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[2005] VSC 463
defendant. The interlocutory process seeking to vary the time-extension order was dismissed, and the plaintiff was ordered to pay the defendants’ costs, including reserved costs.
The liquidator was allowed to ask the Court to change the earlier extension order, even though he had obtained that order himself. The order was not a judgment, so rule 46.08 applied. But being able to apply did not mean that the order would be changed. The Court found that the liquidator had enough time to start the relevant proceeding under the original extension and that his reasons for not doing so were inadequate. The defendants' interest in a clear, determinate time limit also weighed against another extension. The application was dismissed with costs.
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In Scott v Casualife Furniture International Ltd [2005] VSC 463, Mandie J considered whether a liquidator could use rule 46.08 of the Rules of the Supreme Court (Chapter 1) to vary an order that had extended time for applications under s.588FF(1) of the (Cth). The liquidator was David Henry Scott, acting for Casualife Furniture International Pty Ltd and Kencord Manufacturing Pty Ltd, both in liquidation ([1]).
8 cited instruments linked from this judgment.
The relation-back day for both companies was 9 November 2001, and the last day to apply for an extension under s.588FF(3)(b) was 9 November 2004. On that date, the Court made an order extending the period for commencing a s.588FF(1) application to 9 March 2005 ([2], [5]). The application was made ex parte, meaning without notice to the affected parties ([5], [8]).
The background included the liquidator's investigation into a registered mortgage debenture granted by Casualife to Casualife Hong Kong. The liquidator was examining whether the debenture could be challenged under s.588FF(1), including on the basis that it was an uncommercial transaction or an insolvent transaction ([9]). The Court also recounted the liquidator's evidence about a substantial body of documents provided by the ATO and a possible indemnity for the costs of any application ([9]-[10]).
On 4 March 2005, the Court made a further order extending time to 9 June 2005 and requiring the liquidator to serve a copy on any party he considered might be affected ([11]). The principal proceeding was commenced on 8 June 2005 ([12]). However, the second extension order was set aside on 14 October 2005 because the Court had no power under the Act to make it ([13]). The liquidator then sought to vary the original 9 November 2004 order under rule 46.08, in effect moving its extended date to 9 June 2005 ([3], [14]).
The application raised two separate questions: whether rule 46.08 was available to the liquidator, and whether the Court should exercise its discretion to grant the requested variation. Mandie J answered the first question in the liquidator's favour, but the second against him. The application was dismissed, with costs ([20]-[23]).
Rule 46.08 provided that the Court could set aside or vary an order affecting a person where the application for the order was made on notice but that person did not attend, or where the application was not made on notice to that person ([15]). The rule's evident purpose was to give an affected person a route to seek a change where they had not attended or had not received notice. But the rule did not expressly limit applications to the absent or unnotified person ([16]).
The liquidator had obtained the original order without notice to those affected. Mandie J noted that the defendants did not dispute his standing to apply, and held that he had standing ([17]). The judgment also refers to Nicholson v Nicholson as a decision about a similar New South Wales rule. The passage noted that the rule had been read broadly enough to permit an application by someone other than the absent party, including the party who obtained the order. The judgment also recognised that such an application would be exceptional ([16]).
The defendants argued that rule 46.08 applied only to interlocutory orders and not to a final order. Mandie J considered earlier Victorian decisions addressing the relationship between the rule and judgments. He concluded that the 9 November order was not a judgment, whether that term meant a decision in a proceeding equivalent to an action at law or the determination of rights in a principal cause ([18]-[19]). In his view, rule 46.08 applied to all orders, whether final or interlocutory, as long as they were not judgments ([19]). He therefore rejected the objection that the rule was unavailable and held the liquidator could seek variation ([20]).
That conclusion did not resolve whether the requested change should be made. The Court treated the question as discretionary. It considered that the liquidator had been in a position to commence the principal proceeding within the period allowed by the original order. He did not do so while awaiting confirmation of an ATO indemnity and perhaps because of an error of law. The Court found those matters did not provide adequate reasons to alter an order that had provided, and in fact had provided, adequate time to commence the proceeding ([21]).
Mandie J also considered policy and justice. Referring to the analysis of s.588FF in BP Australia Ltd v Brown, he considered that the defendants were entitled to expect one determinate extension under s.588FF(3)(b). They should not remain exposed to losing the benefit of an established time bar because the liquidator could invoke a general power to vary an order made in their absence ([22]). The judgment therefore distinguishes procedural availability from discretionary merit: the liquidator could bring the application, but the circumstances did not justify granting it.
