Consideration
85 The threshold question that is raised by grounds 1, 1A and 1B of the amended notice of appeal is whether the primary judge had jurisdiction to invoke the slip rule discretion. A plethora of cases have considered whether slip rule provisions may be invoked before a sequestration order under the Bankruptcy Act or a winding up order under the Corporations Law as set out in s 82 of the Corporations Act 1989) (Cth) (Corporations Law) or the Corporations Act 2001(Cth) (Corporations Act) is made, but none have addressed the use of that power after the making of a sequestration order upon a lapsed creditor's petition.
86 There are two issues to be resolved. One, whether a subsisting petition is a jurisdictional prerequisite to the making of a sequestration order. The other is whether the slip rule is able to be deployed to extend the period for expiration of the petition after the making of a sequestration order.
87 I commence with the jurisdiction question and the High Court decision in Emanuele which held, by majority, that a failure to obtain the leave that was required by s 459P of the Corporations Law was capable of cure by a grant of leave nunc pro tunc. Several corporations were indebted to the Australian Taxation Office which applied to this Court for the making of winding up orders. After the applications were filed, the corporations entered into deeds of company arrangement, the effect of which was to prohibit the prosecution of the applications. The Australian Securities Commission (ASC) intervened in the applications and gave notice that it would apply for the making of winding up orders pursuant to s 495A of the Corporations Law. At the time, s 495P of the Corporations Law (the identical provision is now s 459P of the Corporations Act) enabled the ASC to apply for winding up orders but only with leave of the Court pursuant to s 459P(2)(d). No application for leave was made before a judge of this Court, O'Loughlin J, made the winding up orders sought by the ASC.
88 Certain of the directors of the companies pursued an appeal to this Court against the making of the winding up orders. The failure to obtain leave was raised during the course of the appeal. The ASC made a retrospective application for leave, which the Court granted and the appeal against the orders was dismissed: Emanuele v Australian Securities Commission (1995) 63 FCR 54, Spender, von Doussa and Hill JJ. The High Court dismissed the appeal brought to it by special leave granted to the directors: Dawson, Toohey and Kirby JJ; Brennan CJ and Gaudron J dissenting.
89 Brennan CJ reasoned that the leave requirement is not "merely procedural" at 122 and continued:
It is imposed to prevent the taking of a step that would commence proceedings in circumstances where the company is entitled, before the commencing step is taken, to protection by the Court's examination of the case to be presented in proof of the company's insolvency. If the requirements of s 459P(2) are treated as merely procedural, the purpose of s 459P(3) and (5) is frustrated.
90 That was one purpose that his Honour regarded as important on the construction question. Another, that the contravention "would or might" prejudice those interests concluding at 124:
The purpose and effect of the provision would be undermined if the absolute protection which the provision is expressed to confer were transformed into a discretionary bar that could be relieved by a curial order.
91 Dawson J agreed with Toohey J and succinctly said why at 125:
Section 459P does not confer jurisdiction on the Federal Court to make a winding up order; it does no more than identify the parties who may make an application, requiring leave to be obtained in the case of some of them including the Commission. Jurisdiction is conferred on the Federal Court by s 459A of the Corporations Law… The failure to obtain leave was a mere defect or irregularity in the exercise of that jurisdiction.
92 Pausing there it is to be recalled that ss 43 and 52 of the Bankruptcy Act are the provisions that confer the jurisdiction to make a sequestration order and unlike s 459P they are not solely limited to identification of the party entitled to seek the making of the order.
93 Toohey J approved of the reasoning of Sholl J in Re Testro Bros Consolidated Ltd [1965] VR 18, which concerned a similar leave requirement at s 199 of the Companies Act 1961 (Vic). Sholl J applied a "uniform set of authorities in Australia, extending over seventy years" for a grant of leave nunc pro tunc to conclude that the statute was concerned with the control exercised by the court over the administration of the affairs of a company with the consequence that provisions such as s 199 were directory. At 131 Toohey J, in concluding that the leave requirement "does not impose a condition precedent to the exercise of the jurisdiction of the court", approved the analysis of Lindgren J in Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385 (Elyard) at 406 who said:
More particularly, the distinction is between a situation in which there is a time limit within which the Court must be approached if an application for an order of a particular kind is to be made at all (s 459G), and a situation in which a proceeding is already under way and is subject to the Court's control and in which a timely but deficient order has been made.
94 Also at 131 Toohey J identified the general policy consideration which flows from the supervisory role of the court which in his view favoured "taking a liberal view of the requirements of s 459P".
95 Gaudron J approached her analysis at 135 by posing as: "the essential question, namely, what is required by s 459P". The answer, in her Honour's view, was to be found in the emphatic language of the provision that "an application… may only be made with leave of the Court" which in her view was unambiguous: at 136. In argument before us, counsel for Victor emphasised the following passage in her Honour's reasons at 139:
It follows, in my view, that although leave to make a winding up application may be granted at any point prior to, or simultaneously with, the making of a winding up order, it may not be granted thereafter, whether by the judge who made the order or by a court exercising appellate jurisdiction. More precisely, until leave has been granted there is no application for the purposes of s 459A and, thus, no application on which a winding up order can be made.
