FEDERAL COURT OF AUSTRALIA

Endresz v Commonwealth of Australia [2019] FCAFC 197

ORDERS

THE COURT ORDERS THAT:

1.    The parties deliver a copy of the reasons of the Full Court published today to the appellant’s trustee in bankruptcy (Trustee) by 4.00 pm on 18 November 2019.

2.    Leave be granted to the Trustee to file and serve submissions, not exceeding five pages in length, in relation to the form of the orders proposed to be made to dispose of this appeal and the costs incurred by or remuneration due to the Trustee as a result of Order 1 made on 15 March 2019 sequestrating the appellant’s estate by 4.00 pm on 22 November 2019.

3.    Leave be granted to the appellant and the respondent to file and serve submissions in reply to any submissions served by the Trustee in accordance with Order 2 or addressing the proposed orders as to costs referred to at [137] of the joint reasons of Rares and Markovic JJ, not exceeding five pages in length, by 4.00 pm on 29 November 2019.

4.    If submissions are filed in accordance with Orders 2 or 3 and none of the parties or the Trustee requests that there be an oral hearing, the form of orders to be made will be determined on the papers.

5.    If no submissions are filed in accordance with Orders 2 or 3 the following orders be made with effect from 2 December 2019:

(a)    The appeal be allowed.

(b)    Order 4 made by the Federal Circuit Court of Australia on 18 May 2018 in proceeding CAG24/2017 and orders 1, 2 and 3 made by the Court on 15 March 2019 in proceeding ACD45/2018 be set aside and in lieu thereof the following orders be made:

(i)    The Court declares that the Creditor’s Petition filed on 12 April 2017 lapsed on 11 April 2018 pursuant to s 52(4) of the Bankruptcy Act 1966 (Cth).

(ii)    There be no order as to costs.

(c)    The respondent pay 50% of the appellant’s costs of the appeal.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS

THE COURT ORDERS THAT:

1.    The parties deliver a copy of the reasons of the Full Court published today to the appellant’s trustee in bankruptcy (Trustee) by 4.00 pm on 18 November 2019.

2.    Leave be granted to the Trustee to file and serve submissions, not exceeding five pages in length, in relation to the form of the orders proposed to be made to dispose of this appeal and the costs incurred by or remuneration due to the Trustee as a result of Order 1 made on 15 March 2019 sequestrating the appellant's estate by 4.00 pm on 22 November 2019.

3.    Leave be granted to the appellant and the respondent to file and serve submissions in reply to any submissions served by the Trustee in accordance with Order 2 or addressing the proposed orders as to costs referred to at [137] of the joint reasons of Rares and Markovic JJ, not exceeding five pages in length, by 4.00 pm on 29 November 2019.

4.    If submissions are filed in accordance with Orders 2 or 3 and none of the parties or the Trustee requests that there be an oral hearing, the form of orders to be made will be determined on the papers.

5.    If no submissions are filed in accordance with Orders 2 or 3 the following orders be made with effect from 2 December 2019:

(a)    The appeal be allowed.

(b)    Order 4 made by the Federal Circuit Court of Australia on 18 May 2018 in proceeding CAG23/2017 and orders 1, 2 and 3 made by the Court on 15 March 2019 in proceeding ACD42/2018 be set aside and in lieu thereof the following orders be made:

(i)    The Court declares that the Creditor’s Petition filed on 12 April 2017 lapsed on 11 April 2018 pursuant to s 52(4) of the Bankruptcy Act 1966 (Cth).

(ii)    There be no order as to costs.

(c)    The respondent pay 50% of the appellant’s costs of the appeal.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS

THE COURT ORDERS THAT:

1.    The parties deliver a copy of the reasons of the Full Court published today to the appellant’s trustee in bankruptcy (Trustee) by 4.00 pm on 18 November 2019.

2.    Leave be granted to the Trustee to file and serve submissions, not exceeding five pages in length, in relation to the form of the orders proposed to be made to dispose of this appeal and the costs incurred by or remuneration due to the Trustee as a result of Order 1 made on 15 March 2019 sequestrating the appellant's estate by 4.00 pm on 22 November 2019.

3.    Leave be granted to the appellant and the respondent to file and serve submissions in reply to any submissions served by the Trustee in accordance with Order 2 or addressing the proposed orders as to costs referred to at [137] of the joint reasons of Rares and Markovic JJ, not exceeding five pages in length, by 4.00 pm on 29 November 2019.

4.    If submissions are filed in accordance with Orders 2 or 3 and none of the parties or the Trustee requests that there be an oral hearing, the form of orders to be made will be determined on the papers.

5.    If no submissions are filed in accordance with Orders 2 or 3 the following orders be made with effect from 2 December 2019:

(a)    The appeal be allowed.

(b)    Order 4 made by the Federal Circuit Court of Australia on 18 May 2018 in proceeding CAG26/2017 and orders 1, 2 and 3 made by the Court on 15 March 2019 in proceeding ACD43/2018 be set aside and in lieu thereof the following orders be made:

(i)    The Court declares that the Creditor’s Petition filed on 12 April 2017 lapsed on 11 April 2018 pursuant to s 52(4) of the Bankruptcy Act 1966 (Cth).

(ii)    There be no order as to costs.

(c)    The respondent pay 50% of the appellant’s costs of the appeal.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS

THE COURT ORDERS THAT:

1.    The parties deliver a copy of the reasons of the Full Court published today to the appellant’s trustee in bankruptcy (Trustee) by 4.00 pm on 18 November 2019.

2.    Leave be granted to the Trustee to file and serve submissions, not exceeding five pages in length, in relation to the form of the orders proposed to be made to dispose of this appeal and the costs incurred by or remuneration due to the Trustee as a result of Order 1 made on 15 March 2019 sequestrating the appellant's estate by 4.00 pm on 22 November 2019.

3.    Leave be granted to the appellant and the respondent to file and serve submissions in reply to any submissions served by the Trustee in accordance with Order 2 or addressing the proposed orders as to costs referred to at [137] of the joint reasons of Rares and Markovic JJ, not exceeding five pages in length, by 4.00 pm on 29 November 2019.

4.    If submissions are filed in accordance with Orders 2 or 3 and none of the parties or the Trustee requests that there be an oral hearing, the form of orders to be made will be determined on the papers.

5.    If no submissions are filed in accordance with Orders 2 or 3 the following orders be made with effect from 2 December 2019:

(a)    The appeal be allowed.

(b)    Order 4 made by the Federal Circuit Court of Australia on 18 May 2018 in proceeding CAG25/2017 and orders 1, 2 and 3 made by the Court on 15 March 2019 in proceeding ACD44/2018 be set aside and in lieu thereof the following orders be made:

(i)    The Court declares that the Creditor’s Petition filed on 12 April 2017 lapsed on 11 April 2018 pursuant to s 52(4) of the Bankruptcy Act 1966 (Cth).

(ii)    There be no order as to costs.

(c)    The respondent pay 50% of the appellant’s costs of the appeal.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

RARES AND MARKOVIC JJ:

1    There are four appeals before the Court, one commenced by each of Allan Endresz (Mr Endresz), Dawn Endresz, Jozsef Endresz and William Forge. On 15 March 2019 orders were made sequestrating the estate of each appellant: reasons for decision were published in Commonwealth of Australia v Endresz [2019] FCA 301 (Endresz Federal Court) and orders made thereafter. It is from those orders that the appellants now appeal. The Commonwealth of Australia (Commonwealth) is the respondent to each of the appeals.

background

2    There has been a long history of litigation between the Commonwealth and the appellants, commencing in 1999 with a proceeding in the Supreme Court of the Australian Capital Territory (Supreme Court) between, eventually, the Commonwealth as plaintiff, 27 defendants and one third party (Supreme Court Proceeding). In that proceeding the Commonwealth sought to recover a sum of money paid from its funds to two companies and thereafter disbursed to or for the benefit of various companies and individuals. The appellants were among the defendants to that proceeding.

3    The hearing of the Supreme Court Proceeding commenced in June 2008. On 1 August 2013 Refshauge J delivered judgement. A number of defendants, including the appellants, were found liable to the Commonwealth on various bases: see Commonwealth v Davis Samuel Pty Ltd (No 7) (2013) 282 FLR 1; [2013] ACTSC 146 (Davis Samuel (No 7)). On 21 November 2014 final orders were made in the Supreme Court Proceeding. Those orders included that the following amounts be paid by each of the appellants to the Commonwealth:

(1)    Allan Endresz – $18,633,178.47;

(2)    Dawn Endresz – $12,715,615.17;

(3)    Jozsef Endresz – $18,633,178.47; and

(4)    William Forge – $12,715,615.17,

see Commonwealth of Australia v Davis Samuel Pty Limited (No 8) [2014] ACTSC 312 (Davis Samuel (No 8)).

4    In December 2014 some of the defendants to the Supreme Court Proceeding filed appeals against the orders made in that proceeding. In June 2016 those appeals were dismissed for want of prosecution: Davis Samuel Pty Ltd v Commonwealth of Australia [2016] ACTCA 22.

5    Thereafter five of the defendants to the Supreme Court Proceeding, including the appellants, applied for the final judgment and orders made in that proceeding to be set aside ex debito justitiae in the inherent jurisdiction of the court (Set Aside Applications). In January 2017 Refshauge ACJ dismissed those applications: Commonwealth of Australia v Davis Samuel Pty Limited (No 11) (2017) 316 FLR 159; [2017] ACTSC 2 (Davis Samuel (No 11)).

6    On 16 August 2016 each of the appellants was served with a bankruptcy notice issued on 4 August 2016. The bankruptcy notices were based on the amount that each appellant had respectively been ordered to pay to the Commonwealth in the Supreme Court Proceeding. The appellants were unsuccessful in their attempts to have the bankruptcy notices set aside.

7    On 12 April 2017 the Commonwealth filed four creditor’s petitions in the Federal Circuit Court of Australia (FCCA), one in relation to each of the appellants, in each case seeking a sequestration order under s 43 of the Bankruptcy Act 1966 (Cth) (Act) based on the failure by the appellants to satisfy the bankruptcy notices served on each of them.

8    On 28 April 2017 the appellants filed notices stating grounds of opposition to the creditor’s petitions, each raising the same four grounds.

9    On 18 July 2017 a judge of the FCCA (who we will refer to as the FCCA Judge) made orders in chambers fixing the creditor’s petitions for hearing on 13 and 14 March 2018.

10    On 6 February 2018 the FCCA Judge made orders in chambers vacating the hearing of the creditor’s petitions on 13 and 14 March 2018 and re-listing them for hearing on 17 and 18 May 2018 (February Orders). At the time the Associate to the FCCA Judge sent an email to the parties in the following terms:

I refer to the above matter which is currently listed for Hearing commencing on 13 March 2018.

Due to administrative difficulties and judicial availability, issues which have only just come to light, it has become impossible to maintain the currently listed Hearing dates in this matter.

It is with regret that Chambers advises that the matter has been re-listed to 17 and 18 May 2018 for Hearing.

I confirm that Orders made in Chambers on even date reflecting the updated trial directions have issued on the ECF.

Chambers sincerely apologises for the inconvenience caused and thanks the parties for their understanding.

11    On 11 April 2018 the creditor’s petitions expired: see s 52(4) of the Act.

12    On 18 April 2018 the appellants each filed an application in a case in the FCCA seeking summary dismissal under r 13.10 of the Federal Circuit Court Rules 2001 (Cth) (FCC Rules) and summary judgment pursuant to s 17A(2) of the Federal Circuit Court of Australia Act 1999 (Cth) of the creditor’s petitions (Summary Dismissal Applications).

13    On 19 April 2018 the Commonwealth filed four applications in a case seeking relief under r 16.05(2)(h) of the FCC Rules in relation to each of the creditor’s petitions (Slip Rule Applications) in the following terms:

The Order of 6 February 2018 adjourning the matter be varied, pursuant to rule 16.05(h) of the Federal Circuit Court Rules 2001 (Cth), by the addition of an Order pursuant to s 52(5) of the Bankruptcy Act 1966 (Cth), that the date of the expiration of which the creditor’s petition dated 12 April 2017 presented by the Applicant will lapse is the later of 18 May 2018 or the date of handing down of any judgment determining the application.

14    On 18 May 2018 the FCCA Judge made orders in each proceeding including an order that:

The Orders of 6th February 2018 be varied, pursuant to the slip rule (Rule 16.05(2)(h) of the Federal Circuit Court Rules 2001 (Cth)), by the addition of an Order pursuant to section 52(5) Bankruptcy Act 1966 (Cth), that the expiration date (or lapsing) of the Creditor’s Petition (presented by the Commonwealth), dated 12th April 2017, shall be not later than 12th April 2019.

see Commonwealth of Australia v Endresz [2018] FCCA 1543 (Endresz FCCA).

15    On 21 June 2018 the FCCA Judge made orders transferring the proceedings to this Court for hearing.

16    On 8 March 2019 the primary judge made orders requiring the parties to bring in short minutes of order to give effect to his Honour’s reasons, which were published on that day: see Endresz Federal Court. On 15 March 2019 a sequestration order was made in relation to the estate of each appellant.

17    On 5 April 2019 the appellants filed their notices of appeal. The grounds of appeal concern both the reasons in Endresz FCCA and those in Endresz Federal Court. Before proceeding to consider them it is convenient to set out a summary of those reasons.

The reasons in Endresz FCCA

18    There were two sets of interlocutory applications before the FCCA: the Slip Rule Applications and the Summary Dismissal Applications.

19    The FCCA Judge’s reasons insofar as they deal with the Slip Rule Applications are relevant to ground 1 of the appeals. In relation to those applications, after setting out a chronology of events and the parties’ respective submissions, the FCCA Judge held that an extension of time of the creditor’s petitions pursuant to r 16.05(2)(h) of the FCC Rules and s 52(5) of the Act should be granted. His Honour’s reasons for reaching that conclusion are summarised below.

20    First, the FCCA Judge referred to the principles set out by a Full Court of this Court (Allsop CJ, Katzmann and Perry JJ) in Flint v Richard Busuttil & Company Pty Ltd (2013) 216 FCR 375 (Flint) at [26]-[33] and [44]-[46] and found that those principles applied to the case before him.

