FEDERAL COURT OF AUSTRALIA Wu v Li [2017] FCA 500 Appeal from: Li v Wu [2016] FCCA 2836 File number: ACD 96 of 2016 Judge: RARES J Date of judgment: 7 April 2017 Catchwords: BANKRUPTCY AND INSOLVENCY – Bankruptcy Act 1966 (Cth) – creditor's petition – where creditor's petition expired under s 52(4) five months after trial judge reserved judgment but before judgment delivered – whether trial judge could extend life of creditor's petition retrospectively under s 52(5) by invoking the slip rule PRACTICE AND PROCEDURE – slip rule – where slip rule or r 39.05(h) of the Federal Court Rules 2011 invoked to extend life of creditor's petition retrospectively after petition expired under statutory time limit – whether slip rule applies – whether trial judge's recording as an "order" decision to "reserve judgment" and adjourn proceedings to a date to be fixed for delivery of judgment amounted to making an "order" for purposes of engaging slip rule – whether failure of trial judge to make, or legal representative to apply for, an order extending life of creditor's petition at hearing constituted an accidental slip or omission Legislation: Bankruptcy Act 1966 (Cth) ss 44, 52, 58 Corporations Act 2001 (Cth) ss 436A, 477 Fair Work Act 2009 (Cth) Federal Circuit Court Rules 2001 r 16.05 Federal Court Rules 2011 rr 36.01, 39.05 Cases cited: Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 Bankstown Grammar School Ltd v Park [2000] FCA 1205 Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498 Flint v Richard Busuttil & Company Pty Ltd (2013) 216 FCR 375 Griffiths v Boral Resources (Qld) Pty Ltd (2006) 154 FCR 554 House v The King (1936) 55 CLR 499 L. Shaddock and Associates Pty Ltd v Parramatta City Council (No 2) (1982) 151 CLR 590 Ling v Enrobook Pty Ltd (1997) 74 FCR 19 Ramsay Health Care Australia Pty Ltd v Compton [2016] FCAFC 125 The Owners - Strata Plan No 5290 v CGS & Co Pty Ltd (2011) 81 NSWLR 285 Date of hearing: 7 April 2017 Registry: Australian Capital Territory Division: General Division National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Category: Catchwords Number of paragraphs: 68 Counsel for the Appellant: Mr MA Karam Solicitor for the Appellant: McInnes Wilson Lawyers Counsel for the Respondent: Mr BF Katekar Solicitor for the Respondent: Vertex Legal ORDERS ACD 96 of 2016 BETWEEN: TAO WU Appellant AND: YUXIN LI Respondent JUDGE: RARES J DATE OF ORDER: 7 April 2017 THE COURT ORDERS THAT: 1. The appeal be allowed. 2. The orders made by the Federal Circuit Court on 4 November 2016 be set aside. 3. On or before 20 April 2017, the parties confer and prepare short minutes of order in respect of: (a) the costs of the appeal and proceeding before the Federal Circuit Court; and (b) protecting the position of the trustee and in default of agreement, proposed draft orders and submissions limited to two pages. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) RARES J: 1 This is an appeal by Tao Wu (the bankrupt) from a decision of the Federal Circuit Court that made a sequestration order against him on 4 November 2016. At the time of making the sequestration order, the trial judge also made an order under r 39.05(h) of the Federal Court Rules 2011 that varied his orders of 3 May 2016 by the addition of a further order that "the period at the expiration of which the [creditor's] petition will lapse is a period of twelve months commencing on 3rd May 2016". The 3 May 2016 orders originally recorded that his Honour had reserved his decision and adjourned the matter to "dates and times to be advised by the Court, pending judgment delivery". The issues 2 The circumstances in which his Honour made the new order extending time under s 52(5) of the Bankruptcy Act 1966 (Cth) (the Act), before which the petition would have lapsed on 6 October 2016 under s 52(4)(a), is at the heart of the bankrupt's principal arguments in support of the appeal, namely that, first, whatever happened on 3 May 2016 when the trial judge reserved his decision did not amount to the making of an order for the purposes of engaging the slip rule or r 39.05(h) and, secondly, in any event, if it did, his Honour did not make any accidental slip or omission on that occasion. 3 The bankrupt also relied on a third ground of appeal, namely that the trial judge erred (at [88]-[125] of his reasons) in the exercise of his discretion under s 52(2)(b) because he ought to have been satisfied by the bankrupt that there was other sufficient cause by reason of which a sequestration order ought not to have been made (the s 52(2)(b) issue). Background 4 These proceedings have a long, tortured and very unfortunate history for the parties. The parties appear to have engaged in a series of commercial relationships from about August 2006 in relation to a shareholders' agreement and the construction of a residence for the creditor, Yuxin Li, and his wife, Hong Chen in O'Malley in the Australian Capital Territory (the O'Malley property). 5 The shareholders' agreement made on 11 August 2006 between the bankrupt, the creditor and Xiu Zheng Ji, concerned a company called Golden Enterprise Investment Pty Limited. The bankrupt agreed to indemnify the creditor 25% of the amount of any unpaid loans that the creditor made to Golden Enterprise. On 18 February 2008, the bankrupt and the creditor agreed that the loan amounts outstanding to the creditor, the subject of the shareholders' agreement, included about $4.5 million, excluding amounts that had been used for the O'Malley property and certain other amounts. 6 Subsequently, on 7 May 2008, a company under the bankrupt's control as the sole director and secretary called Golden Constructions Pty Limited was incorporated. In August 2008, Golden Constructions entered into a building contract with the creditor and his wife in respect of the O'Malley property. The bankrupt began to debit expenses, incurred in respect of the construction work and for other purposes, to the loan account of the creditor with Golden Constructions. 