DAVIES v Chicago Boot Co P/L
[2006] SASC 241
•18 August 2006
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 241Civil
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 the amount of the voidable transaction. Section 588FF(3) prescribes the period within which an application may be made in these terms:
(3)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 by the liquidator within those 3 years.
Section 588FF is in the same terms in the Corporations Act 2001 (Cth).
The plaintiffs and their predecessors are the liquidators of each Harris Scarfe Limited (“HSL”) and Harris Scare Wholesale Pty Limited (“HSW”). The same persons are both the liquidators of HSL and the liquidators of HSW. On 2 April 2004 the persons who were then the liquidators of each HSL and HSW instituted an action in this Court seeking to set aside pursuant to s 588FF(1) payments which they alleged to be preferential payments by both HSL and HSW. The statement of claim alleged the supply of goods by the defendant to both HSL and HSW. Paragraphs 5 and 6 of the statement of claim then pleaded payments by both HSL and HSW by reference to cheques identified by date and the number of the cheque. Paragraphs 5 and 6 were in these terms:
5.HSL made the following payments to the defendant for unsecured debts owed to it pursuant to the HSL Contract:
Cheque Number Date Presented Amount $ 458173 22/02/2001 16,064.68 454765 02/02/2001 151,893.49 456086 19/01/2001 100,779.13 453349 02/01/2001 3,444.92 451981 02/01/2001 1,079.01 Total $273,261.23 (“the HSL transactions”).
6.HSW made the following payments to the defendant for unsecured debts owed to it pursuant to the HSW Contract:
Cheque Number Date Presented Amount $ 47834 04/10/2000 43,540.10 Total $43,540.10 (“the HSW transactions”).
The statement of claim then pleaded that those payments had been made within the six month period ending prior to the relation‑back day, 3 April 2001, and that both HSL and HSW were insolvent at the time of the transactions. In para 12 the liquidators pleaded that the five HSL transactions were
1. insolvent transactions within the meaning of s 588FC;
2. unfair preferences within the meaning of s 588FA;
3. uncommercial transactions within the meaning of s 588FB; and
4. voidable transactions within the meaning of s 588FE.
In para 13 a like plea was made in relation to the HSW transaction. The statement of claim then pleaded that the liquidators had demanded repayment of those payments as preference payments and that the defendant had refused to make the repayments.
It is necessary to notice that the applications were not expressed in the alternative, that is to say, that the liquidators did not make a claim against the defendant in respect of the five HSL transactions and allege in the alternative that the five payments had been made by HSW nor did they make an alternative claim alleging that the payment of $43,540.10 on 4 October 2000 made by HSW was, in fact, made by HSL.
The defendant objected to the claims against HSL and HSW being joined in the one action. The liquidators successfully applied to disjoin the claim against HSW and to transfer that part of the claim to the District Court of South Australia where it was to be heard as a separate action. That step occurred before the defendant had filed its defence.
On 16 August 2004 the defendant filed its defence. On 19 November 2004, the liquidators filed an amended statement of claim. On 24 December the defendant filed an amended defence. As in the case of its original defence, it did not plead to para 3 of the amended statement of claim which had contained the plea of the supply of goods by the defendant to HSL. In the amended statement of claim, para 5 of the original statement of claim had become para 4 to which the defendant pleaded:
4.The defendant admits only that HSL made the payments to the defendant referred to at paragraph 4 of the Claim (“the HSL payments”).
Paragraph 8 of the amended defence pleaded a retention of title clause in the contract for the supply of goods which, it was alleged, meant that the payments in question did not decrease the net value of the assets of HSL available to its creditors. An alternative plea in para 8(b) was in these terms:
In the alternative and for the reasons set out at paragraphs 8(a)(i) - (iv) inclusive above the defendant was not an unsecured creditor of HSL.
There is no reference in the defence to the admitted payments by the defendant to HSL not being in reduction of the indebtedness of the defendant to HSL but in satisfaction of the indebtedness by the defendant to HSW.
On 28 October 2005, the liquidators by leave filed a further amended statement of claim. It is not necessary to note its terms. On 20 March 2006 the defendant applied to amend its defence to plead:
7.The defendant denies the matters alleged in paragraph 7 of the Claim and says further that pursuant to a direction given by HSL on or about 3 December 1998 (“the direction”) the goods referred to in paragraph 7 of the Claim were supplied to Harris Scarfe Wholesale Pty Ltd (“HSW”) and were supplied pursuant to a contract between HSW and the defendant comprising invoices issued by the defendant and provided to HSW.
