by the respondent if the appellant had succeeded in its claim for damages against the respondent. The Court held it was “competent for this Court, pursuant to the slip rule, to amend the Court's previous order to make provision for interest upon the damages, to which the applicants have been held to be entitled”.[5] Somewhat controversially, the rule has also been applied to where a party or a party’s legal representative has inadvertently omitted to apply for an order under s.52(5) of the Act to extend the life of a creditor’s petition.
[3] See Tarrant J Amending Final Judgments and Orders The Federal Press, 2010, pages 23-44.
[4] (1982) 151 CLR 590 (Mason ACJ, Wilson and Deane JJ)
[5] L Shaddock & Associates Pty Ltd v The Council of the City of Parramatta (No 2) (1982) 151 CLR 590 at 595
Before I examine the relevant cases, it will be useful first to consider what meaning can properly be extracted from the text of r.39.05(h) of the FC Rules. For, although the slip rule has been in rules of court for many years, and has been considered and applied in many cases, subject to any binding authority, the precise scope of the rule in any given case must be determined by the proper construction of the text of the particular rule of court in which it is expressed.
Sub-rule 39.05(h) of the FC Rules
Sub-rule 39.05(h) of the FC Rules provides that the “Court may vary or set aside a judgment or order after it has been entered if . . . there is an error arising in a judgment or order from an accidental slip or omission”.
There are a number of matters to notice about this rule. First, the rule applies to a “judgment or order”. The word “judgment” is defined in the Dictionary to the FC Rules to have the meaning given to that word in s.4 of the Federal Court of Australia Act 1976 (Cth) (FCA Act). In that section, “judgment” is defined to mean a “judgment, decree or order, whether final or interlocutory”, or a sentence, and includes a conviction. The word “order” is defined in the Dictionary to the FC Rules to include “a final order, an interlocutory order, a direction and a sentence of the Court”.
The word “judgment”, in its historical sense, refers to the formal decision of a common law court by which it finally determined the issues that were tendered by the parties to the court for its determination. It has been defined as:[6]
the determination or sentence of the law, pronounced by a competent judge or court, as the result of an action or proceeding instituted in such court, affirming that, upon the matters submitted for its decision, a legal duty or liability does or does not exist.
[6] H C Black A Treatise on the Law of Judgments, Second Edition, Volume 1, Bancroft-Whitney Co, 1902, page 2. The usual form of judgments in modern times is expressed in words to the effect: “there be judgment for the plaintiff in the amount of” or there be judgment in favour of the defendant. That, however, is not the form of the common law judgment. A common law judgment was in substance a declaration of right. The Court pronounced that “it is considered that” the plaintiff “do recover against” the defendant a particular amount of money, or “his said damages”, or a particular parcel of land; or, where the plaintiff does not succeed, the form of judgment was that “it is considered that” the plaintiff “take nothing by his said bill (or writ)”: see W Tidd Practical Forms London, 1799, pages 278 and 298.
Section 4 of the FCA Act makes it clear, however, that “judgment” is not limited to its technical common law meaning. It includes a “decree” which, although rarely used in modern times, is an order made by courts of equity that finally determines the rights between the parties.[7] It also includes an “order” which denotes any form of words by which a court pronounces its decisions in response to applications made to it. And, finally, because “judgment” is defined to include an “order”, and “order” is defined to include “directions”, “judgment” also includes “directions”. This may be taken to mean any order the Court makes for the taking of a step in a proceeding.
