New Cap Reinsurance Corp v Reaseguros Alianza SA - [2004] NSWSC 787

No judgment structure available for this case.

CITATION: New Cap Reinsurance v Reaseguros Alianza SA [2004] NSWSC 787

HEARING DATE(S): 09/07/04

JUDGMENT DATE:
31 August 2004

JUDGMENT OF: White J

DECISION: 1. Grant leave to the plaintiffs to file an Amended Statement of Claim in the form of the draft Amended Statement of Claim which is exhibit KAM 17 to the affidavit of Katherine Alison Merrick affirmed 25 February 2004 subject to the correction of typographical errors and omissions; 2. Direct that the plaintiffs file an amended Originating Process incorporating the additional claims for relief referred to in the Amended Statement of Claim. Those documents are to be filed and served within seven days; 3. The plaintiffs pay the costs of the defendant thrown away by reason of the amendments; 4. Costs of the Interlocutory Process filed on 26 February 2004 be the plaintiffs' costs in the proceedings.

CATCHWORDS: Corporations - s 588FF(3) considered - Whether claim for extension of time under s 588FF(3)(b) validly made - Whether claim abandoned on filing statement of claim which did not seek extension - Whether s 588FF(3)(b) precluded amendment pursuant to SCR Pt 20 - Delay in seeking to make amendments - Whether causes of action alleged in amendments statute barred - Whether extension of time for bringing fresh action under s 588FF(1) would be granted under s 588FF(3)(b) - Discretionary considerations - Absence of prejudice to defendant - Possibility of substantial hardship to plaintiffs if amendment refused - SCR Pt 20 r 4(5) considered - Meaning of "substantially the same facts" discussed - Pt 20 r 1 considered - McGee v Yeomans [1977] 1 NSWLR 273 - Proctor v Jetway Aviation Pty Ltd [1984] 1 NSWLR 166, and Clutha v Millar (No. 2) [2002] NSWSC 523 considered.

LEGISLATION CITED: Corporations Act 2001 (Cth)
Federal Court of Australia Act 1976 (Cth)
Insurance Act 1902 (NSW)
Evidence Act 1995 (NSW)

CASES CITED: BP Australia Ltd v Brown (2003) 58 NSWLR 322
Clutha v Millar (No. 2) [2002] NSWSC 523
Brown v DML Resources (No. 2) (2001) NSWLR 685
Greig v Australian Building Industries Pty Ltd (in Liq) (2003) 21 ACLC 1565
McGrath & Ors v HIH Insurance (in Liq) (2004) 22 ACLC 449
Renowdin v McMullin (1970) 123 CLR 584
Supreme Court Rules Victoria
Harries v Ashford [1950] 1 All ER 427
Hall v Merrick [1957] 2 QB 455
Cargill v Bower (1878) 10Chd 502
Lewis & Lewis v Durnford (1907) 24 TLR 64
English Rules
Rodgers v Federal Commissioner of Taxation (1998) 158 ALR 220; 28 ACSR 42
Star v National Australia Bank Ltd (1999) 30 ACSR 583
Rambaldi v Dallbrook Pty Ltd (2003) 21 ACLC 1190
Federal Court Rules
Supreme Court Rules NSW
Australian Securities Commission v Marlborough Goldmines Ltd (1993) 177 CLR 485
Airlink Pty Ltd v Patterson (2003) 58 NSWLR 388
Australia and New Zealand Banking Group Ltd v Larcos (1987) 13 NSWLR 286
Weldon v Neal (1887) 19 QBD 394
Green v Chiswell Furniture Pty Ltd (in Liq) [1999] NSWSC 608
Taylor v Woden Constructions Pty Ltd (Federal Court, 23/8/98, unreported)
Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541
Itek Graphix Pty Ltd v Elliott (2002) 54 NSWLR 207
Burford v Clifford [1932] 2 CH 122
Brickfield Properties Ltd v Newton [1971] 3 All ER 328
Glebe Administration Board v National Australia Bank Bainton J, 4 March 1996 unreported; BC 9600362
McGee v Yeomans [1977] 1 NSWLR 273
Proctor v Jetway Aviation Pty Ltd [1984] 1 NSWLR 166
Fernance v the Nominal Defendant (1989) 17 NSWLR
Leon Fink Holdings Pty Ltd v Australian Film Commission (1979) 141 CLR 672

PARTIES :
New Cap Reinsurance Corporation
v
Reaseguros Alianza SA

FILE NUMBER(S): SC 2309/02

COUNSEL: Plaintiff: P Dowdy
Defendant: R McFarlan QC, P Fury

SOLICITORS: Plaintiff: Henry Davis York
Defendant: Hunt & Hunt

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

WHITE J

Tuesday, 31 August 2004

2309/02 New Cap Reinsurance Corporation Limited (In Liq) & Gibbons v Reasaguros Alianza SA

JUDGMENT

1 HIS HONOUR: This is an application by the plaintiffs for leave to file an amended statement of claim.

2 The first plaintiff (“New Cap”) carried on the business of reinsurance. It is now in liquidation. The second plaintiff was appointed as New Cap’s administrator on 21 April 1999. On 16 September 1999 the creditors of New Cap resolved that it be wound up and the second plaintiff became its liquidator. On 18 April 2002 the plaintiffs filed Originating Process in which they applied for an order under s 588FF of the Corporations Act 2001 (Cth) that the defendant pay to the plaintiffs the amount or amounts which it had received under an alleged unfair preference (as defined by s 588FA of the Act) or arising from an “uncommercial transaction” (as defined by s 588FB of the Act).

3 Section 588FC provides that in certain circumstances an unfair preference or an uncommercial transaction is also an insolvent transaction of a company. Section 588FE provides for the avoidance of insolvent transactions, and of insolvent and uncommercial transactions. Section 588FF relevantly provides:

-SECT 588FF

Courts may make orders about voidable transactions

(1) Where, on the application of a company’s liquidator, a court is satisfied that a transaction of the company is voidable because of section 588FE, the court may make one or more of the following orders:

(a) an order directing a person to pay to the company an amount equal to some or all of the money that the company has paid under the transaction;

………….

(3) An application under subsection (1) may only be made:

(a) within 3 years after the relation-back day; or

(b) within such longer period as the Court orders on an application under this paragraph made by the liquidator within those 3 years.

4 The parties agreed upon a timetable for the conduct of the proceedings which included orders that the plaintiffs file and serve a statement of claim on or before 10 June 2003 and the defendant thereafter file and serve its defence. New Cap filed its statement of claim on 16 July, 2003. The Interlocutory Process seeking leave to file an amended statement of claim was filed on 26 February, 2004. It was common ground that at the time the application for leave to amend was made, the period of 3 years after the relation-back day had expired. (Corporations Act ss 9, 513B,; see also BP Australia Ltd v Brown (2003) 58 NSWLR 322 at 347, 361).

5 In its statement of claim New Cap alleged that it reinsured the defendant in respect of insurance business written by the defendant by a “reinsurance acceptance slip” reference TY28B and signed by New Cap on 21 July 1998. The reinsurance was for a period of 12 months from 1 July 1998. It further alleged that New Cap became liable to the defendant in the amount of not less that US$922,160.25 under that reinsurance contract. It was alleged that on or around 15 January 1999 New Cap paid the defendant the sum of US$922,160.25 in satisfaction of its indebtedness. These allegations are admitted. It was then alleged that at the time of the payment New Cap was insolvent and that the payment was an unfair preference within the meaning of s 588FA and an insolvent transaction within s 588FC, which is voidable pursuant to s 588FE(2).

6 In paragraph 3 of the Originating Process the plaintiffs also claimed the following:

“An order pursuant to section 588FF(3) of the Act extending the time within which any further or other proceedings or claims may be brought against the defendant pursuant to the provisions of Part 5.7B of the Act.”

7 The proposed amendments allege that the plaintiff reinsured the defendant under an additional four reinsurance contracts. One of the four contracts is given NCR reference TY28A. From the particulars in the proposed amended statement of claim I would infer that it is a reinsurance contract for a layer of cover immediately below the cover extended by the contract reference TY28B. The proposed amendments contain allegations that in relation to the reinsurance contract reference TY28A New Cap became liable to the defendant in the sum of not less than US$500,000, and that it also became liable to the defendant in sums of not less than US$126,600 and US$420,000 in respect of two of the other three reinsurance contracts. The proposed amended statement of claim alleges that in satisfaction of its indebtedness under the additional reinsurance contracts New Cap made three payments in addition to those alleged in the statement of claim. Each of the additional payments is alleged to be an unfair preference made when New Cap was insolvent. The payments are alleged to have been made on 8 January 1999, 20 January 1999 and 6 April 1999. The plaintiffs seek orders that the defendant pay to the plaintiffs the sums of US$500,000, US$126,600 and US$420,000 pursuant to s 588FF(1) of the Act together with interest. This is in addition to the order sought for repayment of the sum of US$922,160.25 which is the subject of the Originating Process and Statement of Claim.

