Re Harris Scarfe Ltd (in liq) - [2006] SASC 277

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
Re: HARRIS SCARFE LTD (IN LIQ) & HARRIS SCARFE WHOLESALE P/L (IN LIQ)
[2006] SASC 277
Judgment of The Honourable Justice Debelle
8 September 2006
CORPORATIONS - WINDING UP - LIQUIDATORS
Voidable transactions – application by liquidators to extend limitation period in s 588FF(3) of Corporations Act – application not served and order extending time made ex parte - original liquidators resign and new liquidators appointed – whether new liquidators entitled to rely on order made in favour of original liquidators extending the limitation period – whether creditor whose interests are affected by the order ex parte extending the limitation period is entitled as of right to an order setting aside that order.
Corporations Act 2001 (Cth) s 9, s 477(2), s 503, s 536, s 588FF(1), s 588FF(3), referred to.
BP Australia Ltd v Brown (2003) 58 NSWLR 322; Cameron v Cole (1944) 68 CLR 571; Grieg v Stramit Corporation Pty Ltd (2004) 2 Qd R 17; Kioa v West (1985) 159 CLR 550; New Cap Reinsurance Corp Ltd (in liq) v Faraday Underwriting Ltd (2003) 47 ACSR 306, applied.
Ainsworth v Criminal Justice Commission (1992) 175 CLR 564; Annetts v McCann (1990) 170 CLR 596; Bibra Lake Holdings Pty Ltd (in liq) v Firmadoor Australia Pty Ltd (1992) 7 WAR 1; Butterell v Docker Smith Pty Ltd (1997) 41 NSWLR 129; Commissioner for Corporate Affairs v Harvey [1980] VR 669; Commissioner of Police v Tanos (1958) 98 CLR 383; DJL v Central Authority (2000) 201 CLR 226; Forstaff Adelaide Pty Ltd v Hills Industries Ltd [2006] SASC 88; Gracechurch Holdings Pty Ltd v Breeze (1992) 7 WAR 518; Grassby v The Queen (1989) 168 CLR 1; Lennard’s Carrying Company Ltd v Asiatic Petroleum Company Ltd [1915] AC 705; Logwon Pty Ltd v Warringah Shire Council (1993) 33 NSWLR 13; McGrath v National Indemnity Co (2004) 182 FLR 309; Oates v Williams (1998) 84 FCR 348; O’Brien v Komesaroff (1982) 150 CLR 310; Outboard Marine Australia Pty Ltd v Byrnes [1973] 2 NSWLR 102; Owners of the SS Kalibia v Wilson (1910) 11 CLR 689; Re Gooch’s Case (1872) 2 Ch App 207; Re Vouris (2004) 49 ACSR 543; R v Forbes; ex parte Bevan (1972) 127 CLR 1; Shoard v Palmer (1989) 98 FLR 402; Sydlow Pty Ltd (in liq) v TG Kotselas Pty Ltd (1996) 65 FCR 234; Taylor v Taylor (1979) 143 CLR 1 ; Thomas Franklin & Son Ltd v Cameron (1935) 36 SR(NSW) 286, considered.

RE: HARRIS SCARFE LTD (IN LIQ) & HARRIS SCARFE WHOLESALE P/L (IN LIQ)
[2006] SASC 277
Civil

DEBELLE J. Before the court are a number of applications in respect of proceedings in which the liquidators of two companies have applied pursuant to s 588FF(1) of the Corporations Act2001 (Cth) to set aside payments made by those companies on the ground that they are voidable transactions. I list the applications in the schedule to these reasons. All of the applications have been made by companies which are defendants in separate proceedings in which the liquidators seek to set aside voidable transactions. These applications have a common substratum of fact and, because they give rise to a set of questions common to each application which will assist in the determination of each application, the parties have agreed that it is convenient to determine the answers to those questions in one proceeding. They have also agreed to be bound by the determination of those questions subject to any right of appeal. The import of the questions will be more readily understood once the facts leading to the applications are known. I will therefore set out the questions after stating those facts.
In addition, the liquidators have made an application. I will recite the facts before noting the terms of that application.
Two Companies in Liquidation
On 3 April 2001 Michael Joseph Dwyer and Lindsay Philip Maxsted were appointed administrators of Harris Scarfe Ltd (Receivers & Managers Appointed) (“HSL”) and Harris Scarfe Wholesale Pty Ltd (Receivers & Managers Appointed) (“HSW”) as well as of other companies in the Harris Scarfe group.
On 3 January 2002 a resolution for the voluntary winding up of HSL and of HSW (as well as other companies in the Harris Scarfe group) was carried at a meeting of creditors. The creditors also resolved to appoint Messrs Dwyer and Maxsted joint and several liquidators of HSL and HSW. For convenience, I will call Messrs Dwyer and Maxsted “the original liquidators”.
As the original liquidators had been appointed joint and several administrators of the two companies on 3 April 2001, the relation-back day for the purposes of s 588FF of the Corporations Act is 3 April 2001: s 9 of the Corporations Act.
On 2 April 2004 the original liquidators commenced a number of actions in this court and in the District Court of South Australia on behalf of both HSL and HSW. In those actions they sought orders pursuant to s 588FF of the Corporations Act in respect of transactions which they alleged were voidable.
On 31 March 2004 the original liquidators issued proceedings in this court applying for an order extending the limitation period prescribed by s 588FF(3) by a period of 18 months within which to institute applications pursuant to s 588FF(1) against creditors of the two companies. Those proceedings are the action number 351 of 2004.
