proceeding" includes a person who is substituted as a party
by virtue of an order made to correct a mistake in the name
of
a party.
(8) Subrule (6), with the necessary changes, also applies to
an application under rule 14.03(2).
(9) Subrule (1)
does not apply to the amendment of a
judgment or order.".
15. Subrules (1), (4), (5), (6) and (7) have particular effect on the
outcome
of the applications concerning Murlroam Pty Ltd as defendant. The Victorian
provisions identical to s. 48A of the Limitation Act and r. 36.01 were
considered by the High Court in Bridge Shipping Pty Ltd v Grand Shipping S.A.
[1991] HCA 45; (1991) 173 CLR 231. It was held that r. 36.01(4) covers not only cases of
misnomer, clerical error and misdescription, but also those where the
plaintiff,
intending to sue a person identified by a particular description,
was mistaken as to the name of the person who answered that description.
McHugh J, with whom Brennan and Dean JJ agreed, said at the foot of p. 260 and
over to p. 261 that the rule is remedial and should
be given a beneficial
interpretation: "It is proper to give it the widest interpretation which its
language will permit". Here, the
plaintiff made a mistake "in the name of a
party" because, although intending to sue a person whom the plaintiff knew by
a particular
description, that is, the person to whom the payments sought to
be recovered were made, the plaintiff was mistaken as to the name
of the
person who answered that description (see McHugh J at p. 260). Reference
might also be made to the decision of the Court
of Appeal in Smart and Ors v
Stuart, unreported, 2 April 1992, especially the reasons of Mildren J.
16. It was not suggested that,
apart from the limitations defence, any
prejudice has been or would be suffered by Murlroam Pty Ltd by any of the
orders concerning
it previously made or now proposed. The history of the
matter prior to the issue of the writ shows that whoever lay behind Eastside
was aware from the letter of demand sent by the liquidator of the nature of
the claims made, and, with reference to the considered
reply to that demand by
solicitors, the nature of the defences which might be raised to such claims,
and of the rights it had to
make application to the Court with a view to
protecting its position in respect of s. 368. Such prejudice as may have been
or may
be suffered by Murlroam Pty Ltd, in relation to its being substituted
as a defendant, is compensable in costs.
EXTENSION OF TIME
FOR SERVICE OF WRIT
17. The writ in which Murlroam Pty Ltd was named as defendant was purportedly
served upon it on 3 February 1992,
five months after the time for service had
expired (r. 5.12). The plaintiff seeks an order extending the time for
service to cover
that event nunc pro tunc, or, if it becomes necessary to
serve the company again to give it the opportunity to do so. If service
again
was required and the time not extended the commencement of a fresh action
would be well outside the limitation period which
expired on 3 September 1990.
This is a case in which the failure to serve the writ on the proper defendant
in time was due to the
default of the solicitors for the plaintiff, and where,
for reasons already given, the defendant has been well aware of the claims
to
be made and of the courses of action available to it to protect its position
since long before the time for service expired. There
is no prejudice alleged
by the defendant, other than the potential loss of the limitation defence,
which is not compensable in costs.
18. The writ was purportedly served on the defendant about five months after
the time for service had expired and the plaintiff's
application to extend
time for service was made about one month thereafter, but as a reaction to the
defendant's applications to
have the service set aside.
19. In exercising discretion in relation to the renewal of a writ, an
approach should be adopted which
looks to the general justice of the case,
paying regard to all the circumstances, including not only any limitation
statute but also
the relative hardships which the grant or refusal of renewal
would impose upon the parties (Vanleer Australia Pty Ltd v Palace Shipping
(1981) 34 ALR 3). In that case his Honour Justice Stephen undertook an
extensive review of authorities in England, Canada and Australia including
observations in cases where the relevant circumstances include the operation
of a statute of limitations. His Honour adopted what
was said by Bray CJ in
Victa Limited v Johnson (1975) 10 SASR 496:
"It is not correct to say that the defendant has acquired an
absolute right to immunity when a writ issued within the
limitation
period is not served within 12 months of its
issue and the limitation period has in the meantime expired.
What has expired
is in reality not the limitation period but
the period which would have been a limitation period if no
writ had ever been issued.
What the failure to serve a writ
within 12 months gives the defendant is no more than a right
to contend that the court in
the exercise of its discretion
should not renew the writ. The efficacy of the writ does
not expire absolutely at the end of
the 12 months, it only
expires if and in so far as the court sees fit not to renew
it".
20. His Honour also referred to a
Canadian case to similar effect. That
approach was also adopted by Mason J in Foxe v Brown [1984] HCA 69; (1985) 59 ALJR 186.
There is no longer any express precondition to the exercise of the court's
discretion to extend the period of validity for a service
of a writ.
