FEDERAL COURT OF AUSTRALIA

Lamb v Sherman [2023] FCAFC 85

ORDERS

THE COURT ORDERS THAT:

1.    On or before 31 May 2023, the parties confer and provide draft orders to give effect to the Court’s reasons delivered orally today and to deal with costs or, in the absence of agreement, file and serve draft orders and written submissions, with the written submissions to be limited to 1 page.

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

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

2.    The appellant pay 75% of the respondent’s costs.

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

ORDERS

THE COURT ORDERS THAT:

1.    Order 2 made on 24 April 2023 be varied so that it reads:

“The question of what orders should be made in respect of the interim application filed on 27 March 2023 be referred for the consideration of the Full Court and heard together with the appeal in proceeding QUD60/2023”

2.    The question referred to the Full Court in order 1 above be answered as follows:

“The orders which should be made in respect of the interim application filed on 27 March 2023 are:

1.    Pursuant to r 1.39 of the Federal Court Rules 2011, time be extended so as to permit the respondent to bring the interim application filed on 27 March 2023.

2.    Pursuant to s 35A(5) of the Federal Court of Australia Act 1976 (Cth), order 2 made on 14 July 2022 and order 2 made on 6 October 2022 be set aside.

3.    The applicant pay 75% of the respondent’s costs of the respondent’s interim application.”

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

REASONS FOR JUDGMENT

(Revised from the transcript)

THE COURT:

INTRODUCTION

1    The Court is deciding this appeal today because it involves the status of a person who has been made bankrupt and such matters ought, in the ordinary course, if practicable, be addressed with reasonable promptitude.

2    The appellant debtor, Siobhan Lamb, challenges the decision of a judge of the Court who made a sequestration order against her estate at the suit of the judgment creditor, Sheldon Sherman. The primary judge found that Ms Lamb had committed an act of bankruptcy by failing to comply within the 21 days permitted (that is, by 15 June 2022) with a bankruptcy notice issued on 22 April 2022 that Mr Sherman served on her on 25 May 2022.

3    The complication the subject of this appeal, which his Honour did not deal with in any detail in his reasons, was whether Ms Lamb did not need to comply with the bankruptcy notice. That was because, at 4:37pm on 15 June 2022, seven minutes after the time for a document to be lodged so that it would be deemed to have been filed on that day as prescribed in r 2.25(3)(a) of the Federal Court Rules 2011, Ms Lamb’s former solicitors (to whom we will refer as Ms Lamb’s solicitors) lodged electronically with the Court an application that purported to apply to set aside the bankruptcy notice, under s 41(6A) of the Bankruptcy Act 1966 (Cth).

4    The Registry accepted Ms Lamb’s application for filing at 2:44pm on 16 June 2022. Shortly afterwards, on the same day, Mr Sherman lodged his creditor’s petition for filing.

5    Subsequently, on 14 July 2022 and 6 October 2022, a Registrar made orders purporting to extend the time for compliance by Ms Lamb with the requirements of the bankruptcy notice until 6:00pm on first, 6 October 2022 and secondly, 24 November 2022 (the extension orders). After hearing the application on the latter day, the Registrar did not order any further extension and, on 8 December 2022, gave oral reasons for dismissing Ms Lamb’s application.

THE ISSUES

6    Ms Lamb contends that the primary judge erred in:

    failing to deal, in terms, with the effect of the extension orders and her argument that their consequence was to extend the time for compliance with the bankruptcy notice so that any act of bankruptcy could only have occurred after the presentation of the petition and, therefore, was outside the jurisdictional requirement in s 44(1)(c) of the Bankruptcy Act that, at the time of presentation, a petition must identify an existing act of bankruptcy; and

    finding that, despite her application under s 41(6A) and the extension orders, she had committed an act of bankruptcy on 15 June 2022 by not complying with the bankruptcy notice.

7    In turn, Mr Sherman seeks orders nunc pro tunc (which he did not seek below) that he be granted leave, first, to challenge, on a review under s 35A of the Federal Court of Australia Act 1976 (Cth), the Registrar’s extension orders which he now seeks be set aside on the basis that they had been made without jurisdiction (because Ms Lamb’s application to set aside the bankruptcy notice had not been filed within the time it fixed for compliance, as required by s 41(6A) of the Bankruptcy Act) and, secondly, to amend the petition to assert that Ms Lamb had committed an act of bankruptcy on 25 November 2022, after the Registrar had refused to grant Ms Lamb any further time for compliance with the bankruptcy notice. On 24 April 2023, Rares J ordered that the first of these issues, that arose in the proceeding that Ms Lamb instituted by the application under s 41(6A), be referred to this Full Court pursuant to s 25(6) of the Federal Court Act.

