University of Southern Queensland v Luck
[2017] FCCA 639
•4 April 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| UNIVERSITY OF SOUTHERN QUEENSLAND v LUCK | [2017] FCCA 639 |
| Catchwords: FEDERAL CIRCUIT COURT − Powers of Registrars – scope of powers conferred by Federal Circuit Court Act 1999 (Cth), Federal Circuit Court Rules 2001 (Cth), Bankruptcy Act 1966 (Cth), Federal Circuit Court (Bankruptcy) Rules 2016 (Cth). JUDGMENTS & ORDERS − Slip rule – availability to vary orders that did not reflect court’s intention – variation of orders – effect of variation nunc pro tunc. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.12, 27, 31, 33, 37,40, 43, 52 United Nations Convention on the Rights of Persons with Disabilities Federal Circuit Court (Bankruptcy) Rules 2016 (Cth), rr.1.03, 1.05, 1.06, 1.04, 2.02 Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth), rr.2.02, 2.06 |
| Cases cited: Achurch v the Queen (2014) 253 CLR 141 Deputy Commissioner for Taxation v Cumins (2008) 101 ALD 78 Gilbert + Tobin v Stolyar & Anor [2016] FCCA 743 Gould v Vaggelas [1985] HCA 9; (1985) 157 CLR 215 Ivanhoe Gold Corporation Ltd v Symonds (1906) 4 CLR 643 L Shaddock and Associates Pty Ltd v Parramatta City Council [No 2] (1982) 151 CLR 590 Ling v Commonwealth (1996) 68 FCR 180 Luck v Chief Executive Officer of Centrelink & Anor [2016] HCASL 288 Luck v Chief Executive Officer of Centrelink (Freedom of Information Principal Officer) [2016] HCASL 282 Luck v University of Southern Queensland [2009] FCAFC 73 Luck v University of Southern Queensland [2016] HCASL 287 McNally v Fazio (No.2) [2015] FCCA 1935 Nine Network Australia Pty Ltd v IceTV Pty Ltd (No 2) (2008) FCAFC 154 Owston Nominees No 2 Pty Ltd v Branir Pty Ltd (2003) 129 FCR 558 Ramsay Health Care Australia Pty Limited v Compton [2016] FCAFC 125 Ramsay Health Care Australia Pty Ltd v Compton (No 2) [2016] FCA 691 Re Langridge; Ex parte Bennett, Carroll & Gibbons [1998] FCA 879 Re Lewin; Ex parte Milner (1986) 11 FCR 312 Re Luck [2003] HCA 70; (2003) 203 ALR 1 Re Svir; Ex parte Commissioner of Taxation (1998) 83 FCR 315 Article cited: |
| Applicant: | UNIVERSITY OF SOUTHERN QUEENSLAND |
| Respondent: | GAYE LUCK |
| File Number: | MLG 737 of 2015 |
| Judgment of: | Judge A Kelly |
| Hearing date: | 13 & 14 February 2017 |
| Date of Last Submission: | 14 February 2017 |
| Delivered at: | Melbourne |
| Delivered on: | 4 April 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr Murano |
| Solicitors for the Applicant: | Clayton Utz |
| The Respondent: | Appearing on her own behalf |
THE COURT ORDERS THAT:
The respondent’s application in a case filed on 10 February 2017 be dismissed.
The respondent pay the applicant’s costs of the application in a case filed on 10 February 2017.
A sequestration order be made against the estate of Gaye Luck.
The applicant give a copy of this order to the Official Receiver in compliance with s.52(1A) of the Bankruptcy Act1966 (Cth).
The applicant’s costs including reserved costs, be taxed and paid from the estate of Gaye Luck in accordance with the Bankruptcy Act1966 (Cth).
AND THE COURT NOTES THAT:
A.The date of the act of bankruptcy is 30 March 2015.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 737 of 2015
| UNIVERSITY OF SOUTHERN QUEENSLAND |
Applicant
And
| GAYE LUCK |
Respondent
REASONS FOR JUDGMENT
Introduction
This is the further hearing of a creditor’s petition that was filed by the University of Southern Queensland (“University”) on 9 April 2015.
The University seeks an order for the sequestration of Ms Luck’s estate: ss.43 and 52 Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”). The University’s petition was first listed for hearing on 21 May 2015. Before the hearing which took place on 13-14 February 2017, the hearing of the petition had been adjourned on some eight occasions.
An issue that was first raised by the respondent (“Ms Luck”) days before the hearing on 13-14 February 2017 was whether the petition had lapsed by operation of s.52(4) of the Bankruptcy Act. This issue arose in circumstances where orders had been made on 31 May 2016 by a Registrar pursuant to r.16.05(e) of the Federal Circuit Court of Australia Rules 2001 (Cth) (“Rules of Court”) to vary an order made on 22 March 2016 so that the life of the petition was extended to 8 April 2017. The parties agreed in the making of the order to vary the order made on 22 March 2016.
The order made on 31 May 2016 was made more than 12 months after presentation of the University’s creditor’s petition. I have concluded that the order made on that date to vary the order on 22 March 2016 ‘spoke’; that is, operated with effect, from 22 March 2016. As the legal effect of that order was operative from 22 March 2016, it was an order made within 12 months from the date of presentation of the creditor’s petition. I hold that the order made on 22 March 2015, as varied, was effective to extend the life of the petition to 8 April 2017. By operation of s.52(5) of the Bankruptcy Act, the creditor’s petition has not lapsed.
By an application filed on 10 February 2017, Ms Luck seeks to set aside the order made on 31 May 2016 and for declarations including that the petition lapsed on 8 April 2016. Ms Luck also advanced an alternative submission that the further hearing of the petition should again be adjourned pending the hearing and determination of certain proceedings that she recently filed in the High Court of Australia. Relevantly, in late 2016, Ms Luck filed an application for special leave to appeal from an order of the Full Court of the Federal Court of Australia made on 5 December 2016 dismissing her appeal from an order of Davies, J who dismissed her application to set aside, or extend the time for compliance with, the bankruptcy notice upon which the University’s creditor’s petition is based. I refuse those applications.
At the hearing on 13-14 February 2017, the University was represented by Mr Murano. Ms Luck was self-represented. Although Ms Luck is a self-represented litigant, she is not without considerable experience in litigation. In that regard I note that Ms Luck’s litigation before the High Court alone can be traced back to at least November 2000: Re Luck [2003] HCA 70; (2003) 203 ALR 1, [1].
In the context of the present applications it is necessary to understand the procedural history of this and other proceedings in some little detail. This is necessary as it informs why the creditor’s petition has not been determined and how the hearing of the petition has come to be adjourned, largely at Ms Luck’s request, on so many occasions. For ease of reference, these reasons are arranged as follows:
(a)Background & procedural history;
(b)Ms Luck’s application;
(c)Registrar’s powers in bankruptcy proceedings;
(d)Rules of the Federal Circuit Court;
(e)Bankruptcy Rules 2006 & 2016;
(f)Bankruptcy Act 1966 (Cth);
(g)Lapse of creditor’s petition;
(h)Slip rule;
(i)Criteria under s.52 of the Bankruptcy Act;
(j)Adjournment pending High Court challenge;
(k)Apprehended bias application;
(l)Determination of creditor’s petition.
Background & procedural history
Costs order: June 2009
Nearly eight years ago, on 19 June 2009, a Full Court of the Federal Court (North, Graham, Rares JJ) made orders in proceeding VID 899/2009 that Ms Luck’s purported appeal be dismissed as incompetent. In VID 899/2009, a final order was made that Ms Luck pay the University its costs in that proceeding: [2009] FCAFC 73.
The costs of the University were taxed and allowed at $29,755.87. A certificate of taxation for that sum was issued on 1 February 2010.
Interest accrues on this sum: Federal Court Rules 2011 (Cth), r.39.06.
Bankruptcy notice: January to March 2015
On 7 January 2015, a bankruptcy notice BN 177801 (“Bankruptcy Notice”) was issued by the Official Receiver. It claimed that a debt of $43,804.22 (being the sum of the University’s taxed costs and accrued interest) was owed by Ms Luck in respect of the costs as taxed and allowed in the Federal Court appeal above, VID 899/2009 (“debt”).
On 25 January 2015, the Bankruptcy Notice was served on Ms Luck.
The Bankruptcy Notice fixed a period of 21 days within which Ms Luck was required either to pay to the University the amount of the claimed debt or to make arrangements for settlement of that debt.
The debt was neither paid nor was a suitable arrangement made within the stipulated period for the settlement of that debt. Accordingly, Ms Luck would have committed an act of bankruptcy unless she was able to satisfy the court that she had a counter-claim, set-off or cross-demand equal to or greater than the amount of the debt: Bankruptcy Act, s.40(1)(g). Ms Luck’s attempts to establish that she had such a counter-claim, set-off or cross-demand are addressed below.
The Bankruptcy Notice stated that Ms Luck might apply to extend the time in which to comply with that notice or apply to set it aside.
On 13 February 2015, Ms Luck variously:
(a)applied to a Registrar of the court who extended the time fixed for compliance with the Bankruptcy Notice until 24 February 2015;
(b)commenced Federal Court proceeding, VID 61/2015, applying to set aside the Bankruptcy Notice.
In VID 61/2015, interim orders were sought by Ms Luck that:
(a)the hearing of the application to set aside the Bankruptcy Notice be extended pending the determination of a proceeding that had been commenced by her in the High Court, bearing number M116 of 2014;
(b)the time for compliance with the Bankruptcy Notice be extended.
On 24 February 2015, orders were made in proceeding VID 61/2015 extending (until 4:00pm on 16 March 2015), the time for compliance with the Bankruptcy Notice.
On 16 March 2015:
(a)the application to set aside the Bankruptcy Notice was heard in the Federal Court by Davies, J;
(b)an order was made by Davies, J that the time for compliance with the Bankruptcy Notice be further extended until judgment was delivered on Ms Luck’s application for a stay or adjournment of this proceeding; and
(c)Ms Luck filed a summons in the High Court seeking leave to amend a draft notice of appeal (in an application for special leave pending before that court), so as, amongst other things, to obtain an order for costs in her favour in proceeding VID 899/2009.
In proceeding VID 61/2015, Ms Luck swore an affidavit deposing that the ground on which she sought to set aside the Bankruptcy Notice was that the issues in her special leave application M116/2014 raised what she described as a “novel set-off”: see Luck v University of Southern Queensland [2016] FCA 286, [15(b)]; Luck v University of Southern Queensland [2016] FCAFC 167, [5].
On 30 March 2015, orders were made in VID 61/2015 dismissing, with costs, the application seeking to set aside the Bankruptcy Notice: [2015] FCA 286 (Davies, J). Her Honour held that Ms Luck had not shown that she had a counter-claim, set-off or cross-demand equal to or greater than the amount of the debt: [2015] FCA 286, [23]-[28]. Her Honour grounded that conclusion upon four bases:
(a)Ms Luck’s pending constitutional challenge in the High Court would not satisfy the requirement that there be a counter-claim, set-off or cross-demand of the kind stipulated in s.40(1)(g) of the Bankruptcy Act. The requisite claim must be something ‘sounding in money’ and Ms Luck’s pending constitutional challenge would not sound in a monetary award;
(b)the stipulated kind of counter-claim, set-off or cross-demand must exist at the time when the application to set aside the Bankruptcy Notice is heard and Ms Luck’s asserted claim did not do so;
(c)it was impossible to quantify the asserted claim with the result that it could not be shown any such claim would ‘equal or exceed’ the debt claimed by the University;
(d)the only extant judgment and orders which could now be the subject of challenge by Ms Luck were those made in VID 1158/2013, but an appeal in that proceeding would not extinguish the debt claimed by the University. Otherwise, it was not open to Ms Luck to re-open or re-litigate matters that had been determined in other earlier proceedings, including VID 899/2009.
