Brown v DML Resources (No 3)

[2001] NSWSC 719

Reported Decision: (2002) 20 ACLC 510

New South Wales

Supreme Court

CITATION:	Brown v DML Resources (No.3) [2001] NSWSC 719
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	SC 3830/00
HEARING DATE(S):	24 July, 1 & 20 August 2001
JUDGMENT DATE:	29 August 2001
PARTIES :	Martin Russell Brown and Timothy James Cuming (P & R) DML Resources Pty Limited (In liquidation) (D1) DML Resources (WA) Pty Limited (In liquidation) (D2) BP Australia Holdings Pty Ltd (A1) BP Australia Pty Ltd (A2)
JUDGMENT OF:	Austin J

COUNSEL :	B Coles QC with M Ashhurst (A1 & A2) C R Newlinds (P & R)
SOLICITORS:	Carneys, Lawyers (A1 & A2) Kemp Strang (P & R)
CATCHWORDS:	CORPORATIONS - winding up of a company - liquidator's proceedings under s 588FF to challenge unfair preference - application for extension of time under s 588FF(3) - orders for extension of time made ex parte - orders subsequently set aside on application by a creditor for denial of natural justice - whether s 588FF(3) allows that creditor to be joined as a party outside the three year time limit PRACTICE AND PROCEDURE - ex parte order set aside as regards applicant for denial of natural justice - whether hearing may proceed inter parties without joinder of affected applicant as a defendant
LEGISLATION CITED:	Corporations Law Act 2001 (Cth), ss 5E, 588FF, 1383, 1399, 1400, 1402 Corporations (Repeals, Consequentials and Transitionals) Act 2001 (Cth), ss 3, 6 Corporations Law, s 588FF Corporations (Ancillary Provisions) Act 2001 (NSW), s 6
CASES CITED:	Craig v Kanssen [1943] KB 257 Bridge Shipping Pty Ltd v Grand Shipping SA (1991) 173 CLR 231 Dahozo Pty Ltd v Oz-US Film Productions Pty Ltd (1997) 24 ACSR 739 Drinan v Hickey (1982) 11 NSWLR 744 Fernance v Nominal Defendant (1989) 17 NSWLR 710 Hoskins v Van Den-Braak (1988) 43 NSWLR 290 Hospital Products Ltd v United States Surgical Corporation (1985) 1 56CLR 41 Kioa v West (1995) 159 CLR 550 London Passenger Transport Board v Mosscrop [1942] AC 332 News Ltd v Australian Rugby Football League Ltd (1986) 64 FCR 410 Oates v Attorney-General (Cth) (1998) 156 ALR 1 Pegang Mining Co Ltd v Choong Sam (1969) 2 MLJ 52 Re Eastern Cleaning Services Pty Ltd (1978) 2 NSWLR 278 Stout v R A Wenham Builders Pty Ltd; Michilis Bros Pty Ltd (Third Party) [1980] 1 NSWLR 426 Wenham v General Credits Ltd (Supreme Court of New South Wales, 16 December 1988, unreported Wentworth v Wentworth (executor of the estate of the Late GN Wentworth) [2000] NSWCA 350
DECISION:	Ex parte orders set aside, with costs, as regards applicants. Submissions directed as to whether proceeding should now be dismissed

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

AUSTIN J

WEDNESDAY 29 AUGUST 2001

3830/00 - MARTIN RUSSELL BROWN & 1 OR v DML RESOURCES PTY LIMITED (IN LIQ) & 1 OR (NO.3)

JUDGMENT

1 HIS HONOUR: The plaintiffs are the liquidators of DML Resources Pty Ltd and DML Resources (WA) Pty Ltd (‘the DML Companies’). On 4 September 2000 they applied for an order under s 588FF (3) (b) extending the time within which to bring proceedings to challenge transactions of the DML Companies as unfair and voidable preferences. I made an order in respect of each of the two companies on an ex parte basis. However, in view of the fact that the order might have affected five identified creditors who had been in correspondence with the liquidators in a manner suggesting they may wish to appear and make submissions, I directed that notice of the orders be provided to those creditors and I granted them leave to make an application within 28 days to set aside the orders.

2 BP Australia Holdings Ltd (‘BP Holdings’) exercised that liberty to apply. By its notice of motion filed on 4 October 2000, it sought orders that it be joined as a defendant to the proceeding and that my orders under s 588FF (3) (b) be set aside. Subsequently I made an order that BP Australia Ltd (‘BP Australia’) be joined as an additional applicant.

3   Neither of the BP companies has yet become a party to the proceeding. It was not necessary for either company to become a party in order to apply to set aside the orders: Craig v Kanssen [1943] KB 257, 262; Hoskins v Van Den-Braak (1988) 43 NSWLR 290, 293.

4   After various interlocutory disputes, the application by BP Holdings and BP Australia was heard by me in April 2001. I delivered my reasons for judgment on 17 July 2001, holding that by making the orders of 4 September 2000 on an ex parte basis, I had denied natural justice to the BP companies. The orders had affected their interests and they had a legitimate expectation that they would be given the opportunity to make submissions before the orders were made.

5   I have not yet made any orders to give effect to my reasons for judgment of 17 July 2001. This is because it has proved to be extraordinarily difficult to decide on the future course of the proceeding, in view of the conclusions I reached in my July judgment.

6 To a degree, this difficulty arose out of the somewhat irregular procedure that I adopted during the hearing of the application by the BP companies. In the course of submissions, counsel identified three stages to the application. In Stage 1, the question for decision was whether the BP companies were entitled to have the orders of 4 September 2000 set aside on grounds not going to the merits - that is, on procedural grounds relating to denial of natural justice. I decided on 17 July 2001 to give an affirmative answer to that question. At that time I envisaged a separate Stage 2, which would raise the question whether the plaintiffs could revive their application for an extension of time in circumstances where the application had been dealt with by the making of the ex parte orders of 4 September 2000 but subsequently those orders had been set aside in consequence of my decision on Stage 1. In those circumstances, a fresh application brought now would be outside the time limits set by s 588FF (3). If I were to decide Stage 2 in favour of the plaintiffs, but not otherwise, then I would move to Stage 3, which would involve consideration of the merits of the application for extension of time on a contested basis.

7 Difficulties have arisen, perhaps because I did not subject the three stages to the discipline of formulating precise separate questions for determination under Part 31 of the Supreme Court Rules. In the absence of a more precise formulation, there is some inherent uncertainty in the concepts underlying the three stages. It is probably best to abandon them. Now, having received my July judgment, neither the plaintiffs nor the BP companies wish to adhere to the ‘three stage’ approach.

8   The BP companies say that my July judgment resolves their application, and therefore I should make orders setting aside the ex parte orders of 4 September 2000 insofar as the orders purported to affect them, with costs, and allow them to withdraw. The plaintiffs say that if I set aside the ex parte orders, I should then make directions for the hearing of their original application for orders for extension of time, of which the BP companies now have ample prior notice. Strictly, it will be necessary for the plaintiffs to amend the prayers for relief in their originating process once the ex parte orders have been set aside. In effect, the plaintiffs will be seeking orders applying the extension of time, granted with respect to other creditors on 4 September 2000, to the BP companies.

9   The difficulties have not, frankly, been alleviated by three additional short hearings since the time of delivery of my July judgment. I gained the impression during those hearings that the Court's objective - to resolve the whole dispute between the parties, if it can, fairly and efficiently - was antithetical to the objectives of both sides. It is not unfair to say that the plaintiffs and the BP companies were engaged in a tactical battle, seeking to position themselves so that their opponents' best points would be deflated by the course which the proceeding will now take.

10   On 24 July 2001 I directed the plaintiffs and the BP companies to make written submissions as to the future course of the proceeding, and to make any relevant application. The responses to these directions made it plain that neither party wishes to make any new application, such as an application for the joinder of the BP companies as parties. The BP companies do not wish to proceed with the existing application for joinder, made by BP Holdings on 4 October 2000.