96 Kirby J at 147 observed that, despite it not being uncommon for statutes to provide for a grant of leave before a step may be taken in a proceeding: "[it] is difficult, if not impossible, to reconcile all of the decisions on this and analogous questions". Of several matters that his Honour listed in resolving the construction question, at 156 he reasoned that:
The structure of Pt 5.4 of the Law makes it clear that what s 459P is dealing with is a procedure to be followed in making the application. Only certain designated persons are to have standing. Amongst them, half of those specified (including the ASC) are obliged to seek leave. But the application was undoubtedly before the Court which has jurisdiction. That jurisdiction having attached in the present case, it may be inferred that Parliament contemplated that oversight and inadvertence would sometimes occur for which the Court's general powers of correction would be available, within the limited area of operation and compatibly with the statutory requirement that ordinarily leave should first be obtained.
(Citation omitted.)
97 In argument before us, as might be expected, each counsel relied on and placed different emphasis upon the individual judgments in Emanuele as providing assistance in resolving the construction question on which this appeal turns. In my view, the various judgments in Emanuele, despite the obvious difference between the statutory provisions, assist in framing and understanding the issue that is to be resolved in this appeal, which is whether the existence of a creditor's petition, one that has not lapsed by operation of s 52(4) of the Bankruptcy Act, is a condition to the exercise of the jurisdiction to make a sequestration order pursuant to s 52(1) and if it is, whether a sequestration order made upon a lapsed petition may be retrospectively enlivened by application of the discretion conferred by the slip rule.
98 Speaking of statutory decision-makers, but in terms that in my view apply equally to courts that exercise statutory jurisdiction, Kiefel CJ, Gageler and Keane JJ in Hossain v Minister for Immigration and Border Protection (2018) 264 CLR 123; [2018] HCA 34 at [23] said:
Jurisdiction, in the most generic sense in which it has come to be used in this field of discourse, refers to the scope of the authority that is conferred on a repository. In its application to judicial review of administrative action the taking of which is authorised by statute, it refers to the scope of the authority which a statute confers on a decision-maker to make a decision of a kind to which the statute then attaches legal consequences. It encompasses in that application all of the preconditions which the statute requires to exist in order for the decision-maker to embark on the decision-making process. It also encompasses all of the conditions which the statute expressly or impliedly requires to be observed in relation to the decision-making process in order for the decision-maker to make a decision of that kind.
99 In my view, the existence of a creditor's petition that has not lapsed is a jurisdictional condition to the exercise of the power to make a sequestration order pursuant to ss 43 and 52 of the Bankruptcy Act. That conclusion follows for several reasons. First, the language of the statute is clear and harmonious. A petition by s 5 means a petition "under" the Bankruptcy Act. Section 43 is expressly jurisdictional in its text and contains three jurisdictional facts: (1) the commission by a debtor of an act of bankruptcy; (2) that when the act of bankruptcy was committed the debtor was either personally present or ordinarily resident in, had a dwelling house or place of business in, was carrying on business in or was a member of a firm or partnership carrying on business in Australia; and (3) a petition has been presented by a creditor. It is only upon the hearing of the creditor's petition pursuant to s 52(1), and subject to satisfaction of the proof requirements, that the Court may make a sequestration order against the estate of the debtor. A creditor's petition has an expiry date of 12 months commencing on the date of presentation or such further period that is provided for in an order made under s 52(5), unless prior to the expiration of either of those periods "a sequestration order is made on the petition or the petition is dismissed or withdrawn": s 52(4).
100 In combination, where these provisions speak to a petition which lapses at the expiration of defined periods the meaning is plain: a lapsed petition is not relevantly one that has the statutory character of a creditor's petition upon which a sequestration is capable of being made. It ceases to have effect as a petition, which accords with the ordinary and natural meaning of lapse for which the Macquarie Dictionary Online (Macmillan Publishers Australia, 2022) gives as the fifth definition: "the termination of a right or privilege through neglect to exercise it or through failure of some contingency".
101 Unlike s 459P of the Corporations Law, these provisions confer the jurisdiction to make a sequestration order; they go well beyond identification of the class of persons entitled to petition the Court for a sequestration order. That there is an extant petition is not simply a procedural requirement.
102 Secondly, my reasoning is consistent with the analysis of Starke J and Williams J (in dissent but limited to the question of remittal) in Cameron v Cole (1944) 68 CLR 571 (Cameron), which concerned regulation 22 of the National Security (War Service Moratorium) Regulations 1941 (Cth) and which provided that a person shall not, without the leave of a court having jurisdiction in bankruptcy, issue a bankruptcy notice or present a creditor's petition against a member of the armed forces founded on a judgment debt incurred before the member engaged on war service. Starke J at 596 and Williams J at 611-612 each treated compliance with the regulation as jurisdictional. Starke J at 596 said:
A bankruptcy notice or a petition presented contrary to the provisions of the Regulations is irregular, and a party is entitled ex debito justitiae to have it set aside or treated as ineffective.