This holding addressed Ms Luck’s application to set aside the Bankruptcy Notice.
As concerned the application to extend the time for compliance with the Bankruptcy Notice, Davies J held that there was no basis for any further extension of time. Her Honour reasoned that, as Ms Luck did not have a counter-claim, set-off or cross-demand within the meaning of s.40(1)(g) of the Bankruptcy Act, there would be no utility in staying or adjourning Ms Luck's application to set aside the Bankruptcy Notice pending the determination of her special leave application: see [2015] FCA 286, [29].
Creditor’s petition & appeals: 2015
Ms Luck had failed to establish that she had a counter-claim, set-off or cross-demand equal to or greater than the amount of the University’s debt. In the result, on 9 April 2015, the University filed in this court:
(a)a creditor’s petition seeking that a sequestration order be made against Ms Luck’s estate: see Bankruptcy Act, s.43;
(b)an affidavit verifying the petition;
(c)an affidavit which deposed as to the orders that were made by Davies, J on 30 March 2015 dismissing Ms Luck’s applications to set aside the Bankruptcy Notice and to further extend time for compliance with that notice.
The University’s creditor’s petition identified that the act of bankruptcy relied upon was the failure by Ms Luck within 6 months before presentation of the petition: “. . . to comply on or before 30 March 2015 with the requirements of a bankruptcy notice served on her on 25 January 2015 or to satisfy the Court that she had a counterclaim, set-off or cross demand equal to or more than the sum claimed in the bankruptcy notice, being a counterclaim, set-off or cross demand that she could not have set up in the action in which the judgment referred to in the bankruptcy notice was obtained. . .”
The court listed the petition for hearing on 21 May 2015.
On 13 April 2015, Ms Luck filed a notice of appeal in VID 189/2015, being an appeal from the judgment of Davies, J in VID 61/2015 dismissing Ms Luck’s application to set aside, or extend the time for compliance with, the Bankruptcy Notice. In that appeal, Ms Luck again sought an order that the Bankruptcy Notice be set aside.
On 17 April 2015, Ms Luck filed an application for removal of a cause to the High Court in M49/2015, being for removal from the Full Court of proceeding VID 189/2015.
On 21 April 2015, Ms Luck filed applications:
(a)for removal of a cause to the High Court M53/2015, being for removal of the University’s petition. Notably, Order 3 sought in M53/2015 was that the hearing and determination of the petition by this court be stayed or adjourned pending the hearing and determination of Ms Luck’s application for special leave to appeal in another proceeding before the High Court, M116/2014;
(b)in this proceeding, seeking interlocutory orders that the hearing of the creditor’s petition be “urgently adjourned” pending the hearing and determination of Ms Luck’s applications for:
i)removal of a cause in M53/2015 (ie appeal VID 189/2015);
ii)special leave to appeal in M116/2014.
As appears below, on 3 September 2015, Ms Luck’s application for special leave to appeal in proceeding M116/2014 was dismissed: [2015] HCASL 136. One consequence of the dismissal of the application for special leave in M116/2014 was that the foundation for Order 3 as sought in M53/2015 above (namely, to stay or adjourn the hearing and determination of the University’s petition) fell away.
The University responded to Ms Luck’s application for an adjournment or stay of the creditor’s petition. On 18 May 2015, a notice was filed on behalf of the University that it would oppose Ms Luck’s application to adjourn the hearing of the petition: see Rule 2.06 of the Federal Magistrates Court (Bankruptcy) Rules 2006. By this notice, the University sought an order that the hearing of the creditor’s petition be adjourned to the first available date after judgment was entered in VID 189/2015 (being Ms Luck’s appeal from the order of Davies, J dismissing her application to set aside the Bankruptcy Notice).
In the period 15 to 18 May 2015, the parties agreed that the further hearing of the petition be adjourned to 1 September 2015. In particular, by an email transmitted to the court and the University’s lawyers on 19 May 2015, Ms Luck stated, amongst other things that:
. . . I consent to the Court’s proposal to adjourn this proceeding MLG737/2015 until after the full court hearing of VID189/2015 . . .
. . . I filed in the High Court on 17 April 2015, a Summons . . . , in which I sought an Order for a stay of matter MLG737.2015, in the Federal Circuit Court below, pending the hearing and determination of my Application for Special Leave and the Appeal. . .
I will not be appearing at the hearings of my stay applications, and have sought to have the determinations made on the written materials . . . (emphasis added)
On 19 May 2015, a Registrar ordered that the further hearing of the petition be adjourned to 1 September 2015.
On 3 June 2015, the parties were notified that the appeal in VID 189/2015 was listed for hearing on 21 August 2016.
On 14 August 2015, the appeal in VID 189/2015 was stayed pending the hearing of Ms Luck’s application for removal of that appeal to the High Court. The stay was made on the application of Ms Luck: see Luck v University of Southern Queensland [2016] FCAFC 167, [18].
In the period 26 to 31 August 2015, the parties requested that this court make an order, by consent, that the further hearing of the creditor’s petition be adjourned. On 31 August 2015, the court informed the parties that the Registrar was not comfortable with an indefinite adjournment of the creditor’s petition, that the matter could not be dealt with “on the papers” and that on 1 September 2015 it would be called in open court. Further, if no objection was raised, orders would be made in the parties absence including for a further adjournment.
On 1 September 2015, at the adjourned hearing of the petition, a Registrar ordered that “the further hearing of the petition be adjourned to 19 November 2015.”
As noted above, on 3 September 2015, the High Court dismissed Ms Luck’s application for special leave to appeal in proceeding M116/2014: see [2015] HCASL 136.
On 19 November 2015, at the adjourned hearing of the petition, an order was made by a Registrar that “the further hearing of the petition be adjourned to 22 March 2016.”
Further adjournments & variation of orders: 2016
On 7 March 2016, the University’s lawyers transmitted an email both to the court and Ms Luck advising of their assessment both as to the progress of the appeal in VID 189/2015 and Ms Luck’s applications in the High Court. The email stated in part that the parties were agreed “in inviting the Court to adjourn the matter again when it is called on for hearing on 22 March 2016.”
On 22 March 2016, a Registrar ordered that the further hearing of the petition be adjourned to 31 May 2016. Order 1 reads:
1.The further hearing of the petition be adjourned to 31 May 2016 at 11:00 am.
As noted above, the creditor’s petition was presented on 9 April 2015. Within 12 months from that date the petition had not been dismissed or withdrawn and no order for the sequestration of Ms Luck’s estate had been made: cf s.52(4), Bankruptcy Act.
On 18 May 2016, Ms Luck transmitted an email to the court and the University’s lawyers advising as to the progress of her matters before the High Court and of the unlikelihood of those matters being completed or heard before July 2016. Her email stated in part:
For that reason I seek to arrange consent to adjourn the hearing listed for 31 May 2016 of the above mentioned matter until such time as the High Court deals with and disposes of the other matters, including M53/2015. (emphasis added)
On 23 May 2016, the University’s lawyers transmitted an email to both the court and Ms Luck responding to Ms Luck’s email and confirming that the parties were agreed in inviting the court to adjourn the matter again when it was called on for hearing on 31 May 2016.
On 30 May 2016, the court responded to the University’s 23 May 2016 email (being the day immediately before the further hearing of the creditor’s petition listed for 31 May 2016). The court’s email informed the parties that it had been the Registrar’s intention, when making orders on 22 March 2016, that “the petition remain current and be dealt with at the time of the adjourned hearing.” In those circumstances, the court proposed, subject to their submissions, to make an order that would vary the order made on 22 March 2016 so as to extend the life of the creditor’s petition until 8 April 2017. The court’s email transmitted to the parties on 30 May 2016 then stated:
. . . the Registrar intends on making an order under rule 16.05(2)(e) of the Federal Circuit Court Rules 2001, varying the order of 22 March 2016 and providing an extension of the lifetime of the petition pursuant to section 52(5) of the Bankruptcy Act 1966, consistent with his intention at the time of the earlier order.
Otherwise, the Registrar understands the parties have consented to the further adjournment of the petition.
Shortly afterwards, both the University’s lawyers and Ms Luck replied to the court’s email above. The University agreed with the approach proposed by the Registrar and said it would not make any submissions, unless Ms Luck proposed to make any submissions opposing the course indicated by the Registrar. Ms Luck’s email addressed both the email from the court and the University’s lawyers respectively stating:
. . . I also confirm that I am content with the approach proposed by the Registrar and do not seek to make any submissions at this time. (emphasis added)
For the avoidance of doubt, in the course of the further hearing of the petition before me, Ms Luck emphasised that her email above did not speak of ‘consent’, but rather that it expressed her views that she was content with the approach that had been proposed by the Registrar and that she did not seek at that time to make any submissions.
Consistently with the University’s response and Ms Luck’s stated contentment with the approach proposed by the Registrar, on 31 May 2016, a Registrar ordered as follows:
THE COURT ORDERS BY CONSENT THAT:
1.The further hearing of the petition be adjourned to 1 September 2016 at 11:00 am.
2.Pursuant to rule 16.05(2)(e) of the Federal Circuit Court Rules 2001, the order in this proceeding of 22 March 2016 be varied so that the life of the petition be extended to 8 April 2017, and that extension apply from 22 March 2016 as if it had been ordered on that date.
3.There be no order as to costs.
By the Court
DATE ENTERED: 31 May 2016
Ms Luck’s written submissions contended that this order was received by her on 1 June 2016.
On 24 August 2016, a week before the further hearing of the University’s petition on 1 September 2016, Ms Luck sent an email to the court and the University’s lawyers seeking to adjourn the further hearing of the petition on account of her other litigation. She stated:
. . . I seek to arrange consent to adjourn the hearing listed for 1 September 2016 of the abovementioned matter until such time as the High Court deals with and disposes of the other matters, including M53/2015. (emphasis added)
On 31 August 2016, the University’s lawyers replied to that email stating: “In the attached email chain, Ms Luck requested our client’s consent for this matter to again be adjourned when it is called on for hearing tomorrow.” The University agreed to Ms Luck’s request for a further adjournment, but sought that the petition be listed on the first available date after the Full Federal Court sittings in November 2016. The email concluded that:
However, we are instructed that the [University] is unlikely to consent to any further adjournments in circumstances where the creditor’s petition will lapse after 8 April 2017.
On 1 September 2016, a Registrar adjourned the further hearing of the petition to 8 December 2016.
Dismissal of Ms Luck’s appeals and applications
One of the orders that had been made to regulate the conduct of Ms Luck’s appeal in VID 189/2015 (being the appeal from the order of Davies, J dismissing Ms Luck’s application to have the Bankruptcy Notice set aside), was an order that that appeal be listed for hearing on the first available date after dismissal of her application for removal of a cause in M49/2015. This order took effect on 11 November 2016 when the High Court made orders dismissing that application: [2016] HCASL 286. The order made in proceeding M49/2016 was that:
The application for removal to this Court of the Federal Court Appeal numbered VID189/2015 be dismissed with costs.
On the same date, 11 November 2016, the High Court also made an order in proceeding M53/2015 dismissing Ms Luck’s application for removal to the High Court of this proceeding: [2016] HCASL 287. The order made on 11 November 2016 in M53/2015 was as follows:
The application for removal to this Court of the Federal Circuit Court proceeding numbered MLG737/2015 be dismissed with costs.
