Mass (Australia) Pty Limited v R & B Crane & Rigging Pty Ltd [2008] ACTSC 23

2. The history of the matter has been characterised by a series of mistakes on both sides. Some of these mistakes can be explained by the fact that the solicitor for the plaintiff received instructions in the matter on Thursday 20 December 2007, one working day before his office closed for two weeks over the Christmas-New Year period.

3. The defendant's solicitors received instructions late last year to recover a debt of some $67,000.00 from Mass (Australia) Pty Limited as the proprietor of the business name Mass Steel. The solicitors wrote a letter of demand to Mass (Australia) Pty Limited on 22 November 2007, threatening recovery proceedings if the amount claimed was not paid within fourteen days. The plaintiff company ignored the letter of demand. On 10 December 2007 a director of the defendant company signed two statutory demands, one addressed to Mass (Australia) Pty Limited demanding $56,286.65, and the other addressed to Mass Precast Pty Ltd demanding $10,538.00. The solicitor for the defendant served the notices on 11 December by letter addressed to each of the companies at its registered office. One was a Deakin address, apparently the office of a firm of accountants, and the other was a Mitchell address, apparently the principal place of business. One of the notices was received on 12 December and the other on 13 December.

4. Rule 2.4A of the Corporations Rules, contained in schedule 6 to the Court Procedures Rules, provides that a plaintiff in an application for an order setting aside a statutory demand must carry out a company search of the plaintiff company, which may be annexed to the affidavit supporting the application, but need not be filed or tendered until the hearing of the substantive application. As yet the plaintiff has not filed an affidavit annexing a company search in the present action. The solicitors for the defendant conducted a search on 1 February 2008 of Mass Precast Pty Ltd (ACN 123 838 504), which establishes its correct name. The name is different to the name in the application before me.

5. On 21 December 2007, the solicitor for the plaintiff prepared and filed two originating processes, the one which commenced the present action, and another in proceedings number 912 of 2007. The documents were identical, including as to parties. Mass (Australia) Pty Limited (ACN 108 657 012) was named as plaintiff in both actions.

6. On the same date Mr Rohan Arnold swore an affidavit supporting the application in the present action. He identified himself as a director of Mass (Australia) Pty Limited having authority to make the affidavit. He made a number of factual assertions, in which he referred to Mass Precast five times, Mass Group once, and Mass once. He made no other reference to Mass (Australia) Pty Limited. A reader of the affidavit with no background knowledge would find it confusing and difficult to understand but would not assume, or realise, that more than one Mass legal entity was involved.

7. In action number SC 912 of 2007, Mr Arnold on the same date swore a longer affidavit, again identifying himself as a director of Mass (Australia) Pty Limited with authority to make the affidavit, and again making a number of assertions of fact. Throughout the balance of the affidavit, Mr Arnold referred to Mass Steel on numerous occasions and to Mass on about half a dozen occasions without explaining how these related to the plaintiff company. Again, the affidavit would leave an uninformed reader in a state of confusion.

8. Rule 2.4A of the Corporations Rules provides that a plaintiff may file with the originating process a copy of the statutory demand and of any affidavit which accompanied it. This was not done: if it had been, it seems to me likely that the error making this application necessary would have been detected much earlier. Perhaps the rule should be amended so as to require, rather than merely permit, the filing of a copy of the statutory demand and supporting affidavit: it is after all the very document which the plaintiff is asking the Court to set aside.

9. When one realises that Mr Arnold's affidavits were attempting to respond to two separate notices of demand, they become more intelligible. The defendant and its solicitors had prepared and served both notices of demand, and must have realised immediately on perusing the applications that a mistake had been made, and what the plaintiffs and their solicitors intended. Somewhat extraordinarily and without explanation, the solicitors for the defendant filed a notice of intention to respond in each action in which, without seeking leave to do so, they amended the name of the plaintiff in the present action to Mass Pre Cast Pty Limited (ACN 123 838 504) (sic). Even more extraordinarily, the notices of intention to respond were identical, so that whilst both actions had been commenced in the name of Mass (Australia) Pty Limited as plaintiff, both notices of intention to respond altered the plaintiff's name to Mass Precast Pty Ltd, although misspelled as indicated.