BACKGROUND

8    The parties agreed the following facts about the progress of the application, namely:

    Ms Lamb was served with the bankruptcy notice on 25 May 2022 and had until 15 June 2022 to comply with it. The bankruptcy notice required her to either pay the amount claimed by Mr Sherman as the judgment creditor, settle with him to his satisfaction or apply to set it aside before the time for compliance;

    at 4:37pm on 15 June 2022, Ms Lamb’s solicitors electronically lodged using the Court’s electronic filing system her application to set aside the bankruptcy notice;

    Ms Lamb’s solicitors emailed an unsealed copy of the application and its supporting affidavit to Mr Sherman’s solicitors at 5:34pm that afternoon;

    at 2:27pm and 2:28pm on 16 June 2022, Mr Sherman’s solicitors conducted searches on the Commonwealth Courts Portal which did not disclose that any application to set aside the bankruptcy notice had been filed;

    at 2:44pm on 16 June 2022, the Registry accepted Ms Lamb’s application for filing;

    at 3:16pm on 16 June 2022, Mr Sherman’s solicitors lodged the petition electronically and served Ms Lamb with it at 3:40pm on that day;

    on 14 July 2022, at the first hearing of the application before the Registrar, both parties were legally represented, the Registrar made the first of the extension orders and adjourned the hearing of the application to 6 October 2022;

    on 6 October 2022, the Registrar made the second of the extension orders and adjourned the hearing of the application to 24 November 2022;

    on 24 November 2022, the Registrar heard the application and reserved his decision, but made no orders extending the time for compliance with the bankruptcy notice; and

    on 8 December 2022, the Registrar gave oral reasons and dismissed the application.

9    On 27 March 2023, Mr Sherman filed an application under s 35A of the Federal Court Act to review the Registrar’s decisions to make the extension orders.

10    The parties also agreed the following facts about the progress of the petition as it progressed concurrently with, but separately to, the application, namely:

    on 6 July 2022, another Registrar ordered Ms Lamb to file and serve any notice stating her grounds of opposition to the petition and affidavits by 4:00pm on 20 July 2022. Ms Lamb did not file any notice of grounds of opposition or affidavits until 7 February 2023 and, thus, did not comply with the order of 6 July 2022;

    on 27 July 2022, another Registrar adjourned the hearing of the petition to 19 October 2022;

    on 19 October 2022, the latter Registrar adjourned the hearing of the petition to 30 November 2022;

    on 30 November 2022, another Registrar adjourned the hearing of the petition to 8 February 2023;

    on 7 February 2023, Ms Lamb filed a notice of opposition in which, relevantly, she asserted that, first, pursuant to s 52(2)(a) of the Bankruptcy Act, she was solvent and able to pay her debts, and, secondly, “[t]he petition is defective as it incorrectly identifies the act of bankruptcy alleged to have been taken by [Ms Lamb]”. The notice of opposition raised four other grounds with which it is not necessary for us to deal; and

    on 8 February 2023, Mr Sherman’s counsel asserted in their outline of submissions that orders of the Court to extend time on an application to set aside a bankruptcy notice necessarily fell away if that application were dismissed, as his Honour did in the event.

11    On 2 May 2023, Mr Sherman filed an application in the appeal seeking to amend the petition to assert that Ms Lamb committed an act of bankruptcy on 25 November 2022.

THE PROCEEDING BEFORE THE PRIMARY JUDGE

Background

12    The matter came before the primary judge on 8 February 2023, but, in part because of connectivity issues with the hearing taking place on Microsoft Teams, his Honour was unable to deal with it on that day and adjourned the hearing of the petition to 10 February 2023.

13    When the matter was returned before his Honour, on 10 February 2023, Ms Lamb sought, and was refused, an adjournment of the hearing of the petition. With his Honour’s leave, she filed an amended notice of grounds of opposition and an outline of submissions that, among other matters, contended that the petition was defective and that the extension orders validly had extended the time for compliance with the bankruptcy notice to 24 November 2022, relying on the decision of Deane and Ellicott JJ in in Streimer v Tamas (1981) 37 ALR 211; 54 FLR 253.

14    Mr Sherman’s counsel relied on their outline of submissions and orally submitted that Ms Lamb’s factual assertions that there was a defect in the petition were “made in error.”

15    After hearing evidence and argument, his Honour gave an ex tempore judgment and made the sequestration order.

The primary judge’s reasons

16    His Honour found that, from at least 8 December 2022, if not earlier, Ms Lamb was on notice that the petition was likely to be heard on 8 February 2023, when it had been listed. His Honour noted some personal matters which Ms Lamb asserted in support of her unsuccessful adjournment application, but nothing turned on those on the appeal. He was satisfied that Ms Lamb had had sufficient time to put on whatever evidence and arguments were necessary for her to oppose the petition.

17    His Honour found that Mr Sherman had proved the matters that s 52(1) of the Bankruptcy Act required, namely, the commission of an act of bankruptcy on 15 June 2022, service of the petition on Ms Lamb, and that the judgment debt was still owing. The primary judge concluded that the remaining question was whether, as a matter of discretion, he ought make a sequestration order against Ms Lamb’s estate. His Honour set out the grounds of opposition and then said (at [18]):

Not all of these were pressed after amendments. Some of those grounds may be dealt with in short order in any event. The petition is not inaccurate in relation to its identification of the act of bankruptcy. Further, I am quite satisfied from the court record that the petition was filed before an application to set aside the bankruptcy notice was made. Further, and in any event, that application has been dismissed.