103 As Brennan CJ explained in Emanuele at 124 by reference to Cameron, where the purpose of a prohibition "is designed to protect the interests of a particular person" (here the debtor and creditors generally) breach is "a fundamental irregularity" which in the case of an inferior court has the consequence that an order purportedly made in breach is a nullity: Cameron at 590-591, Rich J and Emanuele at 120, Brennan CJ.
104 Thirdly, although the grounds for exercising the discretion to extend time conferred by s 52(5) of the Bankruptcy Act are broad, requiring only that it be "just and equitable" to do so, the discretion is tightly conditioned in that the application is required to be made before the expiration of the 12 month period and the petition may only be extended for a maximum of 24 months from the date of presentation. These limitations confine in jurisdictional language the scope of the authority that is conferred.
105 Fourthly, Toohey J in Emanuele at 130 - 131 addressed a submission that was advanced to the effect that s 459P of the Corporations Law operates to deny standing where required leave is not obtained by analogy with s 459G (which time limits the ability of a company to apply to have a statutory demand set aside) and the decision of the High Court in David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 (David Grant) where the Court held the temporal requirement to be jurisdictional. In that case, Gummow J, with whom Brennan CJ, Dawson, Gaudron and McHugh JJ agreed, said at 277:
Here, the phrase "an application may only be made within 21 days" should be read as a whole. The force of the term "may only" is to define the jurisdiction of the court by imposing a requirement as to time as an essential condition of the new right conferred by s 459G. An integer or element of the right created by s 459G is its exercise by application made within the time specified.
106 In distinguishing that reasoning as applicable to s 459P, Toohey J accepted the submission of the Commonwealth that s 459P does not "impose a condition precedent to the exercise of the jurisdiction of the court" because of the absence of a temporal requirement and there is "less significance" in the making of a finding of prima facie insolvency prior to or after a grant of leave. That reasoning highlights an essential difference for present purposes. Section 52(4) of the Bankruptcy Act is a temporal provision that is concerned with the limited twelve-month life of a petition which is only capable of extension where an application is made under s 52(5) before it lapses. The reasoning of Gummow J in David Grant is in my view of itself compellingly persuasive by analogy with the scheme of ss 43 and 52 of the Bankruptcy Act to conclude that a petition which has not lapsed is a jurisdictional prerequisite to the making of a sequestration order.
107 Finally, there is the policy consideration that this Court addressed in some detail in Re Young; Ex parte Smith (1985) 5 FCR 204 at 206-208, Bowen CJ, Sweeney and Lockhart JJ (Re Young). As explained by the Court in that case, s 52(4) was originally enacted in response to the mischief identified by the Clyne Committee Report, namely that debtors would seek to have petitions adjourned in the hope of being able to pay their debts and avoid sequestration. The Court then identified at 207-208 the "sound reasons why there should be no uncertainty surrounding the time during which a petition is pending" as follows:
The presentation of a petition is an event which determines many rights duties and liabilities of bankrupts and creditors under bankruptcy law and from which important consequences flow. For example, before a debtor becomes a bankrupt, the court may appoint a trustee to take control of his property (s 50), stay legal proceedings against his personal property (s 60), or order his arrest in certain circumstances and the seizure of his property (s 78) - in each case after the presentation of the petition against him.
After a debtor becomes a bankrupt, the date of commission of an act of bankruptcy and the date of presentation of the petition on which he was made a bankrupt are critical for various purposes including the determination of the period of relation back (s 115), the ascertainment of the property divisible amongst his creditors (s 116), the avoidance of preferences (ss 122 and 123), the avoidance of voluntary settlements (s 120) and the repayment by creditors to the trustee of his estate of moneys received as a result of execution by those creditors against his property (s 118).
Involved in the argument of counsel for the petitioning creditor is the assumption that, if a petition is more than 12 months old and its life has not been extended during that time, it is inherently capable of being extended at any time thereafter, though for a maximum life of twenty-four months from the date of presentation of the petition. The period of twenty-four months referred to in s 52 is the maximum life of the petition. If the submission is correct the court could exercise its power to extend the life of the petition at any time before or after the expiration of the twenty-four months, say three years after that date. If the court may extend the petitions life outside the first twelve-month period there would be no certainty in dealings by a debtor with his creditors or with others, in respect of the debtor's property, that he may not be made a bankrupt, on the petition still pending, within the expiration of the second period of twelve months. The consequences could be serious and may create considerable uncertainty and confusion.
108 A construction of the Bankruptcy Act which holds that a subsisting petition is a jurisdictional prerequisite to the making of a sequestration order achieves that certainty of purpose.
109 I turn now to the second issue: may the slip rule be engaged to extend the life of a petition pursuant to s 52(5) of the Bankruptcy Act after the making of a sequestration order?
110 Logan J was certainly correct to characterise the related question (whether the slip rule may be engaged before a sequestration order is made) as "a vexed one" in Luck v University of Southern Queensland (2018) 265 FCR 304; [2018] FCAFC 102 at [5] (Luck). Much judicial time has been spent at trial and appellate level in this Court (and in others) in grappling with the myriad of cases where, through inadvertence of the legal representatives or of a court, the twelve month period at s 52(4) of the Bankruptcy Act has elapsed and an application is then made under an applicable slip rule to correct an earlier order (ordinarily one that adjourns the hearing of the petition beyond its expiry date) to extend the life of the petition by the device of making an amendment to that order to include one pursuant to s 52(5).
