Malta and Malta

FAMILY COURT OF AUSTRALIA

MALTA & MALTA

[2008] FamCA 279

FAMILY LAW – PRACTICE AND PROCEDURE – Orders – Slip rule – Jurisdiction of the Family Court of Australia under Bankruptcy Act 1966 – Order made outside statutory time limits – Operation of the Federal Court Rules 1979; Order 35 rule 7 – Inference as to intention of judge in simply adjourning the proceedings in the absence of a petitioning creditor who was unaware of the hearing.

Bankruptcy Act 1966 (Cth)
Family Law Act 1975 (Cth)

Elyard Corp Pty Ltd v DBB Needham Sydney Pty Ltd (1995) 61 FCR 385
Griffiths v Boral Resources (Qld) Pty Ltd [2006] FCAFC 149

APPLICANT:

MR MALTA

RESPONDENT:

MRS MALTA

SECONDNAMED RESPONDENT:

GOULBURN-MURRAY RURAL WATER AUTHORITY

PETITIONER:

MR TRIM

R GROUP PTY LTD

FILE NUMBER:

MLF

4121

2002

DATE DELIVERED:

14 APRIL 2008

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

THE HONOURABLE JUSTICE CRONIN

HEARING DATE:

14 APRIL 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT:

MR INDOVINO

SOLICITOR FOR THE APPLICANT:

ACQUARO & CO

COUNSEL FOR THE RESPONDENT:

MR RANDLES

SOLICITOR FOR THE RESPONDENT:

LENNON MAZZEO

Orders

That the petition by Mr Trim against the wife presented in the Federal Magistrates Court of Australia at Melbourne on 28 September 2006 be extended such that it will lapse on 27 September 2008.
That the costs of the petitioner applicant and the wife of and incidental to this application be reserved to be determined by me upon the further hearing of the petition or as otherwise may be agreed between the parties.
That the further hearing of the petition be adjourned for mention by telephone before me on 24 June 2008 at 9.00am.
That for the purposes of the mention hearing referred to, all parties provide a telephone number at which they may be contacted by no later than 4.00pm on Friday 20 June 2008 to the Associate to Justice Cronin.
That the interim applications otherwise as between the petitioning creditor and the wife be dismissed.

IT IS NOTED that publication of this judgment under the pseudonym Malta & Malta is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLF 4121 of 2002

