Sydney Adventist Hospital Ltd v Adair - [2009] FMCA 521

FEDERAL MAGISTRATES COURT OF AUSTRALIA

SYDNEY ADVENTIST HOSPITAL LTD v ADAIR

[2009] FMCA 521

BANKRUPTCY – Application to extend the time for expiration of a creditor’s petition after it lapsed.

Bankruptcy Act 1966 (Cth), s.52
Federal Magistrates Act 1999 (Cth), s.43
Federal Court Rules, O.35, r.7
Federal Magistrates Court Rules, r.1.05
Federal Magistrates Court (Bankruptcy) Rules, r.1.03

Boral Resources (Qld) Pty Ltd v Griffiths (No 2) [2005] FMCA 1340
Deputy Commissioner of Taxation v Sedrak [2009] FMCA 411
Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385
Griffiths v Boral Resources (Qld) Pty Ltd (2006) 154 FCR 554
Re Carol Ann Langridge; Ex Parte: Bennett Carroll & Gibbons [1998] FCA 879
Re Howell; Ex parte Commissioner of Taxation (1996) 70 FCR 261
Re Young; Ex parte Smith (1985) 5 FCR 204
Roskell v Snelgrove (2008) 246 ALR 175

Applicant:

SYDNEY ADVENTIST HOSPITAL LTD

ACN 096 452 925

Respondent:

KEVIN ADAIR

File Number:

SYG 1040 of 2008

Judgment of:

Barnes FM

Hearing date:

26 May 2009

Delivered at:

Sydney

Delivered on:

26 May 2009

REPRESENTATION

Solicitors for the Applicant:

Merewether & Co

Respondent:

No appearance

ORDERS

That there be included in the orders made by a Registrar of this Court in this matter on 1 April 2009 an order that the period at the expiration of which the creditor's petition will lapse be the period of 24 months commencing on the date of presentation of the petition.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG 1040 of 2008

