Gazal Apparel Pty Ltd v Davies - [2007] SASC 91

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
GAZAL APPAREL PTY LTD v DAVIES & ORS
[2007] SASC 91
Judgment of The Full Court
(The Honourable Chief Justice Doyle, The Honourable Justice Duggan and The Honourable Justice David)
16 March 2007
CORPORATIONS - WINDING UP - LIQUIDATORS
Appeal from an order of a Master allowing an extension of time in which to file an application for repayment of monies allegedly paid out as insolvent payments or unfair preferences - the respondents, having been appointed as liquidators on 29 September 2005, issued proceedings against the appellant relying on the extension of time ordered by the Master on 31 March 2004 prior to their appointment - the order of the Master was made on the application of the original liquidators - whether the wording of the order permitting "the plaintiffs" an extension of time applies for the benefit of the respondents who were not acting as the plaintiffs at the time the order was made - order obtained by original liquidators was obtained in their capacity as liquidators - application made by the current liquidators was made within the perioid ordered by the Master and is an application contemplated by that order - appointment of another person to act as liquidator following the making of the Master's order irrelevant - the order, having been made in favour of "the plaintiffs", is not to be read as limited in its application to the persons originally holding the office of the liquidators.
Held: appeal dismissed.
Corporations Act 2001 (Cth) s 511, s 588FA, s 588FC, s 588FE, s 588FF; Acts Interpretation Act 1901 (Cth) s 20, s 21, referred to.

GAZAL APPAREL PTY LTD v DAVIES & ORS
[2007] SASC 91
Full Court: Doyle CJ, Duggan and David JJ

DOYLE CJ. This appeal raises the issue of whether an application to the Court made by the liquidators of a company is made within time. The liquidators rely on an order extending time. That order was obtained by previous liquidators, and is expressed as an order in favour of “the plaintiffs”, rather than being in favour of the liquidators, or the liquidators from time to time, of the company. The submission on appeal is that only the former liquidators can rely on the order extending time, because it is limited to them as “the plaintiffs”. Unless some other solution is found, the application made by the present liquidators must be struck out.
I consider that the Judge rightly rejected that submission. It has no real merit. My reasons for so deciding follow.
Background
Mr Davies and Mr Nicol are the liquidators of Harris Scarfe Limited (Receivers and Managers Appointed) (In Liquidation) and of Harris Scarfe Wholesale Pty Ltd (Receivers and Managers Appointed) (In Liquidation). I will refer to Mr Davies and Mr Nicol as the current liquidators, and to the two companies simply as “Harris Scarfe”.
On 29 September 2005 the current liquidators issued proceedings against Gazal Apparel Pty Ltd (“Gazal”). They claim that payments made by Gazal to Harris Scarfe before the relation-back day of 3 April 2001 were insolvent payments for the purposes of s 588FC of the Corporations Act 2001 (Cth) (“the CA”) or were unfair preferences for the purposes of s 588FA of the CA and so are voidable transactions by virtue of s 588FE of the CA. On this basis they claim orders for payment of those moneys under s 588FF(1) of the CA.
Section 588FF(3) provides:
588FF(3)[Time limit on application under subs (1)] 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 made by the liquidator within those 3 years.
The proceedings by the current liquidators were not issued within three years after the relation-back day.
However, on 31 March 2004, which is within three years after the relation-back day, Mr Dwyer and Mr Maxsted, the original liquidators of Harris Scarfe, applied to the Court for an order fixing a longer period within which an application might be made against certain creditors, including Gazal.
Those proceedings identified Gazal as a company in relation to which a claim might be made, and in relation to which an order under s 588FF(3)(b) was sought. Gazal was not served with those proceedings.
On 14 April 2004, without hearing Gazal, a Master made orders that included the following order:
The period within which the plaintiffs may make an application under s 588FF(1) of the Corporations Act 2001 with respect to transactions alleged by them to be or to possibly be voidable transactions (not being transactions with identified creditors) be extended so as to expire at the conclusion of 2 October 2005.