For completeness, I note that in the course of the hearing, Ms Luck produced the following decisions that were published by the High Court on 11 November 2016, each of which dismissed applications that had been made by Ms Luck. Those decisions were:
(a)Luck v Secretary of Department of Human Services & Ors [2016] HCASL 289;
(b)Luck v Chief Executive Officer of Centrelink & Anor [2016] HCASL 288;
(c)Luck v University of Southern Queensland & Anor [2016] HCASL 287;
(d)Luck v University of Southern Queensland & Anor [2016] HCASL 286;
(e)Luck v Chief Executive Officer of Centrelink (Freedom of Information Principal Officer) [2016] HCASL 283;
(f)Luck v Chief Executive Officer of Centrelink (Freedom of Information Principal Officer) [2016] HCASL 282.
The orders made on 11 November 2016 in proceeding M49/2015, triggered the requirement that Ms Luck’s appeal in VID189/2015 be listed for hearing on the first available date. VID189/2015 was then listed on 30 November 2016. Although Ms Luck applied for an adjournment of that appeal, this application was refused. Moreover, the Full Court determined that it would proceed to determine that appeal on its merits notwithstanding that Ms Luck did not appear at that hearing: [2016] FCAFC 167, [9]-[10]. At the conclusion of the hearing of the appeal on 30 November 2016, the Full Court ordered that Ms Luck’s appeal from the decision of Davies, J dismissing her application to set aside the Bankruptcy Notice be dismissed with costs.
On 5 December 2016, the Full Court delivered reasons for judgment. The Full Court’s reasoning included that a further adjournment of the appeal would be oppressive in circumstances where the judgment debt arose more than seven years earlier, the appeal had been pending for eighteen months and the University was not responsible for the delay: [2016] FCAFC 167 at [42].
The Full Court also considered that an adjournment of the appeal would be inconsistent with the public interest of the expeditious determination of bankruptcy matters: [2016] FCAFC 167 at [43] citing Cirillo v Consolidated Property Pty Ltd [2007] 245 ALR 374 at [51]; Totev v Sfar (2008) 167 FCR 193 at [17] (Emmett, J), at [91]-[92] (Cowdroy, J; Bennett J, agreeing).
In proceeding to address the merits of the appeal, the Full Court endorsed the holding of Davies J, that Ms Luck did not have a cross-claim, set-off or cross-demand within the meaning of s.40(1)(g) of the Bankruptcy Act: [2016] FCAFC 167 at [56], [65]. The Full Court concluded at [64] that:
On the approach she took (and with which we agree), Ms Luck's High Court proceeding was irrelevant to the prospects of her challenge to the University's bankruptcy notice.
In holding that even a successful outcome in the High Court for Ms Luck would have had no impact on the University's entitlement to its costs, the Full Court further held at [75] that:
What did not sound in money was the result which Ms Luck might have anticipated in her High Court proceeding. As Her Honour rightly held, even a successful outcome in the High Court for Ms Luck would have had no impact on the University's entitlement to its costs in the VID 899/2009.
Within two days of the delivery of reasons by the Full Court dismissing the appeal in VID189/2015 (and one day prior to the further hearing of the University’s creditor’s petition), on 7 December 2016, Ms Luck filed an application in the High Court seeking special leave to appeal from the orders dismissing her appeal in VID189/2016. The application for special leave to appeal was assigned No. M165/2016.
On 7 December 2016, the University took steps towards preparing for the further hearing of its petition. At the same time, Ms Luck took steps to secure a further adjournment. In particular:
(a)two affidavits were filed on behalf of the University in compliance with r.4.06 of the Federal Circuit Court (Bankruptcy) Rules 2016. The first affidavit deposed that the University’s debt remained wholly unpaid. The other affidavit deposed as to a search which had been conducted on that date of the National Personal Insolvency Index showing that there was no reference to Ms Luck in that Index;
(b)Ms Luck transmitted an email to the University’s lawyers requesting that the further hearing of the petition be adjourned and attaching a copy of an application for special leave to appeal. Ms Luck wrote seeking an adjournment, stating in part:
As I will not be able to consent to an adjournment because I will be travelling to the Court, You could, if so desired, use this email for the FCC, as my consent to adjourn the matter tomorrow, . . .
I will be seeking to adjourn the matter in the Court tomorrow if the hearing goes ahead, pending the disposal of my special leave application.
On 8 December 2016 (being the day fixed for the further hearing of the creditor’s petition) Ms Luck filed a notice of appearance in this proceeding and requested that the further hearing of the petition be adjourned pending the determination of her application for special leave to appeal in M165/2016. The further hearing of the petition was adjourned to 19 January 2017. The parties were ordered to file and serve outlines of submissions on or before 16 January 2017.
Creditor’s petition referred to a judge: 2017
The University complied with the order for the filing of submissions. On 17 January 2017, Ms Luck filed what was to become the first of a series of written submissions in which she alluded to the failure of her computer and asserted that it had “wiped out all of my arguments.”
Ms Luck’s submission dated 17 January 2017 contained the first indication that she would: (1) contest the making of the order on 31 May 2016 to vary the order made on 22 March 2016 so as to extend the life of the petition, and; (2) assert that the petition had lapsed.
On 18 January 2017, a further two affidavits were filed on behalf of the University. The affidavits deposed that the University’s debt remained wholly unpaid and deposed as to a search which had been conducted on that date of the National Personal Insolvency Index (which showed there was no reference to Ms Luck in that Index).
On 19 January 2017, at the further hearing of the creditor’s petition:
(a)Ms Luck filed an amended outline of submissions. Ms Luck reiterated her contentions concerning the making of the order on 31 May 2016 to vary the order made on 22 March 2016. Ms Luck asserted that the petition had lapsed;
(b)a Registrar made an order that the petition be determined by a Judge of the Federal Circuit Court.
The further hearing of the University’s creditor’s petition was then listed for hearing on 13-14 February 2017.
On 24 January 2017, Ms Luck wrote to the Registry asking that the hearing on 13 February 2017 be “a directions hearing, at which directions can be made in respect of the submissions to be made”. On the same date, the court communicated with the parties, referring to the orders made on 19 January 2017 and advised that the matter would remain listed for hearing on 13 February 2017.
In advance of that hearing, two further affidavits were filed on behalf of the University, again deposing as to non-payment of the debt claimed in the Bankruptcy Notice and of the results of a search of the Australian Financial Security Authority Index.
On 9 February 2017, two business days before the further hearing of the creditor’s petition, Ms Luck lodged with the Registry an application in a case seeking to set aside the order made on 31 May 2016 in respect of the making of an extension of the period of life of the petition. The proposed application sought the following orders:
1.That the Federal Circuit Court order made on 31 May 2016 in respect of the making of an extension of the period of life of the petition in creditor's petition matter MLG 737/2015, by Registrar Burns, be set aside;
2. That the applicant pay the costs of the respondent . . .
3.A declaration that the Creditor's Petition presented the court on 9 April 2015, lapsed on 8 April 2016, and that the petition has expired and has been a nullity since 8 April 2016.
An affidavit filed by Ms Luck in support of that application deposed to her application for special leave to appeal from the orders of the Full Federal Court dismissing her appeal in VID189/2015. Otherwise the affidavit merely recited many of Ms Luck’s written submissions.
Notwithstanding the lateness of Ms Luck’s application in a case, I determined that the preferable course was to list that application for hearing on the same date as the further hearing of the creditor’s petition. In reaching that decision, I was conscious of many factors including that: (1) the approaching extended date upon which the creditor’s petition would lapse; (2) the continual adjournments of the further hearing of the University’s creditor’s petition; (3) the decisions of Davies, J and the Full Court dismissing Ms Luck’s applications to set aside, or extend the time for compliance with, the Bankruptcy Notice; (4) the holding in VID189/2015 that the delay in the resolution of that appeal had not been the fault of the University; (5) the dismissal of some six applications by the High Court on 11 November 2016 including those which were said to relate to Ms Luck’s challenge to the Bankruptcy Notice; (6) the institution of a further application for special leave to appeal in M165/2016 which had been instituted within two days of the delivery of reasons for judgment in VID189/2015; (7) the belated disclosure in Ms Luck’s written submission on 17 January 2017 that the validity of the order made on 31 May 2016 was under challenge; (8) the challenge to the making of the order was well out of time: Federal Circuit Court (Bankruptcy) Rules 2016 (2016 Bankruptcy Rules), r.2.02(3); (9) the refusal to hear the application was near certain to result in an appeal; (10 a preferable course would be to direct the order in which the parties would address their submissions and to limit the parties in the time which they would be permitted to do so: cf ss.55(1), 56(2), 62(1) FCC Act; AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, and see Hon Gleeson AC CJ, The purpose of litigation (2009) 83 ALJ 601, 606.
On 10 February 2017, Ms Luck’s application in a case was sealed and a copy provided to the parties together with Ms Luck’s affidavit. The court advised the parties that Ms Luck's application had been listed for hearing on 13 February 2017.
In response to the application filed by Ms Luck, the University filed a further submission together with an affidavit which exhibited the parties’ communications concerning the series of adjournments of the hearing of the petition in the period 2015 - 2016.
On the first and second days of the hearing of the creditor’s petition, Ms Luck filed amended and further amended written submissions.
At the commencement of the hearing on 13 February 2017, I proposed that in light of the late filing of Ms Luck’s application to set aside the order made on 31 May 2016, it may have been fair to both parties to allocate the first day of the hearing to the University’s lawyers to enable them to make submissions in relation to the creditor’s petition and then to adjourn the further hearing of the matter to 14 February 2017 at which time Ms Luck would be able to make submissions in relation to the creditor’s petition, including upon her application.
Initially, Ms Luck resisted the adoption of that course. However, in the latter course of that first day Ms Luck indicated that the proposal to allocate time during the hearing in the manner suggested would accommodate her preference provided she was afforded an equal amount of time to that which had been afforded to the University. I acceded to that request and, as matters evolved, Ms Luck was afforded a greater amount of time within which to make oral submissions on the hearing of the petition and her application to set aside the order made on 31 May 2016.
Overview
The University secured a final judgment for costs many years ago. The court has certified the sum of those costs. Ms Luck has made no attempt to suggest that any amount has been paid in reduction of those costs. Ms Luck’s application to extend the time to comply with the Bankruptcy Notice had been dismissed by the Federal Court and the Full Court of that court. Ms Luck’s application to establish that she has a novel counter-claim, set-off or cross-demand had likewise been dismissed by each of those courts.
Ms Luck’s application for special leave to appeal the orders in VID189/2015 is extant.
In those circumstances, is it open to make a sequestration order against the estate of Ms Luck and, if so, should such an order be made?
CONSIDERATION
Ms Luck’s challenge to the order made on 31 May 2016
As noted, Ms Luck’s application filed 10 February 2017 seeks to set aside the order made on 31 May 2016 and for declaratory relief that the creditor’s petition has been a nullity since 8 April 2016 (being the day before the anniversary of the presentation of the petition). Ms Luck’s applications require consideration of a Registrar’s power to make an order in a bankruptcy proceeding in the terms made on 31 May 2016.