MR MALTA

Applicant

And

MRS MALTA

Respondent

REASONS FOR JUDGMENT

In what is already a complex web of proceedings in this Court and the Supreme Court of Victoria, a bankruptcy petition against the wife which had been presented in the Federal Magistrates Court of Australia on 28 September 2006 lapsed by effluxion of time.
The petitioner has an interest in the proceedings under Part VIII of the Family Law Act 1975 (Cth) (“the Act”) by virtue of his claim against the wife. The discrete issue I am asked to determine is whether the petition can be extended retrospectively having regard to the statutory provisions in the Bankruptcy Act 1966 (Cth) that otherwise provide that an expired petition cannot be extended. I am asked to decide whether I can and then should, extend the life of the petition under the slip rule.
The case as between the husband and the wife is complex and for the purposes of this judgment, I do not need to refer to those details virtually at all. The husband has no particular interest in this judgment. The history which follows only relates to the issue between the wife and the petitioner.
The petitioner is a legal practitioner who apparently acted for the wife.
As I have already pointed out, the petitioner presented a creditor’s petition against the wife in the Federal Magistrates Court on 28 September 2006. The matter came on before Federal Magistrate McInnis on 16 March 2007, 26 March 2007 and 2 May 2007 and then his Honour delivered reasons for judgment in May 2007.
The claim by the petitioner was for $23,849.30. The ground in the petition was based on an act of bankruptcy by the wife. The wife opposed the petition and disputed the debt. In addition, she claimed to be solvent. Importantly, the wife alleged that she could meet her debts from inter alia, her entitlement from the property settlement to which I have already referred.
Before Federal Magistrate McInnis, the wife sought a transfer of the petition proceedings to this Court. That was because there were then current but apparently inactive proceedings for a property settlement between husband and wife.
McInnis FM found it more likely than not that the wife would receive more from the property settlement than what was claimed in the petition. McInnis FM felt he did not have enough information but said it was more appropriate for the matter to be dealt with by this Court.
His Honour said:
I am also concerned to ensure that the parties including the Respondent Debtor can deal with outstanding property issues in the Family Court and then proceed to deal with the Petition in that Court in a manner to be determined by that Court.
His Honour then transferred the proceeding. No jurisdictional question arises although somewhat unsatisfactorily, this Court transferred the matter back to the Federal Magistrates Court of Australia on the basis that it thought it did not have jurisdiction.
The relevant part of s 35A of the Bankruptcy Act 1966 clearly gives this Court jurisdiction to exercise the power that would otherwise have been open to not only the Federal Magistrates Court of Australia but also the Federal Court.
There would appear to have been something of an unsavoury wandering of this file. In July 2007, it would seem that the file was back in the Federal Magistrates Court of Australia and ultimately transferred back to this Court in September 2007.
What is apparent from the judgment of McInnis FM is that the petitioner had opposed the transfer to this Court. The apparent confusion by all parties about just exactly what was happening was understandable and to some extent, it explains the passing of the petition’s life without notice.
On 17 September 2007, the matter came before Mushin J in this Court. His Honour made an order which reads:
All applications be referred to the List Registrar for re-listing following with the Regional Coordinating Judge and the parties.
On 27 September 2007, the petition lapsed by effluxion of time.
It is evident from the Court file and in particular the cover sheet of the order made on 17 September 2007 that the practitioners for the petitioner were not informed of the hearing. A notation to that effect appears on the subsequent order.
The interesting dilemma is that regardless of notice, the practitioners for the petitioner should have been aware of the life of the petition and its impending demise.
In his submissions filed on 12 December 2007, counsel for the petitioner said:
Whilst the Petitioner’s representatives are by no means blameless in failing to seek an extension of the life of the petition, the circumstances of these proceedings are such as to warrant the invocation by the Court of the “slip rule” to extend the life of the petition. Further, most of the delay in the proceedings has been occasioned by the Respondent Wife in failing to properly comply with the orders of the Court.
On 7 November 2007, Registrar Mestrovic who was then responsible for the file as a result of it being transferred to her by Mushin J, adjourned all matters to me including the question raised by the petitioner of the intention to seek rely upon the slip rule to reinstate the petition.
Initially, I determined in December 2007 to ascertain what position the wife was adopting in relation to the Supreme Court proceedings and orders were made in respect of the filing of submissions for this discrete issue before me.
The petitioner submitted that the Court has the power to extend the period of the life of the petition to a total of 24 months but that such an order had to be made before the petition lapsed. That is clearly set out in s 52(5) of the Bankruptcy Act 1966. The submission went on to say that the slip rule could be used as the basis for extending the life of the petition after it had lapsed. The basis of that submission was Elyard Corp Pty Ltd v DBB Needham Sydney Pty Ltd (1995) 61 FCR 385.
Importantly the petitioner pointed to the fact that between July 2007 and October 2007 it was quite unclear which court and which of its officers were handling the proceedings. Thus, even had the petitioner been conscious of the need to extend the life of the petition before it expired, it would have been difficult to trace the petition itself having regard to the unsavoury wanderings of the file to which I have already referred.