Previously it was necessary to show that reasonable efforts had been made to
serve the defendant or other good reason.
No doubt the plaintiff must still
show good reason. Here, there are two good reasons. The first is that the
default arose through
the failure of the plaintiff's solicitors to properly
search and identify the name of the person carrying on the business at the
relevant time. The second is the operation of statutory limitations in these
circumstances, bringing about the possibility at least
of recovery against the
defendant not being able to be pursued, and consequent hardship to the
creditors of the company. No relevant
hardship or prejudice has been shown on
the part of the defendant if the extension was allowed. The plaintiff's
default has not
been intentional or contumelious nor has the delay been such
as to give rise to a substantial risk that a fair trial is not possible.
(These and other matters which may impinge upon the exercise of the discretion
are referred to in greater detail by Mildren J in
The Commonwealth of
Australia v DKB Investments Pty Ltd, unreported, 12 September 1991).
APPLICATION TO JOIN THE LIQUIDATOR AS A
PLAINTIFF
21. The plaintiff sues as a company in liquidation and there is an
application by it that the liquidator be joined as
an additional plaintiff.
The claim against the defendant is in two parts. The first arises from the
operation of s. 451 of the Code.
It provides that a payment made by a company
that, if it had been made by a natural person, would, in the event of his
becoming
bankrupt, be void as against the trustee in bankruptcy, is in the
event of the company being wound up, void as against the liquidator.
This
incorporates s. 122(1) of the Bankruptcy Act which provides that a payment
made by a person who is unable to pay debts as they
become due from his own
money, in favour of a creditor, having the effect of giving that creditor a
preference .... over other creditors,
being a payment made ..... within six
months before the presentation of a petition is void against the trustee in
bankruptcy. The
relevant date in the case of the liquidation of a company is
the date of the filing of the application for winding up (s. 451(2)),
that is,
7 January 1987. There are provisions in the Bankruptcy Act which may be
applied to the circumstances of a particular payment
to a creditor which may
overcome the effect of this law.
22. There appears to have been a fairly well settled practice as to who
should be plaintiff in relation to proceedings for recovery of a preference.
For example, in Freeway Mutual Pty Ltd v Taylor (1978) 22 ALR 281, which came
before the Full Court of the Supreme Court of Queensland, the proceedings were
initiated by the official liquidator,
similarly, in Court v Hewett, in the
Full Court of the Supreme Court of Western Australia exercising federal
jurisdiction (1981) 39 ALR 627. In the later Western Australian case Kyra
Nominees Pty Ltd (In liquidation) v National Australia Bank Ltd (1986) 4 ACLC
400 the action was commenced in the name of the company in liquidation, but it
seems that the company was being wound up voluntarily
and there may be a
distinction based upon that fact. Reference might also be made to Rees v Bank
of New South Wales [1964] HCA 47; (1964) 38 ALJR 133 where the High Court was considering a
claim by a liquidator of a company in relation to monies said to have
constituted a preference
within the meaning of the equivalent provisions of
the then Companies Act and Bankruptcy Act.
23. Whether or not it was a practice
that proceedings of that type be taken
in the name of the liquidator or the name of the company in liquidation was
not the subject
of any comment in any of those cases, but was taken up by Adam
J, in Re Reid Murray Holdings Ltd [1969] VicRp 39; (1969) VR 315 at 318. That again was a case
concerning preferences which had been commenced in the name of the liquidator.
The major issue was
the procedure adopted, but at page 318 his Honour held
that the action should properly be brought in the name of the liquidator.
In
so doing he referred to Jones v Davies Franklin Cycle Co. Ltd [1902] VicLawRp 107; (1902) 27 VLR
649 and Kent v La Communaute des soeurs de Charite de la Providence, (1903) AC
220. In the former case the claim, which was brought in the name of the
liquidator, was to set aside a transaction made between the company
in
liquidation, Diamond Cycle Pty Ltd and the defendant on the ground that the
transaction amounted to a fraudulent preference. The
brief report indicates
that the argument went only to the question of whether a proceeding on behalf
of a company in liquidation
could only be brought in the name of the company.
Relying upon the provisions of the then legislation, a'Beckett J held that the
action, not being brought in the name and on behalf of the company, the writ
should be set aside. A recent equivalent statutory
provision is to be found
in s. 377(2) of the Code which enables a liquidator to bring or defend legal
proceedings in the name and
on behalf of the company. It is also noted that
in that case the company was in voluntary liquidation and that the writ was
subsequently
amended by leave of the Court. In the latter case the Privy
Council considered an appeal from the Court of King's Bench for the
Province
of Quebec. The action out of which the appeal arose was commenced by the
appellants in their character as liquidators of
a bank against the defendants
to recover a sum alleged to be owing by them to the bank on a promissory note.
