Deputy Commissioner of Taxation v Ozone Manufacturing Pty Ltd - [2011] SASC 172

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
DEPUTY COMMISSIONER OF TAXATION v OZONE MANUFACTURING PTY LTD
[2011] SASC 172
Judgment of Judge Lunn a Master of the Supreme Court
11 October 2011
CORPORATIONS
Application to wind up for presumed insolvency – by s 459R of the Corporations Act action dismissed if not determined within six months – time only to be extended in special circumstances and within the six month period – action continuing after the six month period without extension being sought – application after expiration to extend the period – application under 6R242 to correct the order for last adjournment before the expiration of the six months to include an order for extension of the 6 months – held no correction under 6R242 as extension would have been contentious and not made as a matter of course – extension of time refused.
Amorin Constructions Pty Ltd v Kamtech Electrical Services Pty Ltd (2008) 73 NSWLR 627, applied.

DEPUTY COMMISSIONER OF TAXATION v OZONE MANUFACTURING PTY LTD
[2011] SASC 172
JUDGE LUNN:
Reasons on plaintiff’s application for a nunc pro tunc order extending the time for the termination of this action

By an interlocutory process taken out on 19 September 2011 (FDN36) the plaintiff seeks an order under s 459R of the Corporations Act 2001 (“the Act”) to extend the time for the termination of this action to 9 November 2011 and pursuant to 6R242 to have that order operate nunc pro tunc as from 3 December 2010.[1]   It is opposed by the defendant.
Section 459R of the Act provides:
(1) An application for a company to be wound up in insolvency is to be determined within 6 months after it is made.
(2) The Court may by order extend the period within which an application must be determined, but only if:
(a)    the Court is satisfied that special circumstances justify the extension; and
(b)    the order is made within that period as prescribed by subsection (1), or as last extended under this subsection, as the case requires.
(3) An application is, because of this subsection, dismissed if it is not determined as required by this section.
[1]    This date is apparently a mistake. There was no hearing on 3 December 2010 and the last hearing before the six months expired was on 9 December 2010.
The history of the action
On 24 June 2010 Collison & Co as plaintiff instituted this action seeking the winding up of the defendant on the grounds of its presumed insolvency under s 459C of the Act. The defendant had not complied with a statutory demand for $4,732 served shortly after 27 May 2010. The defendant paid the debt of Collison & Co. At the first hearing of the action on 20 July 2010 an order was made to have the Deputy Commissioner of Taxation, who claimed to be a creditor of the defendant for $3,951,539, substituted as the plaintiff in the action.[2] On 26 August 2010 the solicitor for the defendant informed the Court that it disputed that the plaintiff was a creditor, that it claimed that it was solvent and that it was obtaining a report on its solvency which it expected to take six weeks. At the next hearing on 15 October 2010 counsel for the defendant informed me the accounting firm of Hall Chadwick had only just been instructed to prepare the necessary solvency report and it was unknown when it would be available. The plaintiff’s counsel sought to be supplied with the copies of the documents which the defendant had supplied to Hall Chadwick. At the next hearing on 29 October the defendant had still not received the report from Hall Chadwick and was unable to say when it would be received. In response to the plaintiff’s request to have the action disposed of expeditiously (and presumably within the time limit set by s 459R) I directed that the defendant was to file any affidavits relied upon to establish its solvency by 25 November 2010, it was to make disclosure to the plaintiff of all documents supplied to Hall Chadwick and to make those documents available for inspection within seven days of their disclosure. I adjourned the matter to a time for argument on all issues[3] on 30 November 2010 at 2.15pm.
[2] The references to the plaintiff in these reasons are to the Deputy Commissioner of Taxation.
[3] The defendant’s counsel had submitted that the matters in issue about whether the plaintiff was a creditor of the defendant and that the defendant was solvent could not be resolved until after pending proceedings between the defendant and the plaintiff in the Commonwealth Administrative Appeals Tribunal concerning the defendant’s claims for research grants had been resolved, but the plaintiff’s counsel pressed for a hearing date as soon as possible on the basis that the plaintiff would fail if it could not establish on a summary hearing its right to a winding up order on the evidence then before the Court.