8 The application for leave to amend was made pursuant to the Supreme Court Rules Pt 20, r 4, Pt 20, r 1 and s 588FF(3)(b) of the Corporations Act.

9 So far as relevant Pt 20, r 1 and r 4 provide as follows:

[20.1] General

1 (1) The Court may, at any stage of any proceedings, on application by any party or of its own motion, order that any document in the proceedings be amended, or that any party have leave to amend any document in the proceedings, in either case in such manner as the Court thinks fit.

(2) All necessary amendments shall be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, or of correcting any defect of error in any proceedings, or of avoiding multiplicity of proceedings.

[20.4] Statutes of Limitation

4 (1) Where any relevant period of limitation expires after the date of filing of a statement of claim and after that expiry an application is made under rule 1 for leave to amend the statement of claim by making the amendment mentioned in any of subrules (3), (4) and (5), the Court may in the circumstances mentioned in that subrule made an order giving leave accordingly, notwithstanding that that period has expired.

……..

(5) Where a plaintiff, in its statement of claim, makes a claim for relief on a cause of action arising out of any facts, the Court may order that he have leave to make an amendment having the effect of adding or substituting a new cause of action arising out of the same or substantially the same facts and a claim for relief on that new cause of action.

(5A) An amendment made pursuant to an order made under this rule shall, unless the Court otherwise orders, relate back to the date of filing the statement of claim.

(6) This rule has effect in relation to a summons as it has effect in relation to a statement of claim.

(7) This rule does not limit the powers of the Court under rule 1.

Issues arising on the application

10 The first two issues which arise on the application for leave to amend are:

(1) whether the claim in paragraph 3 of the Originating Process for an order pursuant to s 588FF(3)(b) of the Act extending the time within which further proceedings or claims under Part 5.7B could be brought was validly made;

(2) if that claim was validly made whether it was abandoned on the filing of the statement of claim on 16 July 2003 which did not include that claim.

11 If the plaintiffs fail on either of the first two issues, and the defendant fails on the third, the following further questions arise before general discretionary considerations:

(5) whether the requirements of Pt 20, r 4(5) are satisfied, in particular, whether the proposed amendments, if allowed, would have the effect of adding or substituting new causes of action arising out of the same or substantially the same facts as those which give rise to the cause of action alleged in the existing pleading;

Clutha v Millar (No. 2)

12 If the Court has power to grant leave to make the amendment, the defendant submitted that the power should not be exercised. It submitted, inter alia, that to permit the amendment would be to disregard the policy behind s 588FF(3) which was to encourage greater expedition in the conduct of liquidations and to alleviate the uncertainty faced by people who have had dealings with insolvent corporations. It submitted that the delays attendant on the institution and conduct of the proceeding and in giving notice of the intention to make the additional claims proposed by the amendments were either unexplained, or, to the extent they were explained, the explanation was not such as to warrant the discretion being exercised favourably to the plaintiffs.

13 On the hearing of the application, the plaintiffs applied for an adjournment in order to file affidavit evidence to answer criticisms of the liquidator’s preparation and conduct of the case and of the alleged delay. Those criticisms were contained in written submissions which had been served late. I did not adjourn the hearing of the application, but I did give the defendant leave to file an affidavit in answer to certain specified paragraphs of the defendant’s submissions and for both parties to make further submissions in relation to that evidence. Both parties were content to proceed in that way and both filed additional written submissions. Neither sought a further oral hearing. The affidavit which was filed pursuant to the leave given went beyond the terms of the leave. Objection was taken to the admissibility of part of the affidavit on that and other grounds. I will deal with those objections when I deal with the issues raised under Pt 20, r 4.

First Issue: Was there a valid claim under s 588FF(3)(b)?

14 I have set out the terms in which the application was made in paragraph 6.

15 The defendant submitted that if an order under s 588FF(3)(b) is sought in general terms the applications falling within such an order must be described by category and the description of each category must be clear. In the present case the order which was sought in the Originating Process was for an extension of time in respect of any claim of any description which fell within Part 5.7B. In support of the submission the defendant relied upon the judgment of Austin J in Brown v DML Resources (No. 2) (2001) 52 NSWLR 685 at 693 and the judgment of Spigelman CJ in BP Australia Ltd v Brown (2003) 58 NSWLR 322 at 353-354, [165]-[170].

16 In Brown v DML Resources (No. 2) the order made was that:

“Pursuant to s 588FF(3)(b) of the Corporations Law the period prescribed by s 588FF(3)(b) of the Corporations Law within which any application in respect of any voidable transaction of [the company] under s 588FF be extended to 24 October 2001.”

BP Australia Ltd v Brown

17 Both before Austin J and the Court of Appeal it was submitted by the affected creditor that s 588FF(3) does not permit the making of a general order for an extension of time to make an application under s 588FF(1) against any creditor. It was submitted that the application must be made with respect to a specific person and a specific transaction (at 52 NSWLR 685 at 693; 58 NSWLR 322 at 353). In the Court of Appeal Spigelman CJ, with whom on this matter the other members of the Court agreed, held that an application for a general order for an extension of time to make an application under s 588FF(1) against any creditor was a valid application and an order in those terms was a valid order (at 353, [168]). His Honour agreed with the analysis of Austin J in Brown v DML Resources Pty Ltd (2001) 52 NSWLR 685 at 693-694, [33]-[34]. At [33] Austin J said:

“[33] In my opinion the applicants’ submission places an unduly restrictive interpretation on s 588FF(3). The statutory language does not literally require the construction that they advance. It is true that subs (1) speaks of a particular application concerning a single transaction, and the opening words of subs (3) refer to the specific application identified by subs (1). But subs (3) refers to the application under subs (1) only in order to say that such an application must be made within the period of time that subs (3) sets. Subsection (3) does not say, as it might readily have said if the applicants’ contention were correct, that the application under subs (1) may only be made within a longer period than three years if the Court allows that application to be brought later. Instead, it sets the time limit for making an application under subs (1) as three years after the relation-back day, or such longer period as the Court orders on an application under subs (3) – that is a different application whose purpose is only to extend the time period. Consistently with the wording of subs (3), the application to extend the time limit can be an application to extend the time limit within which a particular subs (1) application can be made, or a broader application that applies to the particular subs (1) application under consideration and to other applications as well.

I see no reason why the other applications cannot be described by category rather than in specific terms, provided that the description is clear.”

18 In the present case the defendant relied upon the last sentence of the passage quoted. It submitted that in the present case the application for an order under s 588FF(3)(b) was neither described by category nor in specific terms and that the description was not clear.

19 It is not obvious to me why the clarity of the description of a claim in an application under s 588FF(3)(b) should be a criterion of validity. Prima facie, the validity of an application should depend on whether the claim made, whether clearly or ambiguously, when properly construed, is within the provision. I doubt that the underlined sentence forms part of the ratio of the decision either of Austin J or the Court of Appeal.

20 A comparison with the order made in Brown v DML Resources Pty Ltd and paragraph 33 of his Honour’s judgment shows that Austin J was of the view that the description of an application being “in respect of any voidable transaction of [the company] under s 588FF” was a sufficiently clear description by category. The category of “voidable transactions” covered all of the transactions in Division 2 of Part 5.7B. It covered all of the transactions in respect of which an order could be made under s 588FF(1).

21 In BP Australia Ltd v Brown Spigelman CJ, after referring to the decision of the Court of Appeal of the Supreme Court of Queensland in Greig v Australian Building Industries Pty Ltd (In Liq) (2003) 21 ACLC 1565, went on to summarise his conclusion in the earlier part of his judgment as being that “the Court does have power to grant an extension of time in general terms by specification of categories” (at 359 [200]).

22 However, his Honour also must have been of the view that a specified category of transactions in respect of which an extension of time may be granted includes any voidable transaction of the company.

23 In Greig v Australian Building Industries Pty Ltd (2003) 21 ACLC 1565 Jerrard JA said (at p. 1585, paragraph 111):

“I agree with the view expressed by Williams JA that s 588FF(3) does not, as a general rule, authorise blanket applications made ex parte without any identification in the application (or order made) of any person or persons against whom an application may ultimately be made for any one of the variety of orders provided for in s 588FF(1)(a) – (j).

…….