[7] A decree is “a sentence or order of the court, pronounced on hearing and understanding all the points in issue, and determining the rights of all the parties in the suit according to equity and good conscience.”: H C Black A Treatise on the Law of Judgments, Second Edition, Volume 1, Bancroft-Whitney Co, 1902, page 3, quoting 2 Daniell Chancery Practice
In short, the words “judgment” and “order” denote the words by which courts pronounce decisions they make. These include not only the decisions by which the courts finally determine parties’ rights and liabilities at the end of an action or suit; they also include all other decisions courts make in the course of any particular action or suit. In the context of the slip rule, however, the words “judgment” and “order” would usually refer to judgments or orders that finally determine the rights of the parties. That is so because most rules of court, including the FCC Rules, empower the court to vary or set aside interlocutory orders.[8] Additionally, the slip rule will also generally not be invoked to set aside or vary an injunction because most rules of courts that have power to issue injunctions empower the court to set aside or vary injunctions.[9]
[8] See FCC Rules, r.16.05(2)(c)
[9] See FCC Rules, r.16.05(2)(d)
Second, r.39.05(h) of the FC Rules applies to a judgment or order that has been entered. The notion of “entry” of a judgment or order is not defined in the FCC Rules. It is relatively clear, however, that “entry” as used in the FCC Rules, means reducing an order made by the Court into writing and then a judge authenticating the order by signing the writing, and affixing the seal of the Court to the writing under r.16.08 of the FCC Rules.[10]
[10] “The signing and sealing of the order constitutes entry of the order.”: Piersons Pro-Health Pty Ltd & Ors v Silvex Nominees Pty Ltd & Anor (No.3) [2010] FMCA 250 at [5] (Lucev FM, as his Honour then was).
Third, to engage r.39.05(h) of the FC Rules, there must be an “error . . . in a judgment or order”. That is, there must be an error in the words a court has employed when pronouncing a decision in response to an application made to it at the end or in the course of an action or suit. The error may be manifested in at least three ways. The judgment or order may omit words it should have included; it may contain words that should not have been included; or it may both omit words that should have been included, and include words that should have been omitted.
Fourth, it is not any error in a judgment that falls within the slip rule. As r.39.05(h) of the FC Rules itself states, the error must be one “arising . . . from an accidental slip or omission”. These words require a causal link between the error in a judgment or order and some accidental slip or omission. Taken literally, the rule applies to any accidental slip or omission that may occur in the course of a proceeding, provided it leads to an error in a judgment or order, including an accidental omission to plead a cause of action or defence, or to raise a particular claim for relief, or to adduce evidence or make a particular submission. Each such accidental slip or omission could result in an error arising in a judgment or order.
It cannot, however, be seriously countenanced that the slip rule applies to errors in a judgment or order that arise from accidental slips or omissions in pleading and adducing evidence. There are other powers that are available to courts to deal with such accidental slips or omissions. The most important of these is the power to permit amendments to pleadings, and the power to grant a party leave to reopen his or her case. This suggests that the slip rule is concerned with errors in a judgment other than those that arise from accidental slips or omissions in pleading or the adducing of evidence.
The application of the slip rule to s.52(5) of the Act
As I have indicated earlier in these reasons, there are a number of cases where it has been held that the slip rule is available to permit the Court to make an order under s.52(5) of the Act even after the time for making the order permitted by s.52(4) has passed (post-expiry extension order)[11]. The relevant cases up to October 2006 were identified by the Full Federal Court in Griffiths v Boral Resources (Qld) Pty Ltd.[12] The Full Federal Court, although expressing discomfort with the use of the slip rule to make a post-expiry extension order, confirmed that the slip rule was available to be used in that way. The Full Federal Court held, however, that the rule could be invoked only where there is a judgment or order, and only if it can be shown that it was due to an accidental slip or omission that no order under s.52(5) of the Act was made at the time of that judgment or order.
[11] The expression “post-expiry extension” is that used by Foster J in Richard Busuttil & Co Pty Ltd v Flint; In the Matter of Flint [2013] FCA 575 at [26]
[12] (2006) 154 FCR 554
The availability of the slip rule to make a post-expiry extension order was recently considered by the Full Federal Court in Flint v Richard Busuttil & Company Pty Ltd.[13] In that case a creditor’s petition was filed on 24 November 2011. On 29 August 2012 a Judge of this Court (then a Federal Magistrate) made directions for the filing of submissions. The Judge made a sequestration order on 7 December 2012, more than twelve months after the date on which the creditor’s petition had been filed. On the same day, immediately before his Honour made the sequestration order, his Honour made an order extending the life of the creditor’s petition up to 23 November 2013. It was submitted that the operation of the slip rule was not engaged in the circumstances of that case.
