VFS Group Pty Ltd v BM2008 Pty Ltd (in liq)
[2010] VSCA 277
•22 October 2010
SUPREME COURT OF VICTORIA
COURT OF APPEAL
| VFS GROUP PTY LTD (ACN 121 880 751) | S APCI 2010 0116 |
| Appellant | |
| v | |
| BM2008 PTY LTD (In Liquidation) (ACN 005 762 685) | Respondent |
| S APCI 2010 0117 | |
| PERTH FREIGHT LINES PTY LTD (ACN 129 516 990) | Appellant |
| v | |
| BM2008 PTY LTD (In Liquidation) (ACN 005 762 685) | Respondent |
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| JUDGES | NETTLE, HARPER and TATE JJA |
| WHERE HELD | MELBOURNE |
| DATE OF HEARING | 23 September 2010 |
| DATE OF JUDGMENT | 22 October 2010 |
| MEDIUM NEUTRAL CITATION | [2010] VSCA 277 |
| JUDGMENT APPEALED FROM | [2010] VSC 395 (Davies J) |
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COMPANIES – Statutory demand – Setting aside – Orders by Associate Judge varying the statutory demand and extending time for compliance with the demand by 3 weeks – Appeal against orders – Time for compliance with the demand expired before appeal due to be heard – Orders not authenticated – Orders recalled by the Associate Judge – New orders made extending time for compliance with the demand to a date after the appeal was to be heard – Whether Associate Judge acted within power in extending time for compliance – Whether erroneous assumption made by Associate Judge as to legal consequences of first set of orders – Inherent jurisdiction of Court to recall and replace orders – Supreme Court (General Civil Procedure) Rules 2005, rr 36.07, 59.02(1), 60.01(1), 77.01(1), 77.06(8) – Corporations Act 2001 (Cth) ss 459F(2), 459G, 459J.
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Appearances: | Counsel | Solicitors |
| For the Appellant | Mr D H Denton SC with Mr L M F Watts and Ms P Djohan | Belleli King & Associates |
| For the Respondent | Mr G T Bigmore QC with Mr D C Harrison | Cooper Mills Lawyers |
NETTLE JA:
I have had the advantage of reading in draft the reasons for judgment of Tate JA, and I agree with her Honour and in the orders which she proposes.
HARPER JA:
I also agree.
TATE JA:
On 26 August 2010, Efthim AsJ made orders in each of these two proceedings extending the period for compliance by the appellants with statutory demands served by the respondent under the Corporations Act 2001 (‘the Act’) to 4:00 pm on 27 August 2010. The appellants are VFS Group Pty Ltd (‘VFS’) in the first proceeding, and Perth Freight Lines Pty Ltd (‘PFL’) in the second proceeding. Efthim AsJ had earlier made orders in each proceeding on 12 July 2010, including an order in the following terms:
The period for compliance with the demand is extended to 2 August 2010.
The orders of 12 July were made in response to applications made by VFS and PFL under ss 459G and 459J of the Act to set aside the statutory demands served on each of them by the respondent on 22 December 2009, requiring payment of a judgment debt of $2,577,072.49. The applications were filed on 8 January 2010 and were both heard on 27 April and 3 June 2010. The basis of each application was that the Plaintiffs had an offsetting claim. Judgment was delivered and orders made on 12 July 2010. On 26 August 2010, Efthim AsJ ‘recalled’ the orders of 12 July and substituted the order extending the period of compliance until 27 August 2010.
Section 459F(2)(b) provides that the period for compliance with a statutory demand is 21 days after the demand is served. An application to set aside the demand relevantly has the effect that the Court, on hearing the application, may make an order, pursuant to s 459F(2)(a), extending the period for compliance with
the demand. By the orders of 12 July the period for compliance was thus ‘extended to 2 August 2010’, that is, extended beyond the 21 day statutory period. The orders of 12 July included an order that the demand be varied to claim $1,948,516.54 (a reduction of $628,555.95).