7 In August 2011, Henry Kazar was appointed administrator of Golden Constructions under s 436A of the Corporations Act 2001 (Cth). On 6 September 2011, the creditors of Golden Constructions resolved that it be wound up and Mr Kazar became its liquidator. On 30 September 2011, the creditor began proceedings in this Court against the bankrupt claiming, among others, indemnity under the shareholder agreement. In March 2012, Mr Kazar issued a demand to the creditor and his wife for over $3.3 million in respect of their alleged liabilities to Golden Constructions of $2.8 million and the unpaid balance of the creditor's loan account with that company of $572,998. After that, the liquidator issued a number of circulars to creditors of Golden Constructions informing them of the possible claim against the creditor based on the demand. 8 On 19 October 2012, the creditor, through his solicitors, responded to the liquidator's demand. The creditor's solicitors denied the existence of the building contract and inferred that the bankrupt may have engineered that document, fraudulently, without the creditor's or his wife's knowledge. Proceedings in this Court to determine the liabilities of the creditor and bankrupt to each other were heard by Jagot J. On 22 October 2013, her Honour entered a judgment in favour of the creditor in the sum of $976,886.80. Her Honour found that she did not need to determine the liquidator's claim in respect of the $572,998 loans on the ground that Golden Constructions was not a party to the proceedings before her, and that any claim that the bankrupt wished to pursue against the creditor in respect of those loans ought to be litigated independently. 9 The bankrupt filed a notice of appeal against her Honour's judgment that was heard by a Full Court in May and August 2014. 10 On 13 August 2014, Mr Kazar, in his capacity as liquidator of Golden Constructions, assigned to the bankrupt that company's claims against the creditor and his wife for amounts allegedly owing by them to Golden Constructions in respect of the building costs associated with the work done at the O'Malley property and the unpaid balance of the creditor's loan account. 11 In the meantime, on 19 December 2013, the creditor served a bankruptcy notice on the bankrupt based on the judgment debt found by Jagot J. Time for compliance with that bankruptcy notice came to be extended until after the delivery of the Full Court's decision that, on 17 August 2015, dismissed the bankrupt's appeal and upheld the creditor's cross-appeal, slightly increasing the amount of the judgment debt. 12 On 11 September 2015, the final period of extension for compliance with the bankruptcy notice expired and a registrar dismissed the bankrupt's application to set the bankruptcy notice aside, with costs. 13 On 6 October 2015, the creditor presented the creditor's petition the subject of this appeal. 14 On 9 October 2015, the bankrupt commenced proceedings against the creditor and his wife, based on the assignment, in the Supreme Court of the Australian Capital Territory seeking judgment on liquidated claims, in consequence of the assignment, of, first, $1,283,804.75 pursuant to the building contract, and, secondly, $572,998.02 in respect of the loan funds, and, in the alternative, an amount of $2,807,999.40 based on a quantum meruit in respect of the building work. No doubt the quantum meruit claim was included because of the creditor's and his wife's earlier denial that any building contract existed between them and the bankrupt. The statement of claim pleaded first the facts of the contract and then the alternative claim in quantum meruit, which necessarily must have been premised on there being no contract under which Golden Constructions had been entitled to recover in contract for the work that it did. 15 On 30 October 2015, the bankrupt filed a notice stating his grounds of opposition to the creditor's petition that raised only one ground, namely that he had an offsetting claim against the creditor, and accordingly there was "sufficient cause" for a sequestration order not to be made under s 52(2) of the Bankruptcy Act. 16 On 17 March 2016, the creditor and his wife filed a defence and counter-claim in the Supreme Court proceedings in which they admitted, for the first time, that a building contract existed between Golden Constructions and them. They also alleged that because cl 18 of that contract prohibited assignment of rights under it without the consent of the other parties, the bankrupt could not rely upon the assignment from the liquidator in the absence of any consent from the creditor and his wife. There is no issue that the creditor and his wife have not given consent to such an assignment. The defence and counter-claim denied that there could be any liability on a quantum meruit, because, for among other reasons, the bankrupt's claim that there was a contract under which building work had been performed was not now in dispute. Those proceedings came before the Supreme Court on 4 April 2016 and it made directions for the purposes of those proceedings. 17 On 3 May 2016, the trial judge heard the creditor's petition in Canberra commencing at 10.19am. Early in the hearing, his Honour made inquiries of counsel for the parties as to whether there were any issues concerning extensions of time to which he had to have regard in respect of the various extensions of the bankruptcy notice that had expired on 11 September 2015. Both counsel informed his Honour that there were no issues on that topic. At the conclusion of the hearing, at about 12.14pm, his Honour described himself as being left in the position of having a "nice conundrum" and said: I formally reserve. I will obviously get to it at the earliest possible time. … We will temporarily adjourn. 18 The transcript recorded that the matter was adjourned at 12.14pm "indefinitely". Subsequently, on 3 May 2016, the judge entered the following orders, being the orders that his first order made on 4 November 2016 sought to vary under r 39.05(h), namely: 1. The matter be formally reserved. 