The nature of the relief
126 As Mr Boensch has succeeded in establishing ground 9 of his notice of appeal, the sequestration order made by the Circuit Court on 12 December 2019 should be set aside and the matter remitted to the Circuit Court. However, a question arises as to whether there would be any utility in remitting the matter to the Circuit Court for rehearing. That issue arises in the following context.
127 It will be recalled that here the creditor's petition was presented on 5 April 2019 and a sequestration order was made within 12 months of presentation of the petition, on 12 December 2019. No application to extend the life of the petition was made pursuant to s 52(5) of the Act as it was not necessary.
128 The parties were invited to provide submissions on the utility of a remittal order in these circumstances. In particular the issue that arises is whether the creditor's petition is stale in light of s 54(2) of the Act because more than 12 months has passed since its presentation or whether it is still valid because a sequestration order was made within 12 months of its presentation.
129 Somerville Legal referred to s 52(4) of the Act and submitted that the creditor's petition is dated 16 May 2019 (although on our inspection it appears to be dated 5 April 2019 and was presented on the same date), the sequestration order was made on 12 December 2019 and, on that basis, the creditor's petition has not lapsed. It contended that, if the Court were to decide to set aside the sequestration order, it is within the Court's discretion to extend the time of the creditor's petition to 16 May 2021.
130 Mr Boensch submitted that if the Court was to set aside the sequestration order, which is the requirement for sending it back to the Circuit Court to look behind the judgment(s), then the situation is as if the sequestration order was never made. He contended that, if the sequestration was, "as if never made", then the extension under s 52(4) of the Act that Somerville Legal seeks to rely on is not available.
131 In Bechara v Bates [2021] FCAFC 34 (Bechara v Bates) a sequestration order was made against the estate of Ms Bechara by a registrar of the Circuit Court on 5 July 2016 based on a creditor's petition which had been presented on 7 April 2016. Thereafter, Ms Bechara applied pursuant to s 104 of the Federal Circuit Court of Australia Act 1999 (Cth) (FCCA Act) for a review of the registrar's order. That application was dismissed. Through a complex set of proceedings the parties came before a Full Court of this Court, both by way of appeal from a decision of a single judge of this Court and by way of application pursuant to s 39B of the Judiciary Act 1903 (Cth) (Judiciary Act) to quash the decision of the Circuit Court. The Full Court (Allsop CJ, Markovic and Colvin JJ) concluded that Ms Bechara was entitled to the relief she sought pursuant to s 39B of the Judiciary Act. In that context the Full Court considered whether, given the passing of time, the creditor's petition was stale such that the proceeding could not be remitted to the Circuit Court. The determination of that issue turned on the effect of the order made by a registrar which was then the subject of a de novo hearing. After referring to the reasons of Emmett J in Totev v Sfar (2008) 167 FCR 193 (Totev), at [149]-[151] the Full Court said:
149 With respect, this is to give the notion of the de novo hearing too mechanical and rigid a form. It must take its place in its statutory context, which here includes s 103(2) of the Circuit Court Act. Section 103(2) means a sequestration order has been made and the debtor's status has changed. The hearing is de novo in the original jurisdiction and proceeds again, on the same petition. However, the hearing is undertaken in order to ensure the supervision of the exercise of delegated judicial power by the registrar. The mere bringing of the application for review does not invalidate, revoke or suspend the exercise of that delegated authority. It remains a valid exercise of delegated judicial power but subject to the review. The form of the review hearing is a de novo consideration, but while that review is pending the delegated authority by which the registrar made the order (in the present case the sequestration order) remains in existence and so too the order made in its exercise.
150 Therefore, if after concluding the de novo review the judge would otherwise make a sequestration order, that is, all the matters in s 52(1) are proved and no matter in s 52(2) arises to stand in the way of a conclusion that a sequestration order ought be made, the application for review will be dismissed and the exercise of delegated authority will remain operative. The Court may make this clear by affirming the order of the registrar. On the other hand, if the conclusion reached on the de novo review is that the petition should be dismissed (whether or not for reasons that were available or present before the registrar), that order will be made, and the sequestration order set aside or annulled: see Pattison.