11   I considered written submissions and supplementary oral argument on 1 August 2001. In the course of argument I made various suggestions for moving the matter forward in a manner that would address the principal areas of dispute between the parties. It became clear, on both sides, that they would want to have the opportunity to make further submissions on some of the issues that I raised. In an attempt to clarify the issues and to ensure that both sides were given the opportunity to make submissions on all relevant points, I delivered an ex tempore interim judgment on 1 August 2001 in which I expressed preliminary views on five issues.

12   My preliminary views were expressed as follows (at paragraph 6 of my judgment of 1 August 2001):

‘(1) that I should make an order setting aside orders (3) and (4) made on 4 September 2000 insofar as they affect the applicants, given that I had concluded that the applicants had been denied natural justice and, therefore, that the orders should not stand as against them;

(2) that it would be premature to make any order for costs at this stage, notwithstanding that the applicants sought an order for their costs in light of my reasons for judgment of 17 July 2001. I shall return to the question of costs shortly;

(3) that it was unnecessary for the plaintiffs to take any steps to resuscitate the application for relief which they made in the originating process filed on 4 September 2001 because my decision to set aside the orders of that date as they affect the applicants was based on procedural grounds (namely, denial of natural justice) rather than any ground going to the substance of the grounds upon which the plaintiffs sought their initial relief. In other words, the setting aside of the orders of 4 September 2000 does not extinguish the application of that date for relief and it is open to the plaintiff to pursue that application without filing any interlocutory process for that purpose;

(4) having received written submissions from the applicants to the effect that the plaintiffs' claim for relief as against them cannot be dealt with unless they are joined as parties to the proceedings, my preliminary view is that that submission is sound. On 17 July 2001, I held that ex parte orders ought not to have been made on 4 September 2000 because the applicants had an interest and legitimate expectation sufficient to entitle them to notice of the application for orders before the application was dealt with. I did not, at that stage, hold that the applicants should have been joined as parties initially. Now, however, since the applicants have succeeded on their Notice of Motion and the proceedings are focused upon relief specifically against them (since the extension of time remains in place in regards to all other creditors), they are directly affected by the proceedings, and if the plaintiffs are successful, their rights will be altered detrimentally. In those circumstances, on the authorities, my preliminary view is that they, the applicants, should be joined as defendants;

(5) although I have heard no argument on this point at all, there is an issue as to whether, given my views on the other matters, the time limit contained in s 588FF(3) has expired so that no further steps along the lines envisaged can be taken in the proceedings. Since s 588FF(3) requires only that an application under that paragraph be made by the liquidator within three years, I express my very preliminary view that as the original application survives, the time limit in subs (3) is no impediment to that application being dealt with in a procedurally correct way.’

13   I directed the plaintiffs and the BP companies to make any further written submissions they wished to make on the preliminary views that I had articulated and on two other issues: namely, whether the Court can and ought make orders for the joining of the BP companies as defendants without any application for joinder having been made by either party; and whether the Court can exercise an exceptional jurisdiction against the BP companies if they are not joined as parties.

14   I foreshadowed that I would then reach conclusions on all of these matters, unless I was persuaded by the submissions that it would be inappropriate to do so, and if I reached conclusions, I would deliver reasons for judgment with respect to those matters. Subsequently I received further written submissions by both sides and I heard further oral argument of 20 August 2001.

15   It seems to me that the following issues have been raised by the two sets of written submissions and the oral argument:

(a) should the Court make orders at this stage, setting aside the ex parte orders made on 4 September 2000?
(b) what will be the status of the plaintiffs' original application once the ex parte orders have been set aside?
(c) should the Court, at this stage, order the plaintiff to pay the costs of the BP companies with respect to their application?
(d) is there an absolute requirement for the BP companies to be joined as parties to the proceeding, before the final hearing?
(e) if the answer to question (d) is in the affirmative, but neither party applies to join the BP companies as parties, should the Court do so of its own motion?
(f) is there any impediment to the joinder of the BP companies at this stage of the proceeding?
(g) if the answer to question (f) is in the affirmative, is this a case where the Court should exercise a jurisdiction to make orders affecting the BP companies, notwithstanding that they are not parties to the proceeding?

The matters presently before the Court


16   The plaintiffs contend that the procedure that I have implemented for the exploration of these issues has not been an appropriate one. They say that not all of the above questions arise out of the process currently before the Court. Further, they say it is not clear what evidence, if any, the Court has before it. They say that the Court should not embark on the resolution of any of the identified issues, but should merely list the plaintiffs' application for an extension of time for hearing on a final basis.

17   It seems to me that the plaintiffs' submission on this point is internally inconsistent. In their second written submission, the plaintiffs acknowledge that certain matters are currently before the Court, and that some of the identified issues may properly be decided at this stage. Such issues include the important question whether the BP companies should be joined as defendants to the proceeding, which (according to the plaintiffs' submission) arises on the Court's own motion for joinder and perhaps in the context of the application by the BP companies for the costs of their successful application. That being so, the most that the plaintiffs can say is that the Court should not decide some of the identified issues at this stage. The plaintiffs have no compelling argument, in my view, to support the proposition that the Court should do nothing more than list their application for extension of time for final hearing.

18   In fact there are three matters before the Court at this stage. First, there is the application, not yet finally dealt with, by the BP companies to set aside the ex parte orders. Secondly, the plaintiffs seek directions with a view to the determination of their original application for orders for extension of time. Thirdly, in the course of argument I have raised the question whether the Court should of its own motion join the BP companies as parties to the proceeding. The evidence before the Court is the evidence adduced on the application by the BP companies to set aside the ex parte orders.

19   Some of the identified issues are clearly matters for determination upon one or more of the applications currently before the Court. It is arguable that some are not. In dealing with each of the issues, I shall consider the question whether, procedurally and in light of the evidence before the Court, it is permissible and appropriate to deal with the issue in these reasons for judgment.

20   In my ex tempore judgment of 1 August 2001, I indicated that I would deliver ‘interim’ reasons for judgment after hearing further submissions. I should make it clear that the reasons for judgment that I now deliver are ‘interim’ only in the sense that they are given upon the interlocutory applications that are currently before the Court. They are ‘final’ in the way that every judgment on an interlocutory question is final.

(a) Should the Court make orders at this stage, setting aside the ex parte orders made on 4 September 2000?


21   This question is squarely before the Court, since the application by the BP companies has been heard and determined by the reasons for judgment delivered on 17 July 2001. The answer to it does not depend upon matters of evidence not already before the Court.

22   The BP companies say that there is no justification for any further delay, and consequently that orders should now be made setting aside the ex parte orders for extension of time made on 4 September 2000, insofar as they affect the BP companies.

23   The plaintiffs urge the Court to do no more than indicate that it proposes to make such orders after the entirety of the dispute between the parties has been concluded. They advance three reasons for this submission.

24   First, they say this would have happened if the ‘three stages’ had been heard consecutively, and was envisaged when the three stage procedure was originally discussed. In my view this contention, if true, is not a good reason for deferring the making of the proposed orders. It is not suggested that any estoppel has arisen against the BP companies preventing them from seeking orders at this stage, or that the plaintiffs have been given an inadequate opportunity to address relevant issues, or that unfairness to the plaintiffs of any other kind would arise if the orders were made.

25   Secondly, the plaintiffs say that if orders are made now, they will be driven to make a decision as to whether to seek leave to appeal, in circumstances where the ultimate outcome of the dispute is unknown. That, it seems to me, is the common situation when interlocutory orders are made.

26   Thirdly, the plaintiffs say that it would be more appropriate, if there were to be appeals, for all appeals arising from the issues between the parties to be dealt with at the same time. That desirable outcome would be defeated were the Court to make orders at this stage. However, if the remainder of this proceeding can be resolved expeditiously, it will be possible for the parties to link all relevant appeals so that the Court of Appeal can consider them concurrently. Moreover, in my view it is probable that the principal issues likely to result in appeal will all have been dealt with upon my handing down the present reasons for judgment.

