Re Howell; Ex parte Deputy Commissioner of Taxation

[1996] FCA 1027

CATCHWORDS

BANKRUPTCY - lapse of creditor's petition - inadvertent omission by petitioning creditor to request extension of time - slip rule - whether the principle known under the rubric of the "slip rule" enables the Court to do justice and rectify what was no more than a lapse or mistake, even in the absence of any express rule to that effect in the Bankruptcy Rules.

Bankruptcy Act 1966, s.52(5)

Re Hibbard; Ex parte Playroom Pty Limited (unreported, Pincus J, 5 December 1988)
Re Agushi; Ex parte Farrow Mortgage Services Pty Ltd (1994) 126 ALR 704
Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 133 ALR 206

RE:  GORDON RAYMOND HOWELL; EX PARTE DEPUTY COMMISSIONER OF TAXATION

NP 1931 of 1995

Burchett J.
Sydney
14 November 1996

IN THE FEDERAL COURT OF AUSTRALIA )
GENERAL DIVISION                 )
BANKRUPTCY DISTRICT OF THE STATE  )
OF NEW SOUTH WALES               )    NP 1931 of 1995

RE:

GORDON RAYMOND HOWELL

Debtor

EX PARTE:

DEPUTY COMMISSIONER OF
  TAXATION

Creditor
Coram:    Burchett J.
Place:    Sydney
Date:     14 November 1996

MINUTE OF ORDERS OF THE COURT

The Court orders, as regards Order 1, as at 9 August 1996, nunc pro tunc, that:

(1)The period at the expiration of which the petition will lapse be the period of 24 months commencing on the date of presentation of the petition.

(2)The proceeding be stood over until 13 March 1997.

(3)Either party be granted liberty to restore the proceeding on seven days notice in case something occurs in the meantime to justify that course.

NOTE:     Settlement and entry of Orders is dealt with in Rule 124 of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA )
GENERAL DIVISION                 )
BANKRUPTCY DISTRICT OF THE STATE  )
OF NEW SOUTH WALES               )    NP 1931 of 1995

RE:

GORDON RAYMOND HOWELL

Debtor

EX PARTE:

DEPUTY COMMISSIONER OF
  TAXATION

Creditor

Coram:    Burchett J.
Place:    Sydney
Date:     14 November 1996

REASONS FOR JUDGMENT

BURCHETT J.

In this matter, the petition was adjourned on the application of the debtor on 9 August last.  That adjournment was to 7 November.  The adjournment had been opposed, and certain terms were exacted of the debtor by the Registrar, who adjourned the matter, which plainly envisaged that unless good reason for a further adjournment were shown, the matter could, and perhaps would, be heard on 7 November.

Section 52, subsection (4) of the Bankruptcy Act 1966 provides as follows:

"(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."

Subsection (5) then provides:

"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."

Both parties accepted that, in this case, the petition was due to lapse pursuant to those provisions on 3 November 1996.  The solicitor for the petitioning creditor has stated, and the debtor does not dispute the statement, that it was her own oversight which resulted in no application for extension being made on 9 August when the matter was adjourned at the debtor's request, over the petitioning creditor's opposition.

In my opinion, it is plain that this was the kind of mistake to which cases concerned with what is called the "slip rule" refer; and that the Registrar, whose attention was, by reason of the mistake, not drawn to the particular problem, also made a mistake of the same character when the orders in respect of the adjournment were made without the addition of an order pursuant to subsection (5) of section 52.  That seems particularly plain in this case, where ancillary directions were given which could have had no other purpose than to enable the petition, as a live petition, to be given effect on a date subsequent to the expiry of the period of 12 months from its presentation.

