Hrycenko v Hrycenko (by his legal representative Hycenko)

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FEDERAL COURT OF AUSTRALIA

Hrycenko v Hrycenko (by his legal representative Hycenko) [2022] FCAFC 152

Appeal from:

Hrycenko (by His Legal Representative Hycenko) v Hrycenko [2021] FedCFamC2G 187

Hrycenko (by His Legal Representative Hycenko) v Hrycenko [2022] FedCFamC2G 2

File number: VID 682 of 2021
Judgment of: BROMBERG, MOSHINSKY AND MCELWAINE JJ
Date of judgment: 9 September 2022
Catchwords:

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

Legislation:

Acts Interpretation Act 1901 (Cth) s 13(1)

Bankruptcy Act 1966 (Cth) ss 5, 43, 44, 52, 58, 60, 115, 157

Corporations Act 2001 (Cth) s 459P

Corporations Act 1989 (Cth) s 82 (Corporations Law) ss 459A, 459G, 459P, 459R

Federal Circuit Court of Australia Act 1999 (Cth) s 8

Federal Circuit and Family Court of Australia Act 2021 (Cth) s 10

Federal Court of Australia Act 1976 (Cth) s 35A(6)

National Security (War Service Moratorium) Regulations 1941 (Cth) r 22

Federal Circuit Court Rules 2001 (Cth) r 16.05

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

Companies Act 1961 (Vic) s 199

Cases cited:

Al Maha Pty Ltd v Huajun Investments Pty Ltd (2018) 365 ALR 86; [2018] NSWCA 245

Amorin Constructions Pty Ltd v Kamtech Electrical Services Pty Ltd (2008) 73 NSWLR 627; [2008] NSWSC 285

Attorney-General (NSW) v Mayas Pty Ltd (1988) 14 NSWLR 342

Bonesch v Somerville Legal (2021) 286 FCR 293; [2021] FCAFC 79

Cameron v Cole (1944) 68 CLR 571

David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265

Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385

Emanuele v Australian Securities Commission (1995) 63 FCR 54

Emanuele v Australian Securities Commission (1997) 188 CLR 114

Endresz v Commonwealth (2019) 273 FCR 286; [2019] FCAFC 197

New South Wales v Kable (2013) 252 CLR 118; [2013] HCA 26

Flint v Richard Busuttil & Company Pty Ltd (2013) 216 FCR 375; [2013] FCAFC 131

Griffiths v Boral Resources (Qld) Pty Ltd (2006) 154 FCR 554; [2006] FCAFC 149

Hossain v Minister for Immigration and Border Protection (2018) 264 CLR 123; [2018] HCA 34

Hrycenko (by His Legal Representative Hycenko) v Hrycenko [2021] FedCFamC2G 187

Hrycenko (by His Legal Representative Hycenko) v Hrycenko [2022] FedCFamC2G…

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Details
Case
[2022] FCAFC 152
Decision Date

CaseChat Overview and Summary

In the case of Hrycenko v Hrycenko (by his legal representative Hycenko), the dispute centred around the power of the Federal Circuit and Family Court of Australia (Division 2) to extend the life of a creditor's petition under the Bankruptcy Act 1966 (Cth). The central issue was whether the Court could invoke the "slip rule" to retrospectively extend the life of a creditor's petition that had expired after the 12-month period, especially when a sequestration order had already been made. This case required the court to determine the applicability of the slip rule in the context of bankruptcy proceedings and the procedural rules governing creditor's petitions.

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

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.)

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.