The application was made against two sets of creditors. The first set comprised thirteen companies listed in Schedule 1 to the application. Those creditors were called “the ascertained creditors”. They were creditors of both HSL and HSW. (Creditors of Dstore Ltd, another company in the Harris Scarfe group, who were also listed in the schedule as the application also concerned creditors of Dstore.) The second set comprised creditors who could not be identified at the date of the application but were described in the affidavit supporting the application. In the application those creditors were called “the unidentified creditors”. The application was made in the following terms:
1.An extension of time of eighteen months from the date of the order, for the Liquidators to bring applications pursuant to s 588FF(1) of the Act against:
1.1 Those creditors identified at the date of filing this application and listed in Schedule 1 to this application (“the ascertained creditors”); and
1.2 Those creditors not identified at the date of filing this application but generally described in the supporting affidavit(s) (“the unidentified creditors”).
2.That the costs of this application be paid out of the assets of the companies in equal proportions.
The application was supported by affidavit sworn by Mr Dwyer. I will refer later to the terms of that affidavit.
The original liquidators caused the proceedings to be served on the ascertained creditors listed in Schedule 1 of the application. However, the proceedings were not served on the creditors described as “the unidentified creditors”. In particular, the proceedings were not served on the following creditors:
1.     Ansell Limited.
2.     ATIV PAC Pty Ltd.
3.     Bonds Industries Pty Ltd.
4.     Dexboy International Pty Ltd.
5.     Union Knitting Mills Pty Ltd.
6.     Sheridan Australia Pty Ltd.
7.     Gazal Apparel Pty Ltd.
8.     Australian Weaving Mills Pty Ltd.
10.    Sony Computer Entertainment Australia Pty Ltd.
11.    Panasonic Australia Pty Limited.
12.    Clarks Shoes Pty Ltd.
13.    Sony Australia Limited.
14.    Email Pty Ltd.
15.Charles Parsons & Co Pty Ltd & Charles Parsons (Vic) Pty Ltd & Rapee Pty Limited.
16.    Puma Australia Pty Ltd.
17.    Samsung Electronics Australia Pty Ltd.
18.    Estee Lauder Pty Ltd.
19.    Thebe International Pty Ltd.
20.    Breville Pty Ltd.
All of these companies have made the applications which are before the court.
On 14 April 2004 the application of the original liquidators was heard ex parte by Master Kelly. Minutes of Order were handed to the Master. He made two separate orders in terms of those minutes. One order related to the creditors referred to in Schedule 1 of the application who in the order are called “identified ascertained creditors that have been served”. The order was in these terms:
1.In relation to the identified ascertained creditors who have been served with the extension application (being those parties set out in Schedule A to this Order), the period within which the plaintiffs may make an application under s 588FF(1) of the Corporations Act 2001 with respect to transactions alleged by them to be or to possibly be voidable transactions be extended so as to expire at the conclusion of 2 October 2005.
The other order was in these terms:
1.The period within which the plaintiffs may make an application under s 588FF(1) of the Corporations Act 2001 with respect to transactions alleged by them to be or to possibly be voidable transactions (not being transactions with identified creditors) be extended so as to expire at the conclusion of 2 October 2005.
The latter order is obviously relatively free from meaning. It is a matter for remark that an order which is obviously of major importance to the liquidators was not more carefully drawn. It is also a matter for remark that an order in such vague terms was made, especially as it is necessary to know who will be bound by the order. It is, therefore, necessary to ascertain the meaning of the order.
The meaning of the latter order becomes clear once regard is had to the terms of the application made by the original liquidators and the affidavit in support of that application sworn by Mr Dwyer on 31 March 2004. In that affidavit, Mr Dwyer deposed to the history of the administration of the winding up of HSL and HSW, to evidence of insolvency of both companies, to the reasons for the delay in bringing preference claims, and other reasons for seeking an extension of the limitation period prescribed by s 588FF. Mr Dwyer said that he and Mr Maxsted had investigated payments made by HSL and HSW for the purpose of assessing potential claims under s 588FF. He said that a database had been prepared of payments made within the relation-back period (3 October 2000 to 2 April 2001) and proved a schedule of those payments. The schedule is called “the HS Payment Schedule”. The HS Payment Schedule is a list of some 1,500 creditors and provides several items of information in relation to each creditor. That information includes each payment made by that creditor within the relation-back period, the amount of the payment and the number of the cheque by which the payment was made, as well as the dates when each cheque was drawn and the date when it was presented for payment. Each of the companies which have joined in this application are listed on that schedule.
After deposing that there is evidence of insolvency of HSL and HSW, Mr Dwyer said in paragraph 7 of his affidavit:
7.Based on our investigations to now, we have been able to determine potential claims for unfair preferences pursuant to section 588FA of the Act. We have not been able to ascertain all potential claims because further investigations are required.
Later in his affidavit, Mr Dwyer deposed to the fact that notice of claims had been sent to creditors described in his affidavit as “notified creditors” and said that proceedings were to be issued against those creditors before the expiry of the limitation period.
Mr Dwyer’s affidavit continued:
33.There were numerous additional creditors who we identified from the Payment Schedules that were not issued with a notice of demand because there was insufficient material available to us to know payment details. In some instances the material available to us is sufficient to show that further investigation is warranted to clarify the payment details and to assess those payments against preference criteria (the Potential HS Defendants). Those further investigations have not been carried out yet because there has been insufficient time and funds to do so. Exhibited hereto and marked MJD5 is a true copy of the Schedule of HS Potential Defendants.
