In the matter of Cardinal Group Pty Limited (in liquidation)

[2015] NSWSC 1761

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Cardinal Group Pty Limited (in liquidation) [2015] NSWSC 1761
Hearing dates:	9 November 2015
Decision date:	25 November 2015
Jurisdiction:	Equity - Corporations List
Before:	Black J
Decision:	The Plaintiffs be granted leave to file an Amended Statement of Claim in the form of Annexure “A” to the Notice of Motion filed 8 September 2015. The Plaintiffs pay the costs thrown away by reason of the amendment
Catchwords:	PRACTICE AND PROCEDURE – application to amend Statement of Claim – where amendments sought to extend the period within which unfair preferences, insolvent transactions and voidable transactions were pleaded – where amendments affected by Corporations Act 2001 (Cth) s 588FF(3) – whether to allow amendments pursuant to Civil Procedure Act 2005 (NSW) CORPORATIONS – winding up – interpretation of ‘transaction’ under Corporations Act 2001 (Cth) s 588FF(1).
Legislation Cited:	- Civil Procedure Act 2005 (NSW) ss 56, 57, 58, 64, 65, 65(2)(c), 65(3) - Corporations Act 2001 (Cth) ss 9, 588FA, 588FC, 588FE, 588FF, 588FF(1), 588FF(3), 588FF(3)(a), 588FF(3)(b), 588FG(2) - Judiciary Act 1903 (Cth) s 79
Cases Cited:	- Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 - Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 - BP Australia Ltd v Brown [2003] NSWCA 216; (2003) 58 NSWLR 322 Capital Finance Australia Ltd v Tolcher [2007] FCAFC 185 - Davies v Chicago Boot Co Pty Ltd (No 2) [2007] SASC 12; (2007) 96 SASR 164 - Dymocks Book Arcade Pty Ltd v Capral Ltd [2011] NSWSC 1423 - Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 - Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2015] HCA 10; (2015) 89 ALJR 425 - Gordon v Tolcher [2006] HCA 62; (2006) 231 CLR 334 - Grant Samuel Corporate Finance Pty Ltd v Fletcher [2015] HCA 8; (2015) 89 ALJR 401 - Greig v Stramit Corporation Pty Ltd [2004] 2 Qd R 17 - Hall v Poolman [2009] NSWCA 64; (2009) 71 ACSR 139 - New Cap Reinsurance Corporation Ltd (in liq) v Reaseguros Alianza SA [2004] NSWSC 787; (2004) 186 FLR 175 - Re Employ (No 96) Pty Ltd (in liq) [2013] NSWSC 61; (2013) 93 ACSR 48 - Rodgers v Federal Commissioner of Taxation (1998) 88 FCR 61; 29 ACSR 270 - Star v National Australia Bank Limited [1999] NSWSC 305; (1999) 30 ACSR 583
Category:	Procedural and other rulings
Parties:	Cardinal Group Pty Limited (in liquidation) (First Plaintiff) Richard Andrew Stone and Peter William Marsden in their capacity as joint and several liquidators of Cardinal Group Pty Limited (in liquidation) (Second Plaintiff) Sydney Recycling Park Pty Limited (formerly known as NSW Investments Pty Limited) (Defendant)
Representation:	Counsel: M A Karam/G P Gee (Plaintiffs) J Giles SC/J Granger (Defendant)   Solicitors: Dibbs Barker (Plaintiffs) Mills Oakley (Defendant)
File Number(s):	2014/364443

Judgment

1. By Originating Process filed on 11 December 2014, the Plaintiffs, Cardinal Group Pty Limited (in liq) (“Company”) and Messrs Richard Stone and Peter Marsden in their capacity as its joint and several liquidators (“liquidators”) brought recovery proceedings against Sydney Recycling Park Pty Ltd (“SRP”) under s 588FF of the Corporations Act 2001 (Cth). The Company provided waste management and skip bin services and SRP supplied tipping services to the Company, and an associated company of SRP had previously also sold a business to the Company.

2. The liquidators claimed a declaration that payments made by the Company to SRP in the period 17 June 2011 to 2 December 2011 in the amount of $280,000 were unfair preferences pursuant to s 588FA of the Corporations Act, insolvent transactions pursuant to s 588FC of the Corporations Act and voidable transactions pursuant to s 588FE of the Corporations Act, and an order that SRP pay $280,000 to the Company and the liquidators under s 588FF of the Corporations Act and interest on that amount. The proceedings continued by Statement of Claim filed on 10 February 2015. By its Defence filed on 13 March 2015, SRP puts in issue whether the relevant payments were made in respect of unsecured debts, whether the Company was insolvent at the time they were made or became insolvent as a result of them, and seeks to establish a good faith defence under s 588FG(2) of the Corporations Act.

