Fat 4 Pty Limited v Feber Distribution Pty Ltd
[2016] VSC 304
•2 June 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2015 04478
IN THE MATTER of FAT 4 PTY LIMITED (IN LIQUIDATION) (ACN 090 539 736)
| FAT 4 PTY LIMITED (IN LIQUIDATION) (ACN 090 539 736) | First Plaintiff |
| DANIEL JURATOWITCH AND BRUNO SECATORE AS JOINT AND SEVERAL LIQUIDATORS OF FAT 4 PTY LIMITED (IN LIQUIDATION) (ACN 090 539 736) | Second Plaintiffs |
| v | |
| FEBER DISTRIBUTION PTY LTD (ACN 122 529 999) | Defendant |
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JUDGE: | GARDINER AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 13 May 2016 |
DATE OF JUDGMENT: | 2 June 2016 |
CASE MAY BE CITED AS: | Fat 4 Pty Limited & Anor v Feber Distribution Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2016] VSC 304 |
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CORPORATIONS – Proceeding by liquidators claiming that payments made by company are voidable transactions under Part 5.7B of the Corporations Act 2001 (Cth) by reason of being unfair preferences and insolvent transactions – Incorrect defendant named as being the recipient of the payments – Application pursuant to rule 36.01 of the Supreme Court (General Civil Procedure) Rules 2015 to amend the name of the defendant to the party who beneficially received the payments – Bridge Shipping Pty Ltd v Grand Shipping S.A. (1991) 173 CLR 231 applied – Leave granted to amend name of defendant.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr T Greenaway | Mendelsons Lawyers |
| For the Defendant | Mr J O’Sullivan | Streeterlaw |
HIS HONOUR:
This is an application by interlocutory process dated 15 April 2016 in which the plaintiffs seek orders pursuant to r 36.01 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’) to substitute Some Agency Pty Ltd (‘Some Agency’) as the defendant in this proceeding in place of Feber Distribution Pty Ltd (‘Feber’). The interlocutory process also claimed relief under r 9.06 of the Rules but this was not pressed.
The interlocutory process is supported by an affidavit of one of the second plaintiffs, Mr Juratowitch, sworn on 13 April 2016. Feber and Some Agency rely on an affidavit of Mattias Leif Friberg sworn 27 April 2016. At the hearing of the application, Mr O’Sullivan, counsel for Feber, was given leave to cross-examine Mr Juratowitch on his affidavit.
Background
The second plaintiffs, Mr Juratowitch and Mr Secatore, are the joint and several liquidators (‘the liquidators’) of Fat 4 Pty Limited (‘the company’). The liquidators were appointed as joint and several administrators of the company on 28 August 2012. On 2 October 2012, the liquidators were appointed joint and several liquidators of the company by a resolution of creditors. Prior to the company going into administration, the company operated a retail fashion business from a number of locations in this State.
On 25 August 2015 the plaintiffs filed an originating process in which they claimed that certain payments totalling $109,439.34, received by Feber from the company during the six months ending on the relation-back day in the winding up of the company, were unfair preferences, insolvent transactions and voidable transactions pursuant to Part 5.7B of the Corporations Act 2001 (Cth) (‘the Act’).
Section 588FF(3) of the Act provides:
An application under subsection(1) may only be made:
(a) during the period beginning on the relation‑back day and ending:
(i) 3 years after the relation‑back day; or
(ii)12 months after the first appointment of a liquidator in relation to the winding up of the company;
whichever is the later; or
(b) [Not relevant for current purposes].
Section 9 of the Act defines ‘relation-back day’ as:
relation‑back day, in relation to a winding up of a company or Part 5.7 body, means:
(a)if, because of Division 1A of Part 5.6, the winding up is taken to have begun on the day when an order that the company or body be wound up was made—the day on which the application for the order was filed; or
(b)otherwise—the day on which the winding up is taken because of Division 1A of Part 5.6 to have begun.
