20 From the perspective of the s.588FF(1) proceedings in which the liquidator claims against the Commissioner as defendant, an order in favour of the Commissioner under s.588FGA(4) is not "such relief against any person [being the relevant director] as the Court might grant against that person [the director] if the person [director] were a defendant in separate proceedings commenced by the defendant [that is, the Commissioner] for that purpose". It is relief that, because of the way in which s.588FGA(4) requires it to be sought, may only be granted in the s.588FF(1) proceedings themselves, that is, what s.78 calls "the first proceedings". A claim squarely based on s.588FGA(4) itself is therefore beyond the scope of s.78 of the Supreme Court Act and is, for that reason, not within the definition of "cross-claim" in Part 1 rule 8, with the result that Part 6 rule 1 does not cause Part 6 to apply to it.
21 This analysis is sufficient to dispose of the contention that, as a matter of the construction of the rules of court, the Commissioner requires leave in order to be able to pursue the claim for an order under s.588FF(4) against the two directors of the relevant company in this case. Because rule 2.2(1)(b) of the Supreme Court (Corporations) Rules makes an interlocutory process in the s.588FF(1) proceedings the means of initiating the Commissioner's claim under s.588FGA(4) and that claim is not a "cross-claim" as defined by the Supreme Court Rules, no requirement for leave arises. It remains to consider whether the court should nevertheless - and as a matter of discretion - proceed on the footing that some screening should be undertaken as if leave were required. In that connection, Mr Carr of counsel, who appeared for the first respondent (director), pointed to what might be termed a supervisory procedural jurisdiction in Corporations Act matters created by rule 1.8 of the Supreme Court (Corporations) Rules:
" 1.8 Court's power to give directions
The Court may give directions in relation to the practice and procedure to be followed in a proceeding if it is satisfied, in the circumstances of the proceeding, that:
(a) the provisions of the Corporations Act, the ASIC Act, or the rules of this Court do not adequately provide for the practice and procedure to be followed in the proceeding, or
(b) a difficulty arises, or doubt exists, in relation to the practice and procedure to be followed in the proceeding."
22 In approaching this aspect of the matter, it is useful to look at some decided cases. It may be said at once, however, that they provide little guidance. It appears that, even within New South Wales and leaving to one side procedural differences that may arise in other jurisdictions, there is not necessarily any settled practice. In Vouris (as liquidator of Cadima Express Pty Ltd) v Deputy Commissioner of Taxation (1999) 33 ACSR 527, the liquidator's application under s.588FF(1) was by statement of claim and the Commissioner's application for an order against the director under s.588FGA(4) was by cross-claim (being, even if, despite s.78, Part 6 applied, a cross-claim of the kind dealt with in Part 6 rule 10 and therefore not attracting any requirement for leave). It is to be noted, however, that this case pre-dated the commencement of the Supreme Court (Corporations) Rules 1999 (originally the Corporations Law Rules) on 1 March 2000. It should therefore not be taken as indicative of the practice to be adopted in the light of those rules.
23 The judgment in Silvia (as liquidator of UFI Pools & Spas (Mfg) Pty Ltd) v Commissioner of Taxation [2001] NSWSC 562, which concerned certain matters of evidence, does not show in clear terms how the Commissioner's claim against the directors was constituted, although several references to "the cross claim" and "the cross defendants" suggest that a cross-claim was filed. Whether the proceeding itself was commenced by summons, statement of claim or originating process does not appear.
24 In Wily (as liquidators of Boutique Resorts Management Pty Ltd) v Commissioner of Taxation [2002] NSWSC 909, by contrast, the Commissioner's s.588FGA claim was described as "a claim made by the Commissioner of Taxation as defendant by amended interlocutory process filed on 9 July 2001". Curiously, the liquidator's s.588FF(1) claim was described as a claim by further amended statement of claim, although again it might be that the statement of claim procedure had been adopted before the present rules came into force on 1 March 2000.
25 The recent judgment of Austin J in Dean-Willcocks (as liquidator of SJP Formwork (NSW) Pty Ltd) v Commissioner of Taxation (No 2) [2004] NSWSC 286 does not address the present question directly but reflects an assumption (arising, it seems, from submissions of counsel) that cross-claims governed by Part 6 of the Supreme Court Rules may be an appropriate vehicle for the pursuit of a claim by the Commissioner under s.588FGA(4). His Honour said at paragraph 39:
"In the present case the directors have available various procedural steps for being heard before s 588FF orders are made. For example, as senior counsel for the Commissioner pointed out, if the Commissioner makes a cross-claim against them under s 588FGA and they disagree with the Commissioner's admission, they can put the fact of insolvency in issue under Part 6 rule 4(c) of the Supreme Court Rules, or seek an order that they are not bound by a finding of insolvency made pursuant to the admission of the Commissioner, under Part 6 rule 4(d). The more difficult question is whether they are entitled to receive notification of the Commissioner's admission or the proposal to make orders, if they are not cross-defendants and have taken no such steps to protect their position."
