Arnautovic & Anor as joint liquidators of Australian Coal Technology Pty Ltd v Nichola & Ors trading as Middletons Lawyers & Anor

[2009] NSWSC 481

CITATION:	Arnautovic & Anor as joint liquidators of Australian Coal Technology Pty Ltd v Nichola & Ors trading as Middletons Lawyers & Anor [2009] NSWSC 481 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	25/05/09
JUDGMENT DATE :	3 June 2009
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Leave to amend by correcting name of party.
CATCHWORDS:	PROCEDURE - Supreme Court procedure - amendment - amendment to correct name of party - whether plaintiffs deliberately chose to sue named defendant - where decision made by liquidators' employee on a misunderstanding - where liquidators' intention was to sue correct party - where director of both parties knew that wrong party had been sued
LEGISLATION CITED:	Civil Procedure Act 2005, Part 5.3A, ss 56, 57, 58, 64(1)(b), 65(1), 65(2)(b), 147 Corporations Act 2001 (Cth), ss 588FF(3)(a) and (b), Corporations Regulations 2001 (Cth), reg 2B.6.01
CATEGORY:	Principal judgment
CASES CITED:	Arnautovic & Anor as Joint Liquidators of Australian Coal Technology Pty Ltd v Nichola & Ors [2009] NSWSC 233 Austin Australia Pty Ltd v A and G Scaffolding and Rigging Service Pty Ltd [2007] NSWSC 1077; (2009) 25 ACLC 1363 Davies v Elsby Bros Ltd [1960] 3 All ER 672 Evans Constructions Co Ltd v Charrington & Co Ltd [1983] QB 810 Greenwood v Papademetri [2007] NSWCA 221
PARTIES:	Sule Arnautovic and Roderick Mackay Sutherland as joint liquidators of Australia Coal Technology Pty Limited - First Plaintiffs/Applicants Nick Nichola & Others trading as Middletons Lawyers - First Defendants Multotec Pty Ltd - Second Defendant ACN 003 895 618 - Third Defendant David Brown Gear Industries Ltd - Fourth Defendant Metso Minerals (Australia) Limited - Respondent
FILE NUMBER(S):	SC 1636/09
COUNSEL:	Mr J Baird - Plaintiffs/Applicants Mr D R Stack - Respondent
SOLICITORS:	Sparke Helmore Lawyers - Plaintiffs Deacons - Respondent

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

WEDNESDAY, 3 JUNE 2009

1636/09 SULE ARNAUTOVIC AND RODERICK MACKAY SUTHERLAND AS JOINT LIQUIDATORS OF AUSTRALIAN COAL TECHNOLOGY PTY LIMITED & ANOR v NICK NICHOLA & OTHERS trading as MIDDLETONS LAWYERS & 3 ORS

JUDGMENT

1 The plaintiffs are the liquidators of Australian Coal Technology Pty Limited (“ACT”).

2 By originating process filed on 20 February 2009, the liquidators sought the following order:

“An Order that, pursuant to section 588FF(3)(b) of the Act, the period within which applications under section 588FF(1) of the Act may be made against the Defendants or any of them be extended up to and including 3 September 2009 or such further date as this Honourable Court may determine.”

3 On 23 March 2009, the liquidators pressed that application in respect of the second and fourth defendants named in the originating process. Judgment was given on 3 April 2009: see Arnautovic & Anor as Joint Liquidators of Australian Coal Technology Pty Ltd v Nichola & Ors [2009] NSWSC 233.

4 On 25 May 2009, I heard an interlocutory process filed on 17 April 2009 by which the liquidators seek leave to amend the originating process as it affects the third defendant.

5 The third defendant is described as “ACN 003 895 618 Pty Ltd (ACN 003 895 618)”. The liquidators seek leave to amend the originating process “to correct the name of the third defendant” to “Metso Minerals (Australia) Limited (ACN 000 197 428)”.

6 This application is made under s 64(1)(b) of the Civil Procedure Act 2005 and by reference to s 65(2)(b). Section 64(1)(b) empowers the court to order “that leave be granted to a party to amend any document in the proceedings”. Sections 65(1) and 65(2), so far as relevant, are in these terms:

“(1) This section applies to any proceedings commenced before the expiration of any relevant limitation period for the commencement of the proceedings.
(2) At any time after the expiration of the relevant limitation period, the plaintiff in any such proceedings may, with the leave of the court under section 64 (1) (b), amend the originating process so as:

…
(b) to correct a mistake in the name of a party to the proceedings, whether or not the effect of the amendment is to substitute a new party, being a mistake that, in the court’s opinion, is neither misleading nor such as to cause reasonable doubt as to the identity of the person intended to be made a party, or
…”

7 The parties to the interlocutory process filed on 17 April 2009 accept that the originating process is one by which proceedings were commenced before the expiration of a “limitation period”. This is because the application under s 588FF(3)(b) advanced by the originating process is an application that can only be made within the period referred to in

s 588FF(3)(a). It is accepted that that period expired on 3 March 2009, some eleven days before the filing of the originating process.

