FEDERAL COURT OF AUSTRALIA

Ramsay Health Care Australia Pty Ltd v Compton (No 2) [2016] FCA 691

ORDERS

THE COURT ORDERS THAT:

1.    The parties are to bring in Short Minutes of Orders to give effect to these reasons forthwith.

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

REASONS FOR JUDGMENT

1    In June 2015 there was filed in this Court a Creditor’s Petition. The petitioning creditor is Ramsay Health Care Australia Pty Ltd (“Ramsay Health Care”). The Respondent is Adrian John Compton. Ramsay Health Care maintains that Mr Compton owes it $9,810,312.33, that amount being the amount of a judgment entered pursuant to orders of the Supreme Court of New South Wales.

2    In July 2015 Mr Compton filed an Interim Application seeking (inter alia) an order that this Court “go behind” the Supreme Court judgment.

3    In November 2015 it was concluded that the Court would not “go behind” the judgment: Ramsay Health Care Australia Pty Ltd v Compton [2015] FCA 1207.

4    An application for leave to appeal (and the appeal, if leave were granted) was heard in May 2016. The Full Court has reserved its decision.

5    The matter has assumed some present degree of urgency because Ramsay Health Care seeks an extension of the duration of its petition pursuant to s 52(5) of the Bankruptcy Act 1966 (Cth) (the “Bankruptcy Act”).

6    Section 52 provides as follows:

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;

and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.

(1A)    If the Court makes a sequestration order, the creditor who obtained the order must give a copy of it to the Official Receiver before the end of the period of 2 days beginning on the day the order was made.

Penalty:     5 penalty units.

Note:    See also section 277B (about infringement notices).

(1B)    Subsection (1A) is an offence of strict liability.

Note:    For strict liability, see section 6.1 of the Criminal Code.

(2)    If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:

(a)    that he or she is able to pay his or her debts; or

(b)    that for other sufficient cause a sequestration order ought not to be made;

it may dismiss the petition.

(3)    The Court may, if it thinks fit, upon such terms and conditions as it thinks proper, stay all proceedings under a sequestration order for a period not exceeding 21 days.

(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.

7    Ramsay Health Care now contends either:

    that the date of “presentation” of its petition was 9 June 2015 – and, accordingly, it may apply today for an order extending the duration of the petition being the day before the petition otherwise “lapses”; or

    if the petition has already “lapsed”, it may apply for an extension of the petition pursuant to r 39.05(h) of the Federal Court Rules 2011 (Cth) (the “Federal Court Rules”), namely the “slip rule”.

It has been concluded that the former submission should be rejected but that the latter submission should be accepted such that the “slip rule” may be invoked even though the period otherwise prescribed by s 52(4) of the Bankruptcy Act has expired. It has further been concluded that it is “just and equitable” to extend the petition for a further period of about three months such that the petition – unless further extended – expires on 5 September 2016.

8    The period of time within which the present application has been made is extremely short. The application first came before the Court at 9.45am today when time for service was abridged and the matter stood down for hearing at either 11.30am or midday, depending on the availability of Senior Counsel for the Respondent. It is regrettable that more time is not available. But the matter has to be resolved quickly. If Ramsay Health Care were to be denied the relief it seeks before the Court as presently constituted, it is only to be expected that it may have wished to seek leave to appeal this afternoon. On its calculation of time, its position may well be prejudiced if it does not obtain relief today.

When was the petition presented?

9    Two issues arise in respect to s 52 of the Bankruptcy Act, namely:

    how is the term “presentation” to be construed for the purposes of s 52(4) and (5); and

    as a factual matter, when was the petition of Ramsay Health Care “presented”.

10    As to the former issue, the presentation of a petition involves both an act on the part of the creditor and an act on behalf of the Court: Purden Pty Ltd v Registrar in Bankruptcy (1982) 64 FLR 306. On the facts of that case a representative of the petitioning creditor had attended at the New South Wales Bankruptcy Registry on 9 February 1982 and lodged a petition seeking a sequestration order. The representative was told by a Registry official that it was not possible for the petition to be sealed and issued on that day but that he should come back on 11 February. Before the primary Judge it was contended that the petition could not be presented unless and until it was filed in the Registry and that that had not occurred prior to 10 February, the date upon which time expired. The primary judge concluded that the petition had been presented out of time. An appeal was allowed. Bowen CJ, Fisher and Lockhart JJ concluded that “presentation” took place when the petition had been handed or delivered to the Registry and accepted. What transpired thereafter within the Registry of the Court was “nothing to the point”. Their Honours concluded:

In our opinion the words “presented” or “presentation” are used in the Act, not in the sense of the unilateral act of the creditor of showing the petition to the appropriate court officer; but in the sense of handing or delivering the petition to and acceptance by that officer. 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.

