Federal Court of Australia

Karlsson v Griffith University (No 2) [2026] FCAFC 102

ORDERS

THE COURT ORDERS THAT:

1.    The respondent’s interlocutory application dated 21 April 2026 is dismissed.

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

REASONS FOR JUDGMENT

THE COURT:

1    On 22 November 2024, after a short adjournment at the conclusion of the appeal hearing, this Court dismissed the appeal brought in these proceedings from a single judge of the Federal Court, with costs: Karlsson v Griffith University [2024] FCAFC 150. As a result, the decision the primary judge delivered on 8 March 2024 was upheld. His Honour had dismissed an application for review of a decision of a registrar of this Court. The registrar’s decision dated 7 November 2023, in turn, had dismissed an application by the appellant, Ms Karlsson, to set aside a bankruptcy notice issued to her by the respondent, Griffith University.

2    On 24 February 2025, the University presented a creditor’s petition, which was presented again in an amended form on 4 April 2025. On 10 July 2025, a registrar of this Court made orders that Ms Karlsson’s estate be sequestrated. On 31 July 2025, Ms Karlsson applied for a review of the registrar’s decision.

3    On 21 April 2026, the University filed an interlocutory application bearing the same date, seeking that this Court, exercising the same appellate jurisdiction, make an order to vary the orders made on 22 November 2024 dismissing the appeal with costs, by either the exercise of the slip rule power in r 39.05 of the Federal Court Rules 2011 (Cth) and/or by the exercise of the Court’s implied jurisdiction. The variation sought was the addition of an entirely new order to extend the time for compliance with the bankruptcy notice to the date of those orders (being 22 November 2024) pursuant to s 41(6A) of the Bankruptcy Act 1966 (Cth). The Court made orders to dismiss the application following the hearing on 27 July 2026. These are the Court’s reasons for those orders.

The operation of s 41(7) where an appeal is brought to the Full Court

4    The reason that the University made the present application is that it had been proceeding, until relatively recently, on a misunderstanding of the operation of s 41(7) of the Bankruptcy Act. That section provides as follows:

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.

5    The University had erroneously understood that s 41(7) operated to extend the time for compliance with the bankruptcy notice until the appeal brought from the decision of the primary judge was dismissed on 22 November 2024. However, as the University now accepts, s 41(7) only operates in relation to applications to the Federal Court in its original jurisdiction, and does not operate to extend the time for compliance with the bankruptcy notice until the appeal proceeding was resolved in this Full Court, exercising appellate jurisdiction. That can be traced to the High Court’s ruling that s 53(2) of the Bankruptcy Act 1924 (Cth) (the predecessor to s 41(7) of the current Bankruptcy Act) was clearly limited by its terms to determinations of the then Federal Court of Bankruptcy, and thus had no operation in relation to appeals to the High Court: Ebert v Union Trustee Co of Australia Ltd [1961] HCA 29; 105 CLR 327 at 333 (Dixon CJ, Kitto, Taylor, Menzies and Windeyer JJ).

6    It has since been held that the same reasoning continues to apply to s 41(7) of the Bankruptcy Act, such that the time for compliance is extended to the date of the original jurisdiction decision regarding an application to set aside a bankruptcy notice, but not to the date of the appeal decision: see Shephard v Chiquita Brands South Pacific Ltd [2004] FCAFC 76; 1 ABC(NS) 610 at [45] (Sackville J); see also Guss v Johnstone [2000] HCA 26; 171 ALR 598 at [57] (Gleeson CJ, Gaudron, McHugh, Kirby and Callinan JJ). In support of that view, Branson J in State Bank of New South Wales Limited v Gomez [2002] FCA 1476 at [11]-[17] rejected the contention that s 41(7) did not distinguish between the Federal Court sitting in original jurisdiction exercised by a single judge and sitting in appellate jurisdiction exercised by a Full Court, following Ebert. Her Honour rejected the attempt to distinguish Ebert upon the basis that that was a case in which the original decision was in the Federal Court of Bankruptcy, whereas the appeal was to the High Court.

7    It follows that s 41(7), properly understood, operates to extend the date for compliance with a bankruptcy notice, if it is not set aside, to the date on which a set aside application made on the basis of a counter-claim, set-off or cross demand is refused, rather than the date on which any appeal from such a determination is later dismissed. At the hearing of this application, the Court was left with some uncertainty as to the date on which such a refusal occurred in this case. It may have been the date of the registrar’s initial decision on 7 November 2023, or alternatively the date of primary judge’s decision to uphold the registrar’s orders, on 8 March 2024.