(emphasis added)

18    His Honour was not satisfied by Ms Lamb’s evidence that she was solvent within the meaning of ss 5(2) and (3) of the Bankruptcy Act, namely, that she was able to pay all her debts as and when they became due and payable, and rejected Ms Lamb’s other grounds of opposition. He was satisfied that Mr Sherman had proven the act of bankruptcy and the necessary matters required under s 52(1) of the Bankruptcy Act and then made the sequestration order.

THE LEGISLATIVE SCHEME

19    Relevantly, the Bankruptcy Act provides:

33     Adjournment, amendment of process and extension and abridgment of times

(1)    The Court may:

…

(c)    extend before its expiration or, if this Act does not expressly provide to the contrary, after its expiration, any time limited by this Act, or any time fixed by the Court or the Registrar under this Act (other than the time fixed for compliance with a bankruptcy notice), for doing an act or thing or abridge any such time.

40    Acts of bankruptcy

(1)    A debtor commits an act of bankruptcy in each of the following cases:

…

(g)    if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia … a bankruptcy notice under this Act and the debtor does not:

(i)    where the notice was served in Australia—within the time fixed for compliance with the notice; or

…

comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained;

41    Bankruptcy notices

(6A)    Where, before the expiration of the time fixed for compliance with a bankruptcy notice:

(a)    proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or

(b)    an application has been made to the Court to set aside the bankruptcy notice;

the Court may, subject to subsection (6C), extend the time for compliance with the bankruptcy notice.

(7)    Where, before the expiration of the time fixed for compliance with a bankruptcy notice, the debtor has applied to the Court for an order setting aside the bankruptcy notice on the ground that the debtor has such a counter-claim, set-off or cross demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter-claim, set-off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied.

44     Conditions on which creditor may petition

(1)    A creditor’s petition shall not be presented against a debtor unless:

…

(c)    the act of bankruptcy on which the petition is founded was committed within 6 months before the presentation of the petition.

52    Proceedings and order on creditor’s petition

(1)     At the hearing of a creditor's petition, the Court shall require proof of:

(a)    the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);

(b)     service of the petition; and

(c)    the fact that the debt or debts on which the petitioning creditor relies is or are still owing;

(emphasis added)

20    The Federal Court (Bankruptcy) Rules 2016 (Cth) relevantly provide:

1.04    Application of these Rules and other Rules of the Court

(1)    Unless the Court otherwise orders:

(a)    these Rules apply to a proceeding in the Court to which the Bankruptcy Act applies;

…

(2)    The other Rules of the Court apply, to the extent that they are relevant and not inconsistent with these Rules:

(a)    to a proceeding in the Court to which the Bankruptcy Act applies;

2.01    Originating application and interim application

(1)    Unless these Rules otherwise provide, a person must make an application required or permitted by the Bankruptcy Act to be made to the Court:

(a)    if the application is not made in a proceeding already commenced in the Court—by filing an application in accordance with Form B2;

(emphasis added)

21    The note under r 2.01 lists numerous examples of applications under the Bankruptcy Act that must be made by filing a Form B2, but does not include, expressly, an application under s 41(6A) of the Bankruptcy Act. However, Pt 3 of the Federal Court (Bankruptcy) Rules is headed ‘Bankruptcy notices’ and provides, in r 3.02, what an application to set aside a bankruptcy notice under s 41(6A) of the Act must include, but that rule says nothing about the form in which such an application is to be made. Thus, because the Federal Court (Bankruptcy) Rules do not otherwise provide, r 2.01(1)(a) required that Ms Lamb make the application, as she did, in accordance with Form B2.

22    Next, the Federal Court Rules in Div 2.3, headed ‘Lodging and filing documents’, contain a detailed scheme for identifying how documents may be lodged with the Court and when they are actually, or are deemed to have been, filed. In 2014, the Court introduced its electronic court file and made amendments to the Federal Court Rules to deal with this innovation. There are now four modes of lodging documents prescribed in r 2.21(1). Relevantly, r 2.23(1) sets out the technical requirements for sending a document for filing to a Registry by electronic communication and rr 2.21 and 2.24 to 2.25 in Div 2.3 provide:

2.21    How documents may be lodged with the Court

(1)  A document may be lodged with the Court by:

(a)     being presented to a Registry when the Registry is open for business; or

(b)     being posted to a Registry with a written request for the action required in relation to the document; or

(c)     being faxed to a Registry in accordance with rule 2.22; or

(d)     being sent by electronic communication to a registry, in accordance with rule 2.23.