151 Looking at the matter thus, and recognising the effect and status of the registrar's order ("for all purposes") there has been before the times set out in s 52(4)(a) and (b) of the Bankruptcy Act a sequestration order made. An application for review does not make the registrar's orders provisional or ineffective.
132 At [152] the Full Court concluded that even after two years from the presentation of the creditor's petition the hearing of the petition on a de novo review, re-enlivened for that purpose, could take place, a view which accorded with the reasoning of Bennett J in Totev, with which Cowdroy J agreed.
133 The facts of this case are different. Here the sequestration order was made on 12 December 2019 by a judge of the Circuit Court. Unlike in in Totev and Bechara v Bates, the sequestration order itself is to be set aside and, as a result, there will be no subsisting order.
134 In Deputy Commissioner of Taxation v Clyne (1984) 4 FCR 156 (Clyne), however, a similar situation presented itself. The High Court had set aside a sequestration order made by a judge of this Court as being beyond power and remitted the matter to the Court for rehearing. The proceeding then came before a Full Court on a stated case which raised for consideration the question whether, in light of the circumstances of that case and by force of s 52(4) of the Act, the creditor's petition had lapsed. The High Court had not addressed the question in its reasons. At 157-158 Toohey and Wilcox JJ said:
Section 52(4) provides for the lapse of a petition unless "a sequestration order is made on the petition" within twelve months or time is extended. The petition was presented on 4 January 1983 and a sequestration order was made within twelve months of that date, namely on 7 October 1983.
That sequestration order has now been set aside by the High Court as being beyond power but that does not mean that the order was a nullity. The Federal Court is a superior court of record: see s 5(2) of the Federal Court of Australia Act 1976 (Cth). An order of a superior court of record which is, for any reason, irregular is not a nullity, but merely voidable: see Cameron v Cole (1943) 68 CLR 571 at 590-591, 598, 599 and 604-605; Taylor v Taylor (1979) 143 CLR 1 at 7-8. This approach was implicitly adopted by the majority justices in the High Court in this case when they referred at 400 to decisions where a second sequestration order had erroneously been made on a petition founded on a debt provable in the existing bankruptcy. They went on:
"It was held that the creditor had no legal right to the second sequestration order which should be rescinded. The proper course was, in our opinion, to annul rather than to rescind the order."
Annulment would, of course, have been unnecessary if the second order, which was - for the same reasons as in the present case - beyond power, had been a nullity when made. One of the two events specified in s 52(4) as necessary to prevent lapse of the petition did occur.
135 The finding in Clyne that the creditor's petition had not lapsed was made because the sequestration order was not a nullity but merely voidable as an order of a superior court of record. But the Circuit Court is not a superior court of record: see Flint v Richard Busuttil & Co Pty Ltd (2013) 216 FCR 375 (Flint) at [20] and s 8(3) of the FCCA Act which provides that that court is "a court of record". Thus it is necessary to consider whether the principle in Clyne applies where the sequestration order is made by the Circuit Court.
136 In New South Wales v Kable (2013) 252 CLR 118 (Kable) at [55]-[56] Gageler J said:
[55] A judicial order of any court, whether superior or inferior, is valid and effective if it is made within jurisdiction. Any judicial order, whether of a superior court or an inferior court and whether made within or without jurisdiction, is a judgment, decree, order or sentence from which an appeal may lie to the High Court under s 73 of the Constitution and, where such an appeal lies, a judicial order made without jurisdiction may be set aside by the High Court in determining the appeal. Any judicial order made in excess of jurisdiction by a federal court, whether the court be created as a superior court or an inferior court, may be set aside by a writ of certiorari issued under s 32 of the Judiciary Act 1903 (Cth) in the exercise of the original jurisdiction of the High Court conferred by s 75 or under s 76 of the Constitution.
[56] There is, however, a critical distinction between a superior court and an inferior court concerning the authority belonging to a judicial order that is made without jurisdiction. A judicial order of an inferior court made without jurisdiction has no legal force as an order of that court. One consequence is that failure to obey the order cannot be a contempt of court. Another is that the order may be challenged collaterally in a subsequent proceeding in which reliance is sought to be placed on it. Where there is doubt about whether a judicial order of an inferior court is made within jurisdiction, the validity of the order "must always remain an outstanding question" unless and until that question is authoritatively determined by some other court in the exercise of judicial power within its own jurisdiction. In contrast:
It is settled by the highest authority that the decision of a superior court, even if in excess of jurisdiction, is at the worst voidable, and is valid unless and until it is set aside.