Division 1A in Part 5.6 of the Act is concerned with when a winding up ‘is taken … to have begun’. Section 513B of the Act provides:
Where a company resolves by special resolution that it be wound up voluntarily, the winding up is taken to have begun or commenced:
(a)…
(b)if, immediately before the resolution was passed, the company was under administration – on the section 513C day in relation to the administration; or
(c)[not relevant];
(d)[not relevant];
(e)[not relevant].
The company was under administration immediately before the creditors resolved that it be wound up.
Section 513C of the Act provides:
The section 513C day in relation to the administration of a company is:
(a)if, when the administration began, a winding up of the company was in progress - the day on which the winding up is taken because of this Division to have begun; or
(b)otherwise – the day on which the administration began.
The ‘administration began’, on an application of ss 513B and 513C, on 28 August 2012. In these circumstances, the later of the two periods mentioned in s 588FF(3)(a) is three years after the relation-back day. Thus, the proceeding was brought three days before the limitation period fixed by s 588FF(3)(a)(i) expired. If it were not for the expiry of the limitation period, the plaintiffs could have applied under rule 9.06 of Ch I of the rules for the substitution of Some Agency for Feber as defendant. Rule 9.06 provides for the substitution of a person, who ought to have been joined as a party, for a person who was not a proper or necessary party. By operation of rule 9.11(3)(a) however, the proceeding against Some Agency would have been deemed to have commenced upon the amendment of the filed originating process. A defence would have been available to Some Agency that it was time barred by operation of s 588FF(3)(a)(i). Thus any application for substitution of Some Agency for Feber would likely have been refused because it would have been futile in the light of the limitations defence available to Some Agency.[1]
[1]See Bridge Shipping Pty Ltd v Grand Shipping SA & Anor (‘Bridge Shipping’) (1991) 173 CLR 231 at 235-236 per Dawson J.
On 18 September 2015 I made orders, inter alia, that the matter proceed by way of pleadings and that the Statement of Claim exhibited[2] to the affidavit of Mr Juratowitch sworn 25 August 2015, stand as the Statement of Claim. The relevant paragraphs of the Statement of Claim stated as follows:
[2]Exhibit DJ-5.
8.During the Relation Back Period, the Company made payments or caused payments to be made in the aggregate amount of $109,439.34 to the Defendant in respect of unsecured debts that the Company owed to the Defendant (payments)
[the payments sought to be declared void are set out as particulars subjoined to that paragraph].
9The Payments are transactions within the meaning of section 588FA and as defined in section 9 of the Act.
10.The Company and the Defendant were parties to the making of each of the Payments.
11.The Payments were made in respect of unsecured debts owed by the Company to the Defendant.
12.The Payments resulted in the Defendant receiving from the Company, in respect of an unsecured debt that the Company owed to it, more than the Defendant would receive from the Company in respect of the debt if the Payments were set aside and the Defendant were to prove for the debt in the winding up of the Company.
In its defence filed 22 October 2015, in response to those paragraphs, Feber stated as follows:
8. In answer to paragraph 8 of the Statement of Claim, the Defendant:
(a)admits that it received each of the payments listed therein (“Payments”);
(b)says further that during the period 29 February 2012 to 28 August 2012, it supplied the First Plaintiff with goods;
(c)says further that the Payments formed part of a running account within the meaning of s 588FA(3) of the Act;
(d)says further, or in the alternative, that the Payments were, for commercial purposes, an integral part of a continuing business relationship between the Defendant and the First Plaintiff; and
(e)says further that the First Plaintiff made the Payments to secure the ongoing supply to it of goods from the Defendant.
9. In answer to paragraph 9 of the Statement of Claim, the defendant:
(a)admits that the payments were “transactions” within the meaning of section 588FA and section 9 of the Corporations Act 2001 (Cth) (‘Act’); and
(b)says further that it does not admit, in the circumstances of this case, that the Payments were, in isolation, the relevant “transaction” for the purpose of s 588FA(1) of the Act.