2. The matter be adjourned on dates and times to be advised by the Court, pending judgment delivery. (emphasis in original) 19 Later on 3 May 2016, at about 4.19pm, the trial judge's chambers communicated by email with the parties' lawyers seeking submissions on two further matters within seven days. The creditor responded with submissions on 5 May 2016 and the bankrupt did so on 9 May 2016. 20 No further submissions were sought or made prior to 6 October 2016 when, by force of s 52(4) of the Act, the petition lapsed. This unfortunate consequence appears to have come to his Honour's attention by 12 October 2016. That is because his chambers communicated with the parties by email on the morning of that day that his Honour expected to deliver judgment in the matter by no later than the end of October 2016 and asked the parties to advise as soon as possible, but no later than noon on 17 October 2016: whether any issues in relation to "time" arise, and whether any extension of time needs to be sought? 21 His Honour's chambers also asked that electronic copies of editable Word versions of all written submissions filed in the matter be sent to his chambers by 14 October 2016. The totality of the parties' submissions, covering about 30 pages, without any editing, came to be inserted into the text of his Honour's published reasons for judgment. 22 On 17 October 2016, both parties responded with submissions to his Honour's request "in relation to time". The creditor also filed an affidavit of his then solicitor, Harry Kay, also sworn on 17 October 2016. Mr Kay annexed a copy of the 3 May 2016 orders to his affidavit and said that at the time when the order for adjournment was made, he did not appreciate the significance of the effect of s 52(4) and (5) and did not turn his mind to the need for the Court also to extend, under s 52(5), the date on which the petition would lapse to ensure that it would not lapse before the Court had delivered judgment and the proceeding was finalised. He said that it had not occurred to him to seek an order extending the creditor's petition past 5 October 2016 in case the Court had not been able to deliver judgment by then. He went on to say that on 12 October 2016, after receiving the email from his Honour's chambers, it occurred to him for the first time that, at the conclusion of the hearing of the petition on 3 May 2016, "I should have instructed my counsel to have applied to extend the lapsing date of the petition until 3 May 2017". Mr Kay said that had he understood on 3 May 2016 the significance of the effect of s 52(4) and (5) and the possible need for the Court to be given more than five months to deliver judgment, he would have instructed counsel to apply to extend the lapsing date of the petition at that time. The trial judge's reasons 23 As is apparent, it was only after the petition had lapsed that his Honour made the order extending time. He also found he had not been satisfied, for the purposes of s 52(2), that the bankrupt had shown sufficient cause why a sequestration order ought not be made. 24 The trial judge recorded that the bankrupt had deposed in his affidavit of 30 October 2015 that he did not presently have sufficient funds to satisfy the judgment debt the subject of the bankruptcy notice. Accordingly, there was no issue that the bankrupt was not solvent and could not pay his debts as and when they fell due, apart from his attempt to rely upon the Supreme Court proceedings to create a sufficient offsetting amount to nullify or substantively reduce the effect of the judgment debt. The trial judge noted that there had been a substantive period of largely unexplained delay between the date of Mr Kazar's assignment to the bankrupt of Golden Constructions' causes of action on 13 August 2014 and the commencement of his proceedings based on the assigned causes of action in the Supreme Court over a year later on 9 October 2015. His Honour was prepared to allow some weight to submissions by senior counsel then appearing for the bankrupt that he had not commenced the proceedings earlier because he was awaiting the outcome of the appeal to the Full Court, but even then, as his Honour noted, almost two months had elapsed between delivery of the Full Court's judgment on 17 August 2015 and the commencement of the Supreme Court proceedings. 25 His Honour accepted the creditor's submission that the powers of a liquidator to assign, sell or dispose of a company's chose in action under s 477(2)(c) of the Corporations Act did not extend to a chose in action that, of itself, was not assignable to a third party by reason of a contractual provision prohibiting such assignment. His Honour followed the decision of Sackville AJA, with whom Giles and Campbell JJA agreed, in The Owners - Strata Plan No 5290 v CGS & Co Pty Ltd (2011) 81 NSWLR 285 at 299 [58]-[59]. Sackville AJA held that a liquidator had no better right than the company in liquidation to make an assignment of a cause of action in breach of, or without complying with, a condition or term in the contract prohibiting assignment of rights under it without consent. 26 Although the bankrupt invited the trial judge not to follow that decision, in my opinion, the trial judge was bound to have followed it and made no error in rejecting the suggestion that the Court of Appeal's decision did not bind him: see Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 492 per Mason CJ, Brennan, Dawson, Toohey and Gaudron JJ. The result, in the circumstances of the present case, is a fortiori because the Corporations Act is now a federal law and a decision by an appellate court of a State or Territory, or this Court, ordinarily must be treated as binding on all lower courts and coordinate courts unless the Court concerned considers that the decision is plainly wrong. 27 In my opinion, his Honour was correct to hold that the decision of the Court of Appeal meant that the bankrupt's claim in contract in the Supreme Court proceedings did not demonstrate sufficient cause not to make a sequestration order for the purposes of s 52(2). Indeed, that claim was hopeless without a consent to the assignment of Golden Constructions' rights against the creditor and his wife in the circumstances. 