8    As adverted to above, previous authority has referred to the distinction between the Court, however constituted, exercising original jurisdiction and exercising appellate jurisdiction. The review of a registrar’s decision falls squarely within the former category, because registrars exercise only delegated judicial power in original jurisdiction, not in appellate jurisdiction. Regard must also be had to the nature of the review contemplated by s 35A(5) of the Federal Court of Australia Act 1976 (Cth), which is well captured in the following observations recently made in Corry v NHB Enterprises Pty Ltd, in the matter of Corry [2026] FCA 768 at [4] (Stewart J):

It is uncontroversial that on [a review of orders made by a registrar] “the matter is considered afresh on the evidence and on the law at the time of the review, that is at the time of the hearing de novo” as if the Court were considering the claim for the first time: Bechara v Bates [2021] FCAFC 34; 286 FCR 166 at [17] and [20] per Allsop CJ, Markovic and Colvin JJ. “That is to say, there must be a complete rehearing of the facts and the law as they exist when the judge reviews the order made by the registrar”: Totev v Sfar [2008] FCAFC 35; 167 FCR 193 at [10] per Emmett J, adopted in Bechara v Bates at [21]. The judge reviewing the registrar’s order “begins afresh and exercises for himself or herself any discretion exercised by the registrar”; the parties in effect “commence the proceeding again”: Totev v Sfar at [13] adopted in Bechara v Bates at [21].

9    Notwithstanding the above, it is unnecessary to finally decide one way or the other as to whether the appropriate date is that of the registrar’s decision, or the primary judge’s decision for the purpose of determining the present application, and undesirable to do so given neither of the parties made detailed submissions relating to that question. As such, the remainder of these reasons assume in the University’s favour, without deciding, that the last date for compliance with the bankruptcy notice was the later date, being the date of the primary judge’s decision on 8 March 2024. As a result, that was the date on which Ms Karlsson committed the act of bankruptcy: Bankruptcy Act s 40(1)(g).

10    Under s 44(1)(c) of the Bankruptcy Act, a creditor’s petition cannot be presented unless that is done within six months of the act of bankruptcy. In this case, the act of bankruptcy was Ms Karlsson’s failure to comply with the bankruptcy notice before its expiry: s 40(1)(g). Had s 41(7) operated in relation to the appeal to this Court as was mistakenly assumed by the University, that act of bankruptcy would have been committed upon this Court’s decision on 22 November 2024, with the result that its original and amended petition were each presented within the six-month period prescribed by s 44(1)(c). However, s 41(7) did not operate in that way, and in fact the time for compliance with the notice of bankruptcy expired on, at the latest, 8 March 2024, with the act of bankruptcy committed at that time. As a result, any creditor’s petition was required to be presented by 8 September 2024. The six-month time limit for presenting a creditor’s petition to Ms Karlsson had thus long expired by the time the University presented its original and amended petitions in early 2025.

11    The Court does not have the power to extend the time within which a creditor may present its petition: Chiquita Brands at [8]-[14] (Hill and Marshall JJ) and [42] (Sackville J).

12    The practical effect of the University’s reliance on its erroneous understanding was that unless the time for compliance with the bankruptcy notice was extended nunc pro tunc to the date of this Court’s orders on 22 November 2024 as it sought (with the effect that the time for presenting its petition was also extended), its creditor’s petition would be invalid.

The present application

13    The University submitted that a nunc pro tunc extension of the time for compliance with the bankruptcy notice could be achieved by the Full Court correcting, pursuant to the slip rule and/or its implied power, the orders made in relation to the appeal on 22 November 2024, to include an extension of the time for compliance with the bankruptcy notice. It submitted that such a correction was appropriate given that, had the s 41(7) issue been noticed by the University at the time, there is no doubt that it would have applied for an extension, and there is no doubt that such an application would have been granted. We would understand “at the time” to mean at the time of the hearing of the appeal or during the case management hearings before the appeal was heard.

14    There is line of authority that a creditor can bring an application for an extension of time to comply with a bankruptcy notice under s 41(6A), as cited by Gomez at [20]. It is not necessary to consider the correctness of that authority given that this was not sought. For present purposes, we therefore proceed upon the basis that the University was able to bring this application.