10. The solicitors for the defendant filed affidavits of service of the notices of demand. The affidavits were each headed in both matters (number SC 911 and SC 912 of 2007) but one named the plaintiff as Mass (Australia) Pty Limited and the other as Mass Pre Cast Pty Ltd (sic). Perhaps not surprisingly, registry staff placed the affidavits of service on the wrong files, adding to the confusion.

11. On 5 February 2008 the solicitors for the plaintiff in the present action, as I mentioned earlier, filed and served an application seeking substitution of one plaintiff for the other. They made the application pursuant to r 231 of the Court Procedures Rules but this was yet another typographical error, the rule they were intending to call in aid being r 221.

12. The application was supported by an affidavit by the plaintiff's solicitor, Mr Gavagna. He explained that on 20 December 2007, the Thursday before Christmas, he had received an email from a Mr Campbell, financial controller of the Mass group, attaching copies of the letter of demand of 22 November 2007 and the letters of 11 December 2007 enclosing the two statutory demands. On the same afternoon, he received instructions from Mr Arnold to make immediate application to the Court to set the demands aside on the basis that the debts claimed were disputed. Mr Gavagna says that the mistake in naming the same company as plaintiff in both actions occurred by reason of the urgency of the matter, and I accept this: the originating processes and supporting affidavits had to be drawn, settled, engrossed, the affidavits sworn, and the documents filed and served before the close of business on Friday, 21 December. The Registry was open on Christmas Eve, Monday 24 December, but I accept that many if not most solicitors' offices were closed by that date and I would not criticise Mr Gavagna on that account.

13. Also on 5 February, the solicitors for the defendant sent a letter to the solicitors for the plaintiff by email, enclosing a copy of an unsealed originating process instituting winding-up proceedings against Mass Pre Cast Pty Ltd (sic), requiring Mr Arnold's attendance for cross-examination at the hearing on 8 February and informing them that Mr Hausfeld of counsel would be appearing in the matter.

14. On 6 February the solicitors for the defendant put on further affidavits going to the substantive issue of whether or not the debts were genuinely disputed. These have not yet been the subject of consideration by the Court, the substantive application having been deferred until the present interlocutory application is concluded.

15. Rule 221, the rule on which the plaintiff initially intended to rely, is as follows:

221 Plaintiffs may be included or substituted

(1) This rule applies if the proceeding has been started in the name of the wrong person as plaintiff or there is doubt whether the proceeding has been started in the name of the right person as plaintiff.

(2) The court may order that someone else, or other people, be included or substituted as plaintiff if satisfied -

a) that starting the proceeding in the wrong name was a genuine mistake; and

b) that it is necessary to enable the court to adjudicate effectively and completely on all issues in dispute in the proceeding.

16. I should set out two other rules which would be applicable to a substitution order under rule 221:

This division applies if the court makes an order under division 2.4.2 (Including and substituting parties) or division 2.4.3 (Changing parties) in a proceeding.

242 Included or substituted parties - date proceeding taken to start

(1) This rule applies if the court orders that a person be included or substituted as a party in the proceeding.

(2) The date the proceeding starts in relation to the person is taken to be -

b) if another date is stated in the order - that date.

(3) However, an earlier date must not be stated in the order if the inclusion or substitution of the person on that date would be outside a limitation period applying to that person.

17. Rule 221 is contained in division 2.4.2, and r 242 is contained in division 2.4.4. Hence r 242 applies to a substitution order under r 221.