28 His Honour also adverted to other matters concerning the contractual claim that related to issues that neither party had raised and which, in my opinion, his Honour ought not to have taken into account. But in any event, the decision by his Honour that he was bound to follow the Court of Appeal's decision that the assignment was ineffective to support the bankrupt's cause of action under the building contract was conclusive on the lack of capacity for that cause of action to provide sufficient cause not to make a sequestration order under s 52(2). 29 The trial judge referred also to Jagot J's finding that the bankrupt's conduct was "inescapably dishonest and designed to advance himself at [the creditor's] expense". 30 His Honour then found that the quantum meruit claim was dependent upon the efficacy and or the validity of the assignment of the debt and, therefore, based on the Court of Appeal's decision, had to be open to the most serious challenge. 31 In my opinion, his Honour's reasoning on the need for the assignment to be valid in order for the bankrupt to succeed on the quantum meruit claim was erroneous. The quantum meruit claim could only arise if the contract did not exist or, because of the existence of a vitiating circumstance, such as fraud, it was ineffectual to create rights. If such a situation arose, that would give rise to a restitutionary claim that arguably would have been assignable independently of the alleged or ineffective contract: see, for example, as the bankrupt argued in the appeal, Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498 at 525-526 [53] and 529 [64] per French CJ, Crennan and Kiefel JJ. 32 However, as the creditor submitted, once he and his wife admitted the existence of the building contract in the Supreme Court proceedings, the claim for quantum meruit became otiose, since the contract governed the relationship of the parties. The restitutionary claim arising in the alternative, based on a quantum meruit, depended upon there being no contract to govern the liability of the creditor and his wife to pay Golden Constructions for the work done on the O'Malley property. Thus, the trial judge erred in his reasoning for not being satisfied that the quantum meruit claim was sustainable by reason of the dubious efficacy of the assignment. 33 Nonetheless, in my opinion, were I to have to revisit that argument, it is clear that the quantum meruit claim that the bankrupt pleaded in the alternative to the contractual claim had no foundation. That was because there was no issue in the Supreme Court proceedings as to the existence of the contract, the invalidity or non-existence of which was the necessary substratum of the quantum meruit claim. 34 The trial judge had regard to the likely duration of the bankruptcy and the delay that would occur before the Supreme Court would be likely to resolve the issues in the proceedings before it. Accordingly, he came to the conclusion that he should make the sequestration order. Next, his Honour also took into account, in not being satisfied that the Supreme Court proceedings raised sufficient cause under s 52(2), the fact that the creditor's wife was a party to those proceedings, but was not relevantly concerned in the creditor's petition. He was not satisfied that the bankrupt would have sufficient prospects of success to warrant the exercise of the discretion under s 52(2) and referred to what the Full Court had said in Ling v Enrobook Pty Ltd (1997) 74 FCR 19 at 26D, that: the authorities do not suggest that it is in the public interest to allow insolvent debtors to prosecute litigation generally. 35 At the end of his reasons the trial judge came to deal with the question of the extension of time under s 52(5). Importantly, he said at [126]: When the matter was heard in May this year, all involved (including the Court) may reasonably have held the view that a decision would have been forthcoming within a relatively short period of time. In my view, it is reasonable to assume also that, if all involved in the hearing (including the Court) had any apprehension that there would be some delay in delivering a judgment an application would have been made to extent the petition. Indeed, this is precisely to what the petitioning creditor's solicitor has now deposed by way of affidavit, filed 17th October 2015 [sic: scil 2016]. (emphasis added) 36 His Honour then set out verbatim, in the next 10 pages, all the submissions that the parties had made on that topic. Next, he noted that there was no slip rule provision in the Federal Circuit Court Rules 2001 but he relied on r 16.05(3) of those rules to support the making of an order in terms of r 39.05(h) of this Court's Rules, which provides that: 39.05 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. 37 His Honour referred to the decision of the Full Court in Ramsay Health Care Australia Pty Ltd v Compton [2016] FCAFC 125 at [21]. There Rares, Gleeson and Markovic JJ said that the slip rule extended to authorising correction of an omission resulting from inadvertence by a party's legal representative, as Mason ACJ, Wilson and Deane JJ had held in L. Shaddock and Associates Pty Ltd v Parramatta City Council (No 2) (1982) 151 CLR 590 at 594; and see too at 597. 