The proposed amendments and the parties’ evidence

3. By a Notice of Motion filed on 8 September 2015, the Company and the liquidators seek leave to file an Amended Statement of Claim in the form annexed to that motion. The proposed Amended Statement of Claim would extend the end of the time period of the claim to 13 December 2011 and increase the amount of the claim to $494,168.58. First, the proposed Amended Statement of Claim seeks to make an amendment to paragraph 7 of the Statement of Claim, increasing the amount claimed from $280,000 to $340,000 by identifying three further transactions on 24 November 2011, 9 December 2011 and 12 December 2011 which are said to constitute unfair preferences and voidable transactions on the same basis as the other payments. The Company and the liquidators contend that the further payments arise from substantially the same facts as those giving rise to the existing cause of action.

4. Second, the proposed Amended Statement of Claim also seeks to introduce a new allegation to the Statement of Claim namely that:

“In July 2011 the Company entered into an arrangement with [SRP] whereby the Company agreed to set-off the sum of $154,168.58 inadvertently paid by the Company’s customers to a company associated with [SRP] against liabilities owed by the Company to [SRP] (“Contra Payments”).”

That allegation is further particularised by reference to the fact that the Company entered into a purchase contract with Smart Skip (NSW) Pty Ltd (“Smart Skip”) on 2 December 2010 to acquire a business known as Smartskip NSW; Smart Skip was owned by Wanless Enviro Asset Management Pty Ltd (“WEAM”), a company of which the sole director and shareholder of SRP, Mr Wanless, was also the director and shareholder; some of Smart Skip’s customers made payments to WEAM rather than to the Company following completion of the Company’s purchase of Smart Skip; and, in accordance with the alleged set-off agreement, amounts were credited to debts owed by the Company to SRP in the amount of $100,000 on 27 July 2011 and $54,168.58 on 29 July 2011 (“Contra Payments”). The Amended Statement of Claim otherwise advances the same allegations in respect of the Contra Payments as in respect of the pleaded payments.

5. The Company and the liquidators read the affidavit of Mr Richard Stone sworn in support of the Originating Process on 11 December 2014, his affidavits sworn in support of the motion on 8 and 24 September 2015 and his affidavit in reply sworn on 7 October 2015. Mr Stone’s first affidavit refers to the circumstances in which he and Mr Marsden were initially appointed joint and several administrators of the Company and then as its liquidators and refers to the payments which are the subject of the original Statement of Claim. That affidavit also sets out matters on which the liquidators rely to seek to establish the Company’s insolvency and refers to dealings between the Company and SRP which Mr Stone characterises as SRP experiencing difficulty in obtaining payment for services which it provided to the Company.

6. Mr Stone’s second affidavit dated 8 September 2015 identifies three further payments made by the Company to SRP on 24 November 2011, 9 December 2011 and 12 December 2011, which he says were uncovered during the course of his further investigations into the Company’s affairs and finances; refers to the discovery of the Contra Payments that are sought to be included in the additional claim and expresses the view that those payments are preference payments; and indicates that he seeks the Court’s leave to amend the Statement of Claim to include those payments. Mr Stone’s third affidavit dated 24 September 2015 refers to the public examination of Mr Wanless, who is the sole director and shareholder of SRP, which was one of nine public examinations undertaken by the liquidators in the period June – August 2014, and also refers to the fact that the liquidators have commenced twenty Court proceedings in respect of the liquidation, and to the extent of the work undertaken by the liquidators in the liquidation.

7. SRP relies on the affidavit of Mr Wanless dated 28 September 2015. Mr Wanless refers to the circumstances of the original claim for repayment of the amounts in issue made against, but not met by, SRP. His evidence is that, after receiving the liquidators’ claim for $280,000, SRP invested in purchasing and financing new plant and equipment for additional waste processing capabilities in its waste disposal facility at Kemps Creek, NSW, and has taken on loans to finance the acquisition of the new plant and equipment in the order of $1.687 million since 16 December 2014. Mr Wanless’ evidence is somewhat imprecise as to the timing of SRP’s decisions, which is a matter of some significance, where it appears that the liquidators foreshadowed the proposed amendment by late July 2015, consent orders providing for the amendment application had been made in August 2015, and the Notice of Motion seeking leave for the amendment had been filed in September 2015.