34.It will not be possible to institute proceedings against the Potential HS Defendants without further investigations being carried out to determine the merit of potential claims for voidable transactions. Those investigations cannot be completed within the limitation period.
35.The HS Payment Schedule and other records and accounts of HSL and HSW also suggest several payments made within the relevant period by HSL and HSW which still require investigation about the circumstances surrounding the payments and the creditors involved. In these instances the identity of the creditor is not yet precisely known. More time is required to pursue investigations to assess potential claims for voidable transactions against those unidentified creditors and to identify the creditors with certainty.
The creditors described as “the potential HS Defendants” are the same 13 creditors who were listed in the schedule to the application.
The assertions in paragraph 35 do not seem to be entirely consistent. As the HS Payment Schedule lists named creditors and contained the other information already mentioned, the assertion that “the identity of the creditor is not yet precisely known” is at least curious. In my view, when regard is had to the terms in which the application is expressed, it is clear that that sentence is a slip. The creditors are known. They are set out in the HS Payment Schedule. The real intent of paragraph 35 is to prove that more time is required to ascertain whether there is evidence to establish voidable transactions involving any of the creditors listed in the HS Payment Schedule. That conclusion is borne out by paragraph 46 of Mr Dwyer’s affidavit which is in these terms:
46.The application for an extension of time is to enable further investigations to be carried out, so as to place us in a position where we are able to assess the merits of the matters and to decide whether or not to bring proceedings for voidable transactions. We have not yet resolved in those matters whether to bring proceedings. For the matters where we have assessed the payment as preferential, proceedings will be issued within the limitation period.
In his affidavit Mr Dwyer had also referred to claims against creditors of Dstore Ltd. In paragraphs 50 and 51 of his affidavit Mr Dwyer summarises the reasons for the application for an extension of time in these terms:
50.     In the premises of the matters set out above we seek an extension of time to:
50.1   complete the requisite investigations;
50.2   review the merits of claims; and
50.3   institute proceedings where appropriate against:
50.3.1   the Potential HS Defendants;
50.3.2   the Potential Dstore Defendants; and
50.3.3   the unidentified creditors of the Companies.
51.I request this application to be made specially returnable because the limitation period expires on 2 April 2004.
The reference to “unidentified creditors” wherever it occurs in this affidavit is a reference to the creditors in the HS Payment Schedule. I believe they were called “unidentified creditors” because the original liquidators had not determined whether the claims pursuant to s 588FF were to be made against them. That conclusion is borne out by the terms of Mr Dwyer’s affidavit, when read with the application. The creditors listed in the HS Payment Schedule are the creditors which answer the description of creditors “generally described in supporting affidavits”. It follows that the second order of 14 April 2004 applies only in respect of creditors listed on the HS Payments Schedule.
The same conclusion might be reached by another route. But for the orders of Master Kelly made on 14 April 2004, the time within which proceedings pursuant to s 588FF of the Corporations Act could be instituted expired on 3 April 2004. The HS Payment Schedule is a very long list containing 83 pages. It lists some 1,500 creditors. It identifies some very substantial payments as being made within the relation-back period. Many of those payments are for hundreds of thousands of dollars. There are over 75 transactions where the payment is an amount between $250,000 and $500,000. There are some 31 payments in excess of $500,000 and some four payments in excess of $1 million. It strains credulity to breaking point to believe that the order relates to other unidentified creditors in some undetermined sum and does not relate to the creditors listed in the HS Payment Schedule from whom the liquidators might seek to recover substantial sums of money. It is clear that the order intended to apply in respect of potential claims against all creditors in the HS Payment Schedule and only in respect of those creditors.
I return to the narrative of the events leading to the applications before me.
On 11 November 2004 Mr Maxsted resigned as liquidator of both HSL and HSW. Mr Dwyer continued as liquidator of both companies.
On 4 January 2005 Mr Dwyer applied to be removed as liquidator of both HSL and HSW and for an order that Colin McIntosh Nicol and Samuel Charles Davies be appointed joint and several liquidators of both companies in his stead. On 21 January 2005 Master Withers made an order removing Mr Dwyer as liquidator of both HSL and HSW and appointing Messrs Nicol and Davies joint and several liquidators of both companies. For convenience, I will call Messrs Nicol and Davies “the current liquidators”.
Relying on the order of 14 April 2004, the current liquidators have instituted proceedings against a number of the companies which are listed on the HS Payments Schedule. They are applying for orders pursuant to s 588FF(1) that specified payments were voidable transactions and seeking to recover an amount equal to the payment. In each action the current liquidators have filed a statement of claim. Each statement of claim recites the appointment of Messrs Dwyer and Maxsted as the original liquidator, the resignation of Mr Maxsted, the removal of Mr Dwyer as liquidator and the appointment of Messrs Davies and Nicol as liquidators in his stead. The facts relating to each of the impugned payments are then alleged. The statement of claim then refers to the extension of the period of limitation by the order of Master Kelly made on 14 April 2004 and seeks orders setting aside each of the impugned transactions.
