Captiv8 Pty Limited (in liquidation) v Bodger

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FEDERAL COURT OF AUSTRALIA

Captiv8 Pty Limited (in liquidation) v Bodger [2018] FCA 1801

File number: NSD 1026 of 2018
Judge: GLEESON J
Date of judgment: 21 November 2018
Catchwords: PRACTICE AND PROCEDURE – application for leave to amend originating process and concise statement pursuant to r 8.21 of the Federal Court Rules 2011 – where plaintiff identified as company in liquidation and liquidator of company not included as party – where liquidator wishes to amend to bring Corporations Act 2001 (Cth) s 588FF(1)(c) claim against defendants – consideration of nature of “mistake”
Legislation:

Civil Procedure Act 2005 (NSW) ss 64, 65

Corporations Act 2001 (Cth) ss 180, 181, 182, 183, 184, 588FB, 588FDA, 588FF(1), 588G(2), 588M(2), 1317H

Federal Court Rules 1979 O 13 rr 2, 4

Federal Court Rules 2011 rr 8.21, 8.22

Land and Environment Court Act 1979 (NSW) s 87

Workplace Relations Act 1996 (Cth)

Cases cited:

Advanced Switching Services Pty Ltd v State Bank of New South Wales t/as Colonial State Bank [2007] FCA 954

Bridge Shipping Pty Ltd v Grand Shipping SA [1991] HCA 45; (1991) 173 CLR 231

Bryant (Liquidator) v L.V. Dohnt & Co Pty Ltd, in the Matter of Gunns Limited (In Liq) (Receivers and Managers Appointed) [2018] FCA 238

Camilleri v The Trust Company (Nominees) Limited [2015] FCA 1138; 109 ACSR 191

Environinvest Ltd (in liq) v Former Partnership of Webster, White, Gridley, Nairn, Newman, Peter and Miller [2012] FCA 1307; (2012) 208 FCR 376

Greenwood v Papademetri [2007] NSWCA 221

Hayward v Darling Downs Aircraft Services Pty Ltd [1993] 2 Qd R 153

Laing v Victoria [2005] FCA 791; (2005) 144 FCR 462

McGraw-Hill Financial, Inc v Clurname Pty Ltd [2017] FCAFC 211; (2017) 123 ACSR 467.

McInnes v Wingecarribee Shire Council (1987) 10 NSWLR 660

Mitry v Business Australia Capital Finance Pty Ltd (in liquidation) [2010] NSWCA 360

Re Spec FS NSW Pty Ltd (in liquidation) [2013] FCA 1027

Re: Harris Scarfe Ltd (in liq) & Harris Scarfe Wholesale P/L (in liq) [2006] SASC 277; (2006) 203 FLR 46

Robinson, in the matter of Reed Constructions Australia Pty Limited (in liq) v JFK Interiors Australia Pty Limited [2015] FCA 1500

Rodgers v Federal Commissioner of Taxation [1998] FCA 1296; (1998) 88 FCR 61

Sibroll Pty Ltd (in liq) v Mitch Properties Pty Ltd [2007] NSWSC 579; (2007) 212 FLR 1

Sullivan v Van der Broek [1999] NSWSC 1177
Date of hearing: 9 August 2018
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category: Catchwords
Number of paragraphs: 72
Counsel for the Plaintiff: Ms IJ King
Solicitor for the Plaintiff: CCSG Legal Pty Ltd
Counsel for the First, Second and Fourth Defendants: Mr S Ipp
Solicitor for the First, Second and Fourth Defendants: Surry Partners Lawyers

ORDERS

NSD 1026 of 2018
BETWEEN:

CAPTIV8 PTY LIMITED (IN LIQUIDATION) (ACN 120 951 377)

Plaintiff
AND:

RYAN JAMES BODGER

First Defendant

KEIR DEL MAHER

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Details
Case
[2018] FCA 1801
Decision Date

CaseChat Overview and Summary

Captiv8 Pty Limited (in liquidation), represented by its liquidator Darren Vardy, filed proceedings against several defendants, including Messrs Bodger, Maher, and Corte. The claim primarily concerns alleged breaches of fiduciary duties and insolvent trading by the defendants, who were directors of Captiv8. The dispute revolves around whether the defendants are liable for certain transactions that allegedly transferred company assets to themselves. The Federal Court was tasked with deciding whether Captiv8 could amend its originating process to include Vardy as a plaintiff for specific claims related to insolvent trading. The court examined whether the omission of Vardy as a plaintiff constituted a mere oversight or a more fundamental mistake.

The court held that while there was no mistake in naming Captiv8 as the plaintiff, the oversight in not including Vardy as a second plaintiff warranted an amendment. The evidence showed that the error occurred within CCSG, the law firm representing Captiv8. The court ruled that the misnomer was not a matter of mistaking the identity of the plaintiff but rather an oversight in identifying Vardy in his capacity as liquidator. The court referenced the McGraw-Hill Financial, Inc v Clurname Pty Ltd case to emphasize that the power to amend pleadings includes situations not explicitly listed in the rules, such as correcting an oversight. The court granted leave to amend the originating process and concise statement to include Vardy as the second plaintiff for the insolvent trading claims, while dismissing the rest of the application.

The final orders of the court were to allow Captiv8 to file amended documents within 14 days, adding Darren Vardy as the second plaintiff for the insolvent trading claims. The court also ordered Captiv8 to pay the costs of the amended interlocutory process and the costs incurred due to the amendments. This decision highlights the importance of accurately identifying all necessary parties in legal proceedings, especially when claims involve specific statutory provisions.

Orders

Orders of the court

1. Leave be granted to the plaintiff to file within 14 days of the date of these orders an amended originating process and an amended concise statement, adding Darren Vardy as the second plaintiff in respect of insolvent trading claims made in those documents.

2. Otherwise, the amended interlocutory process dated 9 August 2018 be dismissed.

3. The plaintiff pay the costs of the amended interlocutory process and the costs thrown away by reason of the amendments referred to in order 1 above.

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

Background

Background to the litigation

The third defendant, Mr Corte, did not appear on the hearing of the application. Mr Corte is the sole remaining director of Captiv8.UNCONTENTIOUS FACTS Captiv8 was registered as a company on 27 July 2006. On 16 June 2015, Mr Vardy was appointed as the liquidator of Captiv8 in a creditors’ voluntary winding up. By letter dated 12 April 2016 from Mr Vardy’s lawyers, Paul Taylor and Adam Wiederman of CCSG Legal Pty Ltd (“CCSG”), to Mr Corte, CCSG notified Mr Corte of Mr Vardy’s intention to recover funds of $228,424.58 from him in respect of insolvent trading. The letter noted that this was a claim that may be brought by the liquidator under s 588G of the Act. Annexed to the letter was a draft statement of claim which nominated Captiv8 and Mr Vardy as plaintiffs. By letters also dated 13 April 2016, CCSG wrote to Mr Maher and Mr Bodger in similar terms. After other correspondence, by letter dated 14 March 2017, from CCSG (Ms Warren and Mr Wiederman) to Rostron Carlyle Lawyers (then apparently acting for Messrs Bodger, Maher and Corte), CCSG stated relevantly that:(1)The liquidator maintained that Messrs Bodger, Maher and Corte were liable for the amount of $228,424.58 as a result of the company trading whilst insolvent.(2)Messrs Bodger, Maher and Corte “have been well aware of the Liquidator’s Claim against them, and the Liquidator has provided ample opportunity for your clients to formulate a defence … [Therefore] our client will be left with no alternative but to commence legal proceedings without further notice”. (3)They reserved “the Liquidator’s rights” to rely on the letter in relation to costs.Originating process On 14 June 2018, Captiv8 filed an originating process, signed by its lawyer Paul Taylor, of CCSG, bringing proceedings against the defendants. The originating process states that the application is made under ss 180, 181, 182, 183, 184, 588FB, 588FDA, 588FF(1), 588G(2), 588M(2) and 1317H of the Act. Relevantly, it states:The Plaintiff [i.e. Captiv8] claims that [Messrs Bodger and Maher] contravened ss 181, 182, 183, 184, 588FB and 588FDA of the Act, and their fiduciary duties owed to the Plaintiff while directors of the Plaintiff by causing the Plaintiff to be a party to a transaction where they transferred its assets to themselves and to the Fourth Defendant, being the goodwill in its business, its client list and portfolio, and its intellectual property, where a reasonable person in the Plaintiff’s circumstances would not have entered into the transaction (Unfair Transaction). The originating process states that, “on the facts stated in the concise statement filed in these proceedings and served with the originating process”, Captiv8 claims relief including:(1)As against Messrs Bodger and Maher, an order pursuant to s 588FF(1)(c) of the Act to pay to Captiv8 an amount that fairly represents some or all of the benefits that they have received because of the “Unfair Transaction”.(2)As against Mr Corte, an order pursuant to s 588M(2) of the Act to pay to Captiv8, as a debt due, an amount equal to the loss or damage caused by Mr Corte’s contravention of s 588G(2).

Evidence

Evidence Before The Court

The genuine steps statement refers to correspondence and a meeting and then states:No further steps could be taken to try to resolve the issues in dispute between the plaintiff and the defendants prior to commencement of proceedings as the limitation period for the Plaintiff’s claims under s 588FB and 588FDA expires on 16 June 2018.EVIDENCE IN SUPPORT OF APPLICATION Captiv8 relied on an affidavit sworn by Hayley Warren, a solicitor in the employ of CCSG. Neither Mr Vardy nor Mr Taylor gave evidence. Relevantly, Ms Warren said:(1)She is the solicitor with the day to day carriage of this matter, instructed by Mr Vardy in his capacity as liquidator of Captiv8.(2)Messrs Bodger, Maher and Corte were publicly examined on 5 and 6 April 2018.(3)When commencing proceedings for voidable transactions and insolvent trading on behalf of a liquidator, it was the usual practice of CCSG and Ms Warren to adopt precedents which had previously been drafted and utilised by CCSG and amended to reflect the relevant proceedings. When drafting these documents, it is the firm’s practice to include both the liquidator and the company as a party to the proceeding.(4)It is the usual practice of CCSG to use a precedent for an originating process seeking recovery of an unfair preference that nominates the first plaintiff as the company in liquidation and the second plaintiff as the liquidator of the company in liquidation.(5)In this proceeding, CCSG elected to adopt the new practice of using a concise statement as described in the Commercial and Corporations Practice Note. This was the first time Ms Warren had used the “Concise Statement” form and CCSG did not, to her knowledge, have a specific precedent for the concise statement.(6)Prior to filing the originating process, concise statement and genuine steps statement, due to an “oversight” on her part, Ms Warren “did not realise that the Liquidator was not a formal party to the proceedings”. (7)It was always Ms Warren’s intention that the liquidator and the company in liquidation would both be the plaintiffs in the proceeding. The documents do not merely fail to identify Mr Vardy as a plaintiff. They also explicitly identify Captiv8 as the party claiming relief under s 588FF(1)(c). Although Ms Warren says that this was the first time she had “used” the concise statement, she does not say that she drafted the concise statement. If Ms Warren had drafted the concise statement, she would have selected Captiv8 as the plaintiff, failed to identify Mr Vardy as a party to the proceeding, and expressly articulated the claim for an order pursuant to s 588FF(1)(c) as a claim by Captiv8, and not by Mr Vardy. Thus, the evidence does not explain how the concise statement (which, on its face, is said to have been prepared by Mr Taylor) (and the originating process and the genuine steps statement) came to be drafted in the form in which the claim under s 588FF(1)(c) was expressed or identified as a claim by Captiv8, instead of Mr Vardy.CAPTIV8’S CONTENTIONS

Decision

Reasons for decision

Accordingly, Captiv8’s application fails except to the extent that it is unopposed.CONCLUSION I will grant leave to Captiv8 to file an amended originating process and an amended concise statement, making only such amendments as are necessary to add Mr Vardy as a second plaintiff to the proceeding in relation to insolvent trading claims presently identified in the originating process and the concise statement (that is, to the extent that the application was not opposed). Captiv8 should pay the costs of the amended interlocutory process and the costs thrown away by reason of the amendments.

Ratio Decidendi

Legal Principle Established

In McGraw-Hill Financial, Inc v Clurname Pty Ltd [2017] FCAFC 211; (2017) 123 ACSR 467, the Full Court considered an application for an amendment to a pleading to include the tort of deceit, where there was an argument as to whether the cause of action was statute barred. At [23], the Full Court relevantly said:The language of r 8.21(1) is clear: an applicant may apply to the Court for leave to amend an originating application for any reason “including” any of the reasons in r 8.21(1)(a)-(g). Subrules (a) to (g) are examples of amendments that may be the subject of application. They are not a code. Thus, the interaction of r 8.21(1)(g) and (2) does not mean that the Court’s power to permit an amendment asserted to involve a statute-barred claim is confined to the circumstances in r 8.21(1)(g)(i). We leave to one side for further argument the proper approach to an amendment introducing an unarguably statute-barred claim. CONSIDERATIONNature of the “mistake” The evidence does not sufficiently reveal the circumstances in which Mr Vardy was not included as a second plaintiff to the proceeding by the originating process. It is reasonable to assume that he gave instructions to CCSG to commence the proceeding including a claim for relief under s 588FF(1)(c). On the evidence, the error or errors that led to the omission of Mr Vardy as a second plaintiff occurred within the offices of CCSG. Ms Warren says that it was her oversight, but that does not explain how Mr Taylor came to sign the originating process, the concise statement and the genuine steps statements, each of which positively identified the claim as a claim made by Captiv8. Ultimately, it may be easier to make findings about what did not happen than what did happen. First, there was no mistake in naming Captiv8 as a plaintiff to the proceeding. As in Sibroll, that proposition is demonstrated by the fact that it does not seek to have Mr Vardy substituted as the plaintiff. It is also apparent from the originating process and the concise statement that Captiv8 is a proper plaintiff, and that Mr Vardy has correctly commenced the proceeding in the name of Captiv8 pursuant to the power conferred on him by s 477(2)(a) of the Act to bring any legal proceeding in the name of and on behalf of the company. Second, Captiv8 does not contend that there was a mistake as to the identity of the plaintiff, for the purposes of r 8.21(1)(d). However, it is relevant to note that there was no mistake as to the identity of the liquidator of Captiv8, that being the person with standing to bring a claim pursuant to s 588FF(1)(c). Further, there is no evidence that Captiv8 (or Mr Vardy or Ms Warren) mistakenly believed that Captiv8 was the proper plaintiff for a claim pursuant to s 588FF(1)(c). Rather, the evidence was that Mr Vardy was not identified as an additional plaintiff by reason of Ms Warren’s oversight.Captiv8’s arguments Captiv8 made the following submissions:(1)The liquidator commenced the proceedings in the name of and on behalf of the company in accordance with s 477(2)(a) of the Act.(2)Mr Vardy is CCSG’s client.(3)The misnomer in this matter is not a matter of mistaking the identity of the plaintiff but a mere oversight “to identify the same person in different capacities”.(4)The facts as pleaded in relation to the proposed amendment are the same. There are no proposed changes to the originating process or the concise statement apart from the addition of Mr Vardy as the named liquidator.