Macks (As Liquidator of Bernsteen P/L (in Liq) v Commissioner of Taxation - [2005] SASC 475

Supreme Court of South Australia
(Appeal from a Master: Civil)
MACKS (AS LIQUIDATOR OF BERNSTEEN P/L (IN LIQ) & ANOR v COMMISSIONER OF TAXATION & ANOR
Judgment of The Honourable Chief Justice Doyle (ex tempore)
8 December 2005
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PRACTICE UNDER RULES OF COURT - OTHER MATTERS ARISING BEFORE TRIAL
Two appeals against the decisions of a Master of the Supreme Court to extend the time within which two fourth party notices might be issued - on appeal - discussion and application of Supreme Court Rule 37.01(1)(c) - consideration of whether in all the circumstances it was appropriate to make an order extending time - appeal allowed.
Supreme Court Rules 1987 r 17.11, r 37.01; Corporations Act 2001 (Cth) s 588FC, s 588FGA(2), s 553C(1), referred to.
Imagecolor (SA) and Sheahan v Curtis & Ors [2000] 316; Mulvaney v The Commissioner of Taxation [2004] SASC 166, applied.

MACKS (AS LIQUIDATOR OF BERNSTEEN P/L (IN LIQ) & ANOR v COMMISSIONER OF TAXATION & ANOR
[2005] SASC 475
Magistrates Appeal: Civil

DOYLE CJ: This is an appeal against a decision by a Master. The Master extended the time within which Mr Viscariello, a third party in proceedings in this Court, might issue a fourth party notice.
The Master exercised the power conferred by r 17.11 and by r 37.01(2).
The plaintiff in the proceedings has appealed against the Master’s order. The plaintiff submits that the fourth party claim is not one that meets the criteria specified in r 37.01 and so submits that there was no basis for the making of the order. The plaintiff submits further, or in the alternative, that because of the delay by Mr Viscariello, and the fact that the fourth party claim raises issues unconnected with the plaintiff’s claim, the Master should not have exercised his discretion to extend time. The plaintiff submits that Mr Viscariello should be left to pursue his claims in other proceedings.
There are, in fact, two appeals before me today. Each appeal is against an identical order in two separate actions before the court. The issues in each action are the same. For convenience I will refer only to one of these actions.
The plaintiff Mr Macks sues as liquidator of Bernsteen Pty Ltd (In Liquidation) (“Bernsteen”), to recover payments made by Bernsteen to the Commissioner of Taxation.
The plaintiff alleges that the payments gave rise to unfair preferences and so are recoverable by the plaintiff from the Commissioner under s 588FC of the Corporations Act. The Commissioner joined Mr Viscariello as third party in those proceedings. The Commissioner claims that if he is liable he is entitled to be indemnified by Mr Viscariello under s 588FGA(2) of the Corporations Act 2001.
As between the plaintiff and the Commissioner the main issue appears to be whether Bernsteen was insolvent at the time of the relevant payments. The Commissioner has indicated, however, that he might well concede this issue. The preferential effect of the payments is not admitted either, but I gather that that also might be conceded. The plaintiff’s claim against the Commissioner, one would think, should not take more than a day or so at most.
The plaintiff’s proceedings were instituted in May 2004. The Commissioner issued a third party claim against Mr Viscariello. In answer to that claim, Mr Viscariello disputes that Bernsteen was insolvent when the payments were made. He raises by way of defence matters on which he can rely under s588GB. There is an issue as to his role in the making of the payments, as to the reason for the payments, and as to Mr Viscariello’s belief as to the solvency of Bernsteen. He claims further that there was mutual credits, mutual debts and other mutual dealings between him and Bernsteen giving him a right of set-off for the purposes of s 553C(1) of the Corporations Act.
These issues will add to the length of the case but on the limited information available there is no reason to think they would lengthen the case substantially. It is reasonable to say that the whole case could be completed in a few days if all parties approach the case sensibly.
That is how things stood when Mr Viscariello made application in October 2005 for an extension of time within which to make the fourth party claim. At that stage the plaintiff’s proceedings were close to being ready to be set down for trial, with a view them being heard in the first few months of 2006. The order under appeal was made on 24 October 2005.
By the time the appeal came to be heard by me today, 8 December 2005, the case had moved on. It appears that the plaintiff’s proceedings are now ready to be set down, subject to the impact of the fourth party claim. If set down, they could be heard in the first few months of 2006. These are developments which I think the Master would have anticipated when he dealt with the matter.