10. The Defendant admits paragraph 10 of the Statement of Claim.
11. In answer to paragraph 11 of the Statement of Claim:
(a)the Defendant does not admit paragraph 11 of the Statement of Claim; and
(b)refers to and repeats paragraph 8 above.
12.The Defendant does not admit paragraph 12 of the Statement of Claim.
On 30 October 2015, the plaintiffs made a request for further and better particulars of the facts contained in paragraph 8 of the defendant’s defence.
On 6 November 2015, Feber’s solicitors responded to that request. Appended to the response were what was described as documents supporting the further and better particulars. Those documents included tax invoices issued by Some Agency. In letters dated 25 January 2016 and 28 January 2016, Feber’s solicitors stated that:
(a) The payments made by the company were for goods which were supplied to it by Some Agency, i.e. not Feber;
(b) The company made some payments to Feber in error;
(c) Feber was not entitled to any of the payments; and
(d) All payments made by the company were ultimately received by Some Agency.
Enclosed with the 28 January 2016 letter was a proposed amended defence in which it was contended that Some Agency was the person who was legally and beneficially entitled to receive and retain the payments referred to and that Feber transferred each of the payments to Some Agency on or about the end of the month in which it received each of the payments the subject of the current proceeding. In addition, it contended that from 29 February 2012 to 28 August 2012 Some Agency, rather than Feber, supplied the company with goods.
The plaintiffs make application pursuant to r 36.01 of the Rules which provides as follows:
36.01 General
(1) For the purpose of—
(a)determining the real question in controversy between the parties to any proceeding; or
(b) correcting any defect or error in any proceeding; or
(c) avoiding multiplicity of proceedings—
the Court may, at any stage order that any document in the proceeding be amended or that any party have leave to amend any document in the proceeding.
(2) In this Order “document” includes—
(a) originating process;
(b) an indorsement of claim on originating process; and
(c) a pleading.
(3)An indorsement of claim or pleading may be amended under paragraph (1) notwithstanding that the effect is to add or substitute a cause of action arising after the commencement of the proceeding.
(4)A mistake in the name of a party may be corrected under paragraph (1), whether or not the effect is to substitute another person as a party.
(5)Where an order to correct a mistake in the name of a party has the effect of substituting another person as a party, the proceeding shall be taken to have commenced with respect to that person on the day the proceeding commenced.
(6)Notwithstanding the expiry of any relevant limitation period after the day a proceeding is commenced, the Court may make an order under paragraph (1) where it is satisfied that any other party to the proceeding would not by reason of the order be prejudiced in the conduct of that party's claim or defence in a way that could not be fairly met by an adjournment, an award of costs or otherwise.
(7)For the purpose of paragraph (6) any other party to the proceeding includes a person who is substituted as a party by virtue of an order made to correct a mistake in the name of a party.
(8)Paragraph (6), with any necessary modification, applies to an application under Rule 14.03(2).
(9)Paragraph (1) shall not apply to the amendment of a judgment or an order.
The application is opposed. At the hearing of this matter, Mr O’Sullivan of counsel, who appeared on behalf of Feber also sought to be heard on behalf of Some Agency, which, although not currently a party to the proceedings, its interests are directly affected by the plaintiffs’ application. Mr Greenaway, counsel for the plaintiffs, did not resist this course.