Although the case originated
in Canada there does not appear to be any
material difference in the law to be applied to that relating to this matter.
At p. 226
Lord Davey, on behalf of their Lordships, said:
"The office of the liquidator has in fact a double aspect.
On the one hand
he wields the powers of the company, and on
the other hand he is the representative for some purposes of
the creditors and
contributories. There are therefore many
cases in which he may sue in his own name, as, eg, to
impeach some act or deed of
the company before winding up
which is made voidable in the interests of the creditors and
contributories. But their Lordships
think that wherever the
object of the action is to recover a debt, or to recover or
protect property the title to which is
in the company, the
action should be brought in the name of the company".
24. At p. 227 it was noted that although the liquidators
had the right to sue
they had sued in the wrong form; they ought to have joined with themselves the
company. Adam J followed the
latter case and he, in turn, by Asche J, as he
then was, in this Court, in Johnston v Port Darwin Petroleum Pty Ltd Action
No. 232
of 1986, which was bound up with a number of other matters (unreported
15 October 1986 - see at p. 15 of the judgment). In Re Evers
Motor Company
Ltd (1962) QWN 6, Gibb J remarked that the reported cases in which
applications had been made for a declaration that a payment made by a company,
was void as a preference, show: "That it is by no means unusual for the
liquidator to represent the general body of creditors on
such an application".
25. It is clear by authority and practice that actions brought under s. 45 of
the Code and its equivalents
ought to be taken in the name of the liquidator.
After all, it is against him that the preferential payment is declared void.
26.
Pursuant to r. 9.06, the Court may, at any stage of proceedings, order
that a person who ought to have been joined as a party or
whose presence
before the Court is necessary to ensure that all questions in the proceedings
are effectually and completely determined,
be added as a party. Here, the
present plaintiff seeks to have Mr Garraway added as a party. His written
consent, as required
by r. 9.07(1), has been given. The plaintiff and
proposed additional plaintiff do not have the same cause of action against the
defendant. On the material available there does not seem to be any dispute by
the defendant as to its having been paid the amounts
in respect of which
repayment is sought. There may be some common questions of law and fact
arising upon the two claims, but, the
rights of relief sought are not in
respect of, or arise out of the same series of transactions. There are two
such series, one prior
to and the other after the commencement of the winding
up (r. 9.02(1)(a)). Further, although the Court has a discretion to join
an
additional plaintiff under r. 9.02(1)(b), it shall not do so unless it is
satisfied that the joinder will not prejudice a party
(r. 9.02(2)(b)).
Although there are no pleadings showing the defence or defences sought to be
raised by the defendant, its solicitors
have indicated they will rely upon its
having provided the company now in liquidation with goods on credit, in good
faith and in
the ordinary course of business. One of the effects of adding
the liquidator in person as a plaintiff (if permissible under r. 9.02),
would
be akin to making an order that an action by him against the defendant be
consolidated with an action by the company in liquidation
against the
defendant (r. 9.12). In Bolwell Fibreglass Pty Ltd v Foley [1984] VicRp 8; (1984) VR 97 at
104, Brooking J opined that a consolidation order should rarely be made and
the order of the Court at p. 119 was that the actions
consolidated be
deconsolidated. Young CJ at p. 100 agreeing with Brooking J, speaking
generally, thought that it was better to confine
cases of consolidation to
cases where several actions had been brought which might have been joined in
one writ. His Honour then
mentioned the distinction between a consolidation
order and one where an order is made that actions be heard together and by the
making of various enabling orders. Kaye J agreed with the Chief Justice and
Brooking J.
27. On the information available, there
are separate causes of actions
arising from a number of transactions falling into two separate periods of
time and there is only
a bare indication of the defence which the defendant
may seek to raise. A separate application by the defendant to the Court,
presumably
under s. 368 was contemplated, although not yet commenced. The
requirements of r. 9.02(1)(a) are not met.
LIMITATION ACT - ADDING A PLAINTIFF
28. But the problem goes deeper than that. There is no equivalent in the
rules concerning the addition of
a party to that which provides that where an
order to correct a mistake in the name of a party has the effect of
substituting another
person as a party, the proceedings shall be taken to have
commenced with respect to that person on the day that proceedings commenced
(r. 36.01(5)). If the addition of Mr Garraway as plaintiff would only take
effect from the date of the order, the time for commencing
his separate claim
against the defendant has long expired. In Mabro v Eagle, Star and British
Dominions Insurance Co Limited (1932) 1 KB 485 and 487 Scrutton LJ speaking of
a similar rule said that in his experience the Court had always refused to
allow a party to be added
where, if it were allowed, a limitations defence
would be defeated. The defendant should not be placed in a position in an
existing
action where, by reason of the joinder of an additional plaintiff, he
would be deprived of a limitation defence which would be available
if the
person sought to be added as a plaintiff had brought a fresh action at that
time. In Liff v Peasley (1980) 1 All ER 623 at 632 Stephenson LJ said that
there was a formidable line of authority that the addition of a new plaintiff
into an existing action
relates back to the date when that action first began.