As noted, the order made on 31 May 2016 was expressed as having been made under r.16.05(2)(e) of the Rules of Court. Rule 16.05(2)(e) confers power to set aside or vary a judgment or order which does not reflect the intention of the court. Ms Luck submitted that:
(a)the creditor’s petition had lapsed by operation of sub-s.52(4);
(b)for that reason, the power conferred by r.16.05 was not available to a Registrar in bankruptcy proceedings;
(c)the Rules of Court were only available in bankruptcy proceedings where relevant and not inconsistent with the 2016 Bankruptcy Rules. Rule 16.05 was inconsistent with those rules and so could not apply to the conduct of bankruptcy proceedings;
(d)as to inconsistency, Ms Luck relied on sub-s.52(4) of the Bankruptcy Act which provides that a creditor’s petition will lapse in certain events;
(e)further, the Registrar had no power on 31 May 2016 to make an order so as to vary the order made on 22 March 2016; that is, the Registrar had no power retrospectively to vary the order made on 22 March 2016.
Ms Luck’s written submission accepted that, in a bankruptcy proceeding, the Rules of Court only applied where relevant and where not inconsistent with the 2016 Bankruptcy Rules. However, at one point Ms Luck seemed to suggest that the 2016 Bankruptcy Rules were, in effect, a complete and exhaustive code of the powers available to be exercised by a Registrar in bankruptcy proceedings.
I reject these submissions. By operation of the order made on 31 May 2016, the University’s creditor’s petition had not lapsed. The power conferred by r.16.05 was available to be exercised by a Registrar in a bankruptcy proceeding. Rule 16.05 was relevant to this bankruptcy proceeding and not inconsistent with the 2016 Bankruptcy Rules. The power may be exercised after the expiry of the 12 month period (but within the 24 month period), fixed by sub-s.52(5) of the Bankruptcy Act. The exercise of the discretion to make an order under the rule will depend upon all the circumstances. Here, the exercise of the discretion was supported amply by the circumstances of the case.
Having regard to the submissions advanced by Ms Luck, it is convenient to analyse the matter in the following order.
Registrar’s powers in bankruptcy proceedings
The Federal Circuit Court of Australia is a court with such original jurisdiction as is vested in it by a law of the Commonwealth: Federal Circuit Court of Australia Act 1999 (Cth) (“FCC Act”), s.10. It is a court vested with jurisdiction by the Bankruptcy Act.
Part III of the Bankruptcy Act concerns Courts and comprises ss.27-37. Division 2 of Part III concerns Jurisdiction and powers of courts in bankruptcy. The Federal Court and the Federal Circuit Court have concurrent jurisdiction in bankruptcy: Bankruptcy Act, sub-s.27(1). [The] Court means a court having jurisdiction in bankruptcy under that Act: Bankruptcy Act, sub-s.5(1).
What powers are conferred on a Registrar?
Part 7 of the FFC Act concerns Management of the Federal Circuit Court of Australia. Part 7, Division 4 provides for the appointment of such Registrars as may be necessary.
Sub-section 99(6) is the source of authority to confer powers on a Registrar. It reads:
(6)The officers of the Federal Circuit Court of Australia, other than the Chief Executive Officer, have such duties, powers and functions as are given to them by:
(a)this Act; or
(b)the Rules of Court; or
(c)the Federal Circuit Court of Australia; or
(d)the Chief Judge.
Section 102 of the FCC Act concerns the subject Registrar’s powers. Sub-section 102(1) provides that the object of that section is to allow certain powers of the court to be exercised by a Registrar. Sub-section 102(2) relevantly provides that a Registrar may exercise certain designated powers. Paragraph 102(2)(i) designates that one power which may be exercised by a Registrar is “a power of the [Court] prescribed by the Rules of Court”. Rules of Court is defined to mean the Rules of Court made under the FCC Act: FCC Act, s.5.
Sub-section 102(2) is to be read with s.103 which permits that the Rules of Court may delegate certain powers to a Registrar and characterises the exercise of a delegated power by a Registrar as one that is to be taken, for all purposes, as having been exercised by the court. Sub-sections 103(1)-(2) read:
(1) The Rules of Court may delegate to the Registrars any of the powers of the Federal Circuit Court of Australia, including (but not limited to) all or any of the powers mentioned in subsection 102(2).
(2) A power delegated by Rules of Court under subsection (1), when exercised by a Registrar, is taken, for all purposes, to have been exercised by the Federal Circuit Court of Australia or a Judge, as the case requires.
In the result, a Registrar may exercise the powers that are conferred by the FCC Act and the Rules of Court. Section 102 of the FCC Act, the object of which is to allow that a Registrar should have certain powers, expressly provides that one source of power is a power prescribed by the Rules of Court.
Each of ss.102 and 103 contain application of laws provisions which, in terms, provide that the FCC Act, the Rules of Court and any other law of the Commonwealth that relates to the exercise by the court of a power that is exercisable by a Registrar (by dent of ss.102(2) or 103(1) respectively), “apply in relation to an exercise of the power by a Registrar under this section as if references in those provisions to the [Court] were references to the Registrar”: see ss.102(6) and 103(7). The drafting technique so employed operates to substitute the Registrar for the Court in the FCC Act, the Rules of Court and any other Commonwealth law that relates to an exercise of power by the court. Thus, the construction of such provisions is to be approached on a premise that the ‘Registrar’ is to be substituted for the ‘Court’.
Sections 102 and 103 then provide that the provisions of: (1) the FCC Act; (2) the Rules of Court, and; (3) any other law of the Commonwealth, that relates to the exercise by the court of a power that is exercisable by a Registrar apply as if references in those provisions to the court were references to the Registrar.
As noted, the Bankruptcy Act is a law of the Commonwealth.
The FCC Act confers a right of review in respect of the exercise of any power conferred by ss.102-103 of the Act: sub-s.104(2). Where a party has applied for such a review, the court may make any order it thinks fit in relation to the matter: sub-s.104(3).
Further, where application is made to a Registrar for a judge to determine an application, the Registrar must not hear the application and must make appropriate arrangements for the application to be heard by a judge: sub-s.104(4).
The intendment of these provisions is to secure the result that there has been a valid conferral of power under the FCC Act, the Rules of Court or any other Commonwealth law – here, the Bankruptcy Act – where that power is to be exercised, in the first instance, by a Registrar: cfTotev v Sfar (2008) 167 FCR 193, [9]-[11] (Emmett, J) citing Harris v Caladine (1991) 172 CLR 84.
The provisions examined above serve to define the scope of a Registrar’s powers: cf Totev v Sfar (2008) 167 FCR 193, [4] (Emmett, J). They do not proscribe a Registrar in a bankruptcy proceeding from exercising a power under r.16.05 of the Rules of Court.
Rules of Federal Circuit Court
Part 6 of the FCC Act, which concerns Practice and procedure, is arranged in eight Divisions and comprises ss.42-88. The court is directed to proceed without undue formality and to endeavour to ensure that the proceedings are not protracted: s.42; cf s.3(2)(a)-(b).
The expression practice and procedure is given an inclusive definition as meaning all matters in relation to which Rules of Court may be made under the FCC Act: see sub-s.43(3).
Sub-section 43(1) provides that the practice and procedure of the court: “is to be in accordance with Rules of Court made under this Act.” It further provides that sub-s.43(1) “is subject to any provision made by or under this or any other Act with respect to practice and procedure. The proviso to sub-s.43(1) makes clear that its terms are subject to any provision made by or under the FCC Act or any other Act with respect to practice and procedure: cf FCC Act, s.81(2).
As a result, while the practice and procedure of the court is required to be in accordance with the Rules of Court, this requirement is itself subject to such other provision as is made by or under the FCC Act or any other Act with respect to practice and procedure.
Sub-section 43(2) then augments the powers at the disposal of the court with respect to matters of practice and procedure. It does so by recourse to the Federal Court Rules, relevantly, providing that insofar as the Rules of Court are insufficient, the rules made under the Federal Court of Australia Act 1976 apply, with necessary modifications, so far as they are capable of application: see Flint v Busuttil & Co Pty Ltd (2013) 216 FCR 375, [25]. These essentially complementary features of s.43 may be seen to support the objects expressed in ss.3 and 42 that the court should proceed without undue formality or delay.
Part 6, Division 8, addresses Rules of Court and comprises ss.81-88.
Section 81, authorises the making of Rules of Court, including by the making of provision for the practice and procedure of the court (and in relation to all matters and things incidental to such practice and procedure), and for prescribing of matters required or permitted by the FCC Act or any other Commonwealth law to be so prescribed.
Sub-section 81(2) makes the Rules of Court subject to any provision made by another Act, rules or regulations thereunder with respect to the practice or procedure in particular matters. The similarities with sub-s.43(1) may be noted. The intendment of the provisions is to provide for the establishment of Rules of Court while at the same time providing that the place of those rules in the hierarchy of matters related to practice and procedure may, in particular instances, operate subject to other provisions of the FCC Act or any other Act.
Consequently, by operation of ss.43(1) and 81(2) of the FCC Act, the practice and procedure of the court is to be in accordance with the Rules of Court while at the same time, the status and application of those rules are made subject to the regulation of practice and procedure as expressed by other provisions of the FCC Act or any other Act.
Rule 16.05 concerns the subject Setting aside and relevantly provides:
(1)The Court may vary or set aside its judgment or order before it has been entered.
(2)The Court may vary or set aside its judgment or order after it has been entered if:
(a)-(b) . . .; or
(c) the order is interlocutory; or
(d) . . .; or
(e) the order does not reflect the intention of the Court; or
(f) the order in whose favour the order is made consents.
(3)This rule does not affect the power of the Court to vary or terminate the operation of an order by a further order.”
(emphasis added). It should be recognised that r.16.05(2) allows that an order might be varied in circumstances where the order was interlocutory and where the order was made with the consent of a party in whose favour it was made.
Rule 16.05(3) provides that r.16.05 does not affect the court’s power to vary an order by a further order. Rule 16.05(3) provides context to r.16.05(2)(e) and serves to reinforce that the powers conferred by r.16.05 should not be given a narrow construction. It is a rule of court.
Order 2 of the orders made on 31 May 2016 was expressed as made pursuant to r.16.05(2)(e). Further, it was an order that was expressed to vary an order made on 22 March 2016. It extended the life of the petition and provided that that extension would apply from 22 March 2016 as if it had been ordered on that date. For convenience, I set out the text of Order 2 made on 31 May 2016 again. It reads:
Pursuant to rule 16.05(2)(e) of the Federal Circuit Court Rules 2001, the order in this proceeding of 22 March 2016 be varied so that the life of the petition be extended to 8 April 2017, and that extension apply from 22 March 2016 as if it had been ordered on that date.
Rule 16.05(2)(e) conferred power to make an order of the kind made on 31 May 2016. Do other rules relating to bankruptcy proceedings constrain the availability of that rule, including to a Registrar?
Bankruptcy Rules 2006 & 2016
Before turning to an examination of these rules, it may be noted that the orders made on 22 March 2016 were made during the period of the operation of the Federal Circuit Court (Bankruptcy) Rules 2006 (“2006 Bankruptcy Rules”), while the orders made on 31 May 2016 were made during the period of the operation of the 2016 Bankruptcy Rules.
The 2006 Bankruptcy Rules commenced operation on 6 February 2006 and were subject to sun-setting provisions contained in Chapter 3, Part 4, of the Legislation Act 2003 (Cth): see s.81(3), FCC Act. By force of sub-s.50(1) of the Legislation Act, the 2006 Bankruptcy Rules were automatically repealed with effect from 1 April 2016.
On the same date, 1 April 2016, the 2016 Bankruptcy Rules took effect: see r.1.02(1) of the 2016 Bankruptcy Rules.
The 2016 Bankruptcy Rules were operative when the Registrar made the order on 31 May 2016 which varied the order of 22 March 2016.