21    Secondly, at [36] of his reasons the FCCA Judge found, based on the chronology of events, that the following propositions should be accepted:

(a)    The original Orders of the Court setting down the matter for hearing contemplated the currency of the petition. All parties (and the Court) accepted this;

(b)    The later Orders, made in Chambers on 6th February 2018, which re-scheduled the hearing of the matter (as notified to the parties) because of the Court’s listing difficulties, could (or should) never realistically be considered as doing anything, directly or indirectly, to thwart the determination of the Creditor’s Petition, including the Respondents’ opposition to it, other than by a hearing;

(c)    Further, as was put in the course of argument, if the slip-rule is not applied here, the Court’s own action in changing the hearing date, without having regard to that date being after the expiration of the petition, would be to frustrate the proper determination of the proceeding. Put another way, it would border on the bizarre that the Court’s own actions would be the vehicle to frustrate the proper and orderly determination of the Creditor’s Petition;

(d)    But for the Court, on 6th February 2018 by Orders in Chambers, (i) having to amend previously made Orders and thereby to change the hearing dates because of the Court’s inability to keep the March hearing dates, (ii) inadvertently omitting to include an Order to extend the expiration date of the petition, and (iii) re-scheduling the hearing to a date after the [current] expiration of the petition with the intention to hear and determine the Creditor’s Petition, there would be no need to seek relief under the slip rule and the hearing would proceed in the usual way. However, in the light of the factors mentioned, in my view, the clear intention of the Court on 6th February was to ensure that the hearing, then listed for March 2018, should proceed in the usual manner on dates in May in order to deal with the substantive matter, being the Creditor’s Petition before it. Accordingly, the course undertaken by the Court, to re-list the hearing but not to consider the extension of time in relation to the petition, patently did not reflect the Court’s intention. The matters I have just set out, in my view, clearly fall within what the Full Court detailed in Flint at [26].

(emphasis added.)

22    Thirdly, the FCCA Judge noted that while relief under an alternative sub-rule of the FCC Rules was neither sought nor argued, the comments in Deputy Commissioner of Taxation v Statewide Contracting Qld Pty Ltd (No 2) [2015] FCA 690 at [9]-[10] and [15]-[17] concerning the operation of r 39.05(e) of the Federal Court Rules 2011 (Cth) (Federal Court Rules), which had an equivalent in r 16.05(2)(e) of the FCC Rules, applied equally to the case before his Honour, albeit that the statutory context was different.

23    Fourthly, the FCCA Judge noted that the February Orders were never intended to “thwart” the hearing of the creditor’s petitions and that their sole intention was to remedy the inability of the court to hear the creditor’s petitions on the previously scheduled dates and to give appropriate notice to the parties in circumstances where no earlier dates than those given in the February Orders were available. At [41]-[42] the FCCA Judge said:

41.    In Elyard, at 392, Lockhart J stated that “the purpose of the slip rule is to avoid injustice.” The Full Court in Flint referred directly to this comment at [46]. In the circumstances of the matter here, that is precisely the object, use and intent of the slip rule in relation to the Orders made by the Court on 6th February 2018.

42.    Further, in the course of argument before me, Mr Endresz said that if an Application had been made at or immediately after the Court’s February 2018 Orders that re-scheduled the hearing dates, the extension of time would have been undoubtedly granted without issue. He made similar statements on a number of occasions during the hearing, his clear purpose being to highlight, in his view, the incompetence of the Commonwealth’s lawyers having had ample time to make an Application and to seek an extension of the expiration of the petition. He noted further that the extension could have been for up to two years without issue. It was only at the very end of the hearing when I asked him to confirm what I had earlier understood his position to be that he back-tracked somewhat, saying that any extension of time would have been subject to any opposition or opposing arguments he may have put before the Court.

24    Finally, the FCCA Judge noted that in addition to the matters set out in his reasons he otherwise accepted the Commonwealth’s submissions and preferred them to those of the appellants. His Honour concluded that the exercise of the court’s discretion was clear in the circumstances of the matter and that the orders sought by the Commonwealth should be made.

The reasons in Endresz Federal Court

25    At the hearing before the primary judge the appellants sought to have the Court go behind the judgments in Davis Samuel (No 7), Davis Samuel (No 8) and Davis Samuel (No 11). The primary judge observed that the fundamental proposition which the appellants sought to advance before him was that the only issue to be resolved by the Supreme Court and the only issue in relation to which that court could make orders, was whether the monies had been paid without authority by the Commonwealth to two entities: CTC Resources and Davis Samuel. That issue depended upon the application of the principles set out in Auckland Harbour Board v The King [1924] AC 318 (Auckland Harbour Board).

26    At [6] the primary judge summarised the four arguments advanced by the appellants, which expanded upon that fundamental proposition, as follows:

•    [whether] the pleaded causes of action as set forth in the Sixth Amended Statement of Claim, being the form of pleading upon which the hearing before the Supreme Court was conducted, fell within the “nature of action” set forth in the Amended Originating Application, that being referred to as “the indorsement on the writ”;

•    the manner in which Refshauge J dealt with and resolved other causes of action, albeit not causes of action of advanced against the Respondents before this Court, so undermined his Honour’s reasoning and judgment that reliance could not be placed upon the manner in which the liability of the present Respondents was resolved;

•    [whether] there were “inconsistent judicial findings” as between the findings made by Foster AJ in ASIC v Forge & Ors [2002] NSWSC 760 and the findings made by Refshauge J; and

•    the manner in which Refshauge J resolved other causes of action, albeit not causes of action of immediate relevance to the present respondents, was such as to cause his Honour’s judgment and orders to be so “tainted” that no reliance could now be placed upon the orders made as against the present four Respondents. The “taint” was such, so it was argued, to render the judgments and orders ultra vires.

27    At [12]-[16] of his reasons, insofar as they were relevant, the primary judge by reference to the reasons in Davis Samuel (No 7) set out the background and findings made by Refshauge J against the appellants (referred to by the primary judge as “the Respondents” or the “now-Respondents”), as follows:

12    The facts start with Mr David Muir, who was an employee of a company, Callform Pty Ltd. He was a contractor to the Department of Administrative Services and later to the Department of Finance and Administration. During his contract with these Departments there occurred two transfers of moneys to a company in which he had a financial or other interest. One transfer, in April 1998, was the transfer of $6 million to CTC Resources NL. This became known as “the April Funds”. The other transfer, in September 1998, was a transfer of $2.75 million to a bank account in the name of Davis Samuel, a partnership of two companies – Kamanga Holdings Pty Ltd and Quancorp Pty Ltd. This became known as “the September Funds”.

13    Of relevance is the involvement of the four Respondents to the present proceedings before this Court. Each was a defendant to the proceedings before Refshauge J:

•    Mr Allan Endresz, being the fifth defendant;

•    Ms Dawn Endresz, being the eighth defendant and the wife of Mr Jozsef Endresz;

•    Mr Jozsef Endresz, being the seventh defendant and the father of Mr Allan Endresz; and

•    Mr William Forge, being the ninth defendant.

Each of these now-Respondents had been, at various points of time, directors of CTC Resources NL. CTC Resources NL was the sixth defendant.

14    In [Davis Samuel (No7)] Refshauge J summarised the claims made by the Commonwealth as against all the defendants to that proceeding as follows (at 44 to 45):

        THE COMMONWEALTH CLAIMS

[249]    The Statement of Claim filed by the Commonwealth is a complex, but carefully drafted document showing, in a relatively easy to follow format, the nature of the claims that have been made. It is divided into parts which are helpful to comprehension, and the allegations against each defendant are then set out in a section relating to that defendant, even though some of the facts and circumstances show that more than one defendant is liable in respect of a particular transaction.

   [250]    There are five causes of action pleaded:

(1)    The principal cause of action is in respect of a breach of fiduciary duty said to be owed by Mr Muir and Callform to the Commonwealth, being the making of the April payment and the September payment. I shall deal with that claim below.

Out of this claim, it is alleged that a number of the defendants either received funds, which were improperly paid in breach of the fiduciary duty owed by Mr Muir and Callform to the Commonwealth, or assisted in the transfer of funds which constituted the breach. Again, this will be dealt with further below.

(2)    Secondly, it is alleged that Mr Muir and Callform breached their equitable duties of confidence which they owed to the Commonwealth by misusing confidential information which had been entrusted to them. It is then asserted that those defendants who participated in the breach of confidence were liable in equity to the Commonwealth as constructive trustees of property acquired as a result.

(3)    Thirdly, it is claimed that the April payment and the September payment were made without power and that they were, therefore, money had and received by CTC Resources (the April Funds) and Davis Samuel or the Davis Samuel Partnership (the September Funds) and, as paid illegally and ultra vires, could be recovered by the Commonwealth and traced into the hands of the holder of those moneys.

(4)    Fourthly, the Commonwealth claimed that the moneys paid in the April payment and the September payment were paid under an operative mistake and that the Commonwealth is entitled to restitution of the funds.

(5)    Finally, the Commonwealth claimed that the making of certain accounts payable invoice entries by Mr Muir, which enabled the making of the April payment and the September payment, was conduct in trade and commerce, and was misleading and deceptive, in contravention of s 52 of the Trade Practices Act 1974 (Cth). To the extent that certain of the defendants participated in the breach of duty of Mr Muir and Callform, it is claimed that, under s 84 of the Act, these contraventions were made with the authority of those defendants.

          His Honour then set forth the defences, and commenced this exposition as follows (at 45):

THE DEFENCES

[251]    The defendants who were active parties (that is, excluding those defendants with whom the Commonwealth has settled, and Kamanga and Quancorp, which are in liquidation), save for TNG, each filed defences which were in relevantly identical terms. I shall refer to these defendants as the Primary Defendants. TNG filed a quite different defence. I shall deal with the proceedings in respect of TNG separately.

[252]    So far as the Primary Defendants are concerned, they admitted formal matters, such as the registration of companies, but refused to admit all the other allegations in the Statement of Claim.

Each of the Respondents to the present proceeding were what Refshauge J described as “active parties”.

15    Justice Refshauge, in his reasons for decision, separately addressed the claims against “certain of the Defendants”, including the Respondents to the present proceeding in this Court: [Davis Samuel (No7)] [2013] ACTSC 146 at [2017] to [2165], (2013) 282 FLR at 282 to 299. The findings made by his Honour centre – at least in part – upon a series of four resolutions passed at a meeting held on 23 October 1998. His Honour summarised the allegations made in respect to these resolutions as follows:

The improvidence of the 23 October Resolutions

[1362]    The 23 October Resolutions were decisions made by de facto directors of TNG who had not been validly appointed. TNG says, in these proceedings, that the 23 October Resolutions were not in the interests of TNG and, indeed, were against its interests in that they resulted in its impoverishment. The Primary Defendants disagree and say that the transactions, made in accordance with the resolutions, were for the benefit of TNG. The Commonwealth pleaded that parts of the transactions flowing from the 23 October Resolutions were:

(1)    a scheme devised by Mr Allan Endresz, Mr Jozsef Endresz, Mr Muir, Mr Forge and Mr Cain for their personal benefit;

(2)    a scheme devised by Mr Muir and Mr Forge to purchase, at greater than market value, the options in Kanowna Lights, from which they stood to derive a personal benefit;

(3)    not a genuine commercial transaction;

(4)    not transactions that Mr Muir and Mr Forge could believe were genuine commercial transactions;

(5)    not consistent with a genuine commercial transaction.

TNG Ltd, formerly known as Hallmark Gold NL, was the twenty-seventh defendant.

16    His Honour ultimately expressed his conclusions in respect to “certain of the Defendants” as follows:

Conclusion of the claim by TNG

[2165]    Having regard to the nature of the 23 October Resolutions, their effect, the circumstances in which they were passed and the context as noted above, and the transactions which gave effect to them, I am satisfied that:

(1)    Mr Muir, Mr Forge and Mr Clark breached their fiduciary duties to TNG by passing the 23 October Resolutions and implementing them to the extent they did so;

(2)    Mr Allan Endresz and Mr Cain both knew that Mr Muir, Mr Forge and Mr Clark were breaching their fiduciary duties to TNG by passing the 23 October Resolutions and implementing them to the extent they did so;

(3)    Mr Allan Endresz and Mr Cain assisted Mr Muir, Mr Forge and Mr Clark in breaching their fiduciary duties to TNG by passing the 23 October Resolutions and implementing them to the extent they did so; indeed, they could be said to have knowingly induced or procured them to breach their duty;

(4)    Mr Jozsef Endresz and Mrs Dawn Endresz knowingly assisted Mr Muir, Mr Forge and Mr Clark breach their fiduciary duties to TNG by causing CTC Resources to sell shares in Kanowna Lights at a gross overvalue to TNG and thereby benefitting from the transaction made in breach of those duties;

(5)    Mr Jozsef Endresz assisted Mr Muir, Mr Forge and Mr Clark breach their fiduciary duties by causing Kamanga to sell options in Kanowna Lights at a gross overvalue to TNG and thereby benefitting from the transaction made in breach of those duties.

These findings include the relevant findings made against the four Respondents to the present proceeding. Other than by reference to one or other of the four arguments now presented for resolution by this Court, none of these findings were put in issue for the purposes of the present proceeding. Nor was the quantification of the relief which flowed from these findings put in issue in the present proceeding. The existence of the fiduciary duties; the breaches; the knowledge or assistance provided; and the quantification of the liabilities were thus accepted by the Respondents – subject only to the resolution of their four arguments.

28    The primary judge made two salient observations. First his Honour observed that a “curious feature” of the proceedings before him was that the appellants advanced “no submission that Refshauge J erred in making any of his findings as to the legal and factual basis upon which any of them was held to be liable and [made] no submission as to any error in the quantification of that liability” other than:

… the errors said to have been committed by Refshauge J in resolving claims that did not fall within the terms of the Amended Originating Application; errors as to the manner in which his Honour resolved causes of action against other defendants to the proceeding before the Supreme Court, those errors being said to have “tainted” that part of the judgment dealing with the liability of the Respondents to the present proceeding; and the argument as to “inconsistent judicial findings”.

29    The primary judge thus noted that it followed that, if each of the arguments relied on as a reason to go behind the judgments failed, the findings about the appellants’ liability would stand unimpeached.

30    Secondly, his Honour observed that in considering each of the appellants’ arguments it was necessary to be reminded that the task faced by the Court was not to consider “whether the judgment should be set aside as upon an appeal” but “whether the debt on which it is based is truly a basis for the making of a sequestration order”, quoting Ramsay Health Care Australia Pty Ltd v Compton (2017) 261 CLR 132 (Ramsay Health Care) at [54].

31    The primary judge concluded that on the facts before him none of the four arguments advanced by the appellants provided any or sufficient reason to go behind the judgment and orders of the Supreme Court and that in “truth and reality” there remained a debt owing to the Commonwealth. His Honour addressed each of the appellants’ arguments in detail.

32    The first issue raised by the appellants concerned the amendments to the statement of claim. The appellants contended that the causes of action ultimately advanced against them in the sixth amended statement of claim, which was the final form of that pleading, went beyond the indorsements in the amended originating application. That is, the amendments made to the originating application did not keep up with those made to the statement of claim, a deficiency which was said to render the Supreme Court Proceeding and judgment a nullity or, put another way, the deficiency was such that the Court could not be satisfied as to the existence of the debt owed to the Commonwealth.

33    The primary judge noted that the same argument was raised before the Supreme Court and that in Davis Samuel (No 11) Refshauge ACJ concluded that the causes of action as pleaded did not go beyond the terms of the indorsement and that, if that conclusion was wrong, his Honour further concluded that:

(1)    any deficiency in the indorsement in the amended originating application did not render the proceeding a nullity as any deficiency was a procedural irregularity; and

(2)    the appellants had lost any entitlement to make an application pursuant to O 69 r 2 of the Supreme Court Rules 1937 (ACT) (ACT Rules) to have the judgment set aside.