In reply, counsel for the wife submitted that the order of Mushin J did not contain any slip. That was because the order did not involve the adjournment of the petition to date after the lapse of the creditor’s petition. I reject that on the basis that it is not essential for a matter to have a specific return date. What is important is that the order is entered or authenticated. Counsel for the wife argued that it could not be inferred that Mushin J would have extended the creditor’s petition to any particular date and that even if he had turned his mind to the question of the extension, he would most likely have concluded that an application for extension ought not to have been made without hearing from the parties. I am not at all sure that I could draw that inference having regard to the very history of the matter to which counsel refers. As I have already pointed out, the wife had sought to transfer the proceedings to this Court under opposition from the petitioner and there could not be any suggestion that the petitioner would have otherwise than argued vociferously for the petition to be determined.
Counsel for the wife contended that Elyard Corp Pty Ltd v DBB Needham Sydney Pty Ltd (op cit) and cases relying on it were wrongly decided and ought not be followed however the concession had to be made that that particular decision remains good law. I shall refer to the more recent views of a Full Court of the Federal Court of Australia below.
The slip rule is contained in Order 35 rule 7(3) of the Federal Court Rules. I am applying those rules having regard to the provisions of s 35A(3)(f) of the Bankruptcy Act 1966. There was some debate as to exactly which rules apply but I am satisfied that the Act requires me to follow the Federal Court Rules.
In Griffiths v Boral Resources (Qld) Pty Ltd [2006] FCAFC 149 the Full Court of the Federal Court of Australia had to deal with a similar case in which unlike the order made by Mushin J, no order had ever been entered. Under Order 36 of the Federal Court Rules, an order is authenticated when the judge signs it. That did not occur in the Federal Magistrates Court in the Griffiths case where the Federal Magistrate simply reserved his judgment at the conclusion of a defended hearing.
The file in this Court shows that Mushin J not only made the order but that it was entered and/or authenticated when his Honour signed the document which adjourned the proceedings to the List Registrar.
In Griffiths, the Full Federal Court traversed all of the relevant authorities under the slip rule[1].
1.Bankstown Grammar School Ltd v Park [2000] FCA 1205; Mathews v Collett [2000] FCA 224; Re Langridge E; ex parte Bennett Carroll and Gibbons [1998] FCA 879; Komesaroff v Law Institute of Victoria [1997] FCR 965; Re Howell; ex parte DCT (1996) 70 FCR 261; Elyard Corp Pty Ltd v DBB Needham Sydney Pty Ltd (1995) 61 FCR 384.
The Full Court said that they were “a little uncomfortable” with the view inherent in Elyard that the slip rule could be used to extend time notwithstanding the statutory requirement that the order had to be made before the petition lapsed. The Full Court was reluctant to reconsider Elyard because it had stood for over ten years without legislative intervention. Their Honours were concerned that to take a different approach would cause substantial confusion in insolvency practice.
The Full Court went on to say that the decision in Elyard should not be taken as establishing an unlimited power to avoid the statutory policy clearly set out in the Bankruptcy Act.
The Full Court referred to refer to Order 35 rule 7(3) in relation to the question of the slip rule. Their Honours pointed to the fact that the rule contemplated a causal connection between the slip and the error and that there had to be an order to be corrected. As their Honours pointed out, the power was to correct, not to vary or set aside and there was no general power to relieve from the consequences of s 52 of the Bankruptcy Act.
In discussion, the Full Court made the observation that the slip was a question of fact. Their Honours then said[2]
In some cases, such as in Elyard, there may be direct evidence of an intention to make a relevant application, steps taken to bring about that result and a failure to carry the intention into effect. In other cases it may be possible to infer that such a step should have been taken, and that the failure to do so can properly be seen as an accidental slip or omission. Where the petition is likely to expire very shortly after the hearing, and prior to the preparation of a reserve judgment, such an inference may be available.
2.Paragraph 68
There is no direct evidence of any intention to make the relevant application but it is quite clear that I can draw an inference that such a step should have been taken and that a failure to do so can be seen as an accidental slip. The unusual feature of the case before me is that despite the lack of diligence on the part of the petitioner, I am entitled to infer that the extension step would have been taken had the practitioner been aware of the hearing. I am also confident that Mushin J would have extended the life of the petition had the imminent expiry been drawn to his attention. Having regard to that and the unfortunate absence of the practitioners who were well experience in these matters, I am entitled to infer that the slip was that of Mushin J.
Ultimately if there is evidence and I find that is the case here, the issue still becomes one of the exercise of my discretion.
This is a case in which discretion should be exercised in favour of the petitioner. I therefore propose to extend the life of the petition and to hear from the wife and the petitioner on 24 June 2008 at a telephone mention whether the petitioner wishes to proceed with the petition immediately or await the outcome of the property proceedings between the husband and the wife. Whilst the petitioner may wish to proceed forthwith, the wife might also wish to be heard on the question of whether or not what seemed to be the intention of Federal Magistrate McInnis should also be contemplated. McInnis FM seemed troubled about the information as to the wife’s solvency. The proceedings currently before the Supreme Court of Victoria may give all parties some indication of what pool of assets there is or is likely to be, between the husband and wife and consequently the wife’s solvency position. That is not to say that the defence by the wife to the petition has been forgotten either.
Accordingly, I propose to make orders as I have indicted above and I propose to reserve all questions of costs for my determination on the hearing of the matter in full.

I certify that the preceding Thirty Six (36) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate:

Date: 23 April 2008

[2008] FamCA 279

14 April 2008