111 It was first held in this Court by Pincus J in Re Hibbard; Ex parte Playroom Pty Ltd [1988] FCA 689 that application of the slip rule in that way could not be reconciled with s 52(5). Heerey J reached the same conclusion in Re Agushi; Ex parte Farrow Mortgage Services Pty Ltd (in liquidation) (1994) 126 ALR 704. Other judges of this Court reached the opposite conclusion. Charlesworth J comprehensively essayed all of the authorities in Luck at [116]- [136]. The views of Pincus J and Heerey J did not prevail and were disapproved by the Full Court in Elyard. That case concerned the slip rule and the power of the Court to extend the time specified in s 459R(1) of the Corporations Law to determine an application to wind up a company within 6 months, unless extended by the exercise of the discretion conferred by s 459R(2). The ratio is that s 459R properly construed did not displace the slip rule which then found expression at Order 35, r 7 of the Federal Court Rules 1979 (Cth).
112 Although the case concerned the Corporations Law, in obiter reasoning and separately, each of Lockhart J and Lindgren J (Black CJ agreed with each) concluded that the slip rule could be engaged to correct an order, and thereby extend the life of a petition presented under the Bankruptcy Act, before a sequestration order is made: Lockhart J at 392-393; Lindgren J at 402-404. In the view of Lockhart J (at 391), the contrary view:
…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.
113 Lindgren J reasoned similarly at 400-401. Despite the doubt that Kiefel J expressed as to the correctness of this reasoning in Re Langridge: Ex parte Bennett, Carroll & Gibbons [1998] FCA 879, Elyard has been accepted, sometimes with reservation, as confirming that in appropriate cases slip rule provisions may be engaged to extend the life of a petition, or perhaps more correctly the time within which a petition is to be determined, once the petition has expired and s 52(5) of the Bankruptcy Act is unavailable. At the level of the Full Court of this Court those cases are: Griffiths v Boral Resources (Qld) Pty Ltd (2006) 154 FCR 554; [2006] FCAFC 149 (Griffiths), Spender ACJ, Dowsett and Collier JJ; Flint, Allsop CJ, Katzmann and Perry JJ; Ramsay Health Care Australia Pty Ltd v Compton (2016) 247 FCR 387; [2016] FCAFC 125 (Ramsay Health Care), Rares, Gleeson and Markovic JJ; Luck, Logan, Mortimer and Charlesworth JJ and Endresz v Commonwealth (2019) 273 FCR 286; [2019] FCAFC 197 (Endresz), Rares, Markovic and Charlesworth JJ.
114 Where in those cases doubt was cast on the correctness or direct applicability of Elyard, it was unnecessary for the Court to decide the point and the appeals were resolved on other grounds. Thus in Griffiths it was held that when a Federal Magistrate reserved his decision upon the hearing of the petition, and then failed to deliver it before it lapsed, no order had been made that could be the subject of an error for the purposes of the slip rule and, in any event, even if an order had been made the slip rule could not apply as it could not be inferred that the magistrate committed an accidental slip, error or omission when he failed to notice that time had expired during the period of his reserved decision. It is relevant for the purpose of this appeal to set out the doubt which the Court expressed as to the correctness of the decision in Elyard at [30]:
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.
115 In Flint at [43] the Court did not find it necessary to consider the correctness of Elyard, as counsel for the appellant ultimately accepted in argument that the slip rule could be used, in an appropriate case, to extend the life of a lapsed petition. The rule was found not to be applicable for other reasons: one, there was no order relevantly in need of correction and the other, the evidence did not support the inference of error or omission by the lawyer for the petitioning creditor or the federal magistrate. However, the Court noted and commented upon the decision of Hammerschlag J in Amorin Constructions Pty Ltd v Kamtech Electrical Services Pty Ltd (2008) 73 NSWLR 627; [2008] NSWSC 285; who considered Elyard to be plainly wrong, primarily on the ground that s 459R(2) of the Corporations Act requires the court to reach a state of independent satisfaction before exercising the discretion to extend time for the determination of the application. Whilst the Court in Flint observed that, "notwithstanding the logical force of the proposition that there is no room for the operation of the slip rule where an independent discretion must be exercised" ([44]), the Court found two difficulties with accepting it at [45] - [46]:
First, in Shaddock the High Court invoked the slip rule to amend an order to include an award pre-judgment interest. Yet an award of interest is in the court's discretion…
Second, if the surrounding circumstances are such (as they can be taken to have been in Elyard) that it can be concluded that proper attendance to the matter (had the error not occurred) could only have resulted in the discretion being exercised in one way, it is difficult to see why the rule should not apply in the same way that it would if the discretion had been exercised and there had been a mere failure to record it.