The judgment addresses a procedural rule alongside a statutory extension power. Section 588FF(3)(b) is described in the judgment as the provision under which the liquidator sought an extension of time to bring an application under s.588FF(1) ([2], [5]). The judgment does not set out the full text of those statutory provisions, so its discussion should be understood within the particular procedural dispute before the Court.
Before Mandie J's ruling, the Victorian decisions referred to in the judgment had addressed whether rule 46.08 applied to judgments. Delmo v Merrigal Pty Ltd included an obiter view that the rule concerned orders and not judgments. Collie v Merlaw Nominees Pty Ltd expressed doubt about that view but assumed it was correct without deciding the point. Jenkins v Visualeyes Pty Ltd ruled, in effect, that the rule did not apply to judgments ([18]). Mandie J distinguished those authorities by holding that the order in this case was not a judgment and that rule 46.08 applied to orders, final or interlocutory, that were not judgments ([19]).
The decision also treats the breadth of rule 46.08 and its discretionary operation as distinct. Its construction permitted the party who obtained an order to apply to vary it, where the order had been made without notice to affected persons. But that construction did not create an automatic right to a variation. The applicant still had to establish satisfactory grounds, and the Court considered the explanation for delay and the interests associated with a determinate time limit ([16]-[22]).
The decision's practical significance is therefore narrow. It explains how Mandie J read rule 46.08 in relation to an order extending a statutory period, and why the Court refused relief on the evidence before it. The judgment does not purport to change the wording of s.588FF(3)(b), nor does it determine the underlying merits of the proposed transaction-avoidance claims. Those claims formed part of the separate principal proceeding described in the reasons ([12]).
At [16], the Court says the rule's evident purpose is to let a person affected by an order seek to have it changed when they did not attend or did not receive notice. It also observes that the rule does not expressly exclude the person who obtained the order. In plain English, the rule's wording was not limited to the party who missed the original hearing.
At [19], Mandie J states that “rule 46.08 applies to all orders, whether final or interlocutory, so long as they are not judgments.” This is the central procedural construction in the decision. The Court did not need to decide whether the extension order was interlocutory, because it considered the order was not a judgment.
At [20], the Court concludes that the liquidator was “entitled under rule 46.08 to seek” variation. That phrase describes the availability of an application, not the result of the application. The next part of the reasons makes this distinction clear.
At [21], Mandie J says the liquidator failed to establish “satisfactory grounds” for the Court to exercise its discretion. The reasons were that the liquidator had enough time under the original order to commence the principal proceeding, and that waiting for confirmation of the ATO indemnity and perhaps an error of law did not adequately explain the failure to do so.
At [22], the Court says the defendants could expect “only one determinate extension of time” under s.588FF(3)(b). In plain English, the Court considered the defendants' interest in knowing when the time limit had expired, rather than remaining exposed to another extension through a general procedural power. That consideration contributed to refusing the variation.
The decision is most directly relevant where a party seeks to vary an order made without notice to affected persons, and a question arises about whether rule 46.08 permits the application. It is particularly relevant to an argument that the rule is confined to interlocutory orders. Mandie J's stated construction was that the rule applied to all orders, final or interlocutory, provided they were not judgments ([19]).
It also bears on applications by the party that originally obtained the order. The Court accepted that the wording did not exclude that applicant, while noting that such an application would be exceptional ([16]-[17]). The case does not establish that every party who obtained an order can secure a variation. Instead, the applicant's standing and the exercise of discretion are separate matters.
The decision may be relevant where a party seeks to use a general procedural power to alter an order affecting a statutory time limit. The particular application concerned time to commence s.588FF(1) proceedings, and the Court considered whether the liquidator's explanation justified changing the earlier extension ([14], [21]-[22]). The reasons give particular weight to whether the applicant had already had adequate time and whether the affected parties could expect a determinate time limit.
The precedent should not be treated as resolving every question about extensions under s.588FF or every application under rule 46.08. Its reasoning concerns the rule's application to the specific kind of order before Mandie J, and the discretionary assessment on the evidence described in the judgment.
The supplied judgment does not identify any later court decisions that applied, distinguished, followed, or otherwise treated Scott v Casualife Furniture International Ltd. No conclusion about its subsequent treatment can therefore be drawn from the provided text.