18. It is common ground between the parties that the time limited by s 459G of the Corporations Act for a company served with a statutory demand to make an application to set the demand aside is a limitation period for the purposes of subrule 242(3). The applicable period is 21 days from the date of service of the notice of demand.

19. The rule the plaintiff now seeks to rely upon is r 502, which is in the following terms:

(1) At any stage of a proceeding, the court may give leave for a party to amend, or direct a party to amend, an originating process, anything written on an originating process, a pleading, an application or any other document filed in the court in a proceeding in the way it considers appropriate.

(2) The court may give leave, or give a direction, on application by the party or on its own initiative.

(3) The court may give leave to make an amendment even if the effect of the amendment would be to include a cause of action arising after the proceeding was started.

(4) If there is a mistake in the name or identity of a party, the court must give leave for, or direct the making of, amendments necessary to correct the mistake, even if the effect of the amendments is to substitute another person as a party.

(5) This rule does not apply in relation to an amendment of an order.

(6) This rule is subject to rule 503 (Amendment - after limitation period).

20. Rule 503 may also be relevant. It reads:

(1) This rule applies in relation to an application for leave in a proceeding to make an amendment mentioned in this rule if a relevant period of limitation, current at the date the proceeding was started, has ended.

(2) The court may give leave to make an amendment correcting a mistake in the name or identity of a party, even if the effect of the amendment is to substitute a new party, only if -

b) the court is satisfied that the mistake sought to be corrected -

(ii) was not misleading or likely to cause any reasonable doubt about the identity of the person intending to sue or intended to be sued.

21. Counsel for the defendant submitted that there was an inconsistency between r 221 and r 502. I am not sure that this is correct. Both rules have antecedents of honourable ancestry. Dawson J in Bridge Shipping Pty Ltd v Grand Shipping (SA) [1991] HCA 45; (1991) 173 CLR 231 at 237 said that the seeming overlap between the rules was somewhat confusing, but that the answer lay to a considerable extent in history. His Honour traced the rules back to the 1883 rules of the Supreme Court of Judicature in the United Kingdom. His Honour explained at 238 that one rule dealt with the jurisdiction of the Court to permit amendment to cure misnomer or misdescription of a party, while the other dealt with the addition or substitution of parties for parties already joined. As his Honour said at 238, 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.

22. His Honour referred to two earlier decisions of Walsh J, Rainbow Spray Irrigation Pty Ltd v Hoette [1963] NSWR 1440, at a time when his Honour was a judge of the Supreme Court of New South Wales; and J Robertson & Co Ltd v Ferguson Transformers Pty Ltd (1970) 44 ALJR 441, by which time his Honour was a Justice of the High Court of Australia. In each case Walsh J permitted amendment under the equivalent of r 502, deciding that each was a case of an error in naming the correct plaintiff rather than an attempt to substitute one party for a different party. Where the original wording used to describe a party could be seen as a mere misnomer, the expiry of a limitation period did not stand in the way of an amendment to correct it.

1. As Dawson J said in Bridge Shipping, the line between the correction of a misnomer or misdescription and the substitution of a different party is not always easy to draw. His Honour cited with approval a passage from the judgment of Donaldson LJ in Evans Construction Co Ltd v Charrington & Co Ltd [1983] QB 810 at 821:

. . . 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.

I should add that his Honour was referring to the then O 20 r 5(3) of the English rules, which is the equivalent of r 503 of the Court Procedures Rules.

Rule 36.01(4) [the equivalent to our r 503] is a remedial rule and should be given a beneficial interpretation. It is proper to give it the widest interpretation which its language will permit. It should be interpreted to cover not only cases of misnomer, clerical error and misdescription. . . The rule imposes three limitations on a person's right to amend. First, there must be a mistake. Secondly, the mistake must be "in the name of a party". Thirdly, the Court may only make the order where it is satisfied that any other party to the proceeding would not by reason of the order be prejudiced in the conduct of his or her claim or defence in a way that could not be fairly met by an adjournment, an award of costs or otherwise.