8. Mr Wanless says that, when he decided to acquire the new plant and equipment and enter into loans to finance them on behalf of SRP, he took into account SRP’s potential liability to pay up to $280,000 and interest and costs in respect of the liquidators’ claim and he says that, although the liquidators’ claim is denied, he took into account the risk of the claim succeeding but did not take into account the risk of the larger claim now sought to be made. Mr Wanless’ evidence is that, if he had known that the liquidators would bring a claim for the larger amount now claimed:

“[T]hat would have affected my decision making in respect of [SRP’s] defence of the claim to date and in respect of the new plant and equipment. I cannot now say whether and if so how that larger claim would have affected the decision I made on behalf of [SRP] to acquire the new plant and equipment and enter into loans to finance that acquisition.”

It should be noted that, first, the proposition that an earlier knowledge of an amendment would have affected a defendant’s decision-making as to the conduct of a defence might well be commonly put in respect of amendment applications, but such applications are often permitted. Second, Mr Wanless does not say that the amendment would have, or was likely to have, affected his decision in respect of the new plant and equipment and frankly concedes that he does not know whether it would have had that affect. Mr Wanless’ evidence is, in effect, that he does not know whether there would be any prejudice to SRP by the amendment, arising on the basis that he might have made a different purchase decision had he previously known of it.

9. Mr Wanless also sets out, at some length, the new plant and equipment purchased by SRP and the new financial liabilities and personal guarantees which SRP and he undertook in respect of the purchase of that plant and equipment. However, it seems to me that that evidence takes the matter no further, where Mr Wanless does not know whether he would have behaved differently had he previously known of the larger claim and, so far as the evidence goes, does not suggest that it is any more likely that he would have behaved differently had he known of the larger claim than that he would have behaved in the same way. To put that proposition another way, if SRP purchased equipment and incurred liabilities which, so far as the evidence goes, it cannot say it would not have purchased and incurred had it known of the liquidators’ larger claim, then SRP suffers no consequential prejudice from facing that claim, at least in that respect.

10. Mr Wanless’ further evidence is that, if SRP were to face judgment for the amount of $494,156.40 now claimed, instead of the $280,000 claimed in December 2014:

“[SRP] will face hardship in satisfying that judgment and in continuing to make the additional financing payments for the new plant and equipment. I am also worried that in the event of such a judgment, I may be called on as a guarantor by Westpac if [SRP] defaults on the new loans because of the amount of the judgment.”

I recognise that Mr Wanless was not cross-examined as to that evidence. However, it seems to me that that evidence should be given limited weight. First, the impact of an additional claim of approximately $214,000 upon SRP’s affairs must depend upon the scale of its business and financing arrangements, and there is no specific evidence before me as to those matters. Neither SRP nor Mr Wanless refer to the extent of its current borrowings or its borrowing capacity, or its ability to borrow the amount required to repay the additional amount that the liquidators now seek to claim, or service such a borrowing. It seems to me that Mr Wanless’ evidence of these concerns is also qualified by the fact that he does not give evidence that he would not have undertaken the relevant acquisitions of plant and equipment in any event, had he known of the larger claim. Mr Wanless also does not give evidence that he had assumed, or took legal advice to the effect that, the Company or the liquidators could not amend their claim, if additional matters came to their attention after the commencement of the proceedings.

11. By his affidavit in reply dated 7 October 2015, Mr Stone explains that the omission of the further payments now sought to be claimed, when the proceedings were instituted, was inadvertent, and occasioned by the extensive work required of the liquidators since their appointment, and refers to his earlier affidavit as to the extent of that work. He also refers to the bulk of documentation and information which has required review, the lack of funding available to the liquidators, and the destruction of a significant volume of company documents prior to the liquidators’ appointment. He also refers to the fact that the liquidators have been forced to rely on MYOB records and supplier ledgers, by reason of the difficulties with the documentation available to them, and his evidence is that the liquidators only became aware of the further payments that are the subject of this application after the commencement of the proceedings.

Whether the Court has power to allow the proposed amendments

12. The amendment application is made under ss 64 and 65 of the Civil Procedure Act 2005 (NSW). Section 64 of the Civil Procedure Act relevantly provides that, at any stage of the proceedings, the Court may order that leave be granted to a party to amend any document in the proceedings and that, subject to s 58 of the Civil Procedure Act, all necessary amendments are to be made for the purpose of determining the real questions raised by the proceedings and avoiding multiplicity of proceedings. Section 65(2)(c) of the Civil Procedure Act in turn provides that a plaintiff may, with leave, amend the Originating Process to add a new cause of action, together with a claim for relief on it, which, in the Court’s opinion, arises from the same or substantially the same facts as those giving rise to an existing cause of action and claim for relief set out in the Originating Process. Section 65(3) provides that, unless the Court otherwise orders, an amendment made under that section is taken to have had effect as from the date on which the proceedings were commenced. It is common ground that the “relation-back day” in relation to the Company was 15 December 2011; the three year time limit for applications relating to voidable transactions contained in s 588FF(3) of the Corporations Act expired on 15 December 2014; and the proceedings were commenced prior to the expiry of that period, so the additional cause of action will also be within time if it is permitted and relates back to the commencement of the proceedings under s 65 of the Civil Procedure Act.