27   Having now had the benefit of all submissions on the point, I am convinced that it is appropriate to make the orders sought by the BP companies.

(b) What will be the status of the plaintiffs' original application once the ex parte orders have been set aside?


28   This question is before the Court because the plaintiffs seek directions as to the future conduct of the proceeding. The answer to it does not depend on matters of evidence. It is therefore appropriate that it be dealt with in these reasons for judgment.

29   The BP companies have applied for orders setting aside the ex parte orders made on 4 September 2000, insofar as they are affected by the ex parte orders. I have decided that the orders sought by the BP companies should be made. The ground upon which I shall make those orders is a procedural ground, namely that the original orders should not have been made until the BP companies were given the opportunity to be heard. It is not a ground relating to the substance or merits of the plaintiffs' application for an extension of time.

30   My decision, therefore, does not mean that the plaintiffs have no substantial entitlement to the kind of relief that they originally sought. My reasons for judgment of 17 July 2001 provided no basis for an order dismissing the proceeding automatically, and consequently the proceeding will remain in existence after the ex parte orders have been set aside. As I have noted, the prayers for relief in the originating process need to be amended to make it clear that the plaintiffs, having already secured an extension of time with respect to other creditors, now seek an equivalent extension of time only with respect to the BP companies.

31   The plaintiffs' application for directions for the final hearing of the proceeding is an appropriate application. But any further steps in the proceeding must be consistent with the rights of the BP companies. My answers to the other questions currently before the Court have led me to the conclusion, which I shall explain, that the plaintiffs' attempt to secure an extension of time as against the BP companies is doomed to fail. That being so, I do not intend to set the proceeding down for final hearing or make any directions to prepare the case for hearing.

(c) Should the Court, at this stage, order the plaintiff to pay the costs of the BP companies with respect to their application?


32   Just as the question whether orders should be made to set aside the ex parte orders is squarely before the Court, so is the question of the costs of the application to set aside those orders before the Court, without any further evidence being necessary for the answer to that question.

33   The BP companies contend that, since they were successful in their application to set aside the ex parte orders, they are entitled to an order that the plaintiffs pay their costs of the application. They point out that as they are not parties to the proceeding, there can be no justification for the Court refusing to deal with their application for costs or delaying the matter.

34   The plaintiffs say that the Court should defer making any order as to costs in relation to the application by the BP companies, for six reasons.

35   First, they say that the substance of the dispute between them and the BP companies has yet to be determined. I am not sure that this will remain true, in light of the present reasons for judgment. However, if it were so, there would still be a powerful case for me to decide the question of costs now, since the only application involving BP companies has now been decided.

36   Secondly, the plaintiffs say that it is only on determination of the dispute between them and the BP companies that any ‘event’ which costs could follow can be identified. This is incorrect, in my opinion. The relevant ‘event’ is my decision that the application by the BP companies should succeed and that orders should be made setting aside the ex parte orders of 4 September 2000, insofar as they affect the BP companies.

37   Thirdly, the plaintiffs say that while they and the BP companies agreed that the matter be heard in ‘stages’, it was envisaged that the stages would be heard consecutively in the one hearing. I am not sure that this is correct in fact, but assuming that an agreement was made to this effect, such an agreement cannot be a ground for deferring the question of costs in light of what has subsequently happened - namely, that the BP companies have succeeded on their application.

38   Fourthly, the plaintiff says there was confusion as to the ambit of ‘Stage 1’, and that substantial time in the preparation and hearing of Stage 1 was devoted to issues having relevance to Stages 2 and 3. In those circumstances, say the plaintiffs, from a practical viewpoint, it will be virtually impossible to dissect out of the work done such costs as are truly referable to ‘Stage 1’. No such difficulty would be presented if costs were considered at the end of the proceeding. But the order sought by the BP companies is not, as I understand it, an order for the costs of Stage 1. There never was any order made for the separate determination of questions. It is an order that the plaintiffs pay the costs of the BP companies with respect to their application. Although it is a matter for a costs assessor once my order for costs has been made, I would expect the BP companies to be able to recover the reasonable costs of preparing their application without any necessary limit as to Stage 1.

39   Fifthly, the plaintiffs say that the application by the BP companies has not yet been disposed of. In the notice of motion filed by BP Holdings on 4 October 2000, the applicant sought an order that it be joined as a defendant as well as orders setting aside the ex parte orders. The joinder application has not been dealt with. However, at the hearing of the application by the BP companies, an order for joinder was not sought and the applicants pressed only for orders setting aside the ex parte orders. The application for relief, as pursued at the hearing, has been fully dealt with. It is therefore appropriate to make an order for costs with respect to that application.

40   Sixthly, the plaintiffs refer to some submissions by the BP companies, which suggest that the BP companies will not appear on any further hearing of the proceeding if they are not joined as defendants. The plaintiffs say that the Court should take into account, as considerations going against an order for costs in favour of the BP companies, the fact that the BP companies, at great expense to the plaintiffs, were successful in seeking orders setting aside the ex parte orders upon the basis that they were entitled to notice of the application and had a right to be heard; and yet, having established that principle, they now do not intend to take up the opportunity to appear at a subsequent hearing.

41   In my opinion, the BP companies were entitled to object to the making of ex parte orders on the ground that there has been a denial of natural justice, and having succeeded in doing so, to then draw back from the proceeding and take whatever advantage is available to them with respect to the limitation period. There is no inconsistency in their stand; nor does their stand provide any basis for denying their application for costs.

42   In summary, my opinion is that the BP companies are entitled to an order that the plaintiffs pay their costs with respect to their application, and there is no ground for delaying the making of that order.

43   The plaintiffs made the rather adventurous submission that if the BP companies do not take up the opportunity to appear at the final hearing, the Court should seriously consider ordering them to pay the costs of their own application, on the basis that it has been from a practical point of view a complete and utter waste of time. This submission assumes that the only legitimate purpose for the application by the BP companies was to ensure that they would be heard before an extension of time was granted.

44 It is transparent, however, that the BP companies are pursuing a strategy designed to undermine what was done by the plaintiffs within the three-year time limit set by s 588FF (3), so the plaintiffs will be out of time and therefore unable to take any further steps towards recovery from them. I cannot say that that is an illegitimate strategy to pursue. Given that strategy, the application by the BP companies was far from being a waste of time. These considerations would not influence me towards making an order for costs against the BP companies, or towards denying them an order for costs in their favour.

(d) Is there an absolute requirement for the BP companies to be joined as parties to the proceeding, before the final hearing?


45   In their written submissions the plaintiffs conceded that the question whether it is necessary to join the BP companies as parties to the proceeding was before the Court and could be decided. It has been fully argued. In my opinion the answer does not depend upon any evidence beyond what is already before the Court.

46 The ex parte orders made on 4 September 2000 were not orders targeting the position of any particular creditor. They were orders granting an extension of time to the plaintiffs to bring actions under s 588FF against any creditor of the DML companies. In July 2001 I held, having regard to some evidence that included correspondence between the plaintiffs and BP Holdings, that the BP companies had an interest in the outcome of the application of 4 September 2000, and a legitimate expectation that they would have the opportunity to make submissions before the Court's orders were made. I did not take the view that it was necessary that they be joined as parties before the orders of 4 September 2000 were made, but only that they be notified of the application and given the opportunity to appear and make submissions.

47   The position has now changed. Once I have made orders to set aside the ex parte orders insofar as they affect the BP companies, the ex parte orders will no longer apply with respect to any recovery proceedings against the BP companies. Thereafter, the relief sought by the plaintiffs in the present proceeding will become, in effect, relief by way of orders expanding the scope of the existing extension of time orders so that they come to apply to the BP companies. Thus, the principal relief sought in the proceeding will come to be relief targeting the position of the BP companies. That would become plain if the plaintiffs sought to amend the originating process consequent upon my orders setting aside the extension of time orders as regards the BP companies. An application to amend in this manner would be necessary, as I have already observed, if the case were to proceed further.