The Plaintiffs’ Evidence
In his affidavit sworn 13 April 2016, Mr Juratowitch states that the director of the company supplied him with certain books and records of the company, including supplier invoices and correspondence. He says that from his investigations he identified that the company made 14 payments totalling $109,439.34 to a creditor during the period 1 March 2012 to 27 August 2012. He identified that creditor by reference to the following:
(a) the company’s supplier ledger referred to the supplier as ‘Dr Denim/Some Agency, 72B Fitzroy Street, Surrey Hills, New South Wales 2010’;
(b) the company’s MYOB data records the email address for Dr Denim/Some Agency as ‘[email protected]’;
(c) the names ‘Dr Denim’ and ‘Some Agency’ were not associated with any business names registered with ASIC;
(d) the company’s electronic payments register described payments as having been made to the named bank account ‘Feber Dist Pty Ltd’;
(e) an ASIC historical search for Feber disclosed that 72B Fitzroy Street, Surrey Hills, New South Wales 2010 was the address of the registered office of Feber and that Mattias Friberg was the sole director and secretary of Feber. That address matched the one recorded in the MYOB supplier ledger referred to;
(f) email correspondence which passed between representatives of the company and Mr Friberg contained reference to ‘Some Agency’ and ‘Dr Denim’, however they did not list an ABN or ACN. Emails dealing with account numbers were often copied to ‘accounts Feber Distribution and Some Agency’;
(g) the Some Agency website states one of its brands is Dr Denim Jeans Makers (‘Dr Denim’) and provides a link to the website. The Dr Denim website states that it is owned and operated by Feber, and a search conducted on ausregistry.com.au reveals the website as registered in the name of Feber;
(h) the Dr Denim website states that when an order is placed through the website a ‘contract with Feber will only come into existence when Feber advises you by email that it has accepted your order and confirmed receipt of your payment’;
(i) the Some Agency website states its online store is called ‘Some Place’ and provides a link to the website for that name. The Some Place website states it is owned and operated by Feber and a search conducted on ausregistry.com.au reveals the website is registered in the name of Feber;
(j) the Some Place website states that when an order is placed through the website a ‘contract with Feber will only come into existence when Feber advises you by email that it has accepted your order and confirmed receipt of your payment’;
(k) Mr Juratowitch instructed his lawyers to issue a letter of demand to Feber on 28 October 2014, and by a letter dated 7 November 2014, Feber’s solicitors acknowledged receipt of that letter and advised that they acted for Feber and that they would obtain instructions and respond in approximately one month; and
(l) on 9 December 2014, the solicitors for Feber requested further particulars of the claim, however, they did not suggest that the demand was misdirected.
On the basis of these matters, Mr Juratowitch states that he instructed his solicitors to issue an originating process against Feber for orders pursuant to s 588FF of the Act.
The Defendant’s Evidence
In his affidavit filed in opposition to the application sworn 27 April 2016, Mattias Friberg states that he is a director of both Feber and Some Agency.
He states that on or about 28 April 2011 he sent an email to all wholesale customers of Feber, which included the company, enclosing the proposed new trading application for Some Agency. In that email he stated:
From June 1 all sales of Dr Denim Jeansmakers, Gram and Resterods will be handled by Some Agency Pty Ltd instead of Feber Distribution Pty Ltd.[3]
[3]Affidavit of Mattias Leif Friberg sworn 27 April 2016, paragraph 4.
On 18 July 2011, the company completed an application for a trading account with Some Agency. The trading account application included the full name and ACN of Some Agency.
On 29 August 2012, the day after the company went into administration, Mr Friberg contacted Mr Nicholas Mann who was a senior manager at Cor Cordis Chartered Accountants, of which the liquidators are principals. He states that in his dealings with the administrators he would introduce himself as ‘Mattias from Some Agency’ and he was quite certain that he would never have introduced himself as ‘Mattias from Feber Distribution’. On 29 August 2012 he emailed Mr Mann with a copy of all outstanding invoices due to Some Agency. Receipt of this documentation, including the trading application and the invoices was acknowledged by Mr Mann. In early September 2012 there was correspondence from the administrators regarding Some Agency’s retention of title claim and Mr Friberg’s nomination to the committee of creditors at the first meeting of creditors held on 7 September 2012.
On 24 September 2012, the administrators published a report pursuant to s 439A of the Act. The report included a listing of Mr Friberg as a representative of Some Agency and a reference to ‘Dr Denim/Some Agency as being an unsecured creditor of the first plaintiff in the sum of $84,725.52’. There was no reference to ‘Feber’, ‘Feber Distribution’ or ‘Feber Distribution Pty Ltd’ in the appendix to the report listing the creditors.
Mr Friberg deposes that in respect of the payments, amounts totalling $87,491.84 were received by Feber from the company. Amounts totalling $21,947.50 were received by Some Agency from the company.