The original liquidators had instituted a number of actions before the limitation period had expired. Those actions included the actions numbered 375 of 2004 and 363 of 2004. On 17 March 2005 the current liquidators applied for an order that they be substituted as plaintiffs in place of the original liquidators in the action number 375 of 2004. On 13 May 2005 the current liquidators made the same application in action number 363 of 2004. On 15 June 2005 Master Lunn published a ruling in which he stated that in his view it was appropriate to make an order substituting the current liquidators as plaintiffs in place of the original liquidators. On 25 July 2005 Master Lunn made an order in each action that the current liquidators be substituted as plaintiffs in each action in place of the original liquidators and stating that the order take effect from 17 March 2005.
On 11 October 2005 Master Lunn made an order in all of the other actions in this court instituted by the original liquidators before the limitation period had expired. Those orders substituted the current liquidators as plaintiffs in place of the original liquidators, the orders taking effect from 6 June 2005.
These are the circumstances in which the companies which are listed in the schedule to these reasons and which are defendants in the actions commenced in the extended limitation period have made applications to set aside the orders made by Master Kelly on 14 April 2004. Some of those defendants and other defendants have also made applications seeking summary judgment or, alternatively, that the statement of claim be struck out. The parties have agreed that certain questions common to all of the applications should be heard and determined. Those questions are:
1.Are the current liquidators as plaintiffs in the actions referred to in the schedule to these reasons entitled to rely on the order of Master Kelly made on 14 April 2004 in Action 351 of 2004 extending the limitation period under s 588FF(3) of the Act?
2.Does the order of Master Kelly made on 14 April 2004 in Action 351 of 2004 have the effect of extending the limitation period in respect of the claim of the current liquidators against Gazal Apparel Pty Ltd, Australian Weaving Mills Pty Ltd, and Sony Computer Entertainment Pty Ltd?
3.Is a creditor whose interests are affected by the order of Master Kelly made on 14 April 2004 extending the limitation period under s 588FF(3) of the Act entitled to apply as of right to set aside the said order?
4.If the answer to question 3 is yes, must the application seeking an extension of time be heard inter partes?
Another creditor RIM Enterprises Pty Ltd has also applied to set aside the order of 14 April 2004. At a directions hearing, it stated through its solicitor that it would abide the order of the court.

For their part the current liquidators have responded by applying to amend the orders made by Master Kelly on 14 April 2004 in respect of both the ascertained creditors and the unidentified creditors so that, instead of the order referring to “the plaintiffs”, the order would refer to “the liquidators of the companies from time to time holding office”. In the alternative, the current liquidators apply for an order that they be substituted for the original liquidators who had obtained the orders from Master Kelly. The applications made by the current liquidators are in these terms:
1.That the orders made by Master Kelly on 14 April 2004 in the within proceedings be amended
1.1 with respect to identified creditors, as follows:
“In relation to the identified ascertained creditors who have been served with the extension application (being those parties set out in Schedule A to this order) the period within which the liquidators of the companies, from time to time holding office, may make an application under section 588FF(1) of the Corporations Act 2001 with respect to transactions alleged by them to be or to possibly be voidable transactions be extended so as to expire at the conclusion of 2 October 2005”; and
1.2 with respect to unidentified creditors, as follows:
“The period within which the liquidators of the companies, from time to time holding office, may make an application under section 588FF(1) of the Corporations Act 2001 with respect to transactions alleged by them to be or to possibly be voidable transactions (being transactions between the unidentified creditors and the companies) be extended so as to expire at the conclusion of 2 October 2005.”
2.In the alternative to the orders sought in paragraph 1, that the Applicants be substituted for the Plaintiffs who obtained the said orders made by Master Kelly.
Shortly stated, the current liquidators seek a variation of the orders made on 14 April 2004 or, alternatively, that they be substituted for the original liquidators.
Another creditor listed on the HS Payment Schedule was L’Oreal Australia Pty Ltd. The current liquidators have issued proceedings against it applying to set aside voidable transactions pursuant to s 588FF(1) and do so in reliance of the order made on 14 April 2004. L’Oreal Australia Pty Ltd was heard as an intervener on the applications by the current liquidators.
Can the Current Liquidators Rely on the Order?
The first question asks whether the current liquidators are entitled to rely on that part of the order made by Master Kelly on 14 April 2004 in action number 351 of 2004 extending the limitation period prescribed by s 588FF(3) which related to those creditors called “unidentified creditors” in the application. That part of the order was in these terms:
1.The period within which the plaintiffs may make an application under s 588FF(1) of the Corporations Act 2001 with respect to transactions alleged by them to be or to possibly be voidable transactions (not being transactions with identified creditors) be extended so as to expire at the conclusion of 2 October 2005.
The defendants seized on the fact that the order was made in favour of “the plaintiffs”, not in favour of either “the liquidators” or “the liquidators for the time being” of HSL and HSW. They contended that the order was made in favour of Messrs Dwyer and Maxsted so that the current liquidators, Messrs Nicol and Davies, are able to rely on it. The effect of the defendants’ argument is that, once a person holding the office of liquidator is for whatever reason replaced, the new liquidator is not able to continue to prosecute the proceedings. The argument must fail because it is grounded on a misconception as to the capacity in which Messrs Dwyer and Maxsted applied for and were granted the order made on 14 April 2004.