48   The question is whether the plaintiffs may proceed to a final hearing at which such relief, specifically affecting the BP companies, is sought, without the BP companies being parties to the proceeding. The issue is important in principle, and has significant practical implications. Generally speaking, unless a person has been joined as a party to a proceeding, that person has no right to adduce evidence, cross-examine, appeal, obtain discovery, issue subpoenas, or seek costs in the proceeding.

49 The joinder of parties is dealt with in Part 8 rule 8 (1) of the Supreme Court Rules, which is in the following terms:
‘Where a person who is not a party-
(a) ought to have been joined as a party; or
(b) is a person whose joinder as a party is necessary to ensure that all matters in dispute in the proceedings may be effectually and completely determined and adjudicated upon,
the Court, on application by him or by any party or of its own motion, may order that he be added as a party and make orders for the further conduct of the proceedings.’

50   The rule is closely similar to rules of Court applying in other British Commonwealth countries, and so decisions in those other jurisdictions are generally applicable here. The wording of the rule does not give any direct guidance as to when the rights or interests of a person are so much at stake in the proceeding that the person ought to be joined as a party. One must turn to the case law for assistance.

51   Some guidance was given by Viscount Maugham in London Passenger Transport Board v Mosscrop [1942] AC 332. That was a case where the only orders sought were declaratory in nature. His Lordship said (at 445):
‘… the persons really interested were not before the Court, for not a single member of the Transport Union was, nor was the Union itself, joined as a defendant in the action. It is true that in their absence they were not strictly bound by the declaration, but the courts have always recognised that persons interested are or may be indirectly prejudiced by a declaration made by the Court in their absence, and that except in very special circumstances, all persons interested should be made parties … .’

52   The notion that persons ‘interested’ or ‘really interested’ should be joined as parties to the proceeding was refined by the Privy Council in Pegang Mining Co Ltd v Choong Sam (1969) 2 MLJ 52. In 1931 an agreement relating to tin mining rights in Malaya was made between three parties, referred to in the judgment as ‘the company’, ‘the sub-lessees’ and ‘the sub-sub-lessee’. The company held mining leases granted by the State, and had sub-let to the sub-lessees, but the company was dissatisfied with the manner in which the sub-lessees were working the mines. The 1931 agreement provided that the sub-lessees would grant sub-sub-leases to the sub-sub-lessee, who was already mining adjacent parcels of land. The agreement contemplated the future acquisition by the company of mining leases over other parcels of land in the vicinity, which were to become subject to the same arrangements.

53   In 1959 the company acquired mining leases over new parcels of land and the sub-sub-lessee claimed that the company was obliged under the 1931 agreement to grant sub-leases to the sub-lessee, who was in turn obliged to grant sub-sub-leases to the sub-sub-lessee. When the company refused to do so, the sub-sub-lessee brought a proceeding against the company and the sub-lessees for specific performance of the 1931 agreement. Although they were defendants, the sub-lessees supported the plaintiff sub-sub-lessee at the hearing. The Court at first instance held that the 1931 agreement did not impose any obligation on the company to grant sub-leases of the disputed parcels of land, or upon the sub-lessees to grant sub-sub-leases of that land.

54   At the time of the action the sub-sub-lessee had entered into a contract with Choong Sam (‘the contractor’) by which the contractor undertook to work the mines on the land subject to existing sub-sub-leases, for a fee of 85.5% of the proceeds of sale. The contract obliged the sub-sub-lessee to use her best endeavours to obtain mining rights over other parcels of land contemplated by the 1931 agreement and to grant the contractor the right to work mines on the new land. The contractor and the sub-sub-lessee agreed that the contractor would be solely responsible for the costs of the litigation and would have the final decision whether or not to appeal.

55   The sub-sub-lessee appealed but subsequently, in breach of her agreement with the contractor, she entered into an agreement with the company whereby in consideration of a lump sum payment she undertook to withdraw the appeal, and acknowledged that the company's obligations to her had been fully and completely discharged. The contractor applied by notice of motion for an order that he be substituted for the sub-sub-lessee as appellant. The Federal Court of Malaysia agreed to do so and an appeal, by leave, by the company to the Privy Council was dismissed.

56   Lord Diplock, delivering the advice of the Board, referred to the proposition that a party may be added if its legal interests will be affected by the judgment in the action but not if its commercial interests only would be affected (at 55-6). He said (at 56):
‘The cases illustrate the great variety of circumstances in which it may be sought to join an additional party to an existing action. In their Lordships' view one of the principal objects of the rule is to enable the Court to prevent injustice being done to a person whose rights will be affected by its judgment by proceeding to adjudicate upon the matter in dispute in the action without his being given an opportunity of being heard. To achieve this object calls for a flexibility of approach which makes it undesirable in the present case, in which the facts are unique, to attempt to lay down any general proposition which could be applicable to all cases. … While their Lordships agree that the mere fact that a person is likely to be better off financially if a case is decided one way rather than another is not a sufficient ground to entitle him to be added as a party, they do not find the dichotomy between ‘legal’ and ‘commercial’ interests helpful. A better way of expressing the test is: will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?’

57   In that case the contractor's rights against the sub-sub-lessee under the contract between them would be directly affected by the dismissal of the sub-sub-lessee's appeal. In the opinion of the Privy Council, the contractor was entitled to be joined as a party even though he had a mere licence to enter and work for minerals, rather than a leasehold interest.

58   Lord Diplock's test was applied by the Full Federal Court in News Ltd v Australian Rugby Football League Ltd (1986) 64 FCR 410. In that case proceedings were brought by News Ltd and associated companies (‘Super League’) against the Australian Rugby Football League (ARL) and the NSW Rugby League (‘the League’) and others. The ARL and the League had conducted the rugby league competition in New South Wales for many years, and the clubs which participated in the competition had signed a competition contract for 1995 and a commitment agreement pledging loyalty for five years. Super League wished to establish a rival competition and in 1995, they arranged for a substantial number of top players and coaches to sign contracts with new entities associated with some of the clubs (‘the rebel clubs’).

59 By their proceeding, Super League alleged that the commitment agreements should be set aside under ss 45 and 46 of the Trade Practices Act 1974 (Cth). The ARL, the League and the clubs still loyal to the League (‘the loyal clubs’) cross-claimed against the rebel clubs for breach of the rebel clubs' contractual duties under their contracts to participate in the 1995 competition and under their commitment agreements, and for breach of the rebel clubs' alleged fiduciary duties in relation to transfer of club assets to the Super League venture. They also cross-claimed against Super League for inducing the rebel clubs' breaches of their contractual and fiduciary duties.

60   The players and coaches who had signed up with the rebel clubs were not parties to the proceeding. However, the solicitors for the ARL wrote letters to them, advising them of the orders that the ARL was seeking by its cross-claim in the proceeding, and suggesting that they should seek their own legal advice on the implications of any of those orders. After the judge at first instance made orders in favour of ARL and the League, Super League appealed, arguing (inter alia) that since the players and coaches had not been joined as parties, the cross-claim was improperly constituted and the orders should be set aside.

61   The Full Federal Court referred with approval to Lord Diplock's test in the Pegang Mining case and said (at 525):
‘The test involves matters of degree, and ultimately judgment, having regard to the practical realities of the case, and the nature and value of the rights and liabilities of the third party which might be directly affected. The requirement that a third party's rights against, or liability to, any party to the proceeding be directly affected is an important qualification that recognises that many orders of a court are likely to affect other people to a greater or lesser extent. … Where, before trial, a question arises whether a necessary party has been joined, attention should be directed to the orders sought in the proceeding. It is the effect of the orders upon the third party that must be determined. The test is not whether the conduct of the third party is raised in the pleadings between the existing parties, or whether the third party is a party to a contract, the meaning or effect of which is pleaded as a matter relevant to the ascertainment of the rights between those parties.’

