Merrion B Pty Ltd v Donchiod Pty Ltd
[2020] VSC 499
•14 August 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2019 04528
IN THE MATTER of DONCHIOD PTY LTD (ACN 601 212 300)
BETWEEN
| MERRION B PTY LTD (ACN 624 885 598) | Plaintiff |
| v | |
| DONCHIOD PTY LTD (ACN 601 212 300) | Defendant |
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JUDGE: | Randall AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF JUDGMENT: | 14 August 2020 |
CASE MAY BE CITED AS: | Merrion B Pty Ltd v Donchiod Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2020] VSC 499 |
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CORPORATIONS – Section 459R of the Corporations Act 2001 (Cth) – Section 459R(2)(b) – The Court may extend the period within which the application for winding up must be determined if the order extending is made within the period of six months – Application of the slip rule to extend time for determination of a winding up application – Slip rule under r 36.07 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) – Whether circumstances justify the use of the slip rule.
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ON THE PAPERS: | Submissions | Date of filing |
| For the Plaintiff | Mr F V Gallichio, solicitor | 28 June 2020 |
| For the Defendant | Mr P Agardy of counsel | 3 July 2020 |
| For the Plaintiff in reply | Mr F V Gallichio, solicitor | 7 July 2020 |
TABLE OF CONTENTS
Background......................................................................................................................................... 1
Relevant statutory provisions.......................................................................................................... 2
The slip rule........................................................................................................................................ 2
Section 459R........................................................................................................................................ 2
The slip rule........................................................................................................................................ 3
Consideration...................................................................................................................................... 3
Orders................................................................................................................................................... 9
HIS HONOUR:
On 4 October 2019, the plaintiff filed and served an originating process to wind up the defendant on the grounds of insolvency. Pursuant to s 459R of the Corporations Act 2001 (Cth) (‘Corporations Act’), the application for the company to be wound up in insolvency was to be determined within six months after the application was made. The application was heard but no determination was delivered within the six months.
The issue arising which is the subject of this ruling is whether or not the Court has power to retrospectively extend time.
Background
The plaintiff’s application was filed and served on 4 October 2019.
On 25 October 2019, the defendant filed and served an interlocutory process pursuant to s 459S of the Corporations Act and to otherwise dismiss the application.
On 6 November 2019, procedural orders were made which included a provision for the filing and service of evidence in December 2019 and of submissions in February 2020, and the hearing was fixed for trial on all issues before myself on 2 March 2020 on a one day estimate.
On 2 March 2020, the hearing was conducted before myself. At the conclusion of that day’s hearing, I ordered that the parties file further short submissions by the end of 6 March 2020. I made a formal order permitting the defendant to amend its interlocutory application and otherwise reserved the decision.
On 6 March 2020, the parties filed and served further short submissions.
The date for the expiry of the application to wind up was 3 April 2020.
After 3 April 2020, there was an exchange of emails with the Court with respect to the expected timing of the delivery of the decision. Thereafter, issues with respect to s 459R were raised. An application was made in June 2020 to extend time under s 459R.
Relevant statutory provisions
Section 459R provides as follows:
Period within which application must be determined
(1)An application for a company to be wound up in insolvency is to be determined within 6 months after it is made.
(2)The Court may by order extend the period within which an application must be determined, but only if:
(a)the Court is satisfied that special circumstances justify the extension; and
(b)the order is made within that period as prescribed by subsection (1), or as last extended under this subsection, as the case requires.
(3)An application is, because of this subsection, dismissed if it is not determined as required by this section.
(4)An order under subsection (2) may be made subject to conditions.
The slip rule
Rule 36.07 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘the Rules’) provides:
Amendment of judgment or order
The Court may at any time correct a clerical mistake in a judgment or an order or an error arising in a judgment or an order from any accidental slip or omission.
Rule 36.07 applies to proceedings under the Corporations Act by virtue of r 1.3(2) of the Supreme Court (Corporations) Rules 2013 (Vic) (‘Corporations Rules’) as there is no equivalent to the slip rule under the Corporations Rules.
Section 459R
Each of the parties recognise that, unless extended under s 459R(2), the application would be dismissed within six months of the filing of the originating process.
The defendant relied upon Amorin Constructions Pty Ltd v Kamtech Electrical Services Pty Ltd (‘Amorin’).[1]In Amorin, Hammerschlag J observed that:
17 The three significant features of s 459R are that:
·the Court may only extend the period if it is satisfied that special circumstances justify it;
·the extension order must be made within the six-month period or as last extended by the Court;
·if the winding up application is not determined within the period concerned it is, by operation of statute, dismissed.[2]
[1](2008) 73 NSWLR 627 (‘Amorin’).
[2]Ibid 630 [17].
The slip rule
The defendant’s position is that in the circumstances, the slip rule ought not to be invoked. The defendant relied upon Amorin, in which the application for an order extending time, made outside the six month period, was refused.