Drafting of the 2016 Bankruptcy Rules and the Federal Court’s Bankruptcy Rules occurred in consultation between the Federal Court and the Federal Circuit Court, Registrars of those courts and others with the object that the respective bankruptcy rules of those courts be harmonised. For example, defined expressions used in the 2016 Bankruptcy Rules bear the same meaning as employed in the Rules of Court and the Bankruptcy Act: 2016 Bankruptcy Rules rr.1.05(2), 1.06.
As noted, the application of the Rules of Court is made subject to the practice and procedure as may be regulated by other provisions of the FCC Act or any other Act: cf ss. 43(1) and 81(2), FCC Act. As concerns bankruptcy proceedings, the 2016 Bankruptcy Rules were made under the FFC Act and apply to a proceeding in the court unless a contrary order is made: cf rr.1.03, 1.04. Paragraph 1.04(2) of the 2016 Bankruptcy Rules makes clear that Rules of Court made under the FCC Act do apply in bankruptcy proceedings but that their application is qualified to the extent they are relevant and not inconsistent with the 2016 Bankruptcy Rules. It reads:
The other Rules of Court apply, to the extent that they are relevant and not inconsistent with these Rules, to a proceeding in the Court to which the Bankruptcy Act applies.
This rule is in terms very different to those applied in earlier authorities referred to below. In particular, Or 1, r.11(1) of the Federal Court Rules as in force in 1995 expressly provided that those rules did not apply to proceedings under the Bankruptcy Act (see below).
The Bankruptcy Act applied to this proceeding. By operation of r.1.04(2), the Rules of Court also applied to this proceeding to the extent that those rules were relevant to that proceeding and insofar as they were not inconsistent with the 2016 Bankruptcy Rules.
Ms Luck did not submit that r.16.0(2)(e) was not relevant to this proceeding: cf 2016 Bankruptcy Rules, 1.04(2).
Ms Luck submitted that r.16.0(2)(e) was not a power available to be applied in the proceeding because it was inconsistent with the 2016 Bankruptcy Rules: cf 2016 Bankruptcy Rules, 1.04(2). To establish inconsistency, Ms Luck’s submission fastened upon r.2.02(1) of the 2016 Bankruptcy Rules. Rule 2.02(1) provides that:
For the purposes of paragraph 102(2)(i) of the [Federal Circuit Court] Act, a power of the Court under a provision of the Bankruptcy Act referred to in Schedule 1 is prescribed.
The reference to ‘Act’ in r.2.02(1) is to the FCC Act: r.1.05(1).
Ms Luck submitted that because the powers conferred on a Registrar when conducting a bankruptcy proceeding were those prescribed by r.2.02(1) of the 2016 Bankruptcy Rules, r.16.05(2)(e) was inconsistent with those rules and so could not apply. The submission begged the question. If r.16.05(2)(e) was relevant and was not inconsistent with the 2016 Bankruptcy Rules, by operation of r.1.04(2) of those rules, the power conferred r.16.05(2)(e) was otherwise available to be applied.
Four observations should be made.
First is that r.2.02(1) identifies the powers that are to be given to Registrars under a provision of the Bankruptcy Act. Rule 2.02(1) does not purport to address the scope of powers otherwise conferred on a Registrar, including such other powers as are conferred on a Registrar by the FCC Act or the Rules of Court. Rule 2.02(1) should be read with r.1.04 which confirms that the other Rules of Court do apply to bankruptcy proceedings to the extent they are relevant and not inconsistent with the 2016 Bankruptcy Rules.
In the result, I do not accept a broad proposition that r.16.05(2)(e) is never available to be applied in bankruptcy proceedings. A separate question is whether the power conferred by the rule is available to be exercised after expiry of the time prescribed by s.52(4) of the Bankruptcy Act (see below).
Secondly, r.2.02(1) expressly identifies the source of authority from which the prescription of power derives. It states that a power of the court referred to in Schedule 1 is being prescribed for the purposes of paragraph 102(2)(i) of the FCC Act. To provide that a power referred to in Schedule 1 is being prescribed for the purposes of paragraph 102(2)(i) of the FCC Act says nothing to suggest that those powers constitute a complete or exhaustive statement of the powers that are available to be exercised in a bankruptcy proceeding.
Thirdly, and perhaps conversely, r.2.02(1) does not express an intent that the only powers that are conferred on a Registrar are the prescribed powers as set out in the Schedule. Such a construction would be inconsistent with r.1.04(2) of the 2016 Bankruptcy Rules.
Finally, as the reasoning in Culleton v Balwyn Nominees Pty Ltd confirms, a finding of inconsistency would be essential to a conclusion that the Rules of Court do not apply to a bankruptcy proceeding: [2017] FCAFC 8, [103] (Allsop CJ, Dowsett and Besanko JJ); see also Flint v Busuttil & Co Pty Ltd (2013) 216 FCR 375, [22] (Allsop CJ, Katzmann and Perry JJ).
As a matter of construction, what Rule 2.02(1) provides is that a power of the court under a provision of the Bankruptcy Act referred to in Schedule 1 is a prescribed power. It does not provide or suggest that r.2.02(1) is a complete or exhaustive repository of the only powers that may be exercised by a Registrar in a bankruptcy proceeding.
The bankruptcy jurisdiction of the Federal Circuit Court was invoked by the filing of the University’s creditor’s petition. Once that jurisdiction was invoked, the court had the powers conferred on it in bankruptcy proceedings. The court had the powers conferred on it by the Rules of Court unless those powers were expressly or impliedly denied by the 2016 Bankruptcy Rules or otherwise. Rather than denying recourse to the powers conferred by the Rules of Court, rule 1.04 of the 2016 Bankruptcy Rules makes clear that the Rules of Court may be applied where relevant and not inconsistent with those rules. Rules 1.04 denies a conclusion that the Rules of Court are excluded: cf Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195) CLR 1, [27]-[31] (Brennan CJ, McHugh, Kirby and Hayne JJ); Pearce & Geddes, Statutory Interpretation in Australia 8th Ed (2015) at [4.36].
The prescription of powers effected by r.2.02 and Schedule 1 to the 2016 Bankruptcy Rules does not alter that conclusion. Schedule 1 is entitled Powers of the Court that may be exercised by a Registrar. The schedule contains a table that is arranged in three columns: the first provides a list of 23 Items; the second identifies the provision of the Bankruptcy Act in respect of which a Registrar may exercise power; the third is headed Description (for information only) and contains an adjectival description of the nature of the power that has been prescribed as a power that a Registrar may exercise: cf r.1.02(3).
Items 2, 9 - 12 of Schedule 1 prescribe powers pursuant to:
(a)section 33, and is described as Adjournment, amendment of process and extension or abridgment of time;
(b)sub-section 52(1), and is described as Power to made a sequestration order against the estate of a debtor;
(c)sub-section 52(2), and is described as Power to dismiss a creditor’s petition;
(d)sub-section 52(3), and is described as Power to stay all proceedings under a sequestration order for a period not exceeding 21 days;
(e)sub-section 52(5), and is described as Power to extend a period at expiration of which a creditor’s petition lapses.
I reject the broad submission that by reason of r.2.02 and Schedule 1 to the 2016 Bankruptcy Rules, the power conferred by r.16.0(2)(e) is not available to be exercised in a bankruptcy proceeding. I do not accept that a power to vary an order which did not reflect the intention of the court is inconsistent with the 2016 Bankruptcy Rules: cf r.1.04(2). Nor would I accept that such a power was irrelevant to the conduct of a bankruptcy proceeding or to this proceeding in particular.
I also reject the submission that the only powers conferred upon a Registrar for the conduct of a bankruptcy proceeding are those contained in Schedule 1 to the 2016 Bankruptcy Rules. This would be to misconstrue r.2.02 and to disregard other provisions addressed above. The submission conflates r.2.02(1) as meaning that unless a power is expressly referred to in Schedule 1 then the power was not one available to a Registrar in a bankruptcy proceeding.
Rule 16.0(2)(e) is not inconsistent with the 2016 Bankruptcy Rules.
Questions of inconsistency in the present case travel beyond the text of the 2016 Bankruptcy Rules. That is because a separate foundation for the submission of inconsistency arose from the exercise of power under r.16.05(2)(e) after the period of 12 months from presentation of the University’s creditor’s petition had expired.
It is therefore necessary to analyse that legislation and the authorities which examine the availability of the slip rule after expiry of time limitations of the kind imposed by s.52(4) of the Bankruptcy Act.
Bankruptcy Act 1966 (Cth)
Part IV of the Bankruptcy Act concerns Proceedings in connexion with bankruptcy. Division 1 of that Part, which comprises ss.40-42, concerns Acts of bankruptcy.
Sub-section 40(1) of the Bankruptcy Act provides for the many cases in which a debtor commits an act of bankruptcy. Relevantly, paragraph 40(1)(g) provides for the circumstances where a creditor has obtained a final judgment or order (the execution of which has not been stayed), and has served a bankruptcy notice under the Act. As the Full Court noted in VID189/2015, in those circumstances, an act of bankruptcy is committed where the debtor does not comply with the requirements of the notice within the time specified to do so or where the debtor fails to satisfy the Court that she has a counter-claim, set-off or cross-demand equal to or exceeding the amount of the judgment debt.
For the purposes of Part IV of the Bankruptcy Act, the Federal Circuit Court of Australia is a Court: see ss.5.1 “the Court”, 27 “Bankruptcy Courts” of the Bankruptcy Act; s.10(1) FCC Act.
Sub-section 41(1) of the Bankruptcy Act authorises the Official Receiver to issue a bankruptcy notice upon the application of a creditor in respect of a final judgment which has not been stayed and which, relevantly, is for a sum greater than $5,000.
Division 2 of Part IV is entitled, Creditors’ petitions and comprises ss.43-54. Section 43 of the Bankruptcy Act confers jurisdiction on the court to make a sequestration order against the estate of a debtor where the conditions specified in that provision are met. The jurisdiction so conferred is expressed in discretionary terms “. . . the Court may. . .” By force of sub-s.43(2), where a sequestration order is made, the debtor becomes a bankrupt and remains so as is there specified.
Section 44 of the Bankruptcy Act identifies conditions which constrain the presentation of a petition by a creditor. Paragraph 44(1)(c) proscribes the presentation of a petition unless the act of bankruptcy on which the petition is founded was committed within six months before presentation of the petition. Section 47 of the Bankruptcy Act identifies other requirements as to a creditor’s petition.
Section 52 of the Bankruptcy Act was key to Ms Luck’s submission that r.16.05(2)(e) was not available as a source of power to vary the order made on 31 May 2016. Section 52 is titled Proceedings and order on creditor’s petition. Relevantly, the section provides:
(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)-(1B) . . .
(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. (emphasis added)
Section 52 addresses a range of matters in relation to the hearing of a creditor's petition. It begins by identifying matters of which a court must be satisfied before a sequestration order may be made and provides for circumstances in which a petition may be dismissed or stayed. It identifies the periods for which the petition has ‘life’ and allows that the initial 12 month life of a petition may be extended.
Section 52 further addresses the lapse of creditor’s petitions.
The text of sub-s.52(4) does not state that a creditor’s petition lapses if no order is made within 12 months of presentation of the petition. Instead, the power to make an order to extend the life of a creditor’s petition is found in sub-s.52(5). The provisions should be read together.
Sub-section 52(4) merely provides that a creditor’s petition lapses at the expiration of the respective periods there stipulated unless, before the expiration of the applicable period: (1) a sequestration order is made on the petition; (2) an order is made under sub-s.52(5), or; (3) the petition is dismissed or withdrawn.