The authorities discussed in Scott are earlier authorities, not later treatment. Delmo, Collie and Jenkins are considered in relation to whether rule 46.08 applied to judgments ([18]). Nicholson is discussed as a decision on a similar New South Wales rule and is used in considering standing and the scope of the rule ([16], [19]). BP Australia Ltd v Brown is referred to for its analysis of s.588FF in the Court's discussion of policy and justice ([22]). The judgment records Mandie J's treatment of those authorities, but does not report later decisions considering Scott itself.
The judgment leaves open the precise boundary between an “order” and a “judgment” in other procedural settings. Mandie J held that the order before him was not a judgment and did not need to decide whether it was interlocutory ([19]). The reasons therefore do not define every category of decision that might fall outside rule 46.08.
The decision also does not specify a comprehensive test for when an applicant who obtained an order may successfully seek to vary it under rule 46.08. It accepts standing on the facts and notes the exceptional nature of such an application, but dismisses the request on its discretionary merits ([16]-[21]). Further cases would be needed to show how courts treat different explanations for delay or different effects on people who relied on a time limit.
Finally, this judgment does not determine the substantive claims in the principal proceeding concerning the mortgage debenture or the transactions under investigation. It records that claims under s.588FF(1), alongside other pleaded grounds, were part of that separate proceeding ([12]). Its disposition concerns only the interlocutory variation application.
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CORPORATIONS - application to vary order extending time under s.588FF(3)(b) Corporations Act 2001 (Cth).
PRACTICE AND PROCEDURE - application pursuant to rule 46.08 Rules of Supreme Court (Chapter 1) to vary order made in the absence of a party - whether party obtaining the order had standing to apply to set aside or vary it - whether rule 46.08 applied to the order in question.
1 The plaintiff, David Henry Scott, is the liquidator of Casualife Furniture International Pty Ltd ("Casualife") and Kencord Manufacturing Pty Ltd ("Kencord").
2 On 9 November 2004, the Court ordered pursuant to s.588FF(3)(b) of the Corporations Act 2001 (Cth) ("the Act") that the time within which the liquidator of Casualife and Kencord might commence an application under s.588FF(1) of the Act be extended to 9 March 2005 (ie an extension of four months).
3 Pursuant to rule 46.08 of the Rules of the Supreme Court (Chapter 1), the liquidator now seeks, in unusual circumstances, to vary the order of 9 November 2004, in effect by changing the extended date to 9 June 2005 (ie by adding an additional 3 months to the extension period originally sought).
4 The history leading up to this application is as follows.
5 Casualife and Kencord were wound up on 18 May 2004 in proceedings numbers 8250 and 8251 of 2001. The relation-back day was 9 November 2001, being the date of the winding-up application. The last day for making an application to extend time under s.588FF(3)(b) of the Act was thus 9 November 2004. The application having been filed on the last day, an order need not have been sought or made until later. In fact the order was sought ex parte and made on that day.
6 The background to the winding up order was referred to in the liquidator's affidavit sworn 9 November 2004. The liquidator referred to the findings of fact made by Hansen J in proceedings numbers 8250 and 8251 of 2001. It was found that a succession of companies under the control of Joseph Guss (the present second defendant) and/or members of his immediate family had carried on an outdoor furniture business. The business had been carried on by Bendix Consolidated Industries Ltd (1978 - 1982), Tropitone Furniture Co Pty Ltd (1982-1991), Tropitone Furniture Co International Pty Ltd (1991 - 2001) and then by Casualife and Kencord. It was found that each of the preceding companies had been the subject of a winding up order on the application of the Deputy Commissioner of Taxation ("ATO") on the ground that it was unable to pay its debts and at the date of the winding up order owed a substantial sum in relation to tax. Bendix owed about $1.2M, Tropitone Furniture Co owed about $1.4M and Tropitone Furniture Co International owed about $148,000, at the respective dates of their winding up orders. At the time of each winding up assets of that entity had been transferred to another entity which conducted the business until it was wound up and so on. Since 1992 Casualife had granted a charge to an entity related to and/or controlled by Guss family interests, namely Casualife Furniture International Ltd (incorporated in Hong Kong) ("Casualife Hong Kong"). Various other transactions were referred to in the judgment of Hansen J and his Honour found that the structures created had been deliberately created by Mr J Guss for the purpose of ensuring the ongoing control of the business by the Guss family, come what may.