The application for the order was made by Messrs Dwyer and Maxsted as liquidators of HSL and HSW. That is clearly established by the affidavit of Mr Dwyer sworn on 31 March 2004 in support of the application. More importantly, Messrs Dwyer and Maxsted had no standing to make the application except as liquidators of HSL and HSW. That is apparent from the terms of s 588FF(1) which entitles a liquidator only to apply to the court to set aside voidable transactions. The order was, therefore, made in favour of Messrs Dwyer and Maxsted as liquidators of HSL and HSW. It was not an order which was made for the personal benefit of either Mr Dwyer or Mr Maxsted. Instead, it was an order upon which they could act only by virtue of the fact that they held the office of liquidators of HSL and HSW. The fact that the order referred to “the plaintiffs” cannot alter the fact that the order was made in their favour as liquidators of HSL and HSW. The right to apply to recover monies pursuant to s 588FF(1) is a statutory right of the liquidator, not a proprietary right of the company: New Cap Reinsurance Corp Ltd (in liq) v Faraday Underwriting Ltd (2003) 47 ACSR 306 at [38]. That proposition only serves to emphasise that an order made by the court pursuant to s 588FF is an order for the benefit of the person holding the office of liquidator and not for the benefit of that person in his own right.
Where legal proceedings involve an application under s 588FF of the Corporations Act, the proceedings may only be instituted by the liquidator: see s 588FF(1) and Bibra Lake Holdings Pty Ltd (in liq)v Firmadoor Australia Pty Ltd (1992) 7 WAR 1, where it was also held that the monies recovered were held by the liquidator for the benefit of creditors and contributories. That decision concerned s 451 of the Companies Code which did not include the detailed provisions as to the orders consequent upon the determination that a transaction is void. Section 588FF(1) expressly provides for orders directing repayment to the company of monies paid in voidable transactions: see in particular paras (a) to (d) of s 588FF(1). It follows that, where the liquidator makes an application under s 588FF(1), the liquidator institutes the proceedings only by virtue of holding the office of liquidator of the company and the proceeds are payable to the company for the ultimate benefit of the general body of unsecured creditors of the company and its contributories. For present purposes, what is important is the fact that the proceedings are instituted by the liquidator on behalf of the company.
In addition to those considerations, there is the fact that the liquidator of a company is an officer of that company: s 9 of the Corporations Act. When a person is appointed liquidator of a company, that person is appointed to an office of the company. It is a statutory office. The liquidator’s powers stem from the provisions of the Corporations Act and the holder of that office is subject to the rights and obligations imposed by the Corporations Act as well as to rights and obligations at law or in equity. For present purposes, it is not necessary to note what those rights and duties involve. All that must be noted is the fact that the person who is acting as liquidator holds an office and those rights and obligations attach that person as liquidator and not in any other capacity.
A company is an abstraction and has no mind of its own so that its directing mind and will must be sought in the person of some individual: Lennard’s Carrying Company Ltd v Asiatic Petroleum Company Ltd [1915] AC 705 at 713 per Viscount Haldane LC. Generally speaking, the directing mind and will of the company are its directors or some other person acting under the direction of shareholders. On a winding up, control of the company’s affairs is taken from the directors and vested in the liquidator so that the person with the directing mind and will is the liquidator. The liquidator’s powers stem from the provisions of the Corporations Act and not by reason of the fact that the liquidator succeeds to the power of the directors: Butterell v Docker Smith Pty Ltd (1997) 41 NSWLR 129. The liquidator is the governing mind of a company in liquidation and the manager of its assets: Re Gooch’s Case (1872) 2 Ch App 207 at 211. The liquidator is the agent of the company: Commissioner for Corporate Affairs v Harvey [1980] VR 669 at 695-696; Thomas Franklin & Son Ltd v Cameron (1935) 36 SR(NSW) 286 at 294; and Sydlow Pty Ltd (in liq) v TG Kotselas Pty Ltd (1996) 65 FCR 234 at 238-239. The duty of the liquidator is to get in the assets of the company and distribute them according to the priorities prescribed by the Corporations Act. By reason of s 536 of the Act, the liquidator is subject to the overall supervision of the court be that liquidator appointed by the court or by creditors in a voluntary winding up.
The defendants relied on the principle that, generally speaking, a judgment or order is not binding on a person who is not a party to the proceedings in which the judgment or order is granted: Outboard Marine Australia Pty Ltd v Byrnes [1973] 2 NSWLR 102 at 104 per Reynolds JA: Gracechurch Holdings Pty Ltd v Breeze (1992) 7 WAR 518 at 522-524 per Ipp J: Shoard v Palmer (1989) 98 FLR 402 at 406-409 per Kirby P: Forstaff Adelaide Pty Ltd v Hills Industries Ltd [2006] SASC 88 at [13] per Doyle CJ. That rule reflects the proposition that a court does not, as a general rule, have jurisdiction over any person who is not a party to the proceedings. Where a liquidator brings proceedings by virtue of his office as liquidator to enforce a right of action vested in the liquidator, the party before the court is the liquidator. If the liquidator is, for any reason, replaced by another liquidator, the new liquidator is bound by any order made while the former liquidator held office as liquidator.
The liquidator is the only person entitled to bring legal proceedings on behalf of a company in liquidation: s 477(2) of the Corporations Act. The statutory power vests in the person who holds office as the liquidator of the company and in no other. While the proceedings might as a matter of form be issued by a named person, that person does not issue them in his own name or for his own benefit but only by virtue of the fact that he holds office as liquidator and brings the proceedings for and on behalf of the company. At the risk of stating the obvious, once that person ceases to be liquidator, he cannot continue to prosecute the proceedings. Those proceedings can only be prosecuted by the person then holding office as liquidator.