Paragraphs (a)-(b) of sub-s.52(4) define the periods upon expiry of which a creditor’s petition will lapse. In each case, the commencement date is the date of presentation of the creditor’s petition. Ascertainment of the date of presentation of a creditor’s petition may be a matter that is not without difficulty on the facts of some proceedings. However, it was not an issue posed in this proceeding. In this case, I treat the date on which the University’s creditor’s petition was received and accepted by the Registry (9 April 2015), as the date of presentation: cf Purden Pty Ltd v Registrar in Bankruptcy (1982) 43 ALR 512, 515-517 (Bowen CJ, Fisher and Lockhart JJ); Ramsay Health Care Australia Pty Ltd v Compton (No 2) [2016] FCA 691, [10] (Flick J).
Here, the sequence of events is not in issue. As a matter of procedural history the order made on 22 March 2016 was made within the 12 month period after presentation of the University’s creditor’s petition. Equally, the order made on 31 May 2016 was made after the expiry of that period. The point of significance is to construe the legal effect of the order made on 31 May 2016. In particular, did Order 2 of the order made on 31 May 2016, which varied the earlier order, have operative effect from 22 March 2016? In my opinion it was effective to do so.
Lapse of a creditor’s petition
Ms Luck submitted that s.33 of the Bankruptcy Act could not be employed to support a power to vary an order made after expiry of the period of 12 months from the date of presentation of a creditor’s petition. She pointed to the Full Court’s decision in Re Young; Ex parte Smith (1985) 5 FCR 204 as authority for a proposition that the court had no power to extend time more than 12 months after presentation of the creditors petition. It is important to identify both the ratio of Re Young; Ex parte Smith and what it did not decide.
Re Young; Ex parte Smith concerned a question of law that was reserved for consideration by the Full Court. The question was whether the court had power to extend the period at the expiration of which a creditor’s petition would lapse if the period of 12 months commencing on the date of presentation of the petition had expired before the court was asked to make an order extending time. The question was posed in the context that reliance was placed upon s.33(1)(c) of the Bankruptcy Act which conferred a power to extend any time limited by the Act. The Full Court’s answer was that s.33(1)(c) did not empower the court to extend the period after the expiration of 12 months from the presentation of the petition: (1985) 5 FCR 204, 209. This was the ratio of that decision.
In a joint judgment, Bowen CJ, Sweeney and Lockhart JJ traced the legislative history of ss.33(1)(c), 52(4) and 52(5) of the Bankruptcy Act. The court held that the general powers conferred by sub-s.52(4) and 52(5) could not be read independently of one another – the provisions were designed to ensure that a petition had no life beyond maximum of 24 months, but had an ‘automatic’ life of 12 months, from the date of presentation of the petition. The court held that a petition could not survive beyond the initial 12 month period without a court order. Properly construed, neither sub-s.52(4) nor 52(5) limited a time for the doing of any act within the meaning of s.33(1)(c). The Full Court disapproved earlier authority which held that s.33(1)(c) did confer power to extend the life of a creditor’s petition where the initial 12 month period from the date of presentation had already expired.
However, in Re Young; Ex parte Smith the court expressly abstained from consideration whether the slip rule was available as a source of power in the context of subs-s.52(4) or 52(5): (1985) 5 FCR 204, 209.
The important question left open in Re Young; Ex parte Smith, was addressed in DDB Needham Sydney Pty Ltd v Elyard Corporation Pty Ltd (1995) 131 ALR 213. The problem there arose in the context of a similar provision (s.459R of the Corporations Law), which required that an application for the winding up of a company must be determined within six months after the application had been made. Sub-section 459R(2) conferred power to extend that time, subject to certain conditions including that the application for an extension was made within that six month period. The period was extended by a Registrar on one occasion. In circumstances that are somewhat analogous to the present, within the six month period after the winding up application was issued, the parties consented to orders that it be adjourned. Then, through inadvertence, no further order was made extending the time for determination of the application.
After expiry of that six month period, a judge (Sheppard J), made an additional order, correcting the Registrar’s order (made within time), so as to extend the time within which the application might be determined. This additional order was made under the slip rule.
In the primary judgment, Sheppard J identified that the only solution which might address the legislative barrier posed by s.459R was an order nunc pro tunc, such that an order made within time could be varied and have legal effect from that date: see DDB Needham Sydney Pty Ltd v Elyard Corporation Pty Ltd (1995) 131 ALR 213, 219-220. His Honour held that relief was available, reasoning that the slip rule could operate with retrospective effect:
If the slip rule is capable of applying, as I think it is, and it has retrospective effect . . . which the High Court in Shaddock decided it has, I do not see any difficulty, in an appropriate case, in making an order which will overcome the slip. Otherwise there is no purpose in the rule. (1995) 131 ALR 213, 223.
The decision was confirmed on appeal: Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385 (Elyard).
In the analyses of Lockhart and Lindgren JJ (with which Black CJ agreed), the primary, or critical, question was whether s.459R prevented the making of an order under the slip rule to correct an order made within the time period: (1995) 61 FCR 385, 388E, 397F.
The Full Court held that the express terms of s.459R did not displace the application of the slip rule or render it unavailable to correct an order after the six month period had expired: (1995) 61 FCR 385, 392D-E, 404D (Lockhart J), 404D-E, 405F (Lindgren J).
Lindgren J observed that it would be a strong thing to hold that the rule was not available and identified the issue as follows at 401G-402C:
Elyard’s submission must be that . . . the inexorable effect of s.459R(2) and (3) is that upon the expiry of the statutory period the application stands dismissed. I would attribute such an effect to those subsections only if it was clear that they and the slip rule cannot co-exist.” (emphasis added)
Lindgren J accepted that provisions such as s.459R of the Corporations Law (and s.52(5) of the Bankruptcy Act), reflected a legislative intention that there would be human oversight and inadvertence, but reasoned the legislature would accept that a mechanism such as the slip rule could co-exist (within its limited area of operation) with those statutory provisions: (1995) 61 FCR 385, 405F-G, 406B.
The immediate importance of Elyard was the holding that s.459R did not preclude resort to the slip rule in appropriate cases. I note that Lockhart J was both a member of the Full Court in Re Young; Ex parte Smith (where the operation of the slip rule was left open), and in Elyard (where the availability of the slip rule was confirmed as a source of power to extend time notwithstanding the expiry of the statutory period fixed for determination of the application).
The analysis in Elyard has been applied to confirm that s.52(4) does not present an insuperable barrier to the applicable of the slip rule in bankruptcy proceedings.
In Re Howell; Ex parte Commissioner of Taxation (1996) 70 FCR 261 at 263F, Burchett J applied Elyard, holding that the reasoning (though obiter dicta as concerned bankruptcy proceedings) should be applied to s.52 of the Bankruptcy Act to allow orders to be made nunc pro tunc to extend the time where the petitioning creditor omitted to ask that a Registrar extend, within time, the life of the petition.
In Re Langridge: Ex parte Bennett (1998) FCA 879 Kiefel, J (as her Honour then was), applied the Full Court’s holding in Elyard in the context of an application of the slip rule to an extension – out of time – to the life of a creditor’s petition. Her Honour varied an order by adding an order to extend the life of the petition to 24 months.
In Re Svir; Ex parte Commissioner of Taxation (1998) 83 FCR 314 at 321.C-E, Burchett, J held, applying the reasoning in Elyard, that the slip rule was available “not as permitting an order to be made ‘after the statutory time limit’, but because an exercise of it operated nunc pro tunc as at the date of the earlier order involving the slip, which was made within the statutory period.” This reasoning, with respect, captures the distinction which is essential to the availability of the slip rule – there must be an order made within time upon which an order can me made nunc pro tunc so as to vary the slip within time.
In Owston Nominees No 2 Pty Ltd v Branir Pty Ltd (2003) 129 FCR 558 at [61] Allsop, J held, in relation to the analogue provision to r.16.05(2)(e) of the Rules of Court (FCR Or 35, r.7(2)(e)), that the power conferred by the rule extended to circumstances in which the subject order was of doubtful or ambiguous meaning and so whether it accurately reflected the intention of the court. Applied to the facts of that proceeding, his Honour held that the court had power to vary the subject declarations as they lacked precision. The circumstances presented in Owston Nominees did not entail consideration of an application for extension – out of time – of the life of a petition.
The reasoning in Owston Nominees No 2 was referred to with approval in Nine Network Australia Pty Ltd v IceTV Pty Ltd (No 2) (2008) FCAFC 154 at [36] (Black CJ, Lindgren and Sackville, JJ).
In Griffiths v Boral Resources (Qld) Pty Ltd (2006) 154 FCR 554 at [68], Spender ACJ, Dowsett and Collier JJ considered it was a question of fact whether there had been a slip or omission. Their Honours accepted that in some cases, as in Elyard, there may be direct evidence of an intention to make an application and that it may be possible to infer that a step should have been taken such that the accidental failure to do so could be seen as an accidental slip or omission. In particular, the Full Court stated “[w]here the petition is likely to expire very shortly after the hearing, and prior to the preparation of a reserved judgment, such an inference may be available.” The court expressed some doubt whether s.43(2)(b) of the legislation applying prior to the FCC Act would permit resort to the Federal Court Rules by a Federal Magistrate as a separate source of power by which to apply a slip rule. This doubt was resolved by a later Full Court (see below).
In Snelgrove v Roskell (2007) 157 FCR 313 at [62], Jacobson J, noted that despite Re Young; Ex parte Smith, orders had been made pursuant to the slip rule extending the life of a petition after its expiry.
In Flint v Busuttil & Co Pty Ltd (2013) 216 FCR 375, the Full Court (Allsop CJ, Katzmann and Perry, JJ), considered the availability of the slip rule where a Federal Magistrate had neither set aside nor varied an order in extending – out of time – the life of a creditor’s petition. The court at [25], after referring to Griffiths, entertained no doubt that the Federal Magistrates Court was conferred with an independent source of power to employ the slip rule under the Federal Court Rules. In the course of that appeal it was accepted by the debtor that the slip rule could be used in an appropriate case to extend the life of a creditor’s petition after it had lapsed: (2013) 216 FCR 375, [31]. The Full Court also accepted that the slip rule extended to errors or omissions of a party’s legal representatives.
To be legally effective, an order that varies an order must be able to attach to an order that was made within time. Here, an order had been made on 22 March 2016, being within the 12 month period of presentation of the University’s creditor’s petition on 9 April 2015.
For completeness, I have not decided the question of whether r.16.05(2)(e) was a source of power to vary the 22 March 2016 order based upon the parties’ consent or contentment to the course which the Registrar adopted. While the Shorter Oxford Dictionary identifies ‘consent’ as one meaning of ‘content’, I do not resolve whether consent and content are synonymous in the context of the orders made on 31 May 2016. It may be accepted that consent is not a foundation for conferring jurisdiction on a court where it has none. Nor do I decide whether consent (or contentment) would be effective to confer power to make the order made on 31 May 2016. Some authority suggests that an order may be varied by consent: Ivanhoe Gold Corporation Ltd v Symonds (1906) 4 CLR 643, 670 (Higgins, J) citing Ainsworth v Wilding (1896) 1 Ch 673, 676 (Romer, LJ); cf r.16.05(2)(f).
These conclusions do not, however, deny the relevance of consent to the consideration of the exercise of discretion under r.16.05.
It is sufficient to conclude that on the proper construction of the 2016 Bankruptcy Rules, r.16.05(2)(e) of the Rules of Court was available as a source of power to support the making of Order 2 made on 31 May 2016 which varied the order made on 22 March 2016.
(f) Slip rule: discretion
Should the discretionary power conferred on a registrar by r.16.0(2)(e) have been exercised in this case?