Whether the addition of a fresh plaintiff relates back to the issue of the
writ, or only takes effect upon the order being made, no such order should be
made where the limitation period for the cause of action
the fresh plaintiff
seeks to pursue has expired. If the order relates back, the accrued defence
of the defendant is effected, and
if it does not then the defence remains
available and the addition of the plaintiff serves no useful purpose. (See the
discussion
of Brandon LJ commencing at p. 639).
THE SECTION 368 CLAIM
29. The other basis upon which a claim is made against the defendant
is under
s. 368(1) of the Code. It provides that "any disposition of property of the
company .... made after the commencement of
the winding up is .... unless the
court otherwise orders, void". In National Acceptance Corporation Pty Ltd v
Benson (1988) 13 ACLR 1 the distinction between the provisions found in ss.
368 and 451 of the Code was discussed, and attention drawn to the law that
under
s. 451 the transactions were void as against the liquidator whereas
under s. 368 the transactions were simply void, that is, void
for all purposes
related or incidental to the administration of the winding up of the company,
and as between the company and a person
dealing with the company. (Neither
the liquidator nor the company in liquidation was a party to those
proceedings). However, in
Tellsa Furniture Pty Ltd (in liquidation) v
Glendave Nominees Pty Ltd (1987) 9 NSWLR 254 the Court of Appeal of New South
Wales was concerned with an appeal brought by a company in liquidation, in
that name, against orders
relating to dispositions of property made by it to
one of its suppliers after the commencement of its winding up. No question
was
raised as to the validity of the proceedings brought in that name.
30. Where a payment is rendered void by operation of s. 368 of
the Code or
its equivalent, any action to recover the monies paid is in the nature of an
action for the recovery of the property
of the company, and, consistent with
Kent, ought to be brought in its name.
31. All of the above is, of course, subject to a statutory
provision to the
contrary, for example, the power of a liquidator to recover property of a
company vested in him (s. 374(2)).
ORDERS
32. On the plaintiff's application:
- The time for service of the writ is extended nunc pro
tunc up to and including the
date of service on Murlroam Pty
Ltd.
- The application that Allen Charles Garraway be added as a
second plaintiff is refused.
- The application that the writ be amended to include an
endorsement under s. 44 of the Limitation Act is refused as
unnecessary.
- On the defendant's application
- The application that the ex parte order of acting Master
Godtschalk made 16 January 1992, be set aside is refused.
- The application that the amended writ amended 16 January
1992
be set aside is refused.
- The application that the amended writ amended 16 August
1991 be set aside is granted.
- The
application that service of the amended writ on the
defendant on or about 3 February 1993 be set aside is
refused.
COSTS
During the hearing of these applications the attention of counsel for the
plaintiff was directed to r. 63.21, costs liability of
legal practitioner.
The solicitor for the plaintiff was present. It was indicated that the Court
was considering making appropriate
orders against the solicitor under the rule
and submissions were invited on that question. Time was allowed so as to
provide
an opportunity for the solicitor to be heard. Counsel indicated later
that instructions had been taken from the solicitor and she
had no submissions
to make.
35. For reasons which appear clearly from the reasons for decision on the
substantive applications,
it is plain that the costs of these proceedings have
been incurred as a consequence of the solicitors default in failing to conduct
or have conducted a proper search of the Business Names register so as to
identify the owner of the name at the relevant times, failing
to abide by the
rules relating to the original change of name of the defendant, failing to
obtain an extension of time for service
of the writ when required, failing to
serve Murlroam Pty Ltd with the application that it be substituted as
defendant, failing to
take the appropriate proceedings on behalf of Mr
Garraway. Had the identity of the true defendant been ascertained in the first
place,
and appropriate proceedings been taken and service effected within
time, none of these applications would have been necessary.
36.
Order that all of the costs of the defendant and Mr Garraway as between
them and their solicitors in relation to the amendment of
the writ on 16
August 1991, the substitution of the defendant as defendant on 16 January
1992, and these applications of the plaintiff
and the defendant be disallowed
as between solicitor and client, and that the solicitors for the plaintiff pay
the costs of the defendant
in relation to the plaintiff's and defendant's
applications.
37. Certified fit for counsel