Maroona Trading Co Pty Ltd (in liq) v Kal Kal Nominees Pty Ltd
[2000] VSC 50
•2 March 2000
| SUPREME COURT OF VICTORIA | Do not Send for Reporting |
| PRACTICE COURT | Not Restricted |
No. 5838 of 1995
| MAROONA TRADING CO. PTY. LTD. (IN LIQUIDATION) | Plaintiff |
| v. | |
| KAL KAM NOMINEES PTY. LTD. | Defendant |
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JUDGE: | BEACH, J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 2 FEBRUARY 2000 | |
DATE OF JUDGMENT: | 2 MARCH 2000 | |
CASE MAY BE CITED AS: | MAROONA TRADING CO. PTY. LTD. (IN LIQUIDATION v. KAL KAM NOMINEES PTY. LTD. | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 50 | |
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CATCHWORDS: Amendment of Pleadings – Serious prejudice to party if amendment permitted – Application refused.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr. J.D. Mattin | Macpherson & Kelley |
| For the Defendant | Mr. N. Jones | Felman & Associates |
HIS HONOUR:
This is an appeal by the defendant from an order made by Master Kings on 25 November 1999 whereby the Master declined to deal with the application by the defendant to amend its further amended defence and counterclaim by adding the following sub-paragraphs (a), (b) and (c) to paragraph 3 of its defence and counterclaim:
"3.… Further in respect of paragraph 3 the defendant says as follows:
(a)as at 30 June 1993 no amount was recorded in the books and records of the plaintiff and the defendant as being owed by the defendant to the plaintiff;
(b)during the financial year ended 30 June 1993 the external accountant for the plaintiff and the defendant, Morris Nutbean of Cassidy Hunter Nutbean, rationalised the inter-company loans within the Bamix Group of companies with the effect that the amounts set out in the books and records of account of the plaintiff and the defendant as being owed by the defendant to the plaintiff were reduced to a nil balance.
PARTICULARS
The reduction in the loan account balances was a rationalisation within the Bamix Group of companies whereby an amount owed by the plaintiff to Trishien Pty. Ltd. was reduced by the amount recorded as being owed by the defendant to the plaintiff and the amount recorded as being owed by the defendant to the plaintiff was reduced to a nil balance.
(c)Accordingly the amounts set out in sub-paragraphs 3(b) and (c) were not owed by the defendant to the plaintiff as at 30 June 1993 or at any time thereafter",
and adjourned the defendant's summons seeking that relief to 15 December 1999.
The plaintiff Maroona Trading Co. Pty. Ltd. (In Liquidation) and the defendant Kal Kam Nominees Pty. Ltd. are members of what was the Bamix group of companies.
On 6 December 1994 Gregory John Shilton was appointed provisional liquidator of the plaintiff. On 22 May 1995 he was appointed Official Liquidator of the plaintiff.
On 25 May 1995 Mr. Shilton filed a writ in the Court on behalf of the plaintiff seeking to recover the sum of $553,227.53 from the defendant.
Paragraph 3 of the Statement of Claim endorsed on the writ reads:
"The Defendant is indebted to the Plaintiff in the sum of $553,227.53.
PARTICULARS
$266,959.53 being payments made by the Plaintiff on behalf of the Defendant and payments received by the Defendant and properly payable to the Plaintiff. Further particulars will be provided during discovery.
$268,268.00 being monies loaned by the Plaintiff to the Defendant as disclosed in the books and records of account of both the Plaintiff and the Defendant as at 30/06/92. The plaintiff is unable to give further particulars until discovery by the Defendant to the Plaintiff."
On 27 June 1995 the defendant filed its defence to the plaintiff's statement of claim. In its defence it simply denied each and every allegation contained in paragraph 3 of the statement of claim.
On 19 July 1995 the plaintiff filed a summons in the Court seeking that the defendant provide further and better particulars of its defence. It was the plaintiff's contention that the defendant should have pleaded the material facts it relied upon in its defence of the claim.