I return now to the fourth party claim. It is a claim by Mr Viscariello against Mr Macks in his personal capacity. Mr Viscariello pleads in some detail aspects of the affairs of Bernsteen and the involvement of Mr Macks as Administrator in a voluntary administration, then as Administrator under a deed of company arrangement, and also as a person who allegedly provided accounting and business advice to Bernsteen and to an associated company which is, in fact, the company the subject of the other proceedings in this Court.
The fourth party claim is a lengthy document running to almost 40 pages. Mr Viscariello alleges misconduct and breaches of duty by Mr Macks in the capacities referred to. He claims that because of Mr Macks conduct, Mr Macks is and was disqualified from appointment as Administrator or as Liquidator and that the appointment as Administrator was void. He claims Mr Macks is not entitled to charge fees or disbursements for acting in those capacities and presumably claims an order for repayment of any fees or disbursements already charged.
He claims that a creditors resolution of 21 December 2001 that Bernsteen be wound up and Mr Macks be appointed liquidator is void. He also claims damages. No details are given of the damages. I assume that it will be alleged that as a result of the conduct by Mr Macks, in some way Mr Viscariello suffered financial loss. Mr Viscariello also seeks orders that Mr Macks cease acting as liquidator and that he be replaced as Liquidator.
These are fairly wide ranging claims. They raise many issues that will not arise in the proceedings between Mr Macks and the Commissioner, or in the third party proceedings between the Commissioner and Mr Viscariello. That much, I gather, is common ground.
It is convenient to begin by considering whether the claims made by the fourth party notice fall within r 37.01. In my view, the claims do not fall within subpara (a) or subpara (b)of r 37.01(1). The claim is not a claim for contribution or indemnity nor does Mr Viscariello claim relief that is connected with the original subject matter of the action and is “substantially the same as some relief or remedy claimed by the plaintiff”. Although there is a connection with the original subject matter of the action, the relief claimed is not the same, or substantially the same as that claimed by Mr Macks or by the Commissioner.
However, a claim will fall within subpara (c) of r 37.01(1) if it involves “the determination of any question of, or issue relating or connected with the original subject matter which is substantially the same as some question or issue arising between the plaintiff and the defendant and which should also be properly determined as between the defendant and the third party”. It is common ground that the claim by Mr Viscariello against Mr Macks falls within r 37.01 only if it falls within this provision.
Once again it appears to be common ground that, at least as things stand, the solvency of Bernsteen at the time of the relevant payments is an issue as between Mr Macks and the Commissioner and as between the Commissioner and Mr Viscariello.
In my view it will also be an issue in the proposed fourth party claim, although not in precisely the same way. The same probably applies to Mr Viscariello’s belief as to the solvency of Bernsteen. I accept that there may also be other relatively minor questions or issues that will arise as between Mr Macks and the Commissioner, or as between the Commissioner and Mr Viscariello that will also arise in the proposed fourth party claim. However, it is clear that most of what Mr Viscariello wishes to raise in his claim has little or nothing to do with the existing claim and existing third party proceedings. It is also clear that the additional matters that Mr Viscariello now wishes to raise will require extensive discovery and significant pre-trial preparation. They are likely to add significantly to the length of the case.
What I might call the overlap between the foreshadowed claim and the existing proceedings, or the linkage between the two, is but a minor aspect of the proposed fourth party claim.
So far, therefore, I conclude that the Master was correct in deciding that the fourth party claim fell within r 37.01(1)(c). It is sufficient if there is an issue in the existing claims and the fourth party claim that is substantially the same. I consider that the issue of insolvency answers that question. It does not matter that other issues arise that are not “substantially the same” in each matter.
But r 37.01(1) also requires one to consider whether the matter the subject of the fourth party claim includes a matter which “should also be properly determined as between the defendant and the third party” which, in the present context, means as between Mr Viscariello and Mr Macks. The Master recognised that this was the case.
It seems to me that the conclusion that the matters that overlap should be “properly determined”, to use the words of the rule, as between Mr Macks and Mr Viscariello in the existing proceedings is far from compelling. The area of overlap is slight indeed. The existing proceedings are almost ready to be set down for trial. The addition of the fourth party claim will almost certainly delay those proceedings for some time. The Master recognised that the question of whether the fourth party proceedings should be tried together with the existing proceedings or separately was yet to be decided. That was one reason that he gave for taking the view that it was appropriate to extend time to allow the fourth party claim to be made. But it seems to me that there necessarily be some delay while the court determines whether or not the fourth party claim should be tried with the balance of the proceedings.
I also consider that at the risk of inconsistent factual findings if the fourth party claim is tried separately is a relatively minor factor. The risk cannot be put to one side altogether but it does not appear to me to be likely to be productive of significant inconvenience.