Mr Friberg states that prior to the execution of the trading account application, Feber was supplying goods to the company, but, from 18 July 2011, all invoices issued and goods supplied to the company originated from Some Agency. In the company’s MYOB card list, the companies’ account is given the nickname ‘Dr Denim/Some Agency’. The trading account application completed identified mailto:[email protected] as the email address for Some Agency. On 5 April 2011, Mr Friberg sent an email to Ms Brown, an employee of the company, requesting that the records be amended to update the accounts email to [email protected].
Mr Friberg states that on each of the invoices from Some Agency there was a footer providing that payments for the invoices be made to Some Agency. In the cheques payment section it added the words ‘please make cheques out to Some Agency PL not to Dr Denim, Gram or Resterods’. Mr Friberg states that Some Agency and Feber are separate entities running separate businesses. Some Agency deals with suppliers for wholesale fashion and Feber deals directly with the public as a separate retail business. Mr Friberg states he recalls having conversations with Ms Purtell, a director of the company, stating that the accounts were still being paid to Feber, necessitating a monthly reconciliation. He requested that this position be rectified. When the payments continued to be directed to Feber he requested an employee of Some Agency, Ms Robertson, to write to Ms Brown telling her to rectify the records.
In his submissions and in his cross-examination of Mr Juratowitch, Mr O’Sullivan put that the naming of Feber, as the defendant in the proceeding, should be viewed against the background of the company’s internal documentation, which revealed that Some Agency and not Feber was the appropriate creditor, and that the liquidators had been made aware of this very early in the piece, shortly after their appointment as administrators. For this reason, Mr O’Sullivan contended, the nomination of Feber as defendant was advertent and not a mistake. He characterised it rather as an error as to law rather than a mistaken naming of a party.
Legal Principles
In Bridge Shipping,[4] the High Court considered the principles applicable to the exercise of power under r 36.01 of the Rules. Both counsel agreed that Bridge Shipping is the leading authority on the issue for current determination and summarises the principles applicable to the exercise of the power under r 36.01, specifically r 36.01(4). It is for this reason that I consider it appropriate to refer at length to the reasons of the plurality which deal with the very rule under consideration here.
[4](1991) 173 CLR 231.
In Bridge Shipping, a vessel left Brazil en route to Melbourne with a load of 32 containers of tobacco owned by Phillip Morris. Phillip Morris had engaged Bridge to arrange the carriage of the goods. Bridge was unaware of the identity of the carrier. The ship’s master issued bills of lading in respect of the tobacco but the bills did not name the carrier. Upon arrival in Melbourne, a number of containers were missing and the contents of others were damaged.
Phillip Morris issued a writ claiming damages against Bridge. Bridge sought contribution from the person responsible for the damage. Its solicitor conducted a search of the Lloyd’s register and that search revealed that the registered owner of the vessel was Grand Shipping SA (‘Grand’). Bridge issued a thirty party notice against Grand. When Grand delivered its defence to the third party claim, it was only then that the solicitor for Bridge discovered that, by a bare boat charter agreement made several years before, Grand had chartered the vessel to Rainbow Line SA (‘Rainbow’) and that Rainbow had been the carrier of the tobacco.
By the time the defence to the third party proceedings was delivered, the time for suing Rainbow for indemnity or contribution had expired and Bridge, in order to overcome this difficulty, made application under r 36.01 to substitute Rainbow as a party for Grand.
The matter ultimately came before the High Court for consideration. The majority judgment was delivered by McHugh J who reviewed the history of the rule in the United Kingdom before its introduction in Victoria. At p 260 McHugh J stated:
Rule 36.01(4) is a remedial rule and should be given a beneficial interpretation. It is proper to give it the widest interpretation which its language will permit. It should be interpreted to cover not only cases of misnomer, clerical error and misdescription but also cases where the plaintiff, intending to sue a person he or she identifies by a particular description, was mistaken as to the name of the person who answers that description’.