Although the orders of 12 July do not expressly record that Efthim AsJ dismissed the applications to set aside the demands, the extension of the period for compliance, and the variation of the demand, indicate that the applications for setting aside had been dismissed.
The critical questions in each of these proceedings turn on what it was that Efthim AsJ did when he recalled the orders of 12 July and made the orders of 26 August 2010 in substitution thereof:
(1) Was he seeking to exercise a fresh discretion after the expiry of the period for compliance, fixed at 2 August by reason of the order of 12 July? This would be impermissible in accordance with the authority of the High Court in Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corp Ltd.[1]
(2) Alternatively, was he exercising the inherent jurisdiction vested in him to correct the orders he made on 12 July which, although he had intended to make them in those terms, had legal consequences which were unforseen and unintended by him and which were based on a mistaken assumption as to the effect of the lodging of an appeal? If so, the orders of 26 August did not involve the exercise of a fresh discretion, and the extension to 27 August is not precluded by Aussie Vic.
[1](2008) 232 CLR 314.
A consequence of an affirmative answer to the first question is that the substantive appeals against the dismissal by Efthim AsJ of the applications to set aside the statutory demands would be rendered nugatory, as the period for compliance would have expired on 2 August 2010, by which date neither VFS nor PFL had complied with the demands (as varied) and no further extension of time had been sought despite an appeal being lodged on 16 July 2010. The trial judge, from whom these applications for leave to appeal, and appeals, are brought, held that the appeals from Efthim AsJ were nugatory and dismissed them on the ground that Efthim AsJ had no power to do what he purported to do on 26 August.[2]
[2]Re Perth Freight Lines Pty Ltd [2010] VSC 395.
If, however, it is the second question that should command an affirmative answer, the appeals would not be nugatory. VFS and PFL would be entitled to ventilate their grounds of appeal against the dismissal by Efthim AsJ of their applications to set aside the demands.
The orders of 12 July were not authenticated until 30 August 2010 on which day the Prothonotary authenticated both the orders of 12 July and the orders of 26 August. The orders of 12 July ought not to have been authenticated on 30 August by which time they had been recalled.
Apparently, the parties only became aware that the orders of 12 July had not been authenticated immediately before the hearing of the appeal was listed to commence on 25 August 2010 before the trial Judge. This was so although there had been an earlier directions hearing in the matter on 23 July 2010 in which it would seem that neither the parties nor the trial Judge raised the issue of the authentication of the 12 July orders, nor does it appear that questions were raised as to the efficacy of the appeal or the duration of the orders made extending the period for compliance and the possible expiry of that period before the appeal was listed for hearing.
Unless the Court otherwise orders, an appeal cannot be heard until the order from which the appeal has been instituted has been authenticated: r 60.01(1) of the Supreme Court (General Civil Procedure) Rules 2005. The need for authentication invited attention by the parties to the terms of the orders made on 12 July.
The respondent argues that the orders of 12 July speak for themselves. It argues, correctly, that an order speaks and is effective from the day it is made, in accordance with r 59.02(1) of the Supreme Court (General Civil Procedure) Rules. An order is not dependent upon authentication for its validity and force of operation. Unauthenticated orders are not provisional or inchoate. They take effect on and from the day they are made, unless the Court otherwise orders. Accordingly, the respondent argues, the date of 2 August was fixed as the end of the period for compliance with the demand by reason of the orders of 12 July, regardless of the fact that they were not authenticated until 30 August.
At the commencement of the hearing of the appeal before the trial Judge on 25 August, Senior Counsel for PFL asked for the matter to be stood over to enable ‘clarification’ of the order of Efthim AsJ with respect to extending the time for compliance. A short adjournment was granted. When the matters returned, shortly after the parties had appeared before Efthim AsJ when the 26 August orders were made, the trial Judge, correctly, made orders extending time for compliance with the statutory demands until 1 September 2010, preserving the rights of VSF and PFL in the event that she was wrong. This was further extended to 4:00 pm on 2 September 2010 and, on that day, to 5:00 pm on 24 September 2010.