Not only is this so according to the ordinary use of the words in the context of the Act; but the far-reaching consequences in bankruptcy law of the presentation of a petition, to which we have already adverted, demonstrate the necessity for the act and date of presentation to be certain and readily ascertainable. Merely to show the petition to the registry clerk without its being received would necessarily introduce an unacceptable element of uncertainty surrounding the date of presentation.

11    On the facts of the present case, the petition bears the following notation:

This document was lodged electronically in the FEDERAL COURT OF AUSTRALIA (FCA) on 5/06/2015 3:56:59 PM AEST and has been accepted for filing under the Court’s Rules.

The document thereafter sets forth the Court’s seal and immediately thereunder states:

Dated : 9/06/2015 1:53:25 PM AEST

If the notation is accepted at face value, it would appear that the petition was lodged and accepted on 5 June 2016.

12    With reference to the decision in Purden, Senior Counsel for Ramsay Health Care submitted that a document which is lodged electronically cannot be “accepted” until there has been human intervention and until a Registry official “accepts” the document that has otherwise been filed. A computer generated notation as to “acceptance”, it is submitted, is not sufficient.

13    That submission is rejected. It is concluded that the notation means what it says. That conclusion, it should be noted, provides the “certainty” to which their Honours referred in Purden.

14    Recourse to the Federal Court Rules which address the circumstances in which a document has been filed electronically does not advance the case of Ramsay Health Care.

15    Rule 2.24 provides as follows:

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, the 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.

Rule 2.25 provides for when a document is “filed” if it has been lodged electronically. Rule 2.25(1) provides as follows:

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 being stamped as ‘filed’; or

(ii)    in any other case – it is accepted in a Registry by being stamped as ‘filed’.

Senior Counsel for Ramsay Health Care seized upon the specification in r 2.25(1)(b)(i) as to the document being “stamped as ‘filed’”. That date, on the face of the petition in the present case appearing under the seal of the Court, is 9 June 2015.

16    Rule 2.24 does not advance the case for Ramsay Health Care because it addresses what the Registry is required to do when a document filed electronically has been “accepted at the Registry”. And r 2.25 addresses the question of the time at which a document is taken to have been filed and does not resolve the question of when a petition has been presented for the purposes of s 52(5) of the Bankruptcy Act. The reference in r 2.25(1)(b)(i) to when a document is “filed” by reference to when it has been “accepted” and “stamped as ‘filed’”, it is respectfully considered, provides no reason to reach a different conclusion.

17    As is apparent from the reasoning in Purden, such steps as may be required to be undertaken once a document has been accepted by the Registry of this Court is of no immediate relevance to the question of when a creditor hands to the Registry or otherwise lodges its petition and when it is accepted. To reach any different conclusion would be to deny “certainty” to the date upon which a document is “presented” for the purposes of s 52 of the Bankruptcy Act.

18    On the facts of the present case it is thus concluded that the petition of Ramsay Health Care was “presented” on 5 June 2015.

The availability of the slip rule

19    The question then necessarily arises of whether Ramsay Health Care may have recourse to r 39.05 of the Federal Court Rules. Rule 1.34 offers no assistance as that rule is confined in its operation to dispensing with “any of these Rules”, namely the Federal Court Rules as opposed to a time prescribed by the Bankruptcy Act: Nugawela v Deputy Commissioner of Taxation [2016] FCA 578 at [39].

20    It is by recourse to r 39.05(h) that Ramsay Health Care, it is respectfully considered, meets with greater success. Rule 39.04 provides as follows:

Varying or setting aside a judgment or order before it has been entered

The Court may vary or set aside a judgment or order before it has been entered.