116 The appeal in Ramsay Health Care turned on a different question. There the primary judge applied the slip rule to extend the life of an expired petition by three months but also ordered that any further application to extend time pursuant to s 52(5) of the Bankruptcy Act could be made within that period. That order was wrongly made in that the attention of the primary judge was not drawn to the Full Court decision in Re Young where it was held that the power conferred at s 52(5) is incapable of being exercised outside of the initial twelve-month period. This Court allowed the appeal and made an order pursuant to the slip rule to extend the life of the petition. The correctness of Elyard was not put in issue.
117 In Luck the appeal turned on the availability of the particular form of wording of the slip rule to a registrar of the Federal Circuit Court and this Court was not asked to reconsider the correctness of Elyard. At issue was whether as a fact Ms Luck had established, as required by r 16.05(2)(e) of the Federal Circuit Court Rules 2001, that an order made by a registrar on 22 March 2016 (whereby the hearing of the petition was adjourned to a date after its expiry) reflected the intention of the parties who had not adverted to the effect of ss 52(4) and (5) of the Bankruptcy Act. Logan J, agreeing generally with Mortimer J, opined at [8] that the facts were "a paradigm case" for application of the slip rule. Mortimer J at [67] reasoned that on the evidence the case was not one "where there would have been any independent discretion to be exercised had the error or omission not occurred" and approved of the reasoning in Flint at [46].
118 Charlesworth J accepted that the slip rule could apply, but dissented on the factual question of why the registrar could not exercise that power which, in summary, she explained at [145] on the basis that the slip rule which then operated was limited to correction of an order which "does not reflect the intention of the Court". In her Honour's view, that rule:
is to be construed in a legal context in which orders (once entered) are final. In that context, the word "intention" should be construed as meaning an intention actually formed upon actual consideration of an issue arising for determination. The word does not encompass a situation in which the Court has, whether by its own omission or the omission of a party, failed to consider the issue at all.
119 In reasoning that way, as her Honour acknowledged at [146], other slip rules are cast more broadly.
120 Endresz is a further example of a case where several creditor petitions expired during the period of an adjournment. Orders were made administratively and in chambers the effect of which was to vacate the initially allocated hearing dates and to substitute new dates, beyond the expiry of the petitions. Shortly after the expiry date, the debtors applied for summary judgment and in response the Commonwealth, as the petitioning creditor, made application pursuant to the Federal Circuit Court slip rule to vary the adjournment orders by adding orders extending the life of each petition pursuant to s 52(5) of the Bankruptcy Act. The Federal Circuit Court made those orders. Thereafter, the proceedings were transferred to this Court and sequestration orders were made. Each bankrupt pursued an appeal to the Full Court. The first and primary ground contended that there was no power to make the sequestration orders by reason of the expiry of the petitions and it was not open, in the circumstances, to engage the slip rule. In oral argument upon the appeal, and despite the framing of the appeal grounds, senior counsel for the appellants submitted that it was not contended "that there is no scope for the operation of the slip rule in the context of s 52(5)": [70]. Rather, it was argued that there was no scope for operation of the slip rule unless at a prior point in time the primary judge had considered the s 52(5) discretion but had failed to record the result in the order.
121 In rejecting that submission "as a very narrow construction of the slip rule" ([72]), Rares and Markovic JJ at [81] endorsed the approach in Flint to the effect that the existence of an independent discretion does not of itself displace the potential application of the slip rule and continued:
The Full Court in Flint recognised the considerable constraints that apply where there is resort to the slip rule in circumstances where the exercise of an independent discretion is required. Whether the slip rule can be invoked where, through an accidental slip or omission an order was not made extending the life of a petition pursuant to s 52(5) of the Act before the expiration of the 12 months from the date of presentation of a petition, will depend upon the circumstances. In particular, as s 52(5) of the Act requires the exercise of an independent discretion, the question of how the discretion would have been exercised had the order been made at the earlier time becomes a relevant factor. As the Full Court recognised in Flint, if the discretion could only be exercised one way it is difficult to see how the slip rule could not apply. But, if there is any room for debate as to the outcome of an exercise of the discretion under s52(5) it is difficult to see how the slip rule could be engaged.
122 Expressly, as their Honours observed at [83], Elyard is distinguishable as it was concerned with a different statutory regime and was not binding as to the construction of the provisions of the Bankruptcy Act. For those reasons it was not necessary to consider its correctness.
123 In contrast, Charlesworth J at [145] said that Elyard "ought not to be distinguished by this Court on the basis that it was concerned with the exercise of the slip rule in the context of the insolvency regime established under the Corporations Act" but expressly reserved her view that "it may be necessary" for this Court at a future time to determine whether Elyard was correctly decided. Otherwise, on this ground, her Honour agreed with the joint reasons that it could not be said on the facts that the discretion could be only exercised in one way, had the issue been adverted to in a timely way: [149].
124 In this appeal, and despite the broad wording of appeal grounds 1, 1A and 1B, senior counsel for the appellant in oral argument did not submit to us that Elyard was wrongly decided or that ss 52(4) and (5) of the Bankruptcy Act operate as an exclusive code so as to displace the potential application of the slip rule. Rather, the argument is that the slip rule power was simply inapplicable in this case for the reason that it could not be engaged to correct the jurisdictional defect that existed when the sequestration order was made. In that way, this case is to be contrasted with others that have considered the potential application of the slip rule to extend the life of a creditor's petition before the making of a sequestration order.