34    The indorsement on the amended originating application was set out at [27] of the primary judge’s reasons as follows:

(underlining in original.)

35    The appellants argued that the only pleading in the sixth amended statement of claim which could properly fall within the terms of the amended originating application was that set out in (a), being a payment “without the authority of the [Commonwealth]” and that, no matter what other causes of action were pleaded in a statement of claim and irrespective of the manner in which a hearing was conducted and how long the proceeding may have taken, the court lacked any power or jurisdiction to make any order giving effect to any claim for relief other than one which fell within the principles in Auckland Harbour Board. The primary judge noted that, on this approach, paragraphs (b) and (c) of the amended originating application were nothing more than “a foreshadowed means of giving effect to any liability that may have arisen by reason of monies being paid ‘without authority’”.

36    The primary judge observed that, according to Refshauge ACJ, the causes of action pleaded in the sixth amended statement of claim were within the “metes and bounds” of the indorsement of the amended originating application. His Honour then referred to the analysis and findings of Refshauge ACJ set out in Davis Samuel (No 11) which led to that conclusion. The primary judge found those reasons to be persuasive and thus concluded that the terms in which the amended originating application were expressed did not confine the only causes of action that could be pleaded to a cause of action concerning payments of money without authority.

37    Quoting Renowden v McMullin (1970) 123 CLR 584 his Honour observed that “the indorsements on the writ did not ‘define, nor necessarily form part of the definition of the issues for trial’” and that it is the “statement of claim which ‘will in its finally amended form determine the issues for trial’”. Relevantly, the primary judge reiterated that the appellants made no submissions that the legal and factual issues as resolved by the Supreme Court did not fall within the terms of the sixth amended statement of claim; that the findings made in Davis Samuel (No 7) about the basis upon which each of the appellants had been found to be liable were not open on the evidence before the court; or that those findings were not findings open to be reached given the manner in which the hearing was conducted.

38    The primary judge thus found that the argument advanced on behalf of the appellants provided no reason to go behind the judgments and orders that had found each of them liable and no reason to conclude other than that they are indebted to the Commonwealth and that the Court could be satisfied as to the existence of that indebtedness. His Honour also found that any error made by the Supreme Court, assuming that there was an error in concluding that the claims advanced in the sixth amended statement of claim were within the metes and bounds of the amended originating application, provided no sufficient reason to question the manner in which that court resolved the claims for relief set out therein.

39    The primary judge then considered the second of the two issues posed in Davis Samuel (No 11), which focused upon the appellants’ contention that the sixth amended statement of claim was a nullity because of the asserted deficiency in the indorsement. The primary judge noted that, given Refshauge ACJ’s conclusions that the causes of action against each of the appellants fell within the “metes and bounds” of the indorsement on the amended originating application, it was unnecessary to resolve that issue but Refshauge ACJ nonetheless did so, providing the following three reasons for rejecting the appellants’ submission:

(1)    any failure to amend the amended originating application was an irregularity and not a nullity;

(2)    the appellants had lost the right to have the proceeding set aside for an irregularity pursuant to O 69 r 2 of the ACT Rules because they had “not made this application within a reasonable time and made it after taking significant steps in the proceedings”; and

(3)    the appellants had waived the irregularity.

40    The appellants took issue with each of these reasons before the primary judge. The primary judge briefly addressed the appellants’ arguments but expressed his agreement with the reasons provided by Refshauge ACJ in Davis Samuel (No 11).

41    The primary judge then turned to consider the appellants’ third argument which is the subject of appeal ground 3. That argument concerned whether there was an inconsistency between the judgment and final orders, on the one hand, in Davis Samuel (No 7) and Davis Samuel (No 8) and, on the other, in the findings of fact made in ASIC v Forge [2002] NSWSC 760. As appeal ground 3 is no longer pressed, we do not propose to set out his Honour’s reasons for rejecting this ground. In summary, the primary judge found that the fundamental problem confronting the appellants was that they had failed to establish the basis upon which they asserted the inconsistency and dismissed the argument as being one without substance.

42    The primary judge then addressed the second and fourth arguments advanced by the appellants, which his Honour observed overlapped.

43    At [62]-[63] the primary judge summarised the appellant’s arguments as follows:

62    The arguments had at their core:

•    the recurring reliance placed upon the pleadings as set forth in the Sixth Amended Statement of Claim going beyond that which was permitted by the terms of the Amended Originating Application – such that the proceeding before the Supreme Court was little more than a farce to the extent that that Court purported to resolve claims such as breach of fiduciary duty, those claims having nothing to do with an argument as to money being paid by the Commonwealth without authority; and

•    irregularities or inconsistency in the manner in which Refshauge J resolved claims separate and distinct from the claims against the Respondents.

The reliance placed by the Respondents upon the confining nature of the Amended Originating Application has been rejected and can be placed to one side for present purposes. It adds nothing to the second and fourth arguments.

63    Instances of perceived deficiencies in the manner in which Refshauge J resolved claims separate and distinct from the claims against the present Respondents can be found (by way of example) in:

•    the observation in the January 2017 judgment that breach of confidence claim was “perhaps, the least adequately specified cause of action in the indorsement as it does not in terms refer to the involvement of other of the defendants” ([2017] ACTSC 2 at [154], (2017) 316 FLR at 189); and

•    the conclusion in the August 2013 judgment that “CTC Resources, Kamanga, Quancorp and Davis Samuel are liable to the Commonwealth under the Trade Practices Act” ([2013] ACTSC 146 at [1777], (2013) 282 FLR at 252) and the conclusion in the January 2017 judgment that the claim under the Trade Practices Act “failed” ([2017] ACTSC 2 at [157], (2017) 316 FLR at 189).

These perceived deficiencies in the reasoning of Refshauge J, it is said on behalf of the Respondents, so “taint” the balance of his Honour’s judgment that reliance cannot be placed upon the manner in which he resolved the claims against the Respondents. Taken together with the confining nature of the Amended Originating Application, it is said the deficiencies render the balance of his Honour’s judgment and orders ultra vires. The judgment and orders, so the submissions ran, were such that no reliance can be placed upon them as to found any conclusion as to the liability of the Respondents to the Commonwealth.

44    The primary judge rejected those arguments.

45    His Honour noted that whether or not the matters relied on by the appellants exposed error on the part of Refshauge J, any error in resolving causes of action and claims against other defendants to the Supreme Court Proceeding provided no reason to question the resolution of the claims against the appellants. The primary judge said that the careful manner in which Refshauge J resolved those claims only served to provide a firm foundation for concluding that the appellants were indebted to the Commonwealth, especially where they made no separate challenge to the factual or legal basis upon which Refshauge J reached his conclusions in Davis Samuel (No 7).

46    The primary judge also questioned the basis upon which the appellants’ arguments proceeded before him, observing that a difference in terminology employed by a judge in reasons for a decision when dealing with different causes of action against different defendants does not, of itself, occasion any reason to conclude that the orders made against the appellants were ultra vires or so “tainted” that reliance could not be placed upon those orders by the Commonwealth: at [66].

47    The primary judge thus rejected each of the grounds relied on by the appellants. His Honour concluded that, while the judgments in Davis Samuel (No 7) and Davis Samuel (No 8) were not “conclusive in bankruptcy”, in the circumstances of the case before it, the Court should “accept the judgment as satisfactory proof of the petitioning creditor’s debt”. His Honour noted that that state of satisfaction was only reinforced in circumstances where the appellants did not put in issue, other than by reference to their four arguments, the facts as found by Refshauge J, the existence of the duties owed or the legal analysis applied to those facts. His Honour held that none of the four arguments relied on by the appellants provided any reason for the Court not to be satisfied that there was an indebtedness which could found the making of sequestration orders, that he was so satisfied and the sequestration orders should be made.

the appeals

48    The notices of appeal filed by the appellants are in relevantly identical terms. Only grounds 1, 2 and 4 were pressed. They provide:

1.    There was no power to make the Sequestration Orders in circumstances where:

a.    by orders made in chambers on 6 February 2018, a learned judge of the Federal Circuit Court vacated the hearing of the creditor’s petition then fixed for 13-14 March 2018 and listed the creditor’s petition for hearing on 17-18 May 2018;

b.    pursuant to s 52(4) of the Bankruptcy Act 1966 (Cth) (the Act), the creditor’s petition lapsed on 11 April 2018 prior to the making of any sequestration order;

c.    on 19 April 2018, the Commonwealth applied to have the Federal Circuit Court’s orders of 6 February 2018 varied pursuant to r 16.05(2)(h) of the Federal Circuit Court Rules 2001 (Cth) (the slip rule) so as to include an order pursuant to s 52(5) of the Act extending the time for the lapsing of the creditor’s petition to the expiry of 18 May 2018 or the determination of the proceedings;

d.    by orders made on 18 May 2018, the learned judge of the Federal Circuit Court granted the Commonwealth’s application and ordered that the orders of 6 February 2018 be varied, pursuant to r 16.05(2)(h) of the Federal Circuit Court Rules 2001 (Cth), by the addition of an order pursuant to s 52(5) of the Act, that the expiration date (or lapsing) of the Creditor’s Petition (presented by the Commonwealth), dated 12th April 2017, shall be not later than 12 April 2019 (the Slip Rule Order); and

e.    in making the Slip Rule Order, the learned judge of the Federal Circuit Court erred in concluding that r 16.05(2)(h) of the Federal Circuit Court Rules 2001 (Cth) could be relied upon in the circumstances to vary the earlier in chambers orders of 6 February 2018 by the addition of the Slip Rule Order, so as to extend the life of the creditor’s petition pursuant to s 52(5) of the Act notwithstanding the earlier expiry of that petition, such that the Slip Rule Order should be set aside.

2.    In making the Sequestration Orders, the learned primary judge erred in concluding that there was a debt owed by the Appellant to the Commonwealth (Reasons for Judgment of 8 March 2019 (Reasons) at [35]), in circumstances where:

a.    the causes of action on which the judgment debt in favour of the Commonwealth against the Appellant was based (the Judgment Debt), namely claims against the Appellant for equitable compensation as an accessory to breaches of fiduciary duties by agents of the Commonwealth, exceeded the scope of the indorsement on the Amended Originating Application filed in the proceedings in the Supreme Court of the Australian Capital Territory (ACTSC Proceedings) (cf Reasons at [34], [40]); and

  b.    by reason of the matters in subparagraph (a) above:

i.    the jurisdiction of the Supreme Court of the Australian Capital Territory to determine those claims was never properly invoked (by way of any relevant process in that Court in respect of those claims), with the result that the Judgment Debt is liable to be set aside ex debito justitiae, and could not have formed a basis upon which the learned primary judge could be satisfied that the Appellant was indebted to the Commonwealth (cf Reasons at [35]-[36], [41]);

ii.    alternatively, the Judgment Debt was and remains irregular, and irrespective of whether or not the irregularity might be capable of rectification in the ACTSC Proceedings, could not have formed a basis upon which the learned primary judge could be satisfied that the Appellant was indebted to the Commonwealth (cf Reasons at [38]-[44]).

4.    In making the Sequestration Orders, the learned primary judge erred in failing to consider, as a separate basis on which the Sequestration Orders ought not to have been made, any of the submissions of the Appellant that, in circumstances where it was held in the ACTSC Proceedings that the payments made by the Commonwealth to the original recipients were ultra vires, illegal and void, there could be no liability in equity on the part of the Appellant as an accessory in relation to those transactions.

49    We turn to consider each ground.

Ground 1

50    By ground 1 the appellants contend that the primary judge had no power to make the sequestration orders on 15 March 2019 in circumstances where the creditor’s petitions on which those orders were based had lapsed as at 11 April 2018. This was said to be because the purported exercise of the slip rule by the FCCA on 18 May 2018 to revive the petitions after their earlier expiry was ineffective.

Statutory framework and legal principles

51    Subsections 52(4) and (5) of the Act set out when a creditor’s petition lapses and when a court can make an order extending the life of a petition. They provide:

(4)    A creditor’s petition lapses at the expiration of:

(a)    subject to paragraph (b), the period of 12 months commencing on the date of presentation of the petition; or

(b)    if the Court makes an order under subsection (5) in relation to the petition—the period fixed by the order;

unless, before the expiration of whichever of those periods is applicable, a sequestration order is made on the petition or the petition is dismissed or withdrawn.

(5)    The Court may, at any time before the expiration of the period of 12 months commencing on the date of presentation of a creditor’s petition, if it considers it just and equitable to do so, upon such terms and conditions as it thinks fit, order that the period at the expiration of which the petition will lapse be such period, being a period exceeding 12 months and not exceeding 24 months, commencing on the date of presentation of the petition as is specified in the order.

(emphasis added.)

52    Rule 16.05(2) of the FCC Rules sets out when the FCCA can set aside or vary its judgments or orders. It provides:

(2)    The Court or a Registrar may vary or set aside a judgment or order after it has been entered if:

(a)    it was made in the absence of a party; or

(b)    it was obtained by fraud; or

(c)    it is interlocutory; or

(d)    it is an injunction or for the appointment of a receiver; or

(e)    it does not reflect the intention of the Court; or

(f)    the party in whose favour it was made consents; or

(g)    there is a clerical mistake in the judgment or order; or

(h)    there is an error arising in the judgment or order from an accidental slip or omission.

(emphasis added.)

53    Rule 16.05(2)(h) of the FCC Rules, which was relied on by the FCCA Judge to amend the February Orders to include an order under s 52(5) of the Act, is known as the “slip rule”.

54    In Re Young; ex parte Smith (1985) 5 FCR 204 a Full Court of this Court (Bowen CJ, Sweeney and Lockhart JJ) considered subss 52(4) and (5) of the Act observing that they could not be considered independently of one another and that they ensured that a petition had no life beyond a maximum of 24 months from its presentation, with the ability to extend it beyond its automatic life of 12 months provided an order is made by the court. Their Honours recognised that there were sound reasons why there should be certainty surrounding the duration of a creditor’s petition. At 207 the Full Court said:

… 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 person or 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).

55    The application of the slip rule in the context of subss 52(4) and (5) of the Act has been considered on a number of occasions. Before setting out those authorities, it is instructive to first refer to the purpose underlying the slip rule itself. That was summarised in Flint at [26] as follows:

The purpose of the slip rule is to avoid injustice to litigants (Gould v Vaggelas (1985) 157 CLR 215 at 274-275) by ensuring that the Court’s judgment or order reflects its intention at the time the order was made or the judgment was published, or reflects the intention that the Court would have had but for the failure that caused the accidental slip or omission: Symes v Commonwealth (1987) 89 FLR 356 at 357. It may be exercised to prevent unintended consequences of the order and in this way give effect to the Court’s intentions: Newmont Yandal Operations Pty Ltd v J Aron Corporation and Goldman Sachs Group Inc (2007) 70 NSWLR 411 (Newmont Yandal) at [116], [185], [194]. It is not confined to errors or omissions of the Court; it extends to errors or omissions resulting from the inadvertence of a party’s legal representative: L Shaddock & Associates Pty Ltd v Parramatta City Council (No 2) (1982) 151 CLR 590 (Shaddock) at 594-595.