It seems incongruous that s 588FF(3) should be construed as allowing a (necessarily very specific) “application under subs (1)” to be made within such extended period as the Court orders, on an application brought ex parte in the broadest possible terms. Instead, s 588FF(3) will be construed more consistently with the particularity required in s 588FF(1) if s 588FF(3) is construed to require that any foreshadowed “application under subs (1)”, for the bringing of which an extension of time is sought, should itself be described in the application made “under this paragraph” for that extension.”

24 However, Jerrard JA went on to describe this as a general rule and said that a case might be taken out of the general rule where a liquidator could satisfy the Court that the date of the liquidator’s appointment, or the state of the affairs of the company, have resulted in the liquidator being unable to describe the nature of a possible application or applications to be brought and the identity of the potential respondent or respondents (at para 112). This indicates that the construction of s 588FF(3) propounded in the passage quoted is a construction as to how the section ought to be applied, rather than one which goes to the validity of an application in general terms for an order under s 588FF(3)(b). In any event I should follow the decision in BP Australia Ltd v Brown.

25 In McGrath & Ors v HIH Insurance (In Liq) (2004) 22 ACLC 449 the liquidators of companies in the HIH Insurance group sought an order “extending to a date 12 months from the date of filing this application, or such other period as the Court thinks fit, the period within which the plaintiffs may make an application under s 588FF(1) of the Act with respect to any voidable transaction involving the HIH Companies which have not been identified by the liquidators as at the date of the filing of this application.” The liquidators gave evidence of the very considerable tasks which they faced in investigating the affairs of the companies in the group having regard to the complexity of the business and affairs of the group, the need for continued liaison with regulatory and investigatory bodies and the difficulty in obtaining access to relevant information and documents. Barrett J made an order substantially in the form which was sought. The order excepted, from the general extension of time, those transactions which the liquidators had already identified as allegedly voidable transactions.

26 In the present case the ambit of the orders sought in para 3 of the Originating Process can be discerned by the reference in that paragraph to s 588FF itself. Subsection 588FF(3)(b) empowers the Court to extend the time for making an application under s 588FF(1). Subsection 588FF(1) empowers the Court to make specified orders where, on the application of a company’s liquidator, it is satisfied that a transaction of the company is voidable because of s 588FE. Although the paragraph does not expressly say so, the reference to s 588FF(3) shows that it must be seeking an extension of time for the bringing of proceedings or claims against the defendant under Part 5.7B of the Act in respect of transactions which are alleged to be voidable transactions under s 588FE. The paragraph could not be seeking an extension of time in respect of any other claim under Part 5.7B because s 588FF would have no application to any such claim.

27 It was submitted for the defendant that even if the application in paragraph 3 of the Originating Process was to be taken as being limited to Division 2 of Part 5.7B, the orders sought potentially extended not only to unfair preference claims but also to claims for uncommercial transactions and unfair loans. It was submitted that for this reason the order sought was too wide such that the application was not authorised by s 588FF(3). However it is clear from the orders which were made in BP Australia Ltd v Brown and in McGrath & Ors v HIH Insurance Ltd (In Liq), where the question of the allowable width of claims was a live issue, that applications under s 588FF(3)(b) may be made in respect of a category of claims as wide as voidable transactions. Implicitly, but nonetheless sufficiently clearly, that is the category of transactions to which paragraph 3 is directed.

28 Accordingly the first challenge to the application under s 588FF(3)(b) fails.

Second Issue: Abandonment of s 588FF(3)(b) Application

29 On 3 June 2003 the Court made orders by consent for the plaintiff to file and serve a statement of claim on or before 10 June 2003 and for the defendant to file and serve its defence on or before 15 July 2003. By these orders the parties agreed to define the issues by pleadings. At the time the order was made the plaintiffs did not intend to bring any application under s 588FF(3)(b). They had not at that stage identified the facts which have given rise to the proposed amendments. The statement of claim did not include the claim in paragraph 3 of the Originating Process.

30 The defendants submitted that by not including the claim in paragraph 3 of the Originating Process in its statement of claim the plaintiffs are to be taken to have abandoned the claim. The defendant relied upon what was said to be the analogous position in jurisdictions in which proceedings may be commenced by a generally endorsed writ. It was submitted that in those jurisdictions, if the plaintiff subsequently files its statement of claim which omits any mention of a cause of action or claim for relief which was stated in the writ, the plaintiff is deemed to have abandoned that cause of action or claim. The defendant referred to Renowden v McMullin (1970) 123 CLR 584 at 609 where Owen J with the concurrence of Kitto and Menzies JJ said:

“The result of omitting from a statement of claim a cause of action which was covered by the writ is correctly stated in

, 19th ed. (1966), at p. 171 as being that, “…if a plaintiff in his statement of claim omits all mention of a cause of action or a claim for relief which is stated in his writ, he will be deemed to have abandoned it”. And again, at p. 179, the pleader is warned that he should “remember that a statement of claim supersedes the write; hence if some special form of relief be claimed on the writ, and not in the statement of claim, it will be taken that so much of that claim is abandoned”. In support reference is made to

. To the same effect is a statement in Bullen and Leake’s

, 9th ed. At p. 33. After pointing out that under the then English rule corresponding to the Victorian O.20, r.2, a plaintiff may alter, modify or extend the claim indorsed on the writ without amending that indorsement, the learned editors go on to say, “On the other hand, if the plaintiff when drafting his statement of claim omits all mention of a cause of action or a claim for relief which is stated on his writ, he will be deemed to have abandoned it (

; followed in

”. Again, in

, 3rd ed., vol. 30, at pp. 34-35 it is said,

‘Where a plaintiff in his statement of claim omits part of what he claims in his writ, he will be deemed to have abandoned that part (

, following

, and he may be refused leave to amend the statement of claim to restore his earlier claim (

.”

31 Essential to this conclusion were the terms of the relevant rule of Court. Order 20, Rule 2 of the Victorian Rules of the Supreme Court provided that the claims in the endorsement to the writ could be altered, modified or extended by the delivery of the statement of claim. Owen J agreed with the opinion of the Full Supreme Court that:

“In the light of O. 20, r. 2, and of a number of authorities to which [their Honours] referred, it was to the statement of claim that regard should be had in determining what were the claims which the plaintiff wished to litigate…..”

32 In their dissenting judgment (at 601) Barwick CJ and McTiernan J also identified the terms of Order 20, Rule 2 as being critical to the proposition that the plaintiff was to be taken to have abandoned part of the endorsement on the writ by the delivery of the statement of claim.

33 The authorities to which Owen J referred on this point were principally Harries v Ashford [1950] 1 All ER 427 and Hall v Merrick [1957] 2 QB 455.

34 In Harries v Ashford Asquith LJ cited and relied upon Cargill v Bower (1878) 10 Chd 502 and Lewis & Lewis v Durnford (1907) 24 TLR 64. His Lordship observed that the former authority might, on its facts, have been a case of approbation and reprobation. However in Lewis & Lewis v Durnford, Swinfen Eady J said (at 24 TLR 65):

“ It was said that the claim for 100 pounds for liquidated damages precluded the granting of an injunction. It was true the writ claimed both forms of remedy; but the claim endorsed thereon was superseded by the statement of claim, and under Order 20, r 4, a plaintiff was entitled in his statement of claim to alter, modify or extend his claim without amending his writ. It has been held in

that where a plaintiff in his statement of claim omits part of his claim, he will be deemed to have abandoned that part.”

35 Order 20, Rule 4 of the English Rules as then in force corresponded with Order 20, Rule 2 of the Victorian Rules as in force in Renowden v McMullin.

36 In Hall v Merrick Hodgson LJ expressly relied upon Order 20, Rule 4 as establishing that when a statement of claim is delivered, it is to the statement of claim only that regard could be had to see what it was that the plaintiff was claiming (at 476). It appears to me that Ormerod LJ was of the same view (at 482).

37 There is no equivalent rule applicable to the present case. There is therefore no true analogy between the present case and the case where a claim made by the endorsement to a writ is omitted in a subsequent statement of claim.

38 I infer from the consent orders and the subsequent delivery of the statement of claim that in the statement of claim the plaintiffs pleaded the matters upon which they relied for the relief which they were then seeking, namely, relief under s 588FF(1) in respect of the alleged unfair preference identified in the affidavit referred to in the Originating Process and in the statement of claim. I do not infer that the plaintiffs intended to abandon their essentially defensive application for an extension of time to bring other applications under s 588FF(1) if the occasion to do so arose.

39 There was no evidence from and no submission by the defendant that it believed the plaintiff had intended to abandon the claim in paragraph 3 of the Originating Process, or that it had acted in any way on such a belief. No issue was raised that the plaintiffs were estopped from relying on paragraph 3 of the Originating Process to the extent necessary on this application.