Accordingly, the question which the case raises is whether, despite the words in subsection (5),

"at any time before the expiration of the period of 12 months commencing on the date of presentation of a creditor's petition,"

the slip rule enables the court to do justice and rectify what was no more than a lapse or mistake.  It was at one stage a controversial question whether the Court was empowered to remedy an error of this kind.  Among other decisions it is appropriate to refer to Streimer v. Tamas (1981) 37 ALR 211; Re Young; Ex parte Smith (1985) 5 FCR 204; Re Hibbard; Ex parte Playroom Pty Limited, (unreported, Pincus J, 5 December 1988); Re Agushi; Ex parte Farrow Mortgage Services Pty Ltd (1994) 126 ALR 704; Re Jago; Ex parte Paale Frame Pty Ltd (unreported, Einfeld J, 28 February 1989); and Re Van Coblyn; Ex parte Mercantile Credits Ltd (unreported, Einfeld J, 21 September 1992).

However, I do not think I need to discuss those authorities, because the subject has been authoritatively illuminated by a Full Court in Elyard Corporation Pty Ltd v. DDB Needham Sydney Pty Ltd (1995) 133 ALR 206. That was not a decision under the Bankruptcy Act; but it was a decision on the slip rule, and the cases directly in point under the Bankruptcy Act - and particularly Re Hibbard and Re Agushi - were dealt with in the judgments of the Full Court, which was unanimous in its decision.

Accordingly, it is sufficient for me to refer to what the Full Court said.  There were two detailed judgments, one by Lockhart J and the other by Lindgren J, with each of whom the Chief Justice expressed his agreement.  Lockhart J (at 209) made it clear that the absence of an applicable rule, in the form which has come to be known as a "slip rule", does not matter.  The power of the Court is inherent or implied, and exists even without any rule drafted so as to express it.

His Honour also made it clear (at 210) that the principle does not require the Court to inquire into the actual state of mind of the Judge to whom the slip is attributed.  The Court may act on the basis that he (or she) would have had a particular intention but for some omission, such as the failure of a party's representative through inadvertence to request the making of some appropriate ancillary order.

Although the case before him was not concerned with the Bankruptcy Act, Lockhart J (at 211-212) made specific reference to section 52 of that Act, and stated that provisions of this kind "reflect the intention of the parliament that ... petitions to sequestrate the estates of natural persons must be dealt with promptly."  He went on to hold "(t)his evident purpose of the parliament is not denied at all by the exercise by the court of its power under the slip rule to correct accidental slips when justice requires that this be done."  He made plain his disagreement with the two bankruptcy cases to which I have referred, Re Hibbard and Re Agushi.  The judgment of Lindgren J is very much to the same effect.  In it, he quotes from the reasoning of the trial judge in Elyard, Sheppard J, making it clear that he too considered the decision in Re Hibbard to be not in accordance with the law.  Lindgren J (at 223) took the same view of the Court's power as Lockhart J - he held the Court has an implied or inherent power, so that the absence of an express slip rule in the Bankruptcy Rules is not fatal to an application of the present kind.

I have no doubt that I should follow the unanimous guidance of the Full Court, although its views in respect of section 52 were stated as obiter dicta, and I hold that the section is subject to the exercise by the Court of its inherent or implied jurisdiction to correct error in the circumstances and in the manner indicated by the cases which fall under the rubric of the slip rule.

The next question is whether I should exercise the power that I have in favour of the petitioning creditor in the present case.  I think the facts present a classical example of the kind of case for which the slip rule was framed.  What occurred was a mere inadvertent omission to ask for an order which would have been made as of course upon application.  Accordingly, having reviewed the decision of the Registrar in Bankruptcy of 9 August 1996, I make, nunc pro tunc, the order of extension which I think should then have been made, and I make it in the following terms:  "It is ordered that the period at the expiration of which the petition will lapse be the period of 24 months commencing on the date of presentation of the petition." 

That leaves the question what should now be done with the petition.  The debtor seeks an adjournment of it, and after some discussion, the solicitor for the petitioning creditor is prepared to accept an order that the petition be adjourned to a date late in February.  I will stand the matter over to 13 March; and I will grant liberty to restore it to either party, on seven days notice, in case something occurs in the meantime to justify that course.  As the application was occasioned by

error, I do not think I should make any order as to costs.

I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment of the Honourable Justice Burchett.

Associate:

Dated:  22 November 1996.

Debtor:  appeared in person.

Solicitor for the Creditor:          M Ching of Australian Government Solicitor

Date of hearing:  14 November 1996