38 The trial judge referred to Mr Kay's affidavit in which he had outlined his inadvertence in not instructing counsel to seek an extension of time for the petition at the hearing and said that there was no evidence opposing Mr Kay's affidavit, which he accepted. His Honour then added that at the date of the hearing he was aware that another judge in the Australian Capital Territory registry was scheduled to retire in mid-July 2016. He referred to the well-known fact that the jurisdiction of the Federal Circuit Court was extremely wide, ranging from bankruptcy to migration, industrial matters under the Fair Work Act 2009 (Cth), human rights and other general federal law matters, as well as matters arising under the family law jurisdiction of that Court. He said that the volume of work in that Court was "oppressive" and that although the Government had consistently stated that retiring judges of the Federal Circuit Court would be replaced quickly, unfortunately, that had not happened. He continued: Had I turned my mind to it, the imminent retirement of one of my colleagues in this Registry, and given the history of lack of timely replacement of judges, should have alerted me to the possibility of an even greater increase in the workload of the Court that would have impacted on my ability to attend to all judgments as expeditiously as I would have wished and intended. (emphasis added) 39 He concluded that the matters to which he had referred satisfied the requirements for the operation of the slip rule and accordingly made the order extending the life of the petition, effectively, for a further seven months from the date on which it had expired earlier on 6 October 2016. This appeal 40 The parties argued the three issues in the appeal that I have noted earlier. In addition, the bankrupt sought an order staying the operation of the sequestration order pending the delivery of judgment in these proceedings. It is not necessary to deal with that interlocutory application in the circumstances. I have dealt already in these reasons with the substance of the s 52(2)(b) issue (being the fourth ground of appeal, the third ground of appeal not being pressed). 41 For the reasons I have given I am not satisfied that that ground could have been sustained. Moreover, in my opinion, the ground as pleaded did not comply with the obligation set out in r 36.01(2)(c) of the Federal Court Rules that a notice of appeal must state briefly but specifically the grounds relied on in support of the appeal. Where a detailed portion of reasoning in reasons for judgment is the subject of appeal it is not sufficient to simply assert that there was an unspecified error in the discretionary assessment. 42 Both parties agreed that any error in the exercise of the trial judge's discretion had to fall within one of the bases identified by Dixon, Evatt and McTiernan JJ in House v The King (1936) 55 CLR 499 at 504-505, namely, that his Honour had made an error by acting on a wrong principle, by allowing extraneous or irrelevant matters to guide or affect him, by mistaking the facts, by not taking into account some material consideration or, where it did not appear how the trial judge had reached the result embodied in the order and, upon the facts, the order was unreasonable or plainly unjust. The notice of appeal failed to identify in any way what the alleged error in the exercise of his Honour's discretion was. That form of drafting should not be repeated. 43 The bankrupt argued that there were two substantive errors by the trial judge in making the order under the slip rule. First, that, however it may be characterised, neither of the two paragraphs set out as the orders of 3 May 2016 amounted to an order having regard to the reasons of the Full Court in Griffiths v Boral Resources (Qld) Pty Ltd (2006) 154 FCR 554 and, secondly, that there was no foundation for the invocation of the slip rule identified in his Honour's reasons. The creditor's submissions 44 The creditor argued that, unlike the position in Griffiths 154 FCR 554, his Honour had in fact made two orders on 3 May 2016 and, in particular, had ordered that the proceedings be adjourned. He argued that the decision in Griffiths 154 FCR 554 was distinguishable because there all that the federal magistrate had done was to say in open court that he reserved his decision, and the Full Court held that that did not imply an order adjourning the proceedings or reserving his decision. The creditor argued that, on 3 May 2016, his Honour made an accidental slip or error in failing to order, as did Mr Kay in failing to instruct counsel to apply for an order, that the life of the petition be extended pursuant to s 52(5). The creditor argued that this was an accidental slip or omission and that in his reasons at [126] the trial judge did not indicate that he had made a deliberate decision on 3 May 2016 to adjourn without ordering an extension of time. The creditor argued that there was a slip made by Mr Kay in not applying, or instructing counsel to apply, for the extension. He contended that the matter was a very complicated one, and indeed there was well over 1,000 pages of material before the trial judge at the time of the hearing of the petition, giving rise to many issues with which the trial judge was required by the submissions below to deal, and that his Honour had carefully considered and dealt with those matters in his reasons. 45 The creditor argued that, on the day of the hearing, his Honour, after he had reserved his decision, sought and made directions for the provision of further submissions. He also argued that judgments often take more than five months to prepare and deliver and that where a matter was complex, such as, he argued, this one was, extensions should be granted. He pointed to the need for the judge to sift through the various intercompany relationships to determine whether or not the bankrupt had demonstrated sufficient cause for the purposes of s 52(2) and that his Honour had to make a discretionary decision whether or not to make the sequestration order. 