125 At the outset that submission invites close attention to the effect of a final order made by a court of inferior jurisdiction where a jurisdictional prerequisite to the valid exercise of the conferred statutory power is not met.
126 The Federal Circuit Court, as it was, and the Federal Circuit and Family Court of Australia, (Division 2), were and are not superior courts of record: Federal Circuit Court of Australia Act 1999 (Cth) s 8; and Federal Circuit and Family Court of Australia Act 2021 (Cth) s 10. As is well understood an order made by an inferior court without jurisdiction is without legal effect: Pelechowski v The Registrar, Court of Appeal (NSW) (1999) 198 CLR 435 at [27], Gaudron, Gummow and Callinan JJ; Attorney-General (NSW) v Mayas Pty Ltd (1988) 14 NSWLR 342 at 347, McHugh J and New South Wales v Kable (2013) 252 CLR 118; [2013] HCA 26 (Kable) where at [56], Gageler J succinctly observed:
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".
(Citations omitted.)
127 Jurisdictionally flawed orders of inferior courts may exist in fact and have consequences, such as for the commencement of appeals, but as I explain below that is no answer to the problem in this case.
128 Accordingly, the fundamental difficulty with the order made by the primary judge on 14 January 2022 to amend the order of 14 May 2021 is the "attempt to cloak the Court with jurisdiction [which is] beyond the power of the slip rule": Al Maha Pty Ltd v Huajun Investments Pty Ltd (2018) 365 ALR 86; [2018] NSWCA 245 (Al Maha) at [272], Preston CJ of the Land and Environment Court (LEC), with whom Basten and Leeming JJA agreed. A relatively long line of analogous cases establish that slip rule provisions cannot be employed in that way.
129 Sutherland and Company v Hannevig Brothers Ltd [1921] 1 KB 336 concerned an award made by an arbitrator of a monetary amount plus costs as between the owner of a vessel and Sutherland. Subsequently, the solicitors for Sutherland corresponded with the arbitrator, noted that certain other costs were not included and stated their "impression" that the additional costs were omitted by reason of an accidental slip or omission, which the arbitrator had power to correct pursuant to a statutory slip rule. The arbitrator agreed and delivered an amended award to include those costs. The Court of the King's Bench set aside the amended award. Rowlatt J at 341 in addressing the scope and availability of the slip rule said:
I cannot pretend to give a formula which will cover every case, but in this case there was nothing omitted by accident: the arbitrator wrote down exactly what he intended to write down, though it is doubtful what that really meant when considered from a legal point of view. But what the arbitrator has really done here is to assume a jurisdiction to expound what he had purportedly written down, and that, I think he cannot do.
130 In separate reasons, McCardie J agreed. Donaldson MR approved of the reasoning of Rowlatt J in Mutual Shipping Co of New York v Bayshore Shipping Co of Monrovia [1985] 1 All ER 520 (Mutual Shipping) at 526, which was also an arbitration case and in doing so distinguished between "having second thoughts or intentions and correcting an award of judgment to give true effect to first thoughts or intentions", where in his view second thought cases are not within the slip rule. He continued:
Neither an arbitrator nor a judge can make any claim to infallibility. If he assesses the evidence wrongly or misconstrues or misappreciates the law, the resulting award or judgment will be erroneous, but it cannot be corrected [under the slip rules]… The remedy is to appeal, if a right of appeal exists. The skilled arbitrator or judge may be tempted to describe this is an accidental slip, but this is a natural form of self-exculpation. It is not an accidental slip. It is an intended decision which the arbitrator or judge later accepts as having been erroneous.
131 That reasoning was referred to with approval in Tonab Investments Pty Ltd v Optima Developments Pty Ltd (2015) 90 NSWLR 268; [2015] NSWCA 287 (Tonab), where a magistrate exercising the Small Claims jurisdiction of the Local Court struck out a defence and entered judgment for the claimant in an amount slightly below the jurisdictional limit of the court. Subsequently, the magistrate made an order for indemnity costs in favour of the claimant. In doing so the magistrate overlooked that he did not have jurisdiction to award costs. When that mistake was realised, and upon further application by the claimant, the magistrate made an order purportedly pursuant to a slip rule to correct the first judgment by adding that the proceeding be transferred from the Small Claims Division to the General Division of the Court and with effect from the date of the original orders. The reason for making that order was that in the General Division there was jurisdiction to award costs. Those orders were the subject of an appeal to the District Court and then to the NSW Court of Appeal, which allowed the appeal. Ward JA, with whom Meagher and Leeming JJA agreed, held the magistrate had no power to invoke the slip rule in that way. Her Honour's characterisation of what occurred at [66] was:
…when the oral reasons are read in the light of the preceding debates it is difficult to avoid the conclusion that this was an ex post facto justification for what had earlier been done and was by then recognised to have been done beyond the jurisdiction of the court. This is the kind of ex post facto justification for the exercise of the slip rule of the kind recognised in [Mutual Shipping] as impermissible.