Where provisions such as ss.52(4)-(5) of the Bankruptcy Act are in issue and an order is sought outside the time period stipulated, it is of particular importance to maintain the distinction between the availability of the slip rule and the exercise of the discretion to make such an order: Elyard (1995) 61 FCR 385, 387G, 405G-406A. Accepting that caution, in Elyard, the Full Court agreed that the circumstances presented an obvious or strong case for the exercise of discretion in favour of applying the slip rule. Lindgren J observed that the whole point of the parties and the registrar agreeing to the making of orders would otherwise have been an exercise in futility: (1995) 61 FCR 385, 387G, 393F-G, 400D-G, 405D-F.
In Streimer v Thomas (1981) 54 FLR 253, the Full Court affirmed an order extending time for compliance with a bankruptcy notice. Although the decision turned upon the inherent power of a superior court to rectify slips, the power was held to be available in cases of accidental slip attributable to the failure of a party or their solicitor to address a particular matter in a hearing. Sheppard, J considered that there was no doubt that time would have been extended had the matter been raised and that the appellant would have raised no objection.
The reasoning in Streimer v Thomas is instructive to the present case. Ms Luck’s contemporaneous email on 30 May 2016 confirmed that she was content with the court’s proposal to make an order which varied the order made on 22 March 2016. There was no challenge to the matters raised in the Registrar’s email, which identified the problem and invited a solution. There was not a hint of disagreement with the Registrar’s proposal to make such an order. On the materials relied upon before me, Ms Luck’s submission made on 17 January 2017 first raised the issue. This is to be seen in the context that: (1) Ms Luck did so only after dismissal of VID189/2015 and the filing of M165/2016; (2) the hearing of this petition from its inception has been characterised by repeated requests from Ms Luck to facilitate the hearing and determination of her appeal in VID189/2015 and her various proceedings for removal of a cause in the High Court. I have no doubt that had the matter been adverted to in March 2016, Ms Luck would have agreed to an order extending the life of the petition.
(g) Re-exercise of power under slip rule
The University advanced an alternative submission that, if it were held that the Registrar had erred, this court should now make an order pursuant to r.16.05. Given my conclusions it is unnecessary to do so.
Had it been necessary to reconsider the matter, I would have been prepared to make an order of the kind sought. The order as framed met the requirements of the case and did so in appropriate terms. Other cases have made orders in slightly different terms: cf Re Howell; Ex parte Commissioner of Taxation (1996) 70 FCR 261, 263G; Re Langridge: Ex parte Bennett (1998) FCA 879; Ramsay Health Care Australia Pty Ltd v Compton [2016] FCAFC 125. One striking example in which the order made did not set aside or vary the order made within time was Flint v Busuttil & Co Pty Ltd (2013) 216 FCR 375, [21].
For completeness, I do not consider that there was an application for review before the court pursuant to s.104(2) of the FCC Act. There was no formal application for such review: cf 2016 Bankruptcy Rules, r.2.02(3). For that reason, the power conferred by s.104(3) of the FCC Act to make any order it thinks fit was not available.
Instead, at the further hearing of the creditor’s petition on 19 January 2017, the University made oral application that the matter should be determined by a judge: FCC Act s.104(3), 2016 Bankruptcy Rules, r.2.02(2). The making of that application was explained by Ms Luck’s late challenge to the efficacy of the order made on 31 May 2016.
In those circumstances, the powers conferred on the court were those related to the conduct of a bankruptcy proceeding. Those powers included the Rules of Court, where relevant and not inconsistent with the 2016 Bankruptcy Rules (including r.16.05(2)(e)).
Satisfaction of the matters stipulated by s.52(1)
As the text of s.52(1)-(2) of the Bankruptcy Act make plain, the court is given two quite distinct discretions as to how it may determine the hearing of a creditor’s petition. On the hearing, consideration must be given to the matters addressed in sub-s.52(1)(a)-(c).
In the present case, the University has filed an affidavit in proof of the matters stated in the petition. Service of the petition was proved and Ms Luck has filed an appearance. A further affidavit has been filed deposing that the debt on which the University relied is still owing: see sub-s.52(1)(a)-(c). So far as they are applicable, I also find that the requirements of Part 4 of the 2016 Bankruptcy Rules are satisfied.
As concerns the debt which is relied on by the University, I accept that the court has a discretion to go behind a judgment to ascertain whether the judgment was founded upon a real debt: Ahern v Deputy Commissioner for Taxation (Qld) (1987) 76 ALR, 137 at 148 (Ahern).
A debtor’s pending appeal from a judgment has been regarded as one route by which to challenge the creditor’s proof of the debt on which the petition is based and perhaps to establish that there is some other sufficient cause why a sequestration order ought not be made: cf sub-ss.52(1)(c), 52(2)(b), Tran v Pu (2015) 228 FCR 562, [23] (Beach, J); Nadarajapillai v Naderasa [2016] FCA 502, [29] (Markovic, J). More recently, in Compton v Ramsay Health Care Australia Pty Ltd [2016] FCAFC 106, [67] the Full Court (Siopsis, Katzmann and Moshinsky JJ), confirmed that satisfactory proof of the petitioning creditor’s debt was relevant under both s.52(1)(c) and (2) of the Bankruptcy Act.
The rationale for the principle is that in exercising the discretions conferred by s.52(1)-(2) and whether to go behind a judgment, the court is deciding if it will accept the judgment as satisfactory proof of the debt. It may not accept it as sufficient where reason is shown for questioning whether, in truth and reality, there was a debt due.
The power to go behind a judgment may also be exercised on an application to set aside a bankruptcy notice Xu v Wan Ze Property Development (Aust) Pty Ltd (in liquidation) (2014) 315 ALR 523(Robertson, J). However, as his Honour observed at [55]:
Nevertheless, the power to go behind a judgment is not readily exercised if there has been a substantive hearing of the matter on its merits by the court in which the judgment was granted.
In the present case, the order made in favour of the University for costs was an order made in June 2009. It was a final order which, of itself, founded a judgment: Totev v Sfar (2006) 230 ALR 236, [32] (Allsop J). A certificate of taxation was issued by the Federal Court in 2010.
Whatever might be said as to the merit of going behind that costs order, the orders made in 2016 by Davies J and the Full Court considered in detail the prospect of Ms Luck establishing whether there was any substance in the otherwise novel counter-claim, set-off or cross-demand to that costs order. Those decisions addressed s.40(1)(g) of the Bankruptcy Act but do not, however, obviate the need to decide whether the judgment for costs was sufficient proof of the debt or if Ms Luck has discharged the onus of demonstrating that there was some other sufficient cause why a sequestration order ought not be made.
There is no rational basis that I can discern why the subject matter of the present application for special leave to appeal in M165/2016 should be considered to undermine a conclusion that the judgment in VID899/2009 should be accepted as satisfactory proof of the debt.
Criteria stipulated by s.52(2)
It remains to consider whether the matters raised in M165/2016 establish some other sufficient cause to exercise the discretion not to make a sequestration order. Where the requirements of sub-s.52(1) are satisfied, the court will generally make a sequestration order unless satisfied by the debtor that they are able to pay their debts or that for some other sufficient cause a sequestration order ought not be made: sub-s.52(2)(a)-(b).
(a) Solvency
The central importance which attaches to solvency as a consideration in the determination whether a sequestration order should go is well recognised: Culleton v Balwyn Nominees Pty Ltd [2017] FCAFC 8, [40]-[46], [52]. There Allsop CJ, Dowsett and Besanko JJ alluded to the difficulty in the making of a sequestration order where the debtor (bearing the onus) affirmatively satisfies the court of their solvency.
In the present case, Ms Luck, who told the court that she had worked as an accountant, made no attempt by evidence or submissions to satisfy the court as to her solvency or ability to pay the University’s debt.
In Re Svir; Ex parte Commissioner of Taxation, Burchett, J considered it to be a relevant consideration in favour of a conclusion that other sufficient cause was established against the making of an order that the debtor had offered moneys in satisfaction of the debt: (1998) 83 FCR 314 at 317D-E; cf Re Lewin; Ex parte Milner (1986) 11 FCR 312.
(b) Other sufficient cause
The question remains whether there is other sufficient cause why a sequestration order ought not be made.
At the hearing of a creditor’s petition, consideration must be given to whether, in accordance with in sub-ss.52(2)(b), other sufficient cause is shown by the debtor why a sequestration order should not be made: Totev v Sfar (2008) 167 FCR 193, [87] (Cowdroy, J); Totev v Sfar (2006) 230 ALR 236, [37], [44] (Allsop CJ), citing Cain v Whyte (1933) 48 CLR 639, 648, Re: Svir; Ex parte Commissioner of Taxation (1998) 83 FCR 314, 317 (Burchett, J).
As those authorities confirm, the expression “other sufficient cause” has been construed in sub-s.52(2)(b) as conferring on the court a broad and unconfined discretion in deciding whether to make a sequestration order. At the same time, that broad discretion is constrained by the need to have regard to the public interest which may be adversely affected by the propping up of an insolvency.
The debtor must establish the existence of some other sufficient cause.
This may entail the identification of a claim that is of sufficient integrity as to warrant that the debtor should have an opportunity to litigate it before a sequestration order is made. It must be a real claim. Sufficiency is not established merely by pointing to the existence of pending litigation or to the allegations in a statement of claim. A claim sounding in money against the petitioning creditor may amount to a sufficient cause but does not do so in all circumstances. While the hearing of a bankruptcy proceeding does not require the court to hear and determine the underlying claim, sufficient evidence must be adduced to satisfy the court that the claim constitutes some other sufficient cause why a sequestration order ought not be made: Totev v Sfar (2006) 230 ALR 236, [40]-[44] (Allsop, J).
(c) Proposed further adjournment of University’s petition
The court may adjourn any proceeding before it, either to a fixed date or generally: Bankruptcy Act, s.33(1)(a).
Ms Luck’s alternative submission was that the creditor’s petition should be further adjourned to permit determination of her pending application for special leave in M165/2016.
I do not consider that I should entertain Ms Luck’s submission for an adjournment. While I do not repeat the history of the matter above, it is sufficient to note that:
(a)in April 2015, Ms Luck’s response to the order of Davies J dismissing the application to set aside, or extend the time for compliance with, the Bankruptcy Notice, was to lodge an appeal in VID189/2015, file an application for removal of a cause M53/2015 (of VID189/2015) and to rely upon each in an application made in this proceeding for an urgent adjournment;
(b)on 7 December 2016, Ms Luck filed an application for special leave to appeal the Full Court’s order in VID189/2015;
(c)Ms Luck’s first challenge to the orders made on 31 May 2016 (with which Ms Luck was then content) occurred on 17 January 2017 (being two days before the further hearing of the petition);
(d)in contrast with the application in April 2015, Ms Luck’s application filed in February 2017 did not seek an adjournment;
(e)despite her challenge to the order made on 31 May 2016, Ms Luck proposed that to ameliorate prejudice, the life of the creditor’s petition should be extended for yet a further 12 month period to 8 April 2018 (that is, a period of 36 months from the date of its presentation).
I also agree in the University’s submissions that the pending special leave application M165/2016 does not afford a basis for holding that the further hearing of the creditor’s petition should be adjourned. Further, I conclude that the University would suffer prejudice of a kind that warrants refusal of Ms Luck’s application to adjourn the further hearing of the creditor’s petition. The petition, which has been adjourned on some eight occasions, would lapse on 8 April 2017.
It would not be in the interests of justice to further adjourn the hearing of the creditor’s petition pending the determination of M165/2016.
