Jones v Rustic Haven Sdn BHD
[2008] WASC 122
•27 JUNE 2008
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: JONES -v- RUSTIC HAVEN SDN BHD [2008] WASC 122
CORAM: NEWNES J
HEARD: 5 MAY & 13 JUNE 2008
DELIVERED : 27 JUNE 2008
FILE NO/S: CIV 2153 of 2005
BETWEEN: MARTIN BRUCE JONES as liquidator of and agent for THE RAVENSWOOD RESORT PTY LTD (in liq) (ACN 067 679 694)
Plaintiff
AND
RUSTIC HAVEN SDN BHD
Defendant
Catchwords:
Corporations - Winding up - Proceedings under s 588FF of Corporations Act 2001 (Cth) - Application by liquidator to amend proceedings outside threeyear period in s 588FF(3) to include further claims - Power of court to amend proceedings under s 588FF - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 588FF, s 588W
Result:
Application to amend refused
Category: B
Representation:
Counsel:
Plaintiff: Mr G D Cobby
Defendant: Mr D K Barker
Solicitors:
Plaintiff: Christensen Vaughan
Defendant: Chalmers Legal Studio Pty Ltd
Case(s) referred to in judgment(s):
Davies v Chicago Boot Co Pty Ltd (No 2) [2007] SASC 12
Gordon v Tolcher [2006] HCA 62
Rambaldi v Dallbrook Pty Ltd [2003] VSC 163
Rodgers v Commissioner of Taxation (1998) 88 FCR 61
Star v National Australia Bank Ltd (1999) 150 FLR 119
Tolcher v Capital Finance Australia Ltd [2005] FCA 108
NEWNES J: This is an application for leave to amend the statement of claim, in accordance with a minute of proposed amended statement of claim dated 19 June 2007. The proposed amendments include the addition of a new claim under s 588W of the Corporations Act 2001 (Cth) (the Act) by the plaintiff, but in this instance in his capacity as liquidator of RRCM Pty Ltd (RRCM).
The application under s 588FF
I will deal first with the proposed amendments by which it is sought to add further claims under s 588FF of the Act to the existing proceedings.
The plaintiff was appointed liquidator of The Ravenswood Resort Pty Ltd (Ravenswood) on 23 June 2003. In the existing statement of claim, the plaintiff, as liquidator of Ravenswood, alleges that, on 5 June 2003, the then receiver and manager of Ravenswood caused or permitted certain land to be transferred to the defendant without consideration. It is pleaded that the transfer of the land was an uncommercial transaction within the meaning of s 588FB of the Act. The plaintiff seeks a declaration that the plaintiff has a caveatable interest in the land and an order that the defendant transfer the land to Ravenswood, or alternatively, seeks damages.
The plaintiff now seeks to make substantial amendments to the statement of claim. The amendments are not particularly easy to follow. Their clarity has perhaps not been assisted by the fact that, as I was informed by counsel for the plaintiff, they have been substantially (if not wholly) extracted from some other pleading in proceedings between the current parties.
The proposed amendments relate to various transactions which are said to have occurred in late 2001 and early 2002 in relation to the land and are apparently intended to meet, or perhaps more accurately to forestall, any contention by the defendant that the transfer of the land pleaded in the current statement of claim was simply to give effect to earlier transactions by which the defendant had acquired the beneficial interest in the land for value.
In essence, the plaintiff pleads that if the defendant acquired the beneficial interest in the land by virtue of those earlier transactions, Ravenswood became insolvent by virtue of entering into the transactions because the defendant acquired the land at a discount of 40% to its market value. The plaintiff seeks, in substance, a declaration that the agreements concerned were void and, in the alternative to an order that the defendant transfer the land back to Ravenswood, an order that the defendant pay compensation to Ravenswood under s 588 FF(1)(d) of the Act.
The first question is whether the plaintiff is precluded from including the new claims in the proceedings because they are out of time.
The application to wind up Ravenswood in insolvency was made on 4 April 2003. The winding up order was made on 23 June 2003. It was common ground, therefore, that the three‑year period within which any claims must be made under s 588FF of the Act expired on 3 April 2006: s 588FF(3). The existing proceedings were brought on 28 September 2005, within time.
The current application to amend the statement of claim was filed on 21 September 2007. It is therefore outside the three‑year period specified in s 588FF(3).
