In the matter of RCG CBD Pty Ltd

HIS HONOUR: The first plaintiff Mitchell Warren Ball was appointed liquidator of the second plaintiff RCG CBD Pty Ltd on 28 June 2013 by resolution of the members of the company in a creditors' voluntary winding up. On 27 June 2016 – one day before the expiry of the three year period referred to in (CTH) Corporations Act 2001, s 588FF(3) – the liquidator commenced these proceedings against ten defendants for relief under s 588FF, in respect of alleged voidable transactions of the company. The liquidator did not seek a so-called "shelf" order. As against the eighth defendant Fox & Staniland Pty Ltd, an incorporated law firm, the originating process claimed $100,030, and the Statement of Claim pleaded the cause of action as follows:

The table particularised the date of the payment as 31 January 2013, and the amount of the payment as $100,030, and described it as "the Fox & Staniland payment". The pleading continued:

There were alternative claims on the basis of moneys had and received (in paragraph 84) and of "loan" (in paragraph 85).

Prior to instituting proceedings on 7 July 2015, the liquidator wrote to Fox & Staniland in the following terms:

It will be observed from that letter that the liquidator was aware that the payment was made to Fox & Staniland's trust account, and sought particulars essentially as to who was the client and to whom the funds had been disbursed. The evidence is that there was no response to that letter.

After proceedings were instituted, Fox & Staniland filed a Defence on 4 August 2016 which in effect disputed that they received the payment beneficially. On 11 August 2016, the liquidator caused a Notice to Produce to be issued, and documents were produced pursuant to it on 5 September 2016.

By interlocutory process filed on 9 September 2016, the liquidator seeks an order pursuant to (NSW) Civil Procedure Act 2005, s 64 and s 65, that the plaintiffs be granted leave to amend the originating process by substituting Nadia Bevilacqua as the eight defendant in place of Fox & Staniland.

The invocation of Civil Procedure Act, s 65, is critical to the application. If Ms Bevilacqua were merely added on new causes of action then that would be outside the three-year period referred to in s 588FF(3) and statute barred. If she can be substituted, then the amendment relates back to the date of institution of the proceedings and would not be statute barred against her.

The parties agree that the prevailing authority on the operation of s 65 is the judgment of the High Court in Bridge Shipping Pty Ltd v Grand Shipping SA [1991] HCA 45; (1991) 173 CLR 231 and, in particular, the judgment of McHugh J, with whom Brennan and Deane JJ agreed. In the course of that judgment, it was concluded that the majority judgment in Evans Construction Co Ltd v Charrington & Co [1983] QB 810 was correct. In that decision, Donaldson LJ (as he then was) said (at 821) that there was:

His Lordship said:

At [20] of His Honour's judgment, McHugh J explained that there may be a "mistake in the name of a party" not only where the plaintiff mistakenly believes that a certain person whom the plaintiff can otherwise identify bears a certain name, but also because the plaintiff mistakenly believes that a person who answers a particular description bears a certain name. As His Honour said:

His Honour said that there was no warrant for treating the provision as dealing only with the case where the properties which identify the party are inherent properties.

At [21], His Honour observed that the rule was a remedial one to be given a wide interpretation, and that it should be interpreted to cover not only cases of misnomer, clerical error and misdescription, but also cases where the plaintiff, intending to sue a person he or she identifies by a particular description, was mistaken as to the name of the person who answers that description. Consequently, His Honour said that the rule had three limitations on a person's right to amend: first, that there must be a mistake; secondly, that it must be in the name of a party; and, thirdly, that the Court must be satisfied that no other party to the proceeding would be prejudiced in the conduct of his or her claim or defence in a way that could not fairly be met by an adjournment, costs or otherwise.

Having embraced that expansive view of the provision, His Honour turned to the facts of the case, in which Bridge had sued the owner of a ship. His Honour observed (at [25]) that if Bridge had intended to sue the carrier, and had mistakenly believed that the name of the carrier was "Grand", it would follow that Bridge had made a mistake in the name of a party. However (at [26]), His Honour observed that the Statement of Claim did not indicate that Bridge sued Grand because it believed that Grand was the carrier but was mistaken as to the name of the carrier but, to the contrary, the allegation that Grand was the owner of the vessel at all material times indicated that Bridge intended to sue Grand because it believed that Grand was the owner. It followed (at [27]) that Bridge made no mistake as to the description of the party which it wished to sue. It intended to sue the owner and did so. If there was a mistake, it was not one of misnomer, clerical error or misdescription, nor was it one where intending to sue a person whom it identified by a particular description it was mistaken as to the name of the person who answered that description.

Accordingly, it is necessary to identify from the evidence and the surrounding circumstances what was the intention of the liquidator when these proceedings were instituted and, in particular, whether the liquidator intended to sue a person having certain characteristics but was mistaken as to who it was who satisfied those characteristics.