46 The accidental slip or omission made on 3 May 2016, the creditor argued, was that neither Mr Kay nor his Honour had adverted to or granted an extension of time. He also argued that the decision of the Full Court in Flint v Richard Busuttil & Company Pty Ltd (2013) 216 FCR 375 was distinguishable because, in this case, it was clear that the judge would have made an order extending the time before which the petition expired for the reasons that he gave concerning his workload, the additional burden caused by the pending retirement of one of his colleagues and by reason of the fact that there was no controversy, so the creditor argued, as to whether the order would have been made. Consideration 47 In my opinion, the creditor's submissions should be rejected. The Bankruptcy Act contemplates that a creditor's petition must be adjudicated upon and a final order made in the ordinary course within a finite period of 12 months under s 52(4)(a), unless an extension of time of no more than a further 12 months is ordered under s 52(5). There is another temporal requirement in s 44(1)(c) that indicates the importance that the Parliament attached to the Court's dealing with a creditor's petition promptly. That is, that the creditor's petition must be founded on an act of bankruptcy committed within six months before the presentation of the petition. 48 Proceedings on a bankruptcy notice and a petition have the potential to result in a change of status for a person who commits an act of bankruptcy or is adjudicated bankrupt. A change in status occasioned by the making of a sequestration order has profound consequences for the bankrupt and his or her creditors. The bankrupt loses many of his or her freedoms to enter into transactions, to carry on business and to own and deal with real or personal property which become vested in, and under the control of, his trustee in bankruptcy, being either the official trustee or a registered trustee. Moreover, the bankrupt's after-acquired property vests in the trustee as soon as it is acquired by or devolves on the bankrupt, subject to any provision to the contrary in the Act (s 58(1)). 49 These considerations suggest that the decision under s 52(5) to extend the time before which a creditor's petition lapses, coupled with the statutory requirement that the Court must consider whether any such extension is just and equitable, should not be treated as a matter of course. 50 At the time of the hearing of a creditor's petition, ordinarily, the parties will be aware, and should make the Court aware, of the period remaining before which the petition will lapse under s 52(4). Allsop CJ, Katzmann and Perry JJ emphasised in Flint 216 FCR at 383 [38], in a case where a petition was to lapse three months after the alleged order in respect of which the creditor unsuccessfully invoked the slip rule, "the expedition required and the public policy that inheres in the prompt dispatch of a creditor's petition under s 52". They continued: The interests of creditors generally can be adversely affected by delays in the disposition of bankruptcy matters. Thus, if there was an error on the part of either the representative of the creditor in not making the application for an extension on (or before) 29 August [2012] or in the federal magistrate not adverting to the question, it is not clear what course would probably have been taken and, a fortiori, not clear that an order would have been made at that time extending the life of the creditor's petition. 51 The mere fact that a judge reserves judgment on a creditor's petition cannot give rise to an expectation that the judge will or should grant an automatic of extension of time under s 52(5). After all, a petition that has already been extended to lapse 24 months after it is lodged, and that is heard close to the expiry of the 24 month period, must be determined before it lapses. It is difficult to discern any situation in which the Court would not make such a determination, while it is possible to do so, where it is aware of the imminent lapsing of the petition. However, that is not always possible, as the case of Bankstown Grammar School Ltd v Park [2000] FCA 1205 shows. There, Lindgren J was not aware that the initial 12 month period expired in one week when, after a full day's hearing, he had adjourned the further hearing of the petition by over one week to take final submissions. 52 Here, the trial judge said that all involved, including his Honour, reasonably held the view on 3 May 2016 that his decision would have been forthcoming within a relatively short period of time. I have set out in full what his Honour said at [126] of his reasons (see [35] above). That statement demonstrated that "the orders" that his Honour made on 3 May 2016, to reserve his decision and to adjourn to a date and time to be advised by the Court "pending judgment delivery", to the extent that that was a judicial, as opposed to an administrative, act (see Griffiths 154 FCR at 566 [50]) did not involve anything other than the deliberate decision that the 3 May 2016 orders actually reflected. At that time there was no circumstance to suggest or reasonable expectation, given the five months before which the petition would lapse, that his Honour would not decide the matter within a reasonably short period of time. 53 The fact that circumstances later changed, or that his Honour later adverted to a possibility that he might have been unable to deliver a decision within the remaining period before 6 October 2016, does not indicate that anyone made an accidental slip or omission at the time when his Honour adjourned the proceedings. On 3 May 2016, there were no circumstances then in contemplation that would have made it just or equitable, within the meaning of s 52(5), to extend the period before which the petition might lapse so that the trial judge would have, not five, but 12 more months to determine the result of the trial he just concluded. Moreover, the subsequent or unanticipated occurrence of new circumstances, or the oversight of a mere possibility, could not convert a rational and deliberate decision to reserve judgment, without considering the grant of an extension under s 52(5), into an accidental slip or omission that occurred on 3 May 2016 when his Honour reserved his decision. Apart from the brief extension of the period for filing further submissions on the matters that his Honour raised later on 3 May 2016 after reserving, that was completed by 9 May 2016, there were no further matters to be dealt with in the determination of the creditor's petition other than his Honour making a decision and delivering his reasons. 