On behalf of the plaintiff it was submitted, however, that where an application under s 588FF has been instituted within time, the three‑year period does not apply to new causes of action which are simply added to the existing claim against the defendant in the proceedings. Counsel referred to the decision of the High Court in Gordon v Tolcher [2006] HCA 62 [38] ‑ [40] and to the decision of the Full Court of the Supreme Court of South Australia in Davies v Chicago Boot Co Pty Ltd (No 2) [2007] SASC 12 as authority for that proposition.
The defendant, on the other hand, contended that an amendment outside the three‑year period to add a new claim was permissible only if it fell within O 21 r 5(5) of the Rules of the Supreme Court 1971 (WA); that is, if the new claim arose out of the same, or substantially the same, facts as the existing cause of action. That short point was the substantive issue between the parties.
In my view, an amendment can be made outside the three‑year period to add new claims to existing proceedings under s 588FF if, but only if, such an amendment is permitted under the rules of court.
In Rodgers v Commissioner of Taxation (1998) 88 FCR 61, the applicant liquidator had commenced proceedings, within time, against the defendant under s 588FF claiming that certain payments were voidable transactions. Subsequently the liquidator sought to amend the originating application to increase the total amount claimed by adding two further payments which he claimed were also voidable transactions. At the time the liquidator sought to make the amendments, the further claims would have been outside the three‑year period if they had been brought in new proceedings. The trial judge refused leave to make the amendment, holding that the court did not have the power to grant such leave.
That decision was reversed on appeal. The Full Court of the Federal Court rejected a contention on behalf of the Commissioner that such an amendment was precluded by the requirement in s 588FF(3) that any application under s 588FF(1) must be made within three years of the relation‑back date. The court drew a distinction between an application to the court - that is, the commencement of a proceeding itself - and the amendment of an existing proceeding. The court held that while s 588FF(3) applied to an application to the court, it did not apply to an amendment to an existing application, which was governed by the rules of court. The relevant rule was O 13 r 2(7) of the Federal Court Rules 1979 (Cth), which was in all material respects the same as O 21 r 5(5) of the rules of this court. The court concluded that the proposed claims arose substantially out of the same facts as the original claim and remitted the application to the primary judge for further determination.
That decision was followed and applied in a number of cases: see for instance, Star v National Australia Bank Ltd (1999) 150 FLR 119, Rambaldi v Dallbrook Pty Ltd [2003] VSC 163, Tolcher v Capital Finance Australia Ltd [2005] FCA 108.
In Davies v Chicago Boot Co Pty Ltd (No 2), similar circumstances arose. There the liquidators had commenced proceedings against the respondent in respect of certain payments which they alleged were preferential payments. The proceedings were commenced within the three‑year period specified in s 588FF(3). Later, outside that three‑year period, the liquidators sought to amend the statement of claim to include additional payments which they alleged had been made to the respondent. The primary judge held that the further claims were out of time and that under s 588FF(3) the claims could not be added to the existing proceedings. He held that the rules of court dealing with the amendment of existing proceedings did not apply.
That decision was reversed on appeal. The Full Court held, following Rodgers, that the power of amendment in the rules of court enabled the court to allow an amendment to an application under s 588FF(1) to add further claims outside the three‑year period. The court also observed that that approach appeared to be entirely consistent with the decision of the High Court in Gordon v Tolcher, which was delivered after argument on the appeal.
In Gordon v Tolcher, the respondent had commenced proceedings against the appellant in the District Court of New South Wales seeking orders under s 588FF(1). The proceedings had been commenced shortly before the expiration of the three‑year period in s 588FF(3). The proceedings were subsequently 'taken to have been dismissed' by reason of certain provisions of the rules of court relating to dormant actions. The respondents sought and ultimately obtained orders which had the effect of rescinding the deemed dismissal and granting a retrospective extension of time for service of the statement of claim. The respondents' application for those orders was made outside the three‑year period. The appellant argued that in light of the provisions of s 588FF(3), the court had no power under the rules of court to make such orders. The High Court rejected that argument. In the course of a unanimous judgment, the court said:
[Section] 588FF is dealing, as an essential aspect of the regime it creates, with the period within which the application must be made. An application may be made only to a court invested with federal jurisdiction by one or other of the provisions of Pt 9.6A. Thereafter, and subject to any other relevant provision of the Corporations Act, the conduct of the litigation is left for the operation of the procedures of that court. These procedures will vary from one State or Territory to another and within the court structures of those States and Territories. The scheme of the Corporations Act is not to impose a direct federal and universal procedural regime. Rather, s 79 of the Judiciary Act is left to operate according to its terms in the particular State or Territory concerned [40].