26 A case providing further guidance is Lord v Commissioner of Taxation [2001] NSWSC 759, a decision of Acting Master Berecry. The Commissioner's claim for an order under s.588FGA(4) was made by interlocutory process. One of the directors against whom that order was sought contended that the claim was premature. He therefore applied for an order setting aside the Commissioner's interlocutory process or, in the alternative, an order that the proceedings as between the Commissioner and that director be stayed. The Acting Master made the following observations about the procedural rules to be applied:
"These proceedings are proceedings based on rights and liabilities under the Corporations Law and they are commenced under the provisions of the Corporations Law Rules . However, where those Rules are silent, the Supreme Court Rules apply and, therefore, parties have the protection of the Supreme Court Rules if there are matters of concern which require the Court to make determinations for the proper and fair prosecution or defence of proceedings. In my view, therefore, as a general proposition, the defendant is entitled to bring the application, by way of interlocutory process, at a time and in the manner that he has done so."
27 In the present case, the Commissioner has filed an interlocutory process and supporting affidavit seeking an order against the two respondents under s.588FGA(4). For reasons I have stated, I consider that procedure to be the correct one. It also accords with the procedure referred to by Acting Master Berecry. The Commissioner has also filed points of claim in response to an indication by the Registrar at a directions hearing that the claim should be fully pleaded. I am satisfied that all these steps are unobjectionable and do not warrant intervention on procedural grounds. (In saying that, I do not mean to imply that I have turned my mind to the sufficiency or otherwise of the points of claim that have been produced).
28 I am also satisfied that no requirement for the grant of leave applied in relation to the interlocutory process filed by the Commissioner. No such requirement is imposed by either the Corporations Act or the rules of court. Indeed, s.588FGA(4) should, as I see it, be regarded as making available to the Commissioner, as a matter of ststutory right, a particular form of procedure the incidents of which come from that provision alone. Nor have I been taken to any decided case in which any requirement for leave has been recognised. In addition, no compelling reason has been advanced for the court's seeking to impose any such requirement through rule 1.8 of the Supreme Court (Corporations) Rules, even assuming that provision to be capable of supporting the imposition of such a requirement.
29 I should perhaps interpolate here the comment that rule 1.8 (or the rules more widely) might, in some cases, become the source of procedural directions in cases of the present kind. If the Commissioner proceeds by way of interlocutory process to seek a s.588FGA(4) order and it appears that that claim is of a kind that would best be fully pleaded, the court might order the filing of points of claim or some other document pleading the claim in full. The fact that an application is initiated by originating process or interlocutory process under the Supreme Court (Corporations) Rules does not mean that it must forever remain within those confines if the court considers that orderly progress of the litigation will be enhanced by some form of pleaded expansion, including one in verified form. But there is no basis on which the court could introduce any screening process, based on a leave requirement, in relation to claims which s.588FGA(4) allowed to be brought as what I have described as a matter of statutory right on the part of the Commissioner.
30 The first respondent has nevertheless advanced several reasons why the Commissioner should not be allowed to proceed with the interlocutory process. They are framed as reasons why leave to file should be refused but since, on my findings, there is no need for such leave, I am content to treat them as reasons in support of the proposition that the Commissioner's interlocutory process should be struck out or stayed.
31 The first submission is that the s.588FF(1) proceedings are significantly advanced and that the Commissioner has been guilty of delay in initiating the s.588FGA(4) claim. The proceedings against the Commissioner were commenced in July 2003. Having regard to s.588FGA as a whole, the Commissioner is not constrained to act at any particular time. The Commissioner may await the outcome of the s.588FF(1) claim and if it is, from the Commissioner's viewpoint, adverse, initiate a new proceeding under s.588FGA(3) or an application under s.588FGA(4) in the original proceeding. There can therefore be no expectation that the Commissioner should act at any particular time if, as here, he chooses to proceed under s.588FGA(4) in the s.588FF(1) proceeding before it has been determined as between the liquidator and the Commissioner. On this, I agree with what was said by Acting Master Berecry in Lord v Commissioner of Taxation (above). There is no substance in the first ground.