The position is illustrated if it is assumed that in legal proceedings commenced by liquidators, the plaintiff is designated, not by the name of the individual holding the office of liquidator, but instead as the liquidator of the company in liquidation, for example, as “liquidator of XYZ Pty Ltd (in liq)”. The position would be no different where the liquidator is a defendant in the legal proceedings. Where the person holding the office of liquidator changes during the course of the legal proceedings, it might be necessary to address particular questions such as undertakings given by the liquidator to the court or to a party to those proceedings but that fact does not gainsay the position that the orders of the court are always made in favour of the liquidator, not in favour of the individual for the time being holding that office. It follows that, in proceedings in which the liquidator is a party, the person holding the office of liquidator is bound by or has the benefit of orders made in those proceedings. So, if the person holding the office of liquidator is replaced by another, the person succeeding that office will be bound by or have the benefit of the orders made before being appointed to that office.
Thus, on 14 April 2004, when Master Kelly made the orders in action number 351 of 2004, those orders were made in favour of Messrs Dwyer and Maxsted as liquidators of HSL and HSW. They were made in the course of the liquidation of each company. They were not made for any other purpose. The orders were made in favour of the persons holding the office of liquidator of HSL and HSW and are available to the person or persons for the time being holding the office of liquidator of each company. As Messrs Nicol and Davies have now been appointed as liquidators in place of the original liquidators, they are entitled to the benefit of the orders.
The conclusion accords with reality and with the scheme of the Corporations Act. Any other conclusion would severely hamper liquidators in the discharge of their duties and, in particular, their ability to prosecute both legal proceedings on behalf of the company and legal proceedings which may only be brought by a liquidator. Assume, for example, that a liquidator had instituted legal proceedings within time but before those proceedings had been heard and determined, the liquidator died or was replaced and the relevant period of limitation had expired. If the defendants’ arguments are to prevail, those proceedings would come to a halt because the new liquidator could not continue to prosecute the proceedings and the limitation period had expired. Assume also that, in this case, after the orders had been made by Master Kelly on 14 April 2004 and before the proceedings had been instituted in the extended limitation period, both Messrs Dwyer and Maxsted had died. The effect of the defendants’ contention is that the person replacing Messrs Dwyer and Maxsted as liquidators could not have the benefit of the order. The new liquidators would not be able to issue proceedings because the limitation period had expired. That would be an absurd, if not a preposterous, result, not only defying common sense, but standing in the path of the orderly administration of a winding up. It is a result which is avoided once it is recognised that in a winding up legal proceedings are instituted by a liquidator with the rights and obligations attaching to that office and not by a person in his own right.
The Corporations Act recognises that a liquidator of a company might have to be replaced in the case of death, resignation or removal from office. Section 503 is an omnibus provision which enables the court to remove a liquidator and appoint another: Re Vouris (2004) 49 ACSR 543 at 547. The Corporations Act makes no provision for transitional arrangements between the original liquidator and the replacement liquidator. It is unnecessary to do so because, although particular individuals hold the office of liquidator, everything is done by an office holder and not by an individual in his own right.
Mr McNamara QC, who appeared for the current liquidators, submitted that the benefit of the order passed by devolution from the original liquidators to the current liquidators. Devolution contemplates a legal consequence flowing from an involuntary act: O’Brien v Komesaroff (1982) 150 CLR 310 at 321 per Mason J with whom the other members of the High Court agreed. A liquidator consents to appointment. Thus, when a person assents to becoming a liquidator to replace another, there is a voluntary act which may prevent a devolution occurring. Although a parallel exists, I do not think it correct to describe the process as devolution. In any event, it is not necessary to rely on that reasoning.
For these reasons, the order of Master Kelly granting the original liquidators of HSL and HSW an extension of time within which to bring proceedings pursuant to s 588FF(1) was made for the benefit of the liquidation of the company. Although one of the original liquidators has resigned and the other has been replaced by the current liquidators, the current liquidators are entitled to rely on the order in favour of the original liquidators. The answer to question 1 is, Yes.
Does the order affect three named companies?
The next question is whether the order of Master Kelly made on 14 April 2004 extended the limitation period in respect of the claims made by the current liquidators against Gazal Apparel Pty Ltd, Australian Weaving Mills Pty Ltd and Sony Computer Entertainment Australia Pty Ltd.
The current liquidators issued proceedings against each company making an application under s 588FF(1) that specified payments were voidable transactions and seeking to recover an amount equal to the payment. In each action the current liquidators have filed a statement of claim. Each statement of claim was in a similar form to those issued in the other applications under s 588FF(1) mentioned earlier in these reasons, and each recites the appointment of Messrs Dwyer and Maxsted as the original liquidator, the resignation of Mr Maxsted, the removal of Mr Dwyer as liquidator and the appointment of Messrs Davies and Nicol as liquidators in his stead. The facts relating to each of the impugned payments are then alleged. The statement of claim then refers to the extension of the period of limitation by the order of Master Kelly made on 14 April 2004 and seeks orders setting aside each of the impugned transactions.
All three companies are creditors listed on the HS Payment Schedule prepared by the original liquidators and exhibited to Mr Dwyer’s affidavit. The current liquidators seek to set aside payments to those companies which are listed on the HS Payment Schedule. For the reasons already expressed, the order of Master Kelly made on 14 April 2004 operates in respect of those creditors listed in the HS Payments Schedule. The order therefore applies to Gazal Apparel Pty Ltd, Australian Weaving Mills Pty Ltd, and Sony Computer Entertainment Australia Pty Ltd.