I do not accept the plaintiff's contention that once an application has been commenced under s 588FF, a new claim can be made against an existing defendant at any time by amendment of the proceedings. In my view, a proceeding for relief under s 588FF(1) may be amended outside the three‑year period to include additional claims only where the amendment is permitted by the rules of court.
In this court, the amendment of originating process and pleadings is dealt with in O 21. Order 21 r 1 deals with amendments that may be made without leave. Order 21 r 1 does not apply where an amendment consists of the addition of a party or a new cause of action: O 21 r 1(3). In the latter case, leave of the court is required. Order 21 r 5 deals with amendment for which leave is required. It provides (so far as relevant):
(1)Subject to -
…
(c)the following provisions of this Rule,
the Court may at any stage of the proceedings allow the plaintiff to amend his writ, or any party to amend his pleading, on such terms as to costs or otherwise as may be just and in such manner (if any) as the court may direct.
(2)Where an application to the Court for leave to make the amendment mentioned in paragraph … (5) is made after any relevant period of limitation current at the date of issue of the writ has expired, the Court may nevertheless grant such leave in the circumstances mentioned in that paragraph if it thinks it just to do so.
…
(5)An amendment may be allowed under paragraph (2) notwithstanding that the effect of the amendment will be to add or substitute a new cause of action if the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action by the party applying for leave to make the amendment.
Accordingly, where the relevant limitation period has expired, the rules of court permit an amendment to be made to existing proceedings to include a new claim only where the new claim arises out of the same or substantially the same facts as the existing claim. That is not the case here.
As I have mentioned, it was conceded by counsel for the plaintiff (correctly in my view) that the claims now sought to be added by the proposed amendment do not arise out of the same, or substantially the same, facts as the existing claim. Counsel accepted that the effect of the amendments would be to add new causes of action and that if, contrary to his contention, the power to allow the amendment was not unlimited, but was constrained by O 21 r 5(5), then the application must fail.
It follows that the application to amend the statement of claim, so far as it relates to further claims under s 588FF sought to be made on behalf of Ravenswood, must be dismissed.
The application under s 588W
The plaintiff also seeks to make claims, in his capacity as liquidator of RRCM and of Ravenswood respectively, under s 588W of the Act. The plaintiff was appointed liquidator of RRCM on 5 June 2003.
It was not in dispute that the proposed claim under s 588W is within time, the limitation period applying to claims under s 588W being six years from the beginning of the winding up: s 588W(2). The defendant objects to the claim on the ground that the pleading of it is inadequate.
In the minute, the plaintiff pleads that the defendant was the holding company of Ravenswood, which in turn was the holding company of RRCM. It is alleged that from 1 May 2002, RRCM - and by virtue of the liability of Ravenswood to indemnify RRCM, Ravenswood - incurred a number of debts totalling $1,175,569. The plaintiff says that at the time each debt was incurred the defendant knew that Ravenswood, and thereby RRCM, were insolvent.
The defendant complains that the plaintiff has not pleaded the facts relied upon for the allegation that Ravenswood and RRCM were insolvent at the time each of the alleged debts was incurred. Indeed the plaintiff does not plead that Ravenswood and RRCM were in fact insolvent at the time each debt was incurred but simply that the defendant knew they were then insolvent. In other words, the defendant's knowledge of the insolvency of Ravenswood and RRCM is pleaded without any specific plea that they were in fact insolvent.
It was argued on behalf of the plaintiff that to the extent necessary those were matters that could be cured by a request for particulars. I do not agree. In my view, they are matters that should be pleaded. I consider the proposed amendments are embarrassing and I would not allow the minute in its current form.
Conclusion
I would therefore dismiss the application so far as it relates to the additional claims sought to be brought by the plaintiff, as liquidator of Ravenswood, under s 588FF. I would adjourn the application in relation to the proposed amendments to introduce a claim under s 588W to allow the plaintiff an opportunity to bring in a further minute dealing with the matters to which I have referred.
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