(Emphasis added, footnotes omitted.)
137 Here, the sequestration order is to be set aside because of the failure to afford procedural fairness to Mr Boensch. Thus whether the sequestration order is void or voidable depends on whether a failure by the Circuit Court to afford procedural fairness is a jurisdictional error. If it is not, the principles in Clyne will apply; the sequestration order is not a nullity, but merely voidable and, one of the events specified in s 52(4) having occurred, the creditor's petition has not lapsed. If it is a jurisdictional error, the sequestration order is void.
138 The starting point to consider that issue is Craig v The State of South Australia (1995) 184 CLR 163 where the High Court discussed the scope of certiorari and the nature of jurisdictional error. When discussing the former, it observed (at 175) that where the writ of certiorari runs it enables the quashing of an impugned order upon one or more established grounds including jurisdictional error, failure to observe some requirements or procedural fairness, fraud and error of law on the face of the record. As to the latter (at 176), the High Court drew a distinction between administrative decision makers and inferior courts. At 177-178 the High Court said the following about what constitutes jurisdictional error on the part of an inferior court:
An inferior court falls into jurisdictional error if it mistakenly asserts or denies the existence of jurisdiction or if it misapprehends or disregards the nature or limits of its functions or powers in a case where it correctly recognises that jurisdiction does exist. Such jurisdictional error can infect either a positive act or a refusal or failure to act. Since certiorari goes only to quash a decision or order, an inferior court will fall into jurisdictional error for the purposes of the writ where it makes an order or decision (including an order or decision to the effect that it lacks, or refuses to exercise, jurisdiction) which is based upon a mistaken assumption or denial of jurisdiction or a misconception or disregard of the nature or limits of jurisdiction.
Jurisdictional error is at its most obvious where the inferior court purports to act wholly or partly outside the general area of its jurisdiction in the sense of entertaining a matter or making a decision or order of a kind which wholly or partly lies outside the theoretical limits of its functions and powers. An inferior court would, for example, act wholly outside the general area of its jurisdiction in that sense if, having jurisdiction strictly limited to civil matters, it purported to hear and determine a criminal charge. Such a court would act partly outside the general area of its jurisdiction if, in a matter coming within the categories of civil cases which it had authority to hear and determine, it purported to make an order of a kind which it lacked power to make, such as an order for specific performance of a contract when its remedial powers were strictly limited to awarding damages for breach. Less obviously, an inferior court can, while acting wholly within the general area of its jurisdiction, fall into jurisdictional error by doing something which it lacks authority to do. If, for example, it is an essential condition of the existence of jurisdiction with respect to a particular matter that a certain event or requirement has in fact occurred or been satisfied, as distinct from the inferior court's own conclusion that it has, there will be jurisdictional error if the court or tribunal purports to act in circumstances where that event has not in fact occurred or that requirement has not in fact been satisfied even though the matter is the kind of matter which the court has jurisdiction to entertain. Similarly, jurisdictional error will occur where an inferior court disregards or takes account of some matter in circumstances where the statute or other instrument establishing it and conferring its jurisdiction requires that that particular matter be taken into account or ignored as a pre-condition of the existence of any authority to make an order or decision in the circumstances of the particular case. Again, an inferior court will exceed its authority and fall into jurisdictional error if it misconstrues that statute or other instrument and thereby misconceives the nature of the function which it is performing or the extent of its powers in the circumstances of the particular case. In the last-mentioned category of case, the line between jurisdictional error and mere error in the exercise of jurisdiction may be particularly difficult to discern.
