FEDERAL COURT OF AUSTRALIA
Hrycenko v Hrycenko (by his legal representative Hycenko) [2022] FCAFC 152
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- Case
- [2022] FCAFC 152
- Decision Date
CaseChat Overview and Summary
The legal issues revolved around the interpretation of the slip rule, as outlined in Rule 16.05 of the Federal Circuit Court Rules 2001 and Rule 17.05 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021. Specifically, the court had to decide if the slip rule could be applied to correct errors arising from accidental slips or omissions in the context of a creditor’s petition that had already lapsed and resulted in a sequestration order. The court also had to examine whether the slip rule could be used to extend the life of the petition beyond the statutory 12-month period after the petition was presented.
The court's reasoning focused on the principles established in Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd, which held that the slip rule could be applied to correct errors from accidental slips or omissions, provided the amendment did not involve matters of controversy. The court in Hrycenko v Hrycenko concluded that the slip rule could be invoked to extend the life of a creditor's petition beyond the statutory 12-month period, even after the sequestration order had been made. The court found that the error in the case was due to an accidental omission and not a deliberate decision, thus making it a suitable case for the application of the slip rule.
Consequently, the court set aside the sequestration order made on 28 October 2021 in the Federal Circuit Court of Australia and the orders amending the 2021 orders nunc pro tunc. The court directed further submissions on consequential orders and costs, with the Registrar to provide copies of the reasons to relevant parties. This decision underscored the importance of the slip rule in ensuring procedural fairness and the correction of inadvertent errors in bankruptcy proceedings.
Orders
Orders of the court
1. 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.
2. 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.
3. The appeal is allowed.
4. The sequestration order made on 28 October 2021 in the Federal Circuit Court of Australia in the estate of Victor Hrycenko is set aside.
5. 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.
6. The proceeding is adjourned for further submissions in writing or for hearing if necessary all consequential orders, including costs.
7. 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.
8. 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.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
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.