3. At 254 McHugh J cited a passage from the judgment of Devlin LJ in Davies v Elsby Brothers Ltd [1961] 1 WLR 170 at 176:

I think that 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.

4. These principles were applied by Young CJ in Eq in A & M Short Pty Ltd v Prestige Residential Marketing Pty Ltd [2005] NSWSC 872, reported in [2005] NSWSC 872; 194 FLR 32. In that case, the plaintiff's solicitors made a mistake as to the name of their client company and its Australian company number. His Honour held that the mistake was a mere misnomer and did not involve the substitution of a new party. The application did not run foul of s 459G(2) of the Corporations Act as to the 21-day limitation period. Where there had been a misnomer, the action was treated as if it originally named the substituted person and there was a mere correction of a bad typographical error (at para 35).

5. In the present case, the defendant company and its solicitors were well aware of the background to the matter. They had been responsible for the preparation and service of the notices of demand addressed to the two Mass companies. It must have been immediately obvious to them that a mistake had been made, and indeed the nature of the mistake. They must also have been aware that the documents had been prepared as a matter of considerable urgency, having been filed and served on what was effectively the last working day before Christmas 2007.

6. For the purposes of r 503, I am satisfied that the solicitors for the plaintiff made a genuine mistake. I am also satisfied that in all of the circumstances the mistake did not mislead the defendant, nor was it likely to cause any reasonable doubt about the identity of the person intending to sue.

7. Even where those conditions are satisfied, the Court retains a discretion under r 503(2). The Court must consider it appropriate to grant leave to make the amendment. It will be a relatively rare case where a plaintiff's solicitors make a mistake as to the name of their own client in an originating process such that it will be appropriate for the plaintiff to be granted leave to correct the mistake. In this case the mistake would probably not have been made if Mr Arnold, the director of the plaintiff company, had instructed solicitors immediately following service of the notices of demand. I am not sure how the Court can communicate to the directors of small-to-medium trading companies the draconian consequences of failing to respond urgently to a statutory demand: perhaps this is a lesson which many will learn only from bitter experience.

8. In all the circumstances I am satisfied that on this occasion the discretion should be exercised in the plaintiff's favour. I mention again in passing the fact that in the interlocutory process of 5 February 2008, and also in the amended interlocutory process dated 8 February 2008, errors were made notwithstanding the fact that the entire application had been made necessary only by earlier careless errors, if understandable ones having regard to the urgency of instituting the present proceedings before Christmas. Errors were made in the name of the proposed plaintiff in both documents; and the title in both documents were amended without any leave having been granted to do so, to show the applicant's name as the name of the company sought to be substituted as plaintiff. I granted leave to file the amended interlocutory process in Court: the interlocutory process of 5 February should have been rejected in the Registry.

9. I cannot impress too strongly upon parties to litigation in the Court the importance of checking matters of detail in documents before they are filed. This is one of the reasons the Court requires the signature of a solicitor on the document. The checking should extend to the matter number, the name of the matter, Australian company numbers and numbers of rules and sections of legislation. Solicitors who do not take adequate care about these matters expose themselves to a liability for costs and to the rejection of documents lodged for filing, carrying a risk of falling foul of a limitation period.

10. As to costs, I note that in A & M Short Pty Ltd Young CJ in Eq took the view that whilst the plaintiff had sought an indulgence, the defendant had resisted it far too strongly. His Honour ordered that the plaintiff pay 20% of the defendant's costs. His Honour appears to have been influenced by the fact that there was a relatively small sum in dispute between the parties.

11. In the present case, whilst the defendant strongly opposed the application, it could not be said that it was resisted too strongly. It seems to me that the normal approach should be taken: the plaintiff has come to the Court asking for an indulgence arising from delay on the part of its directors and mistakes made by its solicitors. The indulgence has been granted, but the defendant should have its costs of the application for amendment.

I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Master Harper.