32 The first respondent next says that the s.588FGA(4) application is premature because the Commissioner may be successful in defending the s.588FF(1) claim. That submission cannot be accepted. The procedure under which the Commissioner proceeds under s.588FGA(4) while the s.588FF(1) proceedings themselves are unresolved is well-established: see, for example, Vouris (as liquidator of Cadima Express Pty Ltd) v Deputy Commissioner of Taxation (above), Hillig (as liquidator of ACN 060 329 482 Pty Ltd) v Commissioner of Taxation [2001] 2 QdR 147, Lofthouse (as liquidator of Main Jenkins Pty Ltd) v Commissioner of Taxation (2001) 164 FLR 106, Silvia (as liquidator of UFI Pools & Spas (Mfg) Pty Ltd) v Commissioner of Taxation (above), Lord v Commissioner of Taxation (above), Wily (as liquidator of Boutique Resorts Management Pty Ltd) v Commissioner of Taxation (above), Scott (as liquidator of Birch Grange Pty Ltd) v Commissioner of Taxation (2003) 53 ATR 652, Gibbons (as liquidator of Deemah Marble & Granite Pty Ltd) v Deputy Commissioner of Taxation [2003] NSWSC 936, Crosbie (as liquidator of Trollope Silverwood & Beck Pty Ltd) v Commissioner of Taxation (2003) 21 ACLC 1659 and McVeigh (as liquidator of JAG Plastering & Carpentry Pty Ltd) v Commissioner of Taxation [2004] FCA 653. In Browne v Deputy Commissioner of Taxation (1998) 26 ACSR 750, the Full Federal Court referred without adverse comment to the way in which the proceedings were constituted:
"As mentioned previously, the deputy commissioner had cross-claimed against the four directors pursuant to s 588FGA of the Corporations Law to indemnify the deputy commissioner in respect of the loss or damage he might sustain resulting from any order made under s 588FF of the Corporations Law ."
33 The weight of precedent sanctions the approach under which a s.588FGA(4) claim is initiated and prosecuted in the principal proceedings before there has been any determination in those proceedings of the question of primary liability as between the liquidator and the Commissioner. There is no reason of principle why the established procedure should be considered inappropriate. As was emphasised by Finkelstein J in Crosbie (as liquidator of Trollope Silverwood & Beck Pty Ltd) v Commissioner of Taxation (above) and by Austin J in Dean-Willcocks (as liquidator SJP Formwork (NSW) Pty Ltd) v Commissioner of Taxation (above), it may well be in the interests of the directors of the company that they have an opportunity at an early stage to play an active part in the proceedings. The Commissioner, aware of the avenue of recourse under s.588FGA, may in some cases think it unnecessary to be vigorous in defending the s.588FF(1) claim. Directors may see it as being to their advantage that they be in a position to place before the court evidence and submissions in opposition to the liquidator's claim.
34 The third basis on which the first respondent says that the Commissioner should not be allowed to prosecute the s.588FGA(4) claim is based on the proposition that that claim is, in the words of Barwick CJ in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, "so clearly untenable that it cannot possibly succeed".
35 The alleged preferential payments that the liquidator seeks to recover from the Commissioner were made between 17 December 2001 and 14 May 2002. Under s.588FGA(1), liability to indemnify is visited upon each person who was a director when the preferential payment was made. The first respondent points to an ASIC search that has been put into evidence in which the first respondent is shown as having been a director of the relevant company from 15 May 2001 to 29 August 2001. The contention of the first respondent is that he was not a director between 17 December 2001 and 14 May 2002 when the relevant payments were made, with the result that the case against him under s.588FGA is so devoid of merit that it cannot be allowed to proceed.
36 The Commissioner's response is that s.588FGA pays attention to the definition of "director" in s.9 and therefore extends to the species of de facto director referred to in paragraph (b) of that definition. The Commissioner will attempt to prove that the first respondent is such a de facto director, relying, in part, on matters that emerged at a s.596A examination. To that one would add the observation that the ASIC search is reflective of no more than the information filed with ASIC and cannot be taken to be determinative of anything. A certificate of ASIC under s.1274C, if issued, would be proof that a person was a director at a time stated in the certificate unless and until evidence to the contrary was adduced. It would not preclude the de facto director case that the Commissioner intends to run. Mr Rodionoff, who appeared for the Commissioner, made the additional point that if the Commissioner fails to make good the allegation that the respondents were directors at the times payments were made, the Commissioner may expect to suffer the normal costs consequences.
37 It is not possible to conclude that the Commissioner's claim based on the proposition that the first respondent was a director in the period 17 December 2001 to 14 May 2002 is "so clearly untenable that it cannot possibly succeed". The Commissioner will therefore not be denied the opportunity to pursue the s.588FGA(4) claim on that ground.
38 The first respondent's application was before me on 24 and 31 May 2004 and was the subject of written submissions dated 25 and 28 May 2004. Treating it, as I do, as an application for an order that the Commissioner's interlocutory process filed on 10 May 2004 be struck out or stayed, I order that the application be dismissed with costs.