    …

2.24    Documents sent by electronic communication

(1)    If a document sent to a Registry by electronic communication in accordance with rule 2.23 is accepted at the Registry, and is a document that must be signed or stamped, a Registrar will:

(a)    for a document that these Rules require to be endorsed with a date for hearing—insert a notice of filing and hearing as the first page of the document; or

(b)    for any other document—insert a notice of filing as the first page of the document.

(2)    If a notice has been inserted as the first page of the document in accordance with subrule (1), the notice is taken to be part of the document for the purposes of the Act and these Rules.

2.25    When is a document filed

(1)    A document is filed if:

(a)    it is lodged with the Court in accordance with rule 2.21(1); and

(b)    either:

(i)    for a document in an existing proceeding—it is accepted in the proper Registry by having the seal of the Court affixed to it; or

(ii)    in any other case—it is accepted in a Registry by having the seal of the Court affixed to it.

Note:    A document that is accepted for filing is added to the Court file. See the definition of Court file in the Dictionary.

…

(3)    If a document is faxed or sent by electronic communication to a Registry, the document is, if accepted by a Registry under subrule (1), taken to have been filed:

(a)    if the whole document is received by 4.30 pm on a business day for the Registry—on that day; or

(b)    in any other case—on the next business day for the Registry.

Note 1:    Business day is defined in the Dictionary.

Note 2:    File is defined in the Dictionary as meaning file and serve.

Note 3:    Because of the Court’s computer security firewall, there may be a delay between the time a document is sent by electronic communication and the time the document is received by the Court.

23    In addition, r 2.26 gives a registrar a discretion to refuse to accept a document, including one that, if accepted, would become an originating application if the registrar is satisfied that the document would be an abuse of the process of the Court or is frivolous or vexatious on its face or by reference to any documents already filed or submitted for filing with it. And r 2.27 sets out when a document will not be accepted for filing, including where it does not substantially comply with the Federal Court Rules.

24    The dictionary to the Federal Court Rules provides that an originating application “means an application starting a proceeding”.

THE PARTIES’ SUBMISSIONS

25    The sole issue on Ms Lamb’s appeal is whether she had “made” her application under s 41(6A) before the time for compliance with the bankruptcy notice had expired so that the extension orders had the effect of extending the time for compliance to after 15 June 2022. That would result in the petition not being able to have satisfied the requirement in s 44(1)(c) (as s 52(1)(a) mandated), that the act of bankruptcy on which it was founded had been committed within six months before its presentation.

26    Ms Lamb submitted that she had lodged the application electronically within the meaning of the Federal Court Rules when the Court received it at 4:37pm on 15 June 2022 and that, first, that receipt constituted her “making” the application within the meaning of s 41(6A) of the Bankruptcy Act, and secondly, the effect of the extension orders was to extend the time for compliance with the bankruptcy notice to 24 November 2022. She contended that this necessarily meant that any act of bankruptcy on which the petition could have relied could not have been committed until 25 November 2022, being the day after the last extension.

27    Mr Sherman contended that Streimer 37 ALR 211 was plainly wrong because, unless and until the Court made an extension order and an extension order remained in place throughout the proceeding, an incurable act of bankruptcy would occur, regardless of a mistake of the kind that occurred in that decision, namely that the judge had overlooked continuing an extension order when adjourning overnight. He submitted that he should be allowed to seek to set aside the Registrar’s extension orders, first, on this basis and, secondly, because the application was made only when it was accepted for filing on 16 June 2022, being after the time for compliance with the bankruptcy notice had expired.

CONSIDERATION

Did Ms Lamb commit an act of bankruptcy on 15 June 2022?

When an application is “made”

28    Although Ms Lamb’s solicitors lodged her application under r 2.21(1)(d) of the Federal Court Rules on the last day for compliance with the bankruptcy notice, that lodgment occurred after 4:30pm. The critical question here is, when was that application under s 41(6A) “made”?

How the legislative provisions operate

29    A debtor commits an act of bankruptcy by force of s 40(1)(g) of the Bankruptcy Act if he or she has been served in Australia with “a bankruptcy notice under this Act” and does not “within the time fixed for compliance with the notice” comply with its requirements or satisfy the Court that he or she has a counterclaim, set-off or cross-demand of the kind specified in s 40(1)(g). However, if, before the expiration of the time fixed for compliance with the bankruptcy notice, the debtor has applied to the Court for an order to set the bankruptcy notice aside on the ground that he or she has a counterclaim, set-off or cross-demand referred to in s 40(1)(g) and the Court has not determined that question before the expiration of the time for compliance, then s 41(7) deems that the time for compliance is extended until and including the day on which the Court determines that issue.

30    In that context, s 41(6A) can be seen to operate consistently with the scheme of the Bankruptcy Act in providing certainty as to whether a debtor has committed an act of bankruptcy. That is because the section requires that, as a jurisdictional precondition of the Court having power to make any order extending the time for compliance with a bankruptcy notice or setting it aside, the debtor “make” that application to the Court before the expiration of the time for compliance with the bankruptcy notice.

