Austin Australia Pty Ltd (in liquidation) & Ors v A & G Scaffolding &... [2007] NSWSC 1077 | Case summary

cf SCR Part 20, rules 1 and 4; DCR Part 17, rules 1 and 4) (1) At any stage of proceedings, the court may order: (a) that any document in the proceedings be amended, or (b) that leave be granted to a party to amend any document in the proceedings. (2) Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings. (3) An order under this section may be made even if the amendment would have the effect of adding or substituting a cause of action that has arisen after the commencement of the proceedings but, in that case, the date of commencement of the proceedings, in relation to that cause of action, is, subject to section 65, taken to be the date on which the amendment is made. ... (5) This section does not apply to the amendment of a judgment, order or certificate. 65 Amendment of originating process after expiry of limitation period (cf SCR Part 20, rule 4; DCR Part 17, rule 4) (1) This section applies to any proceedings commenced before the expiration of any relevant limitation period for the commencement of the proceedings. (2) At any time after the expiration of the relevant limitation period, the plaintiff in any such proceedings may, with the leave of the court under section 64 (1) (b), amend the originating process so as: ... (b) to correct a mistake in the name of a party to the proceedings, whether or not the effect of the amendment is to substitute a new party, being a mistake that, in the court's opinion, is neither misleading nor such as to cause reasonable doubt as to the identity of the person intended to be made a party, or ... (3) Unless the court otherwise orders, an amendment made under this section is taken to have had effect as from the date on which the proceedings were commenced. ... " 6 Peter K Ceilings Pty Ltd opposes the amendment on the ground that no application was made against it within the period prescribed within s 588FF(3)(a). No application was made for the extension of that time limit pursuant to s 588FF(3)(b). Counsel for Peter K Ceilings Pty Ltd submits that subs 588FF(3) covers the field, and there is no scope for the application of ss 64 and 65 of the Civil Procedure Act. Subsection 588FF(3) of the Corporations Act makes other provision. How the Mistake Arose 7 The liquidators identified a number of payments totalling $565,849.22 from Austin Australia to Peter K Ceilings Pty Ltd, made between 3 July 2003 and 23 December 2003. On 10 November 2005, one of the liquidators, Mr Hutchinson, sent a letter of demand to Peter K Ceilings Pty Ltd at its New South Wales address, advising that he considered those payments to be preferential payments. He demanded payment of $565,849.22 within fourteen days. The letter stated in part: " I will take no further steps for 14 days from the date of this letter. However, should I not receive payment or contact from you, then I place you on notice that I intend to exercise my powers pursuant to my appointment as liquidator and will consider taking all steps necessary to recover these payments (plus interest and costs) without further notice to you. " 8 On 21 November 2005, a reply was sent on behalf of Peter K Ceilings requesting reasons for the conclusion that a preferential payment had been made. On 24 November 2005, Mr John Baird from Kemp Strang, telephoned the liquidator's firm to advise that he was acting for Peter K Ceilings Pty Ltd in relation to the preference recovery action. On 17 January 2006, he wrote to the liquidators admitting that Peter K Ceilings Pty Ltd had received the payments, but denying liability to repay the amount claimed on the basis of defences contained in ss 588FG(2) and 588FA(3) of the Corporations Act. Mr Baird concluded by saying that any litigation by the liquidators of Austin Australia would be strenuously defended. 9 On 11 December 2006, the liquidators instructed Gadens Lawyers to commence proceedings against twenty-seven named defendants. Mr Hutchinson deposed that in file notes and office documents prepared in relation to the claim, Peter K Ceilings Pty Ltd was occasionally referred to by way of the abbreviation "PK Ceilings". He caused a schedule of defendants to be sent to Gadens. In the schedule the proposed defendant was identified as "PK Ceilings". 10 On 13 December 2006, Mr Nigel Oram, a solicitor employed by Gadens, conducted an ASIC search of the name "PK Ceilings". The only entry in ASIC's records for "PK Ceilings" was a registered business name, the proprietor of which is Mr Dean Mann, a resident of Western Australia. 11 On 28 December 2006, just within the three-year period, the originating process was filed against the twenty-seven defendants, which incorrectly names "Dean Mann trading as PK Ceilings" as the twenty-seventh defendant. 