Consideration
53 Tolcher, affirmed in Grant Samuel, established that commencement of a voidable preference action within the time stipulated in s 588FF(3) is an essential condition of the right conferred by s 588FF(1) to bring proceedings. In this case, each of the actions against the defendants were commenced within the time limit prescribed by s 588FF(3) but the amendments to the original pleadings added voidable preference claims after the expiry of the limitation period prescribed by s 588FF(3). The question for determination is whether the time limits prescribed by s 588FF(3) applied to the additional claims. For the reasons that follow, I do not accept the submission that Rodgers is no longer good law following the High Court decisions in Tolcher, Grant Samuel and Fortress Credit.
54 First, the question as to whether the Court has the power under its general rules of court to amend an existing application under s 588FF(1) after the expiry of the period prescribed in s 588FF(3) to add further "transactions" in respect of which orders are sought under s 588FF(1) was not addressed in any of those cases. Nor did any of those cases consider the correctness of the construction of s 588FF adopted by the Full Court in Rodgers.
55 Secondly, I am not persuaded by the submissions for the SA defendant that the approach of the Full Court in Rodgers is inconsistent with the later High Court cases. The inconsistency was said to relate to the premise upon which the analysis of the Full Court in Rodgers proceeded which, it was argued, is no longer good law in light of Tolcher and Grant Samuel. That premise was said to be that s 588FF(3) operated to preclude the commencement of an action for relief under s 588FF(1) if the action was not commenced within the time period prescribed by s 588FF(3) whereas, the argument went, Tolcher and Grant Samuel have since established that the commencement of an action within time is an element of the right to relief under s 588FF(1). Reference was also made to Agtrack (NT) Pty Ltd v Hatfield [2005] 223 CLR 251 ("Agtrack"). In that case an action had been brought within the limitation period pleading negligence and breach of contract in respect of an aircraft accident but did not plead a right to claim damages under the Civil Aviation (Carriers' Liability) Act 1959 (Cth) ("the Civil Aviation Act"). Section 34 of the Civil Aviation Act provided that the right of a person to damages under that Act was extinguished if an action was not brought within a prescribed time. After that time limit had expired, the plaintiff applied to amend the statement of claim to add a damages claim under the Civil Aviation Act. The High Court held that s 34 of the Civil Aviation Act imposed "a condition which is the essence of the right to damages rather than providing no more than a bar to the enforcement of an existing right". Thus, it was argued, unless the applications for relief in the present cases as originally instituted constituted applications for relief under s 588FF(1) in respect of the additional transactions sought to be impugned, the liquidators had no right of action under s 588FF(1) in respect of those additional transactions and the Court had no power or jurisdiction to grant relief in respect of those additional transactions under s 588FF(1). This argument was said not to have been addressed in Sydney Recycling. There are two responses. First, it is clear, in my view, that the Full Court in Rodgers, by its reference to what Gummow J said in David Grant & Co Pty Ltd v Westpac Banking Corporation (1985) 184 CLR 265 with regard to s 459G(2) of the Act, was cognisant that s 588FF(3) imposes a jurisdictional precondition for an action for relief under s 588FF(1). Secondly, the difficulty with the argument is that it must depend on a different construction of s 588FF(1), namely that the section requires the commencement of an application for relief under s 588FF(1) within the prescribed time limitation in respect of each transaction for which relief is sought under s 588FF(1). In Sydney Recycling the Court of Appeal rejected such a construction of s 588FF.
56 In Sydney Recycling, the appellant argued on the language of s 588FF(1) that s 588FF(1) concerned an "application" in relation to a particular "transaction" with the characteristics specified in s 588FE. At [72] Bathurst CJ and Payne JA accepted that the appellant's constructional argument was open and had "real force" but their Honours considered that the text of s 588FF(1) was also open to the construction that the section was only concerned with the time limit within which to make an "application", and that the "application" referred to in s 588FF(1) was to be understood as the application, including the application as subsequently amended. At [74]-[78], their Honours reasoned as follows:
74. The text of s 588FF(3), however, is also open to the interpretation that the section is concerned and only concerned with the time limit to make an application, the form of which application is left to the relevant law of the jurisdiction where the proceeding is commenced. Section 588FF(1) is open to the construction that the "application" referred to in sub-s (1) is to be understood as the application, including the application as subsequently amended.