13. An initial question arises as to whether the additional matters sought to be introduced into the pleading are properly characterised as separate “transactions” from those already pleaded, for the purposes of s 588FF(1) of the Corporations Act. Mr Giles contends that the right conferred by s 588FF(1) is directed to each individual “transaction” and he refers to ss 588FA and 588FE of the Corporations Act in that regard. Mr Giles fairly accepted, in oral submissions, that if the matters pleaded and the additional matters sought to be pleaded were properly characterised as part of the same transaction, then the application was made within time in respect of that transaction.

14. Mr Giles submits that paragraph 7 of the Statement of Claim pleads numerous individual transactions, each of them being a payment, and that the Contra Payments sought to be pleaded in paragraph 7A is in turn a separate transaction. Mr Karam responds that SRP’s submissions turn on an inappropriately narrow interpretation of the term “transaction” for the purposes of ss 9 and 588FF(1) of the Corporations Act, treating each individual act of repayment of indebtedness from the Company to SRP as amounting to a separate transaction. Mr Karam submits, and I accept, that the term “transaction” may include a series of events in a course of dealings initiated by a debtor intended to extinguish a debt or which are connected in being directed to bring about a change in the Company’s rights, liabilities or property: Capital Finance Australia Ltd v Tolcher [2007] FCAFC 185 at [120]–[121]; Re Employ (No 96) Pty Ltd (in liq) [2013] NSWSC 61; (2013) 93 ACSR 48 at [15]. Mr Karam submits that a series of steps were here taken by the Company to reduce its overall indebtedness to SRP, which included not only the cash payments but also the set-offs relating to the Smart Skip business, which were connected and were directed at changing the Company’s liability to SRP.

15. It seems to me that, where numerous individual payments by the Company have the same character, each directed to reducing the Company’s debt to SRP on the same basis, they could properly be treated as a single “transaction” and that the Contra Payments, by which a different mechanism is adopted for the same purpose and in the same time period, could arguably also be treated as part of the same transaction. However, it does not seem to me that the proposed pleading takes that approach. I therefore assume, without deciding, that the additional matters pleaded are properly treated, at least for the purposes of an amendment application, as separate transactions because they are pleaded in that manner.

16. On that basis, I must determine a wider issue raised in submissions. Mr Karam, who appears with Mr Gee for the Company and the liquidators, relies on a line of authorities including Rodgers v Federal Commissioner of Taxation (1998) 88 FCR 61; 29 ACSR 270 as authority that, even if individual payments are to be categorised as separate transactions for the purposes of s 588FF of the Corporations Act, an amendment made after the application has been brought within time may add additional transactions to a claim brought against a defendant in an existing proceeding. On the other hand, Mr Giles, who appears with Ms Grainger for SRP, submits that the amendment should not be permitted because the claims are brought more than three years after the relation-back day and no extension has been or can be granted under s 588FF(3)(b) of the Corporations Act. Mr Giles fairly accepts that that submission is inconsistent with the judgment of the Full Federal Court in Rodgers v Federal Commissioner of Taxation above, if that decision is applicable in a State Court, and to the several decisions which have followed it, including decisions of this Court in New Cap Reinsurance Corporation Ltd (in liq) v Reaseguros Alianza SA [2004] NSWSC 787; (2004) 186 FLR 175 and the decision of the Full Court of the South Australian Supreme Court in Davies v Chicago Boot Co Pty Ltd (No 2) [2007] SASC 12; (2007) 96 SASR 164.

12. In Rodgers v Federal Commissioner of Taxation above, a liquidator had brought proceedings under s 588FF(3) of the then Corporations Law within three years of the relation-back date, but subsequently sought to amend the claim to introduce two further payments, of which he had then been unaware. There is substantial similarity between that situation and the present situation. The Full Court of the Federal Court (Wilcox, Tamberlin and Emmett JJ) overturned a decision of a trial judge declining to permit an amendment to introduce the additional transactions into the existing proceeding, on the basis that she had no power to permit that amendment, the position which Mr Giles now asks me to adopt. The Full Court specifically held (at FCR 68) that s 588FF(3) of the then Corporations Law was concerned with the commencement of the proceedings and was not inconsistent with the making of an amendment to a pleading in an existing proceeding, and (at FCR 70) that:

“No doubt it is correct to say each payment amounted to a separate transaction; nonetheless we consider these additional claims arise out of substantially the same facts as those pleaded to support the original claims.”