[13] Flint v Richard Busuttil & Company Pty Ltd (2013) 216 FCR 375 (Allsop CJ, Katzmann and Perry JJ)
The Full Federal Court found the slip rule had not been engaged. The Court noted that, because of the manner in which the Judge dealt with the rule, the petitioning creditor did not put on any evidence in support of the invocation of the slip rule; and, because the only order to which the slip rule could be applied was made some three months before the twelve month period prescribed by s.52(4) of the Act expired, it was not possible to infer that, if an application to extend the period were made on 29 August 2012, the Judge would have extended it.[14] Nor was it possible to infer that the creditor did not, on 29 August 2012, apply for an order under s.52(5) of the Act, or that the Judge himself did not make such order because of some accidental slip or omission.[15] The Full Federal Court also observed that the fact that a post-expiry extension order is one that could only have been made in the exercise of the court’s discretion did not prevent the application of the slip rule; at least not where it is to be concluded that, had the matter been raised, it could only have resulted in the discretion being exercised one way.[16]
[14] Flint v Richard Busuttil & Company Pty Ltd (2013) 216 FCR 375 at page 383, ([38])
[15] Flint v Richard Busuttil & Company Pty Ltd (2013) 216 FCR 375 at page 383, ([39])
[16] Flint v Richard Busuttil & Company Pty Ltd (2013) 216 FCR 375 at page 384, ([46])
Issues
Thus, to determine whether I have the power under the slip rule in this case to make a post-expiry extension order, I must consider the following questions:
a)Did I make an order on 26 May 2014?
b)If (a) is answered in the affirmative, was that order entered?
c)If (b) is answered in the negative, does that mean I have no power to make a post-expiry extension order?
d)If (c) is answered in the negative, did either the applicant’s solicitor or I fail to advert to the possibility that I might be delivering my reasons for judgment on the matters I heard on 16 and 26 May 2014 after 10 July 2014, and that it might be necessary to make an order on 26 May 2014 to extend the life of the creditor’s petition?
e)If (d) is answered in the affirmative, had I on 26 May 2014 adverted to the possibility that it might be necessary to make an order under s.52(5) of the Act, would I have raised that question with the parties on 26 May 2014 for their submissions?
f)If (e) is answered in the affirmative, would I necessarily have made an order under s.52(5) of the Act extending the life of the creditor’s petition after hearing submissions from the parties?
I will now consider each of these questions.
Was an order made on 26 May 2014?
Relying on the decision in Griffiths, Mr Sharpe submits there is no judgment or order to which the slip rule could be applied to permit me to make a post-expiry extension order. In particular, he submits I made no order on 26 May 2014 by the time I indicated I would reserve my decision.
It is true I did not cause to enter any order at the hearing on 26 May 2014. That does not necessarily mean that I made no order. Section 74 of the FCCA Act provides that an order of this Court must be in writing or must be reduced to writing as soon as practicable. That assumes that the order may be made without its being in writing. Further, Part 16 of the FCC Rules recognises a distinction between the giving or making of a judgment or an order, and the entry of judgments or orders. Rule 16.02 of the FCC Rules provides that, unless the Court otherwise orders, a judgment or order takes effect on the day when it is given or made; and r.16.07 provides when an order must be entered.
Whether or not I made an order requires me to refer to a particular matter that I discussed with Mr Sharpe towards the conclusion of the hearing on 26 May 2014 relating to a judgment from the District Court that was due to be handed down. It would be convenient if I set out the transcript of that discussion:[17]
[17] 26.05.14, T94.5-95.10
HIS HONOUR: Are there any other submissions? I think I’ve got the essence of what you’re saying to me. I think I’ve captured all of the ‑ ‑ ‑
MR SHARPE: Yes. Yes, your Honour. Well, only the fact that I would ask for an adjournment, pending the outcome of this decision, because I believe it will be an authority on enforcement action for the purposes of the Federal Court. That’s where the submissions go to: is enforcement action of a bankruptcy notice in a creditors petition.
HIS HONOUR: Well, all I can do is – it’s going to take me a little while to read this material.
MR SHARPE: Certainly, your Honour. Perhaps you might take the ‑ ‑ ‑
HIS HONOUR: I’m not going to adjourn it.
MR SHARPE: No.
HIS HONOUR: It’s appropriate for parties after submissions have been completed to bring to the attention of the court any judgment that has arisen.
MR SHARPE: Yes.
HIS HONOUR: So, as I said, I won’t give judgment before the time that you say Delaney J is going to give his decision.
MR SHARPE: Well, your Honour, that would assist. I ‑ ‑ ‑
HIS HONOUR: Well, I’m not planning not to. It’s just that my workload won’t permit me to.
