Richard Busuttil & Co Pty Ltd v Flint; In the Matter of Flint

The Substantive Ground of Opposition to the Petition 14 The relevant facts are: (a) The Petition was filed on 24 November 2011. (b) The Petition was first returned before a Registrar of the Federal Magistrates Court on 15 December 2011. On that occasion, it was adjourned to the Federal Magistrate's list on 20 February 2012. (c) On 20 February 2012, timetabling orders were made by the Federal Magistrate including an order which fixed the hearing of the Petition for 8 May 2012. (d) The hearing fixed for 8 May 2012 was vacated at the request of the respondent who cited ill health amongst other reasons as the basis for that request. On the same occasion, the matter was relisted for 13 June 2012. (e) On 13 June 2012, timetabling orders were made by the Federal Magistrate. (f) On 29 August 2012, a further timetabling order was made by the Federal Magistrate. The precise terms of that order were: THE COURT ORDERS THAT: 1. Written submissions of no more than 3 pages, for both CAG20/2011 and CAG61/2011, be filed by the respondent within 21 days. The matter will then be determined in Chambers based on the Affidavit material and Submissions of each party. (g) On 7 December 2012, the Federal Magistrate dismissed the respondent's challenge to the Bankruptcy Notice and made the orders in the Petition which I have extracted at [4] above. (h) On 7 February 2013, a Registrar of the Federal Magistrates Court ordered that the Petition file be transferred to this Court. (i) On 12 April 2013, I commenced hearing the Petition but, in order to allow the respondent one last opportunity to pay the debt which she owed to the applicant, adjourned that hearing to yesterday (6 June 2013). (j) Yesterday, when the matter was called on for hearing, the legal representative for the respondent sought yet a further adjournment for a period of four weeks. I refused that adjournment but adjourned the matter to 2.30 pm today. 15 The submissions made in support of the respondent's contention that the Federal Magistrate had no power to extend the life of the Petition in the manner in which he did on 7 December 2012 are satisfactorily captured in the summary which I have set out at [9] above. 16 The legal representative of the respondent amplified those submissions at the hearing before me today. She submitted that the question of power raised by the respondent's first contention had not been settled by the case of Griffiths v Boral Resources (Qld) Pty Ltd (2006) 154 FCR 554 (Griffiths v Boral Resources (Qld) Pty Ltd). She submitted that, in that case, the Full Court had not finally resolved whether the Federal Magistrates Court had power to extend the life of a Creditor's Petition after it had expired by invoking the slip rule and Rules of Court based upon the slip rule. She also submitted that, when proper regard is had to general principles, an inferior court such as the Federal Magistrates Court (now called the Federal Circuit Court of Australia) could not alter orders made by invoking some inherent power. She went on to submit that any rule of court made by such a "junior" court which permitted such amendment would not be valid because it would not be satisfactorily anchored in an appropriate inherent power. Accordingly, her ultimate submission was that the Federal Magistrate did not have the power to make the order which he made on 7 December 2012 extending the life of the Petition. 17 Counsel for the applicant, on the other hand, relied upon Griffiths v Boral Resources (Qld) Pty Ltd as authority for the proposition that the Federal Magistrate had the power under the slip rule to amend one of the orders which he had made earlier in 2012 in the fashion in which he did on 7 December 2012. 18 The parties having joined issue in the manner which I have outlined above, the critical question raised by the respondent's contention concerned the true import of the authority of Griffiths v Boral Resources (Qld) Pty Ltd. 19 Griffiths v Boral Resources (Qld) Pty Ltd is a decision of the Full Court of this Court and is binding upon me. It was handed down on 20 October 2006. The important facts are found in the headnote. There it is recorded that the respondent presented a Creditor's Petition against the appellant on 11 September 2003. That Creditor's Petition was heard by the Federal Magistrates Court on 11 November 2003. At the conclusion of the hearing, the Federal Magistrate said "I will reserve my decision." Sixteen months then passed. 20 On 15 March 2005, the Federal Magistrate gave reasons for making a sequestration order but sought submissions from the parties on his power to extend retrospectively the life of the Creditor's Petition. After receiving those submissions, on 2 August 2005, the Federal Magistrate made orders, among other things, retrospectively extending the time before the Creditor's Petition lapsed (in reliance on the slip rule) and sequestrating the appellant's estate. As is recorded in the headnote, the appellant appealed from that decision. 