The Court observed that the requirements of s 59(2B) of the Federal Court Act 1976 (Cth) and then order 13 r 2(7) of the Federal Court Rules was satisfied in that respect.

18. As Mr Giles also points out, subsequent decisions of State Courts applying the same approach as Rodgersv Federal Commissioner of Taxation above have proceeded on the basis that the corresponding rules in the relevant Court are “picked up” by s 79 of the Judiciary Act 1903 (Cth) to permit an amendment to add a claim in relation to a further transaction after the expiry of the period prescribed by s 588FF(3)(a) of the Act. Mr Karam in turn points out that the High Court observed in Gordon v Tolcher [2006] HCA 62; (2006) 231 CLR 334 that, after the institution of an application, the procedural regulation of the conduct of the matter is left for the procedural law of the relevant State, as picked up by s 79 of the Judiciary Act. I recognise that the High Court’s decision in Grant Samuel Corporate Finance Pty Ltd v Fletcher [2015] HCA 8; (2015) 89 ALJR 401 (to which I refer further below) suggests that there are at least limitations on that principle, so far as that procedural law might have permitted the bringing of a new application, in circumstances that s 588FF(3) would not have done so. Neither party addressed submissions to the question whether a different analysis may apply, to the extent that the amendment is made by reference to State legislation, the Civil Procedure Act, rather than procedural rules of the Court, and I do not address that question where the parties did not make submissions about it. I also proceed on the basis, identified by the High Court in Gordon v Tolcher above at [37]–[41] and in Grant Samuel Corporate Finance Pty Ltd v Fletcher above, that s 588FF(3) is not merely a time stipulation of a procedural character, but is of the essence of the provision made by s 588FF.

19. In Star v National Australia Bank Limited [1999] NSWSC 305; (1999) 30 ACSR 583, to which Mr Karam refers, Rolfe J followed Rodgersv Federal Commissioner of Taxation above and observed (at [86]) that:

“I have come to the view that the legislation and rules under which amendments are permitted in this Court are such that an application to amend a proceeding brought in compliance with s 588FF(3) may be granted, and that it is proper for me to follow the Full Court's construction of s 588FF(3) to the effect that it is not concerned with that topic, but only with the bringing of an original application. Far from being satisfied that it is wrong, I consider that it is correct and gives full rein to the extensive powers of amendment. The amendment provisions clearly have work to do, and they are unfettered by the restraints s 588FF(3) places on the commencement of original applications. There is, accordingly, no inconsistency between s 588FF(3) and the amendment provisions of this Court.”

20. In New Cap Reinsurance Corporation Ltd (in liq) v Reaseguros Alianza SA above, White J in turn treated the question of the meaning of the phrase “an application under subsection (1)” in s 588FF(3) as a matter determined by an intermediate appellate Court, in Rodgers, as followed in later cases, and observed that he was not satisfied that that approach was plainly wrong and followed it. His Honour also noted (at [48]ff) that the consequence of the authorities, which he reviewed and followed, was that the amendment powers then contained in Pt 20 of the Supreme Court Rules (and now contained in the Civil Procedure Act) had a different sphere of operation from s 588FF(3). Mr Giles submits that, to the extent that White J treated the condition in s 588FF(3) as satisfied where a proceeding was commenced in relation to a relevant transaction, that decision is incorrect.

21. In Davies v Chicago Boot Co Pty Ltd (No 2) above at 176, Gray J (with whom Sulan and Anderson JJ agreed) observed that Rodgers had been applied in several subsequent single judge decisions, including Star v National Australia Bank Ltd above and New Cap Reinsurance Corporation Ltd above, and had received apparent approval by the Full Court of the Supreme Court of Queensland in Greig v Stramit Corporation Pty Ltd [2004] 2 Qd R 17, and held (at 177) that the authorities had consistently allowed amendments to add new causes of action against the same defendant outside the relevant statutory limitation period and that those authorities should be followed and applied by that Court in accordance with the principles enunciated by the High Court in Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485. The Court of Appeal there expressly distinguished the issues considered in BP Australia Ltd v Brown [2003] NSWCA 216; (2003) 58 NSWLR 322 as addressing a different issue.