139 Since Craig the question of whether a denial of procedural fairness by an inferior court, as opposed to an administrative decision maker, amounts to jurisdictional error has been the subject of much consideration. Different views have been expressed. For example in DMI16 v Federal Circuit Court of Australia (2018) 264 FCR 454 a Full Court of this Court (Collier, Logan and Perry JJ) said:
55 It is well established that a judge is required to conduct judicial proceedings in accordance with the rules of natural justice and procedural fairness. As, for example, Campbell JA explained in Adamson v Ede [2009] NSWCA 379 (Adamson) (with whose reasons Giles and Hodgson JJA agreed):
54 In Commissioner of Police v Tanos (1958) 98 CLR 383 at 396, Dixon CJ and Webb J (with whom Taylor J agreed) said of the rules of natural justice that "It is hardly necessary to add that its application to proceedings in the established courts is a matter of course." Similarly, in Yates Property Corporation Pty Ltd (in liq) v Darling Harbour Authority (1991) 24 NSWLR 156 at 186, Handley JA said: "Compliance with the requirements of natural justice is … an incident of the judicial process".
55 High Court discussion of Chapter III of the Constitution has emphasised the fundamental role of natural justice in exercising judicial power: Harris v Caladine (1991) 172 CLR 84 at 150 per Gaudron J; Re Nolan; Ex parte Young (1991) 172 CLR 460 at 496 per Gaudron J; Leeth v Commonwealth (1992) 174 CLR 455 at 470 per Mason CJ, Dawson and McHugh JJ, 502 per Gaudron J; Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334 at 359 [56] per Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ; Forge v Australian Securities and Investments Commission [2006] HCA 44; (2006) 228 CLR 45 at 76 [63]-[64] per Gummow, Hayne and Crennan JJ; Kable v Director of Public Prosecutions for NSW (1996) 189 CLR 51 at 116 per McHugh J.
56 However, it does not necessarily follow that a breach of procedural fairness will (necessarily) constitute a jurisdictional error in the context of proceedings in a federal court. As Gaudron and Gummow JJ observed in Re Refugee Review Tribunal; Ex parte Aala (2000) 204 CLR 82 at [42], while a denial of procedural fairness by an administrative decision-maker will sound in jurisdictional error, "different considerations arise where the Commonwealth officer is a member of a federal court": semble SZVDC v Minister for Immigration and Border Protection (2018) 259 FCR 154 at [69] (the Court).
57 In support of his submission that a breach of procedural fairness by the Federal Circuit Court is a jurisdictional error, the appellant relied upon a comment by Robertson J (with whose reasons Logan and Kerr JJ agreed) in SZTES v Minister for Immigration and Border Protection [2015] FCAFC 158 that a denial of procedural fairness by the Federal Circuit Court "could constitute a jurisdictional error": at [51]. However, his Honour's comment was made in obiter only because the Court in SZTES ultimately found that the claim of procedural fairness failed on the facts: ibid at [73]. Equally, in this case it is unnecessary to decide the point of principle; nor would it be desirable to do so in circumstances where the Minister did not take issue with this first step of the appellant's argument. Rather, as we later explain, the appellant's argument fails for other reasons.
140 The parties' submissions do not expressly address the effect of s 52(4) of the Act in the context of setting aside the sequestration order based on a denial of procedural fairness and thus whether, in turn, a denial of procedural fairness by the primary judge, who is a judge of an inferior court, amounts to a jurisdictional error. In the circumstances, it is not necessary for us to determine the issue on this occasion. That is because, even if the breach of natural justice is a jurisdictional error rendering the sequestration order void, it may still have some effect for the purpose of s 52(4) of the Act.
141 In Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (In Liq) (2019) 99 NSWLR 317, the New South Wales Court of Appeal (Leeming, Payne and White JJA, Sackville and Emmett AJJA) considered, among other things, the appropriate construction of s 16(2) of the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA) which allows a claimant with an outstanding payment claim to elect between recovering the amount in any court of competent jurisdiction or by making an adjudication application. The respondent, Ostwald, made an adjudication application in relation to its claim which the appellant, Seymour Whyte, alleged was lodged out of time. Among other matters, the Court of Appeal considered an argument by Seymour Whyte to the effect that, if the adjudication application (and subsequent adjudication determination) were void, Ostwald was precluded from seeking to enforce the debt pursuant to s 16(2)(a)(i) of the SOPA. Seymour Whyte contended that Ostwald was precluded from enforcing the debt pursuant to s 16(2)(a)(i) in a court either as a matter of statutory construction or as a matter of election at common law.