In Environinvest Ltd v Former Partnership of Webster, White, Gridley, Nairn & Ors (2012) 208 FCR 376, Gordon J (at [22]) found, on the authority of Bridge v Grand Shipping, that an order may be made under the corresponding rule of the Federal Court if the applicant intended to commence proceedings against a person having particular characteristics. In that case, the auditor and the applicant mistakenly believed that the identity of the person with those characteristics was the party against whom the proceedings were commenced. At least two cases have considered this issue in the context of proceedings under s 588. I was referred to the judgment of Gardiner AsJ in Fat 4 Pty Ltd v Feber Distribution Pty Ltd [2016] VSC 304. In that case, the liquidator sued Feber, pleading – as explained in para 11 of the judgment – that during the relation-back period, the company had made payments "in respect of unsecured debts that the company owed to the defendant", and that the payments were transactions within the meaning of s 588FA and s 9, that the company and Feber were parties to the making of each of the payments, that the payments were made "in respect of unsecured debts owed by the company to the defendant", and that the payments resulted "in the defendant receiving from the company in respect of an unsecured debt that the company owed to it" more than the defendant would receive if the payments were set aside and the defendant were to prove in the winding-up. Initially, Feber admitted that it received the payments and that it had been supplying the company with goods. After further investigation, it resiled from that position, and contended that the payments made by the company for goods supplied by another entity "Some Agency", not Feber; that the company had in error made some payments to Feber rather than to Some Agency; that Feber was not entitled to any of those payments; and that all the payments were ultimately received by Some Agency. An application for substitution of Some Agency under the equivalent Victorian rule succeeded. Gardiner AsJ said (at [42]) that it was clear from the terms of the statement of claim that the intention of the plaintiffs was to sue the creditor who had been paid the funds in respect of the unsecured debts that the company owed to that party, and that it was obvious from the paragraphs of the statement of claim extracted above that the plaintiffs mistakenly considered, when the claim was issued, that the payments the subject of the claim were made in respect of unsecured debts owed by the company to Feber. His Honour rejected the submission that the selection by the plaintiffs of Feber as the defendant was deliberate and advertent.

In Reed Constructions Australia Pty Ltd [2015] FCA 1500, Farrell J considered the same question in circumstances where the liquidator had sued AJ Lucas Group Limited ACN 060 309 104 (“Group”) as the 10th defendant and sought to have substituted AJ Lucas Operations Pty Ltd ACN 087 777 633 (“Operations”). The evidence revealed considerable confusion in the background documents as to which was the company that had received the payments in question. The pleading asserted that the company and Group entered into transactions whereby Group provided goods and services to the company, that by reason of the matters pleaded Group was an unsecured creditor of the company, and that Group received payments from the company in reduction of that unsecured debt. The liquidator gave evidence:

It emerged that it was in fact Operations that had dealt with the company and was the relevant unsecured creditor of the company. In the light of the way in which the matter was pleaded, and the evidence of the liquidator to which I have referred, her Honour concluded that those matters identified characteristics of the person that the liquidator had intended to sue, and that the liquidator was simply mistaken as to the identity of that person.

Turning then to the present case, there is no testimonial evidence of the liquidator as to who he intended to sue or by what characteristics that person was characterised. All the liquidator says in his affidavit is that he was provided with a copy of the company's business transactions and account statements, and that members of his staff under his supervision investigated them and identified a number of payments made by RCG to various entities and individuals, including the payment in question to Fox & Staniland. In the statement of claim, there is no such reference – as there was in the two cases to which I have referred – to the pre-existing relationship of unsecured creditor and debtor in respect of which the payment was allegedly made. All that can be gleaned from the statement of claim is that it was intended to sue the person to whom the payment was made. In submissions, emphasis was given to [78] of the statement of claim and the pleading that the Fox & Staniland payment to the eighth defendant was a “transaction” within the meaning of s 9. So undoubtedly it was. The definition of “transaction” in s 9 includes a payment. The payee, under that payment, was Fox & Staniland. The only intention that can be gleaned from para 77 and para 78 of the statement of claim is that it was intended to sue the person to whom the payment was made, and that person was identified, correctly, as Fox & Staniland.

The liquidator well knew that the payment was to a trust account. So much is evident from the letter of 7 July 2015, to which I have referred. Had there been evidence of the liquidator that he intended to sue the person beneficially entitled, and not the operator of the trust account, the position may have been different; but there is no evidence of a testimonial character from the liquidator such as there was, for example, in Reed Constructions.

It seems to me that the only reasonable inference on the available evidence is that, knowing that Fox & Staniland were the trustees of a trust account, the liquidator deliberately sued the trustee and not the beneficiary. At the very least, there is no evidence to indicate that he intended to sue the beneficial recipient of the payment, but mistakenly thought that Fox & Staniland was that person. In those circumstances, it seems to me that there was no such mistake or misnomer as would attract the operation of Civil Procedure Act, s 65, and the interlocutory process must be dismissed.

It may well be that Ms Bevilacqua could be joined as a defendant on new causes of action which are not statute barred, for example, on the loan claim or the proposed unjust enrichment claim or the moneys had and received claim, but that is not the present application.

The Court orders that the interlocutory process be dismissed with costs.