62   The Full Court held that insofar as the remedies sought at the trial had been confined to damages for unlawful inducement of breaches of players' and coaches' contracts with the ARL and the League, the players and coaches who had signed up with the rebel clubs were not necessary parties who ought to have been joined. This was because an award of damages against Super League would not directly affect the rights and liabilities of the players and coaches. However, insofar as the relief sought in the cross-claim included injunctive relief and declarations relating to the Super League venture with the rebel clubs, the position was different. In particular, the trial judge had made a declaration that the Super League companies held in trust for the League all their rights pursuant to any contracts which any of them had with any Super League player or coach; and had made injunctive orders to require the Super League to notify every player and coach aligned with the rebel clubs that Super League would require them to return to the clubs for which they had previously worked, and to restrain the Super League from paying players or coaches who failed to do so. The orders affected the players' and coaches' rights against, or liabilities to, their Super League employers, restricting their freedom to choose the employer for whom they would work. The orders affected the obligations and rights of the players and coaches in a substantial and direct way (at 527).

63   As to the effect of the defendant giving the players and coaches notice of the proceeding, their Honours said (at 526):
‘In our opinion the notice given to the players before trial does not, and could not, extend the jurisdiction of the Court to make orders which offend the test stated in Pegang Mining . Absent an application for joinder by a defendant, or by a third party who claims to be directly affected by the proposed orders, it is for the party prosecuting the proceedings to choose who are necessary parties to enable the Court to make the orders sought. Generally speaking, to permit that party to transfer to others who might be affected by the outcome of the proceedings the responsibility of deciding whether or not they should apply to be joined could be productive of uncertainty and inconvenience.’

64   The Full Federal Court’s decision in the Super League case was followed by the Court of Appeal of New South Wales in Wentworth v Wentworth (executor of the estate of the Late GN Wentworth) [2000] NSWCA 350. The appellant was the plaintiff in a proceeding under the Family Provision Act 1982 (NSW) against the first respondent. The Court ordered the first respondent to pay the appellant's costs of that proceeding, subject to some exceptions, and the appellant lodged a bill of costs for taxation. During the course of the taxation of the bill of costs, the appellant invited the taxing officer to disqualify himself on the ground that his conduct gave rise to a reasonable apprehension of bias. He refused to do so. Subsequently the appellant sought an order setting aside the taxing officer's determination. Santow J made the order, holding (on 6 February 1998) that the taxing officer ought to have disqualified himself.

65 At the time of that decision, no order was sought against the taxing officer, and he was not a party to the proceeding, although he had been sent copies of the transcript and the relevant applications. The appellant sought an order for costs against the taxing officer, who was later joined to the proceeding for the purpose of hearing the application for costs against him. Santow J declined to make that order and the appellant appealed to the Court of Appeal, arguing that the Court had the power to make a costs order against the taxing officer under Part 52A rule 4 (5) (b) of the Supreme Court Rules.

66   The Court of Appeal held that there was no basis for Santow J to make a costs order against the taxing officer, because the taxing officer had not been a party to the proceeding at the time when the decision as to his disqualification had been made. Heydon JA (with whom Davies AJA agreed) referred to the Full Federal Court's statement that where a question of joinder of parties arises before trial, attention should be directed to the orders sought in the proceeding. He pointed out (at paragraph 149) that if Santow J had made costs orders against the taxing officer, he would have had standing to seek leave to appeal against them and to contend that the cost orders lacked any basis, on the ground that he was not party to the processes which led to Santow J's findings of 6 February 1998, on which any costs order would have depended.

67   Heydon JA held, again applying the Super League case, that the taxing officer could also have argued that the cost orders were defective because of his non-joinder, which had not been cured by communications from time to time advising him of the proceeding. He found that Part 52A rule 4 (5) (e) did not justify or mandate the non-joinder of the taxing officer, and did not avert the consequences which otherwise flowed from that non-joinder (at paragraph 166).

68 It is interesting that in Heydon JA's opinion, there was no requirement that the taxing officer be joined as a party to the proceeding under Part 8 rule 8 (1) prior to determination of the question whether he should have disqualified himself for reasonable apprehension of bias, because at that stage no orders were sought against the taxing officer (at paragraph 148). Clearly the taxing officer's interests (such as his interest in protecting his reputation) were at stake at that point, but Heydon JA's reasoning reaffirms the proposition, stated by Lord Diplock in the Pegang Mining case, that the question is not whether a person's commercial or other interests would be affected by the orders sought in the proceeding, but whether the orders would directly affect the rights or obligations of the person. The taxing officer had completed his determination before the application was made to set his decision aside, and at that stage an order setting the decision aside would not affect his rights or obligations with respect to future conduct of the taxation or otherwise.

69 In the present case, once I set aside the ex parte orders, it will be necessary for the plaintiffs to seek orders for extension of time specifically directed to the position of the BP companies. The BP companies will have the right to rely on the time limit in s 588FF (3) by way of defence to any action by the plaintiffs under s 588FF, unless the plaintiffs are successful. In my opinion, this right is analogous to the contractual rights of the contractor in the Pegang Mining case, which would have been directly affected by the proposed orders in that proceedings, and the rights of the players and coaches in the Super League case, which would have been directly affected by some of the orders proposed in the cross-claim in that case. Indeed, this is a stronger case than those cases, because the orders which the plaintiffs would seek could not be articulated except by reference to the position of the BP companies. The BP companies are in a position analogous to the position of the taxing officer against whom an order for costs was sought in the Wentworth case, except that here the BP companies are seeking to preserve their existing position against orders that would take away their rights, rather than to protect themselves against the imposition of a liability by the proposed orders.

70 It can be said that the right of the BP companies is conditional, the condition being that the Court does not extend the time under s 588FF (3) (as to such a conditional right, see Oates v Attorney-General (Cth) (1998) 156 ALR 1). However, if there is a condition, it is akin to a condition subsequent rather than a condition precedent; the right of the BP companies to rely on the time limit may be defeasible (if a timely application for extension is made) but presently in existence.

71   In my judgment of July 2001 I took the view that the BP companies had an interest and a legitimate expectation sufficient to warrant that they should have been given notified before my orders of 4 September 2000 were made, but I did not say that they ought to have been joined as parties to the proceeding at that stage. If one examines the orders sought and made on 4 September 2000, as required by the approach of the Full Court in the Super League case, they affected the interests of all creditors including the BP companies, but they did not directly affect the rights of the BP companies. Now, however, where the only substantive relief that could be sought would be an order for extension of time with respect to the BP companies alone, the orders would in terms affect their position and their rights. At this stage, they have more than a legitimate expectation to be notified of the application for relief. The relief, being directed against them, could not be granted unless they were joined as parties.

72   The Pegang Mining , Super League and Wentworth cases are consistent, in my view, with some decisions considered in my reasons for judgment of 17 July 2001, namely Re Eastern Cleaning Services Pty Ltd (1978) 2 NSWLR 278 and Dahozo Pty Ltd v Oz-US Film Productions Pty Ltd (1997) 24 ACSR 739. The plaintiffs sought to rely on Kioa v West (1995) 159 CLR 550, especially at 582 (per Mason J), for the proposition that something less than joinder would be sufficient, but in my opinion that case addresses an administrative process in quite different circumstances from the present case.

73   In their written submissions, the BP companies reviewed the authorities to support their contention that the plaintiffs could not continue unless the BP companies were joined as parties to the proceeding, and then they said (paragraph 23 of their submission dated 31 July 2001):
‘The exceptional jurisdiction available to the Court to make orders against non-parties is one that must necessarily be sparingly exercised. The jurisdiction is one which is beneficial and analogous to equitable relief and, as such, ought not be used to support unreasonable and inequitable applications.’