8 The question now before me is whether there has been “a mistake in the name of a party” and, if so, whether the court can and should form, with respect to the mistake, the opinion to which s 65(2)(b) refers.

9 In the discussion that follows, it will be convenient to refer to Metso Minerals (Australia) Limited as “MMA” and to ACN 003 895 618 Pty Ltd as “the ACN company”.

10 It is relevant to note at the outset that MMA has had its current name since 1 January 2001. For a period of some six years or so before that, its name was “Svedala Australia Limited”.

11 The ACN company has had its present name since 30 May 2002. Before that, for a period of four months (29 January 2002 to 29 May 2002), the name was “Metso Minerals Pty Ltd”. For the preceding ten months or so, the name had been “Metso Mineral (Australia) Pty Ltd” – that is, a name identical with the name that MMA has had since 1 January 2002, save that one name ended with the abbreviations “Pty Ltd” and the other ends with the word “Limited”. In fact, the two companies co-existed for a short time with names that were “identical”, in terms of s 147 of the Corporations Act 2001 (Cth), regulation 2B.6.01 of the Corporations Regulations 2001 (Cth) and Part 1 of Schedule 6 of those regulations.

12 Search materials show that Mr N G Hughes became a director of both MMA and the ACN company on 3 August 2004. He continues in office. Both companies appear to be members of the same European-owned corporate group.

13 There is evidence of a commercial relationship between ACT and MMA before the commencement of external administration of ACT. A letter of 17 February 2006 from Mr Hughes to ACT acknowledged receipt of $182,140.20 from ACT “which Metso Minerals has applied to its invoice 170601, regardless of any narration in the remittance advice”. There is also a letter from Mr Hughes to ACT dated 2 May 2006 about a proposed deed among ACT, MMA and another company. Each letter, although referring to “Metso Minerals” is on note paper clearly identified with MMA and carrying both its full name and its ACN 000 197 428.

14 Mr Arnautovic and Mr Sutherland became administrators of ACT under Part 5.3A of the Corporations Act on 3 March 2006. They became liquidators on 26 May 2006.

15 On 3 March 2006, Mr Hughes wrote to Mr Arnautovic referring to a claim by MMA (identified by its full name) against ACT. A proof of debt in the name of MMA was submitted on or soon after 7 March 2006. Correspondence involving Mr Arnautovic and Mr Sutherland, their solicitors and Mr Hughes then followed over a period of about two months. All the letters from Mr Hughes were on the note paper already described (carrying the full name of MMA and its ACN 000 197 428). Much of the text of the letters referred simply to “Metso Minerals”. Some of the correspondence was by email. The emails bore the full name of MMA but not its ACN.

16 On 23 February 2009, Ms Docherty, a member of the staff of the liquidators’ firm, sent by email, as an attachment, a letter dated 20 February addressed to:

“The Proper Officer
ACN 003 895 618 Pty Ltd
Formerly Metso Minerals Pty Ltd
Level 2
1110 Hay Street
West Perth WA 6005”

17 With that letter was submitted a schedule of payments said to have been “made by you to ACT within the period 30 November 2005 to 3 March 2006”. The letter went on to express the view that these were recoverable as preferences and to demand payment. One item appearing in the schedule was

“16 February 2006 $182,140.20”.

18 This appears to be a reference to the payment receipt of which was acknowledged by Mr Hughes’ letter of 17 February 2006 to ACT.

19 Ms Docherty later instructed the liquidators’ solicitors to prepare and file the originating process in these proceedings. She told them that one of the defendants was the ACN company.

20 In preparing the letter of 20 February 2009 and subsequently instructing the solicitors, Ms Docherty acted at the request of Mr Arnautovic. When instructing her to proceed, Mr Arnautovic said that the relevant company was “Metso Minerals”. Ms Docherty was not sure which entity was meant by “Metso Minerals”. She conducted an ASIC names search against “Metso Minerals”. Four results appeared:

“Metso Minerals Pty Ltd” ACN 003 895 618
“Metso Minerals (Australia) Limited” ACN 000 197 428
“Metso Minerals (Australia) Pty Ltd” ACN 003 895 618
“Metso Minerals (Wear Protection)” WA BNO9449188

21 Ms Docherty then formed an opinion that it was the first of these (which is also the third) – that is, the ACN company – that was the entity that had contracted with ACT. She then obtained a full search of that company.