Third Issue: Does s 588FF(3) permit the introduction of an otherwise statute barred claim by amendment?

40 Having regard to my findings on the first two issues, this question would only arise if I were of the view that an extension of time for making an application under s 588FF(1) should not be granted. The parties accepted that the discretionary considerations which arise under an application under s 588FF(3)(b) for an extension of time would be substantially if not wholly the same as those which arise on an application for leave to amend. I shall return to the discretionary considerations for extension later. Nonetheless, it is necessary to identify the source of the power to grant leave to amend which the plaintiffs can invoke.

41 The defendant submitted that unless an extension of time were granted under s 588FF(3)(b), no new application for an order under s 588FF(1) could be made by way of amendment to the statement of claim. (I will assume in the plaintiff’s favour that its application to amend the statement of claim should encompass an application to amend the Originating Process to claim the relief sought in the proposed amended statement of claim). The reason this was so, the defendant submitted, was that an application for an order under s 588FF(1) was “an application under subs (1)” within the meaning of s 588FF(3) whether that application was made by amendment or by an Originating Process. No rule of Court, nor rule of practice, which deemed the amendment to take effect from the time of the filing of the statement of claim or Originating Process, could affect the operation of s 588FF(3).

42 Counsel for the defendant drew my attention to three authorities which they acknowledged were inconsistent with that submission: Rodgers v Federal Commissioner of Taxation (1998) 158 ALR 220; 28 ACSR 42; Star v National Australia Bank Ltd (1999) 30 ACSR 583; and Rambaldi v Dallbrook Pty Ltd (2003) 21 ACLC 1190.

43 In Rodgers v Federal Commissioner of Taxation the liquidator had sought orders for repayment of monies paid by the company to the Commissioner of Taxation. After the relevant three-year period had expired the liquidator sought leave to amend the application to add claims for additional monies that had been paid to the Commissioner. The application for leave to amend was based on Order 13, Rule 2 of the Federal Court Rules. Section 59(2B) of the Federal Court of Australia Act gave statutory authority to the rules of Court to permit amendment even if the effect of the amendment was to allow a remedy in respect of a claim which would otherwise be barred by the expiry of a limitation period. The Full Court of the Federal Court after referring to the terms of Order 13, Rule 2, which have a similar effect to those of the corresponding Supreme Court Rules, said (at ALR 226):

“[O 13, R 2] is to be contrasted with s 588FF(3), which is concerned with the making of

an application

to the Court, that is, the commencement of the proceeding itself. Section 588FF(3) is not directed to an amendment of an existing claim, at least if that amendment does not involve a new cause of action: see

(1998) 157 ALR 615. There is no inconsistency between O13, R2 and s 588FF(3). One is concerned with making an amendment to a pleading in an existing proceeding; the other is concerned with the commencement of a proceeding.”

44 The suggested qualification where the amendment alleges a new cause of action was not taken up either in the decision in Rodgers or the later authorities. New causes of action were alleged in the amendments. If, as has been held, s 588FF(3) is concerned with the commencement of proceedings there is no reason for such a qualification.

45 Rodgers v Federal Commissioner of Taxation was followed by Rolfe J in Star v National Australia Bank Ltd (1999) 30 ACSR 583 at 601-602. His Honour said that the Supreme Court has as wide a power to grant amendments as was conferred on the Federal Court and that the reasoning in Rodgers was equally applicable to proceedings in the Supreme Court. After referring to the High Court’s decision in Australian Securities Commission v Marlborough Goldmines Ltd (1993) 177 CLR 485 at 492 which requires an intermediate appellate court, and even more a single judge, not to depart from the interpretation placed upon the uniform companies legislation by another Australian intermediate appellate court unless convinced that the interpretation is plainly wrong, his Honour continued (at [86]:

“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 of s 588FF(3) places on the commencement of an original application. There is, accordingly, no inconsistency between s 588FF(3) and the amendment provisions of this Court.”

46 In Rambaldi v Dallbrook Pty Ltd (2003) 21 ACLC 1190, Hansen J applied both decisions (at 1194-1195). This is a consistent body of authority which I should follow.

47 The defendant submitted that there was a paucity of reasoning for the conclusion in Rodgers that s 588FF(3) is concerned with the making of an application to the Court, that is the commencement of the proceeding itself, and not to an amendment of an existing claim. The defendant submitted that that limitation is not warranted by the words of s 588FF, as an application to the Court under subs (1) can be made equally as a result of an amendment as it can through an Originating Process.

48 Whatever be the merits of that argument it is too late in the day for it to be adopted by a single judge. The question is as to the proper meaning of the words “an application under subs (1)” where they appear in subs (3). Subsection (1) gives a Court power to make certain orders where “on the application of a company’s liquidator” it is satisfied that a transaction is voidable. The words “on the application of a company’s liquidator” could be construed as meaning on the filing of proceedings, or they could mean on the application by the liquidator for orders under the section. That choice has been made by an intermediate appellate Court and followed in later cases. I am not satisfied that it is plainly wrong and I follow it.

49 The consequence is that the amendment powers in Pt 20, Supreme Court Rules have a different sphere of operation from s 588FF(3). (See Airlink Pty Ltd v Patterson (2003) 58 NSWLR 388 at 423-425; Australia and New Zealand Banking Group Ltd v Larcos (1987) 13 NSWLR 286; Rodgers v Federal Commissioner of Taxation (1998) 158 ALR 220 at 226-227).

50 The plaintiffs relied upon s 588FF(3)(b) as being an independent source of power for the making of the proposed amendments. Contrary to their other submissions on this issue, the plaintiffs submitted that new proposed applications may be brought either by way of fresh proceedings or by way of amendment to existing proceedings under s 588FF. However, Rodgers v Commissioner of Taxation and the cases which have followed it have established the contrary.

Fourth Issue: Extension of Time

51 The result of the above is that the amending power is to be found in Pt 20 of the Supreme Court Rules. The rule of practice in Weldon v Neal (1887) 19 QBD 394 was that except in very peculiar circumstances, an amendment would not be allowed to introduce a new cause of action which, at the time of the amendment, would be barred by a statute of limitations if commenced by fresh proceeding. Having regard to my conclusions on the first two issues, that rule of practice, and its modification or exclusion by Part 20, r 4, or by Part 20, r 1 and r 4, does not arise if the plaintiffs in any event could bring fresh proceedings on the new causes of action by obtaining an extension of time under s 588FF(3)(b) relying on paragraph 3 of the Originating Process.

52 In Green v Chiswell Furniture Pty Ltd (In Liq) [1999] NSWSC 608 Austin J summarised the principles upon which the Court’s discretion under s 588FF(3)(b) should be exercised. Referring to the judgment of Finn J in Taylor v Woden Constructions Pty Ltd (Federal Court, 23/8/98, unreported), his Honour said:

The following propositions, with which I respectfully agree, emerge from that case:

(a) ordinarily, the issues raised on an extension application are threefold:

(i) the explanation for the delay in bringing the proceedings;

(ii) a preliminary review of merits of the foreshadowed proceedings – that is, an investigation as to whether such proceedings would be so devoid of prospects that it would be unfair, by granting an extension, to expose the other party to the continuing prospect of suit;

(iii) whether the likely actual prejudice resulting form the grant of an extension is sufficiently substantial to outweigh the case for granting an extension;

(b) where the liquidator’s purpose in seeking the extension of time is simply to put himself into a position where he can properly decide whether or not to bring proceedings, a preliminary inquiry into the merits of any consequent proceedings may not always be necessary.”

53 The principles were also considered by the Court of Appeal in BP Australia Ltd v Brown (2003) 58 NSWLR 322 at 356-358. The Court of Appeal described the question as being what was fair and just in all of the circumstances having regard to factors which include the plaintiff’s explanation for delay and whether the defendant would suffer prejudice as a result of the extension, other than the prejudice of being required to repay money if the proceedings succeed.

54 In assessing what is fair and just in all the circumstances, regard must be had to the reason for the imposition of the limitation period, both as applicable to limitation periods generally and those relevant to s 588FF(3)(b). In Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541, McHugh J at 552-553 identified four broad rationales for the enactment of limitation periods, namely:

First, as time goes by, relevant evidence is likely to be lost. Second, it is oppressive, even ‘cruel’, to a defendant to allow an action to be brought long after the circumstances which gave rise to it have passed. Third, people should be able to arrange their affairs and utilise their resources on the basis that claims can no longer be made against them. Insurers, public institutions and businesses, particularly limited liability companies, have a significant interest in knowing that they have no liabilities beyond a definite period.

………..

The final rationale for limitation periods is that the public interest requires that disputes be settled as quickly as possible.

(Citations omitted).