8.The defendant admits only that HSL made the payments to the defendant referred to at paragraph 8 of the Claim (“the HSL payments”) and says further that the payments were made in respect of the invoices which are identified in the schedule attached and marked “A”.
The defendant also applied to make other amendments. The liquidators consented to these and they are not in issue on this appeal. The effect of the above amendment is to plead expressly and for the first time that the defendant was not a creditor of HSL because the goods were supplied to HSW so that it was HSW which was indebted to the defendant.
At the hearing before the Master, counsel for the defendant submitted that the amendment should be allowed because there had been considerable correspondence before the action in which the defendant had alleged it had been contracting with HSW and not with HSL. Counsel for the liquidators stated that they did not oppose the amended defence provided they were granted leave to transfer the action against HSW back from the District Court to this Court, that they were given leave to amend their pleadings in this action and in the District Court action to claim the payments as voidable preferences in each liquidation in the alternative and, that the defendant was not to be allowed to plead any limitation defence under s 588FF(3) of the Corporations Act in respect of that expanded claim. Counsel for the defendant opposed the imposition of any terms upon the grant of leave. The Master dismissed the defendant’s application and refused leave to amend. The defendant has appealed against that decision.
Upon the appeal coming on for hearing before me, I directed that the liquidators draft an amended statement of claim so that the nature of the claim they seek to make against both HSL and HSW is clear. I adjourned the hearing to enable the liquidators to do so. The liquidators have now brought in two forms of an amended statement of claim.
Although expressed in different terms, there is no material difference in the two proposed amendments so far as the issues in this appeal are concerned. It is sufficient to note that one proposal seeks to amend the applications in respect of the five HSL transactions to add an alternative plea that the goods were supplied pursuant to contracts between the defendant and HSW. Thus, the statement of claim now pleads a supply of goods by the defendant to HSL or, in the alternative, a supply of goods by the defendant to HSW. The statement of claim then alleges that the HSL transactions are voidable and, in the alternative, that the five payments which constitute the HSL transactions were payments made by HSW. The effect of that application is that the liquidators of HSW seek to be added as plaintiffs so that they may plead an application in the alternative to the application by the liquidators of HSL in respect of the same five payments. That application is, on any view, a fresh application made outside the period of three years prescribed by s 588FF(3). The liquidators seek to avoid that result by amending the existing application.
The other proposed amendment proceeds on the footing that the claim in the District Court is transferred back to this Court. It is convenient to continue to refer to it as the District Court action. The proposed amendment alleges contracts by which the defendant supplied goods to HSL or, in the alternative, contracts by which the defendant supplied goods to HSW. It further alleges that in the six month period before the relation‑back period HSW made all six payments listed in paras 5 and 6 of the initial statement of claim or, in the alternative, that HSL made all of those six payments. The effect of this proposed amendment is twofold. First, the liquidators of HSL seek to add to the existing five applications an additional application to impugn the payment by cheque number 47834 on 4 October 2000, initially the subject of the claim by the liquidators of HSW. Secondly, the liquidators of HSW seek to be added as a plaintiff and to add the five payments initially the subject of the application by the liquidators of HSL to the existing application to impugn the payment by cheque number 47834 on 4 October 2000. Those are fresh applications which are also outside the period of three years prescribed by s 588FF(3).
The proposed amendments do not seem to have regard to the fact that, although the same persons are the liquidators of both HSL and HSW, the liquidators make the claims against the defendant in different capacities. The application in respect of any payment made by HSL is made by the liquidators of HSL and the application in respect of any payment made by HSW is made by the liquidators of HSW. The liquidators of each company have duties to that company and to the creditors of that company. There may, therefore, be a conflict of interest between the liquidators of HSL and the liquidators of HSW. However, it is possible to determine the issues in this appeal without being distracted by the possibility of any conflict of interest.
I will first examine the question whether the defendant should be granted leave to amend its defence. I will then consider whether the grant of leave should be on the terms that the liquidators seek.
Leave to Amend the Defence?
The amendments which the defendant seeks to make will clarify the issues and will enable the real matters in controversy between the parties to be addressed. The amendments raise arguable issues. There has been no undue delay. The action has not been set down for trial. There is no prejudice to the liquidators which could not be cured by an order as to the costs occasioned by the amendments. The interests of justice are the paramount consideration: State of Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146 at 155. The application accords with the principles expressed in Duke Group Limited (in liq) v Arthur Young (Reg) (1991) 4 ACSR 355 at 355. In my view, there was no proper ground on which to refuse the grant of leave. The defendant should, therefore, be granted leave to amend its defence.