56    In Luck v University of Southern Queensland [2018] FCAFC 102 (Logan, Mortimer and Charlesworth JJ) (Luck) at [116]-[137] Charlesworth J summarised the development of the line of authority in relation to the application of the slip rule both in the context subss 52(4) and (5) of the Act and the analogous provision found in the Corporations Act 2001 (Cth) (Corporations Act) and its predecessors, the most notable of which is Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385 (Elyard). Her Honour’s summary included:

117    In Re Hibbard; Ex parte Playroom Pty Ltd [1988] FCA 689, as in the present case, the hearing of a creditor’s petition was adjourned to a date falling outside the 12 month period prescribed in s 52(4) of the Bankruptcy Act. The petitioning creditor applied to have the adjournment order corrected so as to add to it an order extending the period under s 52(5). Pincus J referred to Shaddock. His Honour emphasised that the slip rule in question may be invoked in circumstances where the error or omission was not a mis-recording of the Court’s own intention, but rather a failure on the part of counsel to ask for an ancillary order which the Court would plainly have made at the time, had it been asked to consider its necessity. His Honour nonetheless dismissed an application for a corrective order to be made in the exercise of the Court’s implied jurisdiction to correct a slip or omission. Such an order would, his Honour said (at 4):

… be an infringement of the requirement in s 52(5) that any order extending the petition be made before the expiration of the period of twelve months commencing on the date of presentation of the petition. It does not appear to me that, on the proper construction of s 52(5), an order for extension may lawfully be made, after the twelve months’ period has ended, predated so as to fall within the twelve months.

118    Einfeld J expressed a contrary view in Re Jago; Ex parte Paal Frame Pty Ltd [1989] FCA 52 and later in Re Van Coblyn; Ex parte Mercantile Credits Limited [1992] FCA 1018.

…

120    The question next arose in a bankruptcy context in Re Agushi; Ex parte Farrow Mortgage Services Pty Ltd (in liq) and another [1994] FCA 641; (1994) 126 ALR 704. Consistent with the reasoning of Pincus J in Hibbard, Heerey J held that the power to correct a slip or omission in an order could not prevail against the express provision of s 52(5) of the Bankruptcy Act. His Honour said (at 706):

I do not doubt that in the present case there was an honest and understandable inadvertence. If there were power to extend, I would not hesitate to exercise it. But it does seem to me that the Act specifically provides for petitions to be heard and determined within 12 months, and by s 52(5) expressly provides that extension can only be granted within that period.

121    The judgments in both Hibbard and Agushi were disapproved by the Full Court in Elyard (Lockhart J at 392 – 393, Lindgren J at 404, Black CJ agreeing at 387 – 388). The grounds of appeal in that case challenged the validity of an order made at first instance by Sheppard J pursuant to O 35 r 7(3) of the now superseded Federal Court Rules 1979 (Cth), equivalent in terms to what is now r 16.05(2)(h) of the FCCA rules and r 39.05(h) of the FCA rules. The order appealed against had the purported effect of correcting an earlier order so as to extend, with retrospective effect, the life of an application to wind up a company pursuant to s 459R of the Corporations Law as then in force. It provided:

(1)    An application for a company to be wound up in insolvency is to be determined within 6 months after it is made.

(2)    The Court may by order extend the period within which an application must be determined, but only if:

(a)    the Court is satisfied that special circumstances justify the extension; and

(b)    the order is made within that period as prescribed by subsection (1), or as last extended under this subsection, as the case requires.

(3)    An application is, because of this subsection, dismissed if it is not determined as required by this section.

   (4)    An order under subsection (2) may be made subject to conditions.

122    On appeal, the company submitted that an order made pursuant to the relevant slip rule could not retrospectively overcome the express requirement of s 459(2) and the self-executing effect of s 459R(3). Rejecting the same arguments at first instance, Sheppard J said in DDB Needham Sydney Pty Ltd v Elyard Corporation Pty Ltd [1995] FCA 603; (1995) 131 ALR 213 (at ALR 223):

With respect to Pincus J [in Hibbard], I fail to see why the conclusion he has arrived at should follow. If the slip rule is capable of applying, as I think it is, and it has the retrospective effect which Pincus J appears to acknowledge and which the High Court in Shaddock decided it has, I do not see why there is any difficulty, in an appropriate case, in making an order which will overcome the slip. Otherwise, there is no purpose in the rule.

123    His Honour continued:

The fact that a statute such as s 52 of the Bankruptcy Act or s 359R of the [Corporations Law] has the effect which it does, does not touch the court’s power to correct, in a proper case, its own order. That is part of its practice and procedure. Nothing in s 459R(3) suggests that the court was not to continue to be able to maintain a correct record of its proceedings. After all the error or omission which needs correction may be that of the court, not the party. What needs to be emphasised is that it is the position after the correction of the order has been made that must be looked at. Only then can one tell whether the particular provision has been complied with.

124    In separate judgments, Lockhart and Lindgren JJ applied the same reasoning. The argument advanced by the appellant company rested, Lockhart J said, on a “misconception of the nature and operation of the slip rule”. His Honour held (at 391):

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. Hence, the order made by the primary judge in this case, on 9 August 1995, corrected the order of the Registrar of 9 June 1995, which then operated with full force from 9 June 1995. 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.

125    His Honour said that the operative orders in Hibbard and Agushi were not the later correcting orders, but the earlier orders as corrected, notwithstanding that the later orders were made outside the statutory time limit. As corrected, the earlier orders “spoke from dates within the time period” (at 393) and the requirement that the extending order be made before the lapse of the petition was thereby fulfilled.

126    After noting (at 402) that authorities decided in the bankruptcy jurisdiction of the Court did not “speak with one voice”, Lindgren J held (at 404) that the approach taken in Hibbard and Agushi did not adequately recognise “the true nature of the slip rule or the effect of the orders which it permits”. His Honour placed considerable emphasis on the terms of O 35 r 7(3) as then in force, which conferred a power to correct an order, as distinct from O 35 r 7(2) (which concerned a power, equivalent to that in issue in the present case, to vary or amend an order so as to reflect the intention of the Court). Lindgren J concluded (at 404 — 405):

What this analysis emphasises in the context of the facts of the present case is first, that there must have been an order made within the statutory period, and secondly, that an order under the slip rule in relation to such an order is appropriately seen not as varying it or setting it aside, but as merely correcting it by including an ancillary order which the Court and the parties intended to be included.

127    The correcting order in Elyard was made in factual circumstances similar to those arising in Hibbard and Agushi and, for that matter, in the present case: an order was made granting an adjournment of a hearing to a date beyond the statutorily prescribed period, the creditor in each case having omitted (by inadvertence) to apply for an order extending the period. It is apparent from the above passage that Lindgren J considered the slip rule in that case had been properly invoked to include an order which both the Court and the parties in fact intended, at the time of the earlier order, to be included. Lockhart J noted (at 391) that the slip rule extends to permit the correction of an order or decree where the omission results from the inadvertence of a party’s legal representative, and thus extends to give effect to the intention that the Court would have formed, but for the failure that caused the accidental slip or omission. To the extent that there is a difference between the reasons for judgment of Lockhart J and Lindgren J as to the scope of the slip rule in question, it is not resolved by the judgment of Black CJ, his Honour agreeing with the reasons given by both Lockhart and Lindgren JJ.

128    Elyard was decided under the Corporations Law as then in force. Strictly speaking, the reasoning of the Court is obiter insofar as it concerns the proper construction of the provisions of the Bankruptcy Act and their interrelation with the so-called slip rule in any of its express or implied forms. The decision has nonetheless been followed by single judges of this Court and a subsequent Full Court in the exercise of its bankruptcy jurisdiction, albeit with some expression of disquiet: Re Howell; Ex parte Commissioner of Taxation (1996) 70 FCR 261 (Burchett J); Komesaroff v Law Institute of Victoria [1997] FCA 965 (Heerey J); Matthews v Collett [2000] FCA 224 (Spender J); Re Langridge; Ex parte Bennett, Carroll & Gibbons [1998] FCA 879 (Kiefel J). These cases do not involve any consideration of the proper construction of any equivalent to r 16.05(2)(e) of the FCCA rules.

129    In Amorin Constructions Pty Ltd v Kamtech Electrical Services Pty Ltd (2008) 73 NSWLR 627, Hammerschlag J of the Supreme Court of New South Wales declined to follow Elyard on the basis that it was plainly wrong. That case concerned the interrelation between s 459R of the Corporations Act 2001 (Cth) (equivalent to s 459R of the Corporations Law) and the slip rule in r 36.16 of the Uniform Civil Procedure Rules 2005 (NSW) (equivalent to what is now r 16.05(2)(h) of the FCCA rules). His Honour first acknowledged (at [54]) that the slip rule would operate to permit an order to be corrected or supplemented to reflect the actual outcome of the exercise by the Court of its discretion, but only where its orders do not accord with its actual actions or intentions. To that extent, his Honour held, s 459R of the Corporations Act did not exclude the operation of the rule.

130    His Honour continued (at [55] — [57]):

55    In Elyard Corporation (at 405), Lindgren J said: ‘It is of the greatest importance to distinguish between the availability of the slip rule and the exercise of discretion whether to make any order or a particular order under it’.

56    It seems to me that it is equally important to distinguish between the exercise of a discretion to correct an error so as to reflect the intention of the Court — or the intention that the Court would have had but for the failure that caused the accidental slip or omission — on the one hand, with the exercise by the Court of an initial special statutory discretion which the earlier Court omitted to exercise on the other.

57    An outcome that permits the latter to occur under the guise of the slip rule would, in addition to the difficulties identified above, undermine the clear policy dictates of Pt 5.4 of the Corporations Act (Cth), which require winding up applications to be dealt with promptly. That policy has recently been reaffirmed by the High Court in Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd (2008) 232 CLR 314 at 324 [17].

131    On the facts, Hammerschlag J held that neither the plaintiff creditor nor its advisers were conscious of the requirement for an extension of time under s 459(2) of the Corporations Act, and that the earlier presiding judge “clearly never had it in mind either” (at [8]). His Honour emphasised the importance of training focus on the precise words of the rule relied upon, rather than applying the terminology in the reasoning of prior case law (at [12]). The test was whether the mistake or omission was truly accidental within the meaning of the particular rule, such that if the question of extending the life of the winding up application had been drawn to the Court’s attention, an order would “at once have been made”: Hatton v Harris [1892] AC 547; Storey & Keers Pty Ltd v Johnstone (1987) 9 NSWLR 446 at 435 (McHugh JA).

132    The question next came before a Full Court of this Court in Griffiths v Boral Resources (Qld) Pty Ltd (2006) 154 FCR 554. In that case, a federal magistrate at first instance reserved judgment after the hearing of a creditor’s petition, but did not deliver judgment until after the period fixed in accordance with s 52(4) of the Bankruptcy Act had expired. The Court (Spender ACJ, Dowsett and Collier JJ) said 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.

133    The Court in Griffiths is to be understood as applying the reasoning in Elyard in its application to orders made pursuant to s 52(5) of the Bankruptcy Act. The slip rule invoked in that case was expressed in the same terms as that invoked in Elyard. Consistent with what was said by Lindgren J in Elyard, the Full Court in Griffiths held (at [33]) that for the rule to be invoked in order to retrospectively effect an extension of time under s 52 of the Bankruptcy 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 [s 52(4)].

134    On the facts, however, no order had been made within the statutory time frame that was capable of correction within the meaning of what was then r O 35 r 7(3): the mere reservation of judgment by the magistrate did not constitute an “order” within the meaning of the rule.

135    In Flint, the Full Court held that the evidence was insufficient to support an inference of error or omission either on the part of the creditor’s lawyer, or on the part of the magistrate at first instance. On the facts, it was unclear whether the magistrate would have exercised his discretion to extend the life of the creditor’s petition had he been asked to do so within the statutory period. Accordingly, there was no “accidental slip or omission” so as to enliven the power in r 39.05(g) or r 39.05(h) of the FCA rules in any event. The Full Court concluded (at [43]):

The above reasons make it unnecessary to reconsider Elyard in the light of the doubts expressed in Griffiths and the criticism of Hammerschlag J in Amorin.

136    It is apparent from this passage that the Full Court in Flint accepted a submission advanced by the appellant in that case to the effect that the reasoning in Griffiths was obiter. I respectfully agree. In each case the rule was not enlivened on its terms, and so its interrelation with the bankruptcy regime did not fall to be decided.

137    Finally, in Ramsay Health Care Australia Pty Ltd v Compton (2016) 247 FCR 387 (Rares, Gleeson and Markovic JJ) a primary judge made an order within the period prescribed by s 52(4) of the Bankruptcy Act extending the life of a creditor’s petition for an additional three months. The primary judge was held to have “intended” to make the order, albeit on the erroneous assumption that the Court retained the power to further extend the life of the period by a subsequent order. The Full Court held that the slip rule could not apply in the circumstances because the order was the product of an intentional decision (albeit based on error) and the order correctly reflected that intention. The slip rule under consideration in that case was expressed in the same terms as that considered in Elyard.

57    It is necessary to consider the decision in Luck in some further detail. The relevant facts were that on 22 March 2016 an order was made at the joint request of the parties adjourning the creditor’s petition to 31 May 2016. In the meantime, in accordance with s 52(4) of the Act, on 8 April 2016 the petition lapsed. On 23 May 2016 the respondent’s solicitors wrote to the court seeking by consent a further adjournment of the petition. On 30 May 2016 the court wrote to the parties noting that at the time the order adjourning the petition was made on 22 March 2016 the fact that the petition would lapse on 8 April 2016 was not brought to the registrar’s attention nor was he aware that was so and that as at the date of the order adjourning the petition it was the registrar’s intention that the petition remain current and be dealt with at the adjourned hearing. In the same email the parties were informed that on 31 May 2016 after the matter was called on for hearing the registrar intended to make an order under r 16.05(2)(e) of the FCC Rules varying the order of 22 March 2016 and providing for an extension of the life of the petition pursuant to s 52(5) of the Act “consistent with his intention at the time of the earlier order”. The parties were invited to appear on 31 May 2016 and to make any submissions in relation to the proposed order. On 31 May 2016 the registrar made the foreshadowed order.

58    Rule 16.05(2)(e) of the FCC Rules permits the court or a registrar to vary or set aside a judgment or order after it has been entered where it does not reflect the intention of the court (see [52] above). At the time the relevant order was made the FCC Rules did not include the slip rule now found in r 16.05(2)(h) of those rules. One of the issues before the Full Court was whether a registrar could make an order pursuant to r 16.05(2)(e) of the FCC Rules to retrospectively vary an order and thereby extend the life of a petition after the expiration of the period specified in s 52(4) of the Act.