54 The effect of his Honour's "orders" that were entered on 3 May 2016 was, in substance, merely to record that he had concluded the hearing and reserved his decision until some date to be fixed, at which he would deliver his decision. It is inconceivable that a party would have a right to appeal against those "orders". Neither "order" recorded on 3 May 2016 had any effect on the rights, liabilities or obligations of the parties. Neither order determined any interlocutory or final matter in the proceedings. All that the recorded "orders" of 3 May 2016 did was to reflect the fact that the trial judge had decided that he was not in a position immediately to make orders or to decide the outcome of the creditor's petition. At that point, there was no more work for the parties to do and his Honour was not then determining any party's rights. 55 In Griffiths 154 FCR at 562 [33], Spender ACJ, Dowsett and Collier JJ said that the slip rule contemplated a causal connection between the slip or omission and the error. They said that if the rule is to be invoked in order to effect an extension of time beyond that permitted by, relevantly, s 52 of the Bankruptcy Act, then there must be a judgment or order to be corrected, and it must have been made within the prescribed time. They said that the power is to correct, not vary or set aside, an order and there is no general power to relieve from the effect of either of s 52(4) or 52(5). Their Honours expressed the view that to reserve judgment did not constitute or imply an order creating an adjournment of the matter, or that it had any other particular significance (at 566 [50]). However, in that case, the federal magistrate had not made any order expressly, unlike the present situation. 56 Their Honours then turned to consider the meaning of the word "adjournment" and the consequence of its use in an order. They said that, in a case like the present, the federal magistrate had adjourned the proceedings to a time and place, of which he would notify the parties, at which he would deliver his reasons. They said that was done only for the purpose of informing the parties that they would be given notice of the date on which he would deliver his decision (154 FCR at 569 [61]). Spender ACJ, Dowsett and Collier JJ concluded that the reservation of judgment did not imply an order for adjournment, and that such an implication was unnecessary. They said that at the time that his Honour said that he reserved his decision, the status and future course of the matter were clear (154 FCR at 596 [61]). They continued (154 FCR at 569 [62]-[63]): We do not mean to imply that an adjournment may never be the subject of an order. If an order for adjournment is pronounced, it may or may not satisfy the test to which we have referred. For example, where one party seeks an adjournment over opposition, the decision to adjourn or not to adjourn may be determinative of the parties' respective rights to have the question determined judicially. In such a case, the decision to adjourn would be a judgment or order for all practical purposes. However that is hardly the effect of an indication by a judge that he or she is presently unable to give a judgment and will do so at a later time. We conclude that there is no reason to treat reservation of judgment as implying an order for adjournment. Of course, reserving judgment will have the effect of adjourning the matter, but it does not follow that there is an order of adjournment. (emphasis added) 57 Their Honours then said that even assuming that, in that case, the federal magistrate had made an order adjourning the proceedings when he reserved his decision, the conditions precedent for the invocation of slip rule had not arisen in circumstances where the decision had been reserved 10 months before the lapsing of the petition under s 52(4). They said (Griffiths 154 FCR at 570-571 [68]-[69]): Even assuming that the magistrate made an order on that date, we consider that the conditions precedent to the invocation of the slip rule did not arise. The only possible "error" would be the omission from the "order" of an extension pursuant to s 52 of the Bankruptcy Act. In that case it would be necessary to identify the accidental slip or omission which caused the error. The primary responsibility for making an application for such order rested upon the present respondent. Whether there was a slip or omission is a question of fact. In some cases, such as in Elyard [Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385], there may be direct evidence of an intention to make a relevant application, steps taken to bring about that result and a failure to carry the intention into effect. In other cases it may be possible to infer that such a step should have been taken, and that the failure to do so can properly be seen as an accidental slip or omission. Where the petition is likely to expire very shortly after the hearing, and prior to the preparation of a reserved judgment, such an inference may be available. In the present case, the petition was presented on 11 September 2003 and heard on 11 November 2003. At the time at which judgment was reserved, almost 10 months remained until the expiry of the petition. In those circumstances, it cannot be inferred that the respondent ought to have applied for an extension of time, and that the failure to do so was an accidental slip or omission. There is also no reason to infer that the magistrate then expected that the judgment would be reserved for such a lengthy period of time. It cannot be said that he committed any accidental slip or omission. It is most unlikely that with 10 months to run, anybody would have anticipated that judgment might not be given within the lifetime of the petition. Perhaps, at some time prior to 11 September 2004, somebody should have realised that an extension might be necessary. Failure to take a step at that stage may have been a slip or omission, but no "error" in the "order" arose from it. (emphasis added) 58 As their Honours said, in some cases, where a petition is likely to lapse very