31    As explained above, because an application to set aside a bankruptcy notice is not one in a proceeding already commenced, r 2.01(1)(a) of the Federal Court (Bankruptcy) Rules provides that “a person must make” it “by filing an application in accordance with Form B2” (emphasis added). The Federal Court (Bankruptcy) Rules apply the Federal Court Rules as to how documents are filed in the Court (r 1.04(2)(a)). Thus, in order to determine when an application under s 41(6A) is made to the Court for the purposes of r 2.01(1)(a) of the Federal Court (Bankruptcy) Rules, it is necessary to consider the operation of rr 2.21-2.25 of the Federal Court Rules.

32    Rules of Court cannot be, or prescribe matters, inconsistent with the Act under which they are made, but they can prescribe how applications to the Court are to be made. The Federal Court Rules prescribe a scheme by which documents, including in particular ones commencing a proceeding, such as an application to set aside a bankruptcy notice under s 41(6A), can be filed in the Court, and make provision for their lodgment anterior to the act of filing. There was no argument that these rules are inconsistent with s 41(6A) of the Bankruptcy Act. The relevant Federal Court Rules set out in [22] above provide how a document will come to be filed if it has been lodged with the Court by being sent by electronic communication to a Registry in accordance with the technical requirements for electronic communication prescribed in r 2.23 (see r 2.21(1)(d)).

33    Rule 2.24(1) prescribes that where the Federal Court Rules require that a document that has been sent to a Registry by electronic communication be signed or stamped by a registrar, then the registrar must “insert a notice of filing and hearing as the first page of the document” (emphasis added). Necessarily, an application under s 41(6A) needs a hearing date and a Court file since it commences a proceeding in the Court. Ordinarily, in order to serve such an application on the petitioning creditor, the debtor needs to have the formal court process, being a sealed application that has a hearing date endorsed on it. Rule 2.24(2) operates so that when the registrar signs or stamps a document, that must be endorsed with a notice of filing and date for hearing. Such a notice is a document created by the Registry as a record of the filing and becomes the first page of the application that the person seeking to make it had earlier lodged by sending it to the Registry by electronic communication.

34    Rule 2.25 prescribes how and when a document is filed in the Court Registry. That process requires, first, the act of the litigant lodging the document with the Court in accordance with rule 2.21 (r 2.25(1)(a)) and secondly, it being accepted in a Registry by having the seal of the Court affixed to it (r 2.25(1)(b)(ii)).

35    Here, because Ms Lamb lodged her application at 4:37pm on 15 June 2022, by force of r 2.25(3)(b) it was deemed to have been filed on the next business day, being 16 June 2022, when, in fact, the Registry accepted it for filing at 2:44pm and inserted, as its first page, the notice of filing and a hearing date of 7 July 2022.

36    An application can only be made to the Court to set aside a bankruptcy notice under s 41(6A) of the Bankruptcy Act by taking a step in the Court to enliven its jurisdiction. That occurs either by making the application orally before a judge or registrar with power to deal with it or by causing the document to be filed in accordance with r 2.01(1)(a) of the Federal Court (Bankruptcy) Rules. As a result of such a step, the Court becomes seized with jurisdiction to deal with the subject matter of the application.

37    The word “filed” is the word traditionally used to describe the act or process of placing a document in the records of a court or registry and is, of course, the act of the court: see Johnston v Vintage Developments Pty Ltd [2006] FCAFC 171 at [16] per Tamberlin, Jacobson and Rares JJ.

38    The purpose of r 2.25 of the Federal Court Rules is to identify when a document lodged with the Court has the legal effect of being filed in the Court and is treated as invoking the Court’s jurisdiction, namely, once it is has been accepted for filing on the day deemed by the rule and given a hearing date. And r 2.01(1)(a) of the Federal Court (Bankruptcy) Rules prescribes that an application commencing a proceeding under s 41(6A) is “made” by filing it.

39    The effect of r 2.25 is to put a person who lodges a document electronically in the same position as one who does so physically. That is, lodgment will only be effective during business hours when there is an officer of the Court with authority to accept the document, and, if the officer accepts it, filing occurs in accordance with the deeming provisions in the rule, unless the Rules otherwise provide or the Court orders. For example, ordinarily if a person attends the Registry to present an originating application or a bankruptcy petition for filing, he or she physically hands the document to an officer of the Registry who must accept it and put it on the court file, unless rr 2.26 or 2.27 apply. Those acts are usually synchronous. However, if the person arrives after the Registry has closed for business, the person must either apply to reopen it or must apply to a person, such as a registrar or a judge, with the authority to waive compliance with the Rules for lodging or filing documents, if the person wants to initiate a proceeding in the Court or lodge a document for filing on that day.