74   They cited Hospital Products Ltd v United States Surgical Corporation (1985) 156 CLR 41 at 149, per Dawson J, in support of this proposition, but in oral argument they conceded on reflection, that the Hospital Products case was irrelevant. Nevertheless counsel for the plaintiffs seized upon this proposition and urged the Court to bring the proceeding to a final hearing without joining the BP companies as parties, on the basis that the Court would be able to invoke the ‘exceptional jurisdiction’ to make orders against the BP companies after the case had been finally heard. Counsel’s research has not put much flesh on the bones of the ‘exceptional jurisdiction’. The inherent power of the Court may permit it to grant leave to a non-party to intervene: see Fernance v Nominal Defendant (1989) 17 NSWLR 710, at 718, where Gleeson CJ set out a quotation from the unreported judgment of McLelland J in Wenham v General Credits Ltd (Supreme Court of New South Wales, 16 December 1988, unreported). The Court has jurisdiction to make an order for costs against a non-party in certain circumstances, under Part 52A rule 4 (5) (a provision discussed in the Wentworth case, para 162ff). And the inherent jurisdiction may well permit orders of other kinds to be made against a non-party in exceptional circumstances.

75   However, counsel have not referred me to any case in which an exceptional jurisdiction has been asserted over a non-party who clearly would have an absolute defence to any claim for relief if he or she were joined as a party to the proceeding. In my opinion it would be an abuse of the inherent jurisdiction for the Court to use it to sidestep a limitation defence. In the present case, the assertion of exceptional jurisdiction over the BP companies in the manner envisaged by the plaintiffs' submission could only have that purpose and effect.

76   There is, therefore, no basis for the Court to exercise jurisdiction over the BP companies, by making an order for extension of time directly affecting them in a proceeding to which they are not parties.

(e) If the answer to question (d) is in the affirmative, but neither party applies to join the BP companies as parties, should the Court do so of its own motion?


77   This question is before the Court because I raised the possibility of the Court, of its own motion, joining the BP companies as defendants in the course of argument. Both sides have had an opportunity to address the question. In my opinion the evidence before the Court is adequate for the purpose of making a decision.

78 Part 8 rule 8 (1) expressly confers on the Court the power to order that a person who ought to have been joined as a party be added as a party to the proceeding. I raised the possibility that I might do so, in order to break what seemed to be a log jam. Neither side was prepared to make any application for joinder of the BP companies, and yet it seemed to me plain that the plaintiffs could not hope to obtain relief unless the BP companies were parties to the proceeding, and that I had no chance of determining the principal issues in dispute between the parties unless the issue of joinder could be advanced in some way.

79   After I raised the possibility of the Court acting on its own motion, I received further submissions which, happily, have addressed all of the issues necessary for the resolution of the dispute. I therefore intend to address the issues, which (as I shall explain) lead me to the conclusion that the proceeding should be dismissed. In the circumstances, it would be pointless for the Court to join the BP companies as defendants, because the proceeding against them is doomed to fail.

(f) Is there any impediment to the joinder of the BP companies at this stage of the proceeding?


80   Once again, this question is before the Court because I have raised the possibility that the Court might make orders for the joinder of the BP companies of its own motion. It has been fully addressed in submissions. I do not believe there is any insufficiency of evidence that would prevent the question from being answered.

81 In my opinion, there is an insurmountable impediment to the joinder of the BP companies at this stage of the proceeding. The plaintiffs were appointed voluntary administrators pursuant to resolutions of the respective boards of the two DML companies on 24 October 1997. Their reports to creditors of the companies recommended that the companies be placed in liquidation, and the creditors accepted those recommendations and resolved under s 439C (c) that the respective companies be wound up, in November and December 1997 respectively. The plaintiffs became the liquidators of the DML companies. These facts are summarised in paragraph 12 of my reasons for judgment of 17 July 2001. They present a problem for the plaintiffs because of the time limit in s 588FF (3) of the Corporations Act.

82 Section 588FF (3) is in the following terms:
‘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.’

83   The ‘relation-back day’ is defined in s 9 of the Act to mean, relevantly, the day on which the winding up of the two DML companies is taken because of Division 1A of Part 5.6 of the Act to have begun.

84   Section 513B, which is part of Division 1A of Part 5.6, states (so far as relevant):
‘Where a company resolves by special resolution that it be wound up voluntarily, the winding up is taken to have begun or commenced: …
(b) if, immediately before the resolution was passed, the company was under administration - on the section 513C day in relation to the administration … .’

85   In the present case the DML companies did not in fact resolve by special resolution that they be wound up. However, by virtue of the deeming effect of s 446A, each company is taken to have passed a special resolution that the company be wound up voluntarily at the time when their creditors resolved under s 439C (c) that the company be wound up.

86   Section 513C states (so far as relevant):
‘The section 513C day in relation to the administration of a company is: …
(b) otherwise – the day on which the administration began.’

87 Thus, under s 513B the winding up of each of the two companies is taken to have commenced on their respective 513C days, in each case 24 October 1997, and under the definition in s 9 this is the relation-back day for each company. Therefore the three-year time limit set by s 588FF (3) expired on 24 October 2000.

88 The application for an extension of time which led to my orders of 4 September 2000 was, of course, an application made within three years after the relation-back day. In my reasons for judgment of 17 July 2001 I held (paragraphs 26-38) that an application for an extension of time under s 588FF (3) could be a general application not identifying any particular transaction or any particular creditor. The plaintiffs' application is a timely application of that kind, and as I have said above, the application will remain before the Court after I set aside the ex parte orders.

89 The originating process by which the plaintiffs’ application has been brought would need to be amended so as to make it clear that the extension of time is sought only in respect of the BP companies. Such an amendment is authorised by Part 20 rule 1 (1) of the Supreme Court Rules. The amendment would not substitute a new cause of action, but only limit and render more specific the existing ‘cause of action’ for an extension of time. Therefore the amendment would fall outside Part 20 rule 1 (3A), which stipulates that if the amendment would substitute a cause of action arising after the commencement of the proceeding, the date of commencement of the proceeding, so far as concerns that new cause of action, is the date on which the amendment is made. Since rule 1 (3A) would not apply, the amendment would fall within the general proposition that in the absence of any contrary order or provision, an amendment is regarded as taking effect from the date of the original pleading, rather than from the date that the amendment is actually made: see Ritchie's Supreme Court Procedure (NSW) , paragraph [20.1.4] and cases there cited. If, contrary to my view, the amendment were thought to involve a new cause of action, the amended claim to relief would arise out of the same facts as the claim to relief originally made. That being so, the Court would be authorised by Part 20 rule 4 (5) to make an order granting leave for the amendment to be made notwithstanding the expiration of the relevant limitation period, and the amendment would relate back to the date of the filing of the originating process (see rules 4 (1) and 4 (5A)).

90   The problem for the plaintiffs is that their application, even if such an amendment were to be made, is an application to which the BP companies are not parties. For the reasons I have given, the Court ought not make orders on the plaintiffs' application without first joining the BP companies as parties. If orders were made without joinder, they would be liable to be set aside, on the authority of the Pegang Mining , Super League and Wentworth cases. Consequently, absent joinder of the BP companies, this is not a case where the Court is able to do what s 588FF (3) (b) envisages, namely to order a longer period than three years from the relation-back day ‘on’ the plaintiff's application made within those three years.

91 If the plaintiffs' application were amended to join the BP companies, the application would be out of time as against them. This is because the order for joinder of the BP companies would be made under Part 8 rule 8 of the Supreme Court Rules, and would therefore be affected by Part 8 rule 11 (3), which provides:

‘Where in any proceedings a party is added otherwise than pursuant to an order under rule 10 or Part 20 rule 4 (3) [neither of which is relevant here], the date of commencement of the proceedings so far as concerns him shall be -
(a) where he is added as a defendant - the date on which the amendment adding him as a defendant is made or the date of entry of his appearance or the date of filing his defence, whichever is earliest;
(b) otherwise - the date on which the amendment adding him as a party is made.’