And at 261:
To give the rule the meaning for which Bridge contends does not mean that a person can sue any person and then at a later time substitute another person for the original defendant. The rule imposes three limitations on a person’s right to amend. First, there must be a mistake. Secondly, the mistake must be “in the name of a party”. Thirdly, the court may only make the order where it is satisfied that any other party to the proceeding would not by reason of the order be prejudiced in the conduct of his or her claim or defence in a way that could not be fairly met by an adjournment, an award of costs or otherwise: 36.01(6).
McHugh J then moved on to consideration of the terms of the statement of claim. He said (at 261):
Paragraph 3 of the statement of claim, which Bridge served with the third party notice, alleged that “Grand Shipping is and at all times material was the owner of the vessel ‘Green Sand’.” Paragraph 5 alleged that the bill of lading, issued in respect of the 32 containers of tobacco, “was issued on behalf of the authority of the Master of the said ship”. Paragraph 6 alleged that Grand owed to Bridge “in relation to the voyage in respect of which the bill was issued a duty” to make the ship seaworthy, to properly man and equip it and to make those parts of the ship carrying the cargo fit and safe for the “reception, carriage and preservation thereof”. Paragraph 7 alleged a further or alternative duty “to keep and care for the cargo and containers”.
My initial reaction to this statement of claim was that, despite its form, Bridge had impliedly intended to sue the carrier of the tobacco but was mistaken as to its name. But further thinking on the matter has caused me to change my mind. The conclusion that Bridge impliedly intended to sue the carrier is inconsistent with the terms of the statement of claim, with the inferences to be drawn from that document, and with the affidavit evidence of Bridge’s solicitor seeking to explain the mistake.
If Bridge had intended to sue the carrier and had mistakenly believed that the name of the carrier was Grand, it would follow that Bridge had made a mistake “in the name of the party”. In the Al Tawwab, Lloyd LJ said:
In one sense a plaintiff always intends to sue the person who is liable for the wrong which he has suffered. But the test cannot be as wide as that. Otherwise there could never be any doubt as to the person intended to be sued, and leave to amend would always be given. So there must be some narrower test. In Mitchell v Harris Engineering the identity of the person intended to be sued was the plaintiff’s employers. In Evans v Charrington, it was the current landlord. In Thistle Hotels v McAlpine the identity of the person intending to sue was the proprietor of the hotel. In The Joanna Borchard it was the cargo-owner or consignee. In all these cases it was possible to identify the intending plaintiff or intended defendant by reference to a description which was more or less specific to the particular case. Thus if, in the case of an intended defendant, the plaintiff gets the right description but the wrong name, there is unlikely to be any doubt as to the identity of the person intended to be sued. But if he gets the wrong description, it will be otherwise.
The statement of claim in the present case does not indicate that Bridge sued Grand because it believed that Grand was the carrier but was mistaken as to the name of the carrier. To the contrary, the allegation in par.3 that Grand was “the owner of the vessel” at all material times indicates that Bridge intended to sue Grand because it believed that Grand was the owner of the vessel. The correctness of that conclusion is confirmed by the affidavit of Bridge’s solicitor who swore that he “was concerned to preserve Bridge Shipping’s rights against the Owner of such vessel.
Bridge made no mistake as to description of the party which it wished to sue. It intended to sue the owner and did so. Bridge’s mistake was not one of misnomer, clerical error or misdescription. Nor was it one where, intending to sue a person whom it identified by a particular description, it was mistaken as to the name of the person who answered that description. The present case is different, therefore, from Lloyd Steel where Clarke J accepted that the plaintiff’s solicitor had “instituted the proceedings because he believed, as a result of his searches of the (Lloyd’s) Register, that the first named defendant in each case was the carrier”. The mistake which Bridge made was that it believed that it had rights against the owner of the vessel. But that was not a mistake “in the name of a party”.