On 19 November 2010 the defendant belatedly filed an appearance stating, inter alia, that one of its grounds of opposition was that it was solvent. On 29 November 2010 the defendant filed an affidavit of its director exhibiting a report dated that day, and 40 pages in length with its appendices, from Hall Chadwick, asserting that the defendant was solvent if its disputed debt with the plaintiff was determined in its favour.[4]
[4] In an earlier action the Full Court had found that the defendant had a genuine offsetting claim against the plaintiff for this debt. See Ozone Manufacturing Pty Ltd v Deputy Commissioner of Taxation (2006) 94 SASR 269. In this action the plaintiff is relying upon the presumed insolvency arising from the defendant’s failure to comply with the statutory demand served by Collison & Co.
At the hearing on 30 November the plaintiff sought an adjournment on the grounds that it wished to consider its position in the light of the report filed by Hall Chadwick and to decide whether to file answering affidavits or to obtain its own expert reports. I adjourned to a directions hearing on 9 December 2010. On that day the defendant indicated it wished to deliver a supplementary report from Hall Chadwick which would be delivered by 20 December. The plaintiff stated that it was in the process of instructing its own expert to get a responding report. The plaintiff’s counsel complained that the plaintiff had not yet been given all of the documents supplied by the defendant to Hall Chadwick or referred to in its report. The defendant’s counsel indicated these would be supplied ASAP. I then adjourned to a further directions hearing on 21 January 2011.
It is not necessary to recount the subsequent history of the matter in any detail. More affidavits and expert reports on solvency have been filed. The hearing of the dispute between defendant and the plaintiff in the AAT commenced in September 2011, but as far as I am aware it has not yet been determined. I have directed a hearing on the summary claim for winding up to commence before me on 7 November 2011 and have set aside 2 ½ days for it.
Until a directions hearing on 1 September 2011, everyone concerned in the matter had overlooked that the six months time limit imposed by s 459R(1) of the Act had expired on 24 December 2010. No order for an extension of the time had been sought or made. It is not suggested that this was other than a genuine oversight on the part of all concerned. The plaintiff has brought FDN 36 seeking the necessary extension of time nunc pro tunc.
Application under R242
Section 459R(2)(b) required that any extension of the six month period should be obtained before the initial six months expires. However it has been held that 6R242 can be used to order an extension nunc pro tunc after the six months have expired.[5]
[5] Timms v Dellaplus Pty Ltd (2008) 99 SASR 578; Elyard Corp Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385.
6R242 provides:
(1)     The Court may correct an error in a judgment at any time.
(2)     If satisfied that the justice of a case so requires, the Court may –
(a)     vary a judgment; or
(b)     set aside a judgment and reopen an action.
“Judgment” is defined in 6R4 to include an order or direction. The authorities cited referred to the use of the “slip rule”. This was a narrower rule in earlier versions of the Rules.[6] 6R242 is in much broader terms and probably confers a wider power on the Court than the old slip rule. Counsel for the plaintiff confined his submissions to the application of authorities under the “slip rule” and did not suggest that the width of 6R242, or the inherent jurisdiction of the Court, would enable the correction to be made if it could not be made under the slip rule.
[6] E.g. O 28 r 10 of the Supreme Court Rules 1947 “Clerical mistakes in judgments or orders, or errors arising therein from any accidental slip or omission, may at any time be corrected by the Court or a Judge upon motion or summons”.
It should also be noted that the fiat of 9 December 2010 was never sealed and the authorities about the power of a Court to correct an unsealed judgment could also be used,[7] but no reliance was placed on this power. Under the slip rule the Court could correct its order as from the earlier date on which it was made to make it read what the parties would have intended it to be at the time and would have been made but for the slip.[8]
[7] See Civil Procedure South Australia [6R 242.5].
[8] Timms v Dellaplus Pty Ltd above at [36].
In Amorin Constructions Pty Ltd v Kamtech Electrical Services Pty Ltd[9] Hammerschlag J considered what type of mistakes or errors could give rise to an application of the slip rule. He cited from the judgment of McHugh JA in Storey & Keers Pty Ltd v Johnstone[10] at [443] where he said:
The rationale of the slip rules requires that an omission or mistake should not be treated as accidental if the proposed amendment requires the exercise of an independent discretion or as a matter upon which a real difference of opinion might exist… in general the test of whether a mistake or omission is accidental is… if the matter had been drawn to the Court’s attention would the correction at once have been made?[11]
[9] (2008) 73 NSWLR 627
[10] (1987) 9 NSWLR 446
[11] Citation of authorities omitted.