It is not now disputed that despite the awkward wording, the order purports to extend the time for bringing proceedings against Gazal. In his reasons the Judge explains why the order can and should be read as affecting Gazal. That order has the effect of permitting an application under s 588FF(1) of the CA to be made against Gazal within the period expiring on 2 October 2005.
The issue, to which I will come in due course, is whether that order extends the period for the bringing of proceedings by “the plaintiffs” (the original liquidators) only, or whether it has effect to extend the time for the bringing of such proceedings by the current liquidators.
In the proceedings by the current liquidators against Gazal, the liquidators rely on this order to meet the obstacle that s 588FF(3)(a) would otherwise present. They rely upon that order as fixing a longer period for the purposes of their proceedings, the order having been made within three years after the relation-back day.
As it happens, the action by the current liquidators was commenced in the District Court, but has been transferred to this Court. Nothing turns on that.
After the action was transferred, Gazal (and other creditors against whom the current liquidators had brought claims) applied for an order striking out the Statement of Claim or permanently staying the proceedings.
A Judge of this Court dealt with that application, and with the applications made by the other creditors. They were dealt with together because the same issues were said to arise in each matter. I will confine my reasons to the application by Gazal, the only appellant before this Court.
Mr Hoffmann QC, counsel for Gazal, relies on the fact that the order made by the Master extending time was made in favour of “the plaintiffs”, meaning the original liquidators.
Mr Hoffmann submits that because of the manner in which the Master’s order is expressed, the order cannot be relied upon by the current liquidators. Because the current liquidators’ application is not made by “the plaintiffs” referred to in the Master’s order, they do not have the benefit of a court order fixing a longer period for the making of their application. He submits that the order sought and obtained from the Master should have been an order in favour of the liquidators of Harris Scarfe, or better still, in favour of the liquidators for the time being. Had the order been so expressed he appears to accept that his submission could not succeed.
Mr Hoffmann submits that a solution might be for the current liquidators to apply to be substituted as plaintiffs in the action in which the Master made his order. As it happens the current liquidators made such an application, by way of response to the application made by Gazal, but the Judge took the view that it was not necessary to make any such order. Mr Hoffmann submits that when the court order was made in January 2005 removing Mr Dwyer as liquidator (Mr Maxsted had resigned earlier) and appointing the current liquidators, the liquidators should have applied under s 511 of the CA for orders to the effect that they were entitled to rely on the Master’s order. He submits that it might still be possible to do this.
It is ironical that despite these apparently helpful suggestions, the Court is faced with an appeal challenging a decision by the Judge the effect of which is to deal with the problem in a different fashion.
I should add that the current liquidators also made an application, in the proceedings in which the Master made his order, for an order that the Master’s order be amended to refer to “the liquidators of the companies from time to time holding office”, rather than to the plaintiffs. The Judge took the view that there was no need to make that order either. The current liquidators have not appealed against the Judge’s refusal to amend the Master’s order, or against his refusal to substitute the current liquidators as plaintiffs.
The Judge’s decision
The parties formulated four questions which were said to be common to all of the applications before the Judge. The questions are:
1.Are the current liquidators as plaintiffs in the actions referred to in the schedule to these reasons entitled to rely on the order of Master Kelly made on 14 April 2004 in Action 351 of 2004 extending the limitation period under s 588FF(3) of the Act?
2.Does the order of Master Kelly made on 14 April 2004 in Action 351 of 2004 have the effect of extending the limitation period in respect of the claim of the current liquidators against Gazal Apparel Pty Ltd, Australian Weaving Mills Pty Ltd, and Sony Computer Entertainment Pty Ltd?
3.Is a creditor whose interests are affected by the order of Master Kelly made on 14 April 2004 extending the limitation period under s 588FF(3) of the Act entitled to apply as of right to set aside the said order?
4.If the answer to question 3 is yes, must the application seeking an extension of time be heard inter partes?