A Grant of Leave on Terms?
I turn to the question whether the grant of leave to amend the defence should be on terms that the liquidators have leave to transfer the actions in respect of the payment by HSW back to this Court and have leave to amend the statement of claim in this action.
Some features of each of the actions as at present framed must be noticed. I have already mentioned that, although the same persons are liquidators of both HSL and HSW, they sue in a different capacity in each application. In the action in this Court the plaintiffs sue as the liquidators of HSL and in the action in the District Court the plaintiffs sue as the liquidators of HSW. The second feature to note is that, when the application was initially commenced, there was an application in respect of the HSL payments which was separate from the application in respect of the HSW payments. It was as if A was suing B to set aside one set of payments and C was suing B to set aside another. Importantly, for the purpose of this appeal, the applications in respect of the separate payments by HSL as initially pleaded were not pleaded in the alternative to the application by HSW. The third feature is that the application in respect of the payments by HSL pleaded payments on specified dates by specified cheques, in each case specifying the number of the cheque. Similarly, in the application in respect of the HSW payment the liquidators pleaded a payment made on a specified date and by a specified cheque, specifying the number of the cheque.
The joinder of these alternative claims by separate plaintiffs may give rise to a number of issues. It is unnecessary to stay with them. It is sufficient for the purposes of this appeal to note that the liquidators of HSL and the liquidators of HSW each seek to add to each of the existing applications under s 588FF an additional application in respect of payments not included in each application as initially made and that those applications are made outside the period of three years prescribed by s 588FF(3). The application by the liquidators of HSL to impugn the payment made by HSW on 4 October 2000 was not made by them within the period of three years after the relation‑back day as prescribed by s 588FF(3) of the Corporations Law. That application is, therefore, out of time. Similarly, the application by the liquidators of HSW to impugn the five payments initially the subject of the HSL action were not made by them within the period of three years after the relation‑back day as prescribed by s 588FF(3) so that these applications are also out of time.
Both the liquidators of HSL and the liquidators of HSW seek to avoid that result by amending the statement of claim to plead the new applications. They call in aid r 53.03 of the Supreme Court Rules which provides:
Where an application for leave to amend is made after any relevant period of limitation has expired, the court may, nevertheless, grant leave, on such terms as it thinks fit:
(a)to correct the name of a party, notwithstanding that it is alleged that the effect of the amendment will be to substitute a new party, if the Court is satisfied that the mistake was genuine and not intended to mislead;
(b)to alter the capacity in which a party brings or opposes a proceeding, if the capacity after the amendment is made is one in which, at the date of issue of the originating proceeding, a party might have brought or opposed the proceeding; or
(c)to add or substitute a new cause of action, if the new cause of action arises out of the same, or substantially the same, facts as the original cause of action.
The validity of the predecessor of this rule was upheld in Karasaridis v Kastoria Fur Products (1984) 37 SASR 345. I respectfully suggest that the reasoning is open to serious question. However, it is not necessary to decide that issue in this appeal and in any event I am bound to follow that decision. For the reasons which follow, r 53.03 does not avail the liquidators.
An Exercise of Federal Jurisdiction
When hearing and determining the proceedings, this Court is exercising federal jurisdiction. Rule 53.03 cannot, therefore, of its own force have any application to these proceedings. There are two avenues by which the Rules of this Court may be applied. The first is by the operation of r 1.3 of the Corporations Rules which provides:
(1)Unless the Court otherwise orders, these Rules apply to a proceeding in the Court under the Corporations Act, or the ASIC Act, that is commenced on or after the commencement of these Rules.
(2)The other rules of the Court apply, so far as they are relevant and not inconsistent with these Rules, to a proceeding in the Court under the Corporations Act, or the ASIC Act, that is commenced on or after the commencement of these Rules.
(3)Unless the Court otherwise orders, the rules applying to a proceeding in the Court under the Corporations Law, or the ASIC Law, as in force immediately before the commencement of these Rules, continue to apply to a proceeding under the Corporations Law, or the ASIC Law, that was commenced before the commencement of these Rules.