59    There, as Logan J said (at [6]) the Full Court was not asked to, and did not, decide if the slip rule as expressed in r 16.05(2)(e) of the FCC Rules was inconsistent with s 52(5), and so could not be used to circumvent the effect of the statutory dismissal in s 52(4). Rather the only issue which the Full Court decided was whether the appellant, Ms Luck, had established that under r 16.05(2)(e), as a matter of fact, the registrar’s order made on 22 March 2016 reflected the intention of the parties to adjourn the hearing of the petition by consent to a date that they did not then realise was after the petition would have expired. This occurred in circumstances where no-one had adverted to the operation of subss 52(4) and (5).

60    Ms Luck’s argument did not challenge that the parties had intended that their petition would be heard on its merits on the adjourned date. She contended that the registrar had no power to make use of r 16.05(2)(e) because the Federal Circuit Court (Bankruptcy) Rules 2016 (Cth) (Bankruptcy Rules) had not delegated that Court’s powers under r 16.05(2)(e) to a registrar. Hence, when the registrar purported to exercise the slip rule under r 16.05(2)(e), he lacked any delegation authorising him to use that rule. In other words, in Luck the Full Court was not required to decide what r 16.05(2)(e) meant or whether, if the Bankruptcy Rules delegated the power to use r 16.05(2)(e) to a registrar, he made any error in his use of that power. Logan J at [3] and Mortimer J at [54] dismissed that ground of appeal. But, although they agreed that this was sufficient to dispose of Ms Luck’s appeal, they offered comments, in obiter dicta on the construction of r 16.05(2)(e), and whether there was any error in the registrar’s use of it (see [62] below). Charlesworth J took a different view, namely that the registrar had not made an order on 22 March 2016 that was capable of correction under r 16.05(2)(e) (see at [158]). She would have dismissed the appeal on another basis.

61    Therefore, the differing views of the Full Court in Luck on the availability of the slip rule to extend the life of a petition under subss 52(4) and (5) of the Act after its expiry created no binding decision on how the slip rule as expressed in r 16.05(2)(e) of the FCC Rules and those sections interacted. The majority suggested that the registrar could employ r 16.05(2)(e) of the FCC Rules as he did to retrospectively vary the order made on 22 March 2016. Mortimer J (with whom Logan J agreed) said at [68] that, on the evidence, the situation in that case was not one where there would have been any independent discretion to be exercised had the error or omission not occurred. Her Honour observed that there was no reason why the principles set out in Flint at [46] (see [80] below) should not apply in circumstances where the parties “with one voice” sought an adjournment of the petition pending the determination of other proceedings and that, despite Ms Luck now seeking to enforce the 12-month limitation period, at the relevant time her focus was on an adjournment of the proceeding so she could pursue her other appellate options. At [70] her Honour said:

Accordingly, Ms Luck’s argument that the only “manner and method” which could be used to extend the life of the creditor’s petition was the method in s 52 (that is, extension before expiry of the 12 month period) should be rejected. It is rejected because, as Lockhart J pointed out in Elyard, what in law is occurring when the slip rule is employed is that the exercise of power is located at the time the omission or failure occurred: see Elyard at 391F-G. Here, that was 22 March 2016, within the 12 month period.

62    As noted above, although not raised on the appeal Mortimer J considered the proper construction of r 16.05(2)(e) of the FCC Rules. Her Honour said that she was not inclined to give that sub-rule a construction limited to “intention ‘in fact’”, as Charlesworth J expressed it at [143] and [153], which she considered was too narrow and tended to frustrate the purpose of the slip rule which, in her Honour’s opinion, r 16.05(2)(e) was designed to reflect. Mortimer J was of the opinion that “the ‘intention’ is referrable to the whole of the situation the judge or registrar foresaw as existing after the making of the orders” and could comprehend what her Honour described as a “positive circumstance”, being orders that were intended to be made but not made in the terms contemplated; and a “negative circumstance”, being a failure to make orders or parts of orders although there was a clear contemplation of the situation which would exist after the orders were made.

63    Charlesworth J expressed a contrary view about whether the registrar could make an order pursuant to r 16.05(2)(e) of the FCC Rules based on the facts of the case. Her Honour thought that the word “intention” in r 16.05(2)(e) should be construed as an intention actually formed upon consideration of an issue arising for determination and would not extend to a situation where the court has by its or a party’s error failed to consider the issue at all. Her Honour also found that r 16.05(2)(e) could operate retrospectively where it was available on the facts, provided the later variation of the earlier order was not otherwise precluded by the enactment under which the substantive issue fell to be decided. Her Honour held that the primary judge misconstrued r 16.05(2)(e) by assuming it was as wide in its meaning as the rule applied in Elyard and thus that there was error affecting the conclusion that the power conferred by the rule was enlivened in the circumstances of the case.

64    Commencing at [153] of her reasons, Charlesworth J set out why in her opinion, based on the facts, the registrar could not make an order pursuant to r 16.05(2)(e) of the FCC Rules. Those facts included that: as at the date of the adjournment, the registrar had wrongly assumed that the petition would not expire and so did not turn his mind to that question; that wrong assumption was induced by the parties’ omission to draw the impending expiry of the petition to the registrar’s attention; and because of the parties’ omission, the registrar did not consider the matters he was required to consider under s 52(5) of the Act, including whether it was just and equitable to make an order extending the life of the petition. Her Honour concluded that the question of whether the retrospective operation of an order made pursuant to r 16.05(2)(e) of the FCC Rules was precluded by s 52(5) of the Act did not arise on the facts of the case.

65    In the course of expressing those views Charlesworth J also considered r 39.05(h) of the Federal Court Rules (equivalent to r 16.05(2)(h) of the FCC Rules, which commenced on 3 August 2017) observing, at [147], that this rule was cast in wider terms than r 16.05(2)(e) of the FCC Rules and may be invoked in at least two categories of case:

The first is that in which, by an accidental slip or omission, an earlier order does not reflect the actual intention of the Court in respect of a question that was in fact considered and determined by the Court at the time that the earlier order was made. The second is that in which, by reason of an accidental slip or omission, an earlier order does not reflect the intention that the Court would have formed in relation to a question, had the necessity to determine the question been appreciated at the earlier time. In either case, the accidental slip or omission resulting in the error may be that of a party and not that of the Court itself.

66    Her Honour said that the intention referred to in the correspondence from the court to the parties was “the intention to make an order pursuant to s 52(5) of the [Act] that the Registrar would have formed had the potential for the lapse of the petition been brought to his attention, and so ensure that the petition would ‘remain current’ as at the adjournment date”. Her Honour thought that, while r 16.05(2)(e) of the FCC Rules was not available to be exercised, consistent with the reasoning in Elyard, the facts were sufficient to enliven the power under r 39.05(h) of the Federal Court Rules.

67    As Charlesworth J considered that, on the facts, r 39.05(h) of the Federal Court Rules was available to be exercised by the primary judge, her Honour was of the opinion that, in the circumstances of the case, the Court on appeal ought to do what the primary judge should have done so as to do justice between the parties and bring finality to the case. However, given that the appeal was otherwise to be dismissed on a different basis, Charlesworth J did not embark on that course.

Consideration

68    The appellants contended that the primary judge had no power to make the sequestration orders on 15 March 2019 because the purported exercise of the slip rule on 18 May 2018 by the FCCA Judge to revive the creditor’s petitions after their expiry was ineffective. The appellants said that was so for two reasons. First, they said there was no power to invoke the slip rule in the context of s 52(5) of the Act to vary the February Orders; and secondly if, contrary to that contention there was a power to invoke the slip rule, they said that in the circumstances of this case the power could not be invoked by the FCCA Judge.

69    As to the first issue, the appellants submitted that the clear and unambiguous terms of s 52(5) of the Act preclude the operation of the slip rule to make an order extending the life of a creditor’s petition nunc pro tunc after its expiry where the accidental slip or omission is a failure to exercise the discretion to extend the life of the petition before it lapses.

70    In oral submissions, senior counsel for the appellants explained that the appellants do not contend that there is no scope for operation of the slip rule in the context of s 52(5) of the Act. Rather, they say that where it is evident from the judge’s reasons that he or she has considered the test and there has been the exercise of the necessary statutory discretion then there is power to invoke the slip rule to vary an order. That is, the slip rule is available to vary an earlier order and make an order pursuant to s 52(5) of the Act where the necessary statutory discretion was exercised at the time of the making of the earlier order and there was, for example, an error or omission in recording the order.

71    The appellants submitted that here, by the time the FCCA Judge sought to exercise the discretion he said he would have exercised but for the inadvertence, the jurisdictional fact upon which the statutory discretion depended, the existence of the creditor’s petitions, had ceased to be and, at that point, the FCCA Judge had no power to make the order. This they said is the factor which sets s 52(5) of the Act apart from other situations in which the slip rule has been applied, for example in the award of statutory interest on judgments where there remained power to award interest at the time of exercise of the slip rule. For those reasons the appellants submitted that the obiter comments in Flint and Griffiths v Boral Resources (Qld) Pty Ltd (2006) 154 FCR 554 (Griffiths), insofar as they suggest that the slip rule might have had application in the circumstances of this case, should not be followed.

72    The appellants contend for a very narrow operation of the slip rule when applied in conjunction with s 52(5) of the Act such that resort could not be had to r 39.05(h) of the Federal Court Rules after a creditor’s petition had expired by operation of s 52(4) of the Act unless the discretion conferred by s 52(5) of the Act had in fact been exercised prior to that time. That construction confines the slip rule’s operation in the context of s 52(5) of the Act to cases of a clerical error or a failure in recording. While we accept that the slip rule will not be available in every case to vary an earlier order by including an order under s 52(5) of the Act, we do not accept the narrow operation urged by the appellants.

73    The starting point is that the slip rule is available to vary an order to address an accidental slip or omission arising from the inadvertence of the court or a party. The purpose of the rule is to avoid injustice to the parties by ensuring the court’s orders reflect its intention at the time the orders were made or reflect the intention that the court would have had but for the accidental omission. However, resort to the slip rule is not available as a matter of course. The court retains a discretion to refuse to make an order by invoking that rule if something has intervened which would mean that it was “inexpedient or inequitable that it be made”: L Shaddock & Associates Pty Ltd v Parramatta City Council [No2] (1982) 151 CLR 590 (Shaddock) at 597.

74    The line of authority set out at [56] above demonstrates that courts have been careful to ensure that the application of the slip rule is kept within principled constraints, given the public interest in the finality of litigation. Of course, the context in which the rule is sought to be applied is important. Where it is sought to vary an order by the application of the slip rule in circumstances where an independent discretion is or was required to be exercised had the order been made at the time it should have been, the ability to make an order under the slip rule has an added complexity.

75    The circumstances of this case illustrate the point. As noted at [51], a creditor’s petition will lapse at the expiration of 12 months commencing on the date of presentation of the petition unless an order has been made under s 52(5) of the Act extending its life. If such an order is made, the petition will lapse at the end of that extended period. The court will not make an order under s 52(5) as a matter of course. That section confers a discretion on the court. It may make an order if it considers it just and equitable to do so, upon such terms and conditions as it thinks fit for a period exceeding 12 months but not exceeding 24 months from the date of presentation of the petition.

76    However, as was recognised by a Full Court of this Court in Ramsay Health Care Australia Pty Ltd v Compton (2016) 247 FCR 387; [2016] FCAFC 125 (Compton), applying Shaddock, it is possible for parties to make a mistake very close to the expiry of the time limit in s 52(5) of the Act such that the slip rule may be thought to have some application. It is not necessary to revisit the correctness of that decision for present purposes.

77    Similar facts to those before us were before the Full Court in Flint. There, like here, an order was made pursuant to r 16.05 of the then Federal Magistrates Courts Rules 2001 (Cth) (FMCR) extending the life of the creditor’s petition after the petition had lapsed. The proceeding was later transferred to this Court where a sequestration order was made against Ms Flint’s estate. Ms Flint appealed. The question before the Full Court was whether the slip rule was properly invoked. If it was not, the primary judge had no power to make the sequestration order.

78    At [20] the Full Court observed that the FCCA is neither a common law court nor a superior court of record but that its rules enable it to vary or set aside an order in some specified circumstances including after it has been entered if it does not reflect the intention of the court. At the time the FMCR did not include a power to vary an accidental slip or omission but s 43(2)(b) of the then Federal Magistrates Act 1999 (Cth) provided that the Federal Court Rules applied, with necessary modifications, to the practice and procedure of the Federal Magistrates Court to the extent that that court’s rules were insufficient. Rule 1.05(2) of the FMCR was to similar effect. Ms Flint accepted for the purposes of the case that the Federal Magistrate made the order under r 39.05 of the Federal Court Rules which relevantly provided that the Court may “vary or set aside” a judgment or order after it has been entered if there is a clerical mistake in a judgment or order or there is an error arising in a judgment or order from an accidental slip or omission.

79    In Flint the Full Court held that the slip rule was not engaged and that it was not open to the Federal Magistrate to make the order he did. That conclusion was based on the facts of the case which, in their Honours’ opinion, did not demonstrate that an accidental slip or omission was made or, if it was, that there was necessarily any error in the order that was made on 29 August 2012 as a consequence of it. Their Honours also found that there was insufficient evidence to support an inference of error or omission on the part of the creditor’s lawyers or the Federal Magistrate.

80    The Full Court noted that its reasons for concluding that the slip rule was not available made it unnecessary for it to reconsider Elyard in light of the doubts expressed in Griffiths and the criticism in Amorin Constructions Pty Ltd v Kamtech Electrical Services Pty Ltd (2008) 73 NSWLR 627 (see [56] above). Their Honours continued at [44]-[46]:

44    We would, however, make the following observations. 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 and the support of the authorities of Storey & Keers and Whitlock v Brew, there are two difficulties with accepting the proposition.

45    First, in Shaddock the High Court invoked the slip rule to amend an order to include an award of pre-judgment interest. Yet an award of interest is in the Court’s discretion. Reference was made to Shaddock in both Storey & Keers and Amorin, but not to this point. In Newmont Yandal Spigelman CJ thought that some of the reasoning in Whitlock v Brew could not stand with later authorities including Shaddock. We respectfully agree.

46    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. As Lockhart J said in Elyard at 392, the purpose of the rule is to avoid injustice. The force of Storey & Keers and Whitlock v Brew can be accepted if there is any room for debate as to the exercise of the discretion. For instance, if there is any debate as to whether it would have been just and equitable to have made an order under s 52, in line with well-established principle, the slip rule cannot apply.

81    We would not reject those obiter comments as the appellants urge us to do but would instead endorse them. 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 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 s 52(5) it is difficult to see how the slip rule could be engaged.

82    It follows that we do not accept that the slip rule can only be invoked to vary or set aside an earlier order to include an order extending the life of a creditor’s petition under s 52(5) of the Act in circumstances where the independent discretion required to be exercised by that section was in fact exercised prior to the expiry of the 12-month period commencing on the date of presentation of the petition.