MR SHARPE: Yes. No. Well, that would effectively assist. Yes.
HIS HONOUR: So all I’m going to do is to say that if there is a judgment which you say is relevant ‑ ‑ ‑
MR SHARPE: Yes, your Honour.
HIS HONOUR: ‑ ‑ ‑ you give notice to the other side about it, and you will have leave to file and serve the judgment with a very short note about what you say is the relevance to what has been submitted to me.
MR SHARPE: Yes. Well, your Honour, that would suffice.
HIS HONOUR: Do you have any objection to that Mr Juhasz?
MR JUHASZ: No, your Honour.
HIS HONOUR: Yes. All right.
MR SHARPE: Yes. That would suffice, your Honour, because, as I said, by my submissions there will be something to be said in the judgment about it, right or wrong.
HIS HONOUR: Yes. All right.
The transcript thus records that Mr Sharpe requested an adjournment to allow for the handing down of a judgment by Judge Delaney of the District Court of New South Wales, and for Mr Sharpe to make submissions on the basis of that judgment. I did not grant the adjournment because I indicated that, because of my work commitments, I would not be handing down my judgment before the time Mr Sharpe indicated that Judge Delaney might be delivering his judgment, but I granted Mr Sharpe leave to provide to me and the applicant a copy of the judgment of Judge Delaney, after it was to be delivered, together “with a very short note about what” Mr Sharpe submits is the relevance of the judgment.
In my opinion, there is no question that at the hearing of 26 May 2014 I made a direction granting Mr Sharpe leave to provide to me and the applicant the judgment of Judge Delaney together with a short note about its relevance. It is true that it was not reduced to writing as soon as practicable. That does not mean, however, I made no order.
There is, therefore, a judgment or order made on 26 May 2014 to which the slip rule is capable of applying.
Consequence of order not having been entered
The order I made at the hearing of 26 May 2014, however, has not been entered. That means that r.39.05(h) of the FC Rules does not apply, because r.39.05(h) applies to the setting aside of a judgment or order that had been entered. Does that make any difference?
In my opinion, it does not. Sub-rule 16.05(1) of the FCC Rules provides that the Court may vary or set aside its judgment or order before it has been entered. This confers on the Court the same power that r.39.05(h) of the FC Rules confers on the Court. The difference between the rules is that the preconditions for the availability of the power are different. For r.39.05(h) of the FC Rules, the preconditions are that there has been an error in the judgment or order arising from an accidental slip or omission. The only precondition to the exercise of the power under r.16.05(1) is that the judgment or order has not been entered.
In my opinion, I can see no error of principle in relying on r.16.05(1) of the FCC Rules to vary or set aside a judgment or order that has not been entered on the same grounds that a judgment or order that has been entered may be set aside or varied because there has been an error in the judgment or order arising from an accidental slip or omission. I will proceed on the basis that I have power to make a post-expiry extension order under r.16.05(1) of the FCC Rules if I am otherwise satisfied that the slip rule has been satisfied in relation to the order I made on 26 May 2014.
Was the possibility of making an order under s.52(5) adverted to?
Neither the applicant nor his solicitor has filed an affidavit that may be relevant to determining why no application was made by the applicant on 26 May 2014 for an order under s.52(5). There is no evidence, for example, about whether the applicant’s solicitor expected I would be delivering my reasons for judgment before 10 July 2014 and for that reason did not apply for an order under s.52(5), or whether the applicant’s solicitor simply omitted to make an application through inadvertence. Nor is there any evidence of what the applicant’s solicitor would have done had I alerted the parties to the issue of whether the life of the creditor’s petition should be extended. For these reasons, I am not able to find that the applicant or his solicitors made no application on 26 May 2014 for an order under s.52(5) of the Act because of an accidental slip or omission.
That, however, is not the end of the matter. It is also relevant to inquire whether it was through an accidental slip or omission on my part that I did not on 26 May 2014 consider whether I should make an order under s.52(5) of the Act. I did not on 26 May 2014, when discussing with Mr Sharpe his application for an adjournment and the work commitments I had, or at any other time during the hearing, address my mind to the fact that the creditor’s petition had been filed on 10 July 2013, that, as a consequence of s.52(4) of the Act, the creditor’s petition would lapse by 10 July 2014 unless before that date I would either deliver my judgment on the creditor’s petition or make an order under s.52(5) of the Act, or that I should raise with the parties the question of whether I should make an order under s.52(5) of the Act.