SYDNEY ADVENTIST HOSPITAL LTD ACN 096 452 925

Applicant

And

KEVIN ADAIR

Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

On 24 April 2008 the applicant, Sydney Adventist Hospital Ltd, filed and presented a creditor's petition seeking that a sequestration order be made against the estate of the respondent, Kevin Adair.
The matter has been before a Registrar of this Court on a number of occasions. It is now before me for the hearing of an interim application filed by the applicant creditor on 19 May 2009 seeking an order pursuant to Order 35 rule 7(3) of the Federal Court Rules that the period at the expiration of which the creditor's petition will lapse be the period of 24 months commencing on the date of presentation of the petition. The applicant relies on affidavits of James Farquhar Merewether and David Joshua Edgeworth Simons, both sworn and filed 19 May 2009.
The respondent is not present today. The last occasion the matter was before a Registrar was 14 May 2009. It appears from the report of listing that the respondent was not present on that day, but that he had been present on 1 April 2009 when the matter was adjourned until 9.45am on 14 May 2009. On 14 May 2009 the Registrar made the usual order in respect of notifying the debtor of details of the time, date and place of the adjourned hearing and of any other orders made.
The applicant relies on an affidavit of service sworn by Giselle Marise Simons on 21 May 2009 and filed in Court today annexing a copy of a letter of notification of the adjournment of the creditor's petition to 26 May 2009. This was sent to the applicant at the same address as the address at which personal service of the creditor's petition was effected, as attested to in an affidavit of service of the creditor's petition of Greg Hughes filed on 26 May 2009. That letter of notification advised the applicant that the creditor's petition was adjourned until today at 9.45am before a Registrar. I am told, and I understand from the report of listing, that there was no appearance by the applicant this morning. Nor is there any appearance now by the applicant before me.
In addition, the applicant served a copy of the interim application on the respondent by letter of 19 May 2009, a copy of which is before the Court. The effect of this material is that I am satisfied that the respondent was informed that the proceedings in relation to the creditor's petition were adjourned until today and hence that it is appropriate to proceed with the hearing of the interim application notwithstanding his absence today.
Under s.52(4) of the Bankruptcy Act 1966 (Cth) a creditor's petition lapses at the expiration of a period of 12 months commencing on the date of presentation of the petition unless the Court makes an order under s.52(5) of the Bankruptcy Act. Section 52(5) provides that:
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.
In this case however, the applicant did not seek an order pursuant to s.52(5) prior to the expiration of the creditor's petition on 23 April 2009. The last occasion the matter was before the Court prior to lapsing of the creditor's petition was 1 April 2009. The affidavit evidence of Mr Merewether, who appeared as agent for the solicitor for the applicant on that day, is that a number of issues were raised by the respondent (who appeared in person) in relation to the applicant's judgment debt and service of documents. The proceedings were adjourned by the Registrar until 9.45am on 26 May 2009, the respondent having said words to the effect, “I am going to be overseas on 20^th April until early May.” Mr Merewether attested that he overlooked the fact that the petition was due to expire, that Registrar Kavallaris did not raise this issue and nor did the solicitor for the applicant. Mr Merewether’s evidence is that had he been aware the petition was due to expire he would have made an application to extend the life of the petition or sought an adjournment of the matter to a date before the date on which the petition would expire. There is a reference to 28 April 2009. This is not the correct date but certainly there is no doubt that the petition expired in April 2009.
In his affidavit, Mr Simons, the solicitor for the applicant, detailed the time it took to serve the creditor's petition, that the respondent had appeared in person on 1 April 2009 and that both he and Mr Merewether, the agent instructed to appear on that date, had overlooked the fact that the petition was due to expire, that the Registrar did not raise the issue and also that had he been aware he would have made an application to extend the life of the petition. Again he refers to 28 April 2009 whereas, as the creditor's petition was filed and presented on 24 April 2008 it would have expired one year after that date.
In other words, there was said to have been an inadvertent failure by the applicant to seek an order pursuant to s.52(5) to extend the life of the creditor's petition.
The application is made under O.35 r.7(3) of the Federal Court Rules. The first issue is whether those rules apply in this Court. The solicitor for the applicant suggested that O.35 r.7(3) did apply in this Court. I agree with that conclusion, although the reasoning is not as straightforward as it might be (see Deputy Commissioner of Taxation v Sedrak [2009] FMCA 411).
The Federal Magistrates Court (Bankruptcy) Rules govern bankruptcy proceedings in this Court. Rule 1.03(2) provides that other rules of the Court apply to a proceeding to which the Bankruptcy Act applies to the extent they are relevant and not inconsistent. The Federal Magistrates Court Rules do not contain a rule in the terms of O.35 r.7(3) which is that “A clerical mistake in a judgment or order, or an error arising in a judgment order from an accidental slip or omission, may at any time be corrected by the Court.” Rule 1.05(1) of the Federal Magistrates Court Rules provides that the practice and procedure of this Court is to be governed principally by those Rules but, by r.1.05(2), if in a particular case the Rules are insufficient or inappropriate the Court may apply the Federal Court Rules, in whole or in part and modified or dispensed with as necessary.
In Roskell v Snelgrove (2008) 246 ALR 175 Lindgren J considered a version of the Federal Magistrates Court Rules in which the list in Schedule 3 to the Rules of particular Federal Court Rules that were applied to proceedings in this Court pursuant to r.1.05(3), included O.35 r.7 of the Federal Court Rules. Part 2 of Schedule 3 to the Federal Magistrates Court Rules no longer includes the reference to r.7 of O.35 so that is it no longer open to find that the provisions of O.35 r.7(3) are applicable in this Court by virtue of r.1.05(3) of the Federal Magistrates Court Rules.