On 23 September 2010, at the hearing of the applications for leave to appeal from the trial Judge, which was merged with the appeals, the Court (Nettle, Harper and Tate JJA) made orders extending the period for compliance with the statutory demands to the hearing and determination of the applications for leave to appeal, or until further order.
At the commencement of the hearing of the appeals before the trial Judge on 25 August, the trial Judge was informed that the appellants had understood that the 12 July orders were intended to be read in the following way, viz.
The time for compliance with the varied demand is extended by 21 days and in the event that an appeal is lodged, until the hearing and determination of that appeal.
Senior counsel for VFS and PFL explained to the trial Judge that on 12 July there had been a discussion with Efthim AsJ as to whether the lodging of an appeal would operate as a stay. He informed the trial Judge that the discussion had involved the use of colloquial language. It would appear that during this discussion no reference was made to r 77.06(8) of the Supreme Court (General Civil Procedure) Rules which provides relevantly that, except so far as the Associate Judge otherwise orders, an appeal shall not operate as a stay of execution or of proceedings under the judgment or order. Senior Counsel submitted to the trial Judge that ultimately what Efthim AsJ had done on 12 July was relevantly to extend the time for compliance with the varied demand by 21 days but, in the event of the filing of an appeal, that time for compliance would be extended to the hearing and determination of the appeal.
PFL had filed an Outline of Submissions before the commencement of the hearing of the appeal before the trial Judge on 25 August, in support of its appeal from the orders of Efthim AsJ, which it had characterised in these terms:
a.Refusing leave to the plaintiffs to re-open their case to rely on further evidence;
b.varying the Defendant’s statutory demand down by $628,555.95 to $1,948,516.64;
c.Extending the time for compliance with the varied demand by 21 days and in the event that an appeal is lodged, until the hearing and determination of that appeal; and
d.otherwise dismissed the Plaintiff’s applications to set aside the statutory demands.
In an affidavit sworn on 27 August 2010, relied upon by the appellants before the trial Judge when the matters returned before her, the solicitor for PFL, Mr Rewell, deposed to the following exchange between Efthim AsJ and counsel on 12 July when his Honour delivered judgment and orally described in general terms the effect of his reasons. After delivery of the judgment, Senior Counsel for VSF and PFL had made a submission to the effect that Efthim AsJ may have misunderstood some of the issues (relating to what his Honour had called derivative actions).
His Honour indicated he had not understood it had been put that way but he would not be changing his reasons and that it would be open to the Plaintiffs to appeal the decision which he expected would happen in any event.
Mr Denton, S.C. responded that the Plaintiffs were most likely to appeal to which his Honour said he had anticipated that without any criticism of any party. His Honour then asked Mr Denton how long the plaintiffs were asking within which to comply with the demand as varied. Mr Harrison, counsel for the Defendant interposed that it was possible that the Plaintiffs would choose not to appeal. Mr Denton requested the court to extend time to the hearing and determination of the substantive dispute in the [related] Federal Court proceeding in Western Australia. Mr Denton resumed his seat.
…
His Honour then decided to refuse the application to extend time for compliance with the demand until the hearing and determination of the Federal Court proceeding in Perth and instead stated that as the Plaintiff was to appeal this decision that once the appeal was lodged then time for compliance would (sic) with the statutory demand would be extended to the hearing and determination of the appeal. He then addressed Mr Harrison directly and asked him whether “Mr Harrison do you take any issue with that?” to which Mr Harrison stated “we do not Your Honour”.
…
His Honour then said that he would grant an extension of 21 days which was the maximum extension he had ever granted anyone because that would give the Plaintiff enough time to get the appeal underway and it would take that long anyway to get together the amount of money required by the demand as varied if it was decided not to appeal.
At the trial Mr Rewell was not cross-examined and his evidence remains uncontradicted, no responding affidavits on these issues having been filed despite there being an opportunity to do so.
