ASIC v Maxwell & Ors

5298/03 - AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v DONALD RICHARD MAXWELL & 26 ORS JUDGMENT 1 The plaintiff (ASIC) wishes to press its application for an order for the winding up of each of the eleventh and thirteenth defendants, Drummoyne Constructions Pty Ltd and Homebush Project One Pty Ltd. To the extent that ASIC bases its claim on alleged insolvency of each such defendant and seeks winding up in insolvency, it faces a difficulty to which I shall come and which was the subject of an application heard by me on 7 February 2005. Before addressing that application, I refer to some matters of background. 2 By an amended statement of claim filed on 18 February 2004, ASIC sought certain relief against and in relation to some eighteen companies and three individuals. Additional individual defendants were later added. The proceedings had been commenced ex parte on 15 October 2003. The relief claimed in the amended statement of claim included winding up orders in respect of the corporate defendants. The grounds relied on were, in each case, insolvency and the just and equitable ground. An interlocutory process filed on the same day as the amended statement of claim sought, first, an order under s.459P(2) of the Corporations Act 2001 (Cth) granting to ASIC nunc pro tunc leave to apply for winding up in insolvency of the corporate defendants, second, an order under s.459R(2) extending, as the court thought fit, the time for determination of such winding up applications and, third, an order for the appointment of a provisional liquidator of each of the corporate defendants. 3 On 3 March 2004, Austin J ordered that all but three of the relevant companies be wound up in insolvency, at the same time granting leave to proceed under s.459P(2). The exceptions were the eleventh, thirteenth and nineteenth defendants. Thereafter, on 9 March 2004 (following a hearing that concluded late in the afternoon on 8 March 2004), Austin J made like orders in respect of the nineteenth defendant and an order appointing a provisional liquidator of each of the eleventh and thirteenth defendants. Another order made by his Honour on 9 March 2004 (Order 3) was: "Pursuant to section 459R(2) of the Corporations Act , the time for determining the Plaintiff's application for the winding up of Drummoyne [i.e, the eleventh defendant] and Homebush [i.e, the thirteenth defendant] be extended to 31 August 2004." 4 Reasons delivered by Austin J on 8 March 2004 did not refer to the s.459R(2) order but Mr Stack of counsel, who appeared for ASIC, stated from the bar table (and the form of order taken out, showing handwritten amendment, confirms) that his Honour was invited to extend the life of the winding up application "to the time when the Court finally determines that application", but preferred to make an order referring to a fixed date. His Honour's reasons for taking that approach are, to my mind, obvious. 5 On each of 19 April 2004, 17 May 2004, 30 August 2004, 27 September 2004, 30 September 2004, 25 October 2004, 11 November 2004 and 13 December 2004, the proceedings again came before the court and various orders and directions were made. On none of those occasions did ASIC make any renewed application under s.459R(2). The period within which ASIC's applications of 18 February 2004 for the winding up in insolvency of the eleventh and thirteenth defendants were to be determined in conformity with s.459R(1) therefore expired on 31 August 2004. Section 459R is in the following terms: " Period within which application must be determined (1) An application for a company to be wound up in insolvency is to be determined within 6 months after it is made. (2) The Court may by order extend the period within which an application must be determined, but only if: (a) the Court is satisfied that special circumstances justify the extension; and (b) he order is made within that period as prescribed by subsection (1), or as last extended under this subsection, as the case requires. (3) An application is, because of this subsection, dismissed if it is not determined as required by this section. (4) An order under subsection (2) may be made subject to conditions." 6 ASIC acknowledges that it is not now open to the court to make any further order under s.459R(2) extending the period for determination of the winding up application as it affects the eleventh and thirteenth defendants. This is because of the statement in s.459R(2) that an extension may be effected "only if" the extending order is made within the period of six months referred to in s.459R(1) or any extended period for the time being applicable because of a previous s.459R(2) extension. 7 ASIC contends, however, that the position with respect to pursuit of the application to wind up the eleventh and thirteenth defendants may, from ASIC's perspective, be retrieved by an order under the "slip rule" (Part 20 rule 10(1) of the Supreme Court Rules 1970) or an analogous aspect of the court's inherent jurisdiction. Part 20 rule 10(1) is as follows: "Where there is a clerical mistake, or an error arising from an accidental slip or omission, in a minute of a judgment or order, or in a certificate, the Court, on the application of any party or of its own motion, may, at any time, correct the mistake or error. 