22. Mr Giles submits that the reasoning applied in Rodgers and the cases that have followed it is no longer maintainable, at least in a State Court, following the judgments of the High Court in Grant Samuel Corporate Finance Pty Ltd v Fletcher above and Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2015] HCA 10; (2015) 89 ALJR 425. Mr Karam responds that the High Court’s decisions in Grant Samuel and Fortress Credit are not on point, so far as they deal with extensions of time to commence an application under s 588FF(3) of the Act, as distinct from the amendment of an existing application, and are not inconsistent with the approach to amendment taken by the Full Court of the Federal Court in Rodgers and in subsequent authorities.

23. In Grant Samuel Corporate Finance Pty Ltd v Fletcher above, the High Court considered the interaction between s 588FF of the Corporations Act and the procedural rules of a Court, including for extensions of time to commence proceedings, and emphasised that the commencement of preference proceedings within the time limit under s 588FF(3), as extended under s 588FF(3)(b), was a precondition to the Court’s jurisdiction under s 588FF; and held that s 588FF “otherwise provided” for the purposes of s 79 of the Judiciary Act, so that an extension of time under that section could not be supplemented or varied by procedural rules of the Court in which the application has been brought. In particular, Mr Giles relies on the observation of the High Court in Grant Samuel at [17] that:

“The provision in s 588FF(3), as to the time for the making of the application, is not to be characterised merely as a procedural stipulation as to time. It would follow that the bringing of an application within the time required by s 588FF(3)(a) or (b) is a precondition to the Court’s jurisdiction under s 588FF(1).”

Mr Giles also refers to the High Court’s observation (at [22]) that the words “may only” in s 588FF(1) has the effect of defining the Court’s jurisdiction by imposing a requirement as to time as an essential condition of the right conferred by s 588FF(1) to bring proceedings for orders with respect to voidable transactions.

24. In Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher above, the High Court confirmed the well-established practice of allowing extensions of time for proceedings under s 588FF of the Corporations Act in general form (often described as “shelf orders”) in an appropriate case. The Court referred to an observation of Spigelman CJ in BP Australia Ltd v Brown above that, where a liquidator is still investigating the identity of recipients of benefits under voidable transactions and cannot identify the transactions to be targeted, the Court’s power “should be broad enough to allow … for an order granting an extension of time in general terms” and observed (at [8]) that that view:

“involved a balancing of the requirement of commercial certainty on the part of those who had had past dealings with the corporation against the conflicting interest of the creditors of the company.”

25. Mr Giles also places weight on the Court’s observation (at [20]) that:

“Section 588FF(1) empowers the court to make the orders for which it provides on the condition that:

on the application of a company’s liquidator, [the] court is satisfied that a transaction of the company is voidable because of section 588FE.

As the appellants submitted, an application under s 588FF(1) must seek orders for which that subsection provides, which concern a transaction alleged to be voidable under s 588FE between the company and one or more other parties. The transaction must be identified, in terms of conduct of the company. It must be arguably capable of inclusion in one of the designated classes of transaction mentioned in s 588FE. The specification of the time that it was done, or of an act done to give effect to it within a relevant period, would also be necessary to the contention that it was a voidable transaction. Parties to the transaction who would be affected by the orders sought would have to be identified and those parties named as respondents.”

26. The Court there also noted (at [24]) that the function of s 588FF(3)(b) of the Corporations Act was “to confer a discretion on the Court to mitigate, in an appropriate case, the rigours of the [3 year] time limits” and (at [27]) that the availability of shelf orders was open on the construction of the section, was consistent with the evident purpose of the section, and was supported by the re-enactment of the section in its existing form after the Court of Appeal had decided BP Australia Ltd v Brown above.

27. I am not persuaded by Mr Giles’ submission that the approach taken in Rodgers v Federal Commissioner of Taxation should no longer be followed, at least at first instance, for several reasons. I proceed on the basis, recognised in Grant Samuel at [21] and Fortress Credit at [24], that s 588FF(3) involves a statutory balancing of the competing interests of creditors and those who have dealt with the Company and might be the subject of s 588FF(1) proceedings, to limit the time within which such proceedings may be brought. I note, however, that that observation is directed to the bringing of an application, which in this case was brought within time, in respect of dealings between the Company and SRP over an extended period, whether they are characterised as a single transaction, in categories of transactions or as individual transactions. That application would have placed SRP on notice that preference claims were made against it, at least to the extent of those pleaded, and potentially to the extent of any further claims which might properly be introduced by reason of further investigation, evidence or discovery, by the amendment process permitted by the Civil Procedure Act. An approach that determined whether such an application was brought by reference to each individual transaction does not seem to me to be required by the policies identified by the High Court, where the bringing of the application will place the defendant on notice of those matters, and commercial certainty also does not seem to me to require that the content of that challenge then be fixed, at the point that the proceedings are commenced, so as to shut the liquidator and creditors out of, for example, any amendment that may later be necessary to take account of evidence led or discovery given in the proceedings.