132 Following her reference to the passage from Donaldson MR in Mutual Shipping, Ward JA at [67] continued:
The slip rule does not permit the making of a correction solely for the purpose of expanding jurisdiction. In the context of considering the power of correction in the Arbitration Act 1889 (UK) 52 & 53 Vict c 49, which permitted correction of errors "arising from any accidental slip or omission", Rowlatt J in Sutherland and Company v Hannevig Bros Ltd [1921] 1 KB 336 held that the addition of particular words to the arbitrator's award to make clear that a particular amount was included within the amount covered by the award was an impermissible assumption of jurisdiction to expound the award…
133 Another example of impermissible use of slip rule provisions to correct or by-pass jurisdictional defects or limitations is Al Maha, where a Commissioner of the LEC made consent orders the effect of which was to grant an amended development consent for a proposal without first obtaining owner consent from an adjoining owner, which was necessary because an aspect of the approved development required the construction of an access driveway on the adjoining land. The statutory scheme required evidence of owner consent to the making of an application on all land the subject of the proposed development. The adjoining owner objected, commenced a proceeding in the Supreme Court and claimed the consent was invalid. Thereafter, a Commissioner purported to amend the impugned consent, in reliance on a slip rule, to remove from it the development work required to be undertaken on the adjoining land. The Court of Appeal quashed the amended consent. Preston CJ of LEC, with whom Basten and Leeming JJA agreed, applied the reasoning in Tonab, held the amendments to be substantive and then reasoned as follows at [271]- [274]:
The amendments to the order and conditions of consent by the slip rule decision were substantive, for the reasons submitted by Al Maha and summarised above. The amendments changed substantively the development to which consent was granted, by removing the construction of the driveway connection to provide permanent access to Hilts Road. The amendment of condition 1 sought to approve a plan of the development that did not exist at the time the Commissioner granted consent. The amended plan sought to describe different vehicular access arrangements for the development. The amendments changed the assessment and approval of the development. The assessment of vehicular access under cl 101(2) of the Infrastructure SEPP was affected by the amendments. One amendment of condition 115 imposed a requirement to obtain development consent for the construction of the driveway connection to Hilts Road, where as the consent granted by the Commissioner had authorised the construction of the driveway connection to Hilts Road.
The amendments sought to overcome the need to obtain the consent of Al Maha, as owner of land on which development is to be carried out, to the development application and thereby to give jurisdiction to the Court to grant consent to the development application. This attempt to cloak the Court with jurisdiction was beyond the power of the slip rule.
The slip rule decision was, therefore, not authorised by the slip rule and should be set aside.
I should also note that the slip rule decision did not cure the lack of jurisdiction caused by the Commissioner's failure to form the opinions of satisfaction under cl 4.6(4) of the [Canada Bay Local Environmental Plan 2013] necessary in order for the Commissioner to have power to grant consent to the development application. The slip rule decision was only intended to overcome the lack of jurisdiction to grant consent to development on Al Maha's land in the absence of Al Maha's consent as owner to the application. None of the slip rule amendments sought to, or could, overcome the jurisdictional error of the Commissioner in granting consent to the development application without first forming the necessary opinions of satisfaction under cl 4.6(4) of the [Canada Bay Local Environmental Plan 2013].
134 Each of these cases stand as authority for the general proposition that, despite the width and flexibility of slip rule provisions, they are not able to be deployed retrospectively to confer jurisdiction which did not exist in a court, a fortiori a court of inferior jurisdiction, when final orders were made. In a very useful text, Amending Final Judgments and Orders by John Tarrant (The Federation Press, 2010) at p 96, this very limitation of slip rule provisions is addressed. The author, without qualification, states: "[t]he slip rule is not available to amend orders in circumstances where it is later held by an appellant court that a statutory basis for exercising the original jurisdiction is invalid" and attention is drawn to the decision of Mansflield J in Rothmore Farms Pty Ltd (in liquidation) v Belgravia Pty Ltd (1999) 17 ACLC 1,676. In that case, his Honour made final declaratory orders in June 1999 shortly prior to the publication of the decision of the High Court in Re Wakim; Ex parte McNally (1999) 198 CLR 511, which struck down the purported investment of State jurisdiction in non-federal matters in federal courts. By a subsequent motion the respondents sought orders to set aside those declarations on several bases including the Federal Court slip rule. In refusing the motion, his Honour reasoned, inter alia, that 1677 - 1678 as follows:
In my judgment, the orders which were made were final orders determining the rights as between the parties. If they were made without jurisdiction at all on the part of the Court, the appropriate avenue is for Mr Cooper and Mr Turner, if they wish to complain of these judgments and orders, to adopt the normal course of appealing from them.
…
In my view, having made final decisions and orders in the action, and there being no circumstance brought to my attention which causes me to doubt that the orders as entered reflect those decisions and orders, I no longer have power to deal with those judgments and orders in the way which is sought on these motions.