8 By an amended interlocutory process filed in court when the matter came before me on 7 February 2005, ASIC sought, in the alternative, the following orders: "1. An order pursuant to Part 20 rule 10 of the Supreme Court Rules and the inherent jurisdiction of the Court, that either: (a) Order 3 of the Orders made by the Court on 9 March 2004 be amended by substituting such date as the Court thinks fit for the date '31 August 2004': or (b) the Orders made by the Court on 30 August 2004 be amended by inserting an additional order in the following terms: ' Pursuant to section 459R(2) of the Corporations Act, the time for determining the Plaintiff's application for the winding up of the Eleventh and Thirteenth Defendants in insolvency be extended to the time when the Court finally determines that application. '" 9 I was referred, in this connection, to the decision of the Full Federal Court in Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385. In that case, an application for winding up in insolvency was filed on 18 November 1994. On 21 April 1995, another creditor was substituted as applicant and an order for extension of time was made under s.459R(2). The extension was until 9 June 1995. On that day (9 June 1995), the court made an order substituting yet another creditor as applicant and adjourning the hearing of the winding up application to 16 June 1995. No order extending time was made under s.459R(2) when the matter was before the court on 9 June 1995, with the result that the period applicable under s.459R expired at the end of that day and it was thereafter no longer open to the court to make a further extending order under s.459R(2), that being the effect of s.459R(2)(b). 10 On 9 August 1995, however, a judge of the Federal Court acted under the slip rule (Order 35 rule 7 of the Federal Court Rules) to make an order, retrospectively to 9 June 1995, extending the s.459R period to 30 November 1995. The Full Federal Court upheld that decision of the primary judge. 11 Of particular relevance in that case were the orders made on 9 June 1995. They were as follows: "1. The Notice of Motion filed by DDB Needham Sydney Pty Ltd ('DDB') be returnable immediately and that service be dispensed with. 2. DDB be substituted as applicant. 3. The substituted applicant amend the application accordingly. 4. The substituted applicant serve on the respondent the further amended application and any further affidavits on which he or she proposes to rely in support of the further amended application at or before 4 pm, 13 June 1995. 5. The respondent file and serve on the substituted applicant a notice of appearance in accordance with Form 79, specifying any grounds of opposition and an affidavit verifying those grounds in accordance with Form 93A at or before 4 pm, 15 June 1995. 6. Under O 71, r 37(9) the requirement to publish a notice in accordance with Form 98 be dispensed with. 7. The proceedings be adjourned to 16 June 1995 to be listed with proceedings no. G3120 of 1995 and be returnable before a judge of the Court (Sheppard J). 8. Any affidavit in support of solvency to be filed and served by 15/6/95 midday." 12 These orders made provision for the due progress of the application for winding up in insolvency at the suit of the substituted applicant, DDB. The Full Court agreed with the primary judge that it was open under the slip rule to supplement, by correction, the orders that were actually made. The correction was by means of an ancillary order that the court had obviously intended should be made. It would have been entirely inconsistent with the orders actually made in relation to prosecution of the winding up application that there be excluded from those orders a provision without which peremptory and automatic dismissal of the application would have occurred at the expiration of the day on which the orders were made. The availability of the slip rule was regarded as indicated by the decision of the High Court in L Shaddock & Associates Pty Ltd v Council of the City of Parramatta (No 2) (1982) 151 CLR 590. The circumstances of the case were seen as justifying exercise of the discretion under the rule in favour of further extension of the time for determination of the winding up application. 