142 After dismissing the argument based on election at common law, Leeming JA (with whom Payne and White JJA agreed) considered and rejected the argument based on the construction of s 16(2)(a)(i) of the SOPA. In doing so at [28]-[30] his Honour outlined the applicable principles as follows:
28 Seymour Whyte relied on Gageler J's analysis in State of New South Wales v Kable (2013) 252 CLR 118; [2013] HCA 26 at [52]. Speaking of a purported but invalid law, and a thing done in the purported but invalid exercise of a power conferred by law, Gageler J said that both remained "at all times a thing in fact". He continued:
"[52] … The thing is, as is sometimes said, a 'nullity' in the sense that it lacks the legal force it purports to have. But the thing is not a nullity in the sense that it has no existence at all or that it is incapable of having legal consequences. The factual existence of the thing might be the foundation of rights or duties that arise by force of another, valid, law." (Footnote omitted.)
29 The fact that a decision is beyond jurisdiction, and may be said to be a "nullity", is not determinative of its status for the purposes of further legal analysis. The law of contempt supplies an example. An inferior court's order beyond jurisdiction is a nullity, in the sense that the failure to obey it cannot be a contempt: United Telecasters Sydney Ltd v Hardy (1991) 23 NSWLR 323 at 335; Pelechowski v Registrar, Court of Appeal (NSW) (1999) 198 CLR 435; [1999] HCA 19 at [27]-[28], [55] and [71]. However, an order beyond jurisdiction may also be the subject of proceedings seeking judicial review in the Supreme Court's supervisory jurisdiction, or indeed an appeal (consider for example an appeal from the District Court upheld on the basis of a denial of procedural fairness).
30 But the question is one of construction …
(Emphasis added.)
143 To like effect at [175] Sackville AJA (with whom Leeming, Payne and White JJA and Emmett AJA agreed) observed that "a decision affected by jurisdictional error - even a failure to comply with a 'mandatory' statutory precondition to the exercise of a power - is not necessarily devoid of legal consequences". After referring to Kable at [52] his Honour said (at [176]) that "legislation may attach consequences to an act or decision that is 'invalid' by reason of a jurisdictional error. The issue in the present case is therefore one of statutory construction": see too Director of Public Prosecutions v Edwards (2012) 44 VR 114 at [45] (per Warren CJ dissenting) and [177]-[182] (per Weinberg JA and Williams AJA).
144 Thus, assuming that the denial of procedural fairness by the primary judge amounts to a jurisdictional error such that Clyne does not apply and the sequestration order is void, the question to be determined is whether, as a matter of construction, s 52(4) of the Act preserves the legal consequences of that order. In particular: is s 52(4) to be construed such that a creditor's petition will not lapse where, before the statutory period expires, in fact (and without regard to the legality or validity of the relevant event) a sequestration order is made or the petition is dismissed or withdrawn?
145 In Clyne at 158 Toohey and Wilcox JJ said:
Mr Clyne submits that the requirement of the subsection is for a valid sequestration order. He argues that, were it not so, the life of the petition would be extended indefinitely. This is the result of the view we take but it need not occasion concern; the court maintains control over the petition and may make such orders, including an order substituting a new creditor or dismissing the petition, as the circumstances require. The alternative position, which may accord to a debtor immunity in respect of a particular petition in relation to which an irregular order had been made, possibly with important consequences in respect of the commencement of the bankruptcy and the assets available for distribution to his creditors, is much more difficult to reconcile with the principles underlying the Act.
146 At 161 Jenkinson J relevantly observed, albeit in obiter, that:
The natural meaning of the final clause of s 52(4) is that the occurrence of one or other of three actual events is specified within an ascertainable period of time. The subsection as a whole declares a legal consequence of the passage of a period of time without the occurrence of any of those three actual events in that period. There is in my opinion nothing in the legislative context to suggest that any of those three actual events are to be understood as of significance in s 52(4) only if the legal effect of the event continues undisturbed by subsequent order of a court. The three events are selected, it would seem, because the occurrence of any of them signifies a normal termination of a proceeding the duration of which it is intended by the legislature to control. There is in my opinion nothing in s 52(4), or elsewhere in the Act, to suggest that in s 52(4) or (5) an attempt has been made to exercise that control, after the proceeding has terminated upon the occurrence of one of those three events, in relation to the unusual supervenient events to which ss 37(1), 38 and 154(1) may give rise.