In BKA Practice Co Pty Ltd v Viking Group Holdings Pty Ltd,[5] Hargrave J considered an application where, as here, the liquidator had mistakenly named a company and not the proper party, a partnership, as defendant in a voidable transaction proceeding. In that case, for a number of years two solicitors had conducted a legal practice in partnership but caused a company to be incorporated, with a view to selling the partnership business to the company, and the company thereafter conducting the legal practice previously conducted by them as partners. As part of the transfer of the business, the contract of sale provided that the assets sold by the partners did not include the debts owing to the partnership on the date of settlement. Accordingly, all of the debts owed to the partnership up to and including the settlement date remained partnership property. On and from the settlement date, the company was registered as the owner of the business and from that time it conducted business as the proprietor of the name under a different ABN than that used by the partnership. The company collected fees on the partnership’s behalf and accounted for them. One of the partnership’s clients was a company which subsequently went into liquidation, Viking Group Holdings (‘Viking’). The partnership issued invoices to Viking over the years. On the last day that the partnership traded, it issued a final invoice to Viking, and Viking arranged for payment of the invoice shortly afterwards. As such, the company was not a creditor of Viking at the time the $200,000 was paid. Under the terms of the contract of sale, it received the payment as agent of the partnership.
[5][2015] VSC 699 (‘BKA’).
Viking was ordered to be wound up in insolvency and a liquidator was appointed. Sometime afterwards the liquidator instructed his solicitors to prepare and commence a proceeding to recover the $200,000 payment as a voidable transaction under s 588FF of the Act on the ground that the payment in receipt of that amount constituted unfair preferences under s 588FA of the Act. By reason that the winding up application was filed on 18 August 2011, the liquidator had until 18 August 2014 to commence any application under s 588FF(1) within the time prescribed by sub-s (3).
In order to determine the identity of the proposed defendant, the liquidator’s solicitors conducted a number of company and business name searches and inspected Viking’s records concerning its dealings with the solicitors. Those records included invoices from both the partnership prior to 2011 and from the company after 1 July 2011. Hargrave J observed that if the solicitors had considered those invoices carefully, they would have discovered that the partnership was the creditor of Viking Group rather than the company. On those facts, the solicitors ought to have concluded that any proceeding under s 588FF should name the partnership as the defendant and not the company, however, the claim was issued against the company. The mistake was discovered after the limitation period had expired, as here. The liquidator applied to the Court for an order under r 36.01 of the Rules correcting the mistake in the name of the defendant so as to substitute the partnership for the company.
The application was supported by an affidavit of the liquidator’s solicitor. She deposed that the mistake she made was her conclusion that the company was the entity which acted as the former lawyers for Viking at the relevant time and should be named as the defendant in the proceeding and it was always the intention of the plaintiffs to commence the proceeding against the former lawyers of Viking who had provided legal services to Viking. She then deposed that on the information then available, the partnership ought to have been named as the defendant in the proceeding and this was a mistake in the name of the proper defendant.
After making reference to passages of Bridge Shipping which are extracted above, Hargrave J observed (at [29])
…this was a case where the liquidator “intended to sue the solicitor that provided the services and received payment”. In other words, that the liquidator intended to sue the legal practice which had provided the services and issued invoices, which remained unpaid, at the date the $200,000 was paid. Only one person satisfies that description on the evidence – the partnership. On appeal, the company acknowledges that if [the associate judge] was correct in considering that the application was governed only by r 36.01 and the principles stated in Bridge Shipping, there was no error in his Honour’s exercise of the discretion.
In PD Enterprises Limited v Pacific Brands Clothing Pty Ltd,[6] Kyrou J heard an appeal from a decision that granted leave to the plaintiff to amend its statement of claim to change the name of the defendant from Pacific Brands Limited to Pacific Brands Clothing Pty Ltd. The plaintiff was a Hong Kong company manufacturing and supplying clothing and commenced proceedings alleging that Pacific Brands Limited had breached its obligations as purchaser under a supply contract. Shortly afterwards, the solicitors for Pacific Brands Group informed the plaintiff’s solicitors that the purchaser under the supply contracts was Pacific Brands Clothing Pty Ltd. The plaintiff ultimately accepted this contention and applied for and was granted leave to amend the name of the defendant under r 36.01(4) of the Rules on the basis that the plaintiff had mistaken the name of the defendant. In his reasons, when dismissing the appeal, Kyrou J made extensive reference to Bridge Shipping. His Honour observed (at [32]):
Had the plaintiff’s solicitors conducted basic company and business name searches prior to the commencement of this proceeding, they would have discovered the correct name of the defendant and no amendment would have been required. However, the reasonableness of the plaintiff’s error in mistaking the name of the defendant is not relevant to the granting of leave under r 36.01(4) of the Rules.