55 In Itek Graphix Pty Ltd v Elliott (2002) 54 NSWLR 207 at 224, Ipp AJA identified the issue of prejudice as being one which ordinarily should be of paramount importance. But the absence of prejudice is not itself decisive. It is rather a relevant factor to be taken into account in the exercise of the general discretion. (BP Australia Ltd v Brown at 358). There is an onus on the applicant to show why it is fair and just that the general rule established by s 588FF(3)(a) should not apply.

56 The three-year limitation period in s 588FF(3)(a) was a response to complaints of inordinate delays in the winding up of insolvent companies and in the commencement of proceedings against persons which had had dealings with those companies to seek to recover monies for the benefit of creditors. (Green v Chiswell [1999] NSWSC 608 at [14]). This legislative concern must be recognised. Nonetheless, Parliament’s response was not to impose an absolute bar on the commencement of proceedings after three years, but to allow for extensions of time in appropriate cases, where applications for extension were made in that period.

57 In this case no submissions were made on the merits of the proposed claims. I can infer from the fact that the original claim is proceeding towards a hearing, that there is a triable issue in relation to that claim. The remaining claims are all of the same kind. That is, they allege that under specified reinsurance contracts, New Cap became liable to pay monies to the defendant and that it did so when it was insolvent, with the result that the defendant received an unfair preference. If the claim in the statement of claim and the defence to it raises a triable issue, I can assume in the absence of a contention to the contrary, that the proposed amendments also give rise to triable issues.

58 The defendant did not submit that it would face any specific identifiable prejudice if the amendments were allowed.

59 The focus of the defendant’s submissions was on the explanation, or lack of it, for the delay. There are two relevant periods of delay to be considered. The first is the period up to 21 April 2002, or possibly 16 September 2002 (see BP Australia Ltd v Brown at 346-347, paras [123]-[128]), being the period of three years after the expiry of the “relevant date”. The second is the period between 18 April 2002 when the proceedings were commenced and 26 February 2004 when the interlocutory application for leave to amend was made.

60 The reason the claims now sought to be made by amendment were not made in the Originating Process is that when it was filed the liquidator was ignorant of the payments which are the subject of the amendments. The liquidation of New Cap is complex. The liquidator’s report to creditors dated 14 August, 2001 reveals that his estimate of the company’s assets and liabilities as at 31 March, 2001 was that it had liabilities of US$586 million and assets of $259 million: a deficiency of US$327 million. The estimated assets included premium and reinsurance recoveries of US$108 million. New Cap wrote an “assumed portfolio” of more than 1,900 contracts with 427 cedants. There are many complex questions of set-off. The liquidator has commenced twenty unfair preference proceedings seeking the recovery of approximately US$60 million. In some of them the liquidator challenges drawings under letters of credit provided by New Cap or their provision. It seems in all of the cases the claims have been made against overseas parties, principally, but not exclusively, in the United States and the United Kingdom. There has been litigation in the US Bankruptcy Court as well as in this country. Applications have been made to the Supreme Court for directions in respect of the operation of s 116 of the Insurance Act and s 562A of the Corporations Act. Another company in what the liquidator called “the New Cap Re group”, New Cap Reinsurance Corporation (Bermuda) Limited is also in liquidation in Bermuda. New Cap was said to be the largest creditor of that company.

61 The liquidator conducted examinations in 2000. Prior to then the liquidator’s staff engaged in an exercise aimed at determining the date from which insolvency could be established, and then identifying payments made by New Cap during the period from the date of insolvency which might give rise to potential unfair preference actions which it would be worthwhile pursuing. As part of this exercise the liquidator caused the electronic cashbook of New Cap to be reviewed to identify payments of in excess of $500,000 for further review. Once those payments were identified the source documents and underwriting and claims records in relation to the payments were then considered to determine whether there were grounds for contending that the payments were unfair preferences. In all cases except one the creditors who had received the payments were based outside Australia.

62 Each of the payments, which is the subject of the proposed amended pleading is less than $500,000. The first “payment” which is the subject of the proposed amendment is alleged to be US$500,000, but of this only US$408,960.59 is alleged to be a transfer of funds. The balance is alleged to be the set-off of premiums payable by the defendant to New Cap against the debt owed by New Cap to the defendant under a reinsurance contract. It was because the liquidators gave priority to identifying the larger payments that the smaller payments to the defendant were not identified at the time the proceedings were commenced. In correspondence the solicitors for the liquidator contended that in each case in which voidable transaction proceedings were commenced, the Originating Process was drafted to include a claim for an order under s 588FF(3)(b) to deal with the possibility that the defendant had received additional payments which were not able to be identified at the time of the first review.

63 After the proceedings were filed there was a considerable delay before the defendant entered an appearance. Documents were translated into Spanish and service was effected through diplomatic channels. The defendant applied to set aside the Originating Process or service of it. That application was listed for hearing on 13 June 2003 but after the defendant was satisfied that the payment in question was made to it from a bank account of New Cap in Australia it did not proceed with that application. This led to the orders to which I have already referred being made for the filing of pleadings. The parties then agreed on proposed categories of documents for discovery. During October 2003 the solicitors for the parties discussed and ultimately agreed upon the categories of documents which each should discover. At the request of the solicitors for the defendant the plaintiffs agreed to give discovery of all contracts or treaties of insurance or reinsurance between New Cap and the defendant pursuant to which payments were made by New Cap to the defendant from April 1998 onwards. They agreed to give discovery of documents recording what monies were paid by New Cap to the defendant in the relevant period under any of those contracts or treaties. They also agreed to give discovery of documents concerning the knowledge or suspicion of the defendant including its brokers, agents or representatives of the financial position or cash flow or insolvency or pending insolvency of New Cap for the period from 21 October 1998 to 21 April 1999.

64 The documents whose discovery was sought were potentially relevant to a defence under s 588FG, namely, as to whether the defendant had no reasonable grounds for suspecting that New Cap was insolvent on 15 January 1999 when it received the payment of US$922,160.25, and whether a reasonable person in its circumstances would have had no such grounds for so suspecting.

65 The defendant’s solicitor deposed that in requesting that the plaintiffs give discovery of these categories of documents, he was aware that the statutory time limit for proceedings to be commenced to recover preference payments had expired. He was of the view that the evidence discovered by the plaintiffs of further payments to the defendant would assist the defendant in establishing its defence. He was unaware that the liquidator had restricted his review of potentially voidable transactions to transactions over $500,000.

66 On 21 July 2003 the solicitor for the defendant told the plaintiffs’ solicitors that he intended to travel to Mexico to visit his client to look at relevant documents and, he hoped, also to take draft statements from relevant persons in Mexico. He made that visit in the beginning of September 2003. On 18 August 2003 he wrote to Messrs Henry Davis York and said that whilst in Mexico with access to all of his clients’ documents it would be convenient for him to have notice of the categories of documents which the plaintiffs might wish the defendants to discover. This would assist him in assuring that all relevant documents which might be required for discovery were identified and brought back to Australia. Despite that request, the plaintiffs’ solicitors did not advise what categories of documents might be required for discovery. It is true that at this stage the defence was not filed, but it was clear that a defence under s 588FG would be pleaded.

67 It was not until about October 2003 that the solicitors for the plaintiffs became aware that there were additional treaties between New Cap and the defendant pursuant to which New Cap had made payments to the defendant in the relevant period. It seems that because of the way the company had maintained files prior to the appointment of the second plaintiff as administrator, the additional payments made on 8 January, 20 January and 6 April 1999 were not disclosed in the files. In the course of either agreeing on the categories of documents for discovery or in obtaining documents for discovery, a consultant employed by the liquidator identified the additional payments in question.

68 The proposed amendments were foreshadowed on 13 November 2003. On 14 November 2003 the defendant’s solicitors complained that if the plaintiffs were permitted to amend the statement of claim there would be considerable further documents which they would have to consider and investigate.

69 The explanation for the delay in foreshadowing and seeking leave to make the amendments does not wholly excuse the delay. Once the decision was made to institute proceedings against the defendant I would have expected the liquidator to have investigated the other payments made from the date the liquidator considered he could establish insolvency. Granted that the other payments were not disclosed in the files which were examined, one would still expect the cashbook to have been examined to identify any such other payments.

70 The complexity of the liquidation and the many tasks which the liquidator faced is a mitigating factor. The delays attendant upon the defendant submitting to the jurisdiction of the court is also a contributing factor to the delay in the amendment being raised in that it delayed the subsequent interlocutory steps.