VFS and PFL further point to the observations made by Efthim AsJ on 26 August as evidence of his earlier intention on 12 July. Having made the orders extending the time for compliance to 27 August, under ‘Other Matters’ Efthim AsJ wrote:
The order of 12 July 2010 was not authenticated and was recalled. It was the intention of the Court when the order was made that the Plaintiff have right (sic). The Court is of the view that it would be unfair for the Plaintiff to lose that when it appears that a contribution (sic) factor was the non-authentication of the order and a misunderstanding by the Plaintiff of the order of 12 July 2010. The Court did not require affidavits to be filed this day as the Court was of the view that they were not necessary.
These observations support the inference that some misunderstanding had occurred in relation to the orders of 12 July, and that Efthim AsJ intended on 12 July that VFS and PFL (then plaintiffs) would have some remaining rights which the orders he made were not intended to preclude the exercise of, or to prejudice.
The observations of Efthim AsJ made in the record of ‘Other Matters’ are consistent with the uncontradicted evidence of Mr Rewell. The error made by Efthim AsJ was to assume that by granting VSF and PFL 21 days before the expiry of the period for compliance (2 August) he was ensuring that, if an appeal was lodged within that time (as it was), the period for compliance would not expire before the hearing and determination of the appeal. Efthim AsJ clearly understood that it was likely that VSF and PFL would seek to appeal and he intended to make orders which would not prejudice their right to appeal. He erroneously assumed that the period for compliance would be extended to the hearing and determination of the appeal simply by the lodging of an appeal and that, in effect, the lodging of an appeal would act as a stay. He was thus mistaken about the legal consequences that would flow from the orders of 12 July.
It was within the inherent jurisdiction of the Court, vested in his office by reason of r 77.01(1) of the Supreme Court (General Civil Procedure) Rules, that Efthim AsJ was able to recall his orders of 12 July and to replace them with the order of 26 August extending the period for compliance until 27 August, by which time the trial Judge had extended the period for compliance further. The inherent jurisdiction of the Court permits the setting aside or recall of an order which was intended to be made but which has had unforseen or unintended legal consequences.[3] The inherent jurisdiction is not confined by the scope of the slip rule as provided for in r 36.07 of the Supreme Court (General Civil Procedure) Rules.[4]
[3]Newmont Yandal Operations Pty Ltd v The J Aron Corporation (2007) 70 NSWLR 411, 427 [89].
[4]Ibid 417 [18]-[19].
An application of the inherent jurisdiction of the Court to correct an order which, although made in the terms the court pronounced, had legal consequences that were unforseen or unintended, has the effect that the rights and obligations of the parties at the time the initial order was made, are to be deemed to be, at that time, the rights and obligations in accordance with the order as corrected. With similar effect to an application of the slip rule, the ‘later order corrects the earlier order, and speaks from the date of the earlier order, which then operates with full force as corrected.’[5] The earlier order is deemed or treated as having always operated as corrected. The presence of supervening events is a consideration to be taken into account in the exercise of discretion; it does not preclude the correction.[6]
[5]Elyard Corp Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385, 391.
[6]L Shaddock & Associates Pty Ltd v Parramatta City Council [No 2] (1982) 151 CLR 590, 597.
Efthim AsJ acted within power when he made the orders of 26 August; the orders were effective in extending the period for compliance to 27 August. The orders of 26 August corrected the orders of 12 July and spoke from the date of 12 July, which then operated with full force as corrected. The appeals by VFS and PFL before the trial Judge were not nugatory.
That being so, there is no need for the Court to consider the alternative argument made on behalf of VFS and PFL that, there having been no ‘final determination’ of the application made under s 459G for an order setting aside the demand, the period for compliance has not expired, pursuant to s 459F(2)(a)(ii).
Leave to appeal from the trial Judge should be granted in each proceeding and the appeals allowed.
The matters should be remitted to the trial Judge for the hearing and determination of the appeals from the dismissal by Efthim AsJ of the applications to set aside the statutory demands. The orders of the trial Judge dismissing the appellants’ appeals, and setting aside the orders of Efthim AsJ made on 26 August 2010, should be set aside. In lieu thereof, it should be ordered that the period for compliance with the statutory demands be extended until the hearing and determination of the appeals from the dismissal by Efthim AsJ of the applications to set aside the statutory demands.
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