The answer to the second question is, Yes.
Procedural Fairness
Questions 3 and 4 arise out of the fact that none of the defendants which have brought these applications was served with the application by the original liquidators for the order extending the limitation period nor were they heard on that application. The order was obtained ex parte. The two questions are:
3.Is a creditor whose interests are affected by the order made by Master Kelly on 14 April 2004 extending the limitation period prescribed by s 588FF(3) of the Corporations Act entitled to apply for and to have the order set aside as a right?
4.If the answer to that question is, Yes, must the re-hearing of the application seeking an extension of time be a hearing inter partes?
The answers to both questions lie in the principles of procedural fairness. For the reasons which follow the answer to both questions is, Yes.
The rules of procedural fairness require that, generally speaking, when an order is made which will deprive a person of some right or interest or the legitimate expectation of a benefit, he is entitled to know the case against him and to be given an opportunity of replying to it: Kioa v West (1985) 159 CLR 550 at 582 per Mason J. That is a fundamental principle of law. As Gibbs J noted in Taylor v Taylor (1979) 143 CLR 1 at 4 statements to a similar effect abound. It is sufficient to note two. In Cameron v Cole (1944) 68 CLR 571 at 589 Rich J said:
It is a fundamental principle of natural justice, applicable to all courts whether superior or inferior, that a person against whom a claim or charge is made must be given a reasonable opportunity of appearing and presenting his case.
Later, in Commissioner of Police v Tanos (1958) 98 CLR 383 at 395 Dixon CJ and Webb J said:
[I]t is a deep-rooted principle of the law that before any one can be punished or prejudiced in his person or property by any judicial or quasi-judicial proceeding he must be afforded an adequate opportunity of being heard.
The principles expressed by Mason J in Kioa v West have been consistently followed and applied: see, for example, Annetts v McCann (1990) 170 CLR 596 and Ainsworth v Criminal Justice Commission (1992) 175 CLR 564; and Oates v Williams (1998) 84 FCR 348. The rules apply in respect of powers conferred on courts by corporations legislation: BP Australia Ltd v Brown (2003) 58 NSWLR 322 at [133] per Spigelman CJ.

Where the rules of procedural fairness are not observed the person affected by the orders is entitled as of right to have the order set aside. That principle was expressed in these terms by Rich J in Cameron v Cole at 589:
If this principle be not observed, the person affected is entitled, ex debito justitiae, to have any determination which affects him set aside; and a court which finds that it has been led to purport to determine a matter in which there has been a failure to observe the principle has inherent jurisdiction to set its determination aside.
An order made in breach of the principles of procedural fairness is not a nullity but a person affected by it is entitled as of right to have the order set aside to the extent that it affects him: BP Australia Ltd v Brown at 133.
An order extending the limitation period in s 588FF(3) affects the rights of both the liquidator and any creditor against whom an application is made under s 588FF(1) within that extended limitation period. It benefits the liquidator by enabling the liquidator to institute proceedings which would have been statute barred but for the order. If the liquidator commences proceedings within the extended time, the creditor is denied the ability to plead that the limitation period of three years provided by s 588FF(3) has expired. In McGrath v National Indemnity Co (2004) 182 FLR 309 at [8] Barrett J described such orders as a final order. Where those orders have been obtained ex parte there is, I think, a real argument that such an order is interlocutory. However, it is unnecessary in this case to stay with that question. Whether final or interlocutory, the order is of considerable importance both to the liquidator and to the defendant creditor alike and affects the rights of both.
It is for these reasons that it has been consistently held that, where a liquidator seeks an order extending the limitation period in s 588FF(3) in order to bring proceedings under s 588FF(1) against an identified creditor, the liquidator should not proceed ex parte but should name the creditor as a defendant and serve the proceedings upon that creditor: Greig v Stramit Corporation Pty Ltd (2004) 2 Qd R 17 and BP Australia Ltd v Brown. Thus, an order which has be made ex parte will be set aside if the party affected by it has neither had notice of the proceedings nor an opportunity of being heard.
However, there will be occasions when it is appropriate for an order to be made without serving the proceedings on those who might be affected by the order or providing an opportunity to those persons to be heard. One circumstance justifying an ex parte application is urgency. The question of ex parte proceedings was addressed in BP Australia Ltd v Brown at [134] – [136] where Spigelman CJ said:
The obligation to comply with procedural fairness imports a higher level of content when imposed on a court than in decision-making processes conducted by administrators or tribunals. It requires, in my opinion, that a person likely to be adversely affected by the order of the court is given an opportunity of making submissions to the court before any such order is made or if, exceptionally, an order is made without such an opportunity being given that, upon application, the person must be put in the same position as he or she would have been prior to the order being made. It is the inherent difficulty of achieving the latter that makes an ex parte order a course to be followed only in the case of necessity or other strong reason.
The creation of a situation in which a person must apply to vacate or vary an order after the order has been made is an exceptional situation. Nothing on the facts of the present case, as at the time of the first judgment, was such as to justify the exceptional course.
Perhaps there will be circumstances in which it is not appropriate to give all who may be affected by an order under s 588FF(3)(b) an opportunity to make submissions prior to the order being made. It is not necessary to determine this question. Here there was a clearly identified party with a substantial interest in the question to be determined. Nothing appeared by way of urgency or otherwise to require an ex parte order to be made. The appellant was unnecessarily placed in the position of applying to the court, pursuant to leave reserved by order of the court, to have the order discharged.