[6][2012] VSC 494 (‘PD Enterprises’).
Consideration
It seems clear that, in this instance, had those who had the responsibility to review the documents to identify the proper defendant thoroughly investigated and considered the position, they would have identified Some Agency and not Feber as the proper defendant. However, as Kyrou J as observes the reasonableness of the plaintiffs’ error is not relevant to the grant of leave here.[7]
[7]See also BKA.
In my view, the plaintiffs should be granted the leave which they seek to substitute Some Agency as the defendant in the proceeding. It is clear from the terms of the statement of claim that the intention of the plaintiffs was to sue the creditor who had been paid the funds in respect of the unsecured debts that the company owed to that party. It is obvious from the paragraphs of the statement of claim which I have extracted above that the plaintiffs mistakenly considered when the claim was issued (and that is the time where the situation must be considered)[8] that the payments the subject of the claim were made in respect of unsecured debts owed by the company to Feber. Indeed, Feber’s own lawyers acted under the same misapprehension when drawing the defence. In that defence, Feber admitted that it had received each of the payments, that it had supplied the company with goods, that it formed part of a running account (or continuing business relationship, as it is described in s 588FA(3) of the Act) and that the payments were made to secure the ongoing supply of goods from Feber. It seems that it was only after Feber’s lawyers reviewed the documents themselves that they discovered the error and raised the issue in response to the plaintiffs’ request for further and better particulars. I reject Mr O’Sullivan’s submission that the selection by the plaintiffs of Feber as defendant was deliberate and advertent.
[8]PD Enterprises at [19], [23].
In my view, the circumstances in this case meet the three limitations set out in Bridge Shipping. First, in my view there has clearly been a mistake. Secondly, the mistake is, in the relevant sense, in the name of the party. Thirdly, Mr O’Sullivan was not able to convince me that any prejudice of the relevant type would ensue by reason of the amendment. The amendment will result in minimal changes to the text of the statement of claim. It has not been said that if Some Agency is named in the statement of claim as being the party who beneficially received the payments, that any prejudice of the relevant kind will ensue. Feber and Some Agency retain the same solicitor and Mr Friberg is the director of both companies. There will be very little in the way of costs thrown away.
I consider that the plaintiffs have made a mistake made in the name of the party in the sense contemplated by r 36.01(4). Mr O’Sullivan, counsel for Feber, sought to make much in cross‑examination of Mr Juratowitch’s being fixed with knowledge that Some Agency was the contracting party, and that the decision to sue Feber was deliberate and no mistake was made in the name of the party. The terms of the statement of claim make it clear that the plaintiffs had intended to sue the party who received the payment, the unsecured creditor, Some Agency. It is unlike the situation in Bridge Shipping where Bridge advertently intended to sue the ship owner. The situation is like those which are given as exemplars in the case of Al Tawwab quoted by McHugh J and indicated above where the intended defendants were able to be identified by reference to a description, in that case, employers, landlords, proprietors of hotels or the cargo owner or consignee. Similarly in the Viking case the intended defendant was the entity mistakenly identified by reference to as the creditor who had received the relevant payment.
As McHugh J observes in Bridge Shipping, r 36.01(4) is a remedial rule and should be given a beneficial interpretation. It can be used in cases where the plaintiff intending to sue a person he or she identifies by a particular description is mistaken as to the name of the person who answers that description.
I would grant the leave which is sought in the interlocutory process to substitute Some Agency for Feber. I will hear the parties on the appropriate orders to be made.
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