Would the question of making an order under s.52(5) have been raised on 26 May 2014?
The next question I address is, assuming that on 26 May 2014 I would have adverted to the fact that the creditor’s petition was due to lapse on 10 July 2014, would I have raised with the parties at the hearing of 26 May 2014 the question whether I should make an order under s.52(5) of the Act?
Knowing myself as I do, my inclination would definitely have been to give the matter priority and ensure that I would deliver my reasons for judgment before 10 July 2014. That by itself suggests to me that I would not have raised with the parties on 26 May 2014 whether I should make an order under s.52(5) of the Act. There is one matter, however, that suggests to me that on 26 May 2014 I would have raised the issue of making an order under s.52(5) of the Act had I adverted my mind to the fact that the creditor’s petition was due to lapse on 10 July 2014. That matter is Mr Sharpe’s having indicated that he intended to rely on a judgment that he expected to be delivered by Judge Delaney of the District Court.
I have already set out part of the transcript of the hearing of 26 May 2014 where Mr Sharpe referred to a judgment he was expecting Judge Delaney would be delivering. He did not there indicate when the judgment was due to be delivered. At the hearing of 16 May 2014, Mr Sharpe indicated that it might be in July 2014. Mr Sharpe said:[18]
Now, Delaney J doesn’t come back to the civil list until 5 June. I think somebody has told me that he may be retiring this year. So, hopefully, if that’s a July type of event, the judgment won’t be far away. But there will be significant findings.
[18] 16.05.14, T30.35
At the hearing on 26 May 2014, Mr Sharpe said that Judge Delaney’s judgment was pending “[a]nother week or two”.[19]
[19] 26.05.14, T93.5
That Mr Sharpe informed me that he intended to rely on a judgment of the District Court of New South Wales that would perhaps not be available before July 2014 would have been a reason for my not doing that which I would otherwise have been inclined to do, namely, to give the matter priority to ensure I would be in a position to deliver my reasons by 10 July 2014. Instead, I am satisfied that I would have explored in more detail with Mr Sharpe precisely when Judge Delaney might be expected to deliver judgment and would have raised the question of whether the life of the creditor’s petition should be extended under s.52(5) of the Act to take into account the fact that the District Court judgment would not be available until possibly July 2014 and, perhaps, even after that month; and that, on my assessment of my workload at that time, I did not expect I would be in a position to deliver my reasons for judgment before that judgment would be available.
Would I have made an order under s.52(5) of the Act?
The fact that it was through my inadvertence that I did not on 26 May 2014 raise with the parties the possibility of making an order under s.52(5) of the Act does not necessarily mean that, had I raised the question, I would have made such an order. Whether or not an order under s.52(5) of the Act should be made is within the discretion of the Court; and, as was implied by the Full Federal Court in Flint, the slip rule will not be available where the order the Court through an accidental slip or omission failed to make is one that it could have made only in the exercise of discretion, but there is doubt about how the discretion would have been exercised. Would it have been inevitable that I would have exercised my discretion in favour of making an order under s.52(5) of the Act had I raised the issue with the parties on 26 May 2014?
Mr Sharpe has set out in an affidavit made on 14 November 2014 what he says he would have done had I raised with the parties on 26 May 2014 whether I should make an order under s.52(5) of the Act. First, Mr Sharpe deposes that, had I raised the question of whether an order should be made under s.52(5) of the Act, he would have “required the Court to firstly determine my interim application . . . claiming the petition to be defunct”, and then “adjourning the application for an extension of time in the interim period pending that outcome”.[20] By this, I understand Mr Sharpe to be submitting that he would have asked the Court to first consider the interim application he filed in Court at the hearing of 16 May 2014 to the extent it claimed paragraph 5 of the interim application, and requested the Court delay the hearing of an application for an extension of the expiration period of the creditor’s petition until after I determined the interim application. The particular claim Mr Sharpe says he would have asked the Court to determine is that contained in paragraph 5 of the interim application:
A Declaration that the Creditors Petition filed 10 July 2013 matter syg1569/2013 is a nullity, the said Petition not being filed in accordance with Part 4, Rule 4.02 of the Bankruptcy Regulations 2006, and, not to date having been given to the Official Receiver in accordance with Part 4, Division 2, Regulation 4.05 of the Bankruptcy Regulations 1996 and section’s 44 and 47 of the Bankruptcy Act 1996, hence subsequently, the said Creditors Petition Details and the Creditors Petition Proceedings are not publicly listed in the National Personal Insolvency Index.