22 On 20 March 2009, Ms Docherty was present at the annual meeting of creditors held in the winding up of ACT. Mr Arnautovic spoke at the meeting about the originating process in these proceedings. Ms Docherty heard Mr Hughes say in response words to the effect:

“Your application for extension of time is against the wrong company.”

23 Mr Arnautovic gave evidence of having been told by Mr Hughes on 20 March 2009:

“You are out of time and you have the wrong defendant named.”

24 Having heard what Mr Hughes said on 20 March 2009, Ms Docherty made another names search on the ASIC website. She then became aware that she had made a mistake in her initial identification and that the company against which the liquidators’ claim lay was MMA, with the ACN 000 197 428, not the ACN company. She informed Mr Arnautovic of this promptly.

25 The factual background may be summarised as follows:

1. MMA had dealings with ACT in the period before the appointment of administrators on 3 March 2006. There is evidence of at least one payment by ACT to MMA shortly before that appointment (the payment of $182,140.20 on 16 February 2006). There is nothing to suggest that the ACN company had dealings with ACT at any time.
2. There was correspondence between the administrators and MMA in the period following commencement of the administration. It concerned financial dealings between ACT and MMA before the commencement of the administration. There is no evidence of any similar correspondence between the administrators and the ACN company.
3. In all of the correspondence just mentioned, MMA was generally referred to simply as “Metso Minerals”.
4. Mr Hughes was closely involved in the correspondence. In fact, all the letters from “Metso Minerals” in the periods just mentioned were signed by Mr Hughes and were on the note paper carrying MMA’s full name and ACN.
5. Mr Arnautovic, when giving instructions to Ms Docherty in early 2009, referred only to “Metso Minerals”. There is no apparent reason why he should have been more precise. On the materials available, it is clear that he had only ever been aware of one company having the words “Metso Minerals” in its name. He obviously intended to refer to that company, that is, MMA.
6. Ms Docherty, having received Mr Arnautovic’s instructions, was not sure which entity was the “Metso Minerals” to which he had referred. She therefore carried out an ASIC search and became aware of the existence of several registered names containing the words “Metso Minerals”.
7. Ms Docherty then made a choice from among the several alternatives presented by the search. She chose the ACN company.

26 The facts of the case closely resemble those considered by White J in Austin Australia Pty Ltd v A and G Scaffolding and Rigging Service Pty Ltd [2007] NSWSC 1077; (2009) 25 ACLC 1363. In that case, proceedings under s 588FF(1) were commenced against “Dean Mann Trading as PK Ceilings”. The liquidators had instructed their solicitors to sue a number of parties including “PK Ceilings”. That was an abbreviation used in the liquidators’ office for “Peter K Ceilings Pty Ltd”. On receipt of the instructions, the solicitors conducted an ASIC search against “PK Ceilings”. The only entry was for Mr Dean Mann and his registered business name “PK Ceilings”. On realising, after the filing of an originating process, that this was not the correct party, the liquidators made application under s 64(1)(b) of the Civil Procedure Act for leave to amend to correct the name of the party.

27 White J reviewed the authorities in detail. As His Honour noted, at one end of the scale stands the case of mere misnomer – where there is a clear and unambiguous intention to sue a particular person but, by mistake, the person’s name is misstated; while at the other end of the scale are cases in which there is again a clear and unambiguous intention to sue a particular person and that intention is implemented, even though that person is the wrong person – in other words, there is a deliberate but wrong choice. The distinction was described by Donaldson LJ in Evans Constructions Co Ltd v Charrington & Co Ltd [1983] QB 810 at 821 in this way:

“There is a real distinction between suing A in the mistaken belief that A is the party who is responsible for the matters complained of and seeking to sue B, but mistakenly describing or naming him as A and thereby ending up suing A instead of B. The rule is designed to correct the latter and not the former category of mistake.”

28 Also apposite is the following passage in the judgment of Devlin LJ in Davies v Elsby Bros Ltd [1960] 3 All ER 672 at 676:

“[T]he question is not what the writer of the document intended or meant but what a reasonable man reading the document would understand it to mean; and that is the test which ought to be applied as a general rule in cases of misnomer—which may embrace a number of other situations apart from misnomer on a writ, for example mistake as to identity in the making of a contract. The test must be: How would a reasonable person receiving the document take it? If, in all the circumstances of the case and looking at the document as a whole, he would say to himself: ‘Of course it must mean me, but they have got my name wrong’, then there is a case of mere misnomer. If, on the other hand, he would say: ‘I cannot tell from the document itself whether they mean me or not and I shall have to make inquiries’, then it seems to me that one is getting beyond the realm of misnomer. One of the factors which must operate on the mind of the recipient of a document, and which operates in this case, is whether there is or is not another entity to whom the description on the writ might refer. ...”