Amorin was applied in Deputy Commissioner of Taxation v Ozone Manufacturing Pty Ltd.[3] Amorin was followed because it was held that the Court would not have ‘at once’ made the extension order.[4] The proceeding had been hard fought. Judge Lunn thought it was highly likely that the defendant would have opposed an application to extend time.
[3][2011] SASC 172.
[4]Ibid [13]–[16].
The defendant’s position with respect to the interests of justice was that justice would be served if the plaintiff were required to serve the defendant in the usual way, allowing the defendant proper opportunity to defend the plaintiff’s claims on the merits.
Consideration
Each of the plaintiff and the defendant correctly identified that if the slip rule had any application, it would operate with respect to the order made on 2 March 2020.
In Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (‘Elyard’),[5] the Court held that the slip rule was not displaced by the then provisions of s 459R of the Corporations Law. Those provisions are the equivalent to the current s 459R of the Corporations Act. The slip rules gives an ‘effect to the intention which the court would have had, if it were not for the failure which led to the accidental slip or omission’.[6] In the context of the slip rule which allows for the correction of an order when there is an error arising from an accidental slip or omission, Lockhart J emphasised that the use of the slip rule is ‘ultimately to avoid injustice’.[7] The effect of the slip rule is that an order under the slip rule will correct the relevant previous order such that it will have effect from the date of the corrected order.[8] As such, an order under the slip rule to extend the period for the determination of a winding up application will have effect from the date of the previous order before the expiry of the statutory period.
[5](1995) 61 FCR 385 (‘Elyard’).
[6]Ibid 392 (Lockhart J).
[7]Ibid.
[8]Ibid 391–2.
The correctness of the Elyard decision has been subsequently questioned in a s 459R case and in bankruptcy cases involving similar provisions.
In Amorin, Hammerschlag J held that the slip rule does not apply when the ‘proposed amendment requires the exercise of an independent discretion’[9] as the omission and mistake would not be regarded as accidental. Therefore, as s 459R(2) of the Corporations Act requires the Court to be ‘satisfied that special circumstances justify the extension’, it requires the Court to exercise an independent discretion and hence the slip rule is unavailable. However, while Amorin questioned the correctness of Elyard, Hammerschlag J did not ultimately reconsider it as Hammerschlag J relied upon other authority to preclude the particular slip rule.[10]
[9]Amorin (n 1) 630 [20] (emphasis omitted), quoting Storey & Keers Pty Ltd v Johnstone (1987) 9 NSWLR 446, 453.
[10]Amorin (n 1) 632–4 [44]–[59].
Hammerschlag J’s reasoning in Amorin was disapproved by the Court in Flint v Richard Busuttil & Co Pty Ltd (‘Flint’),[11] a bankruptcy case.In Flint, the Court did not accept the proposition that the slip rule cannot be used where an independent discretion must be exercised because:
First, in Shaddock the High Court invoked the slip rule to amend an order to include an award of pre-judgment interest. Yet an award of interest is in the Court’s discretion … [and]
Second, if the surrounding circumstances are such (as they can be taken to have been in Elyard) that it can be concluded that proper attendance to the matter (had the error not occurred) could only have resulted in the discretion being exercised in one way, it is difficult to see why the rule should not apply in the same way that it would if the discretion had been exercised and there had been a mere failure to record it.[12]
[11](2013) 216 FCR 375 (‘Flint’).
[12]Ibid 384 [45]–[46].
The reasoning in Flint was subsequently endorsed in Endresz v Commonwealth (‘Endresz’),[13] which is also a bankruptcy case.
[13](2019) 375 ALR 406 (‘Endresz’).
In Elyard, Lockhart J held that the slip rule does not undermine the policy that winding up applications should be resolved quickly as the slip rule is only used to ‘correct accidental slips when justice requires that this be done’.[14] However in Griffiths v Boral Resources (Qld) Pty Ltd (‘Griffiths’),[15] a bankruptcy case, the Court held that it was ‘a little uncomfortable with the view, inherent in Elyard, that the slip rule may be used to extend time notwithstanding the statutory requirement that such order be made within a period of time which has elapsed’[16] due to the policy that ‘insolvency proceedings be speedily resolved’.[17] This policy regarding Part 5.4 of the Corporations Act was later emphasised in the High Court’s decision in Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd.[18] The Court in Griffiths emphasised that the Court ‘must recognise this policy by giving priority to the hearing and determination of such matters’[19] and that ‘[t]he decision in Elyard should not be taken as establishing an unlimited power to avoid this statutory policy’.[20]
[14]Elyard (n 5) 392.
[15](2006) 154 FCR 554 (‘Griffiths’).
[16]Ibid 562 [30].
[17]Ibid 562 [31].
[18](2008) 232 CLR 314, 323–5 [13]–[19].
[19]Griffiths (n 15) 562 [31].
[20]Ibid.
However, the Court in Griffiths did not reconsider Elyard as it has been ‘the practice of the Court and has now stood for over 10 years without legislative intervention’[21] and while Elyard ‘does not directly bind [the Court] in applying s 52 of the Bankruptcy Act, to take a different approach would cause substantial confusion in insolvency practice’.[22]
[21]Ibid 562 [30].