Sub‑rule (2) plainly allows the Court to apply its own Rules so far as they are relevant and not inconsistent with the Corporations Rules
The other route by which the Rules of Court might apply is by s 79 of the Judiciary Act 1903 (Cth). Section 79 is couched in mandatory terms: Solomons v District Court (NSW) (2002) 211 CLR 119 at [22]. Section 79 provides:
The laws of each State or Territory, including the laws relating to procedure, evidence, and the competency of witnesses, shall, except as otherwise provided by the Constitution or the laws of the Commonwealth, be binding on all Courts exercising federal jurisdiction in that State or Territory in all cases to which they are applicable.
The operation of s 79 is subject to four limitations: Solomons v District Court (NSW) at [23]. Two are relevant for present purposes. They are that the laws of each State or Territory will operate only to those “cases to which they are applicable” and that they will operate unless the Constitution or the laws of the Commonwealth otherwise provide: Solomons at [23]; Northern Territory of Australia v GPAO (1999) 196 CLR 553 at [80]; Agtrack (NT) Pty Ltd v Hatfield (2005) 218 ALR 677 at [11]. The notion of inconsistency involved in the expression “otherwise provided” in s 79 has been discussed in Northern Territory of Australia v GPAO at [80] – [81] by Gleeson CJ and Gummow J with whom Gaudron and Hayne JJ agreed. See also Macleod v Australian Securities and Investment Commission (2002) 211 CLR 287 at [22]. It is unnecessary to recapitulate that examination. It is sufficient to note that a Commonwealth law will have “otherwise provided” if the State law adds to or derogates from the relevant law of the Commonwealth: Macleod at [22]. Rule 53.03 is a law of the State relating to procedure which will be applicable unless a law of the Commonwealth otherwise provides.
The Nature of an Application Under s 588FF
The effect of the amendments which the liquidator seeks to make have already been noted. In the action in which the liquidators of HSL are plaintiffs, the liquidators seek to add one other transaction to the existing applications in respect of the five payments made by HSL which are the subject of the existing applications. In the action in which the liquidators of HSW are plaintiffs, the liquidators of HSW seek to add the five payments which are the five payments subject of the proceedings instituted by the liquidators of HSL. For the reasons which follow, I think that s 588FF(3) does not permit the applications to set aside the additional transactions to be added to the existing applications and that r 53.03 does not avail the liquidators. That is a consequence of the fact that s 588(3)(a) requires an application to be made within three years after the relation‑back day and that sub‑s (3)(b) provides an exclusive régime for the extension of the time limit. My reasons for these conclusions follow.
Section 588FF(1) confers a right upon a liquidator to make applications in respect of voidable transactions and sub‑s (3) imposes a condition as to time within which that right must be exercised. It states in unequivocal terms that an application to set aside a voidable transaction may only be made within three years after the relation‑back day. Section 588FF(3)(a) does not allow for any modification of that bar except in the circumstances provided in sub‑s (3)(b). The use of the expression “may only be made” in sub‑s (3) is clearly intended to impose a condition on the right to bring applications under sub‑s (1). It is an essential ingredient of the right to make an application that the application is made within the time prescribed by sub –s (3), that is to say, the condition as to time is of the essence of the right conferred on liquidators by sub‑s (1) to apply for orders in respect of voidable transactions. It is an essential ingredient of the title to the right which it is proposed to enforce: cf Milotin v Williams (1957) 97 CLR 465 at 474.
When a statute imposes limitations as to time upon the exercise of a right, it is not necessarily a statute of limitation. In Australian Iron & Steel Ltd v Hoogland (1962) 108 CLR 471 at 488, Windeyer J noted that statutory provisions imposing time limits on actions take various forms and have different purposes. He went on to note the distinction between statutes of limitation properly so called, which operate to prevent the enforcement of rights of action independently existing and limitation periods annexed by a statute to a right newly created by it, where the legislation imposes a limitation as a condition which is of the essence of the new right. As Windeyer J noted, it is the distinction adverted to in The Crown v McNeil (1922) 31 CLR 76 at 96, 100 and in Maxwell v Murphy (1957) 96 CLR 261 at 282, 292. It is the same distinction to which Gummow J referred in David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 at 267. Where a limitation as to time is an essential element of the right, the plaintiff should allege in his pleading that the action was brought within time: Australian Iron & Steel Ltd v Hoogland at 488.
The reasoning in David Grant supports the conclusion that the requirement as to time in sub‑s (3)(a) is an essential ingredient of the right by a liquidator to make an application. That decision concerned s 459G(2) of the Corporations Law (Vic). Section 459G(1) enabled a company to apply to the court for an order setting aside a statutory demand served on the company. Section 459G(2) provided for the time within which the application should be made. It was in these terms:
An application may only be made within 21 days after the demand is so served.
