Australian Coastal Shipping Commission v Curtis Cruising Pty Ltd

Rule 6.19

1. UCPR r 6.19 makes provision for the joinder of multiple parties in an originating process where there are common questions of law or fact: 6.19 Proceedings involving common questions of law or fact (cf SCR Part 8, rule 2; DCR Part 7, rule 2; LCR Part 6, rule 2) (1) Two or more persons may be joined as plaintiffs or defendants in any originating process if: (a) separate proceedings by or against each of them would give rise to a common question of law or fact, and (b) all rights of relief claimed in the originating process are in respect of, or arise out of, the same transaction or series of transactions, or if the court gives leave for them to be joined. (2) Leave under subrule (1) may be granted before or after the originating process is filed.
2. The rule is concerned with joinder in the originating process, as distinct from addition of a party subsequently (which is addressed by UCPR r 6.24). Joinder under r 6.19 is an act of the plaintiff, not of the court.
3. Rule 6.19 addresses two situations. The first is where the requirements of paragraphs (a) and (b) of sub-rule (1) are satisfied; in those circumstances, the joinder is as of right. The second is where either (or both) of those requirements are not met; in such a case, the leave of the court for the joinder is required. However, sub-rule (2) plainly contemplates that such leave may be granted after the originating process has been filed. In this, it is identical to its neighbour in rule 6.18(2), which makes similar provision in respect of joinder of causes of action: 6.18 Joinder of causes of action (cf SCR Part 8, rule 1; DCR Part 7, rule 1; LCR Part 6, rule 1) (1) In any originating process, the plaintiff may claim relief against the defendant in respect of more than one cause of action in the any of following circumstances: (a) if the plaintiff sues in the same capacity, and claims the defendant to be liable in the same capacity, in respect of each cause of action, (b) if the plaintiff sues: (i) in his or her capacity as executor of the will of a deceased person, or administrator of the estate of a deceased person, in respect of one or more of the causes of action, and (ii) in his or her personal capacity, but with reference to the estate of the same deceased person, in respect of the remaining causes of action, (c) if the plaintiff claims the defendant to be liable: (i) in his or her capacity as executor of the will of a deceased person, or administrator of the estate of a deceased person, in respect of one or more of the causes of action, and (ii) in his or her personal capacity, and in relation to the estate of the same deceased person, in respect of the remaining causes of action, (d) if the court grants leave for all of the causes of action to be dealt with in the same proceedings. (2) Leave under subrule (1) may be granted before or after the originating process is filed.
4. The purpose of r 6.19 is to control the constitution of proceedings, not to impose a precondition to their institution. The leave referred to is not leave to commence proceedings, but to join multiple defendants in them. In this respect, there is an analogy with provisions such as Corporations Act, s 471B and s 500(2), which provide that proceedings must not be commenced or continued against a company in liquidation without the leave of the court. Because the purpose of that provision is to protect the liquidation rather than to impose a precondition on the institution of proceedings, it has routinely been held that proceedings commenced without leave are not a nullity, although they are liable to be stayed, and leave can be granted retrospectively [4] - including after a limitation period has expired, in respect of proceedings commenced without leave before its expiry. [5] The availability of retrospective leave is all the clearer under rule 6.19 (and rule 6.18), because in each case sub-rule (2) makes explicit provision to that effect.
5. Thus it would not be a nullity, nor an abuse of process, for a plaintiff to file an originating process joining multiple defendants in circumstances where leave was required, without first obtaining that leave. The proceedings would be irregular unless and until leave was granted, but not invalid. [6]
6. An additional reason for holding that the filing of an originating process which joins multiple defendants without prior leave, where leave is required, is not a nullity, is provided by UCPR r 6.23, which provides that misjoinder does not defeat proceedings: 6.23 Effect of misjoinder or non-joinder of parties (cf SCR Part 8, rule 7 (1); DCR Part 7, rule 7 (1); LCR Part 6, rule 7 (1)) Proceedings are not defeated merely because of the misjoinder or non-joinder of any person as a party to the proceedings.
7. Accordingly, proceedings in which multiple defendants are joined in the originating process before the requisite leave is granted are irregular unless and until leave is granted, but not invalid. It follows that when the originating process herein was filed on 22 August 2017, claiming relief under s 588FF, within the 3-year limitation period, an application under s 588FF(1) was validly made against each of the 23 defendants.

Rule 6.28

1. UCPR r 6.28 makes provision in respect of the date of commencement of proceedings against a defendant who is joined to proceedings after their institution: 6.28 Date of commencement of proceedings in relation to parties joined (cf SCR Part 8, rule 11 (3) and (4); DCR Part 7, rule 11 (3); LCR Part 6, rule 11 (3)) If the court orders that a person be joined as a party, the date of commencement of the proceedings, in relation to that person, is taken to be the date on which the order is made or such later date as the court may specify in the order.
2. The rule is engaged where the court orders that a person be joined as a party. It is concerned with joinder by order of the court after proceedings have been instituted, and not with joinder by the plaintiff in the originating process. A grant of leave under r 6.19 is not an "joinder by order" within r 6.28: it is not the grant of leave, but the act of the plaintiff in pursuance or anticipation of that leave, that effects the joinder. That is to be distinguished from the position under r 6.24, where it is the order of the court that effects the joinder.
3. This rule and its equivalents were introduced because there was controversy as to whether, where a party was added after proceedings were commenced, the joinder operated, like other amendments, with effect from the date of institution of proceedings, or only from the date of joinder. [7] This was of significance because if it were the former, statutes of limitation could be circumvented. The rules reflect the reality that the added defendant becomes a party to proceedings only from the date of joinder, and until so joined, there are no proceedings against it. That rationale has no application where a defendant has already been named as such in the originating process.
4. This construction of rule 6.28 is supported by the history of the rules. Their predecessors were in Supreme Court Rules 1970, Part 8, and are extracted in the judgment of the Court of Appeal in Fernance v Nominal Defendant; [8] cross-references to the relevant predecessor rule are included in historical notes in the UCPR equivalents, and have been incorporated where those rules are set out above. SCR Pt 8 r 1 was the predecessor of UCPR r 6.18(1); Pt 8 r 2 of UCPR r 6.19(1), and Pt 8 r 4 was the equivalent of UCPR r 6.18(2) and 6.19(2). Pt 8 r 8 was the predecessor of UCPR r 6.24. Pt 8 r 10 empowered the court to add parties where the interest or liability of a party passed by assignment, transmission or devolution to another person.
5. SCR Pt 8 r 11(3) was the predecessor of UCPR r 6.28, and provided as follows: (3) Subject to subrule (2), where a party is added pursuant to an order under rule 8 or rule 10, the date of commencement of the proceedings so far as concerns him shall be the date of filing of the originating process amended so as to add him as a party or, where an amended originating process is not filed, the date of the amendment adding him as a party.
6. Thus SCR Part 8 r 11(3) explicitly referred only to rules 8 (the predecessor of rule 6.24) and 10, both of which provided for joinder by order of the court. There was no corresponding provision in respect of rules 1 and 2, the predecessors of 6.18 and 6.19. Joinder under those rules plainly took effect from the date of the originating process in which they were joined, with or without prior leave. Although UCPR r 6.28 contains no similar express reference, its context, and its use of the words "If the court orders that a person be joined as a party", indicate that it was intended to have the same effect as its predecessor.
7. It follows that rule 6.28 is not engaged by a grant of leave under rule 6.19.

Discretion

1. In Dean-Willcocks, Austin J explained that proceedings of this kind had special features which may justify the granting of leave under UCPR r 6.19. [9] [35] Some special features of unfair preference proceedings may justify the granting of leave under subpara(b), although leave would not be granted in similarly constituted proceedings with a different subject matter. First, since unfair preference proceedings arise under the Corporations Act, it is appropriate that any applications concerning them, and their case management, be allocated to the Corporations List. The significance of doing so is that the Corporations List is a regular weekly list, within which issues concerning the progression of an unfair preference proceeding against multiple defendants can be aired and resolved expeditiously. Secondly, the issue at stake in unfair preference proceedings is whether the liquidator of a failed company should recover assets for the benefit of unsecured creditors as a whole. The adoption of a procedure that is speedy, inexpensive and efficient from the point of view of liquidators should facilitate the commencement and maintenance of proceedings in cases where there appear to be reasonable prospects of success. That would be an important outcome in terms of public policy and the interests of the commercial community as a whole. Thirdly, a central ingredient of unfair preference proceedings is the establishment of the insolvency of the company at the relevant time: s588FC. In the case of a company of any significant size, that question should where practicable be determined by this Court rather than the District Court or a Local Court. By granting leave to the liquidator to maintain a single proceeding in this Court, managed within the Corporations List, the Court can bring the matter to a point where the question of insolvency has been determined or it emerges from the defences that insolvency is not in issue, before deciding whether to make an order transferring the balance of the proceeding to another Court, or to make an appropriate set of orders and directions under Pt8 r6, or to take other appropriate steps. [36] These considerations affect the balancing of interests involved in the exercise of the discretion. Thus, given the public interest at stake, it is unlikely that the Court would regard the additional cost of defending a claim in this Court as opposed to the cost of doing so in an inferior court as a consideration having any significant weight. It is not uncommon for this Court to be asked to deal with a dispute involving little monetary value, because of the public interest involved - an example in the corporate context is an application to set aside a statutory demand under s459G of the Corporations Act, regardless of the amount claimed by the creditor. Similarly, the ability of the Court to make appropriate directions in the Corporations List should enable it to minimise the additional costs arising out of the presence of multiple defendants. For example, directions could be given to the liquidator to give reports to defendants against whom relatively small claims have been made as to the outcome of directions hearings, and on that basis those defendants could be excused from attendance. [37] The fact that a person is located in another State should not necessarily lead the Court to deny the liquidator's application to join that person as a defendant in the proceeding. State borders ceased to have any substantial significance in Australian commercial life some decades ago. Company law now reflects commercial reality in this respect, for the Corporations Act is a national statute, administered by a national commission, and by courts operating under rules of court harmonised on a national basis. Where the defendant in question is a corporation of reasonably substantial size, and the amount claimed against it is a substantial amount, it is not unreasonable to expect the defendant to respond to proceedings initiated in this Court, even though its place of incorporation or registered office or principal place of business is in another State. Where the largest group of defendants comprises corporations whose principal places of business are New South Wales, or persons resident in this State, and the other defendants are scattered throughout other States (as in proceeding No 5662 of 2001), the considerations I have mentioned may well justify granting leave notwithstanding that some of the defendants are located interstate. On the other hand, where a single proceeding is instituted against defendants mostly located in one other State, and most of the witnesses reside in that other State, questions of cost and convenience may lead to denial of the application for leave. [38] In my opinion, if a liquidator of a company wishes to bring a single proceeding to recover unfair preferences from multiple defendants, it is open to him or her to file and serve the originating process, together with an interlocutory process seeking the Court's leave under Pt8 r2, and supporting affidavit evidence. Care should be taken to ensure that there is sufficient time to initiate separate proceedings within the three year time limit set by s588FF(3) in the event that the application for leave is denied in respect of any defendant. The interlocutory process would normally be made returnable in the Corporations List. If leave is granted, the Court is likely to make directions for the filing of a statement of claim and defences, and then bring the matter back for further consideration. If it appears from the defences that insolvency has been placed in issue, the Court will endeavour to make arrangements for the determination of that question. It may do so by leaving the proceeding as a single proceeding against all defendants and making directions to bring it to hearing; or by ordering under Pt8 r6 that (having regard to such matters as the amounts of the respective claims) the claim against a particular defendant be heard before the other claims in the proceeding, causing the presumptions under s588E to arise against the other defendants; or even by making an order for the determination of matters to do with insolvency as separate questions under Pt31 (though the disadvantages which may arise from doing so must be borne in mind: see, for example, ABB Engineering Constructions Pty Ltd v Freight Rail Corporation [1999] NSWSC 1037). If the defences show that the insolvency of the company at all relevant times is conceded, but separate issues are raised by the defendants as to such matters as the running account defence or the good faith defence, the Court may make orders for separate hearings of the claims against individual defendants or groups of defendants under Pt8 r6, and/or in some cases it may transfer the proceeding to another court.
2. Since then, and certainly in more recent times, it has been the policy of the Corporations court that such proceedings should ordinarily be brought under the umbrella of a so-called "mothership" proceeding, as the single proceeding against all defendants has come to be known. Indeed, the court has recently consolidated proceedings commenced separately, including by removing separate proceedings commenced in the District Court, to achieve that result. There is inevitably a common issue of insolvency, and it is highly desirable that that question be litigated, if at all, once only, and that all parties be bound by the decision. There are considerable efficiencies, for liquidators and for courts, in conducting and managing one proceeding rather than multiple proceedings - and they are not limited to the saving of multiple filing fees. Moreover, it is historically conventional that all proceedings in a liquidation are conducted in the one file. And this approach does not prejudice the ability of the court, after the question of insolvency is resolved, to order that aspects of the proceedings which are peculiar to an individual defendant be determined separately - for example where the cases arise out of different transactions, or a good faith defence which is inherently peculiar to the individual defendant is raised. In that way, any additional cost to individual defendants of becoming entwined in the wider litigation can be minimised.
3. No reason why those considerations would not apply, or for departing from that practice, and no detriment to any defendant from adhering to it, is apparent here.

Conclusion

1. My conclusions may be summarised as follows.
2. Proceedings in which multiple defendants are joined in the originating process before the requisite leave is granted are irregular unless and until leave is granted, but not invalid. It follows that when the originating process herein was filed on 22 August 2017, claiming relief under s 588FF, within the 3-year limitation period, an application under s 588FF(1) was validly made against each of the 23 defendants. UCPR r 6.28 is not engaged by a grant of leave under rule 6.19, and the proceedings against each defendant were commenced on the date of filing of the originating process, which was within time. The general policy and practice of the court favours the bringing of a single liquidator's recovery proceeding joining all defendants in the one "mothership" proceeding, because of the commonality of the insolvency issue and the efficiencies gained; and no reason for departing from that practice, and no detriment to any defendant from adhering to it, appears here.
3. The Court orders that: 1. Pursuant to UCPR r 6.19, leave be granted to the plaintiff to join in the originating process each of the 23 defendants named in it. 2. The fourth, eleventh, twelfth, seventeenth, nineteenth and twenty-second defendants pay the plaintiff's costs of the interlocutory process filed 13 October 2017. 3. The proceedings continue on pleadings. 4. The plaintiffs file and serve a statement of claim by 24 November 2017. 5. The defendants file and serve their defences by 22 December 2017. 6. The proceedings be adjourned to 29 January 2018 in the Corporations Judge directions list for further directions. 7. The plaintiff give notice of these orders by email or in writing to those defendants not present when these orders are pronounced, within 48 hours.

Endnotes

1. Dean-Willcocks v Air Transit International Pty Ltd (2002) 55 NSWLR 64 at 69-72 [18]-[27].
2. In addition to those who appeared by counsel at the hearing, the 22nd defendant who did not appear at the hearing of the motion informed the Court that it adopted the position and submissions of the 17th defendant.
3. Grant Samuel Corporate Finance Pty Ltd v Fletcher (2015) 254 CLR 477 at 486-7 [22]; [2015] HCA 8.
4. Re Testro Bros Consolidated Ltd [1965] VR 18 at 33-4; Ceric v C E Heath Underwriting & Insurance (Australia) Pty Ltd (1994) 4 NTLR 135 at 146; BHG Nominees Pty Ltd v Ellis Young Investments Pty Ltd (1998) 16 ACLC 1539; Bell Group Ltd v Westpac Banking Corp (2000) 104 FCR 305; [2000] FCA 439; Moore v Scolaro's Concrete Constructions Pty Ltd (in liq) (2004) Aust Torts Reports 81-767; [2004] VSCA 152.
5. Re Coastal Constructions Pty Ltd (In liq) (1994) 13 ACSR 329; Sihota v Pacific Sands Motel (2003) 56 NSWLR 721; [2003] NSWSC 119 at [2].
6. (NSW) Civil Procedure Act 2005, s 63; Jones v Sun Engineering (Qld) Pty Ltd [2017] WASC 195 at [103]-[105].
7. As to which see Fernance v Nominal Defendant (1989) 17 NSWLR 710; Qantas Airways Ltd v AF Liddle Pty Ltd [1981] 2 NSWLR 34 at 45; and Australian Coastal Shipping Commission v Curtis Cruising Pty Ltd (1989) 17 NSWLR 734.
8. (1989) 17 NSWLR 710 at 714-716.
9. (2002) 55 NSWLR 64 at 74-5 [35]-[37]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 November 2017