21 The judgment of the Full Court in Griffiths v Boral Resources (Qld) Pty Ltd is a unanimous judgment of the three judges who sat in that matter. After dealing with the facts, the Court examined the slip rule at 557-562 [7]-[33]. At 558 [11], the Court extracted r 16.05 of the Federal Magistrates Court Rules 2001 (Cth). Their Honours went on to note that it appeared that the respondent in Griffiths v Boral Resources (Qld) Pty Ltd had not relied upon r 16.05 before the Federal Magistrate. 22 Their Honours moved on to discuss O 35 r 7 of the Rules of this Court as it stood in 2006. At 558-559 [14]-[15], their Honours observed that O 35 r 7 reflected the inherent power of a superior court of record to correct an error in a decree or order. Their Honours referred to the case of Elyard Corp Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385 (Elyard). Their Honours specifically adverted to the fact that, in Griffiths v Boral Resources (Qld) Pty Ltd, the respondent submitted that the inherent power was not limited to superior courts of record but also was available to inferior courts. In that context, the Full Court referred to the decision of Needham J in Gikas v Papanayiotou [1977] 2 NSWLR 944 at 951C-D. The Full Court observed that, in the passage referred to, all of authorities relied upon by Needham J involved orders of superior courts. 23 At 559 [15], the Full Court recorded its scepticism in respect of the question of whether an inferior court could acquire a power akin to an inherent power such as the slip rule by the simple making of a rule of court to that effect. At 559 [15], the Court said: If there is no such inherent power, 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 absence of inherent power, it would be necessary to consider whether s 43 of the FMA confers such a power upon the Federal Magistrates Court. That question may depend upon the meaning of the words "as far as they are capable of application" in s 43(2)(b). Section 43 might be construed as conferring power to apply all of the Federal Court Rules or, alternatively, as only conferring power to apply such rules as the Federal Magistrates Court would be, itself, empowered to make. Although the appellant challenged the power of the federal magistrate to invoke O 35, r 7, the argument was not developed in any detail. For the reasons which follow it is not necessary that we consider that question. We assume for present purposes that the magistrate was entitled to invoke O 35, r 7. 24 The Full Court went on to note that Elyard was the primary relevant authority for the Court's purposes. At 559-560 [17]-[21], the Court discussed Elyard. In particular, at 560 [19]-[21], the Court said: 19 Lockhart J considered that there was authority for the following propositions concerning the operation of O 35 r 7(3): • that an order may be made nunc pro tunc after the expiry of the period specified in s 459R; • that such an order may be made "where the proposed amendment is one upon which no real difference of opinion can exist. It does not apply where the amendment is a matter of controversy; nor does it extend to mistakes that are the consequence of a deliberate decision"; • O 35 r 7(3) may be invoked irrespective of whether the order has been drawn up, passed and entered; • the application of the slip rule is not confined to giving effect to the intention of the judge at the time when the order was made or judgment given; it extends to the intention which the Court would have had, but for the failure that caused the accidental slip or omission; and • the rule also permits the correction of an order or decree where the omission results from the inadvertence of a party's legal representative. 20 In the same case, at 396, Lindgren J pointed out that since the order of 9 June was made by consent, it "necessarily contemplated that [the petition] for the winding up of Elyard would remain on foot and be capable of being determined after 9 June and at least down to 16 June. Likewise the Registrar, in making the orders. Otherwise, the consenting to and making of the orders were futile and nonsensical". 21 At 404-405 his Honour observed: The slip rule in O 35, r 7(3) should be read in the context of the preceding two subrules. Rule 7(1) gives the Court power to "vary or set aside a judgment or order before it has been entered". No limitations on or qualifications of this power are expressed. Rule 7(2) gives the Court power to vary or set aside a judgment or order even where it has been entered, but only in six situations specified in the subrule. The slip rule, r 7(3), applies whether a judgment or order has been entered or not. But as the scheme suggested by rules 7(1) and (2) might lead one to expect, the nature of the slip rule power, made available as it is in any case whatever where the judgment or order has been entered, is strictly confined. Unlike 7(1) and (2), rule 7(3) does not give a power to set aside or vary. It addresses only "clerical mistakes" in a judgment or order and "errors arising in a judgment or order from an accidental slip or omission". These are situations in which, when the mistake, slip or omission comes to light, one might expect the response "Of course, it must be attended to. It is obvious. It goes without saying" …. 