He also cited with approval from the judgment of the Full Court of Victoria in Brew v Whitlock (No 3)[12]:
It is impossible, in our view, to apply the rule to a case where, on the application to correct the judgment, it is necessary to exercise an independent discretion, not only as to whether interest should have been awarded but also as to the rate at which it should run and as to the time from which it should run.
[12] [1968] VR 504.
Hammerschlag J held in the circumstances of the case before him that if the Judge making the order for the adjournment beyond the six months allowed by s 459R had considered s 459R, it was not inevitable that he would “at once” have made the extension order. Thus he held that the slip rule could not be utilised to extend the time under s 459R in that case after the six month period had expired.
While the fiats actually made by me on 9 December 2010 were uncontroversial, it is likely that if the point had then been raised that it was necessary to have a further order made on that day extending the time for the determination of the proceedings to avoid them being dismissed on 24 December 2010 by the operation of s 459R, it is highly likely that the defendant would have opposed such an order. There had been a long-running, protracted and hard fought dispute between the parties in both this action and its predecessor, action SCCIV-05-388. In this action the plaintiff was relying upon the presumed insolvency of the defendant arising from its non-compliance with the statutory demand of Collison & Co. The decision of the Full Court[13] precluded it from instituting its own proceedings for winding up against the defendant if this action was dismissed.[14] Any operation of s 459R(1) then to dismiss the action would have suited its purposes.[15]
[13] See footnote 4.
[14] There is no evidence that there was any other debt owed by the defendant to the plaintiff for which the plaintiff could serve a further statutory demand and to which the defendant could not raise the offsetting claim on which the defendant had been successful. The defendant had already made it clear that it wanted the AAT proceedings to be finalised before this action came on for any summary determination.
[15] There is no authority of which I am aware about what happens about the costs of an action if it is dismissed under S 459R(1). It may be that the defendant would have had to have borne its own costs if s 459R(1) had operated, but it is unlikely that it would have been prepared to have risked substantial further costs in defending the action merely in the hope of obtaining an order against the plaintiff for its costs if it was ultimately successful.
The plaintiff relied upon the decisions of Timms v Dellaplus Pty Ltd (above) and Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (above) as instances of where orders nunc pro tunc had been made under the slip rule to allow retrospective extensions of time under s 459R. However, in those cases the Courts had found that at the time of the making of the orders for adjournment the parties either had, or would have, consented to an order under s 459R to extend the time. Here, I find that there would not have been any such consent by the defendant.
If the issue of an extension of time under s 459R had been raised before me on 9 December 2010, or at any subsequent time before 24 December 2010, it is likely the extension would have been opposed by the defendant and it would have argued that there were not sufficient special circumstances to justify the extension being granted. In finding that any special circumstance existed I would have had to have exercised an independent discretion. It is not necessary to go into whether its opposition to an extension would have succeeded. It is sufficient to find that it was not a foregone conclusion. In other words, if the point had been raised I would not have made the order “at once”, but would have gone into the legal and factual issues in some detail, and probably at some length. The order made on 9 December 2010 was not made by consent, although both parties concurred in what I directed as being the appropriate next steps towards bringing the action to a summary hearing. If the time point under s 459R had been raised on 9 December, and I had not been prepared to grant an extension of the time, I would certainly have set a hearing date on or before 24 December for the summary determination. That may have meant that the plaintiff would have failed to obtain a summary order for winding up because it was not in a position to refute the Hall Chadwick report, but the action would have been disposed of in the six month time-frame allowed by s 459R.
Accordingly, paragraph 2, and therefore also paragraph 1, of FDN 36 must be refused. The effect of this is that this action stood dismissed by virtue of s 459R(1) as from 24 December 2010. If either party wishes to pursue any application for costs, I will give it the opportunity to do so.
I have today made the following orders:
1The orders sought in paragraphs 2 and 1 of FDN 36 are refused.
2Liberty to either party to make any application by interlocutory process for orders for costs.
3Hearings set for 7, 8 and 9 November 2011 vacated.
4Action finalised.