As is apparent, it was unnecessary to decide that issue in BP Australia Ltd v Brown because the order affected a clearly identified party with a substantial interest to be determined. The interest of BP Australia Ltd was in the order of $5.7 million.
In this case the orders have been made ex parte. The only question for consideration is whether a creditor affected by the ex parte order made on 14 April 2004 is entitled to apply to set aside the order and have the order set aside as of right. It is not, therefore, necessary to consider whether the circumstances justified proceeding ex parte or whether it was appropriate to make an order with the capacity to affect some 1,500 creditors. Criticism of so-called “blanket orders” of this kind was expressed by the Court of Appeal in Greig v Stramit Corporation Pty Ltd. The propriety of making an order with the potential to affect some 1,500 creditors is an issue for another day.
In Taylor v Taylor it was held that every court, whether superior or inferior, has inherent jurisdiction to set aside its order unless that jurisdiction is displaced by statute: see Gibbs J at 8 with whom Stephen J agreed and Mason J at 16 with whom Aickin J agreed. I do not understand the decision in DJL v Central Authority (2000) 201 CLR 226 to qualify that proposition so far as it applies to the Supreme Courts of the States. As inherent jurisdiction is confined to superior courts of unlimited jurisdiction and does not exist in inferior courts of limited jurisdiction, it is preferable to refer to the jurisdiction to set aside orders as an implied jurisdiction: R v Forbes; ex parte Bevan (1972) 127 CLR 1 per Menzies J at 7; Grassby v The Queen (1989) 168 CLR 1 per Dawson J at 16; Logwon Pty Ltd v Warringah Shire Council (1993) 33 NSWLR 13 at 16-17 per Kirby J. For present purposes, the correct description of the jurisdiction is of no moment. There is nothing in the Corporations Act which displaces that jurisdiction. The jurisdiction applies a fortiori to orders which have been made ex parte: Owners of SS Kalibia v Wilson (1910) 11 CLR 689 at 694 per Griffiths CJ. A creditor against whom the current liquidators have initiated proceedings within the extended limitation period is entitled, therefore, to apply to have the ex parte orders set aside.
The next question is whether the order should be set aside as of right. As none of the creditors listed in the HS Payment Schedule was served with the application to extend the limitation period and as none of those creditors was heard on the hearing of the application, the order was made in breach of the rules of procedural fairness. The orders affect the rights of each creditor in the sense that it denies the creditor the opportunity to plead that the proceedings are barred by the operation of s 588FF(3). A creditor against whom application pursuant to s 588FF(1) has been instituted within the extended limitation period is, therefore, entitled as of right to have the order of 14 April 2004 set aside so far as it applies to that creditor. The application will then be heard afresh and the current liquidators will have the burden of establishing that an order should be made extending the limitation period in respect of the creditors then before the court. In other words, the parties will be restored to their respective positions as at the date of the application so that the issues arising on the application to extend the limitation period are considered afresh.
Mr McNamara QC submitted that the test in BP Australia Ltd v Brown was rather less stringent than that in Greig v Stramit Corporation Pty Ltd in that, as he put it, the question whether the order will be set aside will depend on the state of the liquidator’s knowledge as to whether a creditor will become a defendant in a proceeding to set aside a voidable transaction. He contended that it will not be set aside as a right where an ex parte order is obtained because the liquidator is still making enquiries as to particular creditors. So, he said, the order in respect of the creditors listed in the HS Payment Schedule should not be set aside. The argument misconceives the reasoning in BP Australia Ltd v Brown at [134] to [136]. The issue then being addressed was the circumstances in which a court would permit an application to extend the limitation period to be heard ex parte. That is not the question which falls for determination in this case. In addition, the argument would allow the current liquidators to have their cake and eat it. The current liquidators have obtained an order ex parte against some 1,500 creditors on the footing that they did not know at the time of the hearing whether they had evidence against individual creditors sufficient to bring an application under s 588FF(1). Having obtained the order, they then contend that any creditor against whom an application under s 588FF(1) has been made is not entitled to an order as of right setting aside the ex parte order. The argument misconceives the effect of the rules of procedural fairness. Those rules clearly provide that a person whose rights are affected by an order of the court is entitled as of right to have that order set aside if he has not been heard in answer to the case against him. The rule applies universally to all who answer that description.
For these reasons, the answer to both questions 3 and 4 is, Yes.
Canon Australia Pty Ltd (“Canon”) and Electrolux Pty Ltd (“Electrolux”) are both creditors who were listed as ascertained creditors in Schedule 1 to the application of the original liquidators issued on 31 March 2004. Orders were made against them ex parte. Relying on the order of 14 April 2004, the current liquidators have issued an application under s 588FF(1) to set aside transactions in which each was involved. There is dispute whether Canon was served with the application of the original liquidators which led to the order of 14 April. There also appeared to be issues of fact as to the service of that application upon Electrolux. The questions of fact will have to be determined at separate hearings in the light of these reasons.
The Liquidators’ Applications
Given these reasons it is unnecessary to rule on the applications of the current liquidators to amend the orders made on 14 April 2004. There is no occasion either to amend the orders in the terms sought or to substitute the current liquidators for the original liquidators in the orders.
Conclusion
For these reasons the answer to each of the questions is, Yes.
It will be necessary to consider each application separately to make the appropriate orders in the light of these reasons.