25 At 561-562 [24]-[33], their Honours discussed a number of other cases, some of which seemed to run counter to the reasoning in Elyard. At 562 [29]-[33], the Court said: 29 The decision of the Full Court in Re Young; Ex parte Smith (1985) 5 FCR 204 establishes that there can be no extension pursuant to s 52 of the Bankruptcy Act once the petition has lapsed. However the Court (of which Lockhart J was a member) considered that there was no question of applying the slip rule in that case (at 209). In Elyard the Court addressed the slip rule, but in the context of winding up rather than bankruptcy. Although s 52 of the Bankruptcy Act serves substantially the same purpose as s 459R of the Corporations Act, there are potentially significant differences between the two sections. 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. 31 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. 32 Order 35, r 7(3) may be invoked only if there is, in a judgment or order: • a clerical mistake; or • an error, arising from an accidental slip or omission. 33 In the latter case, the rule contemplates a causal connection between the slip or omission and the error. If the rule is to be invoked in order to effect an extension of time beyond the time permitted by s 52 of the Bankruptcy Act or s 459R of the Corporations Act, then there must be a judgment or order to be corrected, and it must have been made within the prescribed time. The power is to correct, not to vary or set aside. There is no general power to relieve from the consequences of either section. 26 It is clear, it seems to me, that, even though the Full Court was uncomfortable with the proposition that the slip rule might be used to extend the life of a Creditor's Petition after its expiry notwithstanding the statutory requirement that an order for extension be made within the period of time stipulated in s 52(5) of the Bankruptcy Act (i.e. before the Creditor's Petition has expired), the Court nonetheless concluded that the slip rule was available in an appropriate case as the legal foundation for the grant of a post-expiry extension. 27 At 563 [34], the Full Court commenced an analyis of the concept of "judgment or order" and then considered whether or not, having regard to that analysis, there was a judgment or order to which the slip rule might attach. 28 In the end, the Court concluded that a statement made by a judicial officer to the effect that that officer was "reserving" his or her decision was not a judgment or order to which the slip rule could attach. 29 In addition, and notwithstanding that, strictly speaking, it was not necessary to do so, the Full Court went on to consider whether or not, on the assumption that the Federal Magistrate had made an order, the conditions precedent to the invocation of the slip rule had in fact arisen. The Court concluded that they had not. At 570-571 [68]-[69], the Court said: Was there an error, slip or omission? 68 Even assuming that the magistrate made an order on that date, we consider that the conditions precedent to the invocation of the slip rule did not arise. The only possible "error" would be the omission from the "order" of an extension pursuant to s 52 of the Bankruptcy Act. In that case it would be necessary to identify the accidental slip or omission which caused the error. The primary responsibility for making an application for such order rested upon the present respondent. Whether there was a slip or omission is a question of fact. In some cases, such as in Elyard, there may be direct evidence of an intention to make a relevant application, steps taken to bring about that result and a failure to carry the intention into effect. In other cases it may be possible to infer that such a step should have been taken, and that the failure to do so can properly be seen as an accidental slip or omission. Where the petition is likely to expire very shortly after the hearing, and prior to the preparation of a reserved judgment, such an inference may be available. 69 In the present case, the petition was presented on 11 September 2003 and heard on 11 November 2003. At the time at which judgment was reserved, almost 10 months remained until the expiry of the petition. In those circumstances, it cannot be inferred that the respondent ought to have applied for an extension of time, and that the failure to do so was an accidental slip or omission. There is also no reason to infer that the magistrate then expected that the judgment would be reserved for such a lengthy period of time. It cannot be said that he committed any accidental slip or omission. It is most unlikely that with 10 months to run, anybody would have anticipated that judgment might not be given within the lifetime of the petition. Perhaps, at some time prior to 11 September 2004, somebody should have realised that an extension might be necessary. Failure to take a step at that stage may have