"The Court may set aside or vary an order which affects a person where the application for the order -
(a) was made on notice to that person, but he did not attend the hearing of the application; or
(b) was not made on notice to that person."
16 The evident intent of rule 46.08 is to enable a person affected by an order to seek to have it set aside or varied in circumstances where the person did not attend for some reason or other, including the absence of notice. However an application under the rule is not in terms confined to such a person and the person who obtained the order in the first place is not expressly excluded from seeking to set aside or vary the order. So, in the present case, the liquidator, having obtained the order without notice to the persons affected thereby, claims to be entitled to seek to set aside or vary the order under this rule. In relation to a similar rule in New South Wales it has been held[2] that the rule is wide enough to allow an application by a person other than the absent party, including the party who obtained the order in the first place and that there was no reason for cutting down the literal meaning of the rule, although it was obvious that it would only be in the exceptional case[3] that a party other than the absent party would be seeking to set aside such an order.
17 The defendants did not contend that the liquidator did not have standing to make an application under rule 46.08 and in my view he has such standing. However the defendants submitted that the rule did not apply to the order made on 9 November 2004 because rule 46.08 applied only to interlocutory orders and the order made on 9 November 2004 was a final order and not an interlocutory order.
18 In Delmo v Merrigal Pty Ltd[4] Murphy J said, obiter, that rule 46.08 related only to orders and not to judgments, adding that it appeared that O.46 applied to "interlocutory applications in a proceeding". In Collie v Merlaw Nominees Pty Ltd[5] Nettle J expressed doubt concerning the obiter dictum of Murphy J but assumed, without deciding, that it was correct. In Jenkins v Visualeyes Pty Ltd[6] Balmford J ruled in effect that rule 46.08 did not apply to judgments.
19 In my opinion the order made on 9 November 2004 was not a "judgment" whether that word is understood as meaning the decision of a court obtained in a proceeding the equivalent of what formerly would have been an action at law or the determination of the rights of the parties in a principal cause. The order made on 9 November 2004 may or may not have been an "interlocutory" order but, in my opinion, rule 46.08 applies to all orders, whether final or interlocutory, so long as they are not judgments. The Victorian cases cited above are not authority to the contrary. Furthermore the New South Wales decision to which I have already referred, is authority in relation to a similar rule, that the rule applies to all orders including "final" orders.
[1] See generally BP Australia Ltd v Brown [2003] NSWCA 216; (2003) 58 NSWLR 322.
[2] Nicholson v Nicholson [1974] 2 NSWLR 59.
[3] Nicholson v Nicholson [1974] 2 NSWLR 59, 65 per Jenkyn J.
[4] Unreported, Supreme Court of Victoria, Murphy J, 29 April 1988 (BC8800726)
[7] See Williams: Civil Procedure - Victoria p.5394 and cases there cited.
[8] See Hall v Nominal Defendant [1966] HCA 36; (1966) 117 CLR 423, 443.
[9] Nicholson v Nicholson [1974] 2 NSWLR 59, 64 per Jenkyn J.
Scott
Casualife Furniture International Ltd [2005] VSC 463
(2003) 58 NSWLR 322
(1966) 117 CLR 423
The interlocutory process seeking to vary the time-extension order was dismissed, and the plaintiff was ordered to pay the defendants’ costs, including reserved costs.
7 The liquidator further deposed that, on the day after his appointment as liquidator of Casualife, Casualife Hong Kong appointed a receiver and manager to Casualife. The liquidator deposed as to his seeking of information from the receiver and manager and his continuing investigation as to whether the charge granted in favour of Casualife Hong Kong might be set aside. The liquidator added that there were no funds available in either liquidation and that he had been liaising with the ATO which had indicated that it might fund an investigation into the relevant transactions, and that he had received confirmation of the ATO's agreement to provide funding the day before swearing his affidavit (ie on 8 November 2004).
