Barrot F.T. Pty Ltd (in liquidation) v TT-Line Company Pty Ltd

[2014] VCC 571

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

CIVIL DIVISION

Revised
Not Restricted
Suitable for Publication

COMMERCIAL LIST – GENERAL CASES DIVISION

Case No. CI-13-04321

BARROT F.T. PTY LTD (IN LIQUIDATION)	Plaintiff
v
TT-LINE COMPANY PTY LTD	Defendant

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JUDGE:	HIS HONOUR JUDGE COSGRAVE
WHERE HELD:	Melbourne
DATE OF HEARING:	16 April 2014
DATE OF JUDGMENT:	1 May 2014
CASE MAY BE CITED AS:	Barrot F.T. Pty Ltd (in liquidation) v TT-Line Company Pty Ltd
MEDIUM NEUTRAL CITATION:	[2014] VCC 571

REASONS FOR JUDGMENT
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Subject:  PRACTICE AND PROCEDURE

Catchwords: Application to amend statement of claim -- new claim after filing statement of claim -- new claims otherwise excluded due to s588FF(3) Corporations Act 2001 (Cth)

Legislation Cited:     Corporations Act 2001 (Cth)

Cases Cited:BP Australia Ltd v Brown (2003) 58 NSWLR 322; Rambaldi and KC Parksafe (Vic) Pty Ltd (in liq) v Dallbrook Pty Ltd [2003] VSC 163; Rodgers v Commissioner of Taxation (1988) 88 FCR 61 (FC); Star v National Australia Bank Ltd (1999) 30 ACSR 583

Judgment: Plaintiff granted leave to amend statement of claim pursuant to Order 36.01 County Court Civil Procedure Rules 2008

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J Evans	Mills Oakley Lawyers
For the Defendant	Mr K J Naish	Page Seager

HIS HONOUR:

Application

1 This matter concerns an application by the liquidators of the plaintiff company to amend the statement of claim pursuant to Order 36.01 of the County Court Civil Procedure Rules 2008 to include some new claims which would otherwise be out of time and excluded due to the operation of section 588FF(3) of the Corporations Act 2001 (Cth). The defendant contends the court should refuse the leave sought.

Background

2 On 26 August 2010, Timothy Holden was appointed liquidator of the plaintiff company (“the Company”) pursuant to a resolution of members passed in accordance with section 495 of the Corporations Act 2001 (Cth). The Company was part of a group of companies comprising seven entities, six of which have now been wound up.

3       By reason of the operation of sections 9 and 513C of the Act, and for the purposes of Division 2 of Part 5.7B of the Act, the relation-back day in respect of the plaintiff is 26 August 2010 (“relation-back day”).  The relation-back period therefore is between 26 February 2010 and the relation-back day (“relation-back period”).

4       At a meeting held on 9 September 2010, the creditors of the plaintiff voted to appoint the present plaintiffs as joint and several liquidators of the company.  The plaintiffs filed the writ and statement of claim in the proceeding shortly before the third anniversary of the appointment date.

5       Under section 588FF(1)(a), where a court is satisfied that a transaction of a company in liquidation is voidable because of section 588FE, the court may order a person to pay to that company an amount equal to some or all of the money the company paid under the transaction.  A transaction is voidable under section 588FE(2) if:

“(a)   it is an insolvent transaction of the company; and

(b)   it was entered into ...:

(i)during the 6 months ending on the relation-back day.”

6       Section 588FC provides that a transaction of a company is an insolvent transaction if it is an unfair preference given by the company, or an uncommercial transaction (s588FB), and, in summary, if the company is insolvent at the time the transaction is entered into, or becomes insolvent as a result of entering into the transaction.

7 Section 588FF(3) provides that:

“An application under subsection (1) may only be made:

(a)   within 3 years after the relation-back day; or

(b)   within such longer period as the Court orders on an application under this paragraph made by the liquidator within those 3 years.”

8       The original statement of claim claimed $70,000 in respect of seven payments, each of $10,000, made approximately weekly between 1 April 2010 and 14 May 2010. It appears from the affidavit material that the defendant was one of about 25 companies to whom the Company made “round sum” payments (eg $18,000, $12,000, $30,000) during the relation back period.

9       The amended claim now concerns forty-three allegedly preferential payments made between 31 March 2010 and 29 June 2010.  The payments sought to be added are for various amounts, and apparently relate to the supply of goods or services to the plaintiff during the relation back period.

Submissions

10      The plaintiff says that the new claim, totalling $104,098.42, only became apparent to them after the commencement of the proceeding and the filing of the statement of claim on 16 December 2013, when they further reviewed the plaintiff’s books and records, including the company’s transactional ledger.  The amount of material to be examined was considerable.

11      The defendant contends that if the amendments are allowed it will suffer prejudice in the following ways:

(a)The defendant contends that as a matter of public policy a party is entitled to know, after the expiration of three years, whether it is potentially liable for allegedly preferential payments.  To allow the amendment would increase uncertainty beyond the time permitted by the legislation in section 588FF.  This uncertainty as to time and the potential amount sought should only be countenanced where a good explanation is given for the delay.