83    Before leaving this issue we note, for completeness, that, to the extent that the appellants called into question the correctness of Elyard, that case is distinguishable given it was concerned with the exercise of the slip rule in the context of a different statutory regime, namely s 459R of the Corporations Law. Nonetheless, it follows from what we have said that the foundation of Elyard may be thought to be uncertain and is not strictly binding on the construction of s 459R in the Corporations Act or, of course, on the differently expressed subss 52(4) and (5) in the Act: see McNamara v Consumer Trader and Tenancy Tribunal (2005) 221 CLR 646 at [40]. Similarly, we do not need to consider the correctness of the decision of the majority in Luck. There their Honours were concerned with a different sub-rule, being r 16.05(2)(e) of the FCC Rules which is available where the judgment or order does not reflect the intention of the court.

84    We turn to consider the second issue raised by the appellants, whether the slip rule was correctly invoked by the FCCA Judge. In our opinion, based on the circumstances of this case, it was not. That is so for two reasons. First, at the time of making the February Orders there was no relevant accidental slip or omission made by the court or the parties. Secondly, even if there was an accidental slip or omission, this is not a case where we could conclude that, had the discretion in s 52(5) of the Act been exercised as at the time of the February Orders, it could have only been exercised in one way. There was certainly room for debate.

85    The February Orders were made in chambers, without the FCCA judge first informing the parties that he was considering vacating the trial dates that had been fixed over 6 months earlier. The orders vacated the hearing of the creditor’s petitions set down on 13 and 14 March 2018 and listed them for hearing on 17 and 18 May 2018. The FCCA Judge presented the need for the adjournment as a fait accompli. He caused an email to be sent to the parties informing them of the adjournment, after his decision, why he had acted in their absence and that he would make orders on that day with “updated trial directions”. At the time of the making of the February Orders, neither the FCCA Judge nor the parties raised the fact that the creditor’s petitions would lapse in April 2018, prior to the adjourned hearing dates. If an application for an extension of the creditor’s petitions had been made at that time, the FCCA Judge would have been required to consider whether it was just and equitable to extend the petitions and, if so, upon what terms and conditions such an order should be made including the length of time of any extension. His Honour did not do that.

86    In Endresz FCCA the FCCA Judge said that the “clear intention of the Court on 6th February was to ensure that the hearing, then listed for March 2018, should proceed in the usual manner on dates in May in order to deal with the substantive matter, being the Creditor’s Petition” and that the making of the February Orders without considering the extension of time in relation to the petition, “patently did not reflect the Court’s intention”. But the court’s intention at the relevant time was to adjourn the hearing of the petitions because of a listing issue and the lack of availability of the FCCA Judge as manifested by the adjournment of the hearing of the petitions to May. There is no basis on which to conclude that it also had an intention to extend the life of the petitions. In any event, whether the court had that intention does not establish that there was an accidental slip or omission as at the date of the February Orders.

87    It is easy to say with hindsight that the FCCA Judge would not have let the creditor’s petitions lapse under s 52(4) of the Act had he been aware that the February Orders would have had that effect. However, the perspective of hindsight does not enable us to infer, in the circumstances of this matter, that had the FCCA judge been aware of subss 52(4) and (5) and the principles governing the need to hear and determine a creditor’s petition expeditiously, he necessarily would have made the February Orders and an order extending the life of the petitions rather than addressing his listing issue in a different way. In any event, whether the FCCA judge had the intention with hindsight that the creditor’s petitions should not have lapsed does not establish that there was an accidental slip or omission as at the date of his making the February Orders.

88    The inference to be drawn from the facts is that the FCCA Judge was not aware of the need to make an order extending the life of the creditor’s petitions as at the date of the February Orders or at any time in the period up to the date on which the Appellants made their Summary Dismissal Applications and/or the Commonwealth made its Slip Rule Applications, on 18 and 19 April 2018 respectively. Nor, it seems, was the Commonwealth aware of that need given the timing of the filing of its Slip Rule Applications, although the appellants may have appreciated this. The FCCA Judge did not advert to any factor that would suggest that he had accidentally omitted to make an order extending the life of the petitions, for example by adverting to the fact that they ought to be determined expeditiously, that they had a limited life, that the change in hearing date may necessitate that consequential orders be made and/or by inviting the parties to re-list the matter or provide submissions or draft orders for the court’s consideration if any issue arose from the vacation of the hearing date. There is no evidence of any accidental slip or omission as at the date of the February Orders. The FCCA Judge’s decision was to vacate the dates of the trial that had been set down over 6 months earlier for 17 and 18 March 2018 and then to fix new dates. His Honour did so without affording the parties an opportunity to be heard, including as to the impact that this somewhat unusual way of proceeding may have had on them or other persons who may have been affected by the pending unresolved creditor’s petitions.

89    There is no material before us about the listing issue or what it concerned. Perhaps it may have been that his Honour had to give priority to an urgent case, or it may have been that he had fixed another case on the same dates with no particular need for it to be decided urgently, or that his Honour had personal difficulties or wished to take leave on the relevant days. At the time of making the February Orders the creditor’s petitions still had approximately two months remaining before their expiry pursuant to s 52(4) of the Act. Had an application for an extension of the creditor’s petitions been made at that time, there were a number of ways in which that application may have been resolved having regard to the factors which were required to be taken into consideration upon an application under s 52(5) of the Act and the policy underlying the statutory requirement that a creditor’s petition be dealt with expeditiously. For example, as the appellants pointed out, the FCCA Judge may have resolved the scheduling conflict that had arisen so as to maintain the original hearing dates in March 2018; he may have explored the possibility of referral of the hearing of the creditor’s petitions to another judge of the FCCA; or he may have considered, at that stage, a transfer of the matters to this Court for hearing.

90    Contrary to the Commonwealth’s submissions, these are not purely speculative matters about facts not explored at the time. These were matters which, if considered at the time, could impact on and be relevant to an exercise of the discretion to make an order extending the life of the petitions and, if made, the form of any order. Because the issue was not raised at the time of the February Orders, these and other potentially relevant matters that could weigh upon the exercise of the discretion were not considered or indeed adverted to in any way by the FCCA Judge.

91    In this case, whether or not an extension of the life of the petitions should have been granted was a matter about which there was room for debate and about which there could have been a real difference of opinion. This was not a matter where, for example, because of an intervening issue affecting one or both of the parties they had jointly approached the court for an order adjourning the hearing of the petitions. Rather, the court of its own motion adjourned their hearing without hearing from the parties. It is not possible to infer from the facts as they existed at the time of the February Order that, had an application for an extension of the life of the creditor’s petitions been made at that time, the discretion would only have been exercised in one way. Had the FCCA Judge considered the provisions of subss 52(4) and (5) of the Act and the applicable legal principles, it is unlikely that he could, and it would have been inappropriate for him to, have exercised his discretion without hearing from the parties. Had that occurred, the factors that we have identified above could have been raised by his Honour and or the parties and explored by the court.

92    The Commonwealth submitted that at the hearing before the FCCA Judge the appellants conceded that the application to extend the life of the petitions was a “simple application that would have been granted had an application been made at the time” but that they later sought to distance themselves from that concession and advanced no reason why the discretion would have been exercised differently had the application been made in time. Before the FCCA Judge Mr Endresz appeared for himself and the three other appellants. The “concession” and subsequent distancing referred to by the Commonwealth appear in the following exchanges between the FCCA Judge and Mr Endresz:

His Honour:    Wouldn’t it necessarily follow that if the court fixes a matter for after the expiration of the relevant date of the petition - wouldn’t that effectively make the court an agent of the frustration or the demise of the petition, and you wouldn’t need to do anything?

Mr Endresz:    Your Honour, all it tells me is that I was aware of the - given the earlier proceedings - as to an expiry of the creditor’s petition. ASIC was certainly aware of the expiry of petitions. They had every resources - an army of lawyers, counsel, to consider the effect of your orders in relation to setting a date post the date of expiry. It’s a simple application that would have been granted had an application been made at the time. Now, whether there is availability of the court or new judges or justices or whatever you wish to look at, it could have been a 12-month extension that would have certainly accommodated any of those provisions the court had pressure with the court system.

    Now, the only - it comes back to, your Honour, that the primary and crucial issue is for this court to draw the strongest inference as to the intent on - as Mr Hogan-Doran has said - was what is the nature of the error and how is that, - in terms of - in their - in his words, that the slip is the absence of the order to simply extend the petition. Well, we have submissions that simply want to blame the court for its problems with its book of cases. He throws into his submissions he wants to blame me for the High Court applications that I have every right to pursue in relation to that. The onus is on the Commonwealth to simply put forth an application to seek an extension. Now, that could have been six months, 12 months, who knows what.

    If they had any communication between ASIC and the Commonwealth, again, I cannot stress enough, ASIC was well and truly aware of the nature and the effect of petitions expiring, which - they’ve now got an expired one themselves. It’s my submission, your Honour, that there is not a single shred of evidence - to support an inference of the error or omission, and the reason say that is because the actual inference that should be drawn is the consistency of incompetence. …

And:

His Honour:    Can I just ask this on both sides, if I understood what you said on one aspect, Mr Endresz, and I’ll come back to Mr Hogan-Doran in a moment, if I understood your submission correctly, you said at one stage that had an application been made by the Commonwealth that it would have been granted as a matter of course. Did I understand that correctly?

Mr Endresz:    It may have been granted, subject to me using - you know, my rights as to opposing it. So that’s a matter for what the court would have - it would have done. I said - what I said was that there was an opportunity to go for a 12 month extensions, which is well and truly accommodating any of the issues in relation to further or subsequent directions or delays. Bearing in mind, your Honour, that my focus has been that - you know, the numerous attempts in terms of the High Court as to those applications. So for me that has been primary concern.

(emphasis added.)

93    The exchange relied on by the Commonwealth does not amount to a concession by the appellants to the effect that, had the matter been raised by the FCCA Judge at the time of making the February Orders, it would have been granted. Viewed in context, Mr Endresz was addressing the question of whether there was sufficient evidence of error or inadvertence to invoke the slip rule. In the second exchange set out above the FCCA Judge asked, by way of clarification, if he had correctly understood an earlier submission, namely that if an application had been made by the Commonwealth it would have been granted as a matter of course. In response to that query Mr Endresz said that “it may have been granted” subject to the appellants raising any opposition and that it was a matter for the court to determine. That was consistent with the appellants’ written submissions recorded at [29(11)] of Endresz FCCA. In any event, even if a concession had been made it can be of no effect in circumstances where the necessary preconditions for invocation of the slip rule are not met.

94    For these reasons, we are not satisfied that there could have been only one outcome had the FCCA judge considered at the time of the February Orders the exercise of the discretion in s 52(5) in accordance with law. Accordingly, the slip rule was not properly invoked.

Ground 2

95    Given our conclusion in relation to ground 1, is it not strictly necessary for us to consider the remaining grounds of appeal. However, we do so for completeness.

96    By ground 2 the appellants challenge the finding of the primary judge in Endresz Federal Court at [35]. There his Honour rejected the appellants’ argument that there was reason to go behind the judgment upon which the creditor’s petitions were based because the pleaded causes of action set out in the sixth amended statement of claim did not fall within the indorsements in the amended originating application.

97    The appellants submitted that the creditor’s petitions were based on claims made by the Commonwealth for equitable compensation for liability under the second limb of Barnes v Addy (1874) LR 9 Ch App 244 (Barnes v Addy) and that those claims exceeded the scope of the amended originating application relied on in the Supreme Court Proceeding. They said that, on a proper reading of the amended originating application, the Commonwealth sought restitution of the amounts paid to CTC Resources and Davis Samuel without authority, an accounting or damages for monies had and received by those recipients and a claim for damages for breach of contract as against the Commonwealth’s contractor, Callform. Putting to one side the contractual claim, the appellants said that the other causes of action advanced by the Commonwealth were common law, restitutionary claims and that the primary judge was in error in holding that the claims upon which they were ultimately found liable, which found expression in the sixth amended statement of claim, were within the “metes and bounds” of the amended originating application.

98    The appellants submitted that the primary judge erred in holding that the claim for an account in the amended originating application was an equitable claim which arises consequent upon a breach of fiduciary duty. They said that the claim for an account in the amended originating application was entirely consistent with the common law claim for money had and received, a distinct feature of which is the ability to seek relief in the nature of an account and that there was no basis to conclude that the amended originating application had marked out the perimeters of an equitable cause of action for breach of fiduciary duty, particularly in the absence of any express mention of fiduciary duties.

99    The appellants also contended that the primary judge erred in construing the reference to “damages” in the amended originating application to include “equitable damages”, which could in turn be equated with equitable compensation, and in holding that the claim for an account could include alternate remedies such as equitable compensation or proprietary relief. They submitted that, read in context, the claim for damages in the amended originating application was in the nature of damages arising from the receipt of money paid without authority and/or breach of contract and that it was a contortion of the word “damages” to reason otherwise. The appellants said this was especially so given that “equitable damages” is a species of relief arising in connection with the vindication of legal rights, in particular, relief granted in addition to or in substitution of specific performance or an injunction, neither of which was adverted to in the indorsements and that such relief stands quite apart from the remedy of equitable compensation on which the judgment debts were ultimately based. The appellants noted that the sixth amended statement of claim sought equitable compensation in the prayers for relief and made no reference to equitable damages.

100    The appellants submitted that it followed that the claims against them in the sixth amended statement of claim for equitable compensation for knowing assistance in breaches of fiduciary duty, on which the creditor’s petitions were based, impermissibly exceeded the area marked out by the amended originating application by purporting to introduce new and independent causes of action not covered by it and that at all times those claims were liable to be struck out as exceeding the scope of O 24 r 3 of the ACT Rules, as then in force. They submitted that there were two consequences that flowed from this:

(1)    given the requirements at the time of ss 25 and 26 of the Supreme Court Act 1933 (ACT) (Supreme Court Act), the Supreme Court’s equitable jurisdiction to determine the claims the subject of the judgment debts was never invoked by any relevant process in that court; and

(2)    by impermissibly exceeding the scope of the amended originating application the proceedings were irregular for want of compliance with O 24 r 3 of the ACT Rules with the consequence that the equitable claims against the appellants were liable to be struck out.

101    The appellants submitted that given that the irregularity underpinning the judgment debts is such that the only claims upon which they were founded were themselves liable to be struck out the primary judge could not be satisfied that there was in fact a debt due and payable to the Commonwealth for the purposes of s 52 of the Act so as to justify the making of the sequestration orders. The appellants said that any suggestion that they had waived or otherwise lost their right to object to the irregularity in the Supreme Court Proceeding was irrelevant to the question of whether the irregularity called into question their indebtedness for the purposes of the bankruptcy proceedings, in particular having regard to the interests of third party creditors.

Consideration

102    In our opinion this ground cannot succeed.

103    As the primary judge observed, the role of the Court was to determine whether the debt on which the creditor’s petition is based is truly a basis for making a sequestration order and that the Court needed to be satisfied of the existence of that debt. His Honour correctly pointed out that the Court’s role was not to consider whether the judgment should be set aside as if on appeal: see Endresz Federal Court at [22]. Ground 2, both in this Court and as raised before the primary judge, is an attempt to do the latter, namely attack Davis Samuel (No 11) as if on appeal.