28. I do not consider that I should treat the decision in Grant Samuel, so far as it focussed on the bringing of the application, as overruling longstanding decisions, including two appellate decisions, that relate to the different question of the conduct of the proceedings after the application is brought, where no adverse reference was made to those decisions in the High Court’s judgment and the High Court did not address the question whether the approach that they adopted was inconsistent with s 588FF of the Act or the policies to which the Court referred. It is also implicit in Mr Giles’ careful limitation of his submissions to the position in a State Court that his submission has the potential consequence that preference proceedings would be treated differently in the Federal Court of Australia and in the State Courts, a result which seems to me to be wholly inconsistent with the legislative intent in introducing a national corporations scheme.

29. Mr Giles also submits that s 65(3) of the Civil Procedure Act cannot “extend” a limitation period under s 588FF(3) of the Corporations Act, at least where the limitation period extinguishes the claim. It does not seem to me that that question arises, under the authorities to which I have referred, where the effect of s 65(3) of the Civil Procedure Act is not to “extend” a limitation period, but to treat the commencement of an application within the three year period specified in s 588FF(3)(a) as satisfying the requirement of that section, both in respect of the matters raised in the proceedings at the time of the commencement and in respect of matters subsequently introduced in the proceedings, pursuant to the relevant provisions of the Civil Procedure Act.

30. I am therefore not satisfied, notwithstanding the High Court’s decisions in respect of different issues in Grant Samuel and Fortress Credit, that Rodgers and Davies v Chicago Boot Co Pty Ltd (No 2) and the several first instance decisions reaching the same result are plainly wrong, such that I would be justified in not following those appellate decisions dealing with the same question where the High Court has not made adverse comment about them: Australian Securities Commission v Marlborough Gold Mines Ltd above at 492; Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89.

Whether the amendments should otherwise be permitted

31. Mr Karam refers to the matters which are relevant to an amendment of pleadings generally, including whether the application to amend has been brought in good faith, in a timely manner and for a proper purpose; whether the proposed amendment would cause undue prejudice to the other party; the nature of the amendment and its importance to the amending party; and whether permitting the amendment would be consistent with the dictates of justice: Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 at [14]ff; Dymocks Book Arcade Pty Ltd v Capral Ltd [2011] NSWSC 1423 at [5] – [10]. Mr Karam relies on the liquidators’ evidence that their failure to identify the two additional payments made on 24 November and 12 December and the set-off arrangement, prior to the commencement of the proceedings was inadvertent, and resulted from the size and complexity of their investigation, difficulties in obtaining funding to carry out the necessary investigations, the scale of the proceedings brought, and the destruction of documents to which Mr Stone’s evidence refers. Mr Karam also refers, in support of the liquidators’ position, to the limited information provided by Mr Wanless in the course of the liquidators’ examination as to the off-set arrangement which took place prior to the commencement of the proceedings (Ex A2, Tab 3, p 20). It is sufficient to observe, for present purposes, that Mr Wanless had, or claimed to have, little or no recollection of those matters, and his examination would have provided little or no assistance to the liquidators in identifying the relevant facts.

32. On the other hand, Mr Giles submits that the amendments should not be allowed as the prejudice to SRP outweighs any prejudice to the Company’s creditors from refusing leave to amend and the delay which has caused that prejudice is not adequately explained. Mr Giles submits that, since December 2014, SRP has proceeded on the basis that the pleaded claim was the whole of the amount which the Company and the liquidators sought to recover and has made investment decisions on that basis. It seems to me that that submission significantly overstates Mr Wanless’ evidence, where he was not prepared to say that he would have made investment decisions any differently had the larger claim previously been advanced. In fairness, Mr Giles then implicitly qualifies that submission, by putting the somewhat more qualified proposition that SRP “may well have acted differently” had Mr Wanless known that it faced a claim of almost $495,000; however, even that proposition overstates Mr Wanless’ evidence, which is that he does not know whether he would have acted differently in that event, in respect of the purchase of equipment and borrowings made by SRP. Mr Giles in turn submits that SRP’s decision to acquire, by taking on further debt, new plant and equipment is the type of commercial decision to which the balance affected by the three year time bar in s 588FF of the Corporations Act is directed. Again, it seems to me that that submission has somewhat lesser force, where Mr Wanless does not seek to say that any commercial decision would have been made differently had the larger claim been brought at the time the proceedings were commenced.