135 Although his Honour was concerned with a different circumstance, the crux of his reasoning is consistent with my analysis that the slip rule cannot be retrospectively applied to invest jurisdiction that did not exist when the sequestration order was made in this case. And as the decision of Mansfield J discloses, there is a further reason why the primary judge erred in his purported application of the slip rule. Once the sequestration order was made on 28 October 2021, it was a final order, albeit made without jurisdiction. It must be accepted that it had a factual operation with consequences. On the face of it the Federal Circuit Court had exercised its jurisdiction under the Bankruptcy Act to make the order provided for at s 43 upon the creditor's petition presented to it. Thereafter, various provisions of the Bankruptcy Act commenced to operate; notably, the property of Victor vested in the Trustee (s 58), legal proceedings were stayed (s 60), the relation back day became fixed (s 115) and the Trustee assumed office (s 157). In this case those provisions operated from 28 October 2021. They did not cease to operate once it was appreciated that the sequestration order had been made upon an expired petition.
136 The factual existence of jurisdictionally flawed orders of inferior courts can raise conceptual difficulties. It is sometimes difficult to determine what consequences flow from a decision that is void, invalid, vitiated or without legal effect. On one view there may be none. Dixon J in Parisienne Basket Shoes Pty Ltd v Whyte (1938) 59 CLR 369 when considering a decision of justices made on an information laid out of time at 389 said:
Where there is a disregard of or failure to observe the conditions, whether procedural or otherwise, which attend the exercise of jurisdiction or govern the determination to be made, the judgment or order may be set aside and avoided by proceedings by way of error, certiorari, or appeal. But, if there be want of jurisdiction, then the matter is coram non judice. It is as if there were no judge and the proceedings are as nothing. They are void, not voidable (Cp. The Case of the Marshalsea).
(Footnote omitted.)
137 To similar effect is the judgment of Gummow and Gaudron JJ (when dealing with administrative decisions) in Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597; [2002] HCA 11 at [51]: "[a] decision that involves jurisdictional error is a decision that lacks legal foundation and is properly regarded, in law, as no decision at all". But difficulties of that character do not arise in this case because, although the sequestration order was made without jurisdiction, it did exist in fact. This Court in Jadwan Pty Ltd v Secretary, Department of Health and Aged Care (2003) 145 FCR 1; [2003] FCAFC 288 at [42] (Gray and Downes JJ) reasoned that Bhardwaj "cannot be taken to be authority for a universal proposition that jurisdictional error on the part of a decision-maker will lead to the decision having no consequences whatsoever. All that it shows is that the legal and factual consequences of the decision, if any, will depend upon the particular statute".
138 More recently this Court considered the issue in Bonesch v Somerville Legal (2021) 286 FCR 293; [2021] FCAFC 79, Katzmann, Markovic and Abraham JJ, a Bankruptcy Act case where a judge of the Federal Circuit Court, having denied the debtor procedural fairness, made a sequestration order. This Court set aside the sequestration order for jurisdictional error. It was then required to decide whether the petition had lapsed by operation of s 52(4) of the Bankruptcy Act. The Court concluded that it had not as "in fact" one of the three specified events at s 52(4) had occurred even though the making of the order was infected with jurisdictional error: [149]. The hearing of the petition was remitted to the Federal Circuit Court.
139 In reasoning to that result the Court placed reliance upon the decision of the NSW Court of Appeal in Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) (2019) 99 NSWLR 317; [2019] NSWCA 11 (Seymour Whyte) and in turn the reliance placed by that Court on what Gageler J said in Kable at [52], which relevantly was:
Yet a purported but invalid law, like a thing done in the purported but invalid exercise of a power conferred by law, remains at all times a thing in fact. That is so whether or not it has been judicially determined to be invalid. 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. The factual existence of the thing might have led to the taking of some other action in fact. The action so taken might then have consequences for the creation or extinguishment or alteration of legal rights or legal obligations, which consequences do not depend on the legal force of the thing itself. For example, money might be paid in the purported discharge of an invalid statutory obligation in circumstances which make that money irrecoverable, or the exercise of a statutory power might in some circumstances be authorised by statute, even if the repository of the power acted in the mistaken belief that some other, purported but invalid exercise of power is valid.
(Citations omitted.)
140 In Seymour Whyte, Leeming JA at [29], and after referencing the judgment of Gageler J, stated:
The fact that the decisions beyond jurisdiction, and may be said to be a "nullity", is not determinative of its status for the purposes of further legal analysis… 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…
141 At [175] Sackville AJA reasoned similarly.
142 However, the factual existence of the jurisdictionally ineffective sequestration order that was made in this case on 28 October 2021, does not provide a basis for the later application of the slip rule to retrospectively cure that defect. The slip rule may operate to correct or amend an order made by an inferior court which is within jurisdiction, but not for the purpose of giving effect to another order which does not have legal force as an order of the court. The slip rule order made in this case cannot be considered alone and in abstract. It was made in order to confer jurisdiction that did not exist when the sequestration order was made. To have operative effect, where the slip rule is deployed to confer jurisdiction, it must correct an earlier order so as to give legal effect to the primary order, otherwise there is simply nothing to correct which is the point made by Gaudron J in Emanuele at 139 in the passage which I have set out above. Put another way, the slip rule operates as a mechanism to correct orders made within jurisdiction and not, to adopt the language of Preston CJ of LEC in Al Maha, to "cloak the Court with jurisdiction" which did not exist when the primary order was made.