The plaintiff's summons came before Master Wheeler on 3 August 1995. The plaintiff's application was opposed by counsel for the defendant. The Master dismissed the application. However, he did not give leave to the plaintiff to amend its statement of claim.
On 20 March 1996 the plaintiff filed its amended statement of claim in the Court. Paragraph 3 of the amended statement of claim reads:
"3. The Defendant is indebted to the Plaintiff as follows:
(a)$181,759.18, being payments made by the Plaintiff on behalf of the Defendant;
(b)$85,200.35, being monies loaned by the Plaintiff to the Defendant as disclosed in the books and records of account of both the Plaintiff and the Defendant as at 30/06/92; and
(c)$268,268.00, being monies loaned by the Plaintiff to the Defendant as disclosed in the books and records of account of both the Plaintiff and the Defendant as at 30/06/92."
On 3 December 1997 the defendant filed a summons in the Court whereby it sought leave to amend its defence and leave to deliver a counterclaim.
The summons eventually came before Master Wheeler on 26 February 1998.
The Master dismissed the application. At the time he did so the Master made the following notation on the Court record:
"1.On 20.7.95 counsel said his client would rely only on the defence filed.
2.Delays are lengthy and not well explained particularly after May 1997.
3.There is no evidence to support the defence which in some respects at least are nonsense. See paras. 6 and 17 of proposed amended defence tendered.
4.If I were to permit the counterclaim there would need to be an application for 'Leave to Proceed' the plaintiff being in liquidation.
5. In this case delay alone is sufficient prejudice."
On 3 March 1998 the defendant filed a notice of appeal against the Master's decision.
The appeal came before me in the Practice Court on 24 April 1998. I allowed the appeal and amongst other things gave the defendant leave to amend its defence.
On 2 June 1998 Master Kings fixed the proceeding for trial on 27 October 1998. At that stage the defendant had not availed itself of the order I made on 24 April 1998 and delivered its amended defence.
On 5 October 1998 the defendant filed an amended defence and counterclaim in the Court. Paragraphs 3 to 12 inclusive of the amended defence read:
"3. It denies paragraph 3(a) thereof.
4.Further to paragraph 3 hereof it says that by an inter-company arrangement made in or about early 1992 between the Plaintiff and the Defendant the Plaintiff was allowed use of the Defendants' property at Lot 1, Long Forrest Road, Bacchus Marsh ('the Property') for the purpose of, inter alia, a television rehearsal and production facility ('the Production Facility') in consideration for the Plaintiff paying for and/or reimbursing the Defendant expenses associated therewith ('the First Arrangement').
PARTICULARS
The First Arrangement was entered into orally between Mr. A. Peart for the Plaintiff and Mrs. B. Pearson for the Defendant in early 1992 to the effect alleged and commenced in or about early 1992 whereby the Defendant
(a)altered part of the Property to facilitate the Production Facility;
(b)paid for and on behalf of the Plaintiff expenses associated with the Production Facility from time to time;
(c)allowed the use of the Property and all utilities thereon for the Production Facility by the Plaintiff.
5.There were terms and/or conditions of the First Arrangement, inter alia, that:
(a)the Plaintiff would either directly pay for expenses incurred in connection with the Production Facility; or
(b)reimburse the Defendant for expenses it incurred on behalf of the Plaintiff in connection with the Production Facility.
6. Pursuant to the First Arrangement:
(a)the Plaintiff carried on the Production Facility at the Property from early 1992 to November 1994 (inclusive);
(b)the Defendant incurred expenses for and on behalf of the Plaintiff in connection with the Production Facility;
(c)the Defendant paid directly for expenses incurred by the Plaintiff in connection with the Production Facility in the sum of $181,759.00, and the Plaintiff has failed to reimburse the Defendant with respect to the said expenses.
7. It denies paragraph 3(b) thereof.
8.Further to paragraph 7 hereof it says that by way of an inter-company arrangement between the Plaintiff and the Defendant in or about September/October 1994 it was agreed between them that all sales revenue generated by the Plaintiff in respect of its 'local giftware' product range was to be credited to the Defendant's bank account with the exception of credit card sales which continued to be credited to the Plaintiff's bank account ('the Giftware Arrangement').