been a slip or omission, but no "error" in the "order" arose from it. 30 In my judgment, the Full Court in Griffiths v Boral Resources (Qld) Pty Ltd did not leave open the fundamental question as to whether or not, in the Federal Magistrates Court of Australia, the slip rule could be invoked to overcome the effect of s 52(5) of the Bankruptcy Act in an appropriate case. In my view, the Full Court quite clearly concluded (albeit by way of obiter dicta) that the slip rule could be used for that purpose. At the same time, it is fair to say that the Full Court expressed some disquiet about its conclusion. Ultimately, of course, the Court held that there was no judgment or order to which the slip rule could attach and, for good measure, also held that, even if there was such a judgment or order, there was no error, slip or omission within the meaning of the rule. 31 In the present case, there is one further fact which needs to be added to the facts which I have already set out. That is this: On 22 October 2012, the solicitor for the applicant wrote to the Associate to the Federal Magistrate. After recording that he had not received any submissions from the respondent as directed by the Federal Magistrate on 29 August 2012, the author of the letter said: In those circumstances the writer further presumes that a final decision will be made by his Honour in the near future. The purpose of this letter is to confirm: 1. that no further submissions were made by Ms Flint since the service of our client's submissions upon her; 2. whether or not, it might be appropriate to have this matter relisted for the purpose of bringing down that decision, and discussing the question of costs (if they should apply). Undoubtedly his Honour is aware, a petition for the bankruptcy of Ms Flint, was stayed as a result of her application to review. The writer is concerned with time running, to the extent that it has the validity of both the original bankruptcy notice and the petition which relies upon the bankruptcy, is maintained. Thank you for your assistance with regard to these issues. 32 It is thus apparent that the attention of the Federal Magistrate was drawn to the upcoming expiration of the Petition by means of the letter to which I have referred. 33 In my view, the Federal Magistrate made an order on 29 August 2012 within the meaning of "judgment or order" for the purposes of the relevant Rules of Court as discussed by the Full Court in Griffiths v Boral Resources (Qld) Pty Ltd. As at 29 August 2012, it was almost certainly incumbent upon the applicant to make an application to the Federal Magistrate to have the Petition extended. The letter to which I have referred at [31] above, although sent after 29 August 2012, makes clear, in my view, that the applicant creditor had intended to make the relevant application at the appropriate time, which, in the chronology which I have set out at [14] above, was 29 August 2012. As at 29 August 2012, the Petition was going to expire within a period of less than three months. Having regard to the complexity of the matter which was then before the Federal Magistrate, it was quite likely that he would not be in a position to deliver judgment before the expiration of the Petition. 34 The failure on the part of the applicant creditor to ensure that the Federal Magistrate covered the question of the expiration of the Petition in the orders which he made on 29 August 2012 seems to me to be properly characterised as an accidental slip or omission. Had the Federal Magistrate's attention been drawn specifically to the issue of the upcoming expiration of the Petition, he would undoubtedly have extended it on 29 August 2012. This is so, in my view, because the need for the extension arose from the multiple applications made by the respondent to have the Bankruptcy Notice set aside which were, as at that date, still in the course of being determined. 35 I am satisfied that the present circumstances fall squarely within the circumstances which the Full Court, in Griffiths v Boral Resources (Qld) Pty Ltd, reasoned would attract the operation of the slip rule. 36 For these reasons, I reject the submission made on behalf of the respondent that the Federal Magistrate had no power to extend the life of the Petition on 7 December 2012 as he purported to do. 37 Accordingly, I order that: (1) A sequestration order be made against the estate of Denise Charlene Flint. (2) Frank Lo Pilato be appointed as trustee of the bankrupt estate of Denise Charlene Flint. (3) The applicant creditor's costs of the Petition be taxed and paid out of the estate of the respondent debtor, Denise Charlene Flint, in accordance with the Bankruptcy Act. 38 I note that the date of the act of bankruptcy is 27 October 2011 and that the act of bankruptcy is non-compliance with Bankruptcy Notice number 1479 of 2011 issued on 3 March 2011 and served on 4 April 2011 the time for compliance with which was extended to 26 October 2011 by order of the Federal Magistrates Court of Australia. I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster.