DAVIES v Chicago Boot Co P/L - [2006] SASC 241

SUPREME COURT OF SOUTH AUSTRALIA
(Appeal from a Master: Civil)
In the Matter of HARRIS SCARFE LTD (RECEIVERS & MANAGERS APPOINTED) (IN LIQ)
DAVIES & ANOR v CHICAGO BOOT CO P/L
[2006] SASC 241
Judgment of The Honourable Justice Debelle
18 August 2006
CORPORATIONS - WINDING UP - CONDUCT AND INCIDENTS OF WINDING UP - EFFECT OF WINDING UP ON OTHER TRANSACTIONS
Voidable transactions - application to amend existing application to add application outside time limit - whether amendment permissible - whether s 588FF establishes exclusive régime for making orders extending time period - whether Supreme Court Rules are applicable.
Corporations Law s 459G(1), s 459G(2), s 588FF(1), s 588FF(3), s 1322(4); Corporations Rules r 1.3; Federal Court Act 1976 s 59(2)B; Federal Court Rules O 13; Judiciary Act 1903 (Cth) s 79; Supreme Court Rules r 53.03, referred to.
Agtrack (NT) Pty Ltd v Hatfield (2005) 218 ALR 677; Australian Iron & Steel Ltd v Hoogland (1962) 108 CLR 471; BP Australia Ltd v Brown (2003) 58 NSWLR 322; David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265; Duke Group Limited (in liq) v Arthur Young (Reg) (1991) 4 ACSR 355; Northern Territory of Australia v GPAO (1999) 196 CLR 553; Solomons v District Court (NSW) (2002) 211 CLR 119, applied.
New Cap Reinsurance Corporation Ltd (in liq) v Reaseguros Alianza SA (2004) 186 FLR 175; Rambaldi v Dalebrook Pty Ltd (2003) 21 ACLC 1,190; Rodgers v Commissioner of Taxation (1998) 88 FCR 61; Star v National Australia Bank Limited1 (1999) 30 ACSR 583; Tolcher v Capital Finance Australia (2005) 143 FCR 300, not followed.
Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485; Baldry v Jackson [1976] 2 NSWLR 415; Brook v Flinders University of SA (1988) 47 SASR 119; Cavetina Pty Ltd v Synthetic Dyeworks Industries Pty Ltd (1994) 14 ACSR 274; Emanuele v Australian Securities Commission (1997) 188 CLR 114; Karasaridis v Kastoria Fur Products (1984) 37 SASR 345; Macleod v Australian Securities and Investment Commission (2002) 211 CLR 287; Maxwell v Murphy (1957) 96 CLR 261; Milotin v Williams (1957) 97 CLR 465; State of Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146; The Crown v McNeil (1922) 31 CLR 76; Wardley Australia Ltd v Western Australia (1992) 175 CLR 514, considered.

WORDS AND PHRASES CONSIDERED/DEFINED
"may only be made"

DAVIES & ANOR v CHICAGO BOOT CO P/L
[2006] SASC 241
Civil

DEBELLE J. This appeal from a Master raises important issues as to the operation of the limitation period prescribed by s 588FF(3) of the Corporations Law, the law in force at the time of the transactions the subject of these proceedings.
Section 588FF(1) enables the liquidator of a company to make an application for an order that a transaction is voidable and to recover an amount equal to…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2006] SASC 241
Decision Date: 18 August 2006

CaseChat Overview and Summary

Davies v Chicago Boot Co P/L involved a dispute over the winding up of a corporation and the effect of winding up on certain transactions. The case centred on an application by a liquidator to set aside tax payments made by the corporation to the Commissioner of Taxation. The liquidator initially made an application to set aside payments made between December 1993 and May 1994. After becoming aware of additional payments made in June 1994, the liquidator sought leave to amend the existing application to include these later payments. The key legal issues were whether the amendment was permissible and whether the statutory provisions provided an exclusive regime for extending the time within which such applications may be made.

The court examined whether the Supreme Court Rules, which permit amendments to pleadings even after the expiration of a limitation period if the new claim arises out of the same or substantially the same facts, could be applied in this context. The court also considered whether s 588FF of the Corporations Act established an exclusive regime for extending the time period for making such applications. The Federal Court had previously held that an amendment to a pleading in an existing proceeding was not inconsistent with the statutory provisions, but the Supreme Court noted that this failed to address the requirement that the application must be made within the prescribed time period. The court concluded that the statutory provisions provided an exclusive regime for extending the time period and that once this period had expired, it could not be extended. Consequently, the liquidator was unable to amend the application to include the additional tax payments.

In summary, the court held that the liquidator’s application to amend the existing application to include additional tax payments was not permissible because it was made outside the statutory time limit and the time limit could not be extended once it had expired. The Supreme Court thus upheld the principle that the statutory provisions provided an exclusive regime for extending the time within which such applications may be made.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

DEBELLE J

In Rodgers, a liquidator had made an application pursuant to s 588FF(1) to set aside group tax payments made to the Commissioner of Taxation between December 1993 and May 1994. The liquidator was not then aware of two other later payments made in June 1994. The liquidator applied for leave to amend the application to add the two payments in June 1994. The application was made after the expiry of the three year period after the relation‑back day. The court had to consider the operation of O 13 of the Federal Court Rules which permits an amendment to be made to add or substitute a new claim for relief even after the expiry of a limitation period if the claim arises out of the same facts, or substantially the same facts, as those already pleaded to support the existing claims for relief. The rule is in similar terms to r 53.03. It is expressly authorised by s 59(2)B of the Federal Court Act 1976 which had been inserted into the Federal Court Act in 1994 in order to remove any doubts as to the validity of the rule: see Wardley Australia Ltd v Western Australia (1992) 175 CLR 514, per Toohey J at 561 - 562. The Federal Court held that O 13 was not inconsistent with s 588FF(3), saying (at 68):One is concerned with making an amendment to a pleading in an existing proceeding; the other is concerned with the commencement of a proceeding.With respect, that aphorism fails to address the fact that an essential ingredient of the application is that it was commenced within the three year period prescribed by s 588FF(3). Furthermore, the Court did not address the question whether the provisions of sub‑s (3) of s 588FF provided an exclusive régime for extending the time within which applications may be made. At that time BP Australia Ltd v Brown had not been decided. The Federal Court proceeded on the footing of the “relation‑back principle” but, for the reasons already expressed, that principle cannot apply where a condition as to time is an element of the right being enforced and the statute enabling the right. The Court distinguished David Grant by reference to the following part of the reasons of Gummow J at 277:The force of the term “may only” is to define the jurisdiction of the court by imposing a requirement as to time as an essential condition of the new right conferred by s 459G. An integer or element of the right created by s 459G is its exercise by application made within time specified.The Federal Court said:This statement establishes an application first made outside the prescribed time is ineffective; it says nothing about an application to amend.(The emphasis in each of the above quotations is that of the Federal Court.) In my respectful opinion, the Federal Court’s comment is another instance where the Court failed to address the fact that an essential element of the application is the fact that it is commenced within the three year period prescribed by s 588FF(3) and that s 588FF(3) provides an exclusive régime for extending that time. The liquidator in Rodgers was in truth seeking to make two further applications in respect of each of the payments in June 1994. Each application was outside the three year period prescribed by s 588FF(3). The liquidator was, therefore, unable to plead compliance with s 588FF(3). The liquidator could only make the applications if the three year period had been extended. It had not and, given that the three year period had expired, it could not be extended: BP Australia Ltd v Brown. It was not, therefore, possible to amend the proceedings to add the two applications. The decisions which have applied Rodgers did not add anything new to the reasoning of the Federal Court and, in my respectful view, suffer from the same flaw.Conclusion

Ratio Decidendi

Legal Principle Established

Established by: DEBELLE J

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