[22]Ibid.
Therefore, despite casting doubt on Elyard, these cases have not explicitly held that Elyard was wrongly decided and did not reconsider it. Elyard has also not been reconsidered in circumstances where the slip rule was not invoked. Most recently, Endresz distinguished Elyard from application in bankruptcy cases, which departs from the bankruptcy cases which referred to or followed Elyard. However, in the context of s 459R of the Corporations Act, Elyard continues to apply and the slip rule is available.
It would be fair to say that on the hearing of 2 March 2020, and referring to the order obtained on that date, neither the parties nor the Court turned their minds to the issue of the expiry of the winding up application on 3 April 2020. Given that on 2 March 2020, the hearing had been completed save for the requirement of filing further submissions, if the parties or myself had turned our minds to the volume of the work that I was required to undertake, in general, it would have almost gone without saying that any application for extension would have been granted such that the discretion to extend could only have been exercised in one way. If, however, the defendant had opposed such an application, as it now does, it is clear that the interests of justice would have dictated that an extension of time be permitted to enable me to publish reasons and an order.
Cases in which the slip rule were not invoked focus mainly upon when the order upon which the slip rule is to operate was made and the lapse of the relevant winding up application or creditor’s petition. In summary, where the relevant order was made many months prior to the lapse of the application or petition, the Court has been reluctant to grant an extension pursuant to the slip rule as there was sufficient time to make an application and other alternatives could have been implemented.[23]
[23]See, e.g., Ibid 570–1 [69]; Amorin (n 1) 631–2 [33]–[34]; Flint (n 11) 383 [38]; Endresz (n 13) 434–5 [89].
In contrast, the slip rule has been invoked to extend the life of a winding up application under s 459R in particular circumstances. In Timms v Dellaplus Pty Ltd,[24] the winding up application was extended in circumstances where the matter had been adjourned to after the expiry date and a preliminary point was to be decided. The slip rule was applied as it would have been ‘unjust to require fresh proceedings to be instituted to resolve [the] matter, given the reasons that it has not yet been resolved are not the fault of the parties’[25] and the parties would have consented to the extension if the issue was raised.[26]
[24](2008) 99 SASR 578.
[25]Ibid 589 [49].
[26]Ibid 589 [48].
In Soil & Contracting Pty Ltd v Boban Pty Ltd,[27] the slip rule was applied. The application was listed for trial with three other related applications and therefore was a complex case and was to commence on the next available date which was more than two months after the expiry date. It was held that there was no undue delay in the parties bringing the application to extend more than two months after the expiry given that ‘there was an event outside the control of the parties which necessitated the trial being adjourned’.[28] In the same way, neither party in this proceeding is at fault given that all that was left to do was to hand down a determination by me. In T-S Capital Partners LLC v Paltar Petroleum Ltd (admin apptd),[29] there were four months between the relevant order and expiry of the application. Stewart J noted that there were no hearing dates available prior to the date of the expiry. Again, as in this proceeding, there was no fault on the part of the parties.
[27][2014] WASC 402.
[28]Ibid [50].
[29][2019] FCA 635.
It is of note that each of the cases which permitted the slip rule to be invoked were cited prior to Endresz which distinguished Elyard from application in bankruptcy cases.
I am satisfied that I have the power under the slip rule to correct the orders of 2 March 2020 by inserting an order to extend time under s 459R. I am satisfied that the issue was not raised as a result of an accidental slip or omission by either the practitioners or the Court. I find that had the issue been raised before me on 2 March 2020, an application under s 459R(2) would have been made and, for the reasons set out in paragraph 33 hereof, would have been granted. To the extent that I am required to exercise discretion under the slip rule, I do so in favour of the plaintiff on the following bases:
(i) the order made on 2 March 2020 was made at a time relatively close to the expiry of the winding up application;
(ii) it goes without saying that if the application had been made at the relevant time, and my attention had been drawn to the expiry date, I would have allowed more time given the workload of the Court in March 2020. I make the observation that, notwithstanding that COVID-19 ultimately impacted upon the length of time required for the judgment, it can only be considered an exacerbating factor, which was not foreseeable on 2 March 2020;
(iii) relitigating a subsequent application based upon a new statutory demand would lead to an outcome at the expense of the Court’s resources thereby causing injustice; and
(iv) the above factors outweigh the underlying policy of s 459R to determine a winding up application expeditiously.
I am also satisfied that there were special circumstances on 2 March 2020 that justify the exercise of the discretion to extend the winding up application under s 459R(2), namely that:
(v) the hearing had been completed save for the filing of further submissions and a determination to be handed down by myself; and
(vi) more time was required for judgment given the workload of the Court.
Orders
1. Pursuant to r 36.07 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic), the order made on 2 March 2020 be corrected to include an order pursuant to s 459R(2) of the Corporations Act 2001 (Cth) extending the period within which the application made by the originating process filed on 4 October 2019 is to be determined to 4 September 2020.
2. There be no order as to costs.
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