71 Whether there is an adequate explanation for the delay is only one factor to be taken into account in considering where the interests of justice lie. The absence of any specific prejudice to the defendant is of more weight, although I take into account that prejudice may exist without its being able to be identified because facts which were once known may now be forgotten, or their significance may not now be appreciated (Brisbane South Regional Health Authority v Taylor at 551). No evidence was led by the defendant as to its course of business, or change of personnel, or record keeping, which might bear on the probability of there being prejudice of that kind.

72 It is probable that the litigation of the existing claim will require investigation of the circumstances surrounding the other payments which are the subject of the proposed amendment. They may well be relevant to whether the defendant knew or had reason to suspect that New Cap was insolvent. Where the defendant does not point to the delay causing any identified prejudice, it would be somewhat incongruous if the circumstances relating to the other payments, which might themselves be unfair preferences, were investigated, perhaps minutely, to assess a defence to the claim, yet the liquidator was precluded from claiming relief in respect of them.

73 I do not consider that it is a relevant discretionary factor that it was the defendant who asked for discovery of the documents in relation to the other payments and that the defendant might not have done so if its solicitor had been aware that the liquidator had confined his review to payments over $500,000. The discovery request was a proper forensic decision. However, the question whether the interests of justice require the amendment to be allowed does not depend upon what considerations affected the parties’ tactics in an adversarial contest. If, contrary to my view, this is a relevant consideration, then it is also relevant that the Originating Process put the defendant on notice that the plaintiff might seek an extension of time to make further claims.

74 It is unfortunate that the amendment was not raised before the defendant’s solicitor visited his client’s offices in Mexico. It is probable that the defendant will incur costs additional to those which it would have incurred if relief had been sought in the Originating Process or even if the claims had been raised at the time of the original pleading. However to the extent that such costs have been thrown away, they will be compensated for by a costs order.

75 In my view, it is the absence of identified prejudice which is the paramount consideration in the circumstances of the present case. If the liquidator were to seek to institute fresh proceedings on the new causes of action, the interests of justice would require that he be granted an extension of time under s 588FF(3)(b) to do so. The application to amend is therefore not to be approached on the basis that the limitation period for the new causes of action has expired.

76 Once that point is reached there are no separate considerations which would lead to a refusal of leave to amend pursuant to SCR pt 20 r 1. In McGee v Yeomans [1977] 1 NSWLR 273, Glass JA described the discretionary considerations as follows (at 280):

“The Court, hearing the application will necessarily have regard to the hardship of the plaintiff, if the amendment is refused, and the prejudice to the defendant, if it is granted. It must also consider all other relevant circumstances, such as the fault of the plaintiff or his advisers, the period of time since the limitation has expired, and the defendant’s knowledge of the new cause of action or the new capacity. “

77 The hardship to the first plaintiff and its creditors if the amendment is refused could be substantial. No specific prejudice to the defendant has been identified. The other considerations are those which I have considered in above. The only additional matter is the defendant’s knowledge of the new cause of action. There was no evidence that the defendant had no knowledge of the new causes of action alleged in the amendments. I think it likely from the matter referred to in paragraph 66 that it was aware of the potential for such causes of action to be brought by the liquidator subject to such arguments that it might have in relation to whether the period of limitations had expired.

78 For these reasons the application for leave to amend should not be approached on the basis that the period of limitation has expired. The discretion to grant leave should be exercised in the plaintiffs’ favour.

79 Although the application is to amend the Statement of Claim, the proceedings were commenced by Originating Process. Part 20 rule 1 applies to the amendment of that document. The Originating Process should also be amended to add the additional claims for relief sought in the amended Statement of Claim. Paragraph 10A(b) of the proposed pleading contains a typographical error by omission which should be corrected.

80 These reasons are sufficient to dispose of the application. In case however I am wrong on either of my conclusions on the first two points I will explain why I would in any event have come to the same conclusion if I had found that the new causes of action were statute barred. I have already dealt with and rejected the submission that s 588FF(3) precludes the amendment.

Fifth Issue: Part 20 Sub-rule 4(5)

81 If the amendment raised new causes of action which are statute barred, the first question would have been whether the amendment came within Part 20 rule 4(5). No issue was raised that the amendment powers in Pt 20 could not be relied upon in the face of s 588FF(3), other than the argument addressed under the third issue above. (See Airlink Pty Ltd v Patterson (2003) 58NSWLR 388). No argument was directed to the question of whether Part 20 rule 4 is applicable to the amendment of the Originating Process, it being neither a statement of claim nor a summons. I will therefore assume that the effect of the Supreme Court (Corporations) Rules, Rule 1.3(2) is to make the whole of Part 20, including rule 4, applicable to the amendment of the Originating Process, even though in terms Rule 4 is confined in its operation to a statement of claim or summons (and by Part 6 Rule 6(2), applies also to cross-claims).

82 The proposed amendments allege three new causes of action for the avoidance of payments made on 8 January 1999, 20 January 1999 and 6 April 1999. The payments were made under separate reinsurance contracts. The causes of action do not arise from the same facts as those out of which the existing claim for relief is made. The defendant denied that the proposed new causes of action arise out of substantially the same facts.

83 The facts alleged to give rise to the cause of action alleged in the existing pleading are:

(a) the winding-up of New Cap and the appointment of the second plaintiff as administrator on 21 April 1999;

(b) the entry into the reinsurance contract reference TY28B on 21 July 1998;

(c) the occurrence of certain unspecified “loss events” whereby New Cap became liable to the defendant under that contract;

(d) the payment by New Cap to the defendant of 15 January 1999;

(e) New Cap being insolvent at that time;

84 The plaintiffs filed a further affidavit of Ms Merrick, the solicitor with the conduct of the matter for the plaintiffs, in the circumstances referred to in paragraph 13. In paragraph 38 she deposed as follows:

“I say that from a review of the documents on NCRA’s Alianza claims files that the loss events in respect of which the claims for payment by NCRA were made by Alianza are limited to two events, namely Hurricane Mitch (31 October – 1 November 1998) (treaties 28A, 28B and 276A) and Hurricane Georges 922 September 1998) (treaty 1025B). Further, I say that from a review of the treaties that treaties 28A and 28B are simply different layers of the same policy; 28A being for a 20% line on the $2.5 million xs $2.5 million layer, and 28B being for a 25% line on the $5 million xs $5 million layer, and in each case the policy being a policy of reinsurance of catastrophe XOL reinsurance written by Alianza as facultative reinsurance or proportional treaty. Annexed hereto and marked “D” and “E” respectively are copies of the slips for treaties 28A and 28B.”

85 There is no question that paragraph 38 is outside the terms of the leave given on 9 July 2004. The plaintiffs applied for an extension of that leave. The defendant opposes the extension of leave and submits that the first sentence of the paragraph is also inadmissible on the grounds that it infringes the hearsay rule and the opinion rule.

86 The hearsay rule does not apply to this application where there is evidence of the source of the material objected to (Evidence Act 1995 (NSW) s 75). However the sentence objected to, offends the opinion rule (s 76) and is not within any of the exceptions to that rule. Even if that sentence were otherwise admissible, I would reject it as being outside the leave granted. The question of whether the loss events giving rise to the payments made by New Cap were limited to the two named events is one which might be a matter of dispute. The defendant does not have the opportunity to respond. Accordingly I reject the first sentence of paragraph 38. I extend the leave given on 9 July 2004 to encompass the balance of paragraph 38. There is no suggestion of any dispute as to the authenticity of the two documents which are annexed.

87 The evidence in relation to the balance of paragraph 38 confirms the inference which I would otherwise have drawn from the terms of the proposed amended pleading, although I do not think that it is correct to describe the two treaties as different layers of the same policy. On the face of the documents they are separate reinsurance contracts, which provide separate layers of reinsurance cover to the defendant in, relevantly, the same terms.

88 It does not necessarily follow that each was triggered by the same event. Having said that, it would be surprising if there were any issue that New Cap was liable to the defendant for the payments which it made under each of the reinsurance contracts in question. In the statement of claim, the allegation that New Cap became liable to the defendant in a sum of not less than US$922,160.25 under the contract TY28B and paid that sum in satisfaction of its indebtedness is admitted. Whether the events which gave rise to the defendant’s losses, and to New Cap’s liability to make the various payments to the defendant, are the same or different, may not be material to New Cap’s causes of action. In its statement of claim New Cap has not pleaded the events which gave rise to the defendant’s loss and there has been no suggestion that its pleading is defective for its failure to do so.