29 In Greenwood v Papademetri [2007] NSWCA 221, Campbell JA (with whom Tobias JA agreed) gave authoritative guidance as to the correct approach to s 65(2)(b):

“[33] The power that is conferred by section 65(2)(b) is purposive in its nature. It authorises the court to grant leave to a plaintiff to amend the originating process in whatever way is needed to correct a mistake in the name of a party to the proceedings. The words ‘whether or not the effect of the amendment is to substitute a new party’ do not limit the width of that power. Rather, they make clear that the power can apply in some circumstances where the effect of the amendment is to substitute a new party, and can also apply in some circumstances where the effect of the amendment is not to substitute a new party. The precise order that is appropriate under section 65(2)(b) will depend upon what, in the circumstances of the particular case, is the particular mistake that there has been in the name of a party to the proceedings, and what needs to be done to correct that mistake.

[34] Section 65(2)(b) does not confer on the court power to correct any and every mistake that has been made in the name of a party to the proceedings. It applies only to a mistake that, in the court’s opinion, is neither misleading, nor such as to cause reasonable doubt as to the identity of the person intended to be made a party. In some cases where an amendment is sought under section 65(2)(b) there may be considerable argument about whether a mistake in the name of a party has those characteristics. However, no such argument was put to us on the present appeal.

[35] Even if a proposed amendment is one whose effect could be described by the language in para (b) of section 65(2), there is still a discretion in the court whether to permit that amendment. Section 65(2) contemplates that any amendment made under section 65(2) will be effected through leave granted under section 64(1)(b). Thus, the discretion of the court concerning whether to grant leave to amend under section 65(2) needs to be exercised in accordance with section 64(2). Section 64(2) itself requires the court to exercise its discretion in accordance with section 58, which in turn requires the court to have regard to the provisions of sections 56 and 57. Even if it were not inherent in the grant of a discretion to a judicial officer, section 58(2)(b) enables the court to have regard, in an application for an order under section 65(2)(b), to matters such as the knowledge that the person proposed to be added as a party had of the proceedings during the limitation period, and the nature and degree of any prejudice that the person sought to be added would suffer if the order were made.”

30 It was submitted by Mr Stack of counsel on behalf of MMA that, in the present case, Ms Docherty made a deliberate decision to sue the ACN company, having had before her a choice between that company and MMA. On that basis, it was submitted, the intention was to sue the ACN company, that intention was implemented and the case is not within

s 65(2)(b). Ms Docherty acknowledged, in the course of cross-examination, that she had made and implemented a deliberate choice.

31 The contrary submission, advanced by Mr Baird on behalf of the liquidators, is that the situation was in truth one of misnomer.

32 I accept Mr Baird’s submission. The relevant intention was not that of Ms Docherty. The relevant intention was the liquidators’ intention and, in an immediate sense, that of Mr Arnautovic. He must be taken to have had in contemplation MMA. He had corresponded with Mr Hughes in 2006 in a context making it clear that he was dealing with MMA. He had never had any dealings with the ACN company. There is nothing to suggest that he even knew of its existence.

33 Mr Hughes, moreover, knew full well that the liquidators intended to sue MMA. Having become aware that the ACN company had been sued, he said, quite simply, on 20 March 2009 that the “wrong company” or “wrong defendant” had been sued. Mr Hughes knew full well that the action should have been brought against MMA, rather than the ACN company.

34 There was, in this case, a mistake. The ACN company was sued by mistake when it was the liquidators’ intention to sue MMA. No one was misled. Mr Hughes, a director of both MMA and the ACN company, knew that MMA should have been sued rather than the ACN company. There could have been no reasonable doubt in his mind about the identity of the intended defendant. The s 65(2)(b) criteria are satisfied.

35 The court’s discretion under s 64(2) is therefore enlivened and, having regard to the requirements of s 56, s 57 and s 58, it is appropriate that it be exercised by granting leave to amend as sought.

36 The orders of the court are as follows:

1. Order that leave be granted to the plaintiffs, under
s 64(1)(b) of the Civil Procedure Act 2005, to amend the originating process to correct the name of the third defendant, pursuant to s 65(2)(b) of that Act, from “ACN 003 895 618 Pty Limited” to “Metso Minerals (Australia) Limited” (ACN 000 197 428).
2. That the first plaintiffs’ costs of this application be costs in the winding up of the second plaintiff.

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11/06/2009 - Typo - Paragraph(s) 36