15    However, the live issue that emerged in the course of the hearing of the application was whether this Court had any power under s 41(6A) to make the order sought by University in the first place. If it did not, then there would be no need to address the discretionary considerations for exercising such a power.

16    As acknowledged by the terms of the orders sought by the respondent, there is no power to extend the time for compliance with a bankruptcy notice outside of s 41(6A) of the Bankruptcy Act: Chiquita Brands at [48] (Sackville J). The terms of that subsection are thus of critical importance to this issue of power. As part of the regime for bankruptcy notices, s 41(6A) provides as follows:

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.

17    On the face of s 41(6A), an order extending the time for compliance with a bankruptcy notice may be made if, before the time fixed for compliance, one of the limbs contained in paragraphs (a) and (b) is satisfied. There was no suggestion that paragraph (a) was enlivened in this case, and therefore the power could only have been exercised if an application had been made to the Court to set aside the bankruptcy notice before the expiry of the existing time for compliance with a bankruptcy notice, in this case by no later than 8 March 2024, as contemplated by paragraph (b) read in conjunction with the chapeau to the subsection.

18    The conditions for the exercise of power under s 41(6A) are of fundamental importance to the whole bankruptcy regime, because, once the time for compliance with a bankruptcy notice has passed, that constitutes an act of bankruptcy. That in turn triggers the right to present a creditor’s petition. In an already complex area of the law, certainty and predictability is important. Acts of bankruptcy ought not be able to be readily or easily undone by subsequent events.

19    The importance of these constraints is also reflected in the fact that s 33(1)(c) also provides, under the heading “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.

20    This serves to reinforce the singular importance of s 41(6A) and its careful and deliberate terms by excluding the power to extend time for compliance with a bankruptcy notice from the ambit of the general extension of time power in s 33(1)(c).

21    In Re Shaddock; Ex parte Commonwealth Bank of Australia [1998] FCA 355, Goldberg J addressed in substance the very issue raised by the present application, in relation to the regime that existed at that time of compliance with a bankruptcy notice within 21 days of its service. A bankruptcy notice had been served on the applicant on 18 November 1997, requiring compliance within 21 days, by 9 December 1997. An application was filed on 10 December 1997 seeking to set aside the notice, including on the ground that the applicant had a counter-claim, set-off or cross demand. The applicant later sought to amend that application also to seek an extension of the time for compliance until the 11 December 1997, such that the application would have been filed before the act of bankruptcy constituted by the failure to comply with the notice within 21 days.

22    Justice Goldberg found that because the application under s 41(6A) for an extension of time for compliance with the bankruptcy notice was filed after the act of bankruptcy had already occurred, it was incapable of grounding the Court’s jurisdiction to grant that extension. His Honour explained at 9-10:

I do not consider that the failure to file the application within the time period prescribed by s 41(6A) of the Act is a procedural irregularity capable of cure. Section 33(1)(c) expressly disallows the power to extend the time fixed for compliance with the requirements of a bankruptcy notice. In short, the defect which has occurred is fatal to jurisdiction and not a mere irregularity. Notwithstanding recent dicta for a more flexible approach towards procedural irregularities, (see Emanuele v Australian Securities Commission (1997) 188 CLR 114; Re Saunders (A Bankrupt) [1967] Ch 60; Crayford Freight Services Ltd v Coral Seatel Navigation Co & Ors (unreported, Burchett, Ryan and Marshall JJ, 26 March 1998)), I consider the failure to file the application within the time prescribed by s 41(6A) as being a condition precedent to the exercise of the jurisdiction sought to be invoked by the applicant and not simply a procedural irregularity.

23    In the course of reaching the above conclusion that an order under s 41(6A) could not be made unless an application to set aside the bankruptcy notice had been made before the time fixed for compliance, Goldberg J in Shaddock had regard to authority concerning the introduction of s 41(6A) in its original form. His Honour noted at 6 that in Re Hanby; Ex parte Flemington Central Spares Pty Ltd (1967) 10 FLR 378, a decision of the then Federal Court of Bankruptcy, Gibbs J had said at 381 (reproducing the quote):

However, the critical time for determining whether an act of bankruptcy has been committed is the date on which the period limited by the bankruptcy notice expired ... At the time when the bankruptcy notice expired in the present case, namely 30 May 1966, the judgment had not been set aside and remained a final judgment. Since the debtor had not by that date complied with the requirements of the notice, the act of bankruptcy was then completed. It is not possible to say that by reason of subsequent circumstances an act of bankruptcy once committed ceases to have been committed or must be treated as though it had never been committed.