40    It would be no use to anyone who sought to rely on a document as being lodged or filed on a particular day with the Court for the solicitor or party to stand outside locked Registry doors and take a selfie photograph of themselves that had a time stamp showing them there after business hours and come back the next day to say, “I was at the Registry and it was closed, but treat the document as lodged or filed yesterday.”, where a limitation period, if there were one, would have expired at midnight the previous night.

41    Thus, a person must do something more to make sure, if a lodgment occurs after hours (that is, after 4:30pm under r 2.25(3)), that this act will be effective to invoke the Court’s jurisdiction on the day of lodgment by taking steps to have a judge or registrar open the Court to enable the document to be filed out of hours on the same day.

42    One reason for this, particularly in bankruptcy matters or where a limitation period is about to expire, is that people need certainty as to whether or not a proceeding has been commenced or, in the language of s 41(6A) of the Bankruptcy Act, “an application has been made to the Court”. Applications to the Court are not made in the air. They are made to the Court to invoke regularly its jurisdiction in accordance with the requirements of a statute and relevant rules of Court. It would be absurd to suggest, in the example we have given earlier, that standing outside a closed Registry after business hours is enough to “make” an application to the Court. That is because nobody was at the Registry to receive and accept it or to file it. Hence, the Rules are structured in the way they are, to allow an officer in the Registry to consider whether or not a document lodged electronically or physically should be put on the Court’s file or be used to create a Court file to commence a proceeding and thus invoke the jurisdiction of the Court.

The case law

43    Ms Lamb’s reliance on the decision in Purden Pty Ltd v Registrar in Bankruptcy (1982) 43 ALR 512; 64 FLR 306 does not avail her. Bowen CJ, Fisher and Lockhart JJ explained that the words “presented” and “presentation” used in the Bankruptcy Act were not used in the sense of the unilateral act of the creditor showing the petition to the appropriate court officer, but in the sense of handing or delivering it to, and the officer accepting, it. They said (at 515):

The showing of the document to the court’s officer and its receipt by him are both necessary elements in the notion of presentation of a petition. However, what the officer does with the document thereafter is nothing to the point as by then it has been presented.

(emphasis added)

44    Their Honours went on to cite that the distinction between presentation and filing was of long standing by referring to the reasons of Walker J in Re Daunt; Ex parte McIntyre and Yates (1905) 5 SR NSW 533 at 536–537. There, Walker J explained that this distinction was of little practical effect, saying (at 537):

This, I take it, is the invariable course, and is so universally recognised that in practice a presentation of a petition involves and implies a request that it be immediately filed. The old distinction has become purely verbal. It is not unreasonable to suppose that the Legislature, when speaking of “presentation,” spoke of it as every practitioner would regard it, as carrying with it the usual incident of filing.

(emphasis added)

45    Bowen CJ, Fisher and Lockhart JJ went on to say that, because of peculiarities and differences in the way, at the time in 1982, in which various State registries of this Court dealt with the lodging and filing of documents, such as a creditor’s petition, that a person wished both to present and have filed, it was necessary that the Full Court determine a consistent practice throughout the Registries of the Court as to how the act of presenting a petition could be ascertained. They said (at 517):

It is vital, however, that the date of presentation of the petition be ascertained with certainty. Hence that date ought to be stamped or otherwise marked on the petition.

46    In Streimer 47 ALR 211, the Full Court considered a slightly differently worded s 41(6A) (before its amendment to substantially its current form by Sch 1 of the Bankruptcy Legislation Amendment Act 1996 (Cth)), that then provided:

Where, before the expiration of the time fixed by the Court or the Registrar for compliance with the requirements of a bankruptcy notice—

(a)    proceedings to set aside the judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or

(b)    an application to set aside the bankruptcy notice has been filed with the Registrar;

the Court may, subject to subsection (6C), extend the time for compliance with the bankruptcy notice.

(emphasis added)

47    Contrary to Ms Lamb’s, and indeed Mr Sherman’s, arguments, in Streimer 37 ALR at 214–215 Deane and Ellicott JJ held that the consequence of “filing” the application was:

The Parliament plainly turned its attention to the question of what steps needed to be taken before the expiry of the time which the bankruptcy notice fixed for compliance with its terms. It specified two alternative steps, namely, the institution of proceedings to set aside the relevant judgment or order or the filing of an application to set aside the bankruptcy notice. Subject to either of those steps being taken within the time limited for compliance, the power to extend time is conferred in general words. It would, in our view, be contrary to the plain import of the words used by the Parliament to construe s. 41 (6A) as requiring not only that one or other of the alternative express conditions precedent to jurisdiction be fulfilled within the time originally fixed for compliance but as also requiring that both the application for an order and any initial order be made within that time.

(emphasis added)

48    In that case, the debtor applied to the Court within the time fixed for compliance by the bankruptcy notice for an order extending the time but, some time later after several extensions, the judge hearing the application accidentally omitted to make a further order extending the time for compliance overnight when he adjourned the proceeding to the next day. Deane and Ellicott JJ held that once the jurisdiction of the Court had been enlivened under s 41(6A), the Court could make an order nunc pro tunc to remedy such a defect because nothing in s 41(6A) required expressly that an order be made prior to time at which the notice would expire.