104    Putting that to one side, in any event, for the reasons set out below there was no error in the primary judge’s reasons.

105    Judgment in Davis Samuel (No 11) was given after a contested hearing and was not the subject of an appeal. As was the case before the primary judge, there is no submission to the effect that there is any evidence of collusion, fraud or miscarriage of justice in the court making the orders dismissing the Set Aside Applications which are the subject of Davis Samuel (No 11). Nor do the appellants contend that there was an unexplained failure to rely on or raise a matter where the failure to do so was done in good faith: see Ramsay Health Care at [69]-[71].

106    The appellants seek to re-agitate their arguments before the primary judge as to why the causes of action upon which the judgment debts were based exceeded the scope of the amended originating application relied on in the Supreme Court Proceeding and assert that the primary judge erred in, effectively, finding no error in the reasoning in Davis Samuel (No 11). We too are unable to discern any error in that reasoning or in the reasoning of the primary judge.

107    The primary judge set out Refshauge ACJ’s reasons as to why the causes of action pleaded in the sixth amended statement of claim were within the “metes and bounds” of the indorsement to the amended originating application and found them to be persuasive. On that basis the primary judge concluded that the terms of the amended originating application did not confine the causes of action that could thereafter be pleaded to a cause of action for payment of money without authority as the appellants contended both before the primary judge and on appeal. There is no identification of any authority ignored, principle misunderstood or error in reasoning on the part of the primary judge. The appellants have failed to demonstrate any error on the part of the primary judge in reaching that conclusion.

108    As submitted by the Commonwealth, save for stating in the concluding paragraph of their submissions on ground 2 that any suggestion that they had waived their right to object to the irregularity in the Supreme Court Proceeding was irrelevant to the issues they now raise, the appellants do not give a reason for why the primary judge’s findings and reasons at [37]-[44] of Endresz Federal Court are incorrect. There his Honour considered what he termed “a fall back submission” and agreed with the reasoning of Refshauge ACJ in rejecting the appellants’ contention that the sixth amended statement of claim was a nullity because of the asserted deficiency in the indorsement. That issue was resolved by Refshauge ACJ despite the fact that, having found that the causes of action against each of the appellants fell within the “metes and bounds” of the indorsement on the amended originating application, he was not required to do so.

109    At [43] of his reasons the primary judge found that given the steps taken by the appellants in their conduct of and participation in the Supreme Court Proceeding, described as “significant”, Refshauge ACJ’s conclusion at [188]-[190] of Davis Samuel (No 11) was inevitable. There Refshauge ACJ found that the appellants had permitted the proceeding to be conducted at great expense, without paying any attention to the issue of whether the proceeding was a nullity because it exceeded the terms of the indorsement on the writ, and then tried to resolve that issue separately after judgment had been given. Refshauge ACJ said that to have allowed the Commonwealth to proceed in this way was “clearly unreasonable”.

110    The appellants’ reliance on ss 25 and 26 of the Supreme Court Act does not assist them. At the relevant time those sections provided:

Law and equity to be concurrently administered

25.    Subject to the express provision of any other Act, in every civil cause or matter commenced in the court law and equity shall be administered according to sections 26 to 32 (inclusive).

Equities of plaintiff

26.    In proceedings in the court, the plaintiff is entitled to equitable relief where, in pre-Judicature Act proceedings of the same type, the plaintiff would have been entitled to such relief.

111    The appellants rely on the decision of the England and Wales Court of Appeal in Re Pritchard [1963] Ch 502 (Pritchard). That case concerned the question of whether a proceeding commenced in the District Registry was a nullity because there was no jurisdiction to hear the cause or whether it was a mere irregularity to which R.S.C. Ord. 70 r 1 applied. Order 70 r 1 provided that “[n]on-compliance with any of these Rules … shall not render any proceedings void unless the Court or a Judge shall so direct, but such proceedings may be set aside either wholly or in part as irregular, or amended, or otherwise dealt with in such manner and upon such terms as the Court or Judge shall think fit”. At 523 Upjohn LJ said that in his opinion “Ord. 70 applies to all defects in procedure unless it can be said that the defect is fundamental to the proceedings” and that a fundamental defect will make a proceeding a nullity. In support of their submission that the failure to institute an action for equitable relief in the amended originating application rendered the proceeding a nullity, the appellants rely in particular on the following passage at 523-524 where Upjohn LJ said:

The authorities do establish one or two classes of nullity such as the following. There may be others, though for my part I would be reluctant to see much extension of the classes. (i) Proceedings which ought to have been served but have never come to the notice of the defendant at all. This, of course, does not include cases of substituted service, or service by filing in default, or cases where service has properly been dispensed with: see, for example, Whitehead v. Whitehead (orse. Vasbor). (ii) Proceedings which have never started at all owing to some fundamental defect in issuing the proceedings. (iii) Proceedings which appear to be duly issued but fail to comply with a statutory requirement: see, for example, Finnegan v. Cementation Co. Ltd.

(footnotes omitted.)

112    The appellants say, based on Pritchard that the failure to comply with s 26 of the Supreme Court Act was a failure to comply with a statutory requirement which rendered the proceeding a nullity, notwithstanding the ACT Rules. However, that analysis ignores the authority which has developed in Australia and which would suggest that the appellants’ contention cannot be sustained.

113    The Court drew the appellants’ attention to Berowra Holdings Pty Ltd v Gordon (2006) 225 CLR 364 (Berowra). That case concerned proceedings commenced by Mr Gordon in the District Court of New South Wales for common law damages in relation to an injury he alleged he suffered due to the negligence of his employer, Berowra Holdings Pty Ltd. It was common ground between the parties that the proceedings were commenced in breach of s 151C(1) of the Workers Compensation Act 1987 (NSW) (Workers Compensation Act) which provided that proceedings for recovery of damages against an employer could not be commenced until six months after notice of the injury was given to the employer. Mr Gordon commenced his proceeding for damages against Berowra before the expiry of the six month period stipulated in s 151C of the Workers Compensation Act. Berowra sought to rely on that contravention to contend that the proceeding was a nullity and that all steps taken in it were of no effect. It sought to do so after Mr Gordon had accepted an offer of compromise made under the District Court Rules 1973 (NSW) (District Court Rules).

114    The issue to be resolved by the High Court was whether the prohibition imposed by s 151C denied legal effect to proceedings for common law damages commenced in contravention of that prohibition and to all steps later taken by the parties under the relevant rules of court with respect to such proceedings. Berowra submitted that on its proper construction s 151C of the Workers Compensation Act had that result and thus the action commenced by Mr Gordon in the District Court, together with its own offer of compromise made under the District Court Rules, were null and void. The High Court did not accept that to be so.

115    At [11] the majority (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ) considered the distinction between an act in excess of jurisdiction by a superior court of record of general jurisdiction and by a court of limited jurisdiction. Their Honours said:

In particular, the introduction into s 151C of concepts of “nullity” and “invaldity” is misleading because they tend to obscure the distinction between superior courts of record of general jurisdiction and courts of limited jurisdiction. That distinction has been the subject of comment in this Court, although due regard is to be had to the constitutional context. In the case of the superior courts, acts in excess of jurisdiction cannot be characterised as invalid until quashed or set aside on appeal, whereas that is not necessarily true of the latter. Thus, in the majority judgment of Gaudron, Gummow and Callinan JJ in Pelechowski v Registrar, Court of Appeal (NSW), it was decided that, because an order made by an inferior court (in that case the New South Wales District Court) without power to do so was a “nullity”, it could not found a proceeding for contempt. This situation was contrasted to that arising where an order was made within power but improperly, in which case, until set aside by a superior court, the order had to be obeyed.

116    Commencing at [13] their Honours noted the difficulty with characterising a proceeding as “invalid” because the commencement of an action is the exercise by a litigant of the freedom to invoke the jurisdiction of the judicial arm of government to determine a dispute, a step which engages the procedural law of the relevant court. At [15]–[16] their Honours said:

15    In the adversarial system of justice, choice rests primarily with the parties and it is generally the case that the court’s power of decision or order is exercised upon the application of a party. Generally there is in law no restriction upon a person’s right to start an action and to carry it to the point at which a choice is cast upon the defendant to make some response in order to avoid judgment in default. Once the procedural law has been engaged, all parties to the litigation are subject to it.

16    None of the above denies the possibility of a defendant denying the plaintiff’s right to invoke the jurisdiction of the court, for example where the plaintiff’s right is conditional upon there being an action cognisable within that jurisdiction. However, the material point is that that denial must be made within the structure of the relevantly engaged procedural law, and not outside it. Accordingly, the defendant may challenge at an interlocutory level the strength of the plaintiff’s alleged case by seeking to have a plaintiff’s action struck out for failure to disclose a reasonable cause of action, or dismissed as incompetent. Alternatively, the defendant may have recourse to judicial review by a superior court, challenging the right of an inferior court to adjudicate the plaintiff’s claim and seeking orders to prevent the inferior court continuing to hear the claim. However, the invocation of jurisdiction ordinarily enlivens the authority of the court in question at least in the first instance to decide whether it has jurisdiction.

(footnotes omitted.)

117    The appellants submitted that Berowra could be distinguished because there the Court was dealing with a situation where a right had been conditioned, ie the passing of a period of six months, while here the issue is whether the right arises in the first place because the Supreme Court’s jurisdiction in equity was never invoked and thus the proceeding was a nullity. We would reject that submission for the following reasons:

(1)    in the amended originating application the Commonwealth seeks an accounting, an equitable remedy. That being so, the equitable jurisdiction of the court was invoked;

(2)    if we are wrong about that and, as contended by the appellants, the claim for relief was for a common law accounting then, as their Honours observed to be the case in Berowra at [13], by commencement of the Supreme Court Proceeding the Commonwealth engaged the jurisdiction of the Supreme Court which exercised its jurisdiction pursuant to the ACT Rules until such time as objection was taken to jurisdiction in accordance with those rules. In this case that challenge was not taken until judgment was given and orders were made in the Supreme Court Proceeding. The Supreme Court considered that challenge in Davis Samuel (No 11) and rejected it. The appellants did not appeal from the orders made in Davis Samuel (No 11);

(3)    there can be no dispute that the Supreme Court had the power to exercise equitable jurisdiction. The scope of the controversy between the parties to the Supreme Court Proceeding was defined by the pleadings, namely the amended originating application and the sixth amended statement of claim. The appellants were aware of the case they had to meet, defended the proceeding and prosecuted a cross-claim: see Davis Samuel (No 11) at [206];

(4)    there was a lengthy history of pleading amendments in the Supreme Court Proceeding. The sixth amended statement of claim was filed on 21 June 2001 pursuant to leave granted by the Supreme Court on 27 April 2001, it seems after hearing the Commonwealth’s application to amend by adding a claim under the then Trade Practices Act 1974 (Cth): see Davis Samuel (No 11) at [58]-[59]. There is no suggestion that the Supreme Court did not have power to grant that leave. Section 26 of the Supreme Court Act does not preclude its filing nor the inclusion in a pleading of a claim that is not supported by a writ reflecting the relief claimed therein; and

(5)    in addition, as noted in Davis Samuel (No 11) at [208], s 68 of the Court Procedures Act 2004 (ACT), which at the time was the operative provision, provided that proceedings in the court could not be invalidated “by any formal defect or irregularity, unless the court is of opinion that substantial injustice has been caused and that the injustice cannot be remedied by an order of the court”. That is, there was a statutory source for the conclusion that any irregularity does not invalidate a proceeding unless the court otherwise orders. There is no basis to think that any, let alone substantial, injustice had been caused to the appellants by the asserted non-conformity between the amended originating application and the filing of the sixth amended statement of claim pursuant to the order granting leave for its filing.

118    For those reasons ground 2 should be dismissed.

Ground 4

119    By this ground the appellants contend that the primary judge failed to consider, as a separate basis on which the sequestration orders ought not to have been made, their submissions that, in circumstances where it was held in the Supreme Court Proceeding that the payments made by the Commonwealth to the original recipients, CTC Resources and Davis Samuel, were ultra vires, illegal and void, there could be no liability in equity on the part of the appellants as an accessory in relation to those transactions. The appellants noted that at the conclusion of the hearing before the primary judge the parties were afforded an opportunity to file further submissions on this point and their subsequent submissions addressed the contention and advanced it as a separate basis upon which the Court ought not to make the sequestration orders. The appellants submitted that the primary judge appears to have misconstrued their contention and to have conflated it with a separate contention concerning the treatment of other causes of action by Refshauge ACJ in Davis Samuel (No 11), referring to [6] and [61]-[66] of Endresz Federal Court.

120    The appellants described this ground as narrow. They do not contend that they may not have been liable for the loss to the Commonwealth on some basis but say that a finding of liability under the Auckland Harbour Board principle precluded liability under the second limb of Barnes v Addy. The appellants made the following submissions:

(1)    their contention was relevant because the consequence of the finding that the April and September 1998 payments were made without parliamentary authority was that those payments were illegal and void. Neither the Crown nor its servants, apart from Parliament, could authorise or ratify such a transaction. Accordingly, any recipients of those funds were debtors of the Commonwealth, it was immaterial whether the funds could be traced in any equitable or proprietary sense and no defence of estoppel or change of position was available to any such recipients;

(2)    the application of the principles set out above precluded the operation of liability in equity under the second limb of Barnes v Addy, as applied to fiduciaries, because the appellants were not and could never have been acting “as the agents of trustees [fiduciaries] in transactions within their legal powers”. The Commonwealth’s contractors, in effecting the April and September 1998 payments, had acted not only in excess of their own authority but also that of the Commonwealth;

(3)    accordingly the Commonwealth’s contractors had no “legal power and control” over trust property or property held subject to a fiduciary obligation and the Commonwealth had not conferred, and could not confer, such power on them. In those circumstances the Barnes v Addy principles could not apply. The transactions were void as being beyond the power of the principal to undertake, as distinct from those which, under Barnes v Addy, might be rendered voidable by the imposition of equity; and

(4)    where the transactions were beyond the power of the Commonwealth, the Commonwealth’s rights and remedies lay at law in line with the Auckland Harbour Board principles and, as already noted, any recipients of those funds were liable to the Commonwealth as debtors and could not avail themselves of any equitable defences. In those circumstances it was not open to Refshauge J to impose, under the second limb of Barnes v Addy, equitable obligations and remedies in relation to those funds. It follows that the judgment debts the subject of the creditor’s petitions could not be relied upon as supporting any such indebtedness to the Commonwealth by the appellants.

121    The appellants submitted that by failing to take this matter into account in making the sequestration orders the primary judge could not have been satisfied that there was in truth and reality a debt owing by the appellants to the Commonwealth and otherwise failed to properly exercise the discretion conferred under subss 52(1) and (2) of the Act with the result that the sequestration orders must now be set aside.

122    The Commonwealth accepts that the primary judge did not address the contention set out at [119] above as a separate point. It said that was so because the primary judge understood that it was raised in the context of submissions addressing the issue of the “metes and bounds” of the amended originating application and it was not made plain by the appellants that it was raised as a separate point.