It is not easy to determine these matters at this early stage of the proceedings. However, I must say that on the material now before the court I am not persuaded that the matters raised by Mr Viscariello and his fourth party claim, to the extent they are substantially the same as matters raised by the claims of Mr Macks and of the Commissioner, should properly be determined as between Mr Macks and Mr Viscariello at the same time as the original proceedings are heard. However, that is a matter on which minds might differ. I am not satisfied that the Master was wrong to conclude the contrary. Accordingly, I am not persuaded that the Master erred in deciding that the fourth party claim as proposed fell within r 37.01(c). I am not saying I would have made that finding but I am not persuaded that he erred.
But to so decide does not determine how the application for an extension of time should be disposed of. It is to hold only that the fourth party claim does fall within r 37.01(c). If it did not, the application would not get off the ground.
I turn to the question of whether it was appropriate to make an order extending time. That involves an exercise of judgment taking account of the facts of the case, the interests of justice and the interests of the parties and of the public in the efficient disposition of the case: I refer to the decision in Imagecolor (SA) and Sheahan v Curtis & Others [2000] SASC 316 and to the decision in Mulvaney v The Commissioner of Taxation [2004] SASC 166 in particular at [21].
The first point I make, there is no good explanation for the delay by Mr Viscariello in bringing the fourth party claim. The material in para 20.11 of his affidavit in my opinion is an inadequate explanation. The delay is substantial. The application has come at a stage when the proceedings are ready to be set down for trial.
It is also necessary to consider matters to which I have already referred. The first is that there is no persuasive case for deferring the hearing of Mr Macks’ claim against the Commissioner and the Commissioner’s against Mr Viscariello until the fourth party claim can be brought to trial. That is not to assume that delays will necessarily occur. It is merely to make the point that on the information available there is no persuasive case for delaying the original proceedings. There is also the fact to which I have referred, that the risk of inconsistent finding being made on issues of fact and of inconvenience or injustice being caused seems to be a minor one. The only common issue of any substance appears to be that of the solvency of Bernsteen and Mr Viscariello’s belief about that. This is not a central issue in the fourth party claim. The risk of inconsistent finding cannot be dismissed out of hand, but does not seem to be a high risk or a risk of great significance. In any event that risk is only one matter to be weighed up, it is not decisive.
In submissions before me there were other points made. Mr McNamara QC referred to the desirability of Mr Macks in his personal capacity being bound by the findings of the trial. If that is a reference to the trial of the issues between Mr Macks and the Commissioner and between the Commissioner and Mr Viscariello, it does not appear to me to be of any great weight because of the very limited overlap between the original proceedings and the fourth party claim.
The same comment applies to the submission that it is undesirable that there be successive trials of common issues.
I agree that it is desirable to have the fourth party proceedings decided as soon as possible after the decision of the issues on the plaintiff’s statement of claim, but to the extent that that cannot be achieved, that, to a considerable degree, must be due to delay on the part of Mr Viscariello in bringing the claim forward.
Mr McNamara points in his written outline to the desirability of keeping overall costs to a minimum. I agree with that, but I do not accept that overall costs would be significantly increased with a fourth party claim to be heard separately.
It is true that the grant of leave does not mean the fourth party claim will be heard with the other claims. The court has power to order otherwise but the existence of that power is not an excuse to defer altogether consideration of the appropriateness of a grant of leave. There is I consider little at all to be said for including the fourth party claim in the proceedings.
Standing back, the position appears to me as follows. I accept that the claim made by the fourth party notice falls within r 37.01(1)(c) as a matter of law. But viewing the matter more broadly, there seems little merit in joining the fourth party claim in existing proceedings. That is relevant to the exercise of the judgment to be made in deciding whether to extend time.
To my mind what is decisive is the fact there are no persuasive reasons at all at this stage of proceedings for granting the extension of time. That is a matter of discretion.
It seems to me that the lateness of the application, the prospect of delay to the existing proceedings, the absence of any persuasive reasons for delaying the existing proceedings, all lead to the conclusion that this was not an appropriate case to grant an extension of time. Mr Viscariello will not suffer any injustice. He will be at liberty to bring the claim that he makes by way of fourth party claim as separate proceedings.
It is not an answer to this argument to say that in the course of pre-trial management of the proceedings the court might yet decide to separate the trial of proceedings. On the information presently available the case for separating the proceedings is so strong that in my opinion it leads to the conclusion that an extension of time should not have been granted.
For those reasons in each matter I would allow the appeal, set aside the order made by the master, and order that there be substituted an order dismissing the application for an extension of time within which to file and serve the fourth party notice.