75. Support for this constructional choice is provided by the fact that the Corporations Act leaves the form of the "application" required or permitted under that Act to the rules of the State or Territory where the proceeding is commenced.
76. The relevant requirements for an "application" under sub-ss 588FF(1) and 588FF(3) of the Corporations Act in the present case are those contained in an originating process under the Supreme Court (Corporations) Rules. The only requirements of an originating process under those Rules are the identification of the parties, the section of the Corporations Act relied upon, the relief sought and, at least at some level of generality, identification of the claims made by the plaintiff, which are in turn based on facts stated in a supporting affidavit "if appropriate".
77. The appellant's construction of s 588FF(1) requires an "application" under the section to contain particular content, in circumstances where an "application" is not otherwise defined in the Corporations Act and the form and content of an originating process is otherwise left to rules of court and State and Territory legislation.
78. Section 588FF(1) does not deal with the form of the application at all. This is left to the rules of court which set out the relevant requirements. These requirements, to which we have referred in [76] above, are sufficient to identify the fact that the application is one brought under s 588FF(1), the nature of the claim and the relief sought. There is nothing in s 588FF(1) or any other section of the Corporations Act which otherwise provides so as to prevent those rules being picked up by s 79 of the Judiciary Act…
57 Beazley P also rejected the appellant's construction, stating that there was nothing in the text of s 588FF that required that the "application" on which the Court's power to make orders was conditioned to relate to an individual transaction. Her Honour stated that the references in s 588FF(1)(a)-(h) to "the transaction", and to "a transaction" and "the transaction" in ss 588FA-588FDA, were directed to whether the Court is empowered to make orders in relation to that transaction, provided that all the pre-conditions to the making of an order are met. Her Honour also observed that both ss 588FH(3) and 588FI(2) employ the broader language "an application relating to the transaction", and that the s 588E definition of the term "recovery proceeding" includes "an application under section 588FF by the company's liquidator".
58 Bathurst CJ and Payne JA also rejected the appellant's argument in that case that the reasoning in Fortress Credit at [20] required that an "application" must particularise the "transaction" in respect of which it was made. The High Court in Fortress Credit had stated at [20]-[21]:
20. Section 588FF(1) empowers the court to make the orders for which it provides on the condition that:
"on the application of a company's liquidator, [the] court is satisfied that a transaction of the company is voidable because of section 588FE".
As the appellants submitted, an application under s 588FF(1) must seek orders for which that subsection provides, which concern a transaction alleged to be voidable under s 588FE between the company and one or more other parties. The transaction must be identified, in terms of conduct of the company. It must be arguably capable of inclusion in one of the designated classes of transaction mentioned in s 588FE. The specification of the time that it was done, or of an act done to give effect to it within a relevant period, would also be necessary to the contention that it was a voidable transaction. Parties to the transaction who would be affected by the orders sought would have to be identified and those parties named as respondents.
21. The time limits prescribed by s 588FF(3) apply to "[a]n application under subsection (1)". That term refers to the class of applications which can be made by liquidators under s 588FF(1) in relation to a transaction alleged to be voidable. The time limit in par (a) applies to all such applications, save for those the subject of an order under par (b). The text of par (b), read with the opening words of s 588FF(3), leaves open the construction that the "longer period" may be ordered only for a prospective application relating to a particular transaction or transactions. The text also leaves open the construction that a "longer period" may be ordered for any application under subs (1). The appellants accepted that it was a possible view of the provision that an order under s 588FF(3)(b) could extend generally the period otherwise fixed under s 588FF(3)(a). That was not, they submitted, the better view. The parties relied upon textual and contextual indicators and purposive and consequentialist arguments in support of their preferred constructions.
