Should an extension of time be granted?
28 Rule 1.39 of the Federal Court Rules gives the Court a discretion to extend the time fixed by the rules before or after the time expires and regardless of whether an application for extension is made before the time expires. In Dunlop v Fishburn (No 3) [2012] FCA 315 at [9] and [10] I set out some principles that generally guide the exercise of the discretion to grant an extension of time. It is sufficient to observe here that the discretion is wide and constrained only by the interests of justice and the subject-matter and purpose of the legislation. But an applicant is required to give an explanation for the delay. Time limits are not to be ignored. The absence of an acceptable explanation will militate against the grant of an extension, so, too, any prejudice to the respondent caused by the delay. The merits of the proposed appeal are also relevant. Undoubtedly, as Griffiths J observed in SZQZR v Minister for Immigration and Citizenship (2013) 133 ALD 355 at [31], the length of any relevant delay is also important, as is the nature of the rights and interests with which the proceeding is concerned.
29 I have real misgivings about the explanation proffered by Ms Flint. Significantly, she does not state when it was that she first sought legal advice, when the advice was provided, how the taking of that advice caused or contributed to the delay nor, if she delayed in seeking advice, the reasons for that delay. It would be unacceptable to wait until the time had expired before seeking legal advice unless, for example, that delay was occasioned by illness, accident or some other good reason. Further, Ms Flint must have been alive to the need to act swiftly because she had fallen foul of time limits in the past. Only three months earlier the primary judge had refused her application for an extension of time within which to appeal the federal magistrate's judgment on the review application. Mr Johnson did not try to persuade me that her explanation was satisfactory. It was not.
30 But the statute imposes no fetters on the exercise of the discretion. Consequently, although the Court will normally require an acceptable explanation for the delay, the failure to offer one is not fatal. The Full Court has rejected the notion that the provision of an acceptable explanation is "an essential precondition" for the grant of an extension: Comcare v A'Hearn (1993) 45 FCR 441 at 444. Where the discretion is unconfined, the Court may not impose an arbitrary limitation not expressly imposed by the statute itself: Dix v Crimes Compensation Tribunal [1993] 1 VR 297 at 302.
31 As Wilson J said in FAI General Insurance Co Ltd v Southern Cross Exploration NL (1987) 165 CLR 268 at 283 (Brennan, Deane and Dawson JJ agreeing) of a similarly unrestricted rule permitting the NSW Supreme Court to extend the time fixed by the rules (pt 2, r 3 of the Supreme Court Rules 1970 (NSW)):
The plain meaning of these words is very wide. The court may extend "any time" fixed by "any … order" and may do so as well after as before the time expires and even though the application to extend is not made until after the time has expired. As Baggallay LJ said in Carter v Stubbs (1880) 6 QBD of the analogous English rule, it gives "very full discretionary power; indeed, I can hardly imagine a more extended discretion" (at 120). It is a remedial provision which confers on a court a broad power to relieve against injustice. The discretion so conferred is not readily to be limited by judicial fiat. The fact that it manifestly is a power to be exercised with caution and, in the case of conditional orders, with due regard to the public policy centred in the finality of litigation does not warrant an arbitrary limitation of the power itself, not expressed in the words of the rule ...
32 Thus, while the limited explanation weighs against the grant of an extension, it is not determinative.
33 In this case, despite my misgivings about the adequacy of Ms Flint's explanation, I am satisfied that it would be just to grant an extension of time.
34 It is true that to succeed on any appeal Ms Flint would have to demonstrate error: Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 and it is hard to see how it could be said that either the federal magistrate or the primary judge fell into error by following Griffiths. But Ms Flint wants to challenge the principle accepted in Griffiths. What is more, as French J explained in Seiler v Minister for Immigration, Local Government and Ethnic Affairs (1994) 48 FCR 83 at 98, in an application of this kind "the question of merits must be approached with some caution". As his Honour went on to explain:
If an application has no reasonable prospect of success, then the discretion to refuse an extension on that basis reduces to a decision to strike it out. To say a substantive application has a reasonable prospect of success is to say no more than that there is a finite non-trivial probability that it will succeed. The statement of its merits is then stochastic. It is based upon necessarily incomplete evidence or consideration of the case. It is difficult to imagine any case which appeared weak but not hopeless in which it would be proper to refuse an extension on that account. On the other hand, the stronger the case appears to be, the higher may be the probability that an injustice will be done if an extension is refused. So a strong case may be a positive factor in favour of the grant of extension, but an apparently weak case cannot be treated as a factor weighing against it.