PARTICULARS
The Giftware Arrangement was entered into in or about September/October 1994 between Janet Peart for and on behalf of the Plaintiff and Arthur Peart for and on behalf of the Defendant wherein it was agreed between them that in order for the giftware product range of the Plaintiff's to be easily traced, identified and sales analysed the sales revenue of the giftware product range would be credited to the Defendant's bank account except credit card sales which would continue to be credited to the Plaintiff's bank account.
9.It was a term of the Giftware Arrangement that the Defendant meet the Plaintiff's creditor accounts in connection with the giftware sales ('the Term').
PARTICULARS
The Term was agreed between Janet Peart on behalf of the Plaintiff and Arthur Peart on behalf of the Defendant in September/October 1994.
10.Pursuant to the Giftware Arrangement and the Term between the months of October to 6 December 1994 (inclusive) sales revenue generated by the Plaintiff in connection with the giftware product range was credited to the Defendant's account in the sum of $117,144.40 and the Defendant paid for creditor accounts of the Plaintiff in connection with the said giftware to a total sum of $103,705.00.
11. It denies paragraph 3(c) thereof.
12.Further to paragraph 11 hereof it says that in the books and records of both the Plaintiff and the Defendant as at 30 June 1993 there is no debt owing to the Plaintiff by the Defendant.
PARTICULARS
Copies of the Plaintiff's and the Defendant's balance sheets as at 30 June 1993 are in the possession of the Defendant's solicitors and may be inspected on prior notice."
It would appear that that amended defence and counterclaim was never served on the plaintiff.
On 7 October 1998 the defendant made an application to the Listing Master to vacate the trial date of 27 October. The Listing Master acceded to the application and refixed the proceeding for hearing with priority on 23 November 1998. At the same time the Listing Master gave leave to the defendant to amend its amended defence and counterclaim by 13 October 1998.
On 29 October 1998 the defendant filed a further amended defence and counterclaim in the Court. Although the counterclaim raises additional issue to those raised in the counterclaim filed in the Court on 5 October, paragraphs 3 to 12 of the amended defence are the same.
On 11 November 1998 the Listing Master acceded to a second application by the defendant to vacate the trial date. On that occasion the Master did not refix the proceeding for trial but adjourned it to a directions hearing first on 10 February 1999 and later on 7 May 1999.
On 7 May 1999 the Listing Master fixed the proceeding for trial on 22 September 1999.
Once again, and on the application of the defendant, the trial date of 22 September 1999 was vacated and the proceeding was refixed for trial on 28 October 1999.
The proceeding was not reached on 28 October. The Court record filled in that day by the associate to the Listing Master simply notes:
"Not reached
No orders were made in the proceeding today."
Pausing at this point. I assume that had a Judge been available to hear the proceeding on 28 October 1999 the trial would have commenced that day with the defendant being content to rely upon its defence as it then stood.
At all events on 19 November the plaintiff filed a summons in the Court seeking further interlocutory orders in the proceeding and on 22 November the defendant file a summons in the Court seeking leave to file a further amended defence and counterclaim, leave to join four individuals as third parties to the proceeding and further interlocutory orders.
The summonses came before the Listing Master on 24 and 25 November. That day the Master dealt with the relief sought by the plaintiff in its summons but adjourned the defendant's summons to 15 December (I note that the orders of the Master purport to have been made on 24 November 1999. However, it would seem clear from paragraph 9 of the order that the hearing extended over 24 and 25 November and that the actual orders were pronounced on 25 November).
On 29 November 1999 the defendant filed a notice of appeal in the Court. By its notice of appeal the defendant sought the following relief:
"1. The appeal be allowed.
2. The Defendant have leave to amend its Defence."
I note that no complaint is made concerning the Master's refusal to deal with the defendant's application to join third parties to the proceeding or her refusal to deal with the other applications of the defendant spelled out in its summons.