Despite those circumstances, I consider Ms Luck’s pending application for special leave in M165/2016 as a basis on which the court might act under s.52(2) upon the hearing of the creditor’s petition. Cases which concern the adjournment of a petition grounded upon a pending appeal are instructive in that context also.
(d) Pending appeal
A debtor’s pending appeal from a judgment may be a route by which to contend that a pending appeal constitutes some other sufficient cause why a sequestration order ought not to be made: cf sub-ss.52(2)(b); Tran v Pu (2015) 228 FCR 562, (Beach, J); Compton v Ramsay Health Care Australia Pty Ltd [2016] FCAFC 106, [67] (Siopsis, Katzmann and Moshinsky JJ).
The principles to be applied where the debtor resists a creditor’s petition on the basis of a pending appeal from the underlying judgment are set out by the Full Court in Ahern (1987) 76 ALR, 137 at 148. There, Davies, Lockhart and Neaves, JJ stated:
It is also well established that in general a court exercising jurisdiction in bankruptcy should not proceed to sequestrate the estate of a debtor where an appeal is pending against the judgment relied on as the foundation of the bankruptcy proceedings provided that the appeal is based on genuine and arguable grounds: Re Rhodes; ex parte Heyworth (1884) 14 QBD 49; Bayne v. Baillieu (1907) 5 CLR 64 and Re Verma: Ex parte Deputy Commissioner of Taxation (1985) 4 FCR 181
These cases rest on the broad principle that before a person can be made bankrupt the court must be satisfied that the debt on which the petitioning creditor relies is due by the debtor and that if any genuine dispute exists as to the liability of the debtor to the petitioning creditor it ought to be investigated before he is made bankrupt. Bankruptcy is not mere inter partes litigation. It involves change of status and has quasi-penal consequences. (emphasis added)
In Ahern, it was accepted that the appeal was genuine and arguable.
The principle stated in Ahern was expressed as a general principle – “in general a court exercising jurisdiction in bankruptcy should not proceed to sequestrate the estate of a debtor where an appeal is pending against the judgment relied on as the foundation of the bankruptcy proceedings” – thus it admits of exceptions: Adamopoulos v Olympic Airways SA (1990) 95 ALR 525 (Burchett and Gummow JJ).
The power to adjourn a bankruptcy petition is discretionary: Totev v Sfar (2006) 230 ALR 236, [44]. There Allsop J, (as he then was), identified a range of considerations relevant to an assessment whether an adjournment of a creditor’s petition should be granted, including the public policy of dealing with insolvents. His Honour observed that the fact that there had been an act of bankruptcy did not render a claim by the debtor against the petitioning creditor irrelevant. For that reason, the debtor’s claim: “should be examined to assess whether it can be said that there is sufficient evidence to show that it is a real claim which is likely to succeed.” The reasoning in Totev v Sfar confirms that, just as solvency is of central importance to the exercise of discretion whether to make a sequestration order, so too, the prospects of success of a pending claim is of central importance to a conclusion whether other sufficient cause is established by the debtor. Other factors identified by Allsop, J included:
(a)the stage of the litigation, the length of time for its vindication and any other matters relevant to the debtor’s claim;
(b)the debtor’s claim is not to be tried in the bankruptcy court; the material is examined for the purpose of assessing the veracity of the claim: citing Ling v Commonwealth (1996) 68 FCR 180 at 195-196 (Sundberg, J; Wilcox and Whitlam, JJ agreeing);
(c)the discretion involved in s.52(2)(b) is to be distinguished from the task involved in deciding whether a claim exists that satisfied s.40(1)(g). There, the task (prior to the commission of an act of bankruptcy), is the identification of a bona fide or genuine claim.
These considerations confirm that the determination whether other sufficient cause is shown against the making of a sequestration order requires a fact sensitive evaluation of the particular case.
(e) Pending application for special lave to appeal
One cannot apply uncritically the general principles relating to pending appeals from the judgment underlying a bankruptcy notice from one case to another. Nor can it be assumed that those principles apply without modification to applications for special leave to appeal.
As concerns the task of persuading a court to go behind a judgment in a bankruptcy hearing, it must be recognised that an application for special leave is very different in character from an appeal as of right. Where the appeal is pursued as of right, the debtor bears the onus of establishing that the appeal is of a kind that provides substantial support for a challenge to the judgment underlying the bankruptcy notice. By contrast, where the challenge concerns special leave, the debtor must go further and show that there are arguable grounds to show that the application for special leave will be granted: Westpac Banking Corporation v Carver (2003) 126 FCR 113, [18] (Beaumont, J); Deputy Commissioner for Taxation v Cumins (2008) 101 ALD 78, [33] (Gilmour, J); cf s.35A, Judiciary Act 1903 (Cth).
In the present case, Ms Luck has already raised a substantive challenge to the Bankruptcy Notice, both in the Federal Court and the Full Court. It has now been rejected by four judges. Before Davies, J Ms Luck’s own affidavit deposed that her challenge was novel. As observed by Davies, J in the application to set aside the Bankruptcy Notice, four cogent reasons existed why the grounds of attack on that notice were incapable of establishing that Ms Luck had a counter-claim, set-off or cross-demand greater than the sum of the University’s debt. The Full Court agreed. Ms Luck’s application for special leave was filed with two days of reasons for judgment by the Full Court. While ss.40(1)(g) and 52(2) raise distinct issues, the above considerations inform an assessment whether the circumstances of this case are outside the general rule stated in Ahern and that no sufficient grounds are shown.
Ms Luck’s affidavit does not support a conclusion that there are arguable grounds for the application for special leave in M165/2016.
(f) There is no other sufficient cause
I am not satisfied that Ms Luck has demonstrated, whether by evidence or submissions, that other sufficient cause has been shown why a sequestration order ought not be made: sub-s.52(2)(b). It could not be said that Ms Luck has adduced evidence of a persuasive nature that there is a claim which has a fair prospect of success: Totev v Sfar (2006) 230 ALR 236, [72].
In M165/2016 Ms Luck revisits issues concerning the Disability Discrimination Act 1992 (Cth) and the United Nations Convention on the Rights of Persons with Disabilities. The targets of those complaints are now the members of the Full Court which decided VID189/2015. The matters raised in M165/2016 are matters that were been previously raised in M116/2014. On 3 September 2015, the High Court (Nettle and Gordon, JJ), dismissed M116/2014: [2015] HCASL 136.
I also accept the University’s submissions that the matters raised in M165/2016 and any subsequent appeal are not matters which could affect the debt underlying its Bankruptcy Notice. They are not such as might establish that Ms Luck has a counter-claim, set-off or cross-demand equal to or greater than the debt which Ms Luck could not have set up in the proceeding in which the order was obtained. I accept also the University’s submission that success in M165/2016 would not assist in undermining the University’s Bankruptcy Notice.
I do not accept that the present case is one in which the nature of the issues presented in Ms Luck’s application for special leave are sufficient for Ms Luck to discharge the onus of establishing that other sufficient cause is shown against the making of a sequestration order. In or of itself, M165/2016 does not constitute some other sufficient cause why a sequestration order ought not to be made. As Ms Luck has not satisfied the criteria in s.52(2)(b) of the Bankruptcy Act, I am not satisfied that the University’s creditor’s petition should be dismissed.
Apprehended bias application
On the second day of the hearing Ms Luck submitted that I should recuse myself from the further hearing or determination of the matter. I refused that application and now provide my reasons for doing so.
The test for determining whether a judge should be disqualified for apprehended bias is whether “a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide”: Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337, [6], [33]. There, Gleeson CJ, McHugh, Gummow and Hayne JJ said at [8]:
The apprehension of bias principle admits of the possibility of human frailty. Its application is as diverse as human frailty. Its application requires two steps. First, it requires the identification of what it is said might lead a judge (or juror) to decide a case other than on its legal and factual merits. The second step is no less important. There must be an articulation of the logical connection between the matter and the feared deviation from the course of deciding the case on its merits. ... Only then can the reasonableness of the asserted apprehension of bias be assessed.
Ms Luck’s submission was that references in the course of argument to her not infrequent use of bias applications indicated that I might not bring an impartial mind to the matter.
The suggestion that Ms Luck has a predilection to employ allegations of bias seemed to me well founded. In the materials before me it appears that Ms Luck has raised such allegations against every member of the Federal Court. The use of such allegations can be traced in Ms Luck’s litigation with the University to at least 2009: Luck v University of Southern Queensland [2009] FCA 479. I do not cite the twelve other judgments in the Federal Court where bias has been in issue. Nor do I cite the four proceedings in the Full Court where bias has been in issue. It appears that some of the High Court proceedings likewise entailed such allegations. Ms Luck may have preferred not to engage with the court on the issue, but bias has in fact been employed repeatedly. The issue which fell to be weighed in the balance in evaluating whether Ms Luck’s appeals constituted other sufficient cause against the making of a sequestration order: (see [241] above).
Turning to the second, important step posed in Ebner, no attempt was made to articulate any logical connection between Ms Luck’s bias allegations and a fear that there would be a deviation from the requirement to decide the bankruptcy proceeding on its merits.
Ms Luck’s application filed on the eve of the hearing of the creditor’s petition was allowed to proceed. Each of the three iterations of the written submissions that had been ordered to be filed by 16 January 2017 was accepted. The court commenced the hearing each day at a time to accommodate Ms Luck. The proposal to conduct the hearing in the manner referred to above resulted in Ms Luck receiving an allocation of hearing time in excess of that allowed to the University.
To adapt the reasoning of Graham, J in Luck v University of Southern Queensland [2009] FCA 479, [10], if the making of an observation of the allegations employed by Ms Luck in earlier proceedings in and of itself, was “sufficient to lead a judge to decline to hear or decide a case, the system would soon reach a stage where, for practical purposes, individual parties could influence the composition of the bench. That would be intolerable (see per Gleeson CJ and McHugh, Gummow and Hayne JJ in Ebner at [20]).
I refuse the bias application.
CONCLUSION
The University’s creditor’s petition was founded upon an act of bankruptcy by the failure of Ms Luck to comply with the Bankruptcy Notice or to satisfy the court that she had a counter-claim, set-off or cross-demand equal to or greater than the debt claimed in that notice. The statutory requirements for making a sequestration order have been established by the University. Ms Luck has committed an act of bankruptcy.
I am satisfied that the University has verified by affidavit the matters stated in the creditor’s petition. I am satisfied as to service of the petition and note that Ms Luck has filed an appearance. So too, I am satisfied that the University has proved the currency of the debt. The requirements of s.52(1) are made out.
Despite her stated qualifications and experience as an accountant Ms Luck made no attempt to establish her solvency: s.52(2)(a). No attempt was made to demonstrate how her creditors would be paid within a reasonable period of time. Ms Luck has not established that some other sufficient cause against the making of a sequestration order is shown: s.52(2)(b). The subject matter of the application for special leave in M165/2016 does not support a contrary conclusion.
I find the date of the act of bankruptcy is 30 March 2015. By order made on 16 March 2015, Davies J extended the time for compliance with the Bankruptcy Notice until delivery of judgment in Ms Luck’s application to set aside, or extend the time for compliance with, the Bankruptcy Notice. On 30 March 2015, Davies J dismissed those applications. Ms Luck did not comply with the requirements of the Bankruptcy Notice and thereby committed an act of bankruptcy which act was within six months of presentation of the creditor’s petition; namely, 9 April 2015: Bankruptcy Act, ss. 40(1)(g), 44(1)(c).
There will be a sequestration order against the estate of Ms Luck.
I certify that the preceding two hundred and sixty-two (262) paragraphs are a true copy of the reasons for judgment of Judge A Kelly
Date: 4 April 2017
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