The question was whether the time limit in s 459G(2) could be extended by s 1322(4)(d) of the Corporations Law (Vic) which enabled the Court on the application of an interested person to make:
(d)an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Law or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding.
The Court held that s 459G was specific in its terms and was not supplemented or qualified in its construction or operation by s 1322(4). Gummow J delivered the judgment of the Court. He held that s 459G was expressed in terms which made the requirement as to time an essential condition of the new right which it provided so that it could not be extended by s 1322(4). He said (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 the time specified. To adapt what was said by Isaacs J in The Crown v McNeil, it is a condition of the gift in sub‑s (1) of s 459G that sub‑s (2) be observed and, unless this is so, the gift can never take effect. The same is true of sub –s (3).
This consideration gives added force to the proposition which has been accepted in some of the authorities that it is impossible to identify the function or utility of the word “only” in s 459G(2) if it does not mean what it says, which is that the application is to be made within twenty‑one days of service of the demand, and not at some time thereafter and that to treat s 1322 as authorising the court to extend the period of twenty‑one days specified in s 459G would deprive the word “only” of effect. (Citations omitted)
The authorities to which Gummow J referred to in the second paragraph of that quotation included Cavetina Pty Ltd v Synthetic Dyeworks Industries Pty Ltd (1994) 14 ACSR 274 and, in particular, the remarks of McPherson JA at 281, where, responding to the question whether s 1322 provided a means to extend the period of 21 days specified in s 459G(2) of the Corporations Law, he said:
To answer that question in the affirmative would, in my respectful opinion, deprive the word “only” in s 459G(2) of all effect. If the word is not intended to have its literal meaning, then it is difficult to see what purpose was served by including it in subs (2) at all.
In my view, the same reasoning applies to s 588FF(3).
It must be acknowledged that regard must be had to the statutory context in which the expression “may only be made” appears. An example of another context is Emanuele v Australian Securities Commission (1997) 188 CLR 114. In that case the expression referred to those entitled to make applications under s 459P of the Corporations Law. Section 588FF is in a different statutory context from s 459G. Nevertheless, the use of the expression “may only be made” in s 588FF(3) is like s 459G(2) made in the context of a prescription as to time. To adapt the words of Gummow J in David Grant at 276, the temporal requirements in both provisions operate to define the jurisdiction of the court in respect of an application, be it in one instance to set aside a statutory demand and in the other to apply for orders in respect of a voidable transaction. The reasoning in David Grant is, therefore, equally applicable to s 588FF(3).
An Exclusive Régime to Extend Time
Section 588FF not only creates a right, a condition of which is that it must be enforced within three years after the relation‑back day but it also provides in sub‑s (3)(b) the only means of extending the time within which the right may be enforced: BP Australia Ltd v Brown (2003) 58 NSWLR 322, where Spigelman CJ, expressing the opinion of the Court said at [89]:
Of particular significance in this respect is the scope and purpose of Pt 5.7B of the legislative scheme and its legislative history. After consideration of such matters I have concluded that s 588FF(3)(b) was intended to cover the field of applications for extending the period specified as three years from the relation‑back day under para (a).
In that case the Court of Appeal had to consider whether s 1322(4)(d) of the Corporations Act 2001 (Cth) provided another means by which to extend the period of time within which liquidators might make an application under s 588FF(1). The Court held that it did not. Section 588FF, therefore, establishes an exclusive régime for the making of orders extending the period within which an application under s 588FF(1) may be made. The use of the expression “may only be made” in s 588FF(3) has the consequence that an application must be made within three years after the relation‑back day and the only means by which that period can be extended is by an application under sub‑s (3)(b).
The Liquidators Cannot Amend
Once it is concluded that s 588FF(3)(b) covers the field of applications to extend the three year period in sub‑s (3)(a), other statutory instruments or Rules of Court empowering a court to extend that time are inconsistent with s 588FF(3) and so can have no operation. Rule 53.03(c) authorises the Court to add a new cause of action to an existing action notwithstanding that the relevant limitation period has expired. As s 588FF(3)(b) covers the field of applications for extending the three year period specified as in para (3)(a), the rule can have no operation. If s 1322(4)(d) of the Corporations Law does not provide a means of extending the three year period specified in para (3)(a), a fortiori r 53.03(c) cannot do so.