Even if the sequestration order made by Beaumont J were characterised as void ab initio, as the judgment debtor submitted, that might not preclude a conclusion that a sequestration order had been made, for the purposes of s 52(4), before the expiration of the period of twelve months commencing on the date of presentation of the petition.
147 In Hamilton v Deputy Commissioner of Taxation of the Commonwealth of Australia [1990] FCA 202 a registrar made an order dismissing a creditor's petition. Justice Northrop found that the petition should not have been dismissed and went on to consider whether the petition had lapsed by reason of s 52(4) of the Act. After citing Clyne, his Honour observed at 16 that:
In that case, a sequestration order had been made. Of necessity the same result must apply where the petition was dismissed even though the reasoning expressed could not apply. It is noted that the effect of this conclusion is that appeals from orders of sequestration or dismissal are freed from the constraints resulting from lapse by effluxion of time under sub-section 52(4).
(Emphasis added.)
148 In Adams v Lambert (2006) 152 FCR 433 (Adams), the High Court had set aside an order of this Court dismissing a creditor's petition and remitted the proceeding back to this Court for further hearing. At [5] Gyles J identified that the first issue to be considered was whether the creditor's petition had lapsed by virtue of s 52(4) of the Act. In resolving that issue at [8]-[10] his Honour said:
8. The orders of the High Court and the passage of the judgment which relates to them contemplate that the matter will proceed to a hearing of the case, although there is no indication that the present issue was present to the minds of the Court. As pointed out in the passage from the judgment of Toohey and Wilcox JJ in Deputy Commissioner of Taxation v Clyne (above) somewhat anomalous results occur whichever view is taken where a petition comes on for hearing nearly two years from its date. In Rangott v Marshall (2004) 139 FCR 14 at [24] I said:
It seems that the Act does not expressly address the imposition of an appellate regime upon the provisions in relation to sequestration and bankruptcy. That may be an accident of history.
However, as I held in that case, there is an appellate regime which applies to sequestration orders, the critical provision of which is s 28 of the Federal Court of Australia Act 1976 (Cth).
9. I have no difficulty in agreeing with the submission of counsel for the applicant creditor that the decision of the Full Court in Re Young; Ex parte Smith (above) is not in point. It did not deal with the problem occasioned by the dismissal of a petition, when that dismissal is subsequently set aside on appeal. Nonetheless, the question remains as to the effect of the order of the High Court setting aside the dismissal. On one view, it is as if the dismissal had never occurred (cf Rangott v Marshall (above) at [29]). Thus, there is an argument that, as the dismissal never occurred, the proviso to s 52(4) was not met and the petition has lapsed.
10. In my opinion, the section should not be read in that fashion as it would, in many cases, frustrate the appeal provisions. As this case illustrates, it takes time to dispose of appeals. An order extending a petition which has been dismissed could hardly be made in the meantime. It is, no doubt, for this reason that that point was not taken up either by the Full Court of this Court or by the High Court, notwithstanding invitations to do so by counsel for the applicant creditor. That conclusion is consistent with the reasoning of the Full Court in Deputy Commissioner of Taxation v Clyne. In other words, in my opinion, 'dismissal' in s 52(4) means dismissal in fact, whether or not subsequently set aside (cf Yilmaz v Minister for Immigration and Multicultural Affairs (2000) 100 FCR 495).
149 The observations in these cases and in particular, by analogy, the approach in Adams lead us to conclude that, on a proper construction of s 52(4) of the Act, the creditor's petition will not lapse if in fact one of the three specified events occurs. That construction is supported by the ordinary meaning of the section as well as the fact that, as observed in Adams, appeals take time. It could not have been the intention of Parliament to frustrate the appeal process by its supervision of the bankruptcy process through, relevantly, the imposition of a time period for the resolution of a proceeding on a creditor's petition.