24    Justice Goldberg further noted in Shaddock at 7 in that the above passage was relied upon by Morling J in Re Vella; Ex parte Seymour (1983) 67 FLR 287 at 288-9 (again reproducing the quote):

It is necessary to keep clearly in mind the effect of non-compliance with the bankruptcy notice. The effect was, of course, that the debtor committed an act of bankruptcy when she failed either to comply with its terms or to take appropriate action under s.41(6A). The subsequent setting aside of the judgment did not alter the fact that the act of bankruptcy has already been committed. The act of bankruptcy remained extant. No doubt, in the exercise of its discretion the Court would not make a sequestration order if at the time of the hearing of the petition it was shown that the judgment debtor was not in fact indebted to the judgment creditor. But the act of bankruptcy referred to in s.41(g) would be complete.

25    At 7 in Shaddock, Goldberg J also quoted the following two passages from Re Sterling; Ex parte Esanda Ltd [1980] FCA 61; 44 FLR 125 (Lockhart J):

(a)    At 128:

The Court’s power under s.41(6A) to extend time for compliance with a bankruptcy notice may be exercised only where the proceedings to set aside the judgment or order in respect of which a notice was issued have been instituted, or the application to set aside the bankruptcy notice has been filed with the registrar, in each case before the expiration of the time fixed by the Court or the registrar for compliance with the requirements of the notice: see the introductory words of sub-s.(6A).

(b)    At 130:

Plainly the power to extend time for compliance is in aid of the power to set aside the notice itself. What is the point in extending time for compliance otherwise and for the purpose of enabling the Court to hear the application to set aside the notice without the occurrence of an act of bankruptcy in the meantime? If it did occur this would be destructive of the very power itself.

26    As the language in Re Sterling at 130 reproduced at (b) above is of some complexity, it is worth explaining the point being made a little further, because that explanation assists in understanding the application of what Lockhart J was saying to the present case. We would understand Lockhart J to be saying that there is no point in hearing an application to set aside a bankruptcy notice unless the time for complying with it is extended, in an appropriate case, under s 41(6A), because otherwise that would result in an act of bankruptcy occurring while a viable application to set it aside was still pending (and s 41(7) does not apply). To allow that to occur when there is a proper case to be advanced for setting aside a bankruptcy notice would be destructive of the power to set it aside. That is because once an act of bankruptcy has occurred based on non-compliance with a bankruptcy notice, and no application to set aside the bankruptcy notice has been made before that occurs, the notice is irrevocably spent and there is nothing operative left to set aside, subject to the further observations in the quote next reproduced below. Thus, Lockhart J was explaining the reason for the introduction of the power s 41(6A), further addressed in the quote reproduced in the next paragraph.

27    Finally, Goldberg J said in Shaddock at 7-8:

In Streimer v Tamas (1981) 54 FLR 253 the majority of the Full Federal Court (Deane and Ellicot JJ) held that s 41(6A) of the Act confers jurisdiction on the Court to make orders extending the time for compliance with the bankruptcy notice, notwithstanding the fact that at the time of the making of the order, the time for compliance with the bankruptcy notice has already expired provided that one of the two limbs of sub s(6A) has been fulfilled. In that case, proceedings to set aside the judgment in respect of which the bankruptcy notice was issued had been instituted by the respondent and an application to set aside the bankruptcy notice had been filed before the expiration for the time fixed by the registrar for compliance with the requirements of the bankruptcy notice. At 257 - 258 their Honours said:

Section 41(6A) introduced into Commonwealth bankruptcy legislation, for the first time, express provision on the subject of extending the time for compliance with the requirements of a bankruptcy notice. 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 Parliament to construe s.41(6A) as requiring not only that one or other of the alternative express conditions precedent the 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. Indeed, such a constricted construction would render otiose a large part of the subsection, namely, the words ‘before the expiration of the time fixed for the Court or the Registrar for compliance with the requirements of a bankruptcy notice’.