89 The only common facts on which the cause of action in the existing pleading and the causes of action in the proposed amended pleading are based, are the winding-up of New Cap and the appointment of the second plaintiff as administrator on 21 April 1999. Whether the facts on which the new causes of action are based are substantially the same as those on which the existing cause of action is based is a question of some difficulty. The contracts in question are different, but they arise from the same course of business. They are all reinsurance contracts. Two of them are in identical terms save as to premium, attachment point and layer of cover. The facts which gave rise to New Cap being liable under the reinsurance contracts may be different, but the “fact” that New Cap was liable under the contracts (if that is a question of fact), is likely to be common to each cause of action. The payments were made on different dates, but the dates were close, at least as to three of the four payments. At least as to those three payments, the evidence as to whether New Cap was insolvent at the time of payment is likely to cover the same ground on each cause of action.

90 In Rodgers v Federal Commissioner of Taxation (1998) 158 ALR 220; 28 ACSR 42, the Full Federal Court considered the meaning of the expression “substantially the same” where it appears in Order 13 Rule 2(7) of the Federal Court Rules which are in substantially the same terms as the Supreme Court Rules. There the liquidator sought to recover payments made to the Commissioner of Taxation as voidable transactions. The statement of claim alleged that eight payments were made to the Commissioner for group tax when the company was insolvent and that each payment was a voidable transaction. The amendment which was sought was to set aside two additional payments as voidable transactions where they also were made in respect of group tax and in the same financial year as the original eight payments. The company’s obligation to make the payments of group tax was common to all of the payments. The payments were part of a pattern of regular remittances although each was a separate transaction. The additional payments were made within five weeks of the date of the last payment specified in the original application. The Full Federal Court held that the new causes of action arose out of substantially the same facts as the causes of action raised in the existing pleading. In reaching that conclusion their Honours adopted what was said by Lord Hanworth MR in Burford v Clifford [1932] 2 Ch 122 at 138 where his Lordship referred to the words “substantially the same” as dealing with a case where the same facts have to be conned over in order to ascertain liability.

91 It is true, as counsel for the defendant submitted, that the authorities cited in Rodgers v Federal Commissioner of Taxation for the meaning of “substantially the same facts” dealt with different Rules of Court which raised different issues. The questions raised in the authorities considered by the Full Federal Court were whether there was a substantial similarity in the relief claimed between different parties, or substantial similarity between issues. Counsel rightly submitted that the issues and claims for relief may be substantially the same, although the facts giving rise to the issues or claims for relief may not be.

92 Nonetheless, the Full Federal Court regarded those authorities as being of assistance in construing the present Rule. The approach adopted in Rodgers is consistent with the way in which Part 20 Rule 4, or a cognate Rule of Court, has been approached in other cases. Brickfield Properties Ltd v Newton [1971] 3 All ER 328 is an authority frequently cited. There the addition of a claim against an architect for breach of a duty of design was held to fall within the rule because on the existing claim for negligent supervision it would be necessary for the architect’s design to be examined closely, especially if the design required amplification during the course of construction. (At 336). The Court of Appeal applied the Rule to the substantial similarity of the evidentiary facts which would be examined at the hearing of the existing claim, rather than the ultimate facts to be proved by that evidence. Both Brickfield Properties Ltd v Newton and Rodgers applied the expression to a substantially similar series of events. (See Glebe Administration Board v National Australia Bank, Bainton J, 4 March 1996 unreported; BC 9600362 at 35, 37.

93 The question is one of degree and impression. Applying the approach in Rodgers and Brickfield v Newton, if it were necessary to apply Part 20 rule 4(5), and having regard to the matters in para 89, I would be satisfied that the alleged causes of action to avoid transactions characterised as the “first payment” and the “third payment” arise from substantially the same facts as those the subject of the existing pleading which seeks relief in respect of the “second payment”. However I would not be satisfied that there was a sufficient similarity in the evidentiary facts or series of events relating to the existing claim and those which relate to the cause of action for the fourth payment. It was made almost three months after the existing claim. I do not think that the plaintiff has discharged the onus which lies on it to show a substantially similar identity of facts in relation to that cause of action.

94 Whether or not Part 20 rule 4(5) is satisfied, I would have allowed the amendment under Part 20 rule 1 even if the causes of action which are propounded were statute barred.

Sixth Issue: Amendment under Part 20 Rule 1

95 The plaintiffs submitted that Part 20 rule 1 gives the Court a general discretion to allow an amendment notwithstanding that it raises a barred cause of action, whenever justice so requires. In support of the submission the plaintiffs relied upon the reasoning of Glass JA in McGee v Yeomans [1977] 1 NSWLR 273 at 280.

96 The defendant relied upon Clutha v Millar (No. 2) [2002] NSWSC 523 as authority for the proposition that an amendment to add a new cause of action, where the period of limitation for that cause of action has expired, may be made only under Pt 20, r 4 in the circumstances mentioned in sub-rules (3), (4) and (5) and not under the general power of amendment contained in Pt 20, r 1(1). Counsel for the defendant accepted that the balance of authority was contrary to that proposition. The plaintiffs submitted that I should not follow Clutha v Millar (No. 2). They submitted that the decision in that case paid insufficient regard to Pt 20, r 4(7) which expressly provides that the rule does not limit the powers of the Court under rule 1.

97 In Clutha v Millar (No. 2) the cause of action originally pleaded was held to be statute barred. It was held that the cause of action was complete when the plaintiff first suffered damage which, according to the pleading, was more than six years before the proceeding was commenced. The plaintiff sought leave to amend the date upon which it allegedly first suffered damage to a date falling just within the six-year limitation period. Austin J held that the plaintiff could not avail itself of Pt 20, r 4 as that rule applies only where any relevant period of limitation expires after the date of filing the statement of claim. That is, it was conditioned upon the existence of proceedings which had been commenced within time (at [15]). His Honour also concluded (at [21]):

“… I think the proper inference to draw from

is that where an amendment to a statement of claim is sought to overcome a limitation period which would otherwise defeat the plaintiff’s claim, the amendment is available only where one of the categories in rule 4 is applicable (putting to one side joinder of parties under Part 8 of the Rules). Therefore an amendment cannot be made where the claim in its original form was statute barred, because in such a case rule 4 has no application at all.”

98 In Proctor v Jetway Aviation Pty Ltd [1984] 1 NSWLR 166 the principal issue was whether Part 20 permitted an amendment to revive a statute barred cause of action which had been extinguished by the expiry of the limitation period. The Court of Appeal emphasised that this was the effect of the decision in McGee v Yeomans which single judges were bound to follow. Moffitt P said of McGee v Yeomans (at 171):

“It was decided in this Court in

that Pt 20, r 4(1), applies to a period of limitation under the

1969, which has expired, with the result that, in the circumstances referred to in the various subrules of r 4, the power given by it is exercisable notwithstanding the expiry of the period of limitation. That was the precise decision and binding precedent. It also, however, created a binding precedent on a wider basis, in that it decided that Pt 20, r 4, operated to confer a like power of amendment in respect of an expired period of limitation provided in any other earlier Act. The applicability of this more general precedent would be dependent upon the limitation provision in the other Act not having some quality different to that in the

1969, which made distinguishable the decision in

. The decision necessarily carried with it that Pt 20, r 4, confers the power to amend in the circumstances there prescribed, notwithstanding the terms of the relevant statute as to the expiry of the limitation period including the consequence of the expiry.”

99 In fact the decision of the majority of the Court of Appeal in McGee v Yeomans, which included Moffitt P himself, was not expressly based upon the view that the power to amend to include a statute barred cause of action arose “in the circumstances referred to in the various sub-rules of Rule 4”. Glass JA expressly said that the abrogation of the rule of practice in Weldon v Neal (1887) 19 QBD 394 in the defined situations in Rule 4(3)-(5), together with the provision that that abrogation did not abridge the width of the general power to amend, (being a reference to sub-rule 4(7)), carried the implication that other amendments might be properly allowed in situations not expressly dealt with by the rule, notwithstanding that they introduced causes of action then barred by the expiry of a period of limitation. (McGee v Yeomans at 279-280).

100 In Fernance v the Nominal Defendant (1989) 17 NSWLR 710 Gleeson CJ summarised McGee v Yeomans in the following way:

“In

[1977] 1 NSWLR 273, this Court held that the provisions of Pt 20, r 4, on their true construction, and by necessary implication, displaced the previous settled rule of practice that an amendment would not be allowed if in consequence a party would be deprived of the benefit of a limitation period. That decision related to the power of amendment contained in Pt 20, r 1, which confers upon the court a general power, at any stage of any proceedings, to give a party leave to amend any document in the proceedings.

was a case in which the plaintiff, who had already, within the relevant limitation period, sued the defendant in one capacity, sought to amend the statement of claim so as to add a further cause of action against the same defendant being sued in a different capacity at a time when the relevant limitation period had expired. The case did not fall precisely within the provisions of r 4(3), 4(4) or 4(5). However, the court held that, because of r 4(7), the amendment could be made. Glass JA pointed out (at 277) that under the old rule of practice it would have been necessary for the court to look closely at the question whether the plaintiff was seeking to introduce a new cause of action, or merely to formulate in a different way the old cause of action, and whether the amendment involved no more than the correction of a misnomer or misdescription of the defendant. However, he concluded (at 280) that the Supreme Court Rules, upon their proper construction, were such as to “displace the settled rule of practice laid down in

(1887) 19 QBD 394 and all the finespun distinctions which it engendered”. Instead there was now a general discretion to allow an amendment, notwithstanding that it might raise a barred cause of action, wherever justice so requires.”