13 Elyard Corporation was applied, in analogous s.459R circumstances, by North J in Re DDS Investments Pty Ltd (unreported, FCA, 7 March 1997) and by Emmett J in Westpac Banking Corporation v E & W Jury Pty Ltd (1998) 16 ACLC 547. The availability of Part 20 rule 10 of the rules of this court in such circumstances was confirmed by Hodgson CJ in Eq (as he then was) in Edwards v Waterproofing Manufacturers (Chendu) Pty Ltd [2000] NSWSC 1227. His Honour accepted a submission that, had the court adverted to s.459R and the result it produced (namely, that the time for determination of the winding up application would expire on 14 April 2000), it would not have made, on 28 March 2000, an order for return of subpoenas on 5 April 2000 and allocation of the application to a Master's call-over, without at the same time making some order under s.459S(2) extending the time for determination of the application. The orders, as made, intended and implied that the winding up application should be heard after 14 April 2000. Hodgson CJ in Eq accepted that Elyard Corporation was correctly decided. He continued: "In my opinion, also, the difference between the Federal Court Rule and the Supreme Court Rule does not mean that this Court has any less power than the Federal Court to correct accidental mistakes made in court orders. I accept that Part 20 Rule 10 in its terms is dealing with the correction of a minute of a judgment or order, rather than correction of an order spoken by a judicial officer, and thus is directed towards making sure that the formal record of a judgment or order accords with the actual intention of the Court making that order. However, in my opinion, this Court plainly has an inherent jurisdiction under an implicit slip rule to the same effect as the provision of the Federal Court rule." 14 In Reliance Financial Services Pty Ltd v Martha's T Market Pty Ltd (2003) 45 ACSR 287, Young CJ in Eq expressed a corresponding opinion. The relevant aspect of the slip rule is that which applies where, in the words of Adam J in Arnett v Holloway [1960] VR 22, "the judgment or order as recorded has failed to express the intention of the court or judge when pronouncing the judgment or order." I accept, as did Hodgson CJ in Eq and Young CJ in Eq, that, on the basis elucidated by the Full Federal Court in Elyard Corporation, it is open to this court to rectify the absence of s.459R(2) extension by correcting (by way of supplement) pursuant to Part 20 rule 10 a minute of a judgment or order, or by correcting in like manner in exercise of the inherent jurisdiction an order spoken by a judicial officer. In acting on either of those bases, the court supplies an element clearly implied by, but not explicitly stated in, the orders actually made. 15 I proceed therefore to the question whether such a supplementary order is warranted in this case. That question must be addressed in light of the course the proceedings took after the making of orders on 9 April 2004. The subsequent chronology is as follows: 19 April 2004: Consent orders as to request for and furnishing of particulars affecting the plaintiff and the eight, ninth and twentieth defendants only. Order standing the proceedings over to 17 May 2004. 17 May 2004: Order as to filing and return of a motion by the ninth and twenty-seventh defendants. Order as to particulars involving the fifth, sixth, sixteenth, twentieth and twenty-sixth defendants. Order that defendants file and serve defences by 7 June 2004. Order that plaintiff file all affidavit evidence by 28 June 2004. Order that defendants file affidavits by 26 July 2004. Order that plaintiff file evidence in reply by 23 August 2004. Order that the matter stand over for directions on 24 August 2004. 30 August 2004: Order that eighth, twenty-third and twenty-fourth defendants file and serve defences by 24 September 2004. Order that the defendants, except the first defendant, file and serve all affidavit evidence by 15 October 2004. Order that plaintiff file any affidavit evidence in reply by 22 October 2004. Order that matter stand over for further directions to 25 October 2004. 27 September 2004: By consent of the plaintiff and the eighth, twenty-third and twenty-fourth defendants, orders for filing of defences of those defendants by 11 October 2004. 30 September 2004: By consent, orders for filing of unverified defence by first defendant by 15 October 2004. 25 October 2004: Orders that defendants file and serve defences by 1 November 2004. Order that defendants other than first defendant file and serve all affidavit evidence by 10 December 2004. Order that matter stand over to 13 December 2004. 11 November 2004: Order for release of undertaking of, and imposing restraints upon, one of the individual defendants. 13 December 2004: By consent, order that defendants other than first defendant file and serve affidavit evidence by 28 January 2005 and that matter stand over to 7 February 2005. 16 By their terms, orders made on 17 May 2004, 30 August 2004, 25 October 2004 and 13 December 2004 applied to and affected all defendants. They therefore applied to and affected the eleventh and thirteenth defendants. On 17 May 2004, all defendants were ordered to file and serve defences by 7 June 2004, as well as affidavits by 26 July 2004, and the proceedings were stood over to 24 August 2004. On 30 August 2004, there was an order that all defendants except the first file and serve affidavits by 15 October 2004 and an order that the proceedings stand over to 25 October 2004. On the last-mentioned date, there were orders for the filing of defences by all defendants except the first by 10 December 2004 and an order standing the matter over to 13 December 2004. On the last-mentioned date, there was an order as to the filing and service of affidavits by all defendants except the first by 28 January 2005 and an order that the matter stand over to 7 February 2005. 