Their Honours said that the construction of s 41(6A) which they preferred:

does not mean that s 41(6A) operates so as restrospectively to divest rights to rely upon an act of bankruptcy which would otherwise exist. What s 41(6A) does is to modify, by the introduction of a contingency, the actual and potential rights and liabilities resulting from failure to comply with the requirements of a bankruptcy notice within the time allowed by a notice in any case where, within that time, one of the two conditions specified in the subsection has been fulfilled.

28    Shaddock confirms what s 41(6A) clearly states on its terms: that an order cannot be made to extend the time for compliance with a bankruptcy notice unless, before that time expires, an application is brought to set aside the order giving rise to the debt, or to set aside the bankruptcy notice itself. In this case, the time for compliance with the bankruptcy notice expired on 8 March 2024, when Ms Karlsson’s application to the Court in its original jurisdiction to have the bankruptcy notice set aside was dismissed. After that time, there was no power to extend the date for compliance with the bankruptcy notice. It is not enough to invoke s 41(6A)(b) that at some previous time a proceeding was instituted by the debtor – such proceeding must remain on foot for an extension to be ordered. As Lindgren J held in Re Udowenko; Ex parte Mitchell (1996) 69 FCR 299 at 304:

In my view, it is clear on the proper construction of sub-s 41(6A) that the condition of the existence of the power to extend time is not satisfied by the mere institution of a proceeding or making of an application to set aside, which has been dismissed or otherwise ceased to subsist as a current proceeding or application before the time for compliance with a bankruptcy notice has expired: cf McLean v ANZ Banking Group Ltd (1993) 42 FCR 300 (Ryan J).  The reason is that the purpose of an extension of time under sub-s 41 (6A) is limited to that of supporting a proceeding or application, that is to say, one which was instituted or filed before expiration of the time for compliance with the bankruptcy notice. Further, some support for this view of the provision is found in the use of the perfect form of the verb (“have been instituted” and “has been filed”) in paras 41 (6A) (a) and (b) which suggests a proceeding which has been instituted, or an application which has been made, before the expiration of the time for compliance with the bankruptcy notice, and which still subsists at the time when the occasion for exercise of the power to extend time arises.

29    The above reasoning was quoted and affirmed by the Full Court in Chiquita Brands (Hill and Marshall JJ at [37]-[40], Sackville J at [53]-[54]), and is consistent with the reasoning of Goldberg J in Re Sterling which was also quoted with approval by their Honours, and relied upon by Lindgren J in Udowenko at 303.

30    The effect of the above reasoning in the present case is that from at least when the primary judge dismissed the application to set aside the bankruptcy notice, there was no application before the Court which had been filed before the expiry of the time for compliance, and the Court thus had no power to extend that time under s 41(6A)(b).

31    The final orders of this Court dismissing the appeal were made on 22 November 2024, more than eight months after the primary judge’s decision. Counsel for the University appeared to accept during the hearing of the present application the Full Court did not have power under s 41(6A) at the time it made its final orders, but submitted that it was so empowered during the period the matter had been docketed to the judges of the Full Court as constituted, and in particular on the occasions between May and August 2024 when a registrar made various procedural orders. However, that submission appears to proceed on the basis that an order can be made under s 41(6A) as long as the relevant application is brought prior to the expiry of the time for a creditor to present its petition, being six months after the act of bankruptcy. That is not the case. As outlined above, the relevant deadline is the expiry of the notice of bankruptcy itself, which, as already noted, occurred at the latest on 8 March 2024.

32    Accordingly, we concluded that this Full Court never had any power to make an order under s 41(6A) to extend the time for compliance with the bankruptcy notice. As such, there can be no application of the slip rule, nor the exercise of any implied jurisdiction, to amend any previous order of this Court to include such an order. It is thus unnecessary to address whether it would be possible or appropriate for the slip rule to be exercised in such a manner.

33    Had the University been aware that s 41(7) did not extend the time for compliance with the bankruptcy notice beyond the decision of the primary judge on 8 March 2024, it could have avoided the present outcome by presenting its petition notwithstanding the appeal before this Court, or seeking the expedition of that appeal to this Court such that it could present its petition after the appeal was finalised, but before six months had elapsed: see Sackville J’s comments to a similar effect, albeit relating to a different scenario, in Chiquita Brands at [65]. As a result of its misapprehension of s 41(7) the University did not take any such step. The consequences which have flowed from that misapprehension cannot now be remedied by the Court due to the limited power conferred by s 41(6A).

Associate:

Dated:    4 August 2026