92 It may be contended that this rule is a State law inconsistent with a Commonwealth statutory provision, and is therefore rendered invalid or inoperative under s 109 of the Constitution. In my view, any such argument would fail. Section 588FF (3) refers to an ‘application’. The meaning of that word, not defined by the Corporations Act, is left to be spelled out by the procedural rules of the courts in which such an application may be brought. Thus, it is for the rules of Court to stipulate that the application is by originating process, and to prescribe the form of the application. Equally, it is for the rules of Court to stipulate when a person may be joined as a party to such an application, and with what temporal consequences. Therefore there is no direct inconsistency between Part 8 rule 11 (3) and s 588FF (3). Nor does the Corporations Act exhibit an intention on the part of the Commonwealth legislature to cover any relevant field. This is because s 5E (1) of the Act declares that the Corporations legislation is not intended to exclude or limit the concurrent operation of any law of a State - including, one may infer, a law with respect to Court procedure and the joinder of parties.

93 The plaintiffs submitted that the joinder of the BP companies would be authorised by Part 20 rules 1 and 2, which permit the Court to order that any document in the proceeding be amended, and require that all necessary amendments be made for the purpose of determining the real questions raised by the proceeding, or to correct any defect or error in the proceeding. Amendments under Part 20 are not governed by Part 8 rule 11 (3), so the plaintiffs submit, even where the amendment has the effect of joining a person as party to the proceeding. Where the Court grants leave for an amendment to be made to add a new cause of action arising out of the same facts, the amendment relates back to the date of filing the originating process unless the Court otherwise orders: Part 20 rule 4 (1), (5) and (5A); compare Part 20 rule 1 (3A).

94   In my opinion, this submission is contrary to the authorities. In Wenham v General Credits Ltd (Supreme Court of New South Wales, 16 December 1988, unreported), McLelland J set out the relevant law as follows:
‘In my opinion, except to the limited extent permitted by Pt 20 r 4 (3), (which has no present application), and subject to the question of the existence of any inherent power in the Court to grant leave to a non-party to intervene (which has no present relevance), the Court's power to add new parties must be exercised within the constraints, and subject to the provisions, of Pt 8 of the Supreme Court Rules. The rules in Pt 8 permitting the addition of new parties are r 8 and r 10. Pt 8 r 11 (3) provides, subject to a presently immaterial qualification, that ‘where a party is added pursuant to an order under r 8 or r 10, the date of commencement of the proceedings so far as concerns him shall be the date of filing of the originating process amended so as to add him as a party or, where an amending originating process is not filed, the date of the amendment adding him as a party’ [the rule was subsequently changed, to provide that where a party is added under rule 10, the order relates back to the date of filing the originating process]. The position would probably be the same even without express provision to this effect: see Ketteman v Hansel Properties Ltd [1987] AC 189. Accordingly the amendment of an originating process by the addition of a party pursuant to Pt 8 does not relate back to the date of commencement of the proceedings for the purpose of a statute of limitations, unlike an amendment under Pt 20: as to which see Baldry v Jackson [1976] 2 NSWLR 415; McGee v Yeomans [1977] 1 NSWLR 273 and Proctor v Jetway Aviation Pty Ltd [1984] 1 NSWLR 166.’

95   This passage was held to be correct by the Court of Appeal of New South Wales in Fernance v Nominal Defendant (1989) 17 NSWLR 710, at 718ff. In that case the Court declined to grant leave to a plaintiff to amend his statement of claim to effect the joinder of a defendant after the expiration of the relevant limitation period, even though an order had previously been made granting leave for the joinder of that person as a defendant. The Court approved two decisions by Masters, in which it had been held that there was a settled rule of practice that leave to add a defendant would not be granted after the expiry of the relevant period of limitation ( Stout v R A Wenham Builders Pty Ltd; Michilis Bros Pty Ltd (Third Party) [1980] 1 NSWLR 426) and that the Court will refuse to permit an amendment which would be futile because of an unanswerable defence under a relevant limitation statute ( Drinan v Hickey (1982) 11 NSWLR 744).

96   In Bridge Shipping Pty Ltd v Grand Shipping SA (1991) 173 CLR 231, 236, Dawson J, speaking of the rules of the Supreme Court of Victoria (which do not appear to be materially different from the rules of this Court), summarised the general position emerging from the case law as follows:
‘At one time it was thought that the substitution or addition of a defendant by amendment related back to the commencement of the proceedings so that, if the proceedings were commenced before the expiry of the limitation period, the amendment would defeat the limitation period even though the amendment was made after the expiry of that period. Upon that view, the reason for not allowing the amendment was that it would deprive the defendant substituted or added of the benefit of the limitation period: see Mabro v Eagle, Star and British Dominions Insurance Co Ltd [1932] 1 KB 485; cf Davies v Elsby Bros Ltd [1961] 1 WLR 170; [1960] 3 All ER 672. The accepted view now is - particularly having regard to the present form of the relevant rule … - that the substitution or addition of a defendant by amendment does not relate back to the commencement of proceedings but takes effect from the time of the amendment. That means that the amendment cannot prejudice any existing rights under a statute of limitations (or any other limitation period). Accordingly, leave to amend to substitute or add a defendant who has a good defence under a period of limitation will generally be refused as serving no useful purpose: Liff v Peasley [1980] 1 WLR 781; [1980] 1 All ER 623; Ketteman v Hansel Properties Ltd [1987] AC 189.’


97   In my respectful opinion, that passage accurately reflects the effect of the rules of this Court in light of the case law. I note, in particular, his Honour's reference to a statute of limitations ‘or any other limitation period’.

98 In my opinion, if the BP companies were to be joined as parties to the proceeding, the date of commencement of the proceeding so far as concerns them would be the date of the amendment adding them as parties. Consequently, the plaintiffs' application for an extension of time to permit them to take voidable preference proceedings against the BP companies would be taken to have been made at the time of the order for joinder, and therefore outside the time limit prescribed by s 588FF (3). The Court would not make an order for the joinder of the BP companies in those circumstances, because such an order would be futile.

The effect of the introduction of the Corporations Act


99 I have referred to s 588FF of the new Corporations Act rather than to the corresponding provision of the old Corporations Law, even though most of the events relevant to this case occurred while the Corporations Law was still in force. As it happens, s 588FF (3), and the definitions relevant to it, are in identical form in the old and new statutes. Nevertheless, a process of analysis must be followed before one can decide whether the replacement of the Corporations Law with the Corporations Act makes any substantive difference in this case.

100 The Corporations Act commenced, relevantly, on 15 July 2001. Typically new legislation makes transitional provisions having the effect that things done and proceedings commenced before the date of commencement continue to be governed by the old law. The new Corporations legislation has taken a different approach.

101   The combined effect of various provisions is that, broadly speaking, things done and proceedings commenced before 15 July 2001 are taken to have been done or commenced as if the new Corporations legislation were in place at all times. The following provisions achieve this result:
(a) Chapter 10 of the Corporations Act contains extensive transitional provisions, the object of which (according to s 1370) is to provide for a smooth transition from the old to the new statutory regime, so that everyone is put in the same position immediately after the commencement of the new law as they would have been in if the old law had been valid Commonwealth legislation and the new law were a continuation of it.
(b) Section 3 of the Corporations (Repeals, Consequentials and Transitionals) Act 2001 (Cth), which also commenced on 15 July 2001, repeals the whole of the Corporations Act 1989 (Cth), s 82 of which had set out the text of the former Corporations Law. Section 6 provides that where a person acquires a right or incurs a liability under Chapter 10 of the Corporations Act in substitution for a pre-commencement right or liability, the pre-commencement right or liability is cancelled. These provisions have the substantial effect of not only repealing the Corporations Law but also extinguishing its effect, as from 15 July 2001, with respect to things that happened and proceedings that commenced before that time.
(c) While the Corporations ([name of State]) Act 1989 of each of the States has not been repealed, s 7 of each of those Acts, which purports to adopt the Corporations Law as set out in s 82 of the Corporations Act 1989 (Cth), no longer has any operative effect because s 82 has been repealed.
(d) The Corporations (Ancillary Provisions) Act 2001 of each of the States preserves the effect of the national scheme laws (including the former Corporations Law) only in relation to matters arising before 15 July 2001 (and matters arising directly or indirectly out of such matters), and only insofar as those matters are not dealt with by the new Corporations legislation. Since Chapter 10 of the Corporations Act contains comprehensive transitional provisions, there are unlikely to be many matters falling into this preserved category.