59 In rejecting the appellant's submission on paragraphs 20 and 21 of Fortress Credit Bathurst CJ and Payne JA stated at [85]-[86] as follows:
85. Fortress Credit at paragraph [20] addresses the proposition that "an application under s 588FF(1) must seek orders for which that subsection provides". The court then sets out the specific matters that must be addressed before a court could make an order under that section. The High Court was not addressing the point in time at which all necessary particulars needed to be provided to enliven the court's jurisdiction to make "orders for which that subsection provides", much less was it addressing whether once commenced an "application" could be amended.
86. In paragraph [21] of Fortress Credit the High Court addressed "the class of applications which can be made by liquidators under s 588FF(1) in relation to a transaction alleged to be voidable". This is a reference to an application by a company's liquidators for the kind of orders that can be made pursuant to s 588FF. It is not in our view a prescription of the matters which must be contained in an originating process.
60 Beazley P likewise rejected the appellant's submission on paragraphs 20 and 21 of Fortress Credit. At [139]-[142] the President stated:
139 I also disagree with the appellant's reading of the reasons of the High Court in Fortress Credit at [20]. That passage is set out above at [83] in the reasons of the Chief Justice and Payne JA. In the first sentence, the High Court sets out the first of the two conditions to the making of an order under s 588FF(1), viz, the relevant state of satisfaction on the application of a company's liquidator. The words "which concern a transaction alleged to be voidable" in the second sentence are clearly a reference to the kinds of orders the court is empowered to make. The remainder of the paragraph contains observations of what will generally be required in order to obtain relief under s 588FF. For example, in the second last sentence, the High Court refers to what will be "necessary" to a contention that a transaction constitutes a "voidable transaction".
140 It is also telling that the High Court in Fortress Credit at [20] referred not to an application in relation to a particular transaction, but rather to an application seeking orders for which s 588FF(1) provides. This is further emphasised in Fortress Credit where the Court stated, at [21]:
"The time limits prescribed by s 588FF(3) apply to '[a]n application under subsection (1)'. That term refers to the class of applications which can be made by liquidators under s 588FF(1) in relation to a transaction alleged to be voidable. The time limit in par (a) applies to all such applications, save for those the subject of an order under par (b)." (emphasis added)
141 This approach accords with the statement in the Explanatory Memorandum to the Corporate Law Reform Bill 1992, which indicates that s 588FF(3) was intended to operate to confine the time period in which a liquidator can seek relief from the courts under s 588FF(1), as opposed to operating in relation to each individual transaction:
"1058. Proposed subsection 588FF(3) provides that an application may only be made for an order under proposed section 588FF(1) within three years after the relation-back day or within such longer period as the Court orders providing the application for extension is made within those three years." (emphasis added)
142 Section 588FF(3) was amended by the Corporations Amendment (Insolvency) Act 2007 (Cth) to introduce the alternative time limit in s 588FF(3)(a)(ii), viz, of 12 months after the first appointment of a liquidator in relation to the winding up of the company. The Explanatory Memorandum to that amendment also described s 588FF(3) as concerned with the time period in which a liquidator must exercise their powers of challenge to alleged voidable transactions:
"[7.204] A liquidator's power to challenge voidable transactions must be exercised within three years after the relation-back day, or such further time as the court permits (subsection 588FF(3) of the Corporations Act)."