shortly after a hearing and prior to the preparation of a reserved judgment, it may be possible to infer there had been an accidental slip or omission, but as they said (at 571 [70]): we doubt whether an order for extension of time, if sought at the hearing, would be have been uncontroversial. We suspect that the appellant would have strenuously resisted the suggestion that the matter might remain unresolved for more than 10 months. (emphasis added) 59 As with their Honours in that case, in these reasons I am not making any criticism of his Honour's delay. Indeed, he explained the difficulties with which he was confronted. I, like their Honours, have no doubt that the trial judge here did the best that he could in the circumstances, but I agree with Spender ACJ, Dowsett and Collier JJ that, in future, it would be better if steps were taken in the Registry, as well as by the lawyers for the petitioning creditor, to make sure that judges are reminded of imminent lapsing dates of creditor's petitions and similar under the Bankruptcy Act and the Corporations Act (154 FCR at 571 [71]). 60 Likewise in Flint 216 FCR at 380 [26], the Full Court noted that the purpose of the slip rule was to avoid injustice to litigants by ensuring that the Court's judgment or order reflected its intention at the time that the judgment or order was made, or reflects the intention the Court would have had, but for the failure that caused the accidental slip or omission. The invocation of the slip rule, ordinarily, can occur only where the proposed amendment is one upon which no real difference of opinion can exist: see Flint 216 FCR at 381 [27]. 61 In my opinion, this matter must be analysed as Allsop CJ, Katzmann and Perry JJ did in Flint 216 FCR at 382 [34]-[35], namely: In our view it was not open to the federal magistrate to do as he did. We have come to this conclusion, in short, because the facts do not demonstrate that an accidental slip or omission was made or, if it was, that there was necessarily any error in the order made on 29 August 2012 as a consequence of it. For the slip rule to apply there must be an order in need of correction. (emphasis added) 62 As their Honours explained (216 FCR at 383 [38]-[39]), had an order been applied for three months before the petition lapsed, at the directions hearing on 29 August 2012, it was by no means certain that the federal magistrate would have made an order of the kind ultimately sought to be justified under the slip rule. 63 In this case, once the error became apparent, it was easy, with the benefit of hindsight, for Mr Kay and his Honour to say that, of course, each would have acted to bring about an extension of time, and what is more, that the extension would have been so that the petition would not lapse for a full year from the date of the hearing on 3 May 2016. However, that would have meant that a contested creditor's petition involving a debtor who was admittedly insolvent, but for the existence of there being a sufficient cause not to make a sequestration order, would be heard but not determined for perhaps as long as a year. That would not reflect the promptitude that the Parliament stipulated ought to occur, by reference to the strictures in ss 44(1)(c) and 52(4) and (5). 64 The question here arises as to what would have made it necessarily just and equitable to grant a further seven month extension beyond the five months that the petition had left to run, in circumstances where his Honour considered that it was reasonable to hold the view that a decision would have been forthcoming within a relatively short period of time? The fact that later events transpired, which only became apparent after the lapsing of the petition, is not, in my opinion, a sufficient ground to invoke the slip rule. That, of course, in the circumstances of this case, is most unfortunate, given the lack of any apparent merit in the bankrupt's opposition to the creditor's petition. 65 Mr Kay's evidence was that he did not turn his mind to the question of the extension of time of the petition until after his Honour's email of 12 October 2016. However, that only goes to demonstrate that it was the product of hindsight generated by subsequent events, as opposed to reflecting what would necessarily have happened at the hearing had the possibility of a difficulty in his Honour making a decision before 6 October 2016 been raised. It is by no means certain that the bankrupt would have agreed to as long an adjournment as one year. 66 Nonetheless, on the material before me, his Honour's state of mind at the time he reserved judgment was that he intended to deliver his decision within a relatively short time. In my opinion, what his Honour recorded as "orders" on 3 May 2016 were not orders of a kind that were capable of being varied under r 39.05(h) or the slip rule. That is because neither "order" could have been the subject of any appeal. The act of reserving judgment and adjourning the proceedings to a date when reasons for judgment would be ready to be published and orders made was not the making of an order to which the slip rule could apply. Nor was the failure of Mr Kay to apply for, or his Honour to make, an order extending the period before which the petition would lapse an accidental slip or omission in the framing of the "order" recording the adjournment. 67 In my opinion, the "orders" made on 3 May 2016, or orders recorded, if either were an order, reflected all that his Honour intended to do. Conclusion 68 For these reasons, I am of opinion that the appeal must be allowed. The orders made by the Federal Circuit Court on 4 November 2016 should be set aside. I will order that the parties confer and prepare short minutes and, if necessary, further submissions as to orders for costs of the proceedings below and the appeal, as well as to what consequential orders need to be made in respect of protecting the position of the trustees. I certify that the preceding sixty-eight (68) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. Associate: Dated: 11 May 2017