101 The defendant submitted that his Honour’s exposition was dicta. However quite apart from the respect commanded by dicta of the Chief Justice, his Honour’s analysis is plainly right.

102 Although Mahoney JA held in McGee v Yeomans that Pt 20, r 4(5) was satisfied, neither Moffitt P nor Glass JA relied on sub-rule 4(5). Nonetheless, it may be that it was because the sub-rule was satisfied in McGee v Yeomans that in Proctor v Jetway Aviation Pty Limited Moffitt P held that McGee v Yeomans was binding precedent only for the proposition that in the circumstances referred to in the various sub-rules of Rule 4, the power given by that rule was exercisable notwithstanding the expiry of the period of limitation. If this is the correct interpretation, while it would follow that single judges are not bound by the reasoning of Glass JA in McGee v Yeomans, it would not follow that Proctor v Jetway Aviation Pty Limited is authority that an amendment which would raise a cause of action which expired after the filing of the statement of claim could only be made where one of the categories in Rule 4 is applicable. In Proctor v Jetway Aviation Pty Limited Priestley JA did not characterise McGee v Yeomans as being confined in the way indicated by Moffitt P. Glass JA agreed with both judgments.

103 Were it not for the decision in Clutha v Millar (No. 2) I would have no hesitation in following Glass JA’s construction of the Rules whether or not it was binding as a matter of precedent. I agree with the submission of the plaintiff that the effect of Pt 20, r 4(7) is to preclude an argument that the relationship between Pt 20, r 1 and Pt 20, r 4 is governed by the principle of construction that:

When the Legislature explicitly gives a power by a particular provision which prescribes the mode in which it shall be exercised and the conditions and restrictions which must be observed, it excludes the operation of general expressions in the same instrument which might otherwise have been relied upon for the same power

Anthony Hordern & Sons Ltd v Amalgamated Clothing and Allied Trades Union of Australia

104 However as Mason J said in Leon Fink Holdings Pty Ltd v Australian Film Commission (1979) 141 CLR 672 at 678-679, where there is a clause designed to preserve the generality of an unqualified power according to its terms, that may negate the implication of a restriction upon the generality of the power arising from the grant of a distinct power in special terms. Part 20, rule 4(7) is just such a provision.

105 If the matter had arisen for decision, I would not have considered that comity required me to follow the reasoning in Clutha v Millar (No. 2) as it is not consistent with the reasoning of Glass JA in McGee v Yeomans, with whom, on this point, Moffitt P agreed.

106 I have already explained why I would exercise my discretion in favour of granting leave to amend. For these reasons if I had come to a different conclusion on either of the first two issues, I would nonetheless have granted leave to the plaintiffs to amend pursuant to Pt 20, r 1 in respect of all of the causes of action propounded in the amended pleading, notwithstanding that I would not have found that they all came within the terms of Pt 20, r 4(5).

Conclusion

107 For these reasons I grant leave to the plaintiffs to file an Amended Statement of Claim in the form of the draft amended statement of claim which is exhibit KAM 17 to the affidavit of Katherine Alison Merrick affirmed 25 February 2004 subject to the correction of typographical errors and omissions. I direct that the plaintiffs file an amended Originating Process incorporating the additional claims for relief referred to in the Amended Statement of Claim. Those documents are to be filed and served within seven days. I order that the plaintiffs pay the costs of the defendant thrown away by reason of the amendments. Costs of the Interlocutory Process filed on 26 February 2004 will be the plaintiffs’ costs in the proceedings.

******

Last Modified: 09/02/2004

Citations

New Cap Reinsurance Corp v Reaseguros Alianza SA [2004] NSWSC 787

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CITATION:	New Cap Reinsurance v Reaseguros Alianza SA [2004] NSWSC 787
HEARING DATE(S):	09/07/04
JUDGMENT DATE:	31 August 2004
JUDGMENT OF:	White J
DECISION:	1. Grant leave to the plaintiffs to file an Amended Statement of Claim in the form of the draft Amended Statement of Claim which is exhibit KAM 17 to the affidavit of Katherine Alison Merrick affirmed 25 February 2004 subject to the correction of typographical errors and omissions; 2. Direct that the plaintiffs file an amended Originating Process incorporating the additional claims for relief referred to in the Amended Statement of Claim. Those documents are to be filed and served within seven days; 3. The plaintiffs pay the costs of the defendant thrown away by reason of the amendments; 4. Costs of the Interlocutory Process filed on 26 February 2004 be the plaintiffs' costs in the proceedings.
CATCHWORDS:	Corporations - s 588FF(3) considered - Whether claim for extension of time under s 588FF(3)(b) validly made - Whether claim abandoned on filing statement of claim which did not seek extension - Whether s 588FF(3)(b) precluded amendment pursuant to SCR Pt 20 - Delay in seeking to make amendments - Whether causes of action alleged in amendments statute barred - Whether extension of time for bringing fresh action under s 588FF(1) would be granted under s 588FF(3)(b) - Discretionary considerations - Absence of prejudice to defendant - Possibility of substantial hardship to plaintiffs if amendment refused - SCR Pt 20 r 4(5) considered - Meaning of "substantially the same facts" discussed - Pt 20 r 1 considered - McGee v Yeomans [1977] 1 NSWLR 273 - Proctor v Jetway Aviation Pty Ltd [1984] 1 NSWLR 166, and Clutha v Millar (No. 2) [2002] NSWSC 523 considered.
LEGISLATION CITED:	Corporations Act 2001 (Cth) Federal Court of Australia Act 1976 (Cth) Insurance Act 1902 (NSW) Evidence Act 1995 (NSW)
CASES CITED:	BP Australia Ltd v Brown (2003) 58 NSWLR 322 Clutha v Millar (No. 2) [2002] NSWSC 523 Brown v DML Resources (No. 2) (2001) NSWLR 685 Greig v Australian Building Industries Pty Ltd (in Liq) (2003) 21 ACLC 1565 McGrath & Ors v HIH Insurance (in Liq) (2004) 22 ACLC 449 Renowdin v McMullin (1970) 123 CLR 584 Supreme Court Rules Victoria Harries v Ashford [1950] 1 All ER 427 Hall v Merrick [1957] 2 QB 455 Cargill v Bower (1878) 10Chd 502 Lewis & Lewis v Durnford (1907) 24 TLR 64 English Rules Rodgers v Federal Commissioner of Taxation (1998) 158 ALR 220; 28 ACSR 42 Star v National Australia Bank Ltd (1999) 30 ACSR 583 Rambaldi v Dallbrook Pty Ltd (2003) 21 ACLC 1190 Federal Court Rules Supreme Court Rules NSW Australian Securities Commission v Marlborough Goldmines Ltd (1993) 177 CLR 485 Airlink Pty Ltd v Patterson (2003) 58 NSWLR 388 Australia and New Zealand Banking Group Ltd v Larcos (1987) 13 NSWLR 286 Weldon v Neal (1887) 19 QBD 394 Green v Chiswell Furniture Pty Ltd (in Liq) [1999] NSWSC 608 Taylor v Woden Constructions Pty Ltd (Federal Court, 23/8/98, unreported) Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 Itek Graphix Pty Ltd v Elliott (2002) 54 NSWLR 207 Burford v Clifford [1932] 2 CH 122 Brickfield Properties Ltd v Newton [1971] 3 All ER 328 Glebe Administration Board v National Australia Bank Bainton J, 4 March 1996 unreported; BC 9600362 McGee v Yeomans [1977] 1 NSWLR 273 Proctor v Jetway Aviation Pty Ltd [1984] 1 NSWLR 166 Fernance v the Nominal Defendant (1989) 17 NSWLR Leon Fink Holdings Pty Ltd v Australian Film Commission (1979) 141 CLR 672
PARTIES :	New Cap Reinsurance Corporation v Reaseguros Alianza SA
FILE NUMBER(S):	SC 2309/02
COUNSEL:	Plaintiff: P Dowdy Defendant: R McFarlan QC, P Fury
SOLICITORS:	Plaintiff: Henry Davis York Defendant: Hunt & Hunt