102 It follows that, although the present proceeding began under the former Corporations Law, and everything that happened before 15 July 2001 was governed by the former Corporations Law until that date, the Court must now apply the Corporations Act to things that happened before, as well as to things that happened on or after, 15 July 2001, and to the proceeding as a whole: see, in particular, ss 1383, 1399 and 1400.

103 In my opinion, s 1383 is applicable to the present proceeding. That section applies to the present proceeding because the ingredients of s 1383 (1) are present: thus, the proceeding was commenced before 15 July 2001 under a provision of the old Corporations Law, namely s 588FF (3), the proceeding had not been concluded before 15 July 2001, and no final determination of any of the existing rights or liabilities at issue in the proceeding had been made before that day. This last prerequisite for the application of s 1383 (found in s 1383 (1) (e) (i)) is satisfied because, although I made orders on 4 September 2000 that were capable of finally disposing of the proceeding, by reserving liberty to apply to set those orders aside within 28 days, I left open the possibility of such an application being made, and therefore there was no ‘final determination’ of any of the existing rights of creditors of the DML companies pending the expiration of the 28 day time period. The proceeding would have been finally determined if no application had been made within 28 days, but since BP Holdings made an application to set aside the ex parte orders, and that application had not been finally determined by 15 July 2001, s 1383 (1) (e) (i) is satisfied in this case.

104   Section 1383 (3) has the effect that as from 15 July 2001, a new proceeding equivalent to the old proceeding is taken have been brought in this Court, exercising federal jurisdiction, under the provision of the new Corporations legislation that corresponds to the relevant old provision. As from 15 July 2001, the plaintiffs and the BP companies acquired rights and incurred liabilities under the new Corporations legislation equivalent to their pre-commencement rights and liabilities under the corresponding provision of the old law: s 1400 (2). The new proceeding taken to have been brought by virtue of s 1383 (3) relates to these substituted rights and liabilities.

105 Since a new proceeding is taken to have commenced under the new legislation on 15 July 2001, is the proceeding necessarily out of time under s 588FF (3) of the Corporations Act? The answer to this question depends on the proper construction of s 1402. Subsection 1402 (2) states that if, under the old Corporations legislation, a process such as the winding up of a company commenced from a particular time, and that process is continued after 15 July 2001, then the process as so continued is still taken to have commenced from the same time. The winding up of the DML companies is continued under s 1399 of the Corporations Act.

106 Under ss 513B and 513C (read in conjunction with s 446A) of the former Corporations Law, the winding up of the DML companies was taken to have commenced on 24 October 1997, which was accordingly their relation-back day for the purposes of s 588FF (3). Therefore s 1402 (2) has the effect that, since 15 July 2001, the process of winding up the DML companies, though it is now a process under the Corporations Act, is taken to have commenced on 24 October 1997. Consequently (though this is more than a little bizarre), the time limit set by s 588FF (3) of the Corporations Act expired on 24 October 2000, although the Corporations Act had not commenced on that day. The same result appears to follow from s 1402 (3), which states that if an old Corporations legislation time limit related to a pre-commencement right or liability, the same time limit applies in relation to the substituted right or liability.

107 In the result, the replacement of the Corporations Law by the Corporations Act makes no substantive difference to the outcome of this case. Section 588FF (3) of the Corporations Act prevents a liquidator from making an application for extension of time, if the application is made on or after 15 July 2001 and is outside the three-year time limit set by the old Corporations Law, just as the old Corporations Law would have prevented the application if it were made prior to 15 July 2001 but outside the time limit.

(g) If the answer to question (f) is in the affirmative, is this a case where the Court should exercise a jurisdiction to make orders affecting the BP companies, notwithstanding that they are not parties to the proceeding?


108   My answer to this question is implied by my answers to the other questions.

109 I have decided that this proceeding could not go forward to final hearing unless the BP companies were joined as defendants. Their rights would not be satisfied, as I have explained, by allowing the proceeding to go to final hearing on the basis that the BP companies would not be parties but the Court would contemplate making orders against them as non-parties. But any proceeding against the BP companies as defendants is out of time under s 588FF (3), and the Court has no discretion to cure the deficiency.

110   In these circumstances, the Court would not contemplate exercising jurisdiction to make orders affecting the BP companies, although they are not parties. It would be futile to do so.

Conclusions

111   The plaintiffs have no good answer to the submission by the BP companies that I should now make orders consequent upon the successful application by the BP companies to set aside, with costs, my ex parte orders so far as the orders affected them. I shall make the following orders:
(1) orders 3 and 4 made on 4 September 2000 be set aside in so far as they affect the Applicants;
(2) the Plaintiffs pay the costs of the Applicants' motion filed on 4 October 2000.


112 I have reached the conclusion that the plaintiffs could not bring the proceeding to a final hearing at which they would seek orders for extension of time under s 588FF (3) with respect to voidable preference actions against the BP companies, without first joining the BP companies as parties to the proceeding. But under the Supreme Court Rules the proceeding would be taken to have commenced, as regards the BP companies, at the time of joinder rather than the date of filing of the originating process, and therefore the proceeding would be out of time as regards the BP companies. Consequently their joinder would be futile and the Court would not order it, either on the application of an interested person or of its own motion.

113   Unless the plaintiffs can satisfy me that there is some point in allowing the proceeding to continue on foot, notwithstanding my conclusions, the correct course is for me to order that the proceeding be dismissed. The Court has the power to do so, of its own motion or on application, under Part 13 rule 5. I shall give the plaintiffs one last opportunity to make submissions, if they wish, as to why I should not dismiss the proceeding in light of the conclusions I have reached, and I shall allow the BP companies, if they wish, to respond to any such submissions. The submissions should address any other issues relevant to the final determination of the proceeding, including any question of costs.

114   The conclusions I have reached may appear to be unfair to the creditors of the DML companies as a whole. It appears that litigation funding is in place for actions against the BP companies to recover voidable preferences in a substantial amount, and the plaintiffs have legal advice that they have a good case. My decision will prevent the recovery actions from proceeding and therefore deny creditors the prospect of a distribution if the actions are successful. And I have reached my decision without exploring whether, in substance, the plaintiffs were justified in not commencing the recovery actions within three years of the relation-back day, or whether they were in substance entitled to the extension of time which they obtained on an ex parte basis.

115   Those outcomes are unfortunate, but there are higher principles at stake. One is the principle of natural justice, which entitled the BP companies to notice of the application before the orders for extension of time were made, not merely notice that the orders had been made and leave to challenge them. Another is the principle that orders directly affecting the rights of a person are not to be made unless that person is a party to the proceeding in which the orders are sought. Another is the principle that the Court should not strive to avoid consequences of a limitation period that is clearly applicable and provides an absolute defence.

116 One may query the legislative policy underlying a limitation period which requires a liquidator to commence recovery action or seek an extension of time within three years of the relation-back day, regardless of how complex and time-consuming the winding up may be. But there can be no doubt that there is an operative legislative policy underlying s 588FF (3), articulated in the report of the Harmer Committee and reflected in the reduction of the limitation period from six to three years in the 1993 amendments to the Corporations Law (see my observations on the history and purpose of s 588FF (3) at paragraph 29 of my reasons for judgment of 17 July 2001). My conclusions give effect to that legislative policy.

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Last Modified: 09/04/2001