Rule 39.05 provides in part as follows:

Varying or setting aside judgment or order after it has been entered

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

…

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

21    The rule, it is concluded, may be invoked even though the period prescribed by s 52(4) of the Bankruptcy Act has expired: cf. Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385. Section 459R of the Corporations Law there prescribed that the Court could extend the period within which an application to wind up a company could be made only if “the order is made within that period”, namely 6 months. With reference to the predecessor provision to that now found in r 39.05(h), Lockhart J there concluded:

The slip rule applies where the proposed amendment is one upon which no real difference of opinion can exist. It does not apply where the amendment is a matter of controversy, nor does it extend to mistakes that are the consequence of a deliberate decision …

The slip rule may be invoked irrespective of whether the order has been drawn up, passed and entered …

It is well settled that the application of the slip rule is not confined to giving effect to the intention of the judge at the time when the court's order was made, or judgment given. It extends to the intention which the court would have had, but for the failure that caused the accidental slip or omission … The rule also extends to permit the correction of an order or decree where the omission results from the inadvertence of a party's legal representative …

Justice Lindgren similarly observed:

Availability of an order under the slip rule

The question remains whether s 459R(2) and (3) have the effect of excluding the availability of the slip rule in any case where the court does not in fact make an order for extension within the time specified. This was correctly treated by the parties as the most substantial issue raised by the case.

It is a strong thing to hold that the rule is not available. Cases even more demanding of an order under the rule than the present one can be imagined …

His Honour reviewed the authorities and concluded:

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.

Chief Justice Black agreed with both Lockhart and Lindgren JJ. The rule 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”: Flint v Richard Busuttil & Co Pty Ltd [2013] FCAFC 131 at [26], (2013) 216 FCR 375 at 380 to 381 per Allsop CJ, Katzmann and Perry JJ.

22    The “accidental slip” or omission relied upon by Ramsay Health Care for the purposes of r 39.05(h) is an error made by its solicitor relating to the effect of Order 5 as made on 3 December 2015. That order provided as follows:

...

5.    There is to be an adjournment of the Creditor’s Petition proceedings pending the determination of the Application for Leave to Appeal, and (if leave is granted) the appeal.

...

That order, it is respectfully considered, simply adjourned the hearing of the Creditor’s Petition seeking the making of a sequestration order; it did not of itself extend the duration of the petition. No application had been made during the hearing for an order extending time pursuant to s 52(5) and no order extending time had been made. But the solicitor misunderstood the effect of Order 5 and has made a mistake.

23    On the facts of the present proceeding it is concluded that it is appropriate to invoke the slip rule.

24    Orders have already been made in the present proceeding and it is appropriate to extend the duration of the petition. Had the matter been adverted to at the conclusion of the hearing before the Full Court in May 2016, it is respectfully considered that an order would then have been made to preserve the rights of Ramsay Health Care until a period of time after judgment had been delivered. Any delay in the resolution of the petition cannot be visited upon the petitioning creditor; such delay as has taken place has been as a result of the debtor seeking to pursue his right to have the November 2015 interlocutory judgment reviewed on appeal. Although it is not possible to predict when the decision of the Full Court will be published, an extension of time for about 3 months should be appropriate. If a further extension is necessary, an application can be made.

CONCLUSIONS

25    Considerable care should be exercised before extending the duration of a creditor’s petition. It is not in the interests of either the debtor or other creditors for a petition to be extended beyond that period of time which is necessary for a proper resolution of the petitioning creditor’s entitlement to relief.

26    Although it would have been far more preferable to have been afforded more time in which to consider the present application made by Ramsay Health Care, it has been concluded (within those constraints) that:

    the Creditor’s Petition was “presented” on 5 June 2015;

    neither r 2.24 nor r  2.25 of the Federal Court Rules lead to any different conclusion as to the date upon which the petition had been “presented”;

    rule 39.05(h) of the Federal Court Rules may be invoked to extend the duration of the petition even though it has otherwise lapsed; and that

    the Creditor’s Petition filed by Ramsay Health Care should be extended such that it lapses on 5 September 2016, unless further extended.

27    Given the shortness of time allowed to Mr Compton to consider his position this morning, liberty is to be reserved to him to apply by no later than midday tomorrow to have the orders otherwise to be made to be set aside if he sees fit. Orders should be drafted forthwith by the parties to give effect to these reasons. Those orders should be drafted with a view to protecting the interests of Mr Compton given the fact that there have been “without prejudice” offers made. Liberty should be reserved to the parties to have the matter relisted in the event that a further extension is sought.

THE ORDERS OF THE COURT ARE:

1.    The parties are to bring in Short Minutes of Orders to give effect to these reasons forthwith.

Associate:

Dated:    8 June 2016