12 On 2 February 2007, Mr Oram received a telephone call from Mr Mann's solicitor who asked whether the plaintiffs intended to commence proceedings against his client, stated that Mr Mann was located in Western Australia, had had no dealings with Austin Australia, and had not received payments from it. Mr Oram then searched through the plaintiff's documents relating to the claim against Peter K Ceilings and found that the letter of demand had been sent to Peter K Ceilings Pty Ltd. On 15 March 2007, he conducted an ASIC search for that name, which confirmed the existence of the company. On 19 March 2007, the plaintiff filed its interlocutory process seeking leave to amend the originating process. Making an Application Under Subsection 588FF(1) 13 Section 588FF does not explicitly define what is required to be done in order for an application to be made for one of the orders under subs 588FF(1). 14 The originating process claims "an order pursuant to s 588FF that each of the defendants pay to the first plaintiff the amounts set out in Schedule 1 against the name of the respective defendant." Against the twenty-seventh named defendant, the schedule states an amount of $565,849.22. The originating process gives no further elucidation of the transactions giving rise to that claim. 15 Rule 2.2 of the Supreme Court (Corporations) Rules 1999 (NSW) provides: " 2.2 Originating process and interlocutory process - Forms 2 and 3 (1) Unless these Rules otherwise provide, a person must make an application required or permitted by the Corporations Act to be made to the Court: (a) if the application is not made in a proceeding already commenced in the Court - by filing an originating process, and ... (3) An originating process must: (a) be in accordance with Form 2, and

16 Rule 2.4 provides that: " 2.4 Supporting affidavits (1) Unless the Court otherwise directs, an originating process, or interlocutory process, must be supported by an affidavit stating the facts in support of the process. ... " 17 The originating process was supported by an affidavit sworn by Mr Hutchinson on 22 December 2006 and filed on 28 December 2006. He deposed that, following his appointment as an administrator on 31 December 2003, he caused investigations to be conducted in relation to potential preferential payments which may have been made by Austin Australia during the six months prior to his appointment. He deposed that his investigations identified payments to creditors of Austin Australia whom he identified in the schedule. This paragraph provided no further elucidation than that which appears in the originating process. In relation to the twenty-seventh named defendant, he identified a payment of $565,849.22. He deposed that the payments were made in respect of unsecured debts owed by Austin Australia to the relevant defendant and that the payments were prima facie preferential and voidable pursuant to ss 588FA and 588FF of the Corporations Act. He deposed that he had sent a demand to "many of the defendants" stating that Austin Australia was insolvent at the time of the payments but none of the defendants had conceded its insolvency. 18 Until recently, there was an established line of authority that the expression "application under subsection (1)" referred to the commencement of proceedings and not to the amendment of an existing claim (Rodgers v Commissioner of Taxation (1988) 88 FCR 61 at 67-68; Star v National Australia Bank Ltd (1999) 150 FLR 119; 30 ACSR 583; Rambaldi v Dallbrook Pty Ltd (2003) 21 ACLC 1190; New Cap Reinsurance Corporation Ltd (in Liq) v Reaseguros Allianza SA (2004) 186 FLR 175; Tolcher v Capital Finance Australia Ltd (2005) 143 FCR 300). A different view was expressed in Davies v Chicago Boot Co Pty Ltd (2006) 58 ACSR 505. It is unnecessary to consider this issue, because it has always been the case that to make an amendment to add a new party is to make an application under subs 588FF(1), and hence the application must be made within three years after the relation-back day (Greig v Stramit Corporation Pty Ltd (2004) 2 Qd R 17 at 37-38 [83]-[90], 45 [118], 58 [168]; Tagoori Pty Ltd (in liq) v Lee [2001] 2 Qd R 98 at 99). Those cases were not concerned with the mistaken naming of a party. They were cases in which the effect of an amendment, if allowed, would have been to commence a fresh proceeding against the newly added defendant outside the prescribed time. 19 It has been held that s 588FF(3) covers the field of extensions of time with respect to s 588FF(1) applications to the exclusion of the general power in s 1322(4)(d) to extend the time for doing any act or instituting any proceeding under the Act (BP Australia Ltd v Brown (2003) 58 NSWLR 322 at 347). In Gordon v Tolcher (2006) 231 ALR 582; 60 ACSR 522; 24 ACLC 1625, the High Court said (at [37]): " The provision in subs (3) of s 588FF as to the time of the making of the application is of the essence of the provision made by s 588FF; it is not to be characterised merely as a time stipulation of a procedural nature. " 20 Section 588FF(3) imposes a condition on the entitlement of a liquidator to apply for an order under s 588FF(1). Sections 64 and 65 of the Civil Procedure Act cannot apply by their own force to a Court exercising federal jurisdiction. They apply by virtue of s 79 of the Judiciary Act to the extent Commonwealth law does not make other provision. The question is thus one of construction of s 588FF(1) to determine what is required in order for an application to be made under that subsection. If an application against Peter K Ceilings Pty Ltd was not made by 31 December 2006, it was too late, and the position cannot be saved by recourse to ss 64 and 65 of the Civil Procedure Act. Thus the question is whether the application was made on 28 December 2006 even though Peter K Ceilings Pty Ltd was not named as a defendant and Mr Mann was so named. 21 Section 588FF was enacted against the background of principles which had been developed at common law, and in the construction of rules of court, concerning the effect of the misnomer or the mistaken joinder of a wrong party as plaintiff or defendant, where an amendment to correct the mistake was sought to be made after the expiry of a limitation period. Those authorities are relevant to determining whether, as a matter of construction of s 588FF(3), an application was made under s 588FF(1) against Peter K Ceilings Pty Ltd on the filing of the originating process, even though it was not named as a defendant. 22 The authorities were reviewed by Young CJ in Eq in A & M Short Pty Ltd v Prestige Residential Marketing Pty Ltd (2005) 194 FLR 32 where an application to set aside a statutory demand was made in the name of A & M Short Pty Ltd (a company which did not exist) whereas the statutory demand was addressed to A & M Short Investments Pty Ltd. His Honour held that that was a case of misnomer. His Honour said (at 38 [35]): " Where there has been a misnomer the action is treated as if it originally named the substituted person and there is a mere correction of a bad typographical error..." (citing Bridge Shipping Pty Ltd v Grand Shipping SA (1991) 173 CLR 231 at 238-239 and Brown v DML Resources Pty Ltd (No 3) (2001) 164 FLR 337). 23 At the other end of the scale is a case in which a party makes an intentional decision as to whom to sue, or by whom the suit should be brought, but makes a wrong choice. Thus, in Bridge Shipping Pty Ltd v Grand Shipping SA, the defendant issued a third party notice against the owner of a vessel used to carry goods which were damaged in transit, but the vessel had been under charter to another company. The defendant's mistake was in believing that a cause of action lay against the owner of the vessel. That mistake did not suffice to permit an amendment to the claim after the expiry of a statute of limitations under a statutory rule permitting amendment to correct a mistake in the name of a party, whether or not the effect of the amendment would be to substitute another person as a party. In Sibroll Pty Ltd (in liq) v Mitch Properties Pty Ltd (2007) 25 ACLC 862, the mistake was of the same kind. As Donaldson LJ succinctly put it in Evans Constructions Co Ltd v Charrington & Co Ltd [1983] QB 810 at 821, in a passage quoted by Windeyer J in Sullivan v Van der Broek [1999] NSWSC 1177 (at [6]): " There is a real distinction between suing A in the mistaken belief that A is the party who is responsible for the matters complained of and seeking to sue B, but mistakenly describing or naming him as A and thereby ending up suing A instead of B. The rule is designed to correct the latter and not the former category of mistake. " 24 The intention of the party seeking the amendment is relevant in two respects. First, the use of the incorrect name must be because of a mistake (Re Nos 55 and 57, Holmes Road, Kentish Town [1958] 2 All ER 311 at 316, 318). Secondly, once it is established that there was a mistake, then the party making the mistake must always have intended that the party to be named was the party who was to seek to assert the right (Alexander Mountain & Co (suing as a firm) v Rumere Ltd [1948] 2 KB 436), or was the party against whom the right was sought to be asserted (Rainbow Spray Irrigation Pty Ltd v Hoette [1963] NSWR 1440). 25 The Court's inherent jurisdiction to amend the name of a party who has been misnamed extends to a case where the party wrongly named exists. In Rainbow Spray Irrigation Pty Ltd v Hoette [1963] NSWR 1440, the plaintiff was named as Rainbow Spray Irrigation Pty Ltd, which was an existing company. Walsh J allowed the name of the plaintiff to be amended to read Rainbow Spray Sales Pty Ltd after the limitation period expired. His Honour said that it was not clear that the case ought to be regarded "truly as the substituting for one plaintiff of another plaintiff". It was a case of the misnaming of the company which at all times sought to enforce the right and not as an attempt to substitute one party for a different party. In J Robertson & Co Ltd (in liq) v Ferguson Transformers Pty Ltd (1970) 44 ALJR 441, the defendant was named as "Phillips Electrical Pty Ltd (formerly Phillips Electrical Industries Pty Ltd)". The plaintiff had had dealings with a company of the latter name, but that company's name had been changed to "Phillips Industries Pty Ltd". Phillips Electrical Pty Ltd was a separate company with whom the plaintiff had had no relevant dealings. Walsh J held there had been a mere misnomer and allowed the amendment of the defendant's name, notwithstanding the expiry of the statute of limitations. 26 In Bridge Shipping Pty Ltd v Grand Shipping SA, Dawson J said (at 238-239) of such cases that: " The correction of a misnomer or misdescription does not involve the substitution of a new party except in a technical or formal sense, since the party after the correction is the same person as was misnamed or misdescribed . In such a case, at least as a matter of theory, no question of defeating a statute of limitations arises. " (emphasis added) 27 By parity of reasoning, it appears to me that if there was simply a misnomer of the twenty-seventh defendant in the originating process, the application against Peter K Ceilings Pty Ltd would have been made within the prescribed three-year period, notwithstanding that it was not the named defendant. The correction of the name would not involve the substitution of a new party. It may be said, and was said, that the application does involve the substitution of a party because Mr Mann is at risk of having judgment entered against him if he does not defend the proceedings. However, that is simply a corollary of the fact that the person named as a defendant exists. The same is equally true of cases such as Rainbow Spray Irrigation Pty Ltd v Hoette and J Robertson & Co v Ferguson Transformers Pty Ltd. 28 As Dawson J said in Bridge Shipping (at 240), the line between the correction of a misnomer or misdescription and the substitution of a different party is not always easy to draw. The test most generally applied is that enunciated by Devlin LJ in Davies v Elsby Bros Ltd [1960] 3 All ER 672 at 676. There, the plaintiff had been employed by a firm called Elsby Bros until 1955, when the business of the firm was taken over by a company called Elsby Bros Ltd. In 1959, the plaintiff's solicitors issued a writ against "Elsby Bros (a firm)" claiming damages for "injuries and loss sustained by the plaintiff while an employee of the defendants (sic) ... ". The writ did not identify the date of the injury. The injury had been suffered in March 1956, that is, after Elsby Bros Ltd had become the plaintiff's employer. An application to amend the writ to substitute Elsby Bros Ltd for Elsby Bros (a firm) was dismissed. The test enunciated by Devlin LJ (at 676) was: " ... the question is not what the writer of the document intended or meant but what a reasonable man reading the document would understand it to mean; and that is the test which ought to be applied as a general rule in cases of misnomer - which may embrace a number of other situations apart from misnomer on a writ, for example mistake as to identity in the making of a contract. The test must be: How would a reasonable person receiving the document take it? If, in all the circumstances of the case and looking at the document as a whole, he would say to himself: 'Of course it must mean me, but they have got my name wrong', then there is a case of mere misnomer. If, on the other hand, he would say: 'I cannot tell from the document itself whether they mean me or not and I shall have to make inquiries', then it seems to me that one is getting beyond the realm of misnomer. One of the factors which must operate on the mind of the recipient of a document, and which operates in this case, is whether there is or is not another entity to whom the description on the writ might refer. ... " 29 His Lordship held that no person receiving the writ could know who was intended to be the defendant unless inquiries were made to ascertain the date of the accident and possibly other relevant material. It was therefore not a case of misnomer but of substitution of one party for another (see also per Pearce LJ at 675). 30 The same test was applied but with a different result in Whittam v WJ Daniel & Co Ltd [1961] 3 All ER 796 and by Walsh J in J Robinson & Co v Ferguson Transformers Pty Ltd. In Bridge Shipping (at 249) Toohey J concluded that Devlin LJ's test was not helpful for the purposes of construing r 36.01 of the rules of the Supreme Court of Victoria. As McHugh J said in that case (at 256), the principle in Davies was capable of working injustice and as a result the power to make amendments was changed in England. It is nonetheless an appropriate test to determine whether within the meaning of s 588FF(3) an application was made against Peter K Ceilings Pty Ltd under s 588FF(1) on 28 December 2006, notwithstanding that Mr Mann was the named defendant and Peter K Ceilings Pty Ltd was not. 31 In Epacris Pty Ltd v Director-General, Dept of Natural Resources) [2007] NSWCCA 76, the Court of Criminal Appeal said (at [34]) that the statement of Devlin LJ in Davies v Elsby Bros Ltd quoted in para [28] above: "... has been referred to with approval in many cases in England and Australia, including J Robertson & Co Ltd (in liq) v Ferguson Transformers Pty Ltd (1970) 44 ALJR 441 at 443 (Walsh J sitting as a single justice) and Bridge Shipping Pty Ltd v Grand Shipping SA (1991) 173 CLR 231 at 254 (McHugh J, with whom Brennan & Deane JJ agreed). In each case, however, it was cited not for the purpose of determining whether the test is a subjective or an objective one but in order to distinguish between a mistake as to the name of the party and a mistake as to the identity of the party. " 32 The Court held (at [41]) that the objective nature or quality of the mistake remained the primary factor to be considered in construing Pt 20 r 1 of the Supreme Court Rules (the equivalent to s 64(4) of the Civil Procedure Act). 33 These authorities and principles can be applied analogically in determining whether an application was made against Peter K Ceilings Pty Ltd by the filing of the originating process. If the mistake as to the naming of the defendant was a mistake as to name only, and not a mistake as to the identity of the party to be sued, such that a reasonable person in the position of Peter K Ceilings Pty Ltd receiving the document would say "of course it must mean me, but they have got my name wrong", then the application was brought within time. The fact that Mr Mann undoubtedly exists is not a decisive consideration (J Robertson & Co v Ferguson Transformers Pty Ltd at 443). 34 Mr Hutchinson's letter of 10 November 2005 to Peter K Ceilings Pty Ltd demanded payment of $565,849.22. That is precisely the same amount as the amount claimed in the schedule to the originating process against the twenty-seventh named defendant. The originating process sought an order under s 588FF(1), in Pt 5.7B of the Corporations Act. Mr Hutchinson's letter had demanded payment of that sum pursuant to Pt 5.7B of the Corporations Act and in response, the solicitors for Peter K Ceilings Pty Ltd had identified likely defences if proceedings were brought under s 588FG of the Corporations Act. The schedule to the originating process described the named twenty-seventh defendant, that is Mr Mann, as trading under the name PK Ceilings. The addition of that trading name, coupled with the facts that the originating process claimed exactly the same amount as had been claimed in the liquidator's letter of 10 November 2005, and that the claim was made under the same part of the Corporations Act as had been invoked in the liquidator's correspondence, would lead a reasonable person in the position of Peter K Ceilings Pty Ltd, upon receipt of the originating process, to say "of course it must mean me, but they have got my name wrong". That is, such a person with knowledge of the history of the correspondence would have known that the plaintiffs had simply used the wrong name. The mistake was a mistake in the name of the twenty-seventh defendant, not in its identity. 35 The application was made under s 588FF(1) on the filing of the originating process. It is not to the point that the application was not served on Peter K Ceilings Pty Ltd within the prescribed time. The test is not whether someone from Peter K Ceilings Pty Ltd had reasonable doubt as to whether the company was joined as a party. That question did not arise. It had not been served and, in any event, the test is primarily an objective one. 36 For these reasons, I conclude that the application to amend the originating process is not precluded by subs 588FF(3). The application to amend does not involve the making for the first time of an application under subs 588FF(1) for an order against Peter K Ceilings Pty Ltd in respect of alleged voidable transactions. Accordingly, by virtue of s 79 of the Judiciary Act, ss 64 and 65 of the Civil Procedure Act apply. 37 There is no dispute that if s 588FF(3) does not preclude the application, the amendment ought to be allowed pursuant to s 64(1)(b) and s 65(2)(b) of the Civil Procedure Act. The mistake was not misleading, nor such as to cause a reasonable doubt as to the identity of the person intended to be made a party. 38 The plaintiffs seek an order, said to be pursuant to s 65 of the Civil Procedure Act, that the amendment is to have effect from 28 December 2006 and (for the avoidance of doubt) that that date is the date on which the proceedings are taken to have been commenced against Peter K Ceilings Pty Ltd, being the date of the filing of the originating process. There is no need for such an order. Pursuant to subs 65(3), unless a different order is made, the amendment made under the section will be taken to have had effect as from the date on which the proceedings were commenced. 39 For these reasons, I give leave under s 64(1)(b) of the Civil Procedure Act to amend the originating process pursuant to s 65(2)(b) of that Act in accordance with the amended originating process which is annexure "A" to the interlocutory process filed on 19 March 2007. 40 The costs of the interlocutory process filed on 19 March 2007 will be the plaintiffs' costs in the proceedings against the twenty-seventh defendant.

Austin Australia Pty Ltd (in liquidation) & Ors v A & G Scaffolding & Rigging Service Pty Ltd & Ors

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