However I am of the view that as the Federal Magistrates Court Rules do not contain an equivalent of O.35 r.7(3), it is appropriate under r.1.05(2) of the Federal Magistrates Court Rules to apply such a provision in this case. This approach is consistent with the harmonisation of bankruptcy rules of the two Courts.
The applicant also relied on the decision of the Full Court of the Federal Court in Griffiths v Boral Resources (Qld) Pty Ltd (2006) 154 FCR 554. In that case a Federal Magistrate at first instance (in Boral Resources (Qld) Pty Ltd v Griffiths (No 2) [2005] FMCA 1340) had concluded that r.1.05(2) of the Federal Magistrates Court Rules when read in conjunction with s.43 of the Federal Magistrates Act 1999 (Cth), enabled O. 35 r.7(3) to be applied in this Court. Section 43(2)(b) provides for the application of Federal Court Rules where the Federal Magistrates Court Rules are insufficient.
On appeal in Griffiths the Full Court raised the issue of whether an inferior court such as the Federal Magistrates Court had the inherent power of a superior court of record to correct an error in a decree or order. The Court found it unnecessary to resolve the issue because in the particular circumstances of that case their Honours found that no order had been made to be corrected under such a power. However their Honours assumed for the purposes of the proceedings that the Federal Magistrates Court was entitled to rely on O.35 r.7. It was after that decision that Lindgren J addressed the issue in Roskell v Snelgrove. In addition to finding that the power under O.35 r.7 was available under r.1.05(3)(b) of this Court's rules, his Honour also expressed the view that if that was not the case, there would, in any event, be available to a Federal Magistrate an implied power to the same effect.
In those circumstances I am satisfied that I have the power to correct an error in an order of a Registrar of this Court under the slip rule. I consider that it is appropriate to do so by virtue of the application of O.35 r.7(3) of the Federal Court Rules pursuant to r.1.05(2) of the Federal Magistrates Court Rules and s.43 of the Federal Magistrates Act.
The next issue that arises is whether the inadvertent omission of an order pursuant to s.52(5) of the Bankruptcy Act is the kind of mistake that can be corrected under the slip rule and, if so, whether it ought to be corrected. There is authority that the slip rule may be used to extend the life of the creditor’s petition retrospectively notwithstanding that the time for the making of an order under a provision such as s.52(5) of the Bankruptcy Act has passed (see Re Young; Ex parte Smith (1985) 5 FCR 204, Griffiths v Boral Resources at [30] and Roskell v Snelgrove at [56] – [59] and cases cited therein). Such an order can operate nunc pro tunc.
Further, in Re Howell; Ex parte Commissioner of Taxation (1996) 70 FCR 261 Burchett J applied the slip rule where there had been an inadvertent omission by a petitioning creditor to request an extension of time in relation to a creditor's petition which had lapsed prior to the date to which the matter had been adjourned. In that case, as in this case, it was clear that the creditor had through oversight not made any application under s.52(5). His Honour considered that this was the kind of mistake that could be addressed under the slip rule and followed the approach taken in Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385. Elyard was also followed by Keifel J in Re Langridge; Ex Parte Bennett [1998] FCA 879, notwithstanding that her Honour expressed some concern in relation to the application of the slip rule where the error was that of a party and not the Court's unintended error. In Elyard (at 391 per Lockhart J) it was suggested that the principle did not require the Court to inquire into the actual state of mind of the judge to whom the slip was attributed, but that it may act on the basis that the judge (in this case the Registrar) 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 (see Re Howell at 263).
I am satisfied that this is such a case. There has been an inadvertent omission. It is of the kind that can be corrected under O.35 r.7(3). While the Registrar on 1 April 2009 did not make any ancillary orders for the filing of further documents, in all the circumstances and given the evidence about what occurred on that day, I am satisfied that the orders that were made could have had no other purpose than to enable the petition “as a live petition” (see Re Howell at 262) to be given effect to on a date subsequent to the expiry of the period of 12 months from the date of its presentation and that in those circumstances the Registrar would have intended to extend the time under s.52(5), had it not been for the “inadvertent omission” of the solicitor for the applicant to request such an order.
There is nothing in the evidence before me to suggest that the Court ought not to exercise its discretion in these circumstances. I note that the reason for the length of the adjournment appears to some extent to be attributable to the fact that the debtor indicated that he would be overseas from 20 April 2009, which was before the petition would have expired, until early May 2009. I also note that there is a notation to the orders of 14 May 2009, the next occasion on which the matter was before the Court, that the applicant was to seek an order under the slip rule. No issue of delay arises.
In these circumstances I consider it appropriate to make the order that is sought on the basis that there was an error in the orders made by a Registrar of this Court on 1 April 2009. Where an order is made under the slip rule its effect is that the error in the original order is eradicated so that it is treated as having always been made as corrected (see Elyard at 400). Hence, subject to any submissions to the contrary, I am of the view that the appropriate order would be an order that there be included in the orders made by a Registrar of this Court in this matter on 1 April 2009 an order that the period at the expiration of which the creditor's petition will lapse be the period of 24 months commencing on the date of presentation of the petition.

I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of Barnes FM

Associate:

Date: 2 June 2009