123    It is not necessary to determine whether the issue was raised as a separate point for consideration. Rather, the ground should be considered having regard to the substance of the appellant’s contention, which in our opinion is not made out.

124    The principle relied on by the appellants is set out at 326-327 of Auckland Harbour Board by Viscount Haldane speaking for the Privy Council as follows:

… For it has been a principle of the British Constitution now for more than two centuries, a principle which their Lordships understand to have been inherited in the Constitution of New Zealand with the same stringency, that no money can be taken out of the consolidated Fund into which the revenues of the State have been paid, excepting under a distinct authorization from Parliament itself. The days are long gone by in which the Crown, or its servants, apart from Parliament, could give such an authorization or ratify an improper payment. Any payment out of the consolidated fund made without Parliamentary authority is simply illegal and ultra vires, and may be recovered by the Government if it can, as here, be traced.

125    The appellants, in effect, contend that an entitlement to recover monies pursuant to that principle from the primary recipient of the funds not only excludes the equitable liability of that primary recipient but of any party who in turn receives those funds or a part thereof from the primary recipient. Nothing in Auckland Harbour Board supports that contention. There the Privy Council was addressing a particular issue, namely whether the New Zealand Government had a right to deduct a sum of money from a larger sum which was due to the appellants. The background facts against which that issue arose for determination were complicated and do not need to be set out here. However, it is clear that the Privy Council did no more than to address the issue before it. It said nothing of the ability to bring a claim under the second limb of Barnes v Addy or whether, in circumstances where liability arises because moneys have been paid without Parliamentary authority and thus illegally, such a claim is precluded.

126    The appellants rely on Barnes v Addy at 251-252 and Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296 (Grimaldi) at [254] in support of their submission that the application of the Auckland Harbour Board principle precluded the operation of liability in equity.

127    In Barnes v Addy at 251-252 Lord Selborne LC said:

… But, on the other hand, strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees. Those are the principles, as it seems to me, which we must bear in mind in dealing with the facts of this case. If those principles were disregarded, I know not how any one could, in transactions admitting of doubt as to the view which a Court of Equity might take of them, safely discharge the office of solicitor, of banker, or of agent of any sort to trustees. But, on the other hand, if persons dealing honestly as agents are at liberty to rely on the legal power of the trustees, and are not to have the character of trustees constructively imposed upon them, then the transactions of mankind can safely be carried through; and I apprehend those who create trusts do expressly intend, in the absence of fraud and dishonesty, to exonerate such agents of all classes from the responsibilities which are expressly incumbent, by reason of the fiduciary relation, upon the trustees.

128    Nothing in that passage permits a conclusion that a third party recipient of funds which were obtained by reason of a transaction which is found to be void, because it was made without authority, is discharged from equitable liability.

129    In Grimaldi at [254] a Full Court of this Court said:

Distinctly while the proprietary liability referred to depends upon the existence of trust property in the strict sense, “trust property” for Barnes v Addy purposes extends beyond it to property held or controlled subject to a fiduciary obligation. Most importantly for present purposes, it extends to corporate property, ie property subject to the control and the fiduciary responsibilities of a company’s directors. If the directors dispose of corporate property in a dealing which is beyond their authority, whether actual, ostensible or usual, the dealing ordinarily is void and no interest passes to the third party donee, purchaser, etc. However, if the dealing occurs in a transaction which is within the directors’ authority but which is not in the company’s interests (ie is an abuse of power) or is otherwise in breach of fiduciary duty, the transaction will only be voidable: Richard Brady Franks Ltd v Price (1937) 58 CLR 112 at 142. As Australian law now stands, even if the third party recipient falls within the knowing receipt limb of Barnes v Addy, the company will not ordinarily be able to bring a proprietary claim against the recipient as distinct from a personal one, unless and until the transaction itself has been avoided: see Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 (Daly); Hancock Family Memorial Foundation Ltd v Porteous (2000) 22 WAR 198 at [173]-[206] (Hancock Family Memorial Foundation). Though we later question the correctness of this particular requirement, what needs to be emphasised is that it still allows that a knowing recipient can be held accountable in rem for such of that property (or its traceable proceeds) as remains extant in that person’s hands.

130    The Full Court did not say that a transaction which was void as ultra vires the company could not be the subject of a personal claim in equity where the transaction was also effected by a breach of fiduciary duty in which persons, other than the recipient, had knowingly assisted. It is implicit in what the Court said that it is not necessary to bring a claim in equity to avoid such a transaction. If the transaction was within authority but not in the company’s interests or in breach of fiduciary duty, it may be voidable. The point that their Honours were making in that discussion was that a voidable, but presently unavoided, transaction or dealing does not give the injured party a proprietary claim against the knowing recipient of property passing under that transaction or dealing. The injured party had a personal claim only until the transaction was avoided. However, if the transaction or dealing were avoided (or void ab initio), in addition to the personal claim, the injured party would also have a proprietary claim to recover the property. Nothing said in Grimaldi at [254] prevents recovery against a party who knowingly assisted in a breach of fiduciary duty where a transaction was also void against the company.

131    Moreover, the appellants also rely on Commonwealth v Burns [1971] VR 825 (Burns). That case concerned a claim by the Commonwealth to recover from Mrs Burns the balance of pension payments mistakenly paid to her by the Repatriation Department over a five-year period after the death of her father, Mr Wilton, who was entitled to receive the pension during his lifetime. It was common ground that Mrs Burns was not entitled under the relevant legislation or otherwise to receive the payments which she received over that five-year period and that she did so due to inadvertence on the part of the Repatriation Department. Justice Newton was thus satisfied that the payments made to Mrs Burns were made “without statutory or other lawful authority” and “by reason of a mistake” on the part of officers of the Repatriation Department. At 827 his Honour addressed the consequences that flowed form that finding:

… In my opinion, the authorities establish that money paid out of Consolidated Revenue without statutory or other lawful authority is recoverable by the Crown from the recipient, at all events if paid without any consideration. And, in my opinion, the position is a fortiori where, as here, the payments are the result of a mistake. I consider that the principle, which I have just stated, is a special overriding principle applicable to public moneys in the sense of moneys of the Crown forming part of Consolidated Revenue; the principle is of wider scope than the principles relating to the recovery as between subject and subject of moneys paid under a mistake of fact or for a consideration which has failed.

132    The authority referred to by Newton J was Auckland Harbour Board, which his Honour discussed in detail noting that, based on his Honour’s review, it had been referred to in later cases without disapproval. At 830 Newton J said:

This rule is of wide application and can apply as between subject and subject, so that s. 64 of the Judiciary Act, upon which Mr. Fagan sought to rely in relation to the defence of estoppel, has no application. (It was not suggested that s. 64 prevented the application of the principle in the Auckland Harbour Board Case, and, in my view, it does not do so: cf. South Australia v. Commonwealth (1962), 108 C.L.R. 130, at p. 140 per Dixon, C.J.; [1962] A.L.R. 547.)

133    The appellants submitted, based on Burns, that Auckland Harbour Board survives s 64 of the Judiciary Act 1903 (Cth) (Judiciary Act) such that if the principle remains good, the imposition of a constructive trust under Barnes v Addy is excluded in relation to a payment ultra vires the Commonwealth. That proposition cannot be sustained.

134    In Burns the court was considering the application of the defence of estoppel raised by Mrs Burns. It was in that context that Newton J made observations about the application of s 64 of the Judiciary Act. The question of whether s 64 of the Judiciary Act prevented application of the Auckland Harbour Board principle was not argued before his Honour. Here the Commonwealth made a claim in equity against the appellants including, as described in Davis Samuel (No 11) at [60], an allegation that they received funds which were improperly paid in breach of fiduciary duties owed by certain persons to the Commonwealth or that they assisted in the transfer of funds which constituted the breach. There is no reason why, based on Burns or any other authority to which we were taken by the appellants, the Commonwealth would be precluded from pursuing such a claim: see too Black v S. Freedman & Co (1910) 12 CLR 105 at 109 per Griffith CJ, 110 per Barton J and 110-111 per O’Connor J.

135    For those reasons ground 4 is not made out.

conclusion

136    The appellants have succeeded on ground 1. That being so, subject to the issues raised below, the appeal should be allowed and orders made setting aside the orders made by the primary judge on 15 March 2019 and Order 4 made by the FCCA Judge on 18 May 2018 in each proceeding. In lieu thereof declarations should be made that the creditor’s petitions lapsed on 11 April 2018 pursuant to s 52(4) of the Act.

137    The first issue concerns costs. The appellants seek an order that the Commonwealth pay their costs of the appeals. The appellants raised four and, at hearing, ultimately pressed three grounds of appeal. They were only successful on ground 1. Argument on grounds 2 and 4, which raised different issues to those raised in relation to ground 1, took up a significant proportion of the time spent during the hearing and were the subject of detailed submissions by the parties. The appellants were also unsuccessful on those grounds before the primary judge. Indeed, insofar as the appellants have succeeded on appeal it is not because they have established any error on the part of the primary judge in relation to grounds argued before his Honour. In those circumstances, subject to any submissions that the parties might make, we would propose to make orders that the Commonwealth pay 50% of the appellants’ costs of the appeals and that there be no order as to costs of the proceedings before the FCCA judge or the primary judge.

138    The second issue concerns the position of the appellants’ trustees in bankruptcy (Trustees). The primary judge’s orders were made in March 2019. There was no evidence before us of the position of the Trustees, what steps, if any, they have taken since the sequestration orders were made and whether they have incurred any costs or are entitled to any remuneration. Accordingly, prior to making the proposed orders we will require the parties to provide a copy of these reasons to the Trustees within one business day of their publication. If any Trustee wishes to be heard on the form of the proposed orders set out above and/or the payment of any costs incurred or remuneration due, we will grant him or her leave to file and serve submissions addressing those matters, not exceeding five pages in length, within seven days of the date of delivery of these reasons.

139    If submissions are filed and served by the Trustees and/or the parties wish to make submissions about the proposed costs orders, the parties should be granted leave to file and serve submissions in reply, not exceeding five pages in length, within 14 days of the date of delivery of these reasons. Unless the Trustees or one of the parties considers that an oral hearing is necessary we will thereafter determine the issue of the form of orders on the papers.

140    If no submissions are provided by the Trustees and/or the parties, as contemplated in [138]-[139] above, orders as set out in [136]-[137] above should take effect on 2 December 2019.

Associate:

Dated:    15 November 2019

REASONS FOR JUDGMENT

CHARLESWORTH J:

141    I have had the advantage of reading the joint reasons for judgment of Rares and Markovic JJ in draft.

142    For the reasons given below, I agree that the first ground of appeal should be upheld, and the appeal allowed.

143    The appellants’ arguments in support of the second and fourth grounds should be rejected for the reasons given by Rares and Markovic JJ. I provide additional reasons for rejecting the second ground.

144    I use the same abbreviated terms as used in the joint reasons.

Ground 1

145    In my view, 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. The legal issue to be determined is whether the slip rule expressed in r 16.05(2)(h) of the FCC Rules may apply in the context of a statute that requires a discretionary power to be exercised within a prescribed period. Section 459R(2) of the Corporations Act and s 52(5) of the Act are not materially different in that respect. In an appropriate case arising in bankruptcy, it may be necessary for a Full Court to express a view as to whether Elyard was correctly decided. This is not an appropriate case.

146    Proceeding from the footing that Elyard was correctly decided, I join with Rares and Markovic JJ in endorsing the obiter comments of the Full Court in Flint at [46]. See also Luck at [68].

147    In Luck I concluded that the power to make an order under the different slip rule found in r 16.05(2)(e) of the FCC Rules was not enlivened on the facts. I departed from the majority in that respect. As neither party in Luck had invited the Full Court to determine that the reasoning in Elyard was wrong, I considered it appropriate that the Court exercise the wider iteration of the slip rule in r 39.05(2)(h) of the Federal Court Rules in the exercise of its dispositive powers on that appeal. I said that it was appropriate to apply the principles in Elyard without expressing any view as to its correctness (at [171]).

148    The limitation identified in Flint did not apply on the facts in Luck. In both cases, the discretion in question could only have been exercised in one way, had the necessity to exercise the discretion been adverted to at the earlier relevant time.

149    The distinguishing feature of this case is that it cannot be said that the discretion could only have been exercised in one way, had the necessity to make an order extending the life of the creditor’s petitions been adverted to by the FCCA Judge prior to their expiry. That is a sufficient basis to conclude that the slip rule could not be exercised at a later time so as to add an order extending the life of the petitions, expressed to operate nunc pro tunc. The appeal should be allowed on that basis.

Ground 2

150    The matter adjudicated in the Supreme Court Proceeding was a matter in which the Commonwealth was a party and so involved the exercise of federal jurisdiction: Constitution of the Commonwealth of Australia, s 75(iii). The jurisdiction was that conferred on the Supreme Court by s 39(2) of the Judiciary Act: see s 78AA which defines the word “State” to include the Australian Capital Territory. The Supreme Court had jurisdiction in the sense that it had authority to adjudicate the matter. The underlying justiciable controversy included the question of whether the appellants owed obligations in law or in equity to repay money they had received and to which they had no entitlement.

151    The law in relation to fiduciary duties (including the principles stated in Barnes v Addy) forms a part of a body of law that regulates norms of conduct between people. The existence of a substantive obligation arising in equity or at common law does not depend for its existence on the exercise of a power vested in a court to make orders for its curial enforcement.

152    Provisions such as s 26 and s 28 of the Supreme Court Act and the ACT Rules do not purport to regulate substantive rights as between individuals. As such, they were picked up and applied in the Supreme Court Proceeding in accordance with (and subject to) s 79 of the Judiciary Act: see Rizeq v Western Australia (2017) 262 CLR 1.

153    It is to be acknowledged that the filing of an originating application is the procedure by which an “action” is to be commenced in the Supreme Court: O 2, r 1 of the ACT Rules. The “action” and the “matter” are not one and the same.

154    The appellants have not established that the jurisdiction of the Supreme Court (that is, the Court’s authority to decide the matter) was dependent upon the Commonwealth’s compliance with the procedural requirements contained in O 2 r 8 and O 2, r 9 of the ACT Rules.

155    It is difficult to conceive of a case in which a failure to specify the body of applicable law on the face of an initiating process would result in a superior court of record being deprived of authority to determine the parties’ respective rights and obligations and so render orders made in the resolution of the matter a “nullity”.

156    In the Supreme Court Proceeding, the scope of the controversy was defined by the exchange of pleadings. Subject to observing the rules of procedural fairness (as it did) the Supreme Court clearly had the power to grant equitable remedies in the final resolution of the controversy.

157    The limits of the Court’s powers were not defined by procedural rules concerning the content of an originating application. It follows that the asserted irregularity affecting the originating application (even if it existed) could not render the judgment a nullity or deprive the primary judge of the power to make the sequestration orders. The appellants’ argument on the second ground of appeal elevates form over substance to a degree that is thankfully uncommon, at least in this Court.

158    I join in the orders proposed in the joint reasons.

Associate:

Dated:    15 November 2019