[20] D G Sharpe affidavit, 13.11.14, [15.a.]
I propose to make no finding about whether or not Mr Sharpe would have made such a submission. I am satisfied, however, that if he did, I would not have accepted it. I had made it clear during the hearing of 16 May 2014 that I proposed to deal with all applications that were before the Court, including the interim application Mr Sharpe filed in Court on 16 May 2014:[21]
As I said to you before, my intention is to deal with all of the matters. Now, if you're successful in the interim application that's where it stops. If you're not successful on that I look at the [grounds of] opposition. If you're not successful on that you will lose. That's what I propose to do and that's why I wanted to hear everything today.
[21] 16.05.14, T45.15
Had Mr Sharpe submitted to me that I should look at the interim application before considering whether to extend the life of the creditor’s petition, I would have refused it. I would have insisted that I deal with all issues together as I had already indicated I intended to do. In any event, even if I were to have been inclined to deal with the interim application separately, that would have rendered it more probable that the creditor’s petition would not have been determined by 10 July 2014 because it would have taken time to consider the claim for relief made in paragraph 5 of the interim application. That, in turn, would have rendered it more likely that I would have made an order under s.52(5).
Second, Mr Sharpe deposes that had I raised on 26 May 2014 whether I should then make an order to extend the life of the creditor’s petition, he would have requested an opportunity to put on evidence in support of his application to dismiss any application to extend the creditor’s petition “on the basis of no just or equitable position for the Applicant Creditor, and, conversely, a just and equitable position applying to the Respondent”, and would have requested that the hearing take place before 10 July 2014, but only if I were not to have delivered judgment by that date.[22]
[22] D G Sharpe affidavit, 13.11.14, [15.b.]
Mr Sharpe has not been cross-examined on his affidavit. That does not mean, however, that I am bound to accept his evidence.[23] And I do not accept that Mr Sharpe would have submitted that whether or not an order under s.52(5) of the Act should be made should only be determined if it would have become clear nearer 10 July 2014 that I would not deliver my reasons for judgment by that date. Mr Sharpe’s deposing that he would have made that submission implies he would have taken the risk of my delivering judgment before Judge Delaney were to deliver his judgment and Mr Sharpe having an opportunity to file submissions about the judgment. It is clear from the transcript I have set out earlier in these reasons, however, that Mr Sharpe desired to make submissions on the basis of Judge Delaney’s judgment before I were to deliver my reasons for judgment. At the hearings of 16 May and 26 May 2014, Mr Sharpe applied for an adjournment of the hearings until such time as Judge Delaney delivered his judgment. In those circumstances, it is most unlikely that Mr Sharpe would have willingly risked my delivering judgment before Judge Delaney delivered his judgment and Mr Sharpe made submissions about it.
[23] Ellis v Wallsend District Hospital (1989) 17 NSWLR 553 at 586ff
Third, Mr Sharpe deposes that, had I raised the issue of whether an order should be made under s.52(5), he would have submitted that, in the interests of saving court time and costs, the parties should wait and see whether or not I would be in a position to deliver my reasons for judgment before 10 July 2014.[24] For the reasons I give in paragraph 47, I do not accept Mr Sharpe would have made such submission because it incorrectly implies that he would have willingly taken the risk that I would deliver my reasons for judgment before Judge Delaney would have delivered his judgment and Mr Sharpe made submissions about it.
[24] D G Sharpe affidavit, 13.11.14, [15.c.]
Fourth, Mr Sharpe deposed that he would have sought a future listing of an application for an order under s.52(5) “as late as possible toward the end date of 10 July 2014 so as to allow as far as practical the decision to come from my NSW District Court matter judgment reserved in which I had applied to have my two Farm Tractors returned to my lawful possession”.[25] Again, and for the reasons I have given in paragraph 47, I do not accept Mr Sharpe would have made such submission because it incorrectly implies that he would have willingly taken the risk that I would deliver my reasons for judgment before Judge Delaney would have delivered his judgment and Mr Sharpe made submissions about it.
[25] D G Sharpe affidavit, 13.11.14, [15.d.]
Finally, Mr Sharpe deposes he would have opposed an application to extend time because the creditor’s petition constituted an abuse of process by creditors avoiding the mandatory remedial operation of the Farm Debt Mediation Act 1994 (NSW), and Mr Sharpe would have opposed the extension of time to permit such abuse to continue.[26] Again, and for the reasons I have given in paragraph 47, I do not accept Mr Sharpe would have made such submission because it incorrectly implies that he would have willingly taken the risk that I would deliver my reasons for judgment before Judge Delaney would have delivered his judgment.
[26] D G Sharpe affidavit, 13.11.14, [15.e.]
In my opinion, had I on 26 May 2014 raised the question of whether I should make an order under s.52(5), Mr Sharpe and the applicant would both have agreed to my making such an order. The applicant would have agreed to ensure that the creditor’s petition would not lapse. Mr Sharpe, on the other hand, would have agreed because he intended to rely on a judgment that he expected would be delivered by Judge Delaney, and about which he intended to file submissions, but he did not know when the judgment would be delivered. Had I indicated that I intended not to extend the life of the creditor’s petition, and that I would deliver my reasons for judgment by 10 July 2014, that would have exposed Mr Sharpe to the risk of my deciding the applications I heard without Mr Sharpe having the opportunity to make submissions on Judge Delaney’s judgment. The only way Mr Sharpe would have been able to avoid that risk would have been for him to agree to my extending the life of the creditor’s petition so that I could deliver my reasons for judgment bearing in mind my other work commitments.
I would have considered it just and equitable to extend the period of the creditor’s petition. I would have considered it just and equitable to do so for a further period of twelve months. This would have accommodated Mr Sharpe’s desire to have the opportunity to bring to my attention the judgment of Judge Delaney, once it was delivered, together with submissions in relation to the judgment. There was nothing in the material before me on 26 May 2014, and Mr Sharpe has put nothing in his affidavit of 14 November 2014, to suggest I may not have considered it just and equitable to extend the life of the creditor’s petition by a further twelve months. I would have extended the period for twelve months to avoid the potential difficulties of having to again extend the period if I extended the notice for a shorter period but, for whatever reason, that period proved to be inadequate.
Conclusion and disposition
For the reasons I have given, I am of the opinion that I have power under the slip rule to vary the order I made on 26 May 2014 by adding an order under s.52(5) of the Act to extend the life of the creditor’s petition. I propose to order that the period at the expiration of which the creditor’s petition will lapse will be 24 months commencing on 10 July 2013. I will reserve the question of costs.
Observations on the use of the slip rule to make post-expiry extension orders
Before I conclude these reasons, there are a number of observations I wish to make about the use of the slip rule as a source of power to extend the life of a creditor’s petition under s.52(5) of the Act.
That the Full Federal Court has on two occasions proceeded on the assumption that the slip rule is a valid source of power for the making of a post-expiry extension order should afford a solid ground for concluding that the slip rule is a valid source of power for the making of such orders. There are, however, substantial grounds for doubting that the slip rule can constitute such a valid source of power. First, the Full Federal Court in Griffiths itself said it was “a little uncomfortable with the view . . . 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”.[27]
[27] Griffiths v Boral Resources (Qld) Pty Ltd (2006) 154 FCR 554 at page 562 ([30])
Second, in 1985 the Full Federal Court in Re Young; Ex parte Smith[28] held that s.33(1)(c) of the Act was not available as a source of power for the making of a post-expiry extension order. Paragraph (c) of s.33(1) provides that the Court may “extend before its expiration or, if this Act does not expressly provide [my emphasis] to the contrary, after its expiration, any time limited by this Act, or any time fixed by the Court or the Registrar under this Act (other than the time fixed for compliance with the requirements of a bankruptcy notice), for doing an act or thing or abridge any such time”. It is difficult to see how a rule of court, designed to regulate the practice and procedure of a court in relation to matters over which the court has jurisdiction, can be justified as a source of power to extend the time limited by the Act for the doing of an act after the time has expired, when it has been held that a provision of the Act which appears to deal with that very subject does not apply to the time limited by s.52(4) of the Act.
[28] (1985) 5 FCR 204
Stated another way, the decision in Smith can be characterised as one to the effect that the jurisdiction in bankruptcy that the Act confers in courts does not include jurisdiction to make a post-expiry extension order. If that is a correct characterisation of the decision in Smith, it is difficult to see how the slip rule, a species of delegated legislation that regulates a court’s procedure in matters it has jurisdiction, can confer on a court jurisdiction which has been held the Act does not confer on the court.
Perhaps it might be appropriate for the Full Federal Court to reconsider its decision in Re Young; Ex parte Smith.[29] One reason the Full Federal Court may reconsider Smith might be the plurality’s reasons for judgment in Aussie Vic Plant Hire Pty Ltd v Esanda FinanceCorporation Ltd.[30] The issue in that case was whether the power conferred on a court under s.459F(2)(a) of the Corporations Act 2001 (Cth) (CA) to extend the time for compliance with a statutory demand issued under s.459E of the CA can be exercised after the time by which, under s.459F(2)(a) of the CA, the Court was required to exercise the power. It was submitted that the Court had the power to make such order under s.70 of the CA which provides:
Where this Act confers power to extend the period for doing an act, an application for the exercise of the power may be made, and the power may be exercised, even if the period, or the period as last extended, as the case requires, has ended.
[29] (1985) 5 FCR 204
[30] (2008) 232 CLR 314
Under s.6(1) of the Act, s.70 (being a provision that fell within Part 1.2 of the CA) had “effect for the purposes of this Act, except so far as the contrary intention appears in this Act”. The plurality in Aussie Vic Plant Hire held that the CA manifested a contrary intention, so that s.70 was not available.
Although employing different language, s.70 of the CA, when read with s.6(1) of the CA, is equivalent to s.33(1)(c) of the Act. The potential significance of Aussie Vic Plant Hire to the decision in Smith is that the plurality assumed that s.70 was broad enough to have permitted the court to extend the time for complying with a statutory demand, even after the time in which the court was otherwise empowered to do so had passed, were it not for the plurality’s having discerned that the CA evinced a contrary intention to the express words of s.70.
Another reason it might be appropriate for the Full Federal Court to reconsider its decision in Smith is that the Court’s construction of paragraph (c) of s.33(1) is based on words that are not present in the paragraph. The Full Federal Court construed s.33(1)(c) as applying only to those provisions in the Act that required the doing of an act or thing within a time limited by the Act.[31] That is, the Court construed s.33(1)(c) as empowering the Court to extend, and only to extend, “any time limited by this Act . . . for doing an act or thing [that the Act requires to be done within a specified time]”. Paragraph (c) of s.33(1) of the Act does not contain the words I have included in square brackets. It simply empowers the Court to extend “any time limited by this Act . . . for doing an act or thing”.
[31] Re Young; Ex parte Smith (1985) 5 FCR 204 at page 208-209: “Section 33(1)(c) is directed essentially to provisions in the Act requiring the doing of certain acts or things within specific times. Many examples may be found in the Act, but we refer to the following as sufficient examples for present purposes: ss. 54(1) and (2), 56(13), 102(1), 104(3), 167(6) and (7), 188(4) and 203(1), (3) and (4).” (emphasis added)
It could be argued that extending the life of a creditor’s petition under s.52(5) of the Act before the expiry of the twelve-month period prescribed by s.52(4) of the Act is a time limited by the Act for the doing of an act or thing. The relevant time limited by the Act is that limited by s.52(4), namely, any time “before the expiration of the period of 12 months commencing on the date of presentation of a creditor’s petition”. The relevant act or thing the doing of which is limited by the Act is that specified in s.52(5) of the Act, namely, the Court’s making an 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 presentation of the petition”. If s.52(5) does not expressly provide that the time limited by s.52(4) cannot be extended after that time has expired, it could be argued that s.33(1)(c) of the Act is available as a source of power for making a post-expiry extension order.
I have offered these observations because Mr Sharpe is not legally represented and, I have been informed, the applicant’s attempts to recover the debt on which he relies has financially exhausted him. If there is any appeal to the Federal Court from this decision, therefore, that Court may not have the benefit of any submissions from legally represented litigants.
I certify that the preceding sixty-three (63) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Associate:
Date: 23 December 2014
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