8 On the basis of the foregoing material the order of 9 November 2004 was made.
9 On 4 March 2005, the liquidator applied to the Court for a further extension of time, no proceeding under s.588FF(1) of the Act having been instituted by that stage. The liquidator's affidavit sworn 3 March 2005 recounted what had happened since the order of 9 November 2004. The liquidator deposed as to further communications with the receiver and manager of Casualife. Of more importance, the liquidator deposed that on 15 December 2004 Mr Zafiriou of the ATO had attended at the offices of the liquidator's solicitors and delivered to them 14 ring-binder folders of documents relating to the affairs of Casualife and that the liquidator's solicitors had undertaken a review of that material. The liquidator deposed that as a result of his investigations he believed that he had a claim to set aside the registered mortgage debenture granted by Casualife to Casualife Hong Kong pursuant to s.588FF(1) of the Act. The liquidator in particular said that he proposed to make application to set aside the relevant mortgage debenture as an uncommercial transaction within the meaning of s.588FB of the Act, alternatively as an insolvent transaction within the meaning of s.588FC of the Act.
10 The liquidator further deposed in March 2005 that he had requested from the ATO an indemnity with respect to his remuneration, costs and expenses in bringing any such application and that Mr Zafiriou had informed him that he had recommended that such indemnity be provided but that the liquidator had yet to receive confirmation of same. The liquidator further deposed that a former employee of Casualife had informed him, on Friday 25 February 2005 that the receiver and manager of Casualife had terminated the employment of all staff in January 2005 and that they had been immediately reemployed by Holy May Pty Ltd. Based on an ASIC search, the liquidator deposed that Holy May Pty Ltd was apparently a wholly-owned subsidiary of Casualife Hong Kong and also that Casualife Hong Kong held a registered mortgage debenture over the assets and undertaking of Holy May. The liquidator said that in the circumstances he suspected that the receiver and manager had already sold the business of Casualife to a party related to the Guss family interests and that he wished to both investigate the matter further and to finalised his arrangements with the ATO in relation to the provision of an indemnity.
11 On 4 March 2005, the Court extended time for commencing the relevant application to 9 June 2005, and required the liquidator to serve a copy of the order by prepaid post "on any party he considers may be affected thereby". Liberty to apply was reserved.
12 A proceeding (number 6480 of 2005) ("the principal proceeding") was commenced by originating process dated 8 June 2005. The plaintiffs are Casualife and the liquidator, and the defendants are Casualife Hong Kong, the receivers and mangers of Casualife, Joseph Guss and Antony Guss. Subsequently Holy May Pty Ltd was added as a defendant. A statement of claim of 64 pages was filed on 17 August 2005 from which it appears that the grounds relied upon to challenge various relevant transactions include sham, fraud, illegality and intent to defraud creditors within the meaning of s.172 of the Property Law Act 1958 (Vic), and also include reliance upon claims under s.588FF(1) of the Act.
13 The principal proceeding was commenced within the time allowed by the order of 4 March 2005. However the order of 4 March 2005 has now been set aside by order of 14 October 2005 on the basis that the Court had no power under the Act to make that order.[1]
14 As a result, those parts of the principal proceeding that rely upon s.588FF(1) of the Act have been initiated out of time and are liable to be struck out. The liquidator now seeks to remedy this problem by this application under rule 46.08.
15 Rule 46.08 provides:
20 Accordingly, I consider that the liquidator is entitled under rule 46.08 to seek an order that the order of 9 November 2004 be varied.
21 However in my opinion the liquidator has failed to establish satisfactory grounds for the Court to exercise its discretion to vary the extension of time contained in the order of 9 November 2004. It seems to me that the evidence of the liquidator shows that he was in a position to institute the principal proceeding within the period provided by the order of 9 November 2004 and failed to do so because he was awaiting confirmation of an indemnity from the ATO and perhaps due to error of law. I do not think that those considerations provide adequate reasons to vary the period of extension in an order which, when made, was thought to provide adequate time and, indeed, did provide adequate time to institute the principal proceeding.
22 There are also reasons of policy and justice which affect the exercise of my discretion. In that regard I would refer to the analysis of s.588FF contained in the judgment of Spigelman CJ in BP Australia Ltd v Brown.[10] In my opinion, the defendants were entitled to expect that the liquidator would obtain only one determinate extension of time under s.588FF(3)(b) of the Act and to expect that they should not remain at risk of losing the benefit of any established timebar by reason of the liquidator having recourse to a general power and discretion vested in the Court to vary any order that was made in the absence of the party or parties affected.
23 Accordingly the interlocutory process filed 25 October 2005 is dismissed and the plaintiff is ordered to pay the defendants' costs thereof (including reserved costs).