The Judge answered each of these questions in the affirmative.
It is the Judge’s answer to question 1 that is the subject of the appeal now before the Court.
The Judge made the point that the order obtained by the original liquidators was obtained in their capacity as liquidators of Harris Scarfe. The essence of his conclusion in favour of the current liquidators appears from the following portion of his reasons:
[32]… Where the person holding the office of liquidator changes during the course of the legal proceedings, it might be necessary to address particular questions such as undertakings given by the liquidator to the court or to a party to those proceedings but that fact does not gainsay the position that the orders of the court are always made in favour of the liquidator, not in favour of the individual for the time being holding that office. It follows that, in proceedings in which the liquidator is a party, the person holding the office of liquidator is bound by or has the benefit of orders made in those proceedings. So, if the person holding the office of liquidator is replaced by another, the person succeeding that office will be bound by or have the benefit of the orders made before being appointed to that office.
[33]Thus, on 14 April 2004, when Master Kelly made the orders in action number 351 of 2004, those orders were made in favour of Messrs Dwyer and Maxsted as liquidators of HSL and HSW. They were made in the course of the liquidation of each company. They were not made for any other purpose. The orders were made in favour of the persons holding the office of liquidator of HSL and HSW and are available to the person or persons for the time being holding the office of liquidator of each company. As Messrs Nicol and Davies have now been appointed as liquidators in place of the original liquidators, they are entitled to the benefit of the orders.
The Judge went on to add that this conclusion accorded with “reality and with the scheme of the Corporations Act”. He pointed to the practical problems that would arise otherwise.
Mr Hoffmann submits that the Judge is wrong. I summarise his submission as follows. First, there is no authority for the proposition that the removal and replacement of a liquidator carries with it the benefit of orders obtained by a former liquidator. Generally, a liquidator is in the same position as other litigants. The general rule is that a judgment or order is not binding on a person who is not a party to the proceedings in which it is granted. The current liquidators were not a party to the proceedings in which the Master made his order. Orders made against or in favour of a liquidator are, unless the order provides otherwise, made against or in favour of the person who is the liquidator and who is the party. They do not bind or benefit a later holder of the office. There is no provision in the CA which states that a liquidator is bound by or has the benefit of orders made against or in favour of a former liquidator.
Mr McNamara QC, counsel for the current liquidators, supports the Judge’s reasons. He submits that the Master’s order operates for the benefit of the person holding the office of liquidator, and not only for the benefit of the person who happened to be liquidator when the order was made. He makes the point that the order made by the Master was made in favour of the former liquidators but in their capacity as liquidators. He submits that the benefit of the Master’s order passes by devolution to the current liquidators, and that the appointment of the current liquidators operated to effect an assignment of the benefit of the order.
Disposition of appeal
I agree with the Judge’s conclusion.
I consider that the appeal can be decided by a slightly different route.
The question is whether the application by the current liquidators for orders under s 588FF(1) is made within the time fixed by s 588FF(3). The application was not made within three years after the relation-back day. The question is whether it was made within a longer period ordered by the Court “… on an application … made by the liquidator” within the three year period.
The application made by the current liquidators was made within the period ordered by the Master. It is an application contemplated by that order, to the extent that it is an application against Gazal based on s 588FE.
If the Master’s order can be said to be an application made by the liquidator, the application is made within time. That is the ultimate question. The submission by Mr Hoffmann is that because the order fixes a period within which “the plaintiffs” may make an application, it is not an order made on an application by the liquidator. It is an order made on an application by Mr Dwyer and Mr Maxsted, the former liquidators.
I reject that submission.
The Master’s order was made on an application made by the original liquidators of Harris Scarfe. When they made their application they were “the liquidator”. The order was made on application by the liquidator of Harris Scarfe.