This conclusion is not affected by the principle that an amendment duly made takes effect, not from the date when the amendment is made, but from the date of the original document which it amends: Baldry v Jackson [1976] 2 NSWLR 415 at 419 and the cases there cited; Brook v Flinders University of SA (1988) 47 SASR 119. This is the so‑called “relation‑back principle”. However, I do not think that that principle can apply where compliance with a time requirement is an essential ingredient of a right created by statute and the only means for extending the time limit is provided in the statute creating that right. If the principle were to apply, it would be a means of extending the time limit in a manner inconsistent with the statute. The application by the liquidators of HSL is an application in respect of a different transaction from those which are already the subject of the existing application in this Court. Equally, the application of the liquidators of HSW is in respect of different transactions from the one transaction the subject of the existing claim in the District Court. In each case the liquidators must plead that the application has been made within the three year period specified in s 588FF(3). Plainly, the liquidators cannot include such a plea. If the liquidators seek to rely on r 53.03(c), they are calling in aid a provision which is inconsistent with s 588FF(3)(b) which is the only means by which the three year period in sub‑s (3)(a) can be extended.
In those instances where the liquidator applies to amend the proceeding to add another application to set aside an additional transaction to those already mentioned in the statement of claim, while the application to amend is on its face an application to amend the proceeding, it is in fact an application to make a fresh application to set aside another transaction outside the period prescribed by s 588FF(3). The fact that the liquidator seeks to amend an existing proceeding cannot alter the fact that it is a fresh application which has been made out of time. The fact that the liquidator must plead compliance with s 588FF(3)(a) serves to emphasise that it is a fresh proceeding to which the relation‑back period cannot apply. It is the combination of the fact that the requirement as to time is an essential ingredient of the right to make an application under s 588FF and the fact that s 588FF(3) is an exclusive régime for extending time which prevents the relation‑back principle from applying.
For these reasons, the liquidators of HSL are not able to rely on r 53.03(c) to seek to extend the time within which to apply to bring an application to set aside the transaction entered into on 4 October 2000. Equally, the liquidators of HSW are not able to rely on r 53.03(c) to extend the time within which to apply to set aside the five transactions the subject of the application made by the liquidators of HSL.
The result might appear to be harsh but it could have been avoided if the applications had initially been pleaded in the alternative or if the liquidators had sought an extension of time within the three year period on the ground that they had not completed their investigation of these transactions.
Other Decisions
In reaching this conclusion, I have carefully considered the reasons of the Full Court of the Federal Court in Rodgers v Commissioner of Taxation (1998) 88 FCR 81, where it was held that the power of amendment in Order 13 of the Federal Court Rules enabled the Federal Court to allow an amendment of an application under s 588FF to add applications made outside the three year period. That decision has been followed and applied in Star v National Australia Bank Ltd (1999) 30 ACSR 583, Rambaldi v Dalebrook Pty Ltd (2003) 21 ACLC 1,190, New Cap Reinsurance Corporation Ltd (in liq) v Reaseguros Alianza SA (2004) 186 FLR 175, and Tolcher v Capital Finance Australia (2005) 143 FCR 300. I acknowledge also the force of the observations of the High Court in Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 492 as to the desirability of uniformity of decisions in the interpretation of the Corporations Law and, in particular, its direction that a single judge should not depart from an interpretation placed on the law by an intermediate appellate court:
[U]niformity of decision in the interpretation of uniform national legislation such as the Law is a sufficiently important consideration to require that an intermediate appellate court – and all the more so a single judge – should not depart from an interpretation placed on such legislation by another Australian intermediate appellate court unless convinced that that interpretation is plainly wrong.
However, the later decision of the Court of Appeal in BP Australia Ltd v Brown contains reasoning which calls the decision of Rodgers into question. For the reasons which follow, I respectfully believe the decision in Rodgers to be incorrect. This is an instance of a single judge being faced with two decisions of intermediate appellate courts which contain conflicting reasoning.
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
For these reasons, I allow the appeal from the Master. I set aside the Master’s decision and in lieu thereof order that the defendant be permitted to amend its defence in accordance with exhibit SMM18 to the affidavit of Samuel Michael McGrath sworn herein on 17 March 2006. I dismiss the liquidators’ application that the order allowing the defendant to amend its defence be on terms that the liquidators be permitted to amend the statement of claim in terms of the document handed up in the course of the hearing of the appeal.
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