35 In Griffiths the Full Court relied on Elyard Corp Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385 ("Elyard"). Elyard was not concerned with a creditor's petition but with an application to wind up a company in insolvency. Section 459R of the Corporations Law (now s 459R of the Corporations Act 2001 (Cth)) required that an application to wind up a company in insolvency is to be determined within six months after it is made. Section 459R(2) gave the Court a discretion to make an order extending the period in which the application must be determined but only in special circumstances and, relevantly, only where the order was made within the six month period, or as last extended under the subsection. Section 459R(3) provided that an application was dismissed if not determined as required by the section. In substance the same argument Ms Flint wishes to run on appeal in the present case was put and rejected in Elyard. Lockhart J said at 391-3 (Black CJ agreeing) that the argument was based on a misconception about how the slip rule operates:
In my opinion, the argument rests on a misconception of the nature and operation of the slip rule. This is the case because the later order corrects the earlier order, and speaks from the date of the earlier order, which then operates with full force as corrected…The slip rule, with retrospective operation, corrected the earlier order. …The essential purpose of the slip rule is to give effect to the intention which the Court would have had, if it were not for the failure which led to the accidental slip or omission.
…It is irrelevant that the later order of Sheppard J, which corrected the earlier order, was made after the expiration of the statutory time limit…
36 Lindgren J (with whom the Chief Justice also agreed) expressed the same view at 401-2. At 405 his Honour referred to the opinion of Heerey J in Re Agushi; Ex parte Farrow Mortgage Services Pty Ltd (In liq) (1994) 126 ALR 704 that in enacting s 52(5) of the Bankruptcy Act Parliament must be taken to have contemplated that there would be human oversight and inadvertence, implying that Parliament must have intended that the section prevails over the slip rule. But Lindgren J said that the view was "equally tenable" that Parliament, being taken to have contemplated such behaviour, "readily accepted that such a mechanism as the slip rule would co-exist, within its limited area of operation, with the statutory provision".
37 There is obvious force in these remarks. Moreover, in Elyard Lockhart J observed at 391 that that the rule "extends to permit the correction of an order or decree where the omission results from the inadvertence of a party's legal representative", the situation presenting itself in this case.
38 In Griffiths, however, the Full Court expressed disquiet about the notion that the slip rule may be used to extend the life of a creditor's petition after the statutory period has expired. It observed that there were potentially significant differences between s 52 of the Bankruptcy Act and s 459R of the Corporations Law. At [30]-[31] the Court said:
With all respect, we are a little uncomfortable with the view, inherent in Elyard, that the slip rule may be used to extend time notwithstanding the statutory requirement that such order be made within a period of time which has elapsed. However Elyard concerns the practice of the Court and has now stood for over 10 years without legislative intervention. We are reluctant to reconsider it. Although it does not directly bind us in applying s 52 of the Bankruptcy Act, to take a different approach would cause substantial confusion in insolvency practice.
We wish to stress, however, the importance of the policy, evidenced in both the Corporations Act and the Bankruptcy Act, that insolvency proceedings be speedily resolved, presumably for commercial reasons and for reasons of fairness. Courts exercising jurisdiction in insolvency must recognise this policy by giving priority to the hearing and determination of such matters. The parties and their legal advisers, particularly those advising petitioning creditors, must be aware of the potential problem. The decision in Elyard should not be taken as establishing an unlimited power to avoid this statutory policy.
39 In Re Young; Ex parte Smith (1985) 5 FCR 204 ("Re Young") another Full Court (Bowen CJ, Sweeney and Lockhart JJ) held that there was no power to extend the life of a creditor's petition after the statutory period had expired. The Court in that case said it was unnecessary to consider whether the slip rule could apply because on the facts it could have no application. But at 208 it pointed to the potentially serious consequences and the prospect of "considerable uncertainty and confusion" if a court were to extend the petition's life outside the statutory period.
40 The petitioning creditor, however, submitted that s 33(1)(c) of the Bankruptcy Act gave the Court the power to extend the life of a creditor's petition and submitted that s 52(5) did not expressly provide that the Court could not exercise that discretion more than 12 months after the petition had lapsed. For this reason it contended that there was no conflict between the terms of the Act and the slip rule, and that Griffiths (where there was no mention of s 33(1)(c)) was correctly decided. Yet, in Re Young, to which the petitioning creditor did not refer, the Full Court held that s 33(1)(c) does not empower the court to extend the period if the period has expired before the court is asked to make an order extending it.