17 The orders of 30 August 2004, 25 October 2004 and 13 December 2004 made provision with respect to defences and evidence to be filed by, among others, the eleventh and thirteenth defendants. There was an implicit assumption that the proceedings remained extant in relation to those two defendants and that the claims against them were to be progressed. The relief sought against those defendants was winding up in insolvency or on the just and equitable ground. The existence of that second element meant that, in this case, the procedural orders affecting the eleventh and thirteenth defendants could have sensible and rational operation not related to the applications for winding up in insolvency. In contradistinction to the circumstances in the decided cases to which I have referred, this is not a case in which it must be presumed, from the making of orders after expiration of the s.459R period, that the court, when making those orders, intended to keep alive the applications for winding up in insolvency. There was another aspect of the relief sought against the eleventh and thirteenth defendants by way of winding up orders that formed a rational and intelligible basis for orders progressing the claims for those orders even though the time for determination of the applications based on allegations of insolvency had expired. 18 The gist of the cases is summed up in the following extract from the judgment of North J in Re DDS Investments Pty Ltd (above): "On 21 February 1997, it was implicit in the application for an adjournment made by the applicant that the time for determination of the winding up application would be extended. It was also implicit in the orders made by the Court that the time would be extended under s.459R(2)." 19 In Westpac Banking Corporation v E & W Jury Pty Ltd (above), Emmett J said: "… [I]t appears to me that there can be no doubt that on 18 December 1997 there was a direction given by me listing the matter for directions on 6 February 1998, and that direction can properly be characterised as an order within the meaning of the slip rule. In my view, it goes without saying that I was not intending to waste my breath or waste the Court's time in such a directions hearing. As I have said, had I been asked I would have made an order under 459R(2). Similarly, if I had made such an order and then been asked to do the same thing on 6 February 1998, I would have said of course it is obvious that I intend that what I do on 12 February 1998 will have some utility. In the circumstances, I consider that I have power to make orders of the nature sought and I propose to do so." 20 Because the winding up application against each of the eleventh and thirteenth defendants rested on an additional ground not affected by s.459R, applications for orders and directions for the progressing of those applications towards trial cannot be said to have included, by necessary implication, applications for orders under s.459R. The court was not, on Emmett J's approach, wasting its breath when it made those orders and directions without at the same time making an order under s.459R. 21 Had the mind of the presiding judge turned to the s.459R question on any of the occasions in question, it would not have been unreasonable or perverse for that judge to think that absence of an application for extension under s.459R was attributable not to some oversight or error but to a decision by the plaintiff to pursue the winding up applications solely by reference to the separate and expressly foreshadowed ground to which the s.459R time limit was not relevant. And had a lawyer representing the eleventh or thirteenth defendant on any such occasion thought about the matter, he or she could easily have thought the same. It follows that the presumption of error or oversight, gathered from surrounding circumstances, upon which Elyard Corporation and the subsequent similar cases turned, cannot be seen to arise here. 22 Order 1(a) (see paragraph [8] above) will not be made because, on 9 March 2004, Austin J turned his mind to the s.459R question and made an order extending time to 31 August 2004. There was, on that occasion, no accidental slip or omission. Order 1(b) will not be made because, for reasons I have stated, the orders actually made on 30 August 2004 operated, in their own right, in a rational and intelligible way and did not indicate or depend on any implied assumption as to s.459R(2) extension. The application for Order 1 is therefore dismissed. 23 Although this result means that there is no longer any pressing reason to do so, I should record that I am satisfied that the form of amended interlocutory process filed in court on 7 February 2005 and notice of ASIC's intention to seek on that date the order I have refused were adequately brought to the notice of the eleventh and thirteenth defendants. I mention this because there was no appearance for those parties when the application for that order was heard. **********

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