It is, to put it bluntly, irrelevant that the application later made under s 588FF(1) of the CA is made by a liquidator who happens to be a different person. All that matters is that the Court fixed a longer period for an application under s 588FF(1) on the application of the or a liquidator of Harris Scarfe, and that within that period the or a liquidator of Harris Scarfe made an application for orders under s 588FF(1).
There is no reason to read these provisions in such a way that only the same person who as liquidator obtained an order fixing a longer period can bring an application under s 588FF(1) within that longer period, relying on that order. If that was the intention, I would have expected to find something in the terms of s 588FF to indicate that.
As a matter of ordinary drafting, there was no need for the drafter of the CA to refer in these provisions to the liquidator from time to time, or to define “liquidator” in the Dictionary in s 9 as meaning the liquidator from time to time. Had the drafter done so, that might have put an end to this argument, but I do not agree that absent such a provision s 588FF(3) should be read in the restricted manner suggested.
My view is that on ordinary drafting principles a reference to “the liquidator” in s 588FF(3) is a reference to the person who holds the office of liquidator from time to time.
It is possible that s 20 of the Acts Interpretation Act 1901 (Cth) has application here. It provides that a reference in an act to a person holding or occupying a particular office or position includes all persons who at any time occupy the office or position. If that provision applies, it operates to provide (if provision is necessary) that the reference in s 588FF(3)(b) to “the liquidator” operates as a reference to the person occupying the office of a liquidator from time to time, meaning that an order made on application by an earlier liquidator is to be treated as an order obtained on application by a later and current liquidator. However, it is not necessary to rely on s 20. Without hearing detailed submissions I do not do so. The reason for this is that s 20 might be limited to a reference to an office “in and for the Commonwealth”, because s 21 of the Act provides that references to an office are to be construed as references to an office “in and for the Commonwealth”.
The application by the current liquidators, now before the Court, is made by the liquidators of Harris Scarfe. It is made within the period fixed by an order made on an application by the liquidators of Harris Scarfe. That suffices. A change in the person or persons occupying that office is neither here nor there.
There is no need to draw on notions of devolution or of assignment. It suffices to say that when the original liquidators applied to the Court, they did so as liquidators of Harris Scarfe, as the Judge pointed out in the passage set out above.
It does not matter that the Master’s order refers to “the plaintiffs”. That is a reference to the original liquidators of Harris Scarfe. There is no reason to read the reference to “the plaintiffs” as turning the order into an order permitting the institution of proceedings only by the original liquidators.
For those reasons I would dismiss the appeal.
It is unnecessary, as the Judge said, to deal with the applications by the current liquidators to amend the Master’s order, or to substitute the current liquidators for the original liquidators. In some cases, some such order might be appropriate. For example, if the current liquidators were to retire, I assume that it would be appropriate to make an order substituting the replacement liquidators as plaintiffs in the action now before the Court. I can see no reason why that could not be done.
Other matters
The order drawn up as a result of the Judge’s decision requires attention, as I think Mr Hoffmann acknowledged in the course of his argument. The order stays the proceedings “pending the hearing and determination of the liquidators’ application for an extension of time for the commencement of the proceedings …”. This reflects the Judge’s decision that a creditor affected by the Master’s order is entitled as of right to have the extension of time set aside. The order contemplates that the current liquidators may renew that application (in the proceedings commenced on 31 March 2004) on notice to the relevant creditor.
But Mr Hoffmann told the Court that Gazal has not sought an order setting aside the Master’s order on the grounds that Gazal was not heard. Gazal has taken its stand on the point that the proceedings brought by the current liquidators are out of time.
That being so, the appropriate order in light of the Judge’s decision was an order dismissing Gazal’s application for an order striking out the Statement of Claim or staying the proceedings. The only point taken by Gazal has failed.
Conclusion

The appeal should be dismissed. However, it appears to be necessary to correct the order of the single Judge as drawn up.
DUGGAN J. I agree that the appeal should be dismissed for the reasons given by the Chief Justice.
DAVID J. I would dismiss the appeal. I agree with the reasons of the Chief Justice.