No question was raised before me concerning the question as to whether it was competent for the defendant to appeal from the Master's refusal to deal with the defendant's application to amend the defendant's defence on 24 November and indeed the appeal was dealt with on the footing that the Master had dismissed the application. I must confess that it was not until I came to prepare my reasons for judgment and read the Master's orders more closely that I realised that the Master had made no determination in the matter but had simply adjourned the defendant's summons to 15 December. If the Master did make a determination in the matter it is certainly not reflected in the authenticated order.
However, because of the appalling background to this proceeding, and in the main I refer to the behaviour of the defendant and its legal advisers which I have endeavoured to spell out in my reasons, I determined to deal with the defendant's application to further amend its defence on the merits.
Insofar as it is necessary to do so I exercise the power given to me by Rule 77.03(2)(b) and grant to the defendant special leave to make its application to amend its defence to a Judge of the Court.
I turn now to the merits of the application.
The first matter to note concerning the matters sought to be raised by sub-paragraphs (a), (b) and (c) of paragraph 3 of the defendant's defence and counterclaim is that if the rationalisation there alleged did take place during the financial year ended 30 June 1993 the defendant and its office bearers must have been fully aware of that fact at or about that time. One asks then, why, having had ample opportunity to raise such matters in its defence, has the defendant left it to this late stage of the proceeding to do so.
The defendant's solicitor, in his affidavit of 23 November 1999 sworn in support of the application, gives the impression that the defendant only became aware of the rationalisation when it obtained a report from an accounting expert shortly prior to the trial date of 28 October 1999.
In my opinion that explanation lacks credibility. If the alleged rationalisation took place during the financial year ended 30 June 1993 it would have been reflected in the books of account of the defendant at that time – at the latest by 30 June 1994 which was well before the appointment of the provisional liquidator.
In my opinion if the rationalisation took place there is no acceptable reason for the defendant's failure to make reference to it in its defence when that defence was first prepared and filed.
But what is of far more significance in my opinion, is the serious prejudice which may now be caused to the plaintiff's liquidator if the amendments sought are permitted.
Section 588FE of the Corporations Law deals with transactions of a company being wound up which may be voidable. The relevant sub-sections for present purposes are sub-sections 1, 3 and 4 which read:
"588FE(1) Where a company is being wound up, a transaction of the company that was entered into at or after the commencement of this Part may be voidable because of any one or more of the following subsections.
…
(3) The transaction is voidable if:
(a)it is an insolvent transaction, and also an uncommercial transaction, of the company; and
(b)it was entered into, or an act was done for the purpose of giving effect to it, during the 2 years ending on the relation-back day.
(4) The transaction is voidable if:
(a) it is an insolvent transaction of the company; and
(b) a related entity of the company is a party to it; and
(c)it was entered into, or an act was done for the purpose of giving effect to it, during the 4 years ending on the relation-back day."
Section 588FF then gives the Court the power to make orders on the application of a company's liquidator, concerning voidable transactions. However, sub-section (3) of that section provides that such applications may only be made within three years after the relation-back day or within such longer period as the Court orders on an application made by the liquidator within those three years.
As the time limit imposed by s.588FF(3) has now expired it is arguable that the liquidator's right to set aside the allege rationalisation is now statute barred.
It was argued on behalf of the defendant that that argument is incorrect in that if the liquidator can demonstrate that the rationalisation is voidable he may rely upon the provisions of s.588FE as a defence as it were to the defendant's contention, without the need to make an application under s.588FF.
I am in no position to make a final determination concerning that aspect of the matter. That would require a full hearing of the proceeding.
What I do say, however, is that even if that be so, as the matter presently stands, whilst the liquidator of the plaintiff may be able to use s.588FE as a defence to the defendant's contention concerning the rationalisation, he would not have available to him the remedies provided by s.588FF to recover moneys wrongfully transferred from the defendant to other companies in the Bamix group.
The appeal and/or the application by the defendant to amend its defence is dismissed with costs to be taxed and paid by the defendant.
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