33. Mr Giles in turn advances a submission that there would be no apparent detriment to creditors of the Company if the amendment is refused because, irrespective of the outcome of the proceedings, there will be no return to creditors. Mr Giles submits that the litigation appears to be advanced for the benefit of the litigation funder and to meet the liquidators’ professional fees; or that, if that is wrong, then the effect on creditors of refusing the amendment would be a fraction of a cent in the dollar. Mr Giles made clear, in oral submissions, that he did not submit that there was anything improper as to the fact that the recoveries in the proceedings would potentially go to the costs of the proceedings, a fee charged by a funder under the funding agreement or the liquidators’ remuneration or, possibly, the creditors (T19), but relied on those matters as relevant to the balancing of the prejudice to the respective parties in the application.

34. I also do not accept Mr Giles’ submission in this respect for two reasons. First, an additional recovery of creditors of approximately $214,000 is significant, even if it is spread among a large number of creditors, and it should not be open to individual defendants in preference proceedings to say that the claim against each of them is individually of little significance to creditors, where the total of all claims against all such defendants may well be of significance, or that the claim is of little benefit to creditors because their loss was very large. Second, even if the proceedings were pursued to seek to recover the liquidators’ costs or funding which had been devoted to the conduct of the proceedings, it seems to me that that is a proper purpose, where liquidators would less readily accept appointment, and litigation funders would less readily fund proper proceedings in liquidation, if liquidators could not recover their remuneration or litigation funders could not recover the funding which they provided. It seems to me that that approach is consistent with that of the Court of Appeal in Hall v Poolman [2009] NSWCA 64; (2009) 71 ACSR 139.

31. Mr Giles also submits that there is no adequate explanation in Mr Stone’s affidavits as to why the application is brought “so belatedly”. It seems to me that, first, the delay in bringing the amendment application is relatively limited, in the circumstances; and, second, Mr Stone’s explanation of the extent of the work done and the difficulties which the liquidators have experienced provides sufficient explanation for the timing of the amendment. Mr Giles also emphasised, in oral submissions, that documents were previously available to the liquidators which recorded a reduction in the debt owed by the Company to SRP, described as “Contra” (Ex A1, p 692). I accept that submission, but not the inference which Mr Giles seeks to draw from it. The fact that a single document, or individual entries in it, available to the liquidators within a substantial liquidation, might with hindsight be recognised as referable to a transaction, once the transaction has been identified, does not establish that it was unreasonable for the liquidators not to have identified the significance of that document, or of the transaction, at an earlier point in time.

32. I am satisfied that the proposed amendment is brought by the liquidators in good faith and for a proper purpose; that it was made in a relatively timely way, where it was foreshadowed within several months after the commencement of the proceedings, and shortly after the pleadings had closed; and that the amendments would cause little difficulty for SRP in respect of the conduct of the proceedings, so far as the purchase of the Smart Skip business is already addressed in its evidence filed in the proceedings; the issues which the amendments raise are in relatively narrow scope and the evidence which SRP leads as to good faith in respect of the relevant payments would be equally applicable to the additional claims. It seems to me that there would be prejudice to the Company and its creditors by excluding the relevant claim, not least that it would be limited in part only of the recovery that would otherwise be available from a success in the proceedings. Accordingly, I would grant leave to make the relevant amendment, to the extent that the amendment is governed by the usual principles arising under ss 56–58 and ss 64–65 of the Civil Procedure Act.

33. For completeness, Mr Giles also raised the possibility that SRP will need to consider a running balance account defence, as well as leading evidence in relation to the new transactions, if the amendment is permitted. It does not seem to me that there was sufficient detail in the evidence as to the extent of that defence, or the extent of such evidence, for it to provide a discretionary reason not to permit the amendment. I note that the amendment will be permitted on the usual basis that the Plaintiffs will be required to pay the costs thrown away which, in the circumstances, seems to me to be sufficient to protect SRP’s position in respect of any costs that are properly treated as wasted by reason of the amendment.

34. For these reasons, I am satisfied that the Court has power to allow the relevant amendment, and that it is a proper exercise of discretion to do so. Accordingly, I make the following orders:

1   The Plaintiffs be granted leave to file an Amended Statement of Claim in the form of an Annexure “A” to the Notice of Motion filed 8 September 2015.

2.   The Plaintiffs pay the costs thrown away by reason of the amendment.

39. I will hear the parties as to the costs of this application.

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Decision last updated: 27 November 2015