41 Before Elyard there was a difference of opinion among judges of this Court about whether the slip rule could be used in the present circumstances. Some of the cases are mentioned in Elyard itself. Since then, echoing what was said in Re Young, Kiefel J said in Re Langridge; Ex parte Bennett Carroll & Gibbons [1998] FCA 879 at [2]:
The object of provisions such as s 52(4) is finality in commercial dealings. Moreover, I have considerable difficulty with the notion that the slip-rule is, in reality, to be extended to correct a party's error and not the Court's own unintended error.
42 In Davidova v Murphy [2009] FCA 601 at [82] Flick J expressed reservations about the use of the slip rule for this purpose but felt constrained to follow Griffiths.
43 In Elyard Lockhart J observed at 389 that O 35 r 7 of the former rules (now r 39.05 of the Federal Court Rules 2011) reflects the inherent power of a superior court of record to correct an error in a decree or order. But Elyard was an appeal from a decision of a judge of this Court. The rule with which it was concerned was a rule of this Court. In Griffiths (at [14]) the Full Court referred to authority suggesting that inferior courts have no such power but said that the question was an open one. Absent an inherent power, the Full Court went on to say (at [15]) that "there may be doubt as to whether, in the absence of express statutory authority, an inferior court may acquire it by making a rule of court to that effect". In the present case, the petitioning creditor did not argue that s 43 of the Federal Circuit Court Act 1999 (Cth), which the Full Court in Griffiths mentioned as a possible source of power, had any application.
44 In these circumstances I am not convinced that the argument Ms Flint wishes to run on appeal is doomed to fail.
45 The reluctance expressed by the Full Court in Griffiths to reconsider Elyard might readily be explained by the fact that it was unnecessary for it to do so because the circumstances for the application of the slip rule were adjudged not to arise. Its remarks about its application to creditors' petitions were therefore strictly obiter. In the present case, however, the issue the Full Court avoided confronting in Griffiths squarely arises for consideration. The proposed appeal provides a suitable vehicle for resolving it.
46 Moreover, the making of a sequestration order is a serious matter with serious consequences. The proposed appeal raises issues of general importance. The period of delay is not inordinately long. Although prima facie there is prejudice to the petitioning creditor and, indeed, to other creditors, their position is protected. The sequestration order has not been stayed. Indeed, Ms Flint did not ask for a stay. A trustee has been appointed and has taken control of the bankrupt estate. Ms Flint lodged a statement of affairs with the Official Receiver on 31 July 2013 which discloses assets that greatly exceed the value of her debts. On 8 August 2013 the trustee reported to creditors that he has now received $462,884.19 from the sale of a property which "may be sufficient" to pay Ms Flint's debts in full. He foreshadowed the possibility of an annulment of the bankruptcy pursuant to s 153A of the Act.
47 At the conclusion of the hearing I granted the trustee leave to file evidence and submissions. He then submitted he would suffer prejudice if an extension of time was granted. He proffered evidence of the activities he has undertaken since the making of the sequestration order and the time and effort involved. He complained of a lack of cooperation on Ms Flint's part. He referred to additional work and additional costs this behaviour had allegedly caused. He contended that, had Ms Flint brought her appeal within the prescribed time and/or co-operated with the trustee, his costs would have been significantly less than they are. He also contended that, unless orders are made to protect his costs, he is at risk of being "statutorily bound to continue to act as trustee while the sequestration order remains in force". If the sequestration order were to be set aside, he submitted, he may not be able to recover his costs.
48 Unsurprisingly the petitioning creditor supported the trustee's submissions. It contended that, if the appeal had been filed within time, "the value of the trustee's work at risk would be reduced by the value of that work undertaken after the expiry of the 21 day period". I note, too, that the report to creditors implies that at any time before then Ms Flint did not inform the trustee that she was intending to appeal or, indeed, that she had applied for an extension of time to do so.
49 The trustee's complaints seem to me to be unrelated to the delay in filing a notice of appeal. Absent a stay of the sequestration order, the trustee would have been bound to perform or to continue to perform his duties regardless of whether the notice of appeal had been filed within time. In so doing he would have incurred costs. With the exception of the costs of this application, there is no reason to conclude that the costs are any greater than they otherwise would have been because Ms Flint did not file her notice of appeal within the prescribed time. I do not see why any lack of cooperation by the bankrupt with the trustee, though unfortunate, has any bearing upon the exercise of the discretion to grant or refuse an extension of time to appeal.