(b)The substantial number of additional transactions raised expands substantially the scope of the proceeding and more than doubles the amount claimed by the plaintiffs.

(c)The further payments do not arise out of the same or substantially the same set of facts.  The defendant contends the payments are quite different in character and have no relationship to the payment plan alleged by the plaintiff in its initial material.

(d)The defendant made specific reference to the judgment of Spigelman CJ in BP Australia Ltd v Brown (2003) 58 NSWLR 322 at [112]–[115]:

“There is, in my opinion, a broader public interest to be served by allowing persons who have had dealings with companies which become insolvent to conduct their commercial affairs with a degree of certainty about their exposure to having past transactions unravelled.

...

The commercial and economic life of the community is sometimes better served by allowing the loss to lie where it falls, so that all concerned may proceed with a high degree of certainty as to their financial position. The passage of time, even the passage of three years, can be seen to legitimately alter the balance of conflicting interests in this regard.

A creditor or other person who has received the benefit of a voidable transaction is at risk of having to surrender it. The time limit in s 588FF(3) has the effect that at the end of the period of three years, such a person will know whether s/he remains at risk.”

12      In referring to the new payments arising from different facts, the defendant acknowledges that the plaintiff’s position would be substantially stronger if the plaintiff had simply neglected to include a further $10,000 payment which it had omitted earlier through inadvertence.  However, the defendant says that the payments now sought to be added to the claim are not claimed to be payments made pursuant to a payment plan. Accordingly, the defendant contends that the payments are quite different in character from the payments found in the existing claim.

Consideration of Arguments

13      The parties referred me to various authorities relevant to the application.  It seems clear that the court has the power to permit the amendment.

14      One helpful decision was that of Rambaldi v Dallbrook Pty Ltd [2003] VSC 163. In that case, the statement of claim alleged that various payments made by the plaintiff company as lessee to the defendant were unfair preferences. The amount sought to be recovered was approximately $946,000. The plaintiff then applied to claim four additional payments totalling approximately $341,000. Three of the four payments sought to be added were made by a related entity of the plaintiff company.

15      Hansen J accepted that the court had the power to allow the amendments and could do so, even though the effect was, in practical terms, to introduce a new cause of action.  Accordingly, His Honour was content to follow and apply the decisions of Rodgers v Commissioner of Taxation (1988) 88 FCR 61 (FC) and Star v National Australia Bank Ltd (1999) 30 ACSR 583 in granting the application.

16 In applying Order 36.01(6), His Honour noted:

“The observations in Hatfield and Simplot, which accord with the approach in Rodgers and Star, indicate the considerations that are appropriate to take into account in determining whether to exercise the discretion to allow an amendment. Ultimately it is for the judge in each case to decide, in light of the particular circumstances of the case and the terms of the rule, whether to allow an amendment. The purpose of conferring a discretion in terms such as the discretion in R36.01(6) is to ensure that the Court is able to do that which is just and equitable in all the circumstances of the particular case bearing in mind the terms of the relevant rule.”

17      The payments at issue here appear to relate to dealings between the parties.  The period of time in which the payments are made is substantially similar to the existing claims.  The initial payment sought to be recovered is the day immediately before the first payment in the original statement of claim, and the last payment is some weeks later than the last payment in the original claim.  To that extent, all payments seem to arise from the same trading relationship and context and a similar time period.

18      The defendant points in its affidavit to various matters said to constitute prejudice, such as:

(a)The proceeding was commenced at the last possible moment.

(b)The liquidator initially swore to a date of insolvency that precluded any claim being made against the defendant.

(c)The liquidator altered his opinion regarding the alleged date of insolvency after being advised of the matters set out in (b) above.

(d)The plaintiff failed to pay the setting down fee, resulting in the loss of the trial date.

(e)The plaintiff failed to comply with its discovery obligations.

(f)The plaintiff failed to comply with its obligations to undertake a mediation.

(g)The plaintiff initiated the application to amend its statement of claim at the last possible moment on the day before the listed directions hearing to reinstate the proceeding for trial.

(h)The defendant has prepared its defence and provided its instructions based on certain specified transactions totalling $70,000.

(i)The defendant has complied with its discovery obligations in respect of the existing claims of $70,000.

(j)The defendant has conducted negotiations based on the existing claims of $70,000.

19      It seems to me that none of those matters (assuming for the purposes of the exercise that each of them is relevant) constitutes a sufficient prejudice to justify the refusal of the plaintiff’s application. The main disadvantage for the defendant is that it will be subject to additional claims which would otherwise be statute barred. This “prejudice” is not a relevant form of prejudice in the context of these (or similar) applications. Other than the disadvantage of possibly having to repay to the plaintiff a greater sum, the defendant has not identified a specific prejudice sufficient to outweigh the plaintiff’s claims. Although the new payments sought to be impugned were not “round sum” payments, I did not understand the defendant to contend that the payments received were unrelated to goods or services provided by the defendant to the Company. However, if I am wrong about that, then the defendant will be at liberty to raise such defences as it sees fit in due course. On the material before me (and notwithstanding the forceful argument advanced by the defendant), I consider that it is just to allow the application.

20      I will hear from the parties on the final form of orders.

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