49    The present wording of s 41(6A) also confers power on the Court to make an order extending the time for compliance once the debtor has taken one of the two steps in pars (a) and (b), namely, instituting proceedings to set aside the judgment or order in respect of which the bankruptcy notice was issued or making an application to the Court to set that notice aside. Given that s 41(6A)(a) requires that the debtor institute proceedings, being an act to enliven the jurisdiction of a court that can set aside the judgment or order in respect of which the bankruptcy notice was issued, s 41(6A)(b) must also require the debtor to do an act sufficient to enliven the jurisdiction of this Court (or another court having jurisdiction under s 41(6A)) so as to satisfy its criterion that “an application has been made to the Court to set aside the bankruptcy notice”.

50    Mr Sherman’s argument that Streimer 37 ALR 211 was wrongly decided relied on a construction of s 41(6A) that is in the teeth of both s 33(1)(c) of the Bankruptcy Act, as it applies to an application for an extension filed prior to the time fixed for compliance by the bankruptcy notice, and the ordinary rule of statutory construction, as stated by Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ in Owners of the Ship “Shin Kobe Maru” v Empire Shipping Co Inc (1994) 181 CLR 404 at 421:

It is quite inappropriate to read provisions conferring jurisdiction or granting powers to a court by making implications or imposing limitations which are not found in the express words.

(footnote omitted)

51    Here, the jurisdiction of the Court to make an order extending time exists if, and only if, an application has been made before the time fixed for compliance of the bankruptcy notice, as had occurred in Streimer 37 ALR 211. Moreover, a reading of s 41(6A) of the kind Mr Sherman argued would ignore the facultative alternative in s 41(6A)(a) that all a debtor need do is institute proceedings to set aside the judgment or order in respect of which the bankruptcy notice had been issued in another court, as the debtor’s alternative to making an application under s 41(6A)(b) to set the bankruptcy notice aside.

52    Mr Sherman’s application to overrule Streimer 37 ALR 211 cannot be accepted. First, the decision has stood for over 41 years. If the Parliament had thought the decision had created an inconvenience or did not reflect its intention, it is impossible to think that the legislation would not have been amended to reflect such a construction. Secondly, the decision of Deane and Ellicott JJ is plainly correct and should be followed. Moreover, in Guss v Johnstone (2000) 171 ALR 598 at 610–611 [63], Gleeson CJ, Gaudron, McHugh, Kirby and Callinan JJ referred to Streimer 37 ALR 211 with approval. Their Honours noted (at 609 [55]):

When, on 1 July 1997, on the hearing of an application made by notice of motion filed on 23 June 1997, Sundberg J refused to stay the order of 30 May 1997 by which he declared that the court was not satisfied of the matters referred to in s 40(1)(g), Sundberg J rightly pointed out that a grant of stay on 1 July would not cancel the act of bankruptcy which had already been committed. In James v Abrahams ((1981) 34 ALR 657 at 662), Deane and Lockhart JJ held that the language of s 41(6A), including its express stipulations as to time, makes it impossible to imply any general power in the Federal Court to extend the time for compliance with a bankruptcy notice in a case which does not fall within s 41(6A). In any event, no application was made to Sundberg J to do anything other than stay his previous orders. The only order he had relevantly made was a declaration, and, by force of the statute, that had already resulted in certain consequences. The Full Court was right to dismiss the appeal against the decision of Sundberg J of 1 July 1997.

(emphasis added)

53    They also said (at 610 [62]):

It is true that there is no statutory grant of power to annul an act of bankruptcy (King v Henderson [1898] AC 720 at 728), or to extend the time for compliance with a bankruptcy notice other than in a case where the conditions of section 41(6A) have been satisfied (James v Abrahams (1981) 34 ALR 657).

(emphasis added)

Disposition

54    In order to make an application to the Court, its jurisdiction has to be invoked, which, ordinarily, occurs by the Registry or the Court accepting the filing of a document comprising an application to set aside a bankruptcy notice, as r 2.01(1)(a) of the Federal Court (Bankruptcy) Rules provides. It cannot be that it is sufficient for an application to be lodged to “make” it, because thereafter it may or may not be rejected for filing. The Federal Court Rules seek to create certainty and prevent injustice occurring by clearly prescribing when a document sent electronically will be taken to have been filed. It does so by stipulating that where the Court receives the document prior to 4:30pm on a business day, and, if accepted, it is deemed to have been filed on that day so that the Court’s jurisdiction then will be enlivened, but, in all other cases, the document is deemed to be filed on the next business day. That gives certainty to when the jurisdiction of the Court has been enlivened.

55    Of course, it is always possible, because this Court is a superior court of record, for a person to make an oral application for relief to a judge, including under s 41(6A), in cases where there is urgency and the judge is satisfied that it is appropriate and there is a sufficient basis to accept such an application. Where that occurs, the judge exercises the power of the Court to allow the proceeding to be commenced.

56    When Ms Lamb lodged her application under s 41(6A) of the Bankruptcy Act by electronic communication on 15 June 2022 at 4:37pm, she did not at that time “make” an application to the Court to set aside the bankruptcy notice within the meaning of s 41(6A). That was because the Court had nothing before it by which it could have done anything to extend the time for compliance with the bankruptcy notice, since its jurisdiction had not yet been invoked either by the filing of that application under r 2.01(1)(a) of the Federal Court (Bankruptcy) Rules and in accordance with the Federal Court Rules, or by her making an oral application to a judge or registrar (if a registrar had power to do so) to permit her to “make” the application to the Court at that time. In the circumstances, she had only lodged her application electronically under r 2.21(1)(d), and, by itself, the lodgment could not have invoked the jurisdiction of the Court under s 41(6A). That is because, until the application was accepted by the Registry under r 2.25(1)(b)(ii), when the seal of the Court was affixed to it and a registrar inserted the notice of filing and hearing as its first page under r 2.24(1)(a), it was not filed or made under r 2.01(1)(a) of the Federal Court (Bankruptcy) Rules (or deemed by force of r 2.25(3) of the Federal Court Rules to have been filed), so that it could not be “made” to the Court within the meaning of s 41(6A).

57    The act of the Registrar on 16 June 2022 that accepted Ms Lamb’s application for filing at 2:44pm could not have affected her earlier commission of the act of bankruptcy by failing to comply with the bankruptcy notice before the time that it had fixed for compliance. There is nothing in the Act that permits the Court to cure an act of bankruptcy that has occurred after the time for compliance with a bankruptcy notice has expired, and before any application has been made to the Court under s 41(6A).

58    The imposition of strict time limitations in cases such as this is consistent with the approach the High Court has taken in other similar areas, such as its decision in David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 at 276–277. There Gummow J, with whom Brennan CJ, Dawson, Gaudron and McHugh JJ agreed, identified that the provisions of the then s 459G of the then Corporations Law (Vic), required an application to set aside a statutory demand to be made strictly in accordance with the conditions set out in the statute. His Honour identified those conditions as attaching a limitation or condition upon the authority of the Court to set aside the demand.

59    Similarly here, s 41(6A) imposes a limitation that an application to set aside a bankruptcy notice be made to the Court, that is, to invoke its jurisdiction, before the time fixed for compliance with the bankruptcy notice expires. It is obviously for debtors and in their interests, to make sure that, if they seek to lodge an application under s 41(6A) after the ordinary business hours of the Registry on the last day for compliance with a bankruptcy notice, they do something to make sure that that lodgment will be filed in accordance with the Rules on that day prior to the expiry of the time for compliance.

Conclusion

60    For these reasons, Ms Lamb committed an act of bankruptcy on 15 June 2022. Although his Honour did not deal in terms with her argument based on the late filing of her application, had his Honour done so, that could not have altered the consequence that the act of bankruptcy could not have been set aside: see Guss 171 ALR at 610 [62]. His Honour was correct to find that Mr Sherman had proved that Ms Lamb had committed an act of bankruptcy on 15 June 2022, as required by ss 44(1)(c) and 52(1)(a) of the Bankruptcy Act.

Application to review extension orders

61    Ms Lamb argued that granting Mr Sherman’s application to review the Registrar’s extension orders would cause her prejudice because she had been put to proof of her solvency before the primary judge, which, had Mr Sherman made the application earlier, she may not have had to do.

62    That argument has no substance. In the circumstances, Ms Lamb was opposing the making of the sequestration order and needed to satisfy his Honour that, in any event, she was solvent. Moreover, as explained above, the extension orders had no operative effect. In our opinion, Mr Sherman should be granted an extension of the time to set these orders aside and should be granted that relief, because those orders were, first, made after, and could not have affected the commission of, the act of bankruptcy, secondly, made in a proceeding commenced without jurisdiction under s 41(6A) and, thirdly, plainly wrong. There is no injustice to Ms Lamb in setting the extension orders aside.

Application to amend petition

63    Last, Mr Sherman’s application to amend the petition is hopeless. Section 44(1)(c) requires that the act of bankruptcy upon which the petition is founded must occur prior to its institution. Here, he sought to rely on an act of bankruptcy that occurred on 25 November 2022, well after the presentation of the petition, which falls outside the express words of s 44(1)(c), “[t]he act of bankruptcy on which [a] petition is founded” must be one committed “within six months before” its presentation under s 44(1)(c). That application should be dismissed.

CONCLUSION

64    It follows that the appeal fails, Mr Sherman’s application to have the extension orders set aside should be allowed and those orders should be set aside, and his application to amend the petition must be dismissed.

65    We will allow the parties to confer and bring in draft orders to give effect to these reasons. If they cannot agree, they should make written submissions limited to one page within seven days of these reasons being published.

Associate:

Dated:    5 June 2023