(emphasis in original)
61 I respectfully agree with their Honours' conclusion and reasons for affirming the Rodgers construction of s 588FF and their rejection of the argument that the reasoning in Fortress Credit at [20] required that an "application" must particularise the "transaction" in respect of which relief is sought. Accordingly, I consider that there is nothing in the subsequent High Court cases that compels the conclusion that Rodgers is no longer good law. On the Rodgers construction, it is the commencement of the action for relief under s 588FF(1) that is the relevant jurisdictional precondition prescribed by s 588FF(3) and the amendment power under the Federal Court Rules in that circumstance would therefore not impermissibly operate to vary the time dictated by s 588FF(3). As the jurisdictional precondition is met by an action for relief under s 588FF(1) commenced within time, the Federal Court Rules are not being used to vary the time stipulated by s 588FF(3) within which a proceeding must be commenced. It follows that Rodgers is not inconsistent with the principles settled by Agtrack, Tolcher, Grant Samuel or Fortress Credit. In view of this conclusion, the further arguments advanced for the SA defendant based the nature of the Court's rule making power in s 59(2B) of the Federal Court of Australia Act accordingly do not arise for consideration because no inconsistency with s 588FF(3) arises on the Rodgers construction of s 588FF(1): cf Grant Samuel at [23].
62 The SA defendant put the additional argument that Rodgers was wrongly decided because the term "application" as used in s 588FF(1) includes an application to amend to add transactions. It was submitted that this point of law was not raised in Rodgers nor considered in Sydney Recycling. The submission that the word "application" in s 588FF(1) should be construed to include an application to amend to raise additional transactions that are sought to be impugned was put in two ways.
63 First, it was argued that the statutory policy of s 588FF(3) that was recognised in Tolcher and Grant Samuel informs the meaning of "application". In Grant Samuel at [21] the High Court explained that the statutory policy favours certainty for creditors as to whether they remain at risk of voidable preference proceedings being brought against them by imposing a time limit within which such proceedings may be brought. See also Tolcher at [37]-[39] and Fortress Credit at [24]. I am not persuaded that regard to the statutory policy does inform the meaning of "application". In Fortress Credit the High Court rejected an argument that the statutory policy militated against a construction of s 588FF(3)(b) enabling shelf orders to be made. The Court reasoned at [24]:
There is, however, no independent basis for the assertion that any extension of time which does not identify a particular transaction or transactions must be an unreasonable prolongation of uncertainty militating against a construction which would allow such an order to be made. The section provides for the exercise of discretion by the court. Questions of what is a reasonable or an unreasonable prolongation of uncertainty and the scope of such uncertainty are more appropriately considered case-by-case in the exercise of judicial discretion than globally in judicial interpretation of the provision.
So too, the statutory policy would not dictate a construction of the term "application" to include an application to amend to raise additional transactions. That does not gainsay the relevance of the statutory policy in the exercise of the discretion under r 8.21 as a matter bearing upon whether to allow an amendment.
64 Secondly, reliance was placed on Finkelstein J's comments in Quick v Stoland (1998) 87 FCR 371 in what was said to be an analogous context. In that case, the Full Federal Court considered whether the amendment of an existing claim to add a new cause of action supporting the claimed relief was incompetent. The appellant was a director of a company that incurred debts to the respondent and a proceeding was issued by the respondent against the appellant under s 592 of the Corporations Act 1989 (Cth) ("the Corporations Law") to recover the debt. The statement of claim was subsequently amended to include a claim under s 558M of the Corporations Law. The appellant contended that the respondent was not entitled to bring a claim against him under s 588M by reason of s 588R which provided that:
A creditor of a company that is being wound up may, with the written consent of the company's liquidator, begin proceedings under s 588M in relation to the incurring by the company of a debt that is owed to the creditor.
The appellant argued that the company's liquidator had not given his consent to the commencement of "proceedings" against him and thus the claim was not maintainable. In issue was whether the amendment to add a claim under s 588M could be characterised as the commencement of a proceeding. It was held that the proceeding under s 588M was incompetent because the liquidator had not given his consent to its institution. In a passage relied on by the SA defendant, Finkelstein J stated at p 388:
… it is not necessary to reach any concluded view on the precise meaning of "proceedings" in s 588R(1). It is sufficient to hold that the word should be taken to mean, at the very least, any process by which a claim under s 588M is made in a court of competent jurisdiction. Such a claim may be made in an originating process. If it is, that process could only be commenced with the consent of the liquidator. It would also include a claim made by way of amendment to an existing proceeding. It is the claim made by the amendment which is the means by which the creditor seeks to "recover from the director, as a debt due to the creditor, an amount equal to the amount of the loss or damage" suffered by the creditor. It conforms with the object of s 588R(1) if "proceedings" are taken to include both the commencement of an action at law and any step in that action: compare Eddy v Stewart [1932] 3 WWR 71 at 74; Re Carrick Estates Ltd (1987) 43 DLR (4th) 161.
By parity of reasoning it was argued in the present case that an "application" under s 588FF should be taken to include a claim in the proceedings made by way of amendment to an existing application. The issue in Quick v Stoland, however, concerned the right to amend the statement of claim to add a new and different cause of action to support the claimed relief in the circumstance where the condition for relying on that new cause of action had not been met, whereas in the present matters the amendments concern the addition of further claims under s 588FF in the circumstance of the time requirement under s 588FF having been met by the institution of the proceedings under s 588FF within time.
65 Quick v Stoland was referred to in Rodgers. In Rodgers the Full Court held that s 588FF(3) was not directed to an amendment of an existing claim "at least if that amendment does not involve a new cause of action" citing Quick v Stoland. In Sydney Recycling Bathurst CJ and Payne JA at [114]-[115] affirmed this distinction in the context of s 588FF, stating at [114]-[115]:
114. The reservation by the Full Court concerning cases where "that amendment does not involve a new cause of action" can be put to one side here. The reference to Quick v Stoland makes it clear that what the Full Court was concerned with was carving out cases where the then Corporations Law provided a specific mechanism which needed to be complied with before any proceedings could be commenced. Quick v Stoland was a case involving the meaning of the word "proceedings" in the former s 588R(1) of the Corporations Law. In that case, the Full Court of the Federal Court dealt with the question of whether an amendment of a claim to add a cause of action under s 588M of the former Corporations Law to an existing claim under s 592 of the Law constituted "proceedings" for the purposes of s 588R(1). It was held that "proceedings" are taken to include both the commencement of an action at law and any step in that action (at 388). That conclusion was reached in that case, as Finkelstein J explained, on the basis that under s 588R(1) it was a requirement that the liquidator of the company concerned consent to the commencement of proceedings. In Quick v Stoland, proceedings under s 592 were commenced in 1992. Almost five years later, in 1997, the liquidator's consent was obtained to commence proceedings under s 588R(1). The original (s 592) proceedings were amended to add the s 588R(1) claims. That was held to be impermissible. It is in that sense that the Full Court is to be understood as carving out an amendment which "does not involve a new cause of action".
115. The reservation concerning Quick v Stoland does not apply to the present case which is relevantly identical to the amendment allowed in Rodgers, being two further payments, one being another group tax payment and the other being a group tax penalty payment made by the company, added by amendment after the expiry of the period fixed by s 588FF(3).
I respectfully agree.
66 I have concluded that Rodgers remains good law and accordingly I am bound to follow and apply that decision. For the sake of completeness, I note and also reject the submission that the decision in Rodgers rested upon two "flawed" premises, namely that: (1) the time provision in s 588FF(3) was procedural rather than substantive in nature; and (2) the intention of the drafters of O 13 r 2, which, it argued, was an irrelevant inquiry and an illegitimate approach in resolving the construction question. To the contrary of those submissions, the reasoning in Rodgers was not predicated on either asserted "flawed premises" but rather on the basis of the analysis that once the jurisdictional requirements for the making of the application are met, the conduct of the